Confirmation / Vacation of Arbitration Awards

ORDER VACATING CONFIRMATION OF ARBITRATION AWARD FOR LACK OF JURISDICTION AFFIRMED WHERE DEFENDANT DID NOT APPEAR IN CASE

September 20, 2011 by Carlton Fields

On December 15, 2010, we reported on Aurum Asset Managers, LLC v. Banco de Estado do Rio Grande do Sul, in which a court vacated its prior confirmation of an arbitration award in favor of Aurum upon independently finding that subject matter jurisdiction was lacking over the case. The appellate court has now affirmed that decision, rejecting the argument that the award could be overturned only if it constituted a “clear usurpation of power.” The court explained that the “clear usurpation” legal standard applies only when jurisdiction has been litigated “such that re-litigation of the issue is barred by principles of res judicata.” Here, the defendant had elected to ignore the judicial proceedings. The lower court did not err by conducting its own jurisdictional analysis, finding that jurisdiction did not exist, and vacating the arbitration award. Aurum Asset Managers, LLC v. Bradesco Companhia de Seguros, No. 10-4281 (3d Cir. Aug. 15, 2011).

This post written by Michael Wolgin.

TWO LONDON ARBITRATION AWARDS ENFORCED

September 7, 2011 by Carlton Fields

Constellation Energy recently filed a petition in the US District Court for the Southern District of New York to confirm two London arbitration awards entered against Transfield ER Cape Ltd. Constellation also sought to enforce the awards against ER Cape’s alleged alter ego, Transfield EL Limited, which was not a party to the arbitrations. The District Court held that the arbitration awards against ER Cape should indeed be enforced, concluding that forum non conveniens did not prevent adjudication in US Court and that venue was appropriate. The Court noted that the petitioner’s choice of home forum is entitled to substantial deference, the balance of private and public interests did not strongly favor ER Cape, and that the mere existence of adequate alterative forums in insufficient to override petitioner’s choice of forum. The Court, however, ruled that Constellation had failed to plead sufficient factual content to support a claim for alter ego liability and accordingly dismissed the petition against ER Limited. Constellations’ petition for attorneys’ fees and costs was also denied. Constellation Energy Commodities Group, Inc. v. Transfield ER Cape Ltd., No. 10-cv-04434 (USDC S.D.N.Y. July 29, 2011).

This post written by John Black.

NO MANIFEST DISREGARD OF THE LAW FOR AWARD REINSTATING UNION EMPLOYEE WHO VIOLATED COMPANY RULES

August 24, 2011 by Carlton Fields

The Tenth Circuit Court of Appeals recently affirmed the denial of a motion to vacate an arbitration award that reinstated a union-member employee who had been terminated by the employer ostensibly for “just cause.” In holding that the arbitrator did not commit a “manifest disregard of the law” and that the award drew its essence from the governing collective bargaining agreement, the court found that the arbitrator could conclude that: (1) the employee was not terminated for “just cause,” an undefined term in the CBA, notwithstanding the employee’s violation of company rules; (2) the violation was “forgivable,” and (3) the employee should be placed on probation (a “last chance agreement”), notwithstanding that such a remedy was not provided in the CBA. Chevron Mining Inc. v. United Mine Workers of America Local 1307, No. 10-8074 (10th Cir. Aug. 12, 2011).

This post written by Michael Wolgin.

ARBITRATOR’S UNDISCLOSED RELATIONSHIP WITH COUNSEL RESULTS IN VACATION OF AWARD

August 23, 2011 by Carlton Fields

Recently, a Texas Court of Appeals issued a ruling on an appeal from an order confirming a $22 million arbitration award in a partnership dispute. The appellants argued on appeal that their rights were prejudiced by the evident partiality of the arbitrator because the arbitrator failed to disclose his personal and professional relationship with appellee’s counsel. The court, assessing all contacts between the individuals, found this argument persuasive, noting that the standard for disclosing such relationships reflects the determination that courts should not involve themselves in evaluations of partiality that are better left to the parties. The court found that the relationship between the arbitrator (a US Magistrate Judge) and the appellee’s counsel (a former US District Court clerk) stretched for years and that the social relationship had business overtones. Accordingly, the court concluded that the arbitrator’s duty of disclosure had been triggered and the failure to disclose the relationship constituted evident partiality. The court reversed the confirmation award and judgment, vacated the award, and remanded for further proceedings. Karlseng v. Cooke, No. 05-09-01002 (Tex. Ct. App. June 28, 2011).

This post written by John Black.

COURT CONFIRMS ARBITRATION AWARD ADDING PREPAYMENT PROVISION TO REINSURANCE TREATY

August 15, 2011 by Carlton Fields

Citing the treaty’s honorable engagement clause, a federal district court denied a group of reinsurers’ motion to vacate an arbitration award in which the arbitrators had fashioned a remedy requiring prompt payment of all disputed and undisputed claims. Certain London market reinsurers had entered into a reinsurance treaty with Century Indemnity Company that indemnified Century for certain liabilities arising out of asbestos litigation. The agreement did not contain a “Reports and Remittances” clause dictating when claims should be paid, but provided that the “liability of the Reinsurers shall follow that of the Company in every case.” The treaty also included an “honorable engagement” clause, directing the arbitrators to interpret the agreement to effect its general purpose.

Facing significant losses due to a flood of asbestos litigation, the reinsurers imposed a program in which Century would have to meet documentation requirements before claims were paid. When payments became delayed, Century initiated arbitration. The arbitrators issued an interim order requiring the reinsurers to promptly pay 100% of all undisputed claims and 75% of any disputed claims, finding that arrangement would effectuate the general purpose of the parties’ agreement. After several years of paying claims pursuant to this arrangement, the reinsurers moved to vacate the award when the arbitrators, who had retained jurisdiction over the matter, made the award final. Citing the “honorable engagement” clause, the court denied the motion to vacate and confirmed the award, holding that the arbitrators had the power to fashion the remedy even though it included obligations not explicitly bargained for by the parties. Harper Insurance Ltd. v. Century Indemnity Co., Case No. 10 Civ. 7866 (USDC S.D.N.Y. July 28, 2011).

This post written by Ben Seessel.