Confirmation / Vacation of Arbitration Awards

ARBITRATION PROVISION ENFORCED AGAINST NON-SIGNATORY INSURER

July 7, 2016 by Carlton Fields

The court confirmed an award in favor of two affiliated power supplier companies (“Alstom”), against the subrogated insurer of one of their corporate customers damaged in an accident involving Alstom’s equipment. Alstom and the customer had entered into a mutual compromise and release agreement absolving each other of any liability for the accident. But the customer then made a claim with its insurer, Mitsui, which paid the customer in excess of $24 million for damages sustained in the accident. When Mitsui sought to recover this insurance payment from Alstom in court in Brazil, Alstom invoked the arbitration agreement in its supply contract with Mitsui’s insured (the customer), to which Mitsui was not a party. Alstom then compelled arbitration in New York, and prevailed both on the issue of the proper jurisdiction, and on the merits of the dispute. And the court here has confirmed the award, holding that Mitsui “stands in the shoes” of its insured, and is bound to the arbitration agreement reached with Alstom. Alstom Brasil Energia E Transporte Ltda et al. v. Mitsui Sumitomo Seguros S.A., No. 1:15-cv-08221 (USDC S.D.N.Y. June 20, 2016).

This post written by Joshua S. Wirth.

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COURT UPHOLDS ANNULMENT OF FOREIGN ARBITRATION AWARD BASED ON FOREIGN COURT’S FINDING THAT TRIBUNAL VIOLATED RULE ON FEES

July 6, 2016 by Carlton Fields

A U.S. District Court refused to confirm the award that had been entered by an arbitration tribunal in favor of Getma International against the Republic of Guinea. The award had been annulled by the Common Court of Justice and Arbitration (CCJA) when Guinea complained that the tribunal violated the CCJA Arbitration rules in repeatedly seeking increased arbitrators’ fees from the parties. The CCJA granted the annulment, despite the fact that it had previously advised the tribunal on one occasion to consult with the parties regarding increased fees, because only the CCJA had the ultimate authority to order increased fees, not the parties or the tribunal themselves. Undeterred, Getma attempted to confirm the award in the U.S. District Court, contending that the annulment ran contrary to public policy, citing the New York Convention. The court, however, rejected Getma’s argument, finding that the CCJA was within its authority to annul the award and that the annulment was within the CCJA’s discretion. Getma Int’l v. Republic of Guinea, No. 1:14-cv-01616 (USDC D.D.C. June 9, 2016).

This post written by Joshua S. Wirth.

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THE FIFTH CIRCUIT UPHOLDS ARBITRATION AWARD, FINDING THAT ARBITRATOR DID NOT MANIFESTLY DISREGARD THE LAW AND THAT THE AWARD DID NOT VIOLATE PUBLIC POLICY

June 27, 2016 by Carlton Fields

On May 23, 2016, the Fifth Circuit upheld an arbitrator’s approximate $1.45 million award in favor of McKool Smith P.C., a law firm who represented Curtis International Ltd., a Canadian electronics wholesaler, in patent infringement cases.

The background of the case is as follows. McKool Smith represented Curtis in two patent litigations which were filed in 2013, and settled in January 2014. Curtis and McKool Smith then had disputes over unpaid invoices. McKool Smith commenced arbitration, seeking approximately $1.3 million in unpaid legal invoices, plus expert witness fees, along with pre and post-award interest. The arbitrator awarded the firm the full $1.45 million requested. McKool Smith then moved in Texas federal court to confirm the award, but Curtis filed a cross-motion to vacate it, arguing that the award was contrary to public policy, that the arbitrator had exceeded his powers and that the arbitrator had manifestly disregarded Texas state law by allowing the firm to collect fees that involved the use of unauthorized experts and that had been block-billed. The Texas federal court confirmed the award. In particular, the district court found that Curtis’ arguments that the award violated public policy and was in manifest disregard of the law rested on non-statutory grounds for vacatur that the Fifth Circuit had previously foreclosed. Curtis appealed to the Fifth Circuit, asserting that the arbitrator exceeded his powers within the meaning of the Federal Arbitration Act (the “FAA”) because the arbitration agreement between the parties incorporated Texas law, and the arbitrator manifestly disregarded that law in issuing the award and that the award violated public policy.

In an unpublished decision, the Fifth Circuit noted that it had previously held that the statutory grounds set forth in the Federal Arbitration Act (the “FAA”) are the exclusive means for vacatur under the FAA. However, the Court declined to decide whether manifest disregard of law and public policy fall within those FAA’s statutory grounds, saying it “need not decide this issue today.” The Court noted that Curtis had not shown any ground to vacate the award, holding that “Curtis fails to overcome our deferential standard of review and to demonstrate that the arbitrator manifestly disregarded the law or issued the arbitration award in violation of public policy.” Thus, the Fifth Circuit upheld the award. On June 6, 2016, Curtis filed a petition for rehearing, which was denied by the Fifth Circuit on June 21, 2016.

McKool Smith, P.C. v. Curtis International Ltd., No. 15-11140 (5th Cir. May 23, 2016).

This post written by Jeanne Kohler.

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COURT CONFIRMS ARBITRATION AWARD IN CHEMICAL TRANSPORT DISPUTE FINDING NO MANIFEST DISREGARD OF THE LAW

June 16, 2016 by Carlton Fields

ICC Chemical Corporation sued Nordic Tankers Trading A/S concerning a cancelled charter agreement. Per the agreement, Nordic was scheduled to have its vessel present at the port ready to be loaded with ICC’s chemical cargo. The vessel arrived six days late and ICC was forced to pay a higher price for the cargo as a result. Once the vessel arrived, ICC’s inspector tested the vessel’s tanks to avoid blending the chemical cargo. The inspector found some of the tanks to be “off-color.” Nordic attempted to wash the tanks several times, but the tanks continued to fail inspection tests. Nordic rejected further tank cleaning and requested cancellation of the agreement. ICC then initiated arbitration against Nordic alleging that it suffered significant losses as a result of Nordic’s allegedly wrongful cancellation. In arbitration, the panel issued an award in favor of Nordic, finding that they made every possible effort to present a clean and suitable vessel. ICC filed a motion in New York federal court to vacate the award, alleging that the panel committed a manifest disregard of the law by misallocating the burden of proof by requiring ICC to show that the cargo was not contaminated, rather than requiring Nordic to show due diligence in providing a seaworthy ship. The court found, however, that the record did not support an erroneous allocation of the burden of proof; the panel had determined that the dispute surrounded whether the cargo was contaminated, and appropriately placed the burden on ICC to show that it was not. Accordingly, the court found no manifest disregard and confirmed the award. ICC Chem. Corp. v. Nordic Tankers Trading A/S, Case No. 15-cv-9766-KPF (USDC S.D.N.Y. May 12, 2016).

This post written by Michael Wolgin.
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COURT CONSIDERS DEFENSES UNDER BOTH NEW YORK CONVENTION AND THE FAA IN CONFIRMING DOMESTIC ARBITRATION AWARD AGAINST FOREIGN PARTY

June 13, 2016 by Carlton Fields

Immersion Corporation, a U.S. company, had previously entered into a settlement with Sony, a Japanese company, regarding the latter’s alleged patent infringement. Subsequently, a dispute arose surrounding whether Sony was selling a “Royalty Bearing Product” within the meaning of the settlement agreement. An arbitration was held pursuant to the settlement agreement that found in favor of Immersion, which then sought to confirm the award in court. Sony put forth three grounds of opposition to the award: (1) under the New York Convention, the award was contrary to public policy because the arbitrator did not allow Sony to assert an “invalidity” defense; (2) under the FAA, the arbitrator impermissibly refused to hear evidence related to patent infringement that was pertinent and material to the controversy; and (3) under the FAA, the arbitrator committed a manifest disregard of the law “by failing to determine the extent of direct infringement as a necessary predicate for a finding of indirect infringement.”

In ruling on the petition, the court first determined that Sony appropriately argued defenses under both the New York Convention and the FAA. The former was appropriate, the court explained, because Sony is not a U.S. citizen. The FAA defenses were also appropriate under Ninth Circuit precedent because the arbitration had been held in the U.S. The court then turned to the defenses, and determined after a lengthy analysis that public policy had not been violated, that the arbitrator did provide a process to hear material evidence, and that the arbitrator had not committed a “manifest disregard” because it had in fact determined the necessary predicate of indirect infringement under the law. Accordingly, the court confirmed the award and denied Sony’s motion to vacate. Immersion Corp. v. Sony Comp. Entertainment America LLC, et al., Case No. 16-cv-00857 (USDC N.D. Cal. May 19, 2016).

This post written by Michael Wolgin.
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