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ARBITRATION DECISION UPDATE

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Manifest Disregard:

Turkey Run Properties, L.P. v. Air Structures Worldwide, Ltd., Case No. 4:09-cv-00217 (USDC M.D. Pa. June 22, 2011) (denying motion to vacate arbitration award; holding no manifest disregard; rejecting claim that award was “moot or impossible to follow” as grounds for vacatur)

Stone & Youngberg, LLC v. Kay Family Revocable Trust, Case No. 3:11-cv-00198 (USDC N.D. Cal. June 22, 2011) (denying motion to vacate arbitration award; holding no manifest disregard; noting that manifest disregard is “all but impossible” to show where the award does not set forth panel’s reasoning)

Fluke v. Cashcall, Inc., Case No. 2:08-cv-05776 (USDC E.D. Pa. May 26, 2011) (denying motion to vacate arbitration award; holding no manifest disregard; noting that the Third Circuit has not yet determined whether manifest disregard is still a valid ground for vacatur of an arbitration award under the FAA)

Affinity Financial Corp. v. AARP Financial, Inc., Case No. 1:10-cv-02055 (USDC D.C. July 1, 2011) (confirming $2.75 million arbitration award; holding no manifest disregard; noting that the D.C. Circuit has not yet determined whether manifest disregard is still a valid ground for vacatur of an arbitration award under the FAA; District of Columbia statute that permits a court to vacate an award made in arbitration on “other reasonable grounds” construed narrowly as the “recognized principle” that an award may be vacated for manifest disregard of the law)

Valueselling Associates, LLC v. Temple, Case No. 3:09-cv-01493 (USDC S.D. Cal. June 23, 2011) (confirming arbitration award; denying motion to vacate; absent explicit reference to choice of state arbitration law, FAA governs; holding no manifest disregard for failure to reference controlling authority; arbitrator’s findings related to matters incident to dispute submitted for resolution were not “completely irrational”)

Remand for Clarification:

Atlas One Financial Group, LLC v. Freecharm Ltd., Case No. 1:10-mc-24539 (USDC S.D. Fla. May 15, 2011) (remanding FINRA arbitration award “for clarification as to why the award was rendered so that the Court will know exactly what it is being asked to enforce, modify or vacate”)

Exceeding Arbitrator’s Authority:

Interactive Fitness, Inc. v. Souresh Basu, Case No. 2:09-cv-01145 (USDC D. Nev. May 13, 2011) (denying motion to confirm arbitration award; arbitrator exceeded powers by finding alter ego liability without providing defendant sufficient due process)

Standing/Finality:

Chinmax Medical Systems Inc. v. Alere San Diego, Inc., Case No. 3:10-cv-02467 (USDC S.D. Cal. May 27, 2011) (denying motion to vacate; interim order by single emergency arbitrator issuing temporary equitable relief under AAA International Dispute Resolution Procedures was not a final order and thus not subject to review by the court)

Administrative District Council 1 of Illinois of the International Union of Bricklayers and Allied Craftworkers, AFL-CIO v. Pierport Development & Realty, Inc., Case No. 1:10-cv-07800 (USDC N.D. Ill. June 13, 2011) (denying motion to vacate arbitration award; a party who is uncertain about the finality or appealability of an arbitration award should err on the side of compliance; failure to challenge award within applicable limitations period precludes untimely challenge to award)

Dwyer v. Eagle Marine Services Ltd, Oakland, Case No. 4:10-cv-04440 (USDC N.D. Cal. June 30, 2011) (denying motion to vacate arbitration award; no standing for challenge to arbitration award under LMRA where plaintiff not a party to arbitration and did not allege improper conduct by union representatives; no standing for challenge to arbitration award under FAA where plaintiff not a party to arbitration; notwithstanding lack of standing, award “draws its essence” from agreement, arbitrator did not exceed powers or manifestly disregard law, and award did not violate public policy)

Arbitrator Bias:

Own Capital, LLC v. Celebrity Suzuki of Rock Hill, LLC, Case No. 2:11-cv-10109 (USDC E.D. Mich. May 25, 2011) (denying motion to vacate arbitration award; holding no manifest disregard; claim that mandatory arbitrator selection procedures were violated was waived by party affirmatively stating they had no objection to proposed arbitrators; arbitrator did not exceed powers by failing to disclose work with opposing counsel on other cases; rulings consistently in favor of a party does not necessarily show bias)

Own Capital, LLC v. Johnny’s Enterprises, Inc., Case No. 2:11-cv-12772 (USDC E.D. Mich. June 28, 2011) (confirming arbitration award of $4,034,711; denying motion to vacate award; party waived objection to arbitrator selection procedure by failing to participate in selection process and arbitration proceedings; arbitrator did not exceed powers or possess improper motives when, after action was already pending, plaintiff’s counsel joined firm where arbitrator practiced; holding no manifest disregard)

This post written by Michael Wolgin.

UK COURT: EXCESS POINT IN REINSURANCE AGREEMENT “SCALED” TO REFLECT INSURED’S INTEREST IN LOST ASSETS

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The UK Commercial Court recently ruled on the interpretation of a reinsurance agreement related to wind storm risks for a large independent oil exploration and production venture in the Gulf of Mexico. The dispute concerns the interpretation of the coverage limit provision of a facultative reinsurance policy applied to claims from Hurricane Rita. The provision provided “to pay up to Original Package Policy limits/amounts/sums insured excess of USD250 million (100%) any one occurrence of losses to the original placement.” The cedent calculated the reinsurance claim on the basis that the US $250 million excess point was referable to 100% values of the property, and that since Devon Energy (the insured) had less than a 100% interest, the excess point had to be “scaled” to reflect its lower interest. The Court agreed, finding that the evidence was “overwhelming” that the notation “100%” in the reinsurance agreement “has a recognized and established meaning in the market … [meaning] that the limit or excess scales to reflect the assured’s interest in the relevant assets.” A claim of misrepresentation was also rejected by the court. Gard Marine & Energy Limited v. Tunnicliffe, Case No. 2007 Folio 351, 2011 EWHC 1658 (Comm. Ct. June 30, 2011).

This post written by John Black.

SECOND CIRCUIT REVERSES DISTRICT COURT ON APPLICATION OF STOLT-NIELSEN

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Recently, a group of retail sales employees appealed to the Second Circuit an order vacating an arbitration award on the ground that the arbitrator had exceeded her authority in light of the Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010). The Second Circuit reversed the judgment of the district court, concluding that the district court simply substituted its own interpretation of the parties’ arbitration agreement rather than examining whether the arbitrator had exceeded her authority under Supreme Court precedent. The Second Circuit explained that the district court failed to undertake the appropriate inquiry – whether the arbitrator had the authority to reach the issue at all, not whether the arbitrator decided the issue correctly. The Court noted that the district court had concluded that under Stolt-Nielsen, the arbitrator had improperly ruled that the parties’ arbitration agreement did not prohibit class arbitration. Because this analysis failed to consider the pertinent issue (as noted above), the Second Circuit reversed the judgment of the district court vacating the award and remanded the case with instruction to confirm the award. Jock v. Sterling Jewelers, Inc., No. 10-3247 (2d Cir. July 1, 2011).

This post written by John Black.

COURT CONFIRMS ARBITRATION AWARD, DESPITE AFFORDING LENIENCY TO PRO SE PARTY

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A somewhat exasperated-sounding opinion from a federal court in Maryland addressed a litany of allegations and procedural issues raised by a pro se defendant’s motion to dismiss the action seeking confirmation of an arbitration award, as well as a motion to continue the case, based on the defendant’s medical condition. While according the pro se defendant “leniency” in addressing a number of procedural defects, the court nevertheless found that the defendant failed in his various pleadings to meet the high standards for vacating an arbitration award under the FAA. The court also found that no continuance based on the defendant’s medical condition was necessary because the court had sufficient information to rule on the various motions. The court denied the defendant’s motion to dismiss, denied his motion to continue, and granted the petitioner’s motion for entry of a confirmation order. Colonna v. Hanners, Case No. 10-1899 (USDC S.D. Md. June 1, 2011).

This post written by John Pitblado.