Confirmation / Vacation of Arbitration Awards

MASSACHUSETTS FEDERAL COURT UPHOLDS ARBITRATION AWARD BASED ON EQUITABLE POWERS

August 12, 2015 by Carlton Fields

A recent case out of the District of Massachusetts reviewing an arbitration award against Ace American Insurance Company (“Ace”) found that an arbitrator did not exceed her power in crafting an arbitration award when she relied almost exclusively on her equitable powers under the arbitration provision. In the underlying dispute, Ace had insured a thirteen year old boat, which sank following severe weather. Ace denied coverage claiming that such an incident would fall under the wear and tear provision of the coverage. However, the arbitrator disagreed, finding that “if the ‘wear and tear’ exclusion were enforceable in this case, Ace would comfortably insure boats beyond a certain age without an expectation of ever having to pay” and that allowing Ace to deny coverage would violate Massachusetts Chapter 93A. Where the arbitration provision gave the arbiter authority to resolve “any controversy or claim based in any legal or equitable theory,” the District Court found that the arbiter was well within her powers in making this finding, thereby making a vacation of this arbitration award unwarranted.

Ace American Ins. Co. v. Puccio, Case No. 15-cv-10262-IT (USDC D. Mass. June 4, 2015).

This post written by Zach Ludens.

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COURT DENIES TERMINATED EMPLOYEE’S MOTION TO VACATE ARBITRATION AWARD FOR FAILURE TO SHOW BIAS, MISCONDUCT, OR MANIFEST DISREGARD

August 11, 2015 by Carlton Fields

A district court refused to vacate an arbitration award where Preis, a terminated employee, failed to produce sufficient evidence of bias or misconduct in the arbitration panel’s decision. Preis moved to vacate the award in favor of former employee Citigroup Global Markets Inc. on the grounds that (1) the panel was biased, and (2) the panel manifestly disregarded the law. Although Preis relied on New York’s civil practice laws and Citigroup relied on the Federal Arbitration Act, the court decided choice of law was irrelevant because no conflict existed between state and federal law on the grounds for vacating arbitration awards.

On the issue of bias, the court found that the examples cited by Preis were neutral, did not suggest prejudice, and “would not lead a reasonable person to conclude that the panel was biased.” The court was even more skeptical of Preis’s manifest disregard claim, finding that he failed to show the panel intentionally defied a well-defined, applicable law. His claims did not rise to the level of showing “some egregious impropriety on the part of the arbitrator,” and thus, did not warrant vacating the award. The court did, however, deny Citigroup’s request for attorneys’ fees and costs, finding it failed to show that Preis acted in bad faith in seeking to overturn the award. Preis v. Citigroup Global Markets Inc., Case No. 14-06327 (USDC S.D.N.Y. Apr. 8, 2015).

This post written by Brian Perryman.

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MASSACHUSETTS COURT OF APPEALS MAINTAINS “SEVERELY LIMITED” DE NOVO REVIEW OF REINSURANCE-RELATED ARBITRATION AWARD

August 10, 2015 by Carlton Fields

Collective defendants, Nationwide, appealed from a Massachusetts superior court judgment confirming an arbitration award in favor of collective plaintiffs, Liberty Mutual. The underlying dispute involved a 1972 reinsurance treaty wherein Nationwide, the reinsurer, indemnified Liberty Mutual, the cedant, for a portion of the losses paid on Liberty Mutual’s general liability and worker’s compensation policies. At issue was a provision in the treaty granting Nationwide a right of access to Liberty Mutual’s documents concerning the covered policies. The dispute arose when Liberty Mutual refused to produce documents it claimed were protected by attorney-client and work product privileges. At arbitration, the panel dismissed Nationwide’s argument that it was entitled to any and all documents relating to the covered policies, reasoning that the right of access provision excluded privileged documents. Liberty Mutual thereafter submitted an application to the superior court to confirm the award and Nationwide submitted a cross-application to vacate the access to records portion of the judgment.

Despite a de novo review, the court’s discretion was limited as it was bound by the arbitrators’ findings and legal conclusions, even if they appeared erroneous, inconsistent, or unsupported by the record. Through this lens, the court of appeals upheld the arbitrators’ decision, dismissing Nationwide’s argument that the arbitrators exceeded their powers in interpreting the access to records provision in the reinsurance treaty. The appellate court reasoned that where the parties do not dispute the scope of the arbitrators’ powers and where the claimed error is in the interpretation of the terms of the parties’ underlying contract and not in the agreement to arbitrate in the first place, it must apply a severely limited review of arbitration awards. Liberty Mutual v. Nationwide, No. 14-1129 (Mass. App. Ct. June 5, 2015).

This post written by Brian Perryman.

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LMRA ARBITRATION AWARD UPHELD BY THE THIRD CIRCUIT

August 5, 2015 by Carlton Fields

The Third Circuit affirmed an arbitration award under the Labor Management Relations Act (“LMRA”) as the decision reached by the arbitrator comported with the collective bargaining agreement (“CBA”) between the parties. Washington Hospital (“WH”) employed Deborah Holden, an LPN, before terminating her employment pursuant to the CBA’s absenteeism policy. Holden’s union filed a grievance protesting Holden’s discharge. An arbitrator decided that the termination was improper and reinstated Holden, because WH failed to follow contractually agreed upon discipline procedures. The arbitrator made this decision despite noting that Holden’s ten absences in a 12-month time period would be sufficient grounds on which to terminate an employee. WH sought to vacate the award, but the district court upheld the award.

On appeal, WH argued that the court abused its discretion by denying WH’s request for discovery based on remarks by Holden that put her honesty at issue. However, the court found that Holden’s testimony was not fraudulent, and further, that Holden’s testimony was “immaterial” to the arbitration decision. Instead, the court upheld the district court’s decision because WH did not follow the CBA’s procedures, specifically—WH failed to give two warning notices before terminating Holden. Washington Hosp. v. SEIU Health Care Inc. Penn., Case No. 14-3951 (3d Cir. June 12, 2015).

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

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PROCEDURAL ODDITIES RESULT FROM SIMULTANEOUSLY SEEKING VACATUR OF AN ARBITRATION AWARD AND RELIEF ON THE MERITS OF THE DISPUTE

July 16, 2015 by Carlton Fields

The Second Circuit reversed the district court’s dismissal of a claim for vacatur without prejudice, which had been based on the panel’s finding that it lacked personal jurisdiction. The Second Circuit examined the merits of the vacatur claim and ruled that it should have been dismissed with prejudice. Based on that determination, the Second Circuit then affirmed the district court’s dismissal without prejudice of the second claim filed in the district court for relief on the merits of the dispute (a claim for breach of contract). The Second Circuit explained that dismissal of this claim without prejudice was appropriate due to the preclusive effect of the ruling in arbitration that personal jurisdiction was lacking. The court noted: “Although it may seem odd to deny the award preclusive effect over one claim and to grant it preclusive effect over another in the same suit, that is the logical result anytime a suit includes both a claim to vacate an award and other claims that might be precluded by a final award.” Global Gold Mining, LLC v. Ayvazian, Case No. 13-4759-cv (2d Cir. Apr. 27, 2015).

This post written by Michael Wolgin.

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