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New reinsurance-related and arbitration developments from Carlton Fields

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Nora Valenza-Frost

SDNY Concludes Arbitrators Did Not Exceed Authority in Interpreting Product Pollution Liability Exception to Policy’s Pollution Exclusion

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Petitioner sought to vacate an arbitration award, arguing that the arbitration panel exceeded its authority in interpreting the terms of an insurance policy when it determined that certain claims fell within the policy’s product pollution liability exception to the pollution exclusion. The court found that the petitioner did not demonstrate that the panel manifestly disregarded the terms of the policy: first, the arbitration agreement specifically instructed the panel to interpret the terms of the policy and to determine whether and to what extent the respondent’s losses were excluded by the pollution exclusion or restored by the production pollution liability exception; second, the text of the policy served as the basis for the award, reflecting that the panel did not disregard its terms; and third, the panel explained that the product pollution liability exception only granted coverage for pollution that satisfies the exception’s three requirements, and the court could not review the merits of the panel’s contract interpretation. Accordingly, the award was confirmed.

HDI Global SE v. Phillips 66 Co., No. 1:20-cv-00631 (S.D.N.Y. May 12, 2020).

SDNY Severs Arbitration Award to Confirm in Part and Vacate in Part

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Following clarification by the arbitrator of his arbitration award, the parties sought confirmation, vacature, and/or modification of the award. The court found the award lacked finality: the issue of warrants was before the arbitrator, but even upon the request to clarify the economic value of the warrants, the arbitrator “expressly stated that he did not reach any conclusion as to that issue.” Thus, if the court were to confirm the award as it stood, “it would undoubtedly result in further litigation to determine the economic value of the warrants.” The court therefore requested that the arbitrator limit his decision to the dollar amount to which the petitioner was entitled and confirmed the remainder of the award.

Three Brothers Trading, LLC v. Generex Biotechnology Corp., No. 1:18-cv-11585 (S.D.N.Y. Apr. 24, 2020).

Utah Court Stays Claims in Litigation Pending Completion of Arbitration

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After the plaintiffs filed a fourth amended complaint, certain defendants sought to compel arbitration and stay further federal court proceedings. The plaintiffs did not oppose the motions, which argued that the subject agreements contained broad arbitration clauses, which required arbitration based on the plaintiffs’ claims in the lawsuit. The court concurred, granting all three motions to compel and staying the claims against the defendant-movants pending the completion of arbitration.

J. White, L.C. v. Wiseman, No. 2:16-cv-01179 (D. Utah Apr. 9, 2020).

District Court of Maryland Denies Motion to Dismiss Petition to Vacate Arbitration Award

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The petitioner filed a complaint seeking to vacate an arbitration award, and the respondents moved to dismiss. Despite “the deferential standard of review” given to arbitration awards and the petitioner’s “significantly challenging road ahead,” the district court denied the respondents’ motion.

First, the court determined that the motion to vacate was timely, as the petitioner had 90 days (until January 3, 2020) to move to vacate the arbitration award under both the Federal Arbitration Act and Missouri law, which applied to the parties’ dispute.

Second, the court determined that service of the motion to vacate was timely under the FAA, as the petitioner delivered notice of its motion to vacate physically and electronically by the January 3 deadline, despite the fact that a signed summons was not included until the motion to vacate was again hand-delivered – at the request of respondents’ counsel – three days later. “Though the January 6, 2020 deadline was technically outside of the FAA’s limitations period, the Court finds that Respondents had adequate notice of this action as of January 3, 2020.”

Third, the court determined that the petitioner’s payment of the award within 30 days of the arbitration decision, as required by FINRA, did not foreclose it from pursuing its motion to vacate the award.

Stifel, Nicolaus & Co. v. Stern, No. 1:20-cv-00005 (D. Md. Mar. 31, 2020).

Fourth Circuit Determines Arbitral Panel in UK Is Foreign Tribunal for Purposes of Section 1782

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Where the parties to a private arbitration in the United Kingdom disagreed as to whether the arbitration panel is a “foreign or international tribunal” for purposes of obtaining testimony from residents in South Carolina pursuant to 28 U.S.C. § 1782, the Fourth Circuit determined that the panel was a “foreign tribunal” for purposes of the statute.

The district court denied the appellant’s application for the issuance of subpoenas to three South Carolina residents, relying on case law that held that private arbitral bodies were not “tribunals” as used in section 1782(a). The circuit court disagreed, reasoning that “even if we were to apply the more restrictive definition of ‘foreign or international tribunal’… – that the term refers only to ‘entities acting with the authority of the State’ – we would conclude that the UK arbitral panel charged with resolving the dispute between” the parties meets that definition.

The matter was remanded to the district court to conduct further proceedings on the appellant’s section 1782 application.

Servotronics, Inc. v. Boeing Co., No. 18-2454 (4th Cir. Mar. 30, 2020).