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Confirmation / Vacation of Arbitration Awards

COURT VACATES ARBITRAL AWARD FINDING IT “COMPLETELY IRRATIONAL” AND IN MANIFEST DISREGARD OF LAW

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Platinum Underwriters Bermuda, Ltd. reinsured PMA Capital Ins. Co., under a reinsurance agreement that contained a “deficit carry forward” provision. The parties disputed how certain deficits were to be calculated under the provision and arbitrated the claim. The arbitral panel awarded PMA $6,000,000, but eliminated the “deficit carry forward” provision from the contract, which provision ran to the benefit of Platinum. Both parties sought to vacate or modify the award. The court found the panel’s decision “completely irrational” – even under the broad grant of authority provided to the panel under the contract’s “Honorable Engagement Clause” – as the deficit carry forward provision was part of the essence of the contract and could not be written out of it. Moreover, the court saw no justification for the $6,000,000 award, other than as an equally irrational attempt to “compensate” Platinum for the elimination of the deficit carry forward provision. The Court granted PMA’s application to vacate the award, finding that an arbitration award that is not drawn from the essence of the contract is completely irrational, and therefore, in manifest disregard of the law. PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd., No. 09-84 (USDC E.D. Pa. Sept. 15, 2009).

This post written by John Pitblado.

ARBITRATION AWARD IN FAVOR OF UNION UNDER CBA UPHELD

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The plaintiff moved to vacate an arbitration award in favor of the defendant in disputes about grievance procedures arising from the parties’ Collective Bargaining Agreement (“CBA”). The disputes arose from the plaintiff’s disciplinary actions of certain members of the defendant unions. The court declined to vacate the award, relying on principles of deference to arbitral panels generally, and in particular under a CBA, deference to the arbitrators’ interpretation of the CBA and its procedural requirements. Continental Carbon Corp. v. United Steel, Paper and Forestry, Rubber Manufacturing, Energy, and Allied Industrial Service Workers Int’l Union, 08-cv-543-JHP-TLW (N. D. Okla. July 23, 2009).

This post written by John Pitblado.

VARIOUS RULINGS WITH RESPECT TO ARBITRATION AWARDS

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  • Manifest Disregard of Law: Macromex Srl v. Globex Int’l Inc., No. 08-2255 (2d Cir. May 26, 2009) (affirming district court’s confirmation of award, finding no manifest disregard of law); Brezden v. Associated Sec. Corp., Case No. 09-2771 (USDC C.D. Cal. June 1, 2009) (denying petition to vacate, finding no manifest disregard of law) (respondents have since filed a Notice of Appeal); Holland v. Wachovia Sec., LLC, Case No. 08-1772 (USDC S.D. Cal. May 15, 2009) (dismissing petition to vacate; manifest disregard of law allegation did not necessarily depend on resolution of a substantial question of federal law). None of these opinions discuss the continued viability of this doctrine after the Supreme Court’s Hall Street Associates opinion.

  • Petitions to Vacate: United Gov’t. Sec. Officers of Am., Int’l Union v. Pinkerton Gov’t Servs., Inc., Case No. 08-285 (USDC E.D. Tenn. June 03, 2009) (denying defendant’s motion to dismiss an action to vacate and modify an award, finding the court was not deprived of its concurrent jurisdiction); Steward v. H & R Block Fin. Advisors, Inc., Case No. 08-5994 (USDC D. Minn. May 28, 2009) (dismissing petition to vacate, rejecting petitioner’s numerous claims).

  • Public Policy: Columbia Gas of Ohio, Inc. v. Util. Workers Union of Am., Local 349, No. 08-3616 (6th Cir. May 15, 2009) (affirming the district court’s confirmation of award, enforcement of the contract agreement not contrary to public policy).

  • Miscellaneous: Parham v. Am. Bankers Ins. Co. of Fla., Case No. 07-706 (Ala. May 29, 2009) (finding no indication that the clerk entered the arbitrator’s order as the judgment of that court as required, ruling that the trial court’s order is void and vacated, dismissing the appeal for lack of subject matter jurisdiction as no final judgment exists); Med. Shoppe Int’l., Inc. v. Turner Invs., Inc., Case No. 09-00102 (USDC E.D. Mo. May 7, 2009) (granting application to confirm award as the allegations of bias failed and the court lacked jurisdiction to review allegations of factual errors); Dzanoucakis v. The Chase Manhattan Bank, USA, Case No. 06-5673 (USDC E.D.N.Y. Mar. 31, 2009) (granting motion to confirm award, finding sufficient evidentiary basis to establish the existence of an arbitration agreement and no evidence of impartiality).

This post written by Dan Crisp.

ARBITRATION AWARD SUMMARILY CONFIRMED WHERE NO DISPUTE ABOUT THE AWARD EXISTED

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A petition to confirm a $187,000 reinsurance arbitration award was granted where there was no dispute that the court had jurisdiction over the parties and subject matter of the action, or that the claims at issue were properly submitted to the arbitration panel for resolution. In fact, the amount of the award had already been paid. The petitioner apparently wished the award confirmed simply to avoid any doubt in future litigation. That request was granted. Global Reinsurance Corp. v. Argonaut Ins. Co., Case No. 08-8482 (USDC S.D.N.Y. May 22, 2009).

This post written by Brian Perryman.

CONFUSION OVER HALL STREET CAUSES COURT TO ADOPT “BELT AND SUSPENDERS” APPROACH TO MANIFEST DISREGARD CLAIM

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A software company’s (Xtria) appeal of the trial court’s refusal to vacate a commercial arbitration award was rejected, along with Xtria’s assertion that the arbitrator made a gross mistake or manifestly disregarded the law because the claims of Xtria’s sales agent (International) were barred due to a previous settlement entered into between Xtria and International’s subsidiary (Tracking Systems). The settlement defined Tracking Systems to includes its “past, present and future affiliate.” In a subsequent arbitration between Xtria and International concerning Xtria’s alleged breach of another contract, the arbitrator refused to apply the settlement to International because, although it was Tracking System’s parent company, it was not an “affiliate” under California law, because International controlled Tracking Systems, not the other way around. The arbitrator awarded International $1.35 million for breach of contract. The trial court confirmed the award.

On appeal, the award was again confirmed. The appellate court noted the United States Supreme Court’s decision in Hall Street Associates, LLC v. Mattel, Inc., and Fifth Circuit precedent holding that the “manifest disregard” vacatur ground is no longer a federal common law standard, and contrary state law is preempted by the Federal Arbitration Act. However, the appellate court stated that “without making a determination that the so-called common-law grounds for vacatur no longer exist,” it would address Xtria’s manifest disregard argument “in the attitude of cautiously donning both a belt and suspenders.” However, Xtria’s argument was unavailing since the arbtirator did not manifestly disregard the law in: (1) interpreting the settlement agreement; (2) determining the parties’ intent to exclude International from the settlement; or (3) deciding that International was not a Tracking Systems “affiliate.” There was also no “gross mistake” in the arbitrator’s decision. Xtria v. Int'l Ins. Alliance Inc., Case No. 06-08-00073 (Tex. App. May 15, 2009).

This post written by Brian Perryman.