After partially vacating an arbitration award as being in manifest disregard of law, a District Court has remanded the case to a new arbitration panel for further proceedings. The Court found it inappropriate to remand the case to the same arbitration panel for further proceedings relating to the issue as to which it had found that the panel had manifestly disregarded Pennsylvania law. Koken v. Cologne Reinsurance (Barbados) Ltd., Case No. 98-0678 (USDC MD Pa Dec. 5, 2006).
Arbitration / Court Decisions
District Judge files appellate brief in KPMG criminal tax case
In a highly unusual event, United States District Judge Lewis Kaplan has filed a brief with the United States Court of Appeals for the Second Circuit, defending his opinion relating to the arbitrability of issues relating to KPMG paying attorneys fees for defendants in a criminal tax action, which was the subject of a post on this blog on September 26, 2006. This brief was invited by the Second Circuit in an Order entered December 13, 2006, which provided in part: “Pursuant to Fed. R. App. P. 21(b)(4), we now invite the District Court to address, if it so chooses, the motion for leave to file a mandamus petition.” Stein v. KPMG, LLP, Case No. 06-4358 (2d Cir. Jan. 8, 2007).
Court stays enforcement of arbitral award pending ruling by liquidation court on set off claim
LDG Re reinsured workers' compensation and employers' liability risks retained by Legion Insurance and a related company under two quota share reinsurance agreements. LDG Re booked the reinsurance into a pool facility in which a number of companies participated, including Chartwell Reinsurance (which was later purchased by Trenwick America Reinsurance). When LDG failed to make timely payments under the quota share agreements, Legion demanded arbitration. A settlement was reached. When LDG allegedly failed to make payments required by the settlement agreement, Legion sought to reactivate the arbitration. LDG objected, contending that the dispute was not arbitrable and that the pool members were entitled to set off other debts owed to them by Legion. The panel entered an award purporting to enforce the settlement agreement, requiring a payment by LDG of over $5 million, not mentioning the set off request. Legion moved to confirm the award, and Trenwick moved to intervene in both the District Court action and in Legion's liquidation proceeding in Pennsylvania state court, seeking to assert a set off. In a Memorandum Opinion, followed by an Order and Judgment, the District Court confirmed the arbitration award, but stayed execution pending the submission by Legion or Trenwick of a motion in the liquidation proceeding seeking a ruling as to whether the claimed set off should be allowed. Koken v. LDG Re Corp., Case No. 06-81 (USDC ED Pa. Dec. 29, 2006).
Courts continue confirmation of arbitration awards
Two recent rulings addressed the confirmation of arbitration awards:
- The US Court of Appeals for the First Circuit affirmed the confirmation of an arbitration award in a non-insurance case, rejecting a contention that the award construed a contract in such a way that it violated a First Circuit standard that prohibits the interpretation of contracts “in a way that cannot possibly be described as plausible or rational.” Vital Basics Inc. v. Vertrue Inc., Case No. 05-2741 (1st Cir. Dec. 29, 2006).
- A New York state court ruled that an arbitration award should be confirmed under New York law, since it was not arbitrary, capricious, or irrational, and the losing party had failed to prove its contention that the arbitrator had improperly prejudiced its rights and the integrity of the arbitral process due to purported ex parte contacts with opposing counsel. Mounier v. American Transit Ins. Co., Case No. 2005-03804 (NY Sup.Ct. App.Div. Jan. 9, 2007).
Court denies request to overrule privilege claim in connection with alleged fraud
A US District Court has denied a motion to overrule a Magistrate Judge's ruling, which denied a motion to overrule a claim of attorney-client privilege, in a case alleging fraud in a rent-a-captive insurance program involving Legion Insurance, which is in liquidation. The motion sought discovery from an attorney who allegedly participated in the alleged fraud. The circumstamces of the brief rulings are set out in the objections to the Magistrate Judge's ruling. Koken v. American Patriot Ins. Agency, Inc., Case No. 05-1049 (USDC ND Ill. Dec. 4, 2006).