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Confirmation / Vacation of Arbitration Awards

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

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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”

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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.

RULINGS ON ARBITRATION AWARDS – AN UPDATE

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A number of significant arbitration award decisions have been handed down over the past several weeks.

Orders generally confirming or vacating arbitration awards

  • The Ninth Circuit recently reversed the vacatur of an award finding that the award was not excessive in size and that the arbitration panel did have jurisdiction to enter a punitive damages award. However, the Ninth Circuit also found that Lloyds Underwriters failed to establish the partiality of two of the arbitrators. Lagstein v. Certain Underwriters at Lloyd’s, London, Case No. 03-01075 (9th Cir. June 10, 2010).
  • In Perhach v. Option One Mortgage Corp., Case No. 08-60637 (11th Cir. June 15, 2010), the Eleventh Circuit affirmed the district court’s denial of Albert Perhach’s pro se motion for relief from an order compelling arbitration and his motion to vacate the arbitrator’s award in favor of his former employer Option One Mortgage Corp.
  • The Southern District of New York in Rai v. Barclays Capital Inc., Case No. 10-1675 (S.D. N.Y. June 15, 2010) denied Rai’s motion to vacate an arbitration award against him and entered an order confirming the award in Barclays’ favor.
  • Hearing cross-motions to confirm and vacate an arbitration award in Petrie v. Clark Moving & Storage, Case No. 09-06495 (W.D.N.Y. May 17, 2010), the Western District of New York confirmed the arbitrator’s award in favor of the Petries finding no manifest disregard of the law.
  • The Northern District of California denied Pacific Development Partners motion to vacate or modify an arbitration award in favor of Elem Indian Colony of Pomo Indians. The Court affirmed the arbitrator’s ruling that a contract for casino development was void. Elem Indian Colony of Pomo Indians v. Pacific Development Partners X, LLC, Case No. 09-1044 (N.D. Cal. May 19, 2010).
  • In Adams v. Barnes, Case No. 09-1860 (N.D. Tex. June 17, 2010), the District Court denied former Dallas Cowboy Flozell Adams’ motion to vacate an arbitration award in favor of his former agent Roosevelt Barnes. The Court confirmed the award.
  • In International Brotherhood of Teamsters, Local 701 v. CBF Trucking, Inc., Case No. 09-5525 (D. N.J. June 10 2010), the District Court granted the union’s motion to dismiss CBF Trucking counterclaim and confirmed an arbitration award in favor of the Teamsters.

Violation of public policy

  • In American Postal Workers Union, AFL-CIO v. United States Postal Service, Case No. 09-1084 (N.D. Tex. May 14, 2010), the District Court dismissed plaintiffs’ Complaint to Vacate Arbitration Award and confirmed defendant’s motion to confirm the award. The Court held that the award did not violate Texas public policy and that the award was not a result of any factual error in the arbitrator’s findings.

Attorneys fees

  • Illinois Union Ins. Co. v. North County Ob-Gyn Medical Group, Case No. 09-2123 (S.D. Cal. May 18, 2010): The Southern District of California confirmed an arbitration panel’s ruling that legal fees paid by the insurance company on the medical group’s behalf eroded the liability of a policy issued by IU to NCOG.
  • In First Automotive Service Corp. v. First Colonial Ins. Co., Case No. 07-682 (M.D. Fla. June 16, 2010), the District Court denied motions to remand the case and for sanctions under Rule 11 and confirmed a modified arbitration award as to attorneys’ fees and costs. Judgment was entered in favor of First Automotive and Northbrook Indemnity Co.

Interest

  • In Diaz v. Cruz, Case No. 09-286 (Mass. Ct. App. May 21, 2010), the Massachusetts Court of Appeals determined that, while the Superior Court had jurisdiction to hear a motion to confirm an arbitration award, it erred in granting prejudgment interest in favor of the plaintiff.

This post written by John Black.

COURT HOLDS NEW YORK CONVENTION COVERS DOMESTIC AWARDS THAT ARE “FOREIGN IN CHARACTER”

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A U.S. District Court has denied the Republic of Argentina’s motion to vacate a $185 million dollar arbitration award in favor of a British investor in Argentinean gas distribution. The award was made in an arbitration under the United Nations Commission on International Trade Law Rules, as provided in the Argentina-United Kingdom bilateral investment treaty.

As an initial matter, the court determined that it had proper subject matter jurisdiction over the matter under Chapter 2 of the FAA, also known as the Convention On The Recognition And Enforcement Of Foreign Arbitral Awards. Specifically, the court rejected Argentina’s arguments based on the Convention’s reciprocity clause, finding that an award made in the U.S. between a U.K. investor and a foreign state fell within the New York Convention as an award “not considered as domestic.” The court then rejected each of Argentina’s merits-based arguments, finding that the Court of International Arbitration did not exceed its powers in rejecting a challenge to one of the arbitrators based on bias, that the panel’s decisions were based on plausible constructions of the bilateral investment treaty, and that the panel did not otherwise abuse its powers. Republic of Argentina v. BG Group PLC, Case No. 08-485 (USDC D.D.C. June 7, 2010).

This post written by Michael Wolgin.

UK Court Determines that Arbitrators Correctly Applied US, UK Law

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In a dispute stemming from various reinsurance claims arising from the Claimant’s participation in an excess of loss reinsurance program which protected the Respondent’s casualty book of business, IRA Brasil Resseguros challenged an arbitration panel’s ruling in favor of CX Reinsurance Company before the UK High Court of Justice, Queen’s Bench Division. Mr. Justice Burton granted leave to hear four issues on appeal: (1) the standard of proof required for a reinsured to prove his case under a “double proviso” follows settlements clause; (2) the correct approach to considering the question of proof of loss under such a follow settlements clause; (3) what proof is required in relation to a “losses occurring during” clause; and (4) the test for whether a loss was a loss “arising out of an event.” The court, after considering and applying both UK precedent (for issues 1 and 2) and US case law (for issues 3 and 4) determined that the arbitrators had correctly applied applicable law and dismissed the appeal accordingly. IRB Brasil Resseguros SA v. CX Reinsurance Co. Ltd., Case No. 2010 Folio 12 (Q.B. May 7, 2010).

This post written by John Black.