Confirmation / Vacation of Arbitration Awards

RULINGS ON ARBITRATION AWARDS – AN UPDATE

June 30, 2010 by Carlton Fields

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”

June 24, 2010 by Carlton Fields

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

June 3, 2010 by Carlton Fields

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.

HALL STREET ASSOCIATES DOES NOT BAR A REMAND TO AN ARBITRATION PANEL FOR CLARIFICATION OF THE AWARD

May 20, 2010 by Carlton Fields

A trial court’s judgment confirming an arbitration award and awarding certain pre- and post-judgment interest to the defendant insurance companies was unsuccessfully appealed, the appellate court determining that an earlier remand to the arbitration panel was proper because, among other things, nothing in the United States Supreme Court’s ruling in Hall Street Associates, L.L.C. v. Mattel, Inc. precluded that procedure. On appeal, the plaintiff contended that the trial court: (1) improperly remanded the matter to the arbitration panel for clarification of its award; (2) improperly confirmed the arbitration award as clarified; and (3) abused its discretion in awarding pre- and post-judgment interest.

On the first point, the plaintiff contended that Hall Street Associates overruled the body of precedent permitting a remand to an arbitration panel for clarification of an award. This contention was rejected, as the issue in Hall Street Associates was whether parties to an arbitration proceeding could, by contractual agreement, supplement the statutory grounds for vacating an arbitration award. Hall Street Associates did not concern the procedure at issue, a remand for clarification of an arbitration award. On the second point, plaintiff argued that the arbitration panel imperfectly executed its powers, so that the clarified arbitration award did not conform to the submission. The appellate court noted, however, that courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrators’ decision of the legal questions. The submission at issue was unrestricted. On the third point, the plaintiff claimed the trial court abused its discretion in awarding pre- and post-judgment interest. The decision, however, of whether to grant interest is an equitable determination within the trial court’s discretion. The trial court’s reasoning was sound: “Although it does not appear that the plaintiff made its motions and appeals in bad faith, the plaintiff would receive an unfair advantage if it were allowed to retain this money while the defendants were deprived of its use and the opportunity to earn interest upon it for the past six years.” The judgment was confirmed in full. Hartford Steam Boiler Inspection & Insurance Co. v. Underwriters at Lloyd’s, Case No. AC 30162 (Conn. App. Ct. May 11, 2010).

This post written by Brian Perryman.

Southern District of New York Confirms FINRA Arbitration Award

May 17, 2010 by Carlton Fields

Following an initial FINRA arbitration award holding Steven Singer liable to Hartford Financial Holdings for compensatory damages, Mr. Singer filed Chapter 7 bankruptcy. After a complicated procedural history, the Bankruptcy Court granted relief from the automatic stay and allowed Hartford to proceed with this action in US District Court for the Southern District of New York. In its petition, Hartford asked the District Court to confirm the arbitration award, and for a determination that the award is nondischargeable under § 523(a) of the Bankruptcy Code, or alternatively for a remand to the FINRA arbitration panel so that it may clarify the award. As an additional alternative, Hartford asked the Court to review FINRA arbitration hearings to determine whether the award is dischargeable.

The District Court confirmed the initial arbitration award but denied all of Hartford’s other requests for relief. In particular, the Court determined that a determination of whether the award was nondischargeable would violate the automatic stay. Further, the Court denied modification or remand finding that the award was not an evident miscalculation nor was it indefinite or ambiguous. Pursuant to New York statute and FINRA, 9% interest per annum was set on the award. Hartford Financial Holdings, Inc. v. Singer, Case No. 08-2459 (S.D.N.Y. May 4, 2010).

This post written by John Black.