Confirmation / Vacation of Arbitration Awards

DISTRICT COURT CONFIRMS REINSURANCE ARBITRATION AWARD AGAINST TWO BRAZILIAN COMPANIES

July 30, 2012 by Carlton Fields

Several developments have occurred in the ongoing reinsurance dispute between Aurum Asset Managers and several Brazilian companies. In April, Aurum filed a petition in federal district court to confirm an amended arbitration award, entering judgment in Aurum’s favor, and granting Aurum equitable relief. On June 11th, the district court denied the award as against respondent Banco do Estado do Rio Grande do Sul. The court, however, confirmed the award as against two respondents (Bradesco Companhia de Seguros and Bradesco Auto/Re Companhia de Seguros) unless and until the court received arguments from any party opposing the confirmation prior to June 22nd. On June 26th, having not heard any arguments opposed, the court confirmed the final arbitration award and entered judgment against the two Bradesco entities. Aurum Asset Managers, LLC v. Banco do Estado do Rio Grande do Sol, No. 08-mc-102 (USDC E.D. Pa. June 12, 2012 & June 26, 2012).

This post written by John Black.

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VACATION OF ARBITRAL AWARD REFUSED DUE TO PARTY’S FAILURE TO CHALLENGE AWARD IN FOREIGN FORUM

July 23, 2012 by Carlton Fields

Parties to a stock purchase agreement between two British Virgin Islands companies arbitrated a dispute in Miami, Florida. One party was required to pay a $11 million award. The prevailing party applied to the High Court of the British Virgin Islands (“the BVI court”) for enforcement of the award, pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, while the losing party moved to vacate the award in the U.S. District Court for the Southern District of Florida. Although the BVI court offered to stay the action pending the resolution of the district court case if the losing party posted bond, the losing party failed to either provide the requested $7 million security or appeal the order. The BVI court then granted the application and entered a judgment on the award, which the losing party failed to appeal. The BVI court appointed liquidators, who collected enough funds to satisfy the judgment. The losing party then moved to reopen the vacatur proceedings, which the district court had stayed at the liquidators’ request. The district court reopened the case and granted the prevailing party’s motion to dismiss, holding that it did not have subject matter jurisdiction over the motion to vacate the award.

On appeal, the Eleventh Circuit affirmed the dismissal on other grounds, concluding that the case was prudentially moot, as the district court would be unable to provide effective relief, holding that a party may not sit idly by while an arbitration award is confirmed and only then seek to vacate it. Emphasizing the uniqueness of the facts of the present case, the court stated that the failure to act in the BVI court and consent to a stay of the district court proceeding allowed the BVI case to take precedence. Furthermore, the BVI court had indicated that vacatur in the district court would not affect its final judgment, except in the case of fraud or mistake, which, combined with losing party’s own failure to act, made the likelihood of meaningful relief in the district court virtually non-existent. Ingaseosas Int’l. Co. v. Aconcagua Investing Ltd., No. 11-10914 (11th Cir. July 5, 2012).

This post written by Rollie Goss.

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SECOND CIRCUIT REJECTS MANIFEST DISREGARD ARGUMENTS

July 19, 2012 by Carlton Fields

The Second Circuit has summarily affirmed a district court’s denial of a petition to vacate an arbitration award, and granted the cross-petition to confirm. We noted in our December 15, 2010 post that the Southern District of New York confirmed the award to Bayou Funds, a group of bankrupt entities which had been run as a massive Ponzi scheme. The district court ruled that the arbitrator did not manifestly disregard the law, even though he did not explicate the reasons for his ruling. Goldman Sachs, Bayou Funds’ clearing broker, continued to argue on appeal that the award must be vacated because it was rendered in manifest disregard of the law. After confirming that the manifest disregard doctrine remains viable in the Second Circuit, the appeals court rejected, among other things, Goldman’s arguments that it was not an “initial transferee” under the Bankruptcy Code’s § 550(a), and that the panel manifestly disregarded the law in concluding that it was. A district court decision in a different case supported Bayou Funds’ position and, although the Second Circuit declined to expressly endorse that earlier decision, it was enough to hold there was no manifest disregard. Goldman Sachs Execution & Clearing L.P. v. The Official Unsecured Creditors’ Committee of Bayou Group, LLC, No. 10-5049 (2d Cir. July 3, 2012).

This post written by Brian Perryman.

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ARBITRATION AWARD ROUNDUP

July 11, 2012 by Carlton Fields

Following is a roundup of recent opinions on motions concerning the confirmation, vacation and modification of arbitration awards, organized by the issues presented in the motions:

Manifest Disregard

New York City Dist. Council of Carpenters v. Dufour Group, Inc., No. 12-Civ-00173 (USDC S.D.N.Y. April 19, 2012) (granting petition to confirm, no manifest disregard, no evident partiality, proceeding was not “fundamentally unfair”)

Hargrove v. Citigroup, Inc., No. 1:11-cv-07946 (USDC S.D.N.Y. May 9, 2012) (denying petition to vacate, no manifest disregard in age discrimination case)

Broadnax v. LVI Demolition Services, Inc., No. 2:11-cv-03084 (USDC D.N.J. May 31, 2012) (granting motion to confirm award, finding arbitrator’s award in labor dispute was rationally related to Collective Bargaining Agreement, no manifest disregard).

Gomez v. People’s United Bank, No. 3:10-cv-00904 (USDC D. Conn. June 13, 2012) (granting motion to confirm, no manifest disregard in compensatory damages, punitive damages, and attorneys fee award against car dealer)

Failure to Hear Pertinent Evidence

Ace American Ins. Co. v. Christiana Insurance, LLC, No. 11 Civ. 8862 (USDC S.D.N.Y. April 12, 2012) (granting petition to confirm, arbitrators did not fail to hear pertinent and material evidence, proceeding was not “fundamentally unfair,” arbitrators did not exceed the scope of the submission, and there was no manifest disregard of the law)

Scope of Arbitration

Homesite Ins. Inc. v. Dhaliwal, No. A131226 (Cal. App. Ct. April 19, 2012) (affirming confirmation of award, arbitrator did not exceed powers, and correctly decided question concerning scope of arbitration)

Harrell and Owens Farm v. Federal Crop Ins. Corp., No. 11-1360 (4th Cir. April 18, 2012) (affirming confirmation of award, arbitrator did not exceed powers in deciding scope of arbitration)

Town & Country Salida, Inc. v. Dealer Computer Services, Inc., No. 11-15430 (USDC E.D. Mich. May 31, 2012) (granting in part motion to vacate or modify, granting in part motion to confirm, vacating award against party who was not a party to the agreement to arbitrate, affirming award against affiliate that was party to the agreement)

Alliance Healthcare Services, Inc. v. Argonaut Private Equity, LLC, No. 11-C-3275 (USDC N.D. Ill. June 12, 2012) (granting motion to confirm in part, denying in part, finding arbitration panel did not exceed scope of submission, and confirming award on that basis, but denying moving party’s claim for post-award interest)

Evident Partiality

Chandler v. Journey Education Marketing, Inc., No. 2:10-cv-00839 (USDC S.D.W.Va May 15, 2012) (granting motion to confirm, no evident partiality)

Stone v. Bear, Stearns & Co., Inc., No. 2:11-cv-5118 (USDC E.D. Pa. May 29, 2012) (denying petition to vacate, denying attorneys fees to prevailing party, no evident partiality in FINRA arbitration where arbitrator failed to disclose husband’s ties to securities industry and insufficient challenge to such failure was made during the arbitration)

Jurisdiction/venue

Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, No. 11-Civ. 7707 (USDC S.D.N.Y. May 25, 2012) (denying motion to remand state court action seeking vacatur which was removed to federal court by prevailing party in arbitration, ordering petitioner to show cause why award should not be confirmed)

This post written by John Pitblado.

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APPEALS COURT AFFIRMS CONFIRMATION OF AWARD DETERMINING THAT UMBRELLA POLICY’S POLLUTION EXCLUSION APPLIES

June 28, 2012 by Carlton Fields

[National Union Fire Insurance Company of Pittsburgh issued an umbrella policy to Continental Carbon Company, a manufacturer of carbon-black used in tires and other rubber and plastic goods. Continental notified National Union of a federal lawsuit in which plaintiffs alleged that their property had been damaged by exposure to carbon-black dust pollution. Plaintiffs won a multi-million dollar judgment against Continental that was affirmed on appeal. National Union denied coverage under a pollution exclusion in the policy.

Continental commenced arbitration against National Union, arguing that the Products Completed Operations Hazard (“PCOH”) exception to the pollution exclusion in the policy applied. The arbitrators disagreed, determining that the carbon-black dust pollution at issue was not Continental’s “product” thereby taking it outside of the exception to the pollution exclusion. A Texas court confirmed the arbitration panel’s decision without reasoning. Continental appealed the decision. The appellate court affirmed, finding that Continental had failed to argue in its initial brief that its motion to vacate had been timely under the FAA. The court agreed with National Union that the FAA’s three-month limitations period was an independent ground supporting the judgment of the lower court and affirmed the confirmation of the award. Continental Carbon Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, No. 14-11-00162-CV (Tex. Ct. App. Apr. 17, 2012).

This post written by Ben Seessel.

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