Confirmation / Vacation of Arbitration Awards

FEDERAL COURT ENJOINS ARBITRATION BETWEEN INSURERS AND REINSURER WHILE THE ARBITRATION PROCESS IS INVESTIGATED

October 1, 2013 by Carlton Fields

A federal district court has issued an order enjoining the arbitration of a dispute between several workers compensation insurers and reinsurer, National Union Fire Insurance Co. of Pittsburgh, while allegations of misconduct concerning the arbitration process are investigated. The parties’ reinsurance treaty requires disputes to be adjudicated by “disinterested officials” who are “not under the control of either party.” It also provides that each side will choose one arbitrator and that the two will select an umpire. The chosen two arbitrators in the matter could not agree on an umpire; thus, after casting lots, National Union selected an umpire who was a close friend of their chosen arbitrator. The panel issued an interim final award favorable to National Union that addressed liability but left damages issues open. Plaintiffs petitioned the court to stay the arbitration.

Plaintiffs argued that National Union breached the provision in the treaty requiring disputes to be decided by arbitrators not under either party’s control. In support of their motion, plaintiffs presented National Union’s attorneys’ bills (submitted in connection with its attorneys fee request during the arbitration), demonstrating that National Union’s counsel had repeatedly communicated with its arbitrator during the course of the arbitration proceeding in violation of the arbitration panel’s order. Additionally, plaintiffs showed that the arbitration panel had made decisions without the participation of the third arbitrator chosen by plaintiffs. The court issued a corrected preliminary injunction that precludes any further orders from the arbitrators and communications between the parties and the arbitrators pending subsequent order from the court. National Union has filed a notice of appeal in which it indicates it will argue to the Sixth Circuit, among other things, that the court lacked jurisdiction to enjoin an ongoing arbitration proceeding.

Star Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, Case No. 2:13-cv-13807 (USDC E.D. Mich. Sept. 12, 2013).

This post written by Ben Seessel.

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FOLLOWING VACATUR OF ARBITRATION AWARD IN REINSURANCE DISPUTE AS “COMPLETELY IRRATIONAL,” COURT CONFIRMS NEW AWARD

September 23, 2013 by Carlton Fields

On September 29, 2009 and November 22, 2010, respectively, we reported on a court’s vacatur of an arbitration award related to a “deficit carry forward” provision in a reinsurance agreement, and the Third Circuit’s subsequent affirmance of that order. The dispute surrounded the manner in which deficits in a reinsurer’s “experience account” under a reinsurance agreement for one year, applies to distribution of account funds under a separate reinsurance agreement for a subsequent year. The court previously vacated an arbitration award that awarded the reinsurer $6 million and failed to apply the “deficit carry forward” provision, which the court found to be unsupported by the contract and therefore “completely irrational” (notwithstanding a broad “Honorable Engagement Clause”). In a recent opinion and order, the court affirmed the award of a new arbitration panel, which interpreted the agreements and found that the “deficit carry forward” provision applied to permit the reinsurer to retain its portion of the account deficits prior to distribution to the reinsured of the funds of the account for the subsequent year. Because the panel “grounded its decision on the language” of the relevant reinsurance agreement, the court found that the panel’s decision properly “draws its essence” from the contract. Platinum Underwriters Bermuda, Ltd. v. Excalibur Reinsurance Corp., Case No. 2:12-mc-00070 (USDC E.D. Pa. July 15, 2013), and corresponding judgment entered July 18, 2013.

This post written by Michael Wolgin.

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ARBITRATION AWARD CONFIRMATION ROUNDUP

July 24, 2013 by Carlton Fields

Disagreement over result

Bailey Brake Farms, Inc. v. Trout, No. 2011-CA-00610 (Ms. S.C. May 23, 2013) (mere disagreement with the result of arbitration is not a ground for vacating an arbitration award)

Leeward Constr. Co. v. American Univ. of Antigua College of Medicine, Case No. 12-6280 (USDC S.D.N.Y. Mar. 26, 2013) (mere disagreement with the result of arbitration is not a ground for vacating an arbitration award)

Evident partiality

Bain Cotton Co. v. Chestnutt Cotton Co., No. 12-11138 (5th Cir. Je. 24, 2013) (dewnial of discovery by arbitrator did not amount to evident partiality)

Antietam Industries, Inc. v. Morgan & Keegan Co., Case No. 12-1250 (USDC M.D. Fl. Mar, 25, 2013) (lack of disclosure by arbitrator did not amount to evident partiality, nor was arbitrator misbehavior or exceeding powers demonstrated)

Exceeding authority

Donnelly v. Jewel of Kahana, LLC, Case No. 12-00347 (USDC D. Ha. Mar. 28, 2013)(using the completely irrational test, the arbitrator did not act in excess of authority; improper arbitrator bias was not shown; mere disagreement with arbitration result is not a basis for vacating an award)

E*Trade Securities, LLC v. Nash, Case No. 12-1766 (USDC M.D. FL. Mar. 12, 2013)(arbitrator did not exceed authority by deciding issue when the parties waived their right to have the issue determined by a court)

Jurisdiction

Liu v. Mar, Case No. 13-685 (USDC N.D. Ill. April 10, 2013) (motion to confirm arbitratin award dismissed for lack of subject matter jurisdiction because no basis for federal jurisdiction was articulated other than the Federal Arbitration Act, which does not provide a basis for the exercise of jurisdiction)

Manifest disregard

Bartlett Grain Co. v. Sunburst Farms Partnership, Case No. 13-1152 (USDC D. Ks. July 5, 2013)(avoids quesion of whether the doctrine of manifest disregard of law survives Superme Courtt’s Hall Street Associates opinion by finding that manifest disregard not demonstrated)

Stipulation

Berkley Ins. Co. v. Excalibur Reinsur. Corp., Case No. 13-2633 (USDC S.D. N.Y. May 15, 2013) (arbitration award concerning reinsurance dispute confirmed by stipulation)

Untimely request to vacate

Glaser v. Legg, Case No. 12-805 (USDC D. D.C. Mar. 11, 2013) (petition to vacate arbitration award denied as untimely under the Federal Arbitration Act; Petitioner barred from raising arguments in support of vacating award as affirmative defenses to cross-petition to confirm the award)

This post written by Rollie Goss.

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ARBITRATION ROUND UP

June 27, 2013 by Carlton Fields

Manifest Disregard

HET-JV v. Weston Solutions, Inc., No. 13-100 (USDC E.D. Pa. June 4, 2013) (vacatur denied for ICDR interim award on liability, no manifest disregard, arbitrators did not imperfectly execute powers. Confirmation also denied as premature prior to damages phase of arbitration)

Smith v. Servicemaster Holding Corp., No. 2:11-cv-02943 (USDC W.D. Tenn. May 21, 2013) (vacatur denied where arbitrator ruled that arbitration could proceed on class-wide basis, ruling did not exceed powers, and was not in manifest disregard of the law).

A&G Coal Corp. v. Integrity Coal Sales, Inc., No. 12 Civ. 5293 (USDC S.D.N.Y. May 21, 2013) (vacatur denied, no manifest disregard, arbitrator did not exceed scope of authority).

C-Sculptures, LLC v. Brown, No. 2011-195907 (S.C. May 8, 2013) (affirmation of award reversed by South Carolina Supreme Court, finding award reflected manifest disregard of the law, as arbitrator had been apprised of applicable law and improperly failed to grant respondent’s motion to dimiss)

Exceeding or Imperfectly Executing Powers

Langlais v. Pennmont Benefit Services, Inc., No. 12-3234 (3d Cir. June 7, 2013) (affirming confirmation of arbitration award, arbitrator did not exceed powers, claims were within the scope of arbitration).

Award Exceeds Scope of Submission

Chevron Corp. v. Republic of Ecuador, No. 12-1247 (USDC D.C. June 6, 2013) (confirming award under New York Convention, finding the award was within the scope of the submission).

Marker Volkl (Int’l) GMBH v. Epic Sports Int’l, Inc., No. 12 Civ. 8729 (USDC S.D.N.Y. May 1, 2013) (denying vacatur of foreign award under New York Convention for failure to establish any of the enumerated bases for vacatur, award was within scope of submission).

Award Result of Fraud, Deceit

Meeks v. Host International, Inc., No. 11-17928 (9th Cir. May 22, 2013) (vacatur denied to pro se plaintiff from arbitration award against her in employment termination case, as no fraud, deceit or bad faith demonstrated in arbitration award).

This post written by John Pitblado.

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RHODE ISLAND SUPREME COURT REVERSES TRIAL COURT ORDER VACATING ARBITRATION AWARD

June 13, 2013 by Carlton Fields

In an uninsured/underinsured motorists coverage case, the plaintiff, an injured party in a collision with an underinsured driver, sued her insurer for underinsured motoriests benefits under her policy, which carried limits of $100,000. She was awarded $120,000 by the arbitrator, and the plaintiff then moved to comfirm in court. The insurer objected, based on the fact that there was no basis for any award beyond the policy’s limits. The trial court agreed with the insurer, and vacated that portion of the award in excess of $100,000, and otherwise confirmed the award as modified. However, on appeal, the Supreme Court of Rhode Island reversed, noting:

In modifying this award, the trial justice accepted defendant‘s contention that, . . . arbitrators may not award prejudgment interest above policy limits. . . . In effect, then, the trial justice modified the award based on his belief that the arbitrators had made an error of law. However, it is settled beyond a hint of contradiction that a mistake of law is not grounds for upsetting an arbitration award.

Wheeler v. Encompass Insurance Co., No. 2011-313 (R.I. May 24, 2013).

This post written by John Pitblado.

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