Confirmation / Vacation of Arbitration Awards

ELEVENTH CIRCUIT CONCLUDES IT LACKS JURISDICTION OVER APPEAL OF ORDER COMPELLING ARBITRATION BUT CONFIRMS ORDER CONFIRMING ARBITRATION AWARD

January 12, 2016 by Carlton Fields

This appeal is from two orders by a district court in Alabama. The first order in June 2012 compelled arbitration of a dispute between the parties, the Union and Wise Alloys. The second order in December 2014 enforced the resulting arbitration award in the Union’s favor, but denied the Union’s request for attorneys’ fees. Wise Alloys appealed both the June 2012 and December 2014 orders, and the Union appealed the aspect of the December 2014 which denied its motion for attorneys’ fees. The procedural history and issues involved in the underlying case can be found here.

The Eleventh Circuit held that it lacked jurisdiction over the appeal of the June 2012 order which compelled arbitration because no notice of appeal was filed within 30 days of that order. The Court noted that the June 2012 order was a final decision and was appealable, and the fact that the order stayed the litigation (and did not dismiss it) did not impact the finality of the order compelling arbitration. Thus, because Wise Alloys did not file its notice of appeal within 30 days of the order, the Court had no jurisdiction over that aspect of the appeal.

With respect to Wise Alloys’ appeal of the December 2014 order and its challenge to the arbitration award based on its view that the arbitrator exceeded his authority, the Eleventh Circuit noted that its judicial review of arbitration awards is limited and that it specifically reviews a labor arbitration award for “whether [it] is irrational, whether it fails to draw its essence from the collective bargaining agreement or whether it exceeds the scope of the arbitrator’s authority.” Thus, under this standard, the Eleventh Circuit agreed with the district court that the arbitrator’s interpretation of the agreement, even if incorrect, was not an impermissible amendment or change to the agreement. It also held that the arbitrator was permitted to resort to extrinsic evidence to interpret an ambiguity he concluded was in the agreement. Accordingly, the Court affirmed the district court’s December 2014 order, confirming the arbitration award. In addition, it also confirmed the portion of the order denying the Union’s request for attorneys’ fees. United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers Int’l Union, et al. v. Wise Alloys, LLC, No. 14-15744 (11th Cir. Dec. 8, 2015).

This post written by Jeanne Kohler.
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COURT CONFIRMS FINAL ARBITRATION AWARD IN REINSURANCE DISPUTE

January 7, 2016 by Carlton Fields

Certain Underwriters at Lloyd’s of London petitioned the U.S. District Court for the District of Massachusetts to confirm an award issued by a three-member panel in an arbitration against Transport Insurance Company. The arbitration involved aggregation and allocation disputes related to certain billings submitted by Transport to Underwriters under various excess of loss reinsurance treaties. In 2014, the panel issued an interim award that imposed prospective obligations on the parties. Thereafter, a dispute arose between them regarding a revised billing submitted by Transport, resulting in the issuance of a final award that incorporated the panel’s interim ruling by reference. Underwriters moved to confirm under Section 9 of the Federal Arbitration Act, and, specifically, Chapter 2 of that Act, 9 U.S.C. §§ 201-208, which provides for enforcement of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (and applied, as the arbitration involved UK syndicates). The District Court granted Underwriter’s motion and entered judgment consistent with the final award. Certain Underwriters at Lloyd’s, London v. Transport Insurance Co., No. 1:15-cv-12313 (USDC D. Mass. Nov. 20, 2015).

This post written by Rob DiUbaldo.

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STATE STATUTE OF LIMITATIONS FOR RECOGNITION OF FOREIGN JUDGMENTS HELD NOT PREEMPTED BY FAA

December 31, 2015 by Carlton Fields

National Aluminum Co., Ltd. (“NALCO”) prevailed in arbitration held in India against Peak Chemical Corp. in 2005. Ultimately, the award was affirmed on appeal by an Indian court in February 2012. When earlier this year, NALCO attempted to enforce the Indian judgment in a federal district court in Illinois, Peak contended that the judgment was barred by the FAA’s three-year statute of limitations for the recognition of international arbitration awards. The court, however, agreed with NALCO, which distinguished the recognition of the award itself from the recognition of the Indian judgment affirming the award; while the former may be time barred, the latter was still enforceable under Illinois’ 15-year statute of limitations for the enforcement of foreign judgments. The court observed that there was “little case law on the issue,” but that case law from other courts, as well as policy considerations, supported its determination that the FAA does not preempt a state’s power to recognize a former judgment. The court then rejected Peak’s alternative arguments attempting to preclude the recognition of the foreign judgment under Illinois law. National Aluminum Co., Ltd. v. Peak Chemical Corp., Inc., Case No. 1:14-cv-01314 (USDC N.D. Ill. Sept. 23, 2015).

This post written by Michael Wolgin.

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ARBITRATION AWARD THAT ATTEMPTED TO INDIRECTLY ADJUDICATE NON-PARTY VACATED AS EXCEEDING ARBITRATOR’S AUTHORITY

December 10, 2015 by Carlton Fields

The dispute involved whether a defense contractor, its owners, and its captive insurance companies (collectively, “OSI”) were entitled to a return of their premiums from a non-party insurer (“PoolRe”) that serviced a risk pool in which OSI had decided not to participate. This unsuccessful risk pool arrangement had been arranged by a law firm and related companies (collectively, “Capstone Companies”) that were responsible for forming and administering the captives. Following a contested arbitration in Texas, which culminated in an award that was vacated, and a concurrent Delaware litigation that culminated in a dismissal in favor of a second arbitration in Delaware, a Delaware arbitrator awarded OSI reimbursement of the premiums it had paid to non-party PoolRe. However, since PoolRe was not a party to the agreement between OSI and Capstone Companies, the arbitrator exercised its equitable powers and ordered the Capstone Companies “to arrange for the payment” from PoolRe to OSI.

Capstone Companies moved to vacate the award, and the Delaware district court granted the motion, ruling that the arbitrator exceeded his authority by awarding relief against non-party PoolRe. While the award did not technically require any action on the part of PoolRe because all the obligations were imposed upon the Capstone Companies to arrange for payment, the court found that the award effectively imposed an obligation upon a non-party. The court was also persuaded by the fact that a separate arbitration proceeding was pending between OSI and PoolRe before the International Chamber of Commerce, and the Delaware award’s attempt to adjudicate PoolRe through Captstone could result in a conflicting award. Hendricks, et al. v. Feldman Law Firm LLP, et al., Case No. 1:14-cv-00826 (USDC D. Del. Sept. 25, 2015).

This post written by Barry Weissman.

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COURT VACATES ARBITRATION DECISION THAT ALLOWED CLASS MEMBERS TO OPT-OUT OF INJUNCTIVE RELIEF CLASS, FINDING ARBITRATOR EXCEEDED HER AUTHORITY AND MANIFESTLY DISREGARDED LAW

December 7, 2015 by Carlton Fields

Reviewing a previously conferred arbitration award, a district court in New York granted defendant Sterling Jewelers’ motion to vacate the decision to the extent that it would have allowed class members the opportunity to opt-out. In 2008, plaintiff Laryssa Jock and others sued defendant for sex discrimination. After significant motion practice and discovery that extended multiple years, an arbitrator certified a class for declaratory and injunctive relief claims. The arbitrator subsequently allowed class members the opportunity to opt-out.

On review, defendant first alleged that the arbitrator exceeded its authority to certify a class by binding over 40,000 absent class members, and not just those class members whom had affirmatively opted-in to the class or whom were represented by counsel in the arbitration. The court did not find this argument persuasive noting that all class members agreed to arbitration in prior employment agreements thereby granting an arbitrator the power over absent class members. The court did find, however, that the arbitrator exceeded her authority and manifestly disregarded the law by permitting class members to opt-out of injunctive and declaratory relief based on Rule 23(b)(2). The court found that under Rule 23, “the relief sought must perforce affect the entire class at once.” Instead, the arbitrator failed to consider the U.S. Supreme Court’s Wal-Mart v. Dukes decision, whereby “opt-out classes may not be certified for the purposes of seeking classwide injunctive relief.” For these reasons the court vacated the class determination award’s opt-out provision for injunctive and declaratory relief but upheld the rest of the award. Jock v. Sterling Jewelers, Inc., Case No: 08 Civ. 2875 (JSR) (USDC S.D.N.Y. Nov. 16, 2015).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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