New reinsurance-related and arbitration developments from Carlton Fields
What happens when an arbitrator is asked to further arbitrate an alleged fraud committed in a prior arbitration in which the same arbitrator presided? In this Special Focus, John Pitblado examines a recent Seventh Circuit decision holding that knowledge acquired in a prior reinsurance arbitration about an alleged failure to disclose material documents did not render the arbitrator impartial, since an arbitration need not follow the pattern of jury trials.
This post written by John Pitblado.
Western Technology Services initiated an arbitration against Cauchos Industriales under the parties’ licensing and service agreements, and was awarded the preliminary injunction it sought terminating the contracts. Cauchos moved to vacate that award, and Westech moved for sanctions, asserting Cauchos’ motion to vacate was frivolous. Both motions were denied. However, after a final arbitration award in its favor, Westech thereafter sought to confirm the award in court, and also sought attorneys fees for its enforcement action, based alternatively on the FAA, as well as the parties’ contract. The court rejected both arguments, finding that Cauchos’ earlier attempt to vacate the award was not frivolous under the FAA’s standard for obtaining attorneys fees in an enforcement action, and finding that entitlement to attorneys fees under the contract had been considered and rejected by the arbitration panel, which decision was entitled to deference. Western Tech. Svcs. Int’l., Inc. v. Cauchos Industriales, S.A., Case No. 09-1033 (USDC N.D. Tex. Nov. 16, 2010).
This post written by John Pitblado.
A federal appeals court affirmed that Louisiana Stadium & Exposition District and the State of Louisiana (“LSED”) waived their right to arbitration by expressing the intent to litigate a dispute with Merrill Lynch, Pierce Fenner & Smith Inc. (“MLPFS”) concerning auction rate securities. LSED, which owns the Superdome, structured $240 million in municipal debt as auction rate securities to finance repairs after Katrina, based on MLPFS’s allegedly misleading advice. After the auctions failed in 2008, LSED filed lawsuits against MLPFS. Following eleven months of litigation, LSED moved to compel arbitration before FINRA. The appeals court affirmed that LSED had waived its right to arbitration by expressing its intent to litigate, finding that MLPFS would be prejudiced because, among other reasons, it would forfeit procedural victories it had won in litigation, including having the cases consolidated with other auction rate securities actions, and lose the opportunity to file a dispositive motion, which are disfavored in FINRA arbitrations. Louisiana Stadium & Exposition District v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 10-889 (2d Cir. Nov. 22, 2010).
This post written by Ben Seessel.
In a suit brought by FR 8 Singapore, a Singapore company, to compel arbitration with the alleged alter ego companies of Albacore Maritime, a Marshall Islands corporation, the court denied the defendants’ motion to dismiss for lack of subject matter jurisdiction, and held the choice of law provision in the agreement between FR 8 and Albacore applied to defendants’ motion to dismiss for failure to state a claim. The dispute stemmed from a failed purchase of a ship by Albacore from FR 8. The purchase agreement was signed by Albacore in Greece and FR 8 in Singapore, and provided for English choice of law and dispute resolution in London. When the purchase failed, arbitration commenced between FR 8 and Albacore, but Albacore’s parent companies (alleged alter egos) refused to participate. FR 8 sued in the United States under the FAA and the Convention in the Recognition and Enforcement of Foreign Arbitral Awards, to compel the alter egos’ participation. The defendants argued that the refusal to participate by the alter egos, which were non-signatories to the agreement, did not render FR 8 a “party aggrieved” under the FAA. The court rejected FR 8’s argument, questioning whether the FAA applied to compel non-signatories to arbitrate, but holding that FR 8 was a “party aggrieved” because correspondence between FR 8 and the defendants’ counsel constituted “an unambiguous demand to arbitrate,” with which the alter egos refused to comply. The court also resolved conflicting precedent on whether federal common law or the parties’ choice of law would apply to defendants’ motion to dismiss for failure to state a claim, holding the choice of English law provision would apply. FR 8 Singapore v. Albacore Maritime Inc., Case No. 10 Civ. 1862 (USDC S.D.N.Y. Dec. 14, 2010).
This post written by Michael Wolgin.
Exceeding Arbitrator’s Authority:
Controlotron Corp. v. Siemens Energy & Automation, Inc., Case No. 09 CV 03112 (USDC S.D.N.Y. Dec. 23, 2010) (denying motion to vacate award; granting motion to confirm award; arbitrator did not exceed authority by permitting amendment of claim and failing to make formal “written findings of fact and conclusions”)
Twin City Yellow Taxi, Inc. v. Farm Bureau Mutual Insurance Co., Case No. A10-775 (Minn. Ct. App. Dec. 28, 2010) (affirming denial of motion to vacate award; insufficient evidence that arbitrator exceeded powers; no evidence of evident partiality; defense not raised below is waived)
William Shirk v. Chicago Title Insurance Co., Case No. B222195 (Cal. Ct. App. Dec. 28, 2010) (affirming confirmation of award; award not procured by fraud; arbitrator did not exceed powers by reserving jurisdiction to decide future indemnity claims)
Class Arbitration:
Louisiana Health Service Indemnity Co. v. Gambro A B, Case No. 05-1450 (USDC W.D. La. Dec. 21, 2010) (denying motion to vacate order compelling class arbitration or limit order to only individual claims; distinguishing Stolt-Nielsen because panel applied FAA law rather than “policy choices”)
Imperfect Execution:
Ewers v. Genuine Motor Cars, Inc., Case No. 1:10 CV 1247 (USDC N.D. Ohio Dec. 10, 2010) (confirming award; denying motion to vacate or modify award; arbitrator did not imperfectly execute powers for failure to provide reasons for award that exceeded treble damages; “arbitrators are not required to explain their decisions” and agreement provided that no written opinion should issue; no manifest disregard of the law)
Consent Award:
American Heritage Life Insurance Co. v. Southwest Reinsure Inc., Case No. 3:10-cv-01040 (M.D. Fla. Nov. 23, 2010) (confirming $3,500,000 consent award)
Finality:
Sensordynamics AG Entwicklungs – UND Produktionsgesellschaft v. Memsco, LLC, Case No. 08-56803 (9th Cir. Dec. 29, 2010) (denying petition to confirm foreign arbitration award; award subject to change is not final and generally not appealable)
This post written by Michael Wolgin.