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Arbitration / Court Decisions

ARBITRATION AWARD CONFIRMATION DECISIONS

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Courts continue to confirm arbitration awards at a very high rate:

  • In this reinsurance matter, the court determined that whether to award post-judgment interest on an award, and at what rate, was for the court, not an arbitration panel, to decide, even if the issue was addressed in the reinsurance agreement., The court determined to award post-judgment interest at the statutory rate, since the contract did not clearly displace that rate, and to award attorneys’ fees as provided for in the agreement. Newmont U.S.A. Limited v. Ins. Co. of N. A., Case No. 06-1178 (USDC D. Col. Sept. 19, 2008).
  • The court in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Rothstein, Case No. 08-373 (USDC S.D. N.Y. Sept. 29, 2008) confirmed an award, rejecting a contention that the award was in manifest disregard of law, without any discussion of the Hall Street Associates opinion.
  • The court confirmed an award under a collective bargaining agreement in Bemis Co., Inc. v. Graphic Communication Union Local No. 735-S, Case No. 07-1307 (USDC M.D. Pa. Sept. 15, 2008), finding that the arbitrator had reasonably interpreted the agreement with no arbitrator bias.
  • In The Householder Group v. Caughran, Case No. 07-316 (USDC E.D. Tex. Sept. 17, 2008), the court limited its consideration of a request to vacate an award to the statutory factors in the Federal Arbitration Act, pursuant to Hall Street Associates, and confirmed the award, in the face of what amounted to evidentiary and procedural challenges, some of which had not even been raised during the arbitration hearing.
  • A Magistrate Judge recommended confirmation of an award in Int’l. Brotherhood of Elec. Workers v. Firstenergy Generation Corp., Case No. 07-304 (USDC W.D. Pa. Aug. 22, 2008), on the basis that the award drew its essence from the agreement, which the arbitrator interpreted. The district judge overruled objections to the recommendation, confirming the award.
  • An award against an individual in his personal capacity, who signed an agreement in a representative capacity, was vacated in Millmaker v. Bruso, Case No. 07-3837 (USDC S.D. Tex. Oct. 9, 2008). The court noted that Hall Street Associates pout the continued viability of the manifest disregard of law doctrine in doubt, but that there had been no manifest disregard in this case. The court also upheld an award of attorneys’ fees pursuant to the terms of the contract.

This post written by Rollie Goss.

U.K. COURT CONSTRUES PARTIES’ INTENT IN CREATING REINSURANCE CONTRACT AGAINST REINSURER

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Allianz Insurance Company of Egypt (“Allianz”) sued its reinsurer, Aigaion Insurance Company S.A. (“Aigaion”), for US $675,000 arising from the constructive loss of the oceangoing vessel “Ocean Dirk,” one of several scheduled ships under the reinsurance contract. Aigaion denied liability for the claim on the theory that the parties never arrived at consensus over the terms of the reinsurance contract, and thus it was null and void ab initio.

Allianz countered with evidence of communications by and between Allianz, Aigaion, and the intermediary broker who placed the risk, Chedid & Associates Ltd. (“Chedid”). The court held that these communications, consisting mainly of e-mail correspondence, indicated that the parties clearly intended for Aigaion to be bound as Allianz’s reinsurer for certain risks covered by Allianz’s underlying insurance. Aigaion took the position that the communications reflected a continued intent on the part of both parties to negotiate certain terms of the contract, even after the reinsurance contract had issued, but that the parties failed to reach consensus sufficient to create a contract. The court found in Allianz’s favor, noting that the communications reflected a resort to certain shorthand understood in the industry, and that Aigaion clearly communicated its intent to be bound by those terms with the same understanding as had Allianz, at the latest by a date certain which may have post-dated the contract, but nonetheless pre-dated the loss. The Court entered judgment in favor of Allianz for the net premium due. Allianz Insurance Company of Egypt v. Aigaion Insurance Company S.A. [2008] EWHC 1127 (Queen’s Bench Div. Comm. June 2, 2008).

This post written by John Pitblado.

SECOND CIRCUIT HOLDS THAT MANIFEST DISREGARD OF LAW DOCTRINE SURVIVES HALL STREET ASSOCIATES

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The Second Circuit Court of Appeals has held that the manifest disregard of law standard is a judicial gloss on the specific grounds for vacature of arbitration awards enumerated in section 10 of the Federal Arbitration Act, and remains a valid ground for vacating arbitration awards after the Supreme Court's Hall Street Associates decision. The issue in this case was whether class arbitration was appropriate under an arbitration agreement which was silent on that issue. It was undisputed that this was a question for the arbitrator to initially decide, and that it was a question of contract interpretation. The arbitrator allowed class arbitration, but the District Court found that decision to be in manifest disregard of law. The Second Circuit, noting the very narrow scope of the manifest disregard of law doctrine, disagreed, and remanded with directions that the District Court deny the request to vacate the arbitration award. Stolt-Nielsen SA v. AnimalFeeds Int'l. Corp., No. 06-3474 (2d Cir. Nov. 4, 2008). This decision further develops the conflict in court decisions as to whether the manifest disregard of law doctrine remains viable.

This post written by Rollie Goss.

UPDATE ON EVIDENCE ISSUES IN REINSURANCE BROKER NEGLIGENT MISREPRESENTATION CASE

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After a failed bid to take an interlocutory appeal from a federal district court’s denial of its motion for summary judgment in a case alleging that the broker negligently presented incomplete and misleading information to the plaintiff reinsurer, the court considered a number of evidentiary motions in limine. On October 9, 2008 we reported the US District Court for the Eastern District of Pennsylvania’s ruling on those motions. Some of the proffered testimony and exhibits were excluded with the caveat that the proponent could undertake to cure the defect and seek admission a second time. Plaintiffs sought reexamination of five pieces of excluded evidence. The court generally found the proffered evidence admissible. The most notable exhibits in this category were two extensive financial tables purportedly generated from the reinsurer’s financial system, and a summary of various “bordereaux” and other information included in the financial tables. The court originally excluded these for lack of foundation, but Plaintiff proffered a detailed affidavit describing the computer system, the witnesses' knowledge and oversight of its operation, and his attestation of authenticity. The court determined that the witness was qualified to authenticate the documents and that his sworn affidavit was sufficient. Accordingly, the exhibits were found to be admissible at trial. United National Insurance Co. v. Aon Ltd, Case No. 04-539 (E.D. Pa. Aug. 7, 2008).

This post written by John Black.

FACTUAL DISPUTES PRECLUDE SUMMARY JUDGMENT AS TO WHETHER CLAIMS COOPERATION CLAUSE WAS AGREED TO BY REINSUREDS

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In this English case, the claimant reinsurer, Markel, applied for the UK equivalent of summary judgment against two defendant German reinsureds, seeking a declaration that it was not liable under a contract of reinsurance. The primary issue was whether the contract provided in a claims cooperation clause that it was a condition precedent to any liability under it that if the reinsureds knew of any circumstances which may give rise to a claim against them, they should advise Markel within thirty days. Conflicting evidence was submitted as to whether the parties had agreed to the clause as suggested by Markel. Consequently, the court stated it was unable to accept Markel’s submission that there should be summary judgment since the issue involved questions of fact to be determined at trial. The court further addressed the separate issue of whether knowledge of the manager of the reinsurance pool (VOV) amounted to knowledge of the reinsureds for purposes of the claims cooperation clause. The court rejected Markel’s construction of the clause, holding that under the terms expressed, knowledge of VOV would not be imputed. Summary judgment was denied on all issues. Markel Capital Ltd. v. Gothaer Allgemeine Versicherung AG [2008] EWHC 2517 (Comm. Oct. 24, 2008).

This post written by Brian Perryman.