In a non-reinsurance securities arbitration, the United State Court of Appeals for the Fifth Circuit has held that although courts “do not hesitate to vacate an award when an arbitrator is not selected according to the contract-specified method …” any departure from the terms of the parties' agreement in this case was trivial, not warranting vacatur of the arbitration award. Bulko v Morgan Stanley, 1006 WL 1460022, case no. 05-10242 (5th Cir. May 30, 2006).
Arbitration / Court Decisions
Denial of motion to vacate arbitration award due to choice of law affirmed
The United States Court of Appeals for the Ninth Circuit held in a non-reinsurance case that a District Court correctly denied a motion to vacate an arbitration award on the basis that the arbitration panel “manifestly disregarded the law” by applying Washington law, rather than Arizona law, because the decision was not “completely irrational” and did not constitute a manifest disregard of the law. Parsons v. Polen, 2006 WL 1082820, case no. 04-35654 (9th Cir. Apr. 25, 2006) (opinion not available on Court's web site).
Rehearing granted of opinion vacating arbitration award
In Positive Software Solutions, Inc. v. New Century Mortgage Corp., No. 04-11432 (Jan. 11, 2006), the United States Court of Appeals for the Fifth Circuit (in a case which did not involve reinsurance) affirmed the judgment of a District Court vacating an arbitration award due to the failure of the sole arbitrator to disclose that his law firm served as co-counsel in an unrelated case with counsel for one of the parties in 1990 – 1996. The Court found that the failure to disclose the prior relationship created a reasonable impression of possible partiality that warranted vacating the arbitration award. The evidence was undisputed that the party against which the arbitration award had been entered did not know of the relationship until after the entry of the award. On May 5, 2006, the Fifth Circuit granted a petition for rehearing en banc, setting the matter for argument in September 2006.
Motion to transfer venue in reinsurance case denied
The United States District Court for the Western District of Missouri denied a motion by a defendant/reinsured to transfer venue of a case involving reinsurance claims, finding that the movant had not made a clear showing that the balance of interests weighed in favor of transfer. Employers Reinsurance Corp. v. Mass. Mutual Life Ins. Co., No. 06-0188 (May 4, 2006).
UK Court of Appeals speaks on the materiality standard for contract avoidance
In North Star Shipping Ltd v Sphere Drake Insurance Plc, [2006] EWCA Civ 378 (April 7, 2006), the UK Court of Appeals stated that when a party seeks to avoid insurance on the basis of the non-disclosure of a “material circumstance,” a material circumstance “is one that would have an effect on the mind of a prudent insurer in estimating the risk and it is not necessary that it should have a decisive effect on his acceptance of the risk or the amount of premium to be paid.” Id., paragraph 18.