Confirmation / Vacation of Arbitration Awards

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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TEXAS SUPREME COURT HOLDS THAT ORDER VACATING ARBITRAL AWARD DUE TO UNRESOLVED QUESTIONS OF FACT IS NOT APPEALABLE

June 12, 2012 by Carlton Fields

As a condition of his employment at Bison, Aldridge signed an arbitration agreement in which he agreed to resolve by arbitration any claims for work-related injuries. After Aldridge sustained an injury at work, Bison paid him approximately $80,000 in medical and wage replacement benefits in exchange for a release in which Aldridge gave up the right to take legal action. Aldridge later demanded arbitration. The arbitrator dismissed Aldridge’s claim with prejudice based on the terms of the release. Aldridge filed a petition to vacate; Bison moved to confirm.

The trial court vacated in part, holding that there were unresolved questions of fact regarding whether the release and waiver was enforceable. In particular, the court held that there were fact issues regarding whether Texas’s fair notice requirement had been met and, if not, whether both parties had actual knowledge of the terms of the waiver. Further, the court held that there was a question regarding whether the “ambiguous terms of the waiver” precluded arbitration. Bison appealed. The court of appeals held that the trial court’s order was interlocutory and thus not appealable. The Supreme Court affirmed, holding that the order was interlocutory and non- appealable because it left “significant factual and legal issues open for further determination.” The dissenting justices opined that mandamus review was warranted under Texas procedure because the FAA would permit an appeal from the trial court’s order, which the dissent argued calls for an “arbitration Mulligan.” Bison Bldg. Materials, Ltd. v. Aldridge, No. 06-1084 (Tex. Jan. 16, 2008).

This post written by Ben Seessel.

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CITING CONCEPCION, FIFTH CIRCUIT AFFIRMS NO CLASS ARBITRATION RULING

June 11, 2012 by Carlton Fields

Jeffrey Reed brought a putative class action case against his alma mater, “on-line” school, Florida Metropolitan University, Inc. (“FMU”), in Texas state court, alleging that FMU solicited students in violation of certain provisions of the Texas Education Code. FMU removed to federal court, and moved to compel arbitration under the parties’ agreement. The court granted the motion to compel, and also refused to address the issue of whether class arbitration was allowable, which Reed had raised, finding it should be decided by the arbitrator. At arbitration, Reed moved for a “Clause Construction Award” allowing the arbitration to proceed on a class basis. Over FMU’s objection, the arbitrator ruled in Reed’s favor. Reed moved to confirm and FMU moved to vacate the ruling. The district court vacated the award, finding it exceeded the scope of the arbitrator’s power under the Federal Arbitration Act. Reed appealed. The Fifth Circuit Court of Appeals affirmed, based on the U.S. Supreme Court’s holdings in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct 1758 (2010) and AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), emphasizing that the arbitrator forced the parties into class arbitration without a contractual basis for doing so. Reed v. Florida Metropolitan Univ., Inc., No. 11-50509 (5th Cir. May 18, 2012).

This post written by John Pitblado.

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