Arbitration Process Issues

PETITION TO COMPEL REINSURANCE ARBITRATION DISMISSED AFTER UMPIRES SELECTED

October 10, 2012 by Carlton Fields

A court recently dismissed a case brought to compel arbitration in a asbestos reinsurance coverage dispute between Century Indemnity Company and Everest Reinsurance Company, after the parties reported to the court that they had finally installed umpires in multiple arbitrations related to the dispute. The parties had previously agreed to an ARIAS neutral selection process in November 2011 as part of a global agreement involving the arbitrations, but a report filed by the parties in January 2012 reflected that no agreement as to the umpires could then be reached. Everest Reinsurance Co. v. Century Indemnity Co., Case No. 11-5893 (USDC S.D.N.Y. June 29, 2012).

This post written by Michael Wolgin.

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COURT APPOINTED UMPIRE GETS THROWN OUT BEFORE ARBITRATION BEGINS

October 9, 2012 by Carlton Fields

An Alabama court claimed authority under Section 5 of the Federal Arbitration Act to appoint an umpire in an arbitration upon complaint by the plaintiff that “a lapse in the naming of an arbitrator . . . or umpire” had occurred in the arbitration selection process. 9 U.S.C. § 5. The arbitration provision at issue required each party to nominate one non-impartial arbitrator and required the two chosen arbitrators to select a neutral umpire within thirty days of the second arbitrator’s appointment. The Supreme Court of Alabama reversed the circuit court’s appointment, holding that 1) defendants’ delay in providing a list of potential umpires by six days beyond the prescribed thirty days was so minimal it did not warrant judicial intervention, and 2) defendants did not act in bad faith by proposing two potential umpires plaintiffs contend were biased because there was no showing that the potential umpires would not disclose facts relevant to their ability to be fair if selected and defendants offered to propose an additional umpire when plaintiffs complained of bias. Lexington Insurance Co. v. Southern Energy Homes, Inc., No. 1091617 (Ala. Aug. 17, 2012).

This post written by Abigail Kortz.

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TWO APPELLATE COURTS REJECT ARGUMENT THAT ARBITRATION PROVISIONS PROHIBITING CLASS ARBITRATION OF SMALL CLAIMS ARE UNCONSCIONABLE

October 8, 2012 by Carlton Fields

In opinions issued the same week, the 11th and 3rd Circuits affirmed district court orders granting defendants’ motions to compel arbitration on an individual, rather than on a class-wide, basis over plaintiffs’ objections that class-arbitration waiver clauses in their credit card and wireless telephone service agreements were unconscionable and unenforceable. The circuit courts followed Supreme Court precedent from AT&T Mobility LLC v. Concepcion, which held that Section 2 of the Federal Arbitration Act, which provides that arbitration agreements are “valid, irrevocable, and enforceable,” preempts state laws that hold class-arbitration waivers to be unconscionable and unenforceable. Consistent with the Supreme Court’s reasoning, the circuit courts found that preemption trumps the public policy argument, accepted by some other courts, that when arbitration is mandated, “class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system.” Homa v. American Express Co., No. 11-3600 (3rd Cir. Aug. 22, 2012); Pendergast v. Sprint Nextel Corp., No. 09-10612 (11th Cir. Aug. 20, 2012).

This post written by Abigail Kortz.

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Round-Up Of Decisions Vacating or Confirming Arbitration Awards

October 4, 2012 by Carlton Fields

Following is a summary of court decisions, some confirming, others vacating, arbitral awards:

Windler v. Anheuser-Busch, Inc., Case No. 10-cv-00350 (USDC D. Colo. Aug. 22, 2012) (denying motion to vacate arbitration award, finding that arbitrator did not manifestly disregard the law on reasonable accommodations under the Americans With Disabilities Act)

Barrick Enterprises, Inc. v. Crescent Petroleum, Inc., No. 11-1778 (6th Cir. Aug. 27, 2012) (affirming district court’s confirmation of arbitration award involving dispute under a petroleum supply agreement; finding that ex parte communication between arbitrator and employee was not in excess of arbitrator’s powers and district court did not apply the wrong evidentiary standard in confirming the award)

Scurtu v. Hospitality & Catering Management Services, Case No. 1:07-cv-00410 (USDC D. Ala. Sept. 13, 2012) (denying motion to vacate or modify arbitration award where the movant failed to set forth any grounds under the FAA for vacatur or modification or show how the arbitrator’s award would have satisfied such grounds)

N.J. Regional Council of Carpenters v. Jayeff Construction Corp., No. 11-3872 (3d Cir. Sept. 12, 2012) (affirming district court’s decision vacating arbitration award where there was insufficient evidence that appellee non-union contractor had entered into collective bargaining agreement bearing arbitration clause)

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Smolcheck, Case No. 12-80355 (S.D. Fla. Sept. 17, 2012) (denying motion to vacate and granting motion to confirm arbitration award; rejecting movant’s arguments on evident partiality, arbitrator misconduct, and insufficient opportunity to be heard)

Quench LLC v. Liquor Group Wholesale, Inc., Case No. 3:11-cv-811 (M.D. Fla. Sept. 13, 2012) (denying motion to vacate and granting motion to confirm arbitration award; finding that arbitrator had jurisdiction over signatory to agreement and that respondent was not prejudiced, under the circumstances, by waiting until after the final hearing before deciding whether certain respondents were subject to the arbitrator’s jurisdiction)

Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Schwarzwaleder, No. 11-2605 (3d Cir. Aug. 13, 2012) (reversing district court’s decision vacating arbitration award requiring former employee to repay a loan from her former employer; arbitrator’s decision was not “irrational” as to warrant vacatur)

Comerica Bank v. Howsam, No. B232749 (Cal. Ct. App. Aug. 20, 2012) (affirming orders denying vacatur and confirming arbitration award; finding that arbitrator’s failure to timely disclose potentially disqualifying circumstances, as required under California statute, was not a ground for vacatur of international commercial arbitration award, and, further, that the award was not procured by fraud or corruption, did not result from a manifest disregard of the law, and that the arbitrator did not exceed his powers in deciding alter ego issues)

This post written by Ben Seessel.

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Court Enforces Arbitration Agreement Despite “Service-of-Suit” Provision

October 2, 2012 by Carlton Fields

Pacific West Securities Inc. made a claim for coverage with its insurers, relating to underlying securities claims alleged against it in a FINRA proceeding brought by investors. The insurers contested coverage and initiated arbitration under the contracts. Pacific West brought suit in Washington state court, seeking to stay arbitration and have the matter heard in court based on the service-of-suit provision in the parties’ contracts. The insurers removed the case to federal court and moved to dismiss the petition to stay the arbitration. Citing the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion, the court granted the motion, finding that the service-of-suit clause and the arbitration clause were compatible and could be read in a reasonable way to further the strong federal policy embodied in the FAA of enforcing arbitration agreements. Pacific West Securities Inc. v. Illinois Union Insurance Co., No. C12-539RSM (USDC W. D. Wash. Aug. 29, 2012).

This post written by John Pitblado.

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