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Confirmation / Vacation of Arbitration Awards

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.

ARBITRATION ROUND UP

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Manifest Disregard:

ABS Brokerage Services, LLC v. Penson Financial Services, Inc., Case No. 09-4590 (USDC D.N.J. July 8, 2010) (denying motion to vacate, granting motion to confirm, no manifest disregard)

Arora v. TD Ameritrade, Inc., Case No. CV-10-01216 (USDC N.D. Cal. July 26, 2010) (denying motion to vacate FINRA award, no manifest disregard).

Dealer Computer Services, Inc. v. Johnson Ford Lincoln Mercury Nissan, Inc., Case No H-10-719 (USDC S.D. Tex. July 26, 2010) (granting motion to confirm, denying motion to vacate, no manifest disregard, and awarding attorneys fees and court costs to plaintiff as defendant had “no legally non-frivolous” basis for its challenge to the award and refusal to pay award was in bad faith)

Alpaca Shop Franchise Co. v. Roxburgh, Case No. 3:05-cv-1203 (USDC D. Conn. July 22, 2010) (granting petition to confirm, no manifest disregard, no ambiguity in award)

The First Baptist Church of Glenarden v. New Market Metalcraft, Inc., Case No. 8:10-cv-00543 (USDC S.D. Md. July 30, 2010) (granting motion to confirm, no manifest disregard).

Evident Partiality:

Hernandez v. Smart & Final, Inc., Case No. 3:09-CV-02266 (USDC S.D. Cal. June 17, 2010) (granting petition to confirm, denying petition to vacate award, no manifest disregard, no evident partiality)

Haddad v. Jackson, Case No. 1:07-cv-01676 (USDC E.D. Cal. July 16, 2010) (granting motion to confirm, denying motion to vacate, no evident partiality)

Procedure / Jurisdiction:

Technologists, Inc. v. Mir’s Ltd., Case No. 09-1339 (USDC D.D.C. July 27, 2010) (granting Rule 60(b) motion to vacate default judgment on petition to vacate, re-opening post-arbitration proceeding to further briefing on confirmation/vacatur)

Cargill Inc. v. Morgan, Case No. 1:10-cv-00088 (USDC E.D. Mo. July 28, 2010) (denying motion to vacate award, no arbitrator misconduct, and failure to exhaust arbitration appeal process under National Grain and Feed Association rules)

Exceed Powers:

Valve Corp. v. Activision Blizzard, Inc., Case No. 09-35800 (9th Cir. July 30, 2010) (affirming order requiring further arbitration proceedings on an offset issue the arbitrator initially refused to decide, finding arbitrator’s refusal to decide properly presented issue exceeded powers)

Samaritan Medical Center v. Local 1199, Service Employees Int’l Union, Case No. 7:09-cv-01072 (USDC N.D.N.Y. July 19, 2010) (denying motion to vacate, granting motion to confirm, arbitrator did not exceed powers by crafting remedy not provided for in collective bargaining agreement)

This post written by John Pitblado.

11TH CIRCUIT UPHOLDS CONFIRMATION OF ARBITRATION AWARD PURSUANT TO LIQUIDATED DAMAGES CLAUSE

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Following the district court’s confirmation of an arbitration award of damages to Seaborne Virgin Islands, National Aerotech Aviation appealed to the 11th Circuit Court of Appeals arguing that the district court “improperly and erroneously weighed the material facts” in determining whether the arbitrator acted in manifest disregard of the law. The 11th Circuit affirmed the district court’s decision, concluding that Aerotech had offered no evidence to suggest that the arbitrator deliberately ignored the law, and further holding that Georgia law explicitly allows parties to a contract to agree to liquidated damages. Thus, the district court did not err in granting summary judgment in favor of Seaborne. Aviation’s final argument – that the district court should have allowed discovery to proceed – was quickly dismissed by the Court, noting that district courts are granted wide discretion in ruling on discovery motions. National Aerotech Aviation, Inc. v. Seaborne Virgin Islands, Inc., Case No. 09-3252 (11th Cir. July 19, 2010).

This post written by John Black.

FEDERAL JUDGE CONFIRMS REINSURANCE ARBITRATION AWARD

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After arbitration between insurers Praetorian Insurance Co. (f/k/a Insurance Corporation of Hannover) and Clarendon Insurance Group Inc., and their reinsurer, American Constantine Insurance Co., the U.S. District Court for the Southern District of New York granted an unopposed petition to confirm the $7 million arbitration award. The award requires the reinsurer to place the amounts owed to the insurers either in escrow or in lines of credit for the insurers’ benefit, as collateral for the reinsurer’s share of reserves and incurred but not reported losses. Clarendon Am. Ins. Co. v. Am. Constantine Ins. Co., No. 10-2928 (USDC S.D.N.Y. June 8, 2010).

This post written by Michael Wolgin.