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Confirmation / Vacation of Arbitration Awards

COURT DENIES MOTION TO RECONSIDER CONFIRMATION OF ARBITRATION AWARD

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Following a denial of its motion to vacate an adverse arbitration award, plaintiffs ABS Financial Services submitted a Motion for Reconsideration requesting that the US District Court for the District of New Jersey reverse its prior ruling and judgment. In its earlier decision, the Court had confirmed the arbitration award even though it contained errors of law because it determined that the the award was supported “by at least some of the evidence in the record and was an arguably reasonable construction of the parties’ contracts.” Noting the extremely difficult standard of review for motions for reconsideration, the Court denied the instant Motion, holding that it had not committed a clear error or manifestly disregarded the law in its prior ruling and judgment. ABS Brokerage Servs., LLC v. Penson Fin. Servs., Inc., Case No. 09-04590 (D. N.J. Aug. 16, 2010).

This post written by John Black.

NINTH CIRCUIT REVERSES CONFIRMATION OF ARBITRATION AWARD BASED ON IMPROPER FORUM

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The Ninth Circuit has reversed and remanded a district court’s confirmation of an arbitration award because the plaintiff/counterclaim defendant, a manufacturer located in Belarus, established a defense under the New York Convention. The parties agreed to an arbitration clause that requires disputes to be arbitrated where the “defendant” is located. Arbitration was commenced in California, but the plaintiff expressly reserved the right to have any counterclaims asserted against it arbitrated in Belarus. When counterclaims were filed, the arbitrator refused to dismiss them on the ground they should have been filed in Belarus. The district court confirmed the California arbitrator’s award against the plaintiff, which appealed to the Ninth Circuit.

On appeal, the court held that procedures used in the arbitration of “counterclaims” were not in accordance with the agreement. Invoking a defense under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), the plaintiff contended the “arbitral procedure was not in accordance with the agreement of the parties” because the counterclaims should have been arbitrated in Belarus. The Ninth Circuit agreed. The arbitration agreement required that any “dispute” be arbitrated at “the defendant’s [site].” The term “dispute” encompassed both claims and counterclaims. Further, a party is a “defendant” as to any dispute whenever another party seeks damages or other form of relief against it. Polimaster Ltd. v. RAE Systems, Inc., No. 08-15708 (9th Cir. Sept. 28, 2010).

This post written by Brian Perryman.

ARBITRATION ROUND UP

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Manifest Disregard:

Paul Green School of Rock Music Franchising, LLC v. Smith, Case No. 09-2718 (3d Cir. Aug. 2, 2010) (affirming district court’s confirmation of arbitration award; holding no manifest disregard; declining to address whether the Third Circuit considers “manifest disregard” to be a valid ground for vacatur of an arbitration award under the FAA)

The Burton Corp. v. Shanghai Viquest Precision Industries, Co., Case No. 10 Civ. 3163 (USDC S.D.N.Y. August 3, 2010) (denying petition to vacate award; granting petition to confirm award; noting that in the Second Circuit, “manifest disregard” remains a valid ground for vacating arbitration awards; finding no manifest disregard; arbitrator did not exceed authority)

Kunz v. JHP Enterprises, LLC, Case No. 1:09CV115 (USDC D. Utah August 9, 2010) (granting motion to confirm FINRA award; no manifest disregard)

Ozormoor v. T-Mobile USA, Inc., Case No. 08-11717 (USDC E.D. Mich. August 19, 2010) (denying motion to vacate award; arbitrator did not exceed authority; no manifest disregard; upholding one-year limitation provision in arbitration agreement)

Westerlund v. Landmark Aviation, Case No. CV09-0686 (USDC C.D. Cal. August 9, 2010) (denying motions to vacate and motion to modify award; granting motion to confirm award; no manifest disregard; award not “completely irrational”; arbitrator did not exceed powers)

Choice of Law:

Idea Nuova, Inc. v. GM Licensing Group, Inc., Case No. 09-3652 (2d Cir. Aug. 9, 2010) (affirming district court’s (1) dismissal of complaint to vacate or modify arbitration award and (2) confirmation of award; concluding that by agreeing to submit disputes “to AAA arbitration for resolution,” the parties incorporated the AAA Commercial Arbitration Rules into their agreement)

Johnson v. Rosenfeld, Case No. 08-56911 (9th Cir. Aug. 13, 2010) (affirming district court’s confirmation of award and application of choice of law provision; holding that arbitrator did not violate California disclosure rules nor exceed his powers under California arbitration procedure)

Overlapping Remedies:

Kaliroy Produce Co. v. Pacific Tomato Growers, Inc., Case No. CIV 10-160 (USDC D. Az. Aug. 4, 2010) (denying motion to vacate award; granting petition to confirm award; holding that New York Convention’s remedies are not exclusive of remedies under the FAA; among other rulings: no manifest disregard, no violation of public policy, award did not “fail to draw its essence” from arbitration agreement; no evident partiality; Notice of Appeal to Ninth Circuit)

F. Hoffmann-La Roche Ltd. v. Qiagen Gaithersburg, Inc., Case No. 09 Civ 7326, 7396 (USDC S.D.N.Y. Aug. 11, 2010) (denying motion to vacate international arbitration award; granting motion to confirm award; finding that matter was “international” under the New York Convention but that FAA also applied; no manifest disregard; arbitrator did not exceed authority)

This post written by Michael Wolgin.

ARBITRATION AWARD VACATED FOR ARBITRATOR BIAS AND MISCONDUCT

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In a labor dispute governed by the Labor-Management Relations Act, the U.S. District Court for the Eastern District of Louisiana has vacated a labor arbitration award due to bias and misconduct on the part of the arbitrator. The arbitrator had admitted that he had a prior business relationship with a party affiliated with the plaintiff. The arbitrator also made a request of plaintiffs’ counsel to assist him in recovering money connected with the prior business relationship and implied that plaintiff’s counsel’s compliance would effect the result of the arbitration. The Federal Mediation and Conciliation Service Arbitration Review Board had found that the arbitrator violated the Code of Professional Conduct for this behavior. The court held that “it is crucial that arbitrators remain, and appear, completely unbiased” and the arbitrator’s failure to do so required that the arbitration award be vacated. United Steel Workers AFL CIO v. Murphy Oil USA, Inc., No. 09-7191 (U.S.D.C. E.D. La. Aug. 3, 2010).

This post written by Michael Wolgin.

CASE REMANDED TO NEW ARBITRATION PANEL IN LIGHT OF PRIOR PANEL’S MANIFEST DISREGARD OF LAW

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After a second trip to the First Circuit, a district court has held that remand to a new panel of arbitrators is appropriate where the panel’s vacated award was earlier held to be in manifest disregard of the law. The case involved a storied procedural history involving multiple appeals to the First Circuit. The plaintiff sought confirmation of a NASD/FINRA arbitration award, which the district court granted. After the First Circuit vacated the award as manifestly disregarding the law, and remanded the case to the district court, the district court ordered a remand of the matter to FINRA for rehearing. The defendants appealed again, arguing that the district court’s remand order “tacitly adopted” the plaintiff’s allegedly erroneous assertion that the First Circuit had condoned remand to the original arbitration panel. Although it affirmed the order remanding the case to FINRA, the First Circuit directed the district court to determine whether a new arbitration panel should be constituted, the original arbitration panel should be reconstituted, or FINRA should decide the issue in the first instance. The district court found that remand to a new panel was “most appropriate” because of the First Circuit’s earlier finding that the arbitrators had acted in manifest disregard of the law. Kashner Davidson Securities Corp. v. Mscisz, Case No. 05- 11433 (USDC D. Mass. June 25, 2010).

This post written by Brian Perryman.