Construing the Wisconsin arbitration statute, the Wisconsin Supreme Court vacated an arbitration award in a dispute between Allstate Insurance Company and a policyholder on the basis that a party-appointed arbitrator demonstrated evident partiality. Borst v. Allstate Insurance Co., Case No. 2004 AP 2004 (Wisc. June 13, 2006). The arbitrator appointed by Allstate was an attorney who had a “substantial, ongoing attorney/client relationship with Allstate.” Even though the relationship was disclosed, and all parties were aware of the relationship going into the arbitration hearing, the Court found that disclosure and knowledge did not avoid the prohibition of such a relationship under Wisconsin law. The Court also strictly limited the permissible discovery depositions to those permitted by the Wisconsin statute.
Court confirms arbitration award despite statute of limitation plea
An NASD arbitration panel entered an award in favor of Wachovia Securities. When the pending case was dismissed, Wachovia filed a separate action for confirmation of the award pursuant to the Federal Arbitration Act. The defendant opposed confirmation on the basis that the FAA requires that a request for confirmation be filed within one year of the date of the award. The Court disagreed, finding that binding Eighth Circuit law held that the one year period was permissive, and not mandatory, and that it would not enforce the bar since Wachovia had moved to confirm the award in the prior action, prior to its dismissal. Wachovia Securities, LLC v. Riddle, Case No. 06-233 (USDC D. Neb. July 26, 2006). The Court noted that there was a conflict on this issue between different panels of the Eighth Circuit.
Court of Appeal vacates arbitration award as being in manifest disregard of law
In an action filed by an insurance agent against John Hancock Mutual Life and two affiliates, Patten v. Signator Insurance Agency, Inc., Case No. 05-1148 (4th Cir. March 13, 2006), the United States Court of Appeals for the Fourth Circuit vacated a District Court decision denying a motion to vacate an arbitration award filed by an insurance agent, finding that the arbitration award failed to draw its essence from the governing arbitration agreement and was made in manifest disregard of law. The Court found that the arbitrator disregarded an unambigous provision in the agreement containing an arbitration clause by implying a one year statute of limitation into the arbitration agreement, where the agreement did not contain any limitation agreement, but an earlier, superceded agreement, did contain a one year limitation provision. Applicable law provided either a three or a six year limitation period.
Court finds no disputed issue as to the application of the "follow the fortunes" doctrine
In an earlier ruling in this case, the Court had held that the “follow the fortunes” doctrine applied to a request for payment under a reinsurance agreement. The Court then granted the reinsurer a six month period of discovery during which it might take discovery on whether the claims made against its reinsured were within either of two exceptions to the “follow the fortunes” doctrine, i.e., that the claims were manifestly outside the scope of the underlying policy, or that the decision to pay the claims had been fraudulent, collusive, or in bad faith. After the discovery period was completed, the reinsured moved for summary judgment, contending that there was no evidence to support the applicability of either exception to the “follow the fortunes” doctrine. The District Court agreed, and granted the reinsured summary judgment. National Union Fire Insurance Co. v. American Re-Insurance Co., Case No. 03-6999, in the United States District Court, Southern District of New York (July 28, 2006).
UK Court issues injunction to stop actions in a United States District Court
At the request of the sole member of a Lloyd's syndicate that is in run-off, the London Commercial Court has issued an injunction to restrain a party to a UK arbitration from seeking to intervene in a related action pending in a United States District Court, in which it would seek to restrain the Claimant in the UK arbitration from proceeding with the UK arbitration. Goshawk Dedicated Ltd. v. ROP Inc., [2006] EWHC 1730 (Queen's Bench Div. Commercial Court July 12, 2006). The Court held that the parties were obligated to arbitrate in the UK, as contractually agreed. This is an interesting example of a jurisdictional conflict between two countries.