Lewis arbitrated a claim for retaliatory discharge against his employer, Circuit City, and after losing the arbitration on the merits sued Circuit City on the same claim. The same attorney represented Lewis in both proceedings. Circuit City filed a motion to dismiss, which the District Court converted into a motion for summary judgment. The District Court granted the motion, finding that Lewis had not alleged any of the bases for vacating an arbitration award under the Federal Arbitration Act, and that his lawsuit improperly sought to relitigate a claim after a final judgment, contrary to the doctrine of claim preclusion. The Tenth Circuit affirmed, denying sanctions in a case that may have merited sanctions. Lewis v. Circuit City Stores, Inc., No. 05-3383 (10th Cir. Aug. 31, 2007).
Arbitration Process Issues
ARBITRATION PANEL CAN PROCEED TO AN AWARD AFTER ONE MEMBER RESIGNS
In Zeiler v. Deitsch, No. 06-1893 (2d Cir. Aug. 23,2007), the Court held that an arbitration panel composed of three rabbis could proceed to make an award after one member had resigned from the panel, because the arbitration agreement permitted that result. The Court also affirmed the confirmation of various accounting awards. This opinion is somewhat unique in that the arbitration was governed by Jewish law. The Court also stated, however, that the result would have been the same had the Federal Artbitration Act controlled.
COURT OF APPEALS HOLDS THAT ARBITRATION AGREEMENT DEADLINES TO BE STRICTLY ENFORCED
The US Court of Appeals for the Seventh Circuit has held that time deadlines in arbitration agreement must be strictly enforced, affirming a District Court decision previously reported on in this blog in December 11, 2006 and August 24, 2006 posts. The dispute arose out of the timing of appointing an arbitrator in an international arbitration.
The Seventh Circuit affirmed a district court’s ruling that when Argonaut, a California-based insurer, missed the deadline for appointing one of the arbitrators in an international arbitration, it lost its right to appoint an arbitrator. The arbitration agreement required that the parties make their appointments by a certain time. The appointment deadline fell on the Sunday of Labor Day weekend. When Argonaut did not appoint its arbitrator, Lloyd’s appointed an arbitrator for that position on the panel, giving it two party-appointed arbitrators. Argonaut argued that in light of the holiday, the notice it gave on the Tuesday after Labor Day was a “timely nomination” of the arbitrator. The court disagreed, holding that “[i]n the absence of a choice-of-law provision, we conclude that parties are to be bound to the explicit language of arbitration clauses, with no state-specific exceptions that would extend otherwise clear contractual deadlines.” Certain Underwriters at Lloyds v. Argonaut Ins. Co., No. 04 c 5852 (7th Cir. Aug. 29, 2007).
COURT ENFORCES LIMITATIONS ON DISCOVERY IN CONNECTION WITH RULE 60 MOTION
This case presents an interesting arbitration process issue. In 2004, the parties to this action participated in an arbitration, resulting in a $10,000 award to defendant, Smith Barney. Subsequently, plaintiff filed an action to vacate, and defendant moved to confirm the award. In February, 2005 a California district court confirmed the arbitration award. Plaintiff then filed a motion under Rule 60 of the Federal Rules of Civil Procedure to vacate that order, and later filed a Renewed Rule 60 Motion. The renewed motion was filed on the grounds that defendant and its counsel had committed “fraud. . . misrepresentation or other misconduct” by making material misrepresentations to the court. Plaintiff also sought discovery under its motion on the basis of newly discovered case law and evidence. The court granted “limited’ discovery. Plaintiff proceeded to use the limited permission granted by the court to “bombard” Defendant with voluminous discovery. Concluding that the Plaintiff’s discovery requests were “inappropriate in breadth” and “went well beyond the limited subjects referred to in the court’s. . . [o]rder,” the Court denied plaintiff’s motion to compel and granted Smith Barney’s motion for protective order. Sathianathan v. Smith Barney, Case No. C-04-02130 SBA (JCS) (N.D. Cal. Aug. 24, 2007).
ILLINOIS FEDERAL COURT RULES PARTY’S CONSENT TO JURISDICTION OF STATE COURT IS NOT A WAIVER OF THE STATUTORY RIGHT TO REMOVE
Plaintiff, Continental Casualty Company’s (“CCC”) and defendant, LaSalle Re Limited (“LaSalle Re”) were parties to several reinsurance agreements, including one Excess of Loss Retrocession Agreement which contained an arbitration clause. In April 2004, the parties executed a Release Agreement, terminating all obligations under the Reinsurance Agreements. Pursuant to the Release Agreement the parties consented to the jurisdiction of Illinois courts in connection with any legal action arising out of the Agreement.
A dispute subsequently arose pertaining to the Retrocession Agreement, and LaSalle Re made a demand for arbitration. In response, CCC filed an action in Illinois state court seeking a declaration of its rights under the Release Agreement. Specifically, CCC argued that the Release Agreement extinguished all obligations under the Retrocession Agreement, including the obligation to arbitrate. Subsequently, LaSalle removed the case to federal court and CCC filed an emergency motion for remand. CCC argued that the forum selection clause in the Release Agreement prevented the case from proceeding in federal district court. The court disagreed and denied CCC’s motion concluding that “[a] general consent to the jurisdiction of a particular court does not. . . adequately demonstrate a waiver of defendant’s statutory right to remove.” Continental Casualty Co. v. LaSalle Ltd., Case No. 07 C 4228 (N.D. Ill. Aug. 16, 2007).
Nine days later, CCC filed a motion in the federal court to stay the arbitration proceedings. (see CCC’s Motion to Stay Arbitration and CCC’s Memorandum of Law in Support of Motion to Stay Arbitration). In connection with its motion, CCC attached copies of the Arbitration Request and the Retrocession Agreement as exhibits to the Amended Complaint (See Ex. 1). To date, the court has not ruled on this motion.