Confirmation / Vacation of Arbitration Awards

FEDERAL JUDGE CONFIRMS REINSURANCE ARBITRATION AWARD

August 5, 2010 by Carlton Fields

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.

EIGHTH CIRCUIT HOLDS THAT HALL STREET ELIMINATED MANIFEST DISREGARD OF LAW DOCTRINE; AFFIRMS ARBITRATION AWARD

July 27, 2010 by Carlton Fields

Following an arbitration award and district court confirmation granting Medicine Shoppe International lost future profits and future license fees, defendants/appellants Turner Investments and Donnie Turner (President of Turner Investment) appealed to the Eighth Circuit arguing that the district court erred in confirming the award because the arbitrator showed a manifest disregard for the law. Specifically, Turner Investments assert that Medicine Shoppe failed to demonstrate future profits with reasonable certainty as required by Missouri law, that Medicine Shoppe failed to mitigate damages, and that the award of future fees to a franchisor hampered the growth of important franchise markets contrary to public policy. The Eighth Circuit affirmed the award, citing Hall Street Assoc. LLC v. Mattel, Inc., 552 U.S. 576 (2008) for the proposition that only the enumerated reasons listed in the FAA justify vacatur of an arbitration award. Having found that none of the enumerated reasons existed, the Court affirmed the judgment of the district court. The Eighth Circuit therefore joins the list of Circuit Courts of Appeal which have held that the doctrine of manifest disregard of law did not survive Hall Street. Medicine Shoppe Int’l, Inc. v. Turner Investments, Inc., Case No. 09-2179 (8th Cir. July 21, 2010).

This post written by John Black.

NO MANIFEST DISREGARD IN AWARD AGAINST TEAMSTERS’ UNION

July 22, 2010 by Carlton Fields

A federal court in New Jersey granted an employer’s motion to dismiss a complaint filed by the union representing a terminated employee. The union sought to vacate an arbitrator’s award in an employment dispute pertaining to the employee’s termination. The court noted the “narrow” standard in overturning an arbitrator’s award, and that even “improvident” or “silly” factfinding by the arbitrator would not constitute a “manifest disregard” of the law. The court analyzed whether the collective bargaining agreement containing the arbitration clause was valid, for lack of signature by an authorized employer representative, but ultimately agreed with the arbitrator’s decision on that point and others, finding the decision “well-reasoned” and “supported by the record.” Int’l Brotherhood of Teamsters, Local 701 v. Stroehmann Bakeries, No. 09-6205 (USDC D.N.J. June 22, 2010)

This post written by John Pitblado.

STOLT-NIELSEN DOES NOT MANDATE MOTION FOR RECONSIDERATION IN ELEM INDIAN COLONY CASE

July 15, 2010 by Carlton Fields

On June 30th, we reported that the dispute between the Elem Indian Colony and Pacific Development Partners X the Northern District of California affirmed an arbitrator’s ruling that a contract for casino development was void. Following that decision, defendants Pacific Development asked for leave to file a motion for reconsideration arguing that Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010) dictates that the arbitrator’s decision should be reversed. The Stolt-Nielsen case dealt primarily with the issue of class arbitration where not all parties have agreed to participate in class arbitration.

The District Court denied Pacific Development’s request for leave to file a motion for reconsideration holding that the issue presented in Stolt-Nielsen need not be reached because the arbitrator’s decision also rested on an independent rationale: that the “memorandum of understanding” approved by the Tribe’s executive committee was void for lack of regulatory approval. Finally, the Court ruled that although the arbitrator awarded attorneys’ fee based upon a flawed theory, the award was not contrary to law because it was supported by another legal theory. Elem Indian County of Pomo Indians v. Pacific Development Partners X, LLC, Case No. 09-1044 (USDC N.D. Cal. June 29, 2010).

This post written by John Black.

FOURTH CIRCUIT AFFIRMS CONFIRMATION OF ARBITRATION AWARD OVER OBJECTIONS THAT THE AWARD WAS PROCURED BY “UNDUE MEANS”

July 13, 2010 by Carlton Fields

The appeal arises from a contract dispute concerning the construction of a wastewater treatment plant for the City of Greensboro. The parties – Greensboro, the contractor (MCI Constructors), and the contractor’s surety on a performance bond (National Union Fire Insurance Company) – agreed to submit the matter to arbitration. Greensboro was award nearly $15 million in the arbitration. The district court granted Greensboro’s motion to confirm that award. On appeal, MCI and National Union argued that the district court should have vacated the award because the liability award was procured by “undue means” in violation of § 10(a)(1) of the Federal Arbitration Act; that the arbitration panel exceeded the scope of its powers to issue the award; and that the district court should have remanded the award because the award failed to specify whether it includes the contract balance.

The Fourth Circuit affirmed. First, the court stated that an award is procured by “undue means” if there is proof of fraud or corruption, but the most that happened during the arbitration in question was Greensboro’s counsel’s “legally objectionable” tactics. Next, the court determined whether the arbitration panel exceeded the scope of its powers under the contract by not requiring the City to submit the dispute on the contract price to the engineering firm that designed the project. The court found that since the submission of this issue to the engineering firm was not a contract requirement, the panel did not exceed its authority by not requiring such a submission. The court further rejected the contention that because the panel did not specify the basis for its award, the award was ambiguous. It is “well settled” that arbitrators are not required to disclose the basis upon which their awards are made and “courts will not look behind a lump-sum award.” Finally, the court rejected the objection that the panel failed to issue a reasoned written statement of decision; a written statement was not requested by the parties, as contemplated under the applicable arbitration rules (AAA Complex Commercial Arbitration Rules). MCI Constructors v. City of Greensboro, No. 09-1600 (4th Cir. July 1, 2010).

This post written by Brian Perryman.