Confirmation / Vacation of Arbitration Awards

Late last month, the Second Circuit Court of Appeals summarily affirmed denial of a petition to vacate an arbitration award where a party was arguing that the arbitrator was biased. The case involved a dispute between an Israeli medical device company and a New York-based investment company and whether the medical device company owed a fee when it located an investor. The investment company argued that “the Arbitrator’s procedural rulings and fee award in [the medical device company]’s favor, along with her professional affiliations, evince[d] partiality.” The investment company attempted to point to the facts that (i) the arbitrator struck six of its ten document requests and refused to grant it an extension of time to engage an expert witness and (ii) the arbitrator came from the International Chamber of Commerce, where two attorneys of the medical device company were affiliated, neither of which the trial court accepted as bases for vacating the arbitration award. The Second Circuit entered an order summarily affirming. Landmark Ventures, Inc. v. InSightec, Ltd., No. 14-4599-cv (2d Cir. Oct. 30, 2015).

This post written by Zach Ludens.

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A Texas district court denied Curtis International, Ltd.’s (“Curtis”) counter-motion to vacate an arbitration award in a row over attorney and expert witness fees and expenses. Curtis, a manufacturer and distributor of electronic and home appliances, retained McKool Smith as counsel to handle several patent infringement lawsuits. Upon settlement of these underlying actions, McKool Smith sought over $1.4 million dollars in unpaid legal fees and expert witness expenses. An arbitrator awarded McKool Smith fees and expenses with interest, after the dispute stalled at mediation. Curtis sought to vacate the award based on public policy, arbitrator authority, and manifest disregard of the law concerns.

Curtis argued that the arbitrator award conflicted with the Texas Disciplinary Rules of Professional Conduct in contravene to Texas public policy. The court quickly dismissed this argument finding that “[t]he Fifth Circuit has foreclosed the use of non-statutory grounds for vacatur, including public policy grounds.” The court again invoked the Fifth Circuit regarding manifest disregard of the law, finding the ground invalid when applying for vacatur. The court finally addressed Curtis’ concerns that the arbitrator exceeded his authority. The court noted that the engagement agreement between the parties explicitly stipulated that Curtis would be responsible for the expenses incurred by the use of expert witnesses. The court also found that contrary to Curtis’ assertions, McKool Smith did discuss the use and retention of expert witnesses. For these and other reasons, the court denied Curtis’ motion and confirmed the arbitration award. McKool Smith, P.C. v. Curtis Int’l, Ltd., No. 3:15-cv-01685-M (N.D. Tex. Oct. 14, 2015)

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

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A broker sought to vacate his FINRA compensatory damages award against a broker/dealer because the award did not include his attorney’s fees. The broker believed he was entitled to those fees as the “prevailing party” within the meaning of his contract with the broker/dealer. The broker argued that the panel exceeded its authority and manifestly disregarded the law by ignoring the contract and failing to award fees. The court, however, found that the panel did not exceed its authority because the panel’s authority was to award fees to the prevailing party, the panel had “interpreted that authority to include authority to award no fees,” and the panel was “arguably construing the contract before it and acting within its scope.” The court further found that the panel did not manifestly disregard the law because the panel never declared the broker to be the “prevailing party,” and the panel “was well within the limits of California law in deciding that despite recovering some damages, [the broker] was not a prevailing party, and was thus not entitled to attorney’s fees as a matter of right.” Lehner v. LPL Financial, LLC, Case No. 1:15-cv-01178 (USDC N.D. Ohio Aug. 7, 2015).

This post written by Michael Wolgin.

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The U.S. Court of Appeals for the Eighth Circuit upheld a federal district court’s enforcement of an arbitration award after finding that the Appellant’s claims were precluded by foreign proceedings. American Hearing Systems, doing business as Interton, appealed the enforcement of the foreign arbitration award, arguing that the district court did not have subject-matter jurisdiction under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”). Additionally, Interton argued, even if the court had subject matter jurisdiction, the written arbitration agreement did not apply to the current dispute between the parties.

AVR Communication, Ltd., an Israeli company, sought arbitration in Israel asserting a number of claims governed by a previous arbitration agreement. Interton argued that the disputes giving rise to the claims were outside of the scope of the contract containing the arbitration provision. Interton failed to prevail on this argument in both the Israeli arbitration and later in the enforcement of the award by AVR in federal district court.

On appeal, Interton interpreted the language of the Convention to impose a subject matter jurisdiction requirement to include presentment of a written contract. The Eighth Circuit summarily dismissed this argument. The court found that the issue was not whether there was a written agreement, but whether the disputes in question were covered by the agreement to arbitrate. The court held that this question was precluded by the foreign arbitration proceeding and upheld the award. AVR Communications, Ltd. v. American Hearing Systems, Inc., Case No. 14-2313 (8th Cir. July 14, 2015)

This post written by Joshua S. Wirth, a law clerk at Carlton Fields in Washington, DC.

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