Confirmation / Vacation of Arbitration Awards

A single arbitrator heard evidence on claims for monies allegedly due under a facultative reinsurance contract. The arbitrator entered a partial final award, finding liability for indemnity payments, no liability for certain defense costs and requiring supplemental submissions on the amount of the indemnity and cost obligations. The parties moved for confirmation or vacation of this award, and the court declined to act, stating that the award was not yet final. The court remanded the matter to the arbitrator for further proceedings. On remand, the arbitrator held to his indemnity determination but decided that further submissions justified an award of defense costs. A final award was entered for $3 million, plus interest. The prevailing party sought to confirm the award, and the losing party contended that the partial award was final as to the defense cost issue, and the arbitrator did not have authority to change that ruling under the doctrine of functus officio. The court held that the partial award was not final, and hence the doctrine did not apply, and confirmed the final award, entering final judgment on the award. Employers' Surplus Lines Ins. Co. v. Global Reinsur. Corp., Case No. 07-2521 (USDFC S.D.N.Y. Feb. 2008).

This post written by Rollie Goss.

Plaintiffs allegedly suffered losses relating to stock options in WorldCom stock. They filed an NASD arbitration asserting claims, and were members of a class certified with respect to WorldCom stock losses. The class action settled and the proposed settlement received final approval one month before the arbitration hearing. The Claimants in the arbitration were members of the settlement class and had not excluded themselves from the class. The settlement's final approval Order included a fairly typical release of claims and an injunction against class members maintaining or participating in legal proceedings seeking to pursue claims that were released by the settlement. The arbitration proceeded, and Claimants recovered an award, at least part of which was for losses released by the class settlement. Both the District Court and the Court of Appeals found that the award should be vacated to the extent that it awarded damages for claims that had been released by the class settlement. Rich v. Spartis, No. 06-1723 (USCA 2d Cir. Feb. 8, 2008).

This post written by Rollie Goss.

During January 2008, five of the US Courts of Appeal addressed issues relating to the vacation of arbitration awards in six different cases, with a district court also entering this arena. This is an unusual concentration of appellate activity in this area, and the cases addressed different bases for vacating arbitration awards:

• In Long John Silver's v. Cole, No. 06-1259 (USCA 4th Cir. Jan. 28, 2008) the court affirmed a district court decision confirming an arbitration award over objections that the arbitrator had manifestly disregarded controlling legal principles and exceeded his scope of authority. The arbitrator had followed the American Arbitration Associations class action rules to certify an opt-out arbitration class of labor claims, rather than certifying an opt-in class pursuant to the Fair Labor Standards Act.
• In Howard Univ. v. Metropolitan Campus Police Officer's Union, No. 07-7055 (USCA D.C. Cir. Jan. 18, 2008) the court affirmed a district court decision confirming an award over objections that the arbitrator did not have jurisdiction to resolve the dispute and engaged in misconduct by excluding certain evidence. The court found the jurisdictional objection was waived when it was not raised during the arbitration, and that the evidentiary decision did not prejudice the right of the parties to a fundamentally fair hearing.
• In Uhl v. Pacific Employer's Ins. Co., No. 07-1044 (USCA 6th Cir. Jan. 9, 2008) the court affirmed the decision of the district court (reported in a January 4, 2007 post to this blog) confirming an award over the objection that the undisclosed fact that one of the arbitrators had served as co-counsel in another matter with counsel for one of the parties in the arbitration, since the objecting party had failed to establish specific facts that indicated improper motives on the part of the arbitrator.
• In Sherrock Bros., Inc. v. DaimlerChrysler Motors Co., No. 06-4767 (USCA 3d Cir. Jan. 7, 2008), the court affirmed the decision of the district court (reported in a October 31, 2006 post to this blog) confirming an award over two objections: (1) that the arbitration panel's rulings on res judicata, collateral estoppel and waiver were in manifest disregard of the law; and (2) that the use of a summary judgment procedure to dispose of the claims was error.
• In Truck Drivers Local v. Allied Waste Systems, Inc., No. 06-1572 (USCA 6th Cir. Jan. 4, 2008) the court reversed the decision of a district court (reported in a October 31, 2006 post to this blog) which vacated an award, finding that one of its own recent decisions “refined” the scope of review of labor arbitration awards, such that the arbitrator did not exceed his authority by making an interpretive error, and since the arbitration agreement did not clearly and consistently limit the arbitrator's authority in the manner contended for by the party seeking to vacate the award.
• In Hall v. American General Financial Service, Inc., No. 06-1768 (USCA 8th Cir. Jan. 29, 2008), in a very perfunctory opinion, the court affirmed a decision confirming an award, stating the the party objecting to the award had not demonstrated that the award was completely irrational or in manifest disregard of the law.
• In Nationwide Mut. Inc. Co. v. Randall & Quilter Reinsur. Co., Case No. 07-120 (USDC S.D. Ohio Jan. 24, 2008), the court confirmed an award, which had already been paid. The issue was whether the award should be confidential, when there was no written confidentiality agreement, only a discussion of confidentiality at one of the arbitration hearings. The court found that since the parties had not consented to the confirmation of oral awards, the court was not authorized under section 9 of the Federal Arbitration Act to confirm a purported oral confidentiality order. See a September 5, 2007 post to this blog for an earlier ruling in this case.

This post written by Rollie Goss.