Confirmation / Vacation of Arbitration Awards

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.

COURT OF APPEALS HOLDS THAT DISTRICT COURT CORRECTLY CONFIRMED AN ARBITRATION AWARD NOTWITHSTANDING PARTY FRAUD

August 8, 2011 by Carlton Fields

A federal court of appeals affirmed the confirmation of an arbitration award in favor of an employee who had committed fraud in connection with an arbitration, because, as the district court had held, the fraud was not material to the outcome of the proceeding. Michael Mickens, an employee of trucking company CBF, was terminated for allegedly failing to complete an assigned run. At meetings with CBF and union members that Mickens surreptitiously recorded, Mickens insisted that he had completed the run. After Mickens was terminated, the union demanded arbitration during which Mickens explained for the first time that he had not completed his assignment because a guard had purportedly relayed instructions from CBF not to complete the run. CBF introduced the minutes of the meetings which showed Mickens’s initial and false story, but the arbitrator concluded that Mickens was wrongfully terminated and ordered reinstatement with full back pay.

Mickens’s tapes of the meetings, which had been the subject of discovery requests during the arbitration but had not been disclosed or produced, were produced to CBF in subsequent litigation. When the union filed an action in district court to confirm the award, CBF moved to vacate on the grounds that the award had been procured by fraud. The district court confirmed the award, holding that the employee had lied and secretly withheld the tapes, thereby committing fraud, but that the fraud was not material to the outcome of the arbitration because the arbitrator was already aware of the essential facts on the tapes—that the employee had lied about completing the trucking run—because the minutes of the meetings had been introduced. The court of appeals agreed and affirmed. Int’l Brotherhood of Teamsters v. CBF Trucking, Inc., No. 10-3044 (3d Cir. July 28, 2011).

This post written by Ben Seessel.

ARBITRATION ROUND-UP

August 3, 2011 by Carlton Fields

Timeliness:

Ohio Farmers Insurance Co. v. City of Akron, Case Nos. 25642, 25725 (Ohio Ct. App. July 20, 2011) (affirming confirmation of award; panel properly found “good cause” for delay in seeking confirmation; rule providing one year to seek confirmation deemed not a statute of limitations).

Partiality:

Grego v. Nexagen USA LLC, Case No. 10-02691 (USDC N.D. Ohio July 15, 2011) (confirming award; denying motion to vacate; allegedly unfair amount of briefing opportunities was a “far cry” from “evident partiality”).

Authenticity of Agreement:

Klima v. Evangelical Lutheran Good Samaritan Society, Case No. 10-01390 (USDC D. Kan. June 21, 2011) (denying motion to dismiss or compel arbitration; ordering trial to determine authenticity of signature on arbitration agreement).

Scope of Agreement:

Adol Owen-Williams v. BB&T Investment Services, Inc., Case No. 06-00948 (USDC D.D.C. July 18, 2011) (denying reconsideration of order confirming award; noting “manifest disregard” is unsettled law in D.C. Circuit);

McGowan Working Partners, Inc. v. Eland Energy, Inc., Case No. 10-02472 (USDC N.D. Tex. July 6, 2011) (confirming award; denying motion to vacate; noting “manifest disregard” no longer viable in Fifth Circuit; panel did not exceed authority for determining issues outside scope of arbitration agreement);

Pocono Medical Center v. SEIU Healthcare Pennsylvania CTW, CLC, Case No. 10-01334 (USDC M.D. Pa. July 14, 2011) (granting SEIU’s motion for summary judgment; award drew essence from collective bargaining agreement; employee wrongly terminated without “just cause”; upholding challenge to application of corporate policy).

Standard of Review:

Roofers Local No. 30 Combined Pension Fund v. D.A. Nolt, Inc., Case Nos. 10-3753, 10-3854 (3d Cir. July 22, 2011) (affirming confirmation of award; de novo standard of review for arbitrator’s legal conclusions; where a court’s “denial of a motion to reconsider is based upon the interpretation of legal precepts” the review of the court’s decision is plenary)

FINRA Awards:

Ruggiero v. Richert, Case No. 10-23539 (USDC S.D. Fla. July 18, 2011) (granting motion for summary judgment; denying petition to vacate FINRA award and sanctions; panel was entitled to schedule hearing and require telephonic attendance, notwithstanding petitioner’s travel schedule);

Aviles v. Charles Schwab & Co., Case No. 10-12216 (11th Cir. July 20, 2011) (affirming confirmation of FINRA award and denial of motion to vacate; noting “manifest disregard” law no longer viable in Eleventh Circuit; no evident partiality);

Mid-Ohio Securities Corp. v. Estate of Burns, Case No. 10-01975 (USDC D. Nev. June 14, 2011) (confirming FINRA award; denying motion to vacate; finding no manifest disregard; panel had authority to interpret FINRA rule relating to timeliness of arbitration, akin to statute of limitations; no record of plaintiff citing law to panel);

Bayme v. Groupargent Securities, LLC, Case No. 10-06213 (USDC S.D.N.Y. July 19, 2011) (denying petition to vacate FINRA award; finding no “manifest disregard” for determination that panel lacked jurisdiction based on finding that petitioner was employed by non-FINRA member);

Kulchinsky v. Ameriprise Financial, Case No. 11-00319 (USDC E.D. Pa. July 13, 2011) (confirming FINRA award; denying motion to vacate; noting validity of “manifest disregard” law still undetermined in Third Circuit; no manifest disregard where no evidence that party informed panel of law).

This post written by Michael Wolgin.