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Arbitration / Court Decisions

RECENT ARBITRATION AWARDS IN FEDERAL COURT

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Over the past several months, a number of district and circuit courts have addressed the propriety of arbitration awards. This post briefly summarizes the salient factors from each case:

• Awards confirmed: Bradley v. Merrill Lynch & Co., Inc., Case No. 08-0269-cv (2d Cir. Sept. 2, 2009) (opponent failed to raise any substantial issues with the award, other than that it was unfavorable); Int’l. Brotherhood of Teamsters Local 177 v. UPS, Case No. 09-CV-0903 (D. N.J. Oct. 9, 2009) (none of the exceptions under the functus officio doctrine is applicable, and the award issued did not reflect a manifest disregard of the agreement); Silicon Power Corp. v. GE Zenith, Case No. 08-4331 (E.D. Pa. Sept. 29, 2009); Hughes v. Aloha Tower Development, Corp., Case No. CV 09-00277 (D. Haw. Sept. 9, 2009) (Aloha “bargained for the arbitrator’s interpretation award and is now bound by it”); Marketstar Corp. v. Prosper Bus. Development Corp., Case No. 2:07-CV-00132 (D. Utah Sept. 4, 2009) (also denying motion for pre-judgment interest); Fruehauf Trailer Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, Case No. 98-514 (Bankr. D. Del. Oct. 5, 2009).

• Lack of prejudice: In OneBeacon Am. Ins. Co. v. Mitchell, the Second Circuit Court of Appeals issued a summary order upholding the District Court’s determination that the petitioner was not prejudiced in the arbitration proceedings, and that the arbitration award was justified. OneBeacon Am. Ins. Co. v. Mitchell, Case No. 08-3432-cv; 08-3488-cv (2d Cir. Oct. 9, 2009).

• Remand to arbitrators: In On Time Staffing LLC v. Coast to Coast Installations, Inc., the District of New Jersey ruled on Plaintiff On Time Staffing’s Petition to Confirm the Interim Award. The Court confirmed the arbitration award against Coast to Coast, but remanded to the arbitrators for clarification as to whether the interim award is intended to be a “separate independent claim.” On Time Staffing LLC v. Coast to Coast Installations, Inc., Case No. 09-4158 (D. N.J. Oct. 8, 2009).

This post written by John Black.

CATASTROPHIC CLAIMS COVERAGE DENIED WHERE INSURER FAILED TO PROVE IT PAID PREMIUMS TO ITS REINSURER FOR THE ALLEGEDLY COVERED VEHICLE

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A court granted summary judgment to the Michigan Catastrophic Claims Association, a reinsurer for statutorily mandated no-fault personal injury protection benefits, where the plaintiff, an insurer authorized to write automobile insurance and member of the Association, failed to present evidence that it had paid premiums to the Association. The court therefore declined to address what it considered to be a question of first impression: whether the Association’s obligation to reimburse its member-insurers for no-fault personal injury protection benefits paid in excess of the statutory threshold applied when the insurer’s policy requires its insureds to share financial responsibility for the claim. The Association argued that under Michigan’s no-fault statute, failure to pay a premium to the Association disqualifies the member-insurer from receiving indemnification. Examining the record, the court concluded that the insurer could not establish entitlement to indemnification as it had not provided admissible evidentiary support that it paid the Association a premium on the vehicle involved in the underlying accident. Old Republic Insurance Co. v. Michigan Catastrophic Claims Association, Case No. 08-12522 (USDC E.D. Mich. Sept. 29, 2009).

This post written by Brian Perryman.

SUIT AGAINST LLOYD’S DISMISSED FOR LACK OF JURISDICTION BECAUSE ONE OF THE NAMES SHARED CITIZENSHIP WITH PLAINTIFFS

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A federal district court granted the motion of certain underwriters at Lloyd’s of London to dismiss the suit for lack of subject matter jurisdiction, holding that when determining the diversity of citizenship of the parties in a case involving Lloyd’s, all the “names” must be taken into consideration. When federal jurisdiction is founded on 28 U.S.C. § 1332, the parties must be diverse in their citizenship, so that each defendant is a citizen of a state different from each plaintiff. In this case, the plaintiffs, citizens of Louisiana, claimed that an insurance policy with Lloyd’s covered property damaged in Hurricane Katrina. Lloyd’s presented the court with an unsworn declaration that one of the names on the policy also was a citizen of Louisiana. Rejecting plaintiffs’ technical arguments about the unsworn nature of the declaration, the court dismissed the case because the diversity requirement was not met. St. Charles Property Association v. Certain Underwriters at Lloyd’s London, Case No. 09-2504 (USDC E.D. La. Oct. 2, 2009).

This post written by Brian Perryman.

SPECIAL FOCUS: THIRD CIRCUIT TELENOR DECISION REGARDING THE PRECLUSIVE EFFECT OF A COLLUSIVE FOREIGN COURT JUDGMENT AND THE NECESSITY FOR A TRIAL TO DETERMINE THE ARBITRABILITY OF A DISPUTE

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On October 26, 2009 we posted a brief item on Telenor Mobile Communications AS v. Altimo Holdings & Investments Limited, 07-4974 (2d Cir. Oct. 8, 2009), in which the Third Circuit held that: (1) the district court did not err in not holding a trial to determine whether a dispute before it was arbitrable based upon a dispute as to whether the person who signed the contract containing an arbitration provision had apparent authority to sign the document on behalf of a corporate party, when the factual record clearly demonstrated that the signer had apparent authority to do so; and (2) the district court did not act in manifest disregard of law by confirming an arbitration award that failed to give preclusive effect to a collusive judgment of a Ukrainian court adjudicating an issue before the arbitration panel. Blogmaster Rollie Goss submits a more detailed SPECIAL FOCUS post on this interesting case.

This post written by Rollie Goss.

SECOND CIRCUIT AFFIRMS CONTEMPT ORDER IN KYISTAR DISPUTE

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In a companion opinion to the Second Circuit affirming the district court’s grant of a motion to confirm the final arbitral award in a dispute involving Kyivstar G.S.M. (“Kyivstar”) (see our October 26, 2009 post), a Ukrainian mobile telecommunications company, the Second Circuit has affirmed the decision of the district court finding Storm LLC (“Storm”) and its corporate parents (collectively, the “Respondents”) in civil contempt for the failure to comply with the final arbitration award and denying the Respondents’ motion for an order to amend the contempt order to delay sanctions and eliminate the requirement that Storm deposit its shares of Kyivstar with the court to secure compliance with the award.

In this appeal, Storm’s corporate parents disputed the determination that they were alter egos of Storm, which made them jointly liable for contempt, and the conclusion that the award required Storm’s affiliates to divest their interest from a Turkish telecommunications company rather than Astelit, LLC, a Ukrainian telecommunications company, and asked the circuit court to remand the divestiture question to the arbitration panel for clarification. The Second Circuit affirmed the decisions of the district court, stating that the findings of fact supported the conclusion that the corporate parents were alter egos of Storm and concluding that no support existed for a remand of the divestiture question because the award was unambiguous and the district court’s legal analysis was correct. Telenor Mobile Communications AS v. Storm LLC, No. 07-6929 (2d Cir. October 8, 2009).

This post written by Dan Crisp.