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.
Arbitration Process Issues
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.
COURT ORDERS ‘UNSEALING’ OF DOCUMENTS DESPITE POSSIBLE CONFIDENTIALITY AGREEMENT IN UNDERLYING ARBITRATION
This action arose out of an arbitration proceeding between petitioner, Nationwide Mutual Insurance Company (“Nationwide”), and Respondent R&Q Reinsurance Company (“R&Q”). The arbitration was resolved in Nationwide’s favor and Nationwide filed a petition to enforce the arbitration award. Shortly afterwards, R&Q filed a motion for leave to file a motion for summary judgment under seal. Nationwide objected to the filing of the motion under seal on the grounds that a confidentiality order was never in effect during the arbitration, and in the alternative, R&Q waived compliance with the order by filing documents in the court given the presumption that all documents filed in court will be open to the public.
The court found the latter argument dispositive, concluding that “the public interest in access to court records outweighs any prejudice to R&Q from unsealing its filing.” This decision illustrates the importance of properly documenting and implementing any desired confidentiality restriction. Nationwide Mutual Ins. Co. v. Randall & Quilter Reinsurance Co., Case No. 2:07-cv-0120 (S.D. Ohio Aug. 10, 2007).