The United States Court of Appeals for the Ninth Circuit, in an unpublished opinion involving a non-insurance matter, affirmed the denial of a motion to vacate an arbitration award, which contended that the arbitrators had exhibited evident partiality or corruption. However, the Court could not evaluate this claim on its merits because there was no transcript of the arbitration proceeding available. Henry v. Standard Automation & Control, 2006 WL 2233390, Case No. 04-16588 (9th Cir. August 24, 2006). Unless whatever is the subject of post-hearing motions is completely encompassed within written submissions to a panel, which will be an atypical occurrence, it is likely that there will be an inadequate record for judicial review if the arbitration hearing is not transcribed. Electing not to have a court reporter attend an arbitration hearing therefore will severely limit a party's post-hearing options, making an arbitration award effectively not subject to even the limited “judicial review” provided for in the Federal Arbitration Act.
Confirmation / Vacation of Arbitration Awards
Construing the Wisconsin arbitration statute, the Wisconsin Supreme Court vacated an arbitration award in a dispute between Allstate Insurance Company and a policyholder on the basis that a party-appointed arbitrator demonstrated evident partiality. Borst v. Allstate Insurance Co., Case No. 2004 AP 2004 (Wisc. June 13, 2006). The arbitrator appointed by Allstate was an attorney who had a “substantial, ongoing attorney/client relationship with Allstate.” Even though the relationship was disclosed, and all parties were aware of the relationship going into the arbitration hearing, the Court found that disclosure and knowledge did not avoid the prohibition of such a relationship under Wisconsin law. The Court also strictly limited the permissible discovery depositions to those permitted by the Wisconsin statute.
An NASD arbitration panel entered an award in favor of Wachovia Securities. When the pending case was dismissed, Wachovia filed a separate action for confirmation of the award pursuant to the Federal Arbitration Act. The defendant opposed confirmation on the basis that the FAA requires that a request for confirmation be filed within one year of the date of the award. The Court disagreed, finding that binding Eighth Circuit law held that the one year period was permissive, and not mandatory, and that it would not enforce the bar since Wachovia had moved to confirm the award in the prior action, prior to its dismissal. , Case No. 06-233 (USDC D. Neb. July 26, 2006). The Court noted that there was a conflict on this issue between different panels of the Eighth Circuit.
In an action filed by an insurance agent against John Hancock Mutual Life and two affiliates, , Case No. 05-1148 (4th Cir. March 13, 2006), the United States Court of Appeals for the Fourth Circuit vacated a District Court decision denying a motion to vacate an arbitration award filed by an insurance agent, finding that the arbitration award failed to draw its essence from the governing arbitration agreement and was made in manifest disregard of law. The Court found that the arbitrator disregarded an unambigous provision in the agreement containing an arbitration clause by implying a one year statute of limitation into the arbitration agreement, where the agreement did not contain any limitation agreement, but an earlier, superceded agreement, did contain a one year limitation provision. Applicable law provided either a three or a six year limitation period.
A District Court confirmed an arbitration award in a non-reinsurance context in Lebeau v. Oppenheimer & Co., rejecting contentions that the award should be vacated because, inter alia, the arbitrators did not allow sufficient discovery, did not adequately disclose conflicts and demonstrated bias. One interesting finding is that under the Federal Arbitration Act, one may waive such objections by raising them for the first time in the context of motions to confirm or vacate a later award, rather than raising them in the arbitration, at the time of the alleged misconduct. Lebeau v. Oppenheimer & Co., Case No. 05-5876 (USDC E.D. Pa. June 23, 2006).