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You are here: Home / Archives for Arbitration / Court Decisions / Interim or Preliminary Relief

Interim or Preliminary Relief

Second Circuit Holds That Refusal to Enjoin Arbitration Is Immediately Appealable, Clarifies Standard for Obtaining Preliminary Injunction Enjoining Arbitration

February 19, 2024 by Brendan Gooley

The Second Circuit Court of Appeals recently held that a district court’s refusal to enjoin arbitration was immediately appealable because the arbitration agreement was governed by state law rather than the Federal Arbitration Act. The Second Circuit went on to clarify the standard for obtaining a preliminary injunction enjoining arbitration and remanded the case for a determination of whether that standard was met.

The Resource Group International Ltd. (TRGI) and related entities and TRGI’s chairman and director, Muhammad Ziaullah Khan Chishti, entered into a preferred stock purchase agreement with several other entities. The agreement contained an arbitration clause that provided for arbitration in accordance with “the Uniform Arbitration Act as in effect in the State of New York.” Chishti subsequently resigned from TRGI and executed a release agreement with the entities who had signed the stock purchase agreement. The release agreement contained (1) a forum-selection clause designating the state and federal courts in New York as the “exclusive jurisdiction” for any litigation between the parties and (2) a merger clause stating that the release agreement constituted the “entire agreement” between the parties and that it “supersede[d] all prior arrangements or understandings.” The release agreement required Chishti to refrain from commencing litigation or other proceedings against TRGI and others.

Chishti subsequently initiated arbitration against TRGI claiming that TRGI had breached the stock purchase agreement. TRGI then filed suit in the Southern District of New York claiming that Chishti had breached the release agreement. TRGI sought a declaratory judgment that the release agreement superseded the stock purchase agreement’s arbitration provisions and a temporary restraining order and a preliminary injunction staying the arbitration proceedings. The district court denied the preliminary injunction, concluding that TRGI had not shown irreparable harm or a likelihood of success. TRGI appealed.

The Second Circuit first concluded that it had jurisdiction to consider TRGI’s interlocutory appeal. Although Section 16 of the FAA precludes appeals from interlocutory orders refusing to enjoin arbitration subject to the FAA, the Second Circuit explained that the parties to the stock purchase agreement “opted out of the FAA and expressly elected New York state law to govern any arbitration.” New York law allowed for interlocutory appeals from orders refusing to enjoin arbitration.

Turning to the merits, the Second Circuit held that the release agreement did in fact supersede the stock purchase agreement and that TRGI was likely to succeed on its claim on that point. The release agreement also made clear, however, that at least some claims could be arbitrable. The Second Circuit therefore remanded the case to determine whether the instant claims were arbitrable under the release agreement. The Second Circuit also explained that “forced arbitration of inarbitrable claims may constitute irreparable harm when the arbitration is one for which any award would not be enforceable and for which the time and resources expended in arbitration is not compensable by any monetary award of attorneys’ fees or damages.” The Second Circuit instructed the district court to consider that standard on remand.

Resource Group International Ltd. v. Chishti, No. 23-286 (2d Cir. Jan. 22, 2024).

Filed Under: Arbitration / Court Decisions, Contract Interpretation, Interim or Preliminary Relief

Sixth Circuit Rejects Claim of “Implicit Vacatur” of Arbitration Award and Affirms District Court’s Entry of Preliminary Injunction

November 16, 2022 by Kenneth Cesta

This case involves a dispute concerning the use of the name of a family business. The Grewal family managed real estate companies using the name “Singh” in the company name, and the companies obtained a trademark on their name. A member of the family, referred to in the opinion as Darshan, left the business and formed new companies that also used the Singh name. One of the original companies sued the new Singh companies alleging that the new companies infringed the Singh trademark. The dispute was submitted to arbitration where the original Singh companies prevailed. The arbitrator’s award prohibited the new companies from using the name Singh “as the only identifying proper noun used to describe their business.” The district court confirmed the arbitrator’s award and entered a permanent injunction. Thereafter, the new Singh companies “rebranded” and added “Michigan” to their company names. The original Singh companies filed a new suit requesting that the district court hold Darshan in contempt and modify the prior permanent injunction to prohibit the new companies from adding “Michigan” to their names. Before addressing those claims, the district court entered a preliminary injunction enjoining Darshan from “any use of, or Promotion with the term ‘Singh,’” including “the ‘Singh Michigan’ names.”

Darshan appealed the preliminary injunction in the new suit, contending that the preliminary injunction “implicitly vacated the arbitration award.” The Sixth Circuit rejected the argument, concluding that “[c]ourts use preliminary injunctions as temporary devices to maintain the status quo while they adjudicate disputes.” The court noted that “the district court entered the preliminary injunction while it considered how the arbitration award applied to Darshan’s new act of alleged infringement.” With regard to Darshan’s argument that the preliminary injunction “implicitly vacated” the arbitration award, the Sixth Circuit explained that “implicit vacatur can occur when a district court rules on a motion to confirm, modify, or vacate an arbitration award.” The court then ruled that because the district court had yet to rule on the original Singh companies’ motion to modify the earlier award, no implicit vacatur had occurred. The court also rejected Darshan’s argument that the arbitration confirmation action resolved all issues and claims in the new action and that “claim and issue preclusion” applied. The court held that claim and issue preclusion “apply to claims and arguments that were resolved before,” which it concluded did not apply in this case. Finally, the court rejected Darshan’s argument that “law of the case precludes us from reconsidering issues decided in the previous action,” finding that “[t]his is a separate suit, arising out of Darshan’s actions after the arbitration award was confirmed. So law of the case does not apply.” The Sixth Court affirmed the district court’s rulings.

Singh Management Co. v. Singh Michigan Homes, LLC, No. 21-1826 (6th Cir. Oct. 26, 2022).

Filed Under: Arbitration / Court Decisions, Confirmation / Vacation of Arbitration Awards, Interim or Preliminary Relief

COURT CONFIRMS ARBITRATOR’S ENTRY OF INTERIM PRELIMINARY INJUNCTION, HOLDING THAT THE AWARD WAS SUFFICIENTLY “FINAL”

October 31, 2017 by Michael Wolgin

This case concerns a 10-year agreement by which plaintiff, an endodontist, contracted to perform consulting services for defendant Dentsply, a business that manufactured and sold endodontic products for the dental industry. The agreement prohibited plaintiff from disclosing any confidential information about Dentsply’s business affairs or from competing with Dentsply for three years after the termination of the agreement. But immediately prior to the end of the 10-year term of the agreement, plaintiff brought suit contending that the confidentially and non-compete provisions of the agreement were unenforceable, and seeking declaratory and injunctive relief. The case proceeded to arbitration during which the arbitrator sided with Dentsply and enjoined plaintiff from breaching the confidentiality and non-compete provisions. Dentsply then filed a motion to confirm the arbitrator’s preliminary injunction award.

Plaintiff opposed Dentsply’s motion, asserting a number of arguments based on the notion that the preliminary injunction was not sufficiently final to be confirmed by the court. The court rejected each of plaintiff’s arguments and then considered “whether, in the absence of binding Supreme Court or Tenth Circuit precedent, the Court should join the district and circuit courts that have considered interim arbitral awards final for the purposes of judicial review and confirm the Ruling.” The court decided to join those courts and confirmed the arbitrator’s preliminary injunction. The court reasoned that the interim arbitration ruling “finally and definitively enjoin[ed] plaintiff from breaching the 2007 agreement’s confidentiality and non-compete provisions during the pendency of the arbitration, and if the Ruling [was] not enforced, a subsequent award of injunctive relief to defendant may be rendered meaningless.” Moreover, the Court reasoned that the Ruling was “not a preliminary or procedural trifle, and expending the judicial resources to confirm it does not frustrate our arbitration system’s goal of expediency.” Instead, the Court found, “confirming the Ruling [gave] teeth to the arbitrator’s interim award of equitable relief, thereby promoting arbitration as an efficacious and reliable alternative to the litigation process.” Johnson v. Dentsply Sirona Inc., Case No. 16-CV-0520-CVE-PJC (USDC N.D. Okla. Sept. 27, 2017).

This post written by Gail Jankowski.

See our disclaimer.

Filed Under: Confirmation / Vacation of Arbitration Awards, Interim or Preliminary Relief, Week's Best Posts

COURT CONFIRMS INTERIM ARBITRATION AWARD REQUIRING POSTING OF PRE-HEARING SECURITY

July 10, 2017 by Carlton Fields

Respondent moved for an immediate stay of an arbitration of claims relating to the purchase of insurance and to vacate the panel’s interim award requiring the posting of pre-hearing security.  Petitioner moved to confirm the interim award.

Respondent’s sole basis for vacating the interim award was that the panel issued its interim award without conducting a full hearing on the merits of its defenses.  It predicated this request upon 9 U.S.C. § 10(a)(3), contending that the arbitrator refused to hear evidence pertinent and material to the controversy, relying on Home Indem. Co. v. Affiliated Food Distributors, Inc., 1997 WL 773712 (S.D.N.Y. Dec. 12, 1997).  The panel distinguished Home Indemnity, in which the arbitration panel had “specifically conditioned . . . discovery on [the] posting of security,” and refused “even a threshold review of the underlying dispute,” finding instead that the panel in this matter had “expressly ordered that discovery proceed while the motion for pre-hearing security was litigated” and that Petitioner “produced over 40,000 pages of discovery… prior to the interim award… unlike the panel in Home Indemnity, the panel here provided [Respondent] with adequate opportunity to present its evidence and argument,” including “extensive briefing and oral argument.”

The court further commented that “[b]y its very nature, … a request for pre-hearing security is made on a limited record at an early stage of the arbitration proceedings and may be ordered before a full hearing on all defenses.” The court confirmed the panel’s interim award.  Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Source One Staffing LLC, Case No. 16-6461 (USDC S.D.N.Y. May 17, 2017).

This post written by Nora A. Valenza-Frost.
See our disclaimer.

Filed Under: Interim or Preliminary Relief, Week's Best Posts

BANKRUPTCY COURT REQUIRES AN MF GLOBAL HOLDINGS BERMUDA REINSURER TO POST $15 MILLION BOND BEFORE DECIDING MOTION TO COMPEL ARBITRATION

July 3, 2017 by Rob DiUbaldo

In the most recent decision in an ongoing dispute between MF Global Holdings Ltd. and its (re)insurers, the Bankruptcy Court for the Southern District of New York ordered Allied World to post a $15 million bond before the court would consider its pending motion to compel arbitration. As previously reported on this blog, the Bankruptcy Court found the Bermuda Insurers violated the Barton Doctrine by initiating suits in Bermuda which resulted in anti-suit injunctions. Following that decision the Bermuda Insurers dismissed the Bermuda actions and the anti-suit injunctions were lifted. MF Global Holdings has since reached a settlement with one Bermuda Insurer and has been able to respond to another Bermuda Insurer (Allied World)’s pending motions to dismiss and to compel arbitration in Bermuda.

In response MF Global Holdings argued that, pursuant to New York Insurance Law § 1213, Allied World was required as an unauthorized foreign insurer to post a bond sufficient to secure payment of any possible final judgment (or procure a license to do insurance business in the state) before it filed any pleading in the proceeding against it. Allied World contended that its motions are not “pleadings” covered by the statute, its policy was not issued or delivered in New York (and thus not subject to section 1213), and that the statute is preempted by the New York Convention. Concluding that Allied World cannot “so easily avoid” the protections provided by New York Insurance Law, the Bankruptcy Court rejected each of those arguments in an opinion dated June 12, 2017.

First, the court rejected the reading of the term “pleading” offered by Allied World. Allied World claimed the statute covered only pleadings that defend against the complaint on the merits, such as an answer, but the court relied on precedent interpreting the bond requirement broadly to include motions to dismiss or compel within the definition of “pleading.” Second, the court rejected the notion that Allied World delivering the insurance policy to MF Global’s Bermuda broker meant that it did not deliver a policy in New York and come under the purview of New York Insurance Law. To accept that argument would allow foreign unlicensed insurers to subvert the law’s intent of regulating such insurers, the Court found, by using a broker or intermediary to physically deliver a policy that the insurer knew would provide coverage to a New York company insuring risks in New York. Finally, the court found no conflict between section 1213 and the New York Convention.

The court, however, did not require a bond in the full $60 million amount requested by MF Global. Instead, the court used its discretion to fix the bond amount at $15 million—the policy limit of Allied World’s policy—before it would consider the insurer’s pending motion to compel arbitration or to dismiss.

In re: MF Global Holdings Ltd., Case No. 16-01251 (Bankr. S.D.N.Y. June 12, 2017)

This post written by Thaddeus Ewald .

See our disclaimer.

Filed Under: Interim or Preliminary Relief, Week's Best Posts

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