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New reinsurance-related and arbitration developments from Carlton Fields

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Confirmation / Vacation of Arbitration Awards

SWISS RE ARBITRATION AWARD CONFIRMED BY DISTRICT COURT

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OneBeacon Insurance Company filed a motion to vacate an arbitration award in favor of Swiss Re. OneBeacon argued that the award should be vacated because the arbitrators were guilty of misconduct by refusing to permit necessary discovery and hear certain evidence. The dispute between the parties was governed by a Multiple Line Reinsurance Treaty contract which is an excess loss reinsurance contract containing an arbitration clause. The court denied OneBeacon’s motion to vacate and confirmed Swiss Re’s motion to confirm, finding that the arbitration panel acted reasonably in construing the term “occurrence” under the treaty and that the panel’s discovery and evidentiary decisions were within its discretion. OneBeacon American Insurance Co. v. Swiss Reinsurance Am. Corp., Case No. 09-11495 (USDC D. Mass. Dec. 23, 2010).

This post written by John Black.

APPEALS COURT DERAILS ATTEMPT TO VACATE ARBITRATION AWARD

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Burlington Northern and Santa Fe Railway Company (BNSF) and the Public Service Company of Oklahoma (PSO) entered into a long-term agreement in 1985 pertaining to the transport of coal. A dispute about rates arose and the matter was submitted to arbitration, as per the parties’ agreement. The arbitration provision was limited to rate disputes. The panel awarded PSO the rate decrease it sought, and BNSF thereafter moved to vacate the award in federal district court, arguing the panel (1) exceeded its authority by deciding matters outside the scope of the submission; and (2) incorrectly interpreted the contract in manifest disregard of the law. The district court ultimately confirmed the award, and BNSF revived its arguments on appeal to the Tenth Circuit Court of Appeals. The Tenth Circuit affirmed, finding that BNSF was merely seeking to alter its burden by disguising the issue as one of arbitrability, when really it was seeking review of the decision on the merits. Applying the correct standard of “extreme deference” to the panel’s decision on the merits, the court affirmed the district court’s ruling confirming the panel’s award. Burlington Northern and Santa Fe Railway Co. v. Public Service Company of Oklahoma, No. 09-5133 (10th Cir. Dec. 10, 2010).

This post written by John Pitblado.

SIGNIFICANT ARBITRATION AWARD DECISIONS

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A number of significant arbitration award decisions have been handed down in the last few weeks:

Employment

  • The District Court confirmed an arbitration award as to Main Line that was originally obtained against Main Line by a sister local union. The Court found Main Line in violation of the union’s collective bargaining agreement and that the grievance procedure was properly followed. Sheet Metal Workers’ Int’l. Assoc. Local Union 27 v. Main Line Mechanical, Inc., Case No. 10-01873 (USDC D. N.J. Oct. 25, 2010).
  • On cross motions for summary judgment, the District Court granted in part and denied in part HPD’s motion, finding that the arbitrator correctly found that HPD had cause to terminate plaintiff Shaw. The arbitration award was confirmed, except for as to attorneys’ fees and costs. Shaw Constructors v. HPD, LLC, Case No. 10-01874 (USDC E.D. La. Oct. 26, 2010).
  • The District Court for Puerto Rico granted Puerto Rico Telephone Co.’s motion for summary judgment finding that plaintiff had failed to establish that the arbitral decision on behalf of a terminated union member should be set aside. The arbitrator’s decision was confirmed. Union Independiente de EmpleadosTelefonicos de Puerto Rico v. Puerto Rico Telephone Co., Case No. 10-1667 (USDC D. P.R. Nov. 15, 2010).
  • A physician and his wife initiated an employment action against Washington Hospital Center, which resulted in arbitration. Dr. Tio moved for a vacatur of the award, which was denied by the District Court. Tio v. Washington Hospital Center, Case No. 08-00626 (USDC D.D.C. Nov. 30, 2010).

Jurisdictional Decisions/International Agreements:

  • The Sixth Circuit affirmed the District Court’s determination that it lacked jurisdiction to confirm an arbitration panel’s interim award denying class arbitration for lack of ripeness. The Court of Appeals ruled that Dealer Computer failed to demonstrate cognizable hardship. Dealer Computer Servs., Inc. v. Dub Herring Ford, Case No. 09-1848 (6th Cir. Oct. 14, 2010).
  • The Eastern District of Pennsylvania vacated its own prior confirmation of an arbitration award in favor of Aurum Asset Managers, finding that it lacked subject matter jurisdiction to confirm the award because Banco is entitled to sovereign immunity. Aurum Asset Managers, LLC v. Banco de Estado do Rio Grande do Sul, Case No. 08-00102 (USDC E.D. Pa. Oct. 13, 2010).
  • The Southern District of New York granted Japanese entity NTT DoCoMo’s motion to confirm an arbitration award, finding the US public policy did not preclude an arbitration panel from ordering specific performance of a stock purchase agreement. NTT DoCoMo v. Ultra D.O.O., Case No. 10-03823 (USDC S.D. N.Y. Oct. 12, 2010).
  • The Southern District of New York recently granted Swedish firm NYKCool’s motion to confirm an arbitration award and for post-award interest on a dispute related to Contracts of Affreightment. NYKCool A.B. v. Pacific Fruit Co., Case No. 10-03867 (S.D. N.Y. Nov. 24, 2010).

Manifest Disregard for the Law:

  • The Second Circuit recently issued a Summary Order affirming the District Court’s confirmation of an arbitration award in favor of the County of Nassau. The Court applied New York law and determined that the award was not in manifest disregard of law because it was not irrational, and that no arbitrator partiality was demonstrated. County of Nassau v. Chase, Case No. 09-3642 (2d Cir. Oct. 4, 2010).
  • The District Court for Arizona confirmed an arbitration award against AZ Holding, finding that the arbitrator’s failure to award attorneys’ fees and costs did not amount to manifest disregard of the law. AZ Holding, LLC v. Frederick, Case No. 08-00276 (USDC D. Ariz. Nov. 29, 2010).
  • The Southern District of New York denied Goldman Sachs’ motion to vacate an arbitration award and instead confirmed the award, ruling that the arbitrator did not manifestly disregard the law, even though he did not explicate the reasons for his ruling. Goldman Sachs Execution & Clearing L.P. v. The Committee of Unsecured Creditors’ Committee of Bayou Group, LLC, Case No. 10-05622 (USDC S.D. N.Y. Nov. 30, 2010).

This post written by John Black.

CAL. CT. APP. OVERTURNS CONFIRMATION OF AWARD DUE TO NONDISCLOSURE OF PERTINENT BUSINESS RELATIONSHIP BETWEEN ARBITRATOR AND PARTY

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Nancy Hurwitz Kors appealed to the California Court of Appeals an order confirming an arbitration award in favor of the law firm Benjamin, Weill & Mazer in a dispute over attorneys’ fees. Kors argued that the confirmation must be reversed because the chief arbitrator failed to disclose business relationships casting doubt on his ability to be impartial, as required by the California Arbitration Act. Shortly after the issuance of the arbitration award, Kors’ counsel discovered that the chief arbitrator was counsel for the defendant law firm in a recent case in which the law firm had sought to arbitrate a fee dispute with another client, had filed a brief on behalf of the law firm with the California Supreme Court shortly before his appointment as chief arbitrator in the present dispute and argued the case to the Supreme Court on behalf of the law firm while serving as chief arbitrator in this matter. The California Court of Appeals reversed the order confirming the award finding that the circumstances of the chief arbitrator’s business relationship with the law firm could cause a person to “entertain a doubt that the proposed neutral arbitration would be able to be impartial.” Benjamin, Weill & Mazer v. Kors, No. 07-00939 (Cal. Ct. App. Oct. 12, 2010).

This post written by John Black.

THIRD CIRCUIT AFFIRMS VACATUR OF REINSURANCE CLAIM ARBITRATION AWARD

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Platinum Underwriters appealed to the Third Circuit the vacatur of an arbitration award in Platinum’s dispute against PMA Capital over a “deficit carry forward” provision in a reinsurance agreement. The Third Circuit affirmed the District Court’s decision, finding that the arbitrators had exceeded their powers under the Federal Arbitration Act in awarding Platinum $6 million, which effectively eliminated the “deficit carry forward” provision, in violation of the standard that an award must be “rationally derived from the agreement between the parties or from the parties’ submissions to the arbitrators.” The Court found that “this relief exceeded the arbitrators’ powers because it was not sought by either party, and was completely irrational because it wrote material terms of the contract out of existence.” The Court agreed with the District Court that the “honorable engagement” language in the contract did not justify the elimination of the agreed upon contractual provision. PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd., No. 09-3963 (3d Cir. Nov. 8, 2010).

This post written by John Black.