In Hilb Rogal & Hobbs Co. v. Golub, Case No. 05-574 (USDC E.D. Va. Aug. 18, 2006), a non-insurance case, a District Court refused to vacate an arbitration award under the manifest disregard of law standard, holding that “[t]he mere fact that an arbitration panel reached a legal conclusion in error is not sufficient for vacatur.”
Arbitration / Court Decisions
Vacation of arbitration awards due to failure to follow arbitration agreement
Two opinions recently have addressed the issue of whether an arbitration award should be vacated when the arbitrators fail to follow the arbitration agreement.
- In Martin v. Wells Fargo Financial, Inc., 2006 WL 2466945, Case No. 05-00003 (9th Cir. Aug. 25, 2006), the Court of Appeals affirmed a District Court decision vacating an arbitration award “because the underlying arbitrations were not conducted in accordance with the terms of the parties' arbitration agreement.” This unreported opinion is not available on Pacer, and it does not reveal what the Court of Appeals viewed as the deficiencies in the arbitration.
- In Allstate Ins. Co. v. Superior Court, 2006 WL 2473419 (Cal.Ct.App. Aug. 29, 2006), the Court reversed the vacation of an award on the basis that the panel rendered a “reasoned” award when the arbitration agreement provided that the award should not state reasons. Instead of vacating the award, the Court directed that the “reasons” be stricken from the confirmed award as surplusage.
Massachusetts court holds that AAA arbitrators may impose sanctions for discovery abuse
In a non-insurance matter, the Supreme Judicial Court of Massachusetts has held that a panel of arbitrators convened under the rules of the American Arbitration Association had authority to impose monetary sanctions for discovery abuse, finding that they had the inherent authority to impose monetary sanctions and enter other orders relating to noncompliance with appropriate discovery orders, in order to facilitate their adjudication of claims effectively, in the manner contemplated by the arbitration process. Superadio Limited Partnership v. Winstar Radio Productions, LLC, 446 Mass. 330, 844 N.E.2d 246 (Mass. 2006).
SPECIAL FOCUS: multiple arbitrations
Courts are sometimes asked to consolidate mutliple arbitrations relating to insurance and reinsurance matters. This issue has been the topic of three recent court opinions.
- In Markel International Ins. Co. v. Westchester Fire Ins. Co., Case No. 05-5522 (Aug. 10, 2006), the United States District Court for the District of New Jersey found that since the issue of the type of arbitration proceeding, including whether multiple arbitrations should be consolidated, was not a “gateway” issue under the Supreme Court’s analysis in Green Tree Financial Corp. v. Bazzle, 539, U.S. 444 (2003), the arbitrators, rather than the courts, should decide whether to use multiple arbitration panels or a consolidated panel.
- In Allstate Ins. Co. v. Global Reinsurance Corp., Case No. 06-4419 (Aug. 8, 2006), the United States District Court for the Southern District of New York held that arbitrators should decide whether to consolidate two arbitrations related to two facultative reinsurance certificates. The Court strongly implied that if the reinsurance agreements contained a provision relating to consolidated arbitrations, that the Court could have acted to enforce whatever the parties had agreed to in that regard.
- In Certain Underwriters at Lloyd’s v. Westchester Fire Ins., Case No. 06-1457, the United States Court of Appeals for the Third Circuit currently is accepting briefing of an appeal of a decision of a District Court decision that required separate arbitration panels in multiple arbitrations. The briefs suggest that conflict exists on this issue between a pre-Bazzle unreported Third Circuit opinion and a post-Bazzle Seventh Circuit opinion.
Expect further developments in this area.
Court rejects nationwide service of third-party arbitration subpoena
The United States Court of Appeals for the Second Circuit, in a non-reinsurance matter, has held that the Federal Arbitration Act does not authorize nationwide service of process of third-party subpoenas. This opinion is of particular interest since it exposes a jurisdictional gap: the FAA provides that subpoenas issued by arbitrators may be enforced by the District Court in which the arbitration panel sits (the Southern District of New York in this matter), yet that Court did not have jurisdiction over the recipient of the subpoena, which was located in Texas, due to the failure of Congress to provide for nationwide jurisdiction. The Court indicated that this was a problem for Congress to address, and that parties should consider the likely sources of third-party evidence when deciding where to arbitrate disputes. Dynegy Midstream Services, LP v. Trammochem, Case No. 05-3544 (2d Cir. June 13, 2006).