Reinsurance Focus

There have been a large number of Court of Appeal and District Court opinions recently relating to arbitrations awards. This week, we present a two-part post to present these opinions. Today's post concerns evident partiality and venue, while tomorrow's will address the scope of arbitrators' authority and manifest disregard of law.

• In a potentially important opinion, the Second Circuit has issued a fairly detailed analysis of a situation in which an arbitrator came to be aware of a business relationship between his company and the parent company of one of the parties to the arbitration. Rather than investigate, he walled himself off with a “Chinese Wall” in an attempt to remain ignorant, and did not disclose his lack of investigation of the potential conflict. The District Court held that this constituted evident partiality, and vacated the arbitration award. The Court of Appeals affirmed. This case contains a good discussion of the legal principles relating to evident partiality. Applied Industrial Materians Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., Case No. 06-3297 (USCA 2d Cir. July 9, 2007).
• In Toroyan v. Barrett, Case No. 06-4422 (USDC SD N.Y. July 10, 2007), the court confirmed an arbitration award over objections of evident partiality and manifest disregard of law. The evident partiality claim was based on the fact that parties to the arbitration had contributed to maintaining an endowed chair in a different school of the University where the arbitrator was a professor. The court rejected the evident partiality claim for three reasons: (1) there was no indication that the arbitrator knew of the relationship; (2) the relationship was immaterial; and (3) the objector should have known about the issue and raised it prior to losing the arbitration.
• In The Ridge at Red Hawk, LLC v. Schneider, Case No. 06-4162 (USCA 10th Cir. July 9, 2007), the 10th Circuit affirmed a venue decision by an arbitration panel. This case is intersting in part because it involves parallel proceedings in a Texas state court and a Utah federal court, with Rooker-Feldman Doctrine implications. The courts concluded that a somewhat unique arbitration provision in the contract underlying the dispute allowed an appeal of the venue issue only if the determination was strictly legal in nature, and the arbitration award indicated that the venue determination was a combination of a legal and factual determination. Therefore, the courts dismissed the federal court challenge to the arbitration award.
• In ReliaStar Life Ins. Co. v. Certain Underwriters at Lloyd's London, Case No. 06-3845 (USDC D Minn. Feb. 1, 2007), the court confirmed an arbitration award by agreement of the parties. The Stipulation filed with the court includes a copy of the award.