Construing the Wisconsin arbitration statute, the Wisconsin Supreme Court vacated an arbitration award in a dispute between Allstate Insurance Company and a policyholder on the basis that a party-appointed arbitrator demonstrated evident partiality. Borst v. Allstate Insurance Co., Case No. 2004 AP 2004 (Wisc. June 13, 2006). The arbitrator appointed by Allstate was an attorney who had a “substantial, ongoing attorney/client relationship with Allstate.” Even though the relationship was disclosed, and all parties were aware of the relationship going into the arbitration hearing, the Court found that disclosure and knowledge did not avoid the prohibition of such a relationship under Wisconsin law. The Court also strictly limited the permissible discovery depositions to those permitted by the Wisconsin statute.
Arbitration Process Issues
At the request of the sole member of a Lloyd's syndicate that is in run-off, the London Commercial Court has issued an injunction to restrain a party to a UK arbitration from seeking to intervene in a related action pending in a United States District Court, in which it would seek to restrain the Claimant in the UK arbitration from proceeding with the UK arbitration. ,  EWHC 1730 (Queen's Bench Div. Commercial Court July 12, 2006). The Court held that the parties were obligated to arbitrate in the UK, as contractually agreed. This is an interesting example of a jurisdictional conflict between two countries.
The United States Court of Appeals for the Eleventh Circuit, in B. L. Harbert International, LLC v. Hercules Steel Co., Case No. 05-11153 (11th Cir. Feb. 28, 2006), in a non-reinsurance case, strongly endorsed the finality of arbitration under the Federal Arbitration Act, by affirming the confirmation of an arbitration award (and the denial of a motion to vacate the award). The Court obviously believed that the Appellant appealed merely because it disagreed with the arbitration decision. The Appellant contended that the arbitration award reflected a manifest disregard for the law, which the Court held was an exceptional circumstance requiring clear evidence that an arbitrator was conscious of the law and deliberately disregarded it. Concluding that the proof did not come close to satisfying this standard, the Court considered imposing sanctions on Appellant for the appeal, voicing a strong disapproval for continuing arbitration proceedings through post-award court challenges.
The Seventh Circuit, in a case involving an appeal from an arbitration award in an NASD securities case, stated that “[i]t is tempting to think that courts are engaged in judicial review of arbitration awards under the Federal Arbitration Act, but they are not” due to the narrow grounds for vacating such an award. The Court affirmed the confirmation of an award entered by a panel based upon a motion for summary judgment by the Respondent after the Claimant had presented his case, rejecting the contention that there was no evidence to support the award. Noting that the non-statutory “manifest disregard of the law” basis for vacating an award is limited to matters in which the arbitrators “direct the parties to violate the law,” the Court deferred to whatever inferences the arbitrators might have drawn from what the evidence presented shows, and what it omits. Wise v. Wachovia Securities, Case No. 05-2640 (7th Cir. June 7, 2006). Since the Respondent had not presented any evidence prior to the decision on the merits by the panel, this case demonstrates very substantial deference by a court to an arbitration panel's determination of facts and the sufficiency of evidence.
The United States Court of Appeals for the District of Columbia Circuit, in a securities case, affirmed the refusal of a District Court to vacate an arbitration award. Appellant conceded that none of the four bases for vacating an award articulated by the Federal Arbitration Act were present, but contended that the award should be vacated nevertheless because the award was “in manifest disregard of the law.” The Court described this standard as requiring that a panel ignore well defined, explicit law that was clearly applicable to the case, and that decisions based upon debatable points of law and disputed issues of fact did not satisfy this standard. Kurke v. Oscar Gruss and Son, Inc., Case No. 05-7018 (D.C. Cir. July 18, 2006).