Confirmation / Vacation of Arbitration Awards

SECOND CIRCUIT REVERSES AWARD OF ATTORNEYS’ FEES FOR CONFIRMATION OF ARBITRAL AWARD

February 18, 2016 by Carlton Fields

The Second Circuit reversed a lower court’s decision granting attorneys’ fees for the cost of confirming an arbitration award. The dispute arose out of a shipping contract for overseas shipping of acrylonitrile, and the defendant in arbitration prevailed. Following arbitration, the district court awarded the prevailing party its fees in seeking to confirm the arbitration award under a provision in the charter agreement awarding fees for a breach of contract. The Second Circuit reversed, finding first that there was no breach of the agreement by the party losing in arbitration. Further, there could be no breach of the agreement by resisting the arbitral award’s confirmation—and even if there was—such a provision would be unenforceable. By agreeing to arbitrate, the parties “also consented to confirmation of the arbitral award in any court of competent jurisdiction,” which the court found to be an effective incorporation of the Federal Arbitration Act into the contract. The Second Circuit went further, however, in holding that any agreement purporting to limit the ability to challenge an arbitration award would be unenforceable because it would “divest the courts of their statutory and common-law authority to review both the substance of the awards and the arbitral process for compliance with § 10(a) and the manifest disregard standard.” Zurich American Insurance Co. v. Team Tankers A.S., No. 14-4036-cv (2d Cir. Jan. 28, 2016).

This post written by Zach Ludens.

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COURT DENIES MOTION TO STAY FURTHER REINSURANCE ARBITRATION PENDING APPEAL CONCERNING INITIAL ARBITRATION

February 16, 2016 by Carlton Fields

At the end of January, the United States District Court for the Eastern District of Michigan denied a motion to stay arbitration pending appeal. The case involves a reinsurance dispute between National Union Fire Insurance Company of Pittsburgh and members of the Meadowbrook Insurance Group. Following an initial arbitration, National Union moved to confirm the award. The court confirmed in part but vacated the portion of the arbitration award dealing with prejudgment interest. As a result, the court ordered the parties to arbitrate the issue of prejudgment interest. Both parties appealed, and National Union filed a motion to amend the judgment and a motion to stay the subsequent arbitration pending appeal.

According to National Union, the parties had already arbitrated the amount and interest in the first arbitration and the district court should have confirmed, vacated, or modified the awards—rather than submitting that question to a new arbitration—which National Union is appealing to the Sixth Circuit. However, the district court noted that the arbitration panel found in favor of National Union “in part because Meadowbrook failed to produce documentation” that would allow it to compute damages and prejudgment interest. Therefore, the district court reasoned, this issue had not already been arbitrated, and National Union was unlikely to succeed on the merits of its appeal. For this reason, among others, the court denied both National Union’s motion to amend the judgment and a motion to stay the subsequent arbitration pending appeal. Star Insurance Co. v. National Union Insurance Co. of Pittsburgh, Case No. 14-12915 (E.D. Mich. Jan. 27, 2016).

This post written by Zach Ludens.

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THIRD CIRCUIT FINDS THAT ALLEGED LEGAL ERRORS DO NOT JUSTIFY VACATUR OF ARBITRATION AWARD

February 15, 2016 by Carlton Fields

The United States Court of Appeals for the Third Circuit recently confirmed an arbitration award in a dispute concerning the ownership of certain music rights, rejecting the argument that alleged legal errors constituted sufficient grounds to vacate the award. The underlying arbitration involved a dispute between The Pullman Group, LLC and its owner, David Pullman (collectively, “Pullman”), and the estates of John Whitehead and Gene McFadden, who were “an integral part of the Philadelphia music scene in the 1970s.” Pullman entered into a contract with Whitehead and McFadden to purchase their song catalogue, but the sale was never finalized. After the musicians passed away, Pullman and the estates agreed to arbitrate their dispute over ownership of the catalogue. An arbitration panel ruled in favor of the estates, and Pullman brought an action in federal court to vacate the award on the grounds that the panel had committed various legal errors.

The district court denied Pullman’s motion to vacate the award, which the Third Circuit affirmed. The court held that mere errors of law are insufficient to warrant vacatur of arbitration award, and that such outcome is only justified where an arbitrator’s legal error is so substantial that a party was deprived of a fair hearing. In this case, that the arbitration panel’s application of New York law and decision to exclude certain testimony was well-founded, and did not arise to the level of misconduct required to vacate the award. The Third Circuit rejected Pullman’s alternative argument that the panel’s ruling amounted to “manifest disregard of the law,” finding that even if this doctrine is still a viable ground to vacate an arbitration award (which the court declined to address), it would not apply because the panel’s decision did not ignore binding legal precedent. Whitehead v. The Pullman Group, LLC, Nos. 15-1627 & 15-1628 (3d Cir. Dec. 10, 2015).

This post written by Rob DiUbaldo.

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PENNSYLVANIA FEDERAL COURT CONFIRMS ARBITRATION AWARD IN FAVOR OF PHILADELPHIA UNION SOCCER TEAM IN WRONGFUL TERMINATION SUIT WITH FORMER COACH

February 4, 2016 by John Pitblado

A Pennsylvania federal court recently confirmed an arbitrator’s decision in a wrongful termination suit which held in favor of the Philadelphia Union soccer team, finding it did not violate former head coach Piotr Nowak’s contractual rights when the team fired him in 2012.

In the order confirming the award, and denying Nowak’s motion to vacate it, the court noted that a federal court’s review of an arbitration award “gives extreme deference” to the arbitrator’s decision and does not “second guess but instead presume[s] the reasoned award is enforceable”.

In the motion to vacate the award, Nowak claimed that the arbitrator was biased and made factual judgments from what Nowak claimed was hearsay evidence in testimony by witnesses. However, the court found that the record revealed that the arbitrator did not misapply the law, noting that the award itself highlighted sufficient independent evidence supporting the arbitrator’s conclusions, including witness testimony from former players, a trainer and Nowak himself. It also found that the award, supported by ample record evidence, was not completely irrational. Finally, the court found that there was no evidence of bias or impartiality on the part of the arbitrator. Thus, because Nowak did not establish any ground for vacatur, the court denied the motion to vacate and granted the motion to confirm the arbitration award.

Piotr Nowak v. Pennsylvania Professional Soccer, LLC, et al., No. 12-4165 (E.D. Pa. Jan. 11, 2016).

This post written by Jeanne Kohler.

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DELAWARE FEDERAL COURT CONFIRMS ARBITRATION AWARD IN COMMERCIAL DISPUTE, FINDING THAT THE FAA STANDARD, AND NOT THE DELAWARE UNIFORM ARBITRATION ACT, GOVERNED THE PARTY’S CHALLENGE

January 28, 2016 by Carlton Fields

Roquette Freres, S.A. and Solazyme, Inc. entered into a Joint Venture Operating Agreement (the “JVOA”), which was established for the purpose of “the research and development, manufacture, distribution, sales, marketing and support” of certain products. The JVOA contained an arbitration provision that required disputes arising out of or connected with the agreement to be resolved under the “Arbitration Rules of the Center for Public Resources in New York”. The JVOA further provided that the arbitration be conducted “according to the laws of the State of Delaware” and that the agreement was “governed and construed in accordance with” Delaware law.

After the arbitration panel ruled in Solazyme’s favor, Roquette moved to vacate the award under Delaware law. Solazyme counterclaimed for confirmation of the award, arguing that the standard set forth in the Federal Arbitration Act (“FAA”) governed Roquette’s challenge. As a threshold matter, the court found that because the JVOA did not specifically reference the Delaware Arbitration Act, and Roquette did not file its action in the Delaware Court of Chancery (as contemplated by the statute), the FAA controlled. Applying the standard set forth by the FAA, the court confirmed the panel’s award and denied Roquette’s motion to vacate because: (1) the panel’s interpretation of the time period in which to render an award, which Roquette argued had not been strictly adhered to, was a procedural issue that required broad deference under the statute and was rationally derived from the JVOA and CPR rules; (2) the panel’s consideration of extrinsic evidence was necessary to resolve the issues in dispute, and thus permissible; (3) alleged “public policy” considerations did not provide the court with a basis to vacate the panel’s ruling as a matter of law; and (4) the relief crafted by the panel, though broad in scope, was based upon the language of the JVOA, and thus within the panel’s authority. Roquette Freres, S.A. v. Solazyme, Inc., No. 1:14-cv-01442 (USDC D.Del. Dec. 21, 2015).

This post written by Rob DiUbaldo.
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