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Arbitration / Court Decisions

PARTICIPATION IN EEOC INVESTIGATION DOES NOT WAIVE RIGHT TO ARBITRATE

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A federal district court recently dismissed a Title VII discrimination suit and compelled the parties to arbitration, finding that the employer did not waive its right to arbitrate by participating in an EEOC investigation. The court held that the mere involvement of an administrative agency in the enforcement of a statue did not preclude arbitration. The court noted that the employer specifically advised the EEOC that its participation should not be considered as a waiver of arbitration and that the employee would not be prejudiced by arbitration. The court concluded that the EEOC’s provision of 90 days for the employee to file suit against the company in court was subject to the arbitration agreement. Henry v. Turner Construction Co., No. 09-9366 (USDC S.D.N.Y. June 14, 2010).

This post written by Michael Wolgin.

STOLT-NIELSEN DOES NOT MANDATE MOTION FOR RECONSIDERATION IN ELEM INDIAN COLONY CASE

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On June 30th, we reported that the dispute between the Elem Indian Colony and Pacific Development Partners X the Northern District of California affirmed an arbitrator’s ruling that a contract for casino development was void. Following that decision, defendants Pacific Development asked for leave to file a motion for reconsideration arguing that Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010) dictates that the arbitrator’s decision should be reversed. The Stolt-Nielsen case dealt primarily with the issue of class arbitration where not all parties have agreed to participate in class arbitration.

The District Court denied Pacific Development’s request for leave to file a motion for reconsideration holding that the issue presented in Stolt-Nielsen need not be reached because the arbitrator’s decision also rested on an independent rationale: that the “memorandum of understanding” approved by the Tribe’s executive committee was void for lack of regulatory approval. Finally, the Court ruled that although the arbitrator awarded attorneys’ fee based upon a flawed theory, the award was not contrary to law because it was supported by another legal theory. Elem Indian County of Pomo Indians v. Pacific Development Partners X, LLC, Case No. 09-1044 (USDC N.D. Cal. June 29, 2010).

This post written by John Black.

FOURTH CIRCUIT AFFIRMS CONFIRMATION OF ARBITRATION AWARD OVER OBJECTIONS THAT THE AWARD WAS PROCURED BY “UNDUE MEANS”

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The appeal arises from a contract dispute concerning the construction of a wastewater treatment plant for the City of Greensboro. The parties – Greensboro, the contractor (MCI Constructors), and the contractor’s surety on a performance bond (National Union Fire Insurance Company) – agreed to submit the matter to arbitration. Greensboro was award nearly $15 million in the arbitration. The district court granted Greensboro’s motion to confirm that award. On appeal, MCI and National Union argued that the district court should have vacated the award because the liability award was procured by “undue means” in violation of § 10(a)(1) of the Federal Arbitration Act; that the arbitration panel exceeded the scope of its powers to issue the award; and that the district court should have remanded the award because the award failed to specify whether it includes the contract balance.

The Fourth Circuit affirmed. First, the court stated that an award is procured by “undue means” if there is proof of fraud or corruption, but the most that happened during the arbitration in question was Greensboro’s counsel’s “legally objectionable” tactics. Next, the court determined whether the arbitration panel exceeded the scope of its powers under the contract by not requiring the City to submit the dispute on the contract price to the engineering firm that designed the project. The court found that since the submission of this issue to the engineering firm was not a contract requirement, the panel did not exceed its authority by not requiring such a submission. The court further rejected the contention that because the panel did not specify the basis for its award, the award was ambiguous. It is “well settled” that arbitrators are not required to disclose the basis upon which their awards are made and “courts will not look behind a lump-sum award.” Finally, the court rejected the objection that the panel failed to issue a reasoned written statement of decision; a written statement was not requested by the parties, as contemplated under the applicable arbitration rules (AAA Complex Commercial Arbitration Rules). MCI Constructors v. City of Greensboro, No. 09-1600 (4th Cir. July 1, 2010).

This post written by Brian Perryman.

DISTRICT COURT DENIES ERC’S § 1292(B) REQUEST FOR CERTIFICATION FOR INTERLOCUTORY APPEAL

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In the latest development in the ongoing dispute between Employers Reinsurance and its reinsured Mass Mutual, ERC asks the US District Court for the Western District of Missouri to amend its prior rulings to certify the “follow the settlements” and statutes of limitations issues for immediate interlocutory appeal under 28 U.S.C. § 1292(b). Noting the heavy burden required to certify a question for interlocutory appeal, the District Court incorporated its prior ruling on the “follow the settlements” issue and denied ERC’s request for certification as to that issue, since it had denied certification of that issue previously. The court also refused to certify the statute of limitations issue for interlocutory appeal finding that the issue was not a purely legal question as required by § 1292(b). Employers Reinsurance Corp. v. Massachusetts Mut. Life Ins. Co., Case No. 06-0188 (USDC W.D. Mo. June 16, 2010).

This post written by John Black.

SPECIAL FOCUS: ALLOCATION OF SETTLEMENT AMOUNT AMONG INSURANCE AND REINSURANCE POLICIES

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In a recent opinion, the United States Court of Appeal for the Third Circuit addressed the applicability of the follow-the-fortunes doctrine to the post-settlement allocation of a settlement amount to a multi-layer insurance program, upon a challenge to the allocation by a reinsurer. Rollie Goss offers an expanded analysis of this case. Travelers Cas. and Surety Co. v. Ins. Co. of North America, Nos. 06-4100 and 08-1032 (3d Cir. June 9, 2010).

This post written by Rollie Goss.