Week's Best Posts

Texas Federal Court Enforces Arbitration Award Under the New York Convention Despite Jurisdictional Challenge

May 21, 2018 by Carlton Fields

Respondent argued against the confirmation of the arbitral award as it was based upon the consent of the parties, rather than a disputed hearing, which it contended made the award not subject to the New York Convention, resulting in a lack of jurisdiction. The Court disagreed that it lacked subject matter jurisdiction, citing to Albtelecom SH.A. v. UNIFI Commc’ns, Inc., 2017 WL 2364365 (S.D.N.Y. May 30, 2017). The court noted that “[w]hile the tribunal did not make findings or reach legal conclusions, it made an award that bound parties, with its power. No binding or persuasive statutory language or case law requires a court to hold that a tribunal must reach its own conclusions, separate from the parties’ agreement, to make a valid binding award subject to the Convention.”

As Respondent did not argue that the award should not be confirmed on any ground but lack of subject-matter jurisdiction, the Court found the award must be confirmed.

Transocean Offshore Gulf of Guinea VII Ltd., et al. v. Erin Energy Corp., No. H-17-2623 (USDC S.D. Tex. Mar. 12, 2018)

This post written by Nora A. Valenza-Frost.
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Court of Appeal of England and Wales Finds That Party’s Forgery of Documents in Connection with a Transaction Does Not Bar Confirmation of Arbitration Award

May 15, 2018 by Rob DiUbaldo

The Court of Appeal of England and Wales has rejected a challenge to an arbitration award issued by the China International Trade Arbitration Commission (the “Tribunal”) against RBRG Trading (UK) Limited in favor of Sinocore International Co. Ltd., despite an argument from RBRG that the award was contrary to public policy.

The matter arose from Sinocore’s agreement to sell steel to RBRG. The parties later amended the contract to give RBRG a right to inspect the steel, and RBRG claimed that the parties agreed to amend a letter of credit issued by a Dutch bank in connection to the transaction to change the shipping date to July 20 and 30, 2010. Sinocore then shipped the steel on July 7, 2010, a fact of which RBRG was informed, but presented bills of lading that falsely gave the date of July 20-21, 2010 to the bank. The bank refused to pay due to the fraudulent bills of lading, and Sinocore terminated the contract and sold the steel to a third party. RBRG then commenced the arbitration, claiming that Sinocore had breached the agreement to allow RBRG to inspect the steel by shipping it too soon, and Sinocore counterclaimed for damages related to the termination of the contract.

The Tribunal determined that RBRG had not asked to inspect the steel and had been timely notified of its shipment and thus could not claim damages from Sinocore’s failure to allow an inspection. The tribunal further determined that RBRG had breached the contract by instructing the bank to issue the amended letter of credit, an amendment to which Sinocore had not agreed. The Tribunal further determined that that forgery of the bills of lading had not harmed RBRG and had not been the cause of the termination of the agreement, which instead resulted from RBRG’s instruction to issue the non-conforming letter of credit.

When Sinocore attempted to enforce the award in the United Kingdom, RBRG argued that it should not be enforced because it was based on Sinocore’s forgery of bills of lading, and that it was contrary to public policy to assist a seller who present forged documents under a letter of credit. The court disagreed, however, and emphasized the importance both of enforcing arbitral awards and of strictly construing the exception for awards that violate public policy. Ultimately, relying in part on the Tribunal’s determination that RBRG’s conduct caused the contract to terminate, the court found that the connection between the forged bills of lading and the award was simply too weak to justify a departure from the general rule that arbitral awards should be enforced.

RBRG Trading (UK) Limited v. Sinocore International Co. Ltd., [2018] EWCA (Civ) 838

This post written by Jason Brost.

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SDNY Denies Plaintiff’s Attempt To Vacate Arbitral Awards In Administrative Charge Dispute With Verizon

May 14, 2018 by Rob DiUbaldo

Verizon Wireless prevailed recently in confirming certain arbitration awards related to a dispute based on allegedly unlawful administrative charges for a cellular contract. Verizon’s customer agreement contained an arbitration clause prohibiting class arbitrations, and an arbitrator issued two relevant decisions during the course of the dispute. The first decision held the plaintiff could not pursue general injunctive relief. The second decision held, in part, that plaintiff did not have standing because, while he continued to pay the phone bill, he had assigned his account to his partner, thus rejecting plaintiff’s request for individual injunctive relief. The arbitrator also ordered Verizon to pay $1,500 without interest—the full amount of disputed administrative charges that Verizon had previously tendered and plaintiff rejected—$500 in attorney’s fees, and arbitrator compensation. The parties cross-moved to confirm and vacate various aspects of the arbitral decisions.

First, the court declined plaintiff’s request to vacate the arbitrator’s first decision. It disagreed with plaintiff’s argument that the arbitrator exceeded his authority by precluding general injunctive relief where the claim for such relief should have been non-arbitrable, because the “narrowest of circumstances” required to overturn an arbitrator’s decision on that ground were not present. The court also refused to find the arbitrator manifestly disregarded the law by precluding injunctive relief because plaintiff’s contention constituted a “mere disagreement” with the arbitral decision and because the arbitrator had valid grounds for his decision.

Second, the court likewise refused plaintiff’s attempt to vacate the second decision. The court concluded the arbitrator did not exceed his powers in awarding $500 in attorney’s fees because attorney’s fees issue was properly before the arbitrator. It determined the arbitrator did not manifestly disregard the law because plaintiff failed to establish the arbitrator “intentionally defied the law” as required to overturn on that ground. Similarly, the court rejected plaintiff’s arguments of arbitral misconduct and partiality. There was no misconduct because the limited nature of permitted discovery, challenged by plaintiff, was entirely within the arbitrator’s broad discretion. Further, the arbitrator was not partial where Verizon paid the mandatory arbitrator fees because the arbitration agreement provided for such payment by Verizon. Lastly, the court declined to find the arbitration violated plaintiff’s due process rights because the “law of the case”—via a prior finding of the court—determined the signing of the arbitration agreement could not constitute state action required for a due process claim.

Thus, the court confirmed the arbitrator’s two decisions and closed the case.

Katz v. Cellco P’ship, Case No. 12-9193 (USDC S.D.N.Y. Apr. 17, 2018).

This post written by Thaddeus Ewald .

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Decade-Long Battle Between Policyholder, Reinsurer, And Retrocessionaire To Continue As Reinsurer Files Notice Of Appeal

May 8, 2018 by Michael Wolgin

A Brazilian mining and steelmaking company (Companhia Siderurgica Nacional, S.A. (“CSN”)), a Brazilian insurance company (IRB Brazil Resseguros, S.A. (“IRB”)), and an American insurance company (National Indemnity Company (“NICO”)) have been locked in battle for a decade over liability stemming from a $167 million loss suffered by CSN. We have previously written about this litigation here.

On January 23rd, the Southern District of New York ordered IRB to pay NICO $5 million pursuant to an arbitration award. On February 22, 2018 IRB appealed this order to the Second Circuit. On March 26th a $5.55 million supersedeas bond was filed with the court on behalf of IRB to stay execution of the order pending the outcome of the appeal. National Indemnity Co. v. IRB Brazil Resseguros, S.A., No. 15-CV-3975 (USDC S.D.N.Y. Feb. 22, 2018 & March 26, 2018).

This post written by Benjamin E. Stearns.
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Fifth Circuit Affirms Federal Court’s Injunction Of State Court Proceeding That Attempted To Stay Arbitration

May 7, 2018 by Michael Wolgin

The case originated from the alleged violation of a noncompete and nonsolicitation agreement between the Shaw Group, later partially acquired by Aptim Corporation, and Dorsey McCall, its former employee. Shaw originally filed the case in state court, but after Aptim’s acquisition, Shaw moved to dismiss its state action while Aptim pursued a federal court action to enforce the arbitration clause in McCall’s employment contract Aptim initiated arbitration, but the state court ordered the arbitration stayed, finding that Shaw and Aptim waived arbitration by filing suit in state court. The district court for the Eastern District of Louisiana, however, declined to abstain from proceeding with its case, and then compelled arbitration and entered an order staying the state court proceeding. McCall appealed.

On appeal, the Fifth Circuit explained that “[w]hether to abstain is not a question answered by the recitation of ‘a mechanical checklist’ but instead rests ‘on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction.’” The Fifth Circuit weighed the factors and affirmed the district court’s decision against abstention based in part on the strong federal policy favoring arbitration. Notably, the Fifth Circuit was not persuaded by the fact that the state court’s order staying arbitration preceded the federal court’s ruling compelling arbitration, as the former was not a final judgment. The Fifth Circuit also agreed with the district court that Aptim had not waived arbitration since Aptim demanded arbitration only one month after the state court action had begun, and McCall could not demonstrate the he was prejudiced. Aptim Corp. v. McCall, Case No. 17-30772 (USDC E.D. La. Apr. 17, 2018).

This post written by Gail Jankowski.

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