A District Court in the Sixth Circuit has confirmed an arbitration award in a products liability injury matter, rejecting a contention that the award should be vacated due to the failure of one of three arbitrators to disclose that he had been counsel of record in several cases years ago in which counsel for one of the parties to the arbitration was either co-counsel or counsel for another party. The Court found that the Sixth Circuit had stated that the review of an arbitral award is governed by “one of the narrowest standards of judicial review in all of Ameican jurisprudence.” The Court found that no reasonable person would find that the presence of the two attorneys in the same lawsuits constituted a conflict of interest or resulted in bias, fraud or corruption. Uhl v. Komatsu Forklift Co., Case no. 04-10148 (USDC E.D. Mich. Dec. 8, 2006).
Confirmation / Vacation of Arbitration Awards
Quoting from one of its own 2004 opinions, the Fifth Circuit has elaborated upon the standard for finding that an arbitration award is in manifest disregard of law, holding that such a finding requires proof of two elements: (1) that the legal error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator; and (2) that the award results in a significant injustice. The first element includes a need to demonstrate that the arbitrator appreciated the existence of a clearly governing principle of law, but decided to ignore or pay no attention to such principle. The arbitration hearing at issue was not reported. The Court concluded that “[h]aving failed to secure a record of the arbitration proceedings, and without any evidence that the arbitral panel was aware of the Fifth Circuit standard [for awarding attorneys' fees], OneBeacon cannot make this showing, so its claim that the award was in 'manifest disregard' of the law fails ….” OneBeacon America Ins. Co. v. Turner, Case No. 06-20302 (5th Cir. Oct. 30, 2006).
Two recent opinions continued the trend of courts confirming arbitration awards over a variety of objections:
- In , (USDC W.D. Wash. Nov. 14, 2006), an NASD arbitration award was confirmed over contentions that it was irrational and exhibited a manifest disregard of law. The Court found that the Petition to Vacate the award merely complained about evidence rulings by the Arbitration Panel and its weighing of the evidence.
- In , (USDC D. Del. Nov. 3, 2006), an arbitration award relating to a shareholder agreement was confirmed, rejecting five grounds proposed for the vacation of the award: (1) the arbitrator exceeded his authority by rejecting the “binding valuation” of the objector's accountant; (2) the award contained “evident material miscalculation of figures;” (3) the arbitrator refused to consider pertinent evidence, amounting to a manifest disregard of law; (4) the arbitrator refused to consider an alleged breach of a contractual provision; and (5) the arbitrator exceeded his authority with respect to attorneys' fees and costs.
These opinions are further examples of courts viewing such complaints as nothing more than impermissible re-argument of the merits of the arbitration under different guises.
Noble Assurance Company insured its parent, Shell Petroleum, Inc., and reinsured the risks with Gerling-Konzern General Insurance Co – UK. When a dispute arose over the reinsurance, the parties arbitrated the dispute in London. The Panel ruled in Nobel's favor, and Gerling then filed suit in US District Court in Vermont against Noble and Shell, seeking rescission of the reinsurance agreement, vacature of the London arbitration award on the basis that it violated public policy and was issued in manifest disregard of the law and declarations that various contracts were void. In a preliminary ruling, the District Court permitted jurisdictional discovery as to the claim against Shell, denied Gerling's motion for summary judgment and granted Noble's motion to dismiss in part. The fundamental issue of whether the US court action could attack the London arbitration award was not presented in these motions. Gerling-Konzern General Ins. Co – UK v. Noble Assurance Co., Case No. 06-76 (D. Vt. Nov. 1, 2006). It will be interesting to follow this action, since it appears to be, at least in significant part, a collateral attack on the London arbitration award.
A District Court has denied a motion to vacate an arbitration award in a securities matter entered by an NASD panel, which sought vacation on the following grounds: (1) the award was irrational, in light of the evidence presented; (2) the Panel improperly refused to hear the rebuttal testimony of an expert; and (3) one of the arbitrators exhibited evident partiality. The Court concluded that the “irrationality” argument amounted to nothing more than a disagreement with the arbitrators' decision, that the evidence ruling was within the discretion of the Panel and that there was insufficient evidence of evident partiality. The court noted that “[a]s long as there is some basis for the arbitrators' decision, no matter how 'slender' that basis may be, the award must be confirmed.” Edward Mellon Trust v. UBS Painewebber, Inc., Case No. 06-0184 (USDC W.D. Pa. Nov. 6, 2006).