Arbitration Process Issues

NINTH CIRCUIT AFFIRMS SUMMARY JUDGMENT IN CHALLENGE OF ARBITRATION AWARD

February 13, 2009 by Carlton Fields

Collier appealed from the district court’s sua sponte grant of summary judgment, confirming an arbitration award. Finding the case suitable for decision without oral argument, the Ninth Circuit concluded that summary judgment was properly granted because Collier initiated and fully participated in arbitration proceedings and, as a consequence, waived any argument that the dispute was not arbitrable. Additionally, the Ninth Circuit affirmed the district court’s conclusion that Collier failed to satisfy the statutory requirements to vacate or modify the arbitrator’s award. This opinion demonstrates the importance of preserving objections to the arbitration process. Collier v. State of New York, No. 07-55474 (9th Cir. Jan. 15, 2009).

This post written by Dan Crisp.

COURT GIVES PARTIES A DEADLINE TO APPOINT A THIRD ARBITRATOR

February 12, 2009 by Carlton Fields

National Casualty Company (“NCC”) filed a complaint in federal court against several of its reinsureds (collectively, “MMO”) alleging that, under the treaties, MMO’s demand for arbitration was ineffective to commence arbitration. Specifically, NCC claimed the demand for arbitration was not properly served and did not identify the dispute with sufficient particularity. Further detail regarding this dispute is set forth in the Complaint and in the memoranda in support of and in opposition to MMO’s Motion to Stay or Dismiss, Compel Arbitration and Appoint an Arbitrator.

When the arbitrators appointed by the parties failed to agree on a third arbitrator, the court held a telephone conference with the parties. The court then stated its preference that, pursuant to the parties’ agreements, the previously selected arbitrators choose a third arbitrator by December 23, 2008, failing which the court would appoint a third arbitrator, giving consideration to the names submitted by the parties. Finally, the district court ordered the action dismissed with prejudice. National Casualty Co. v. Mutual Marine Office, Inc., Case No. 08-8062 (USDC S.D.N.Y. Dec. 11, 2008).

This post written by Dan Crisp.

COURT GRANTS MOTION TO SEAL ARBITRATION AWARD

February 10, 2009 by Carlton Fields

Parties to a reinsurance agreement arbitrated a claims dispute, agreeing that the final award and all “arbitration information” be kept confidential. The prevailing party moved to confirm the award and to seal the award. The court found that there was a strong presumption of access to court records, and that the award should be sealed only if there was a showing that the material was of the kind of information that courts will protect, and that disclosure would work a clearly defined and serious injury to the party seeking closure. Evaluating the factors to be considered in evaluating a request to seal a portion of a court record set forth by the Third Circuit, the court found that the award should be sealed. Century Indem. Co. v. Certain Underwriters at Lloyd's, London, Case No. 08-219 (USDC E.D. Pa. Jan. 12, 2009).

This post written by Rollie Goss.

THIRD CIRCUIT AFFIRMS ENFORCEMENT OF ARBITRATION AWARD

February 4, 2009 by Carlton Fields

United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union (“United”) brought an action in the Western District of Pennsylvania to enforce an arbitration award directing Neville Chemical Company to reinstate and make whole an employee it had improperly discharged. This appeal followed the District Court’s Orders granting United’s motion for summary judgment and ordering Neville to pay damages including back pay.

The Third Circuit held that because Neville failed to raise the argument of that the employee was physically unable to work during the arbitration, it had waived the physical limitations defense to the enforcement of the arbitration award. The Third Circuit cited its previous decision in United Food and Chemical Workers Union Local 1776 v. Excel Corp., 470 F.3d 143 (3d Cir. 2006) noting that “‘the long-established federal policy of settling disputes by arbitration would be seriously undermined if parties kept available information from the arbitrator and then attempted to use the information as a defense to compliance with an adverse award.’” The Court further noted that the argument had not been timely raised under Pennsylvania law and that the back-pay damages imposed by the District Court did not amount to a second opportunity to receive unemployment compensation. United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union v. Neville Chemical Co., No. 07-3554 (3d. Cir. Oct. 30, 2008).

This post written by John Black.

COURT COMPELS TRUSTEE OF TRUST AGREEMENT INCORPORATED INTO REINSURANCE CONTRACT TO ARBITRATION

January 26, 2009 by Carlton Fields

Homestead Insurance Company (“Homestead”) entered into a reinsurance contract with Interstate Guaranty Insurance Company (“Interstate”). Under applicable Georgia insurance regulations, Interstate was required to place funds in a trust for Homestead’s benefit to protect Homestead in case Interstate became insolvent. Thereafter, Homestead, Interstate and Wachovia Bank entered into a trust agreement, with Wachovia serving as Trustee. The trust agreement contained provisions incorporating it into the reinsurance contract. The reinsurance contract contained an arbitration clause mandating arbitration as a condition precedent to a lawsuit where disputes arose concerning either “the interpretation of [the reinsurance] Agreement” or the “rights of either party” thereunder.

After dispute arose between Homestead and Wachovia pertaining to Wachovia’s conduct as Trustee, Homestead filed an action in New Jersey state court (which was ultimately removed and transferred to Georgia federal court) to compel Wachovia to arbitration as required under the reinsurance contract. Wachovia argued that it was not a party to the reinsurance contract, and thus was not bound by the provision mandating arbitration. However, the court agreed with Homestead, citing terms of the trust agreement that indicated the parties’ intent to incorporate it in its entirety into the reinsurance contract, and finding that the Trust Agreement incorporated by reference the arbitration clause of the Reinsurance Agreement. The court found that the interpretation of the Trust Agreement came within the scope of arbitrable issues. After the court denied Wachovia’s motion to reconsider, Homestead dismissed the case with prejudice. Homestead Insurance Company v. Wachovia Bank, N.A., Case No. 07-2821 (USDC N.D. Ga. 2008).

This post written by John Pitblado.