Reinsurance Focus

Four recent opinions address interesting issues in the confirmation of arbitration awards:

• In Extendicare Health Services, Inc. c. District 1199P Service Employees International Union, No. 06-4768 (3d Cir. Oct. 26, 2007), the court affirmed a district court decision finding that the reinstatement of an employee by an arbitrator in a labor arbitration was not contrary to public policy. This opinion contains a rather extended discussion of the public policy issue analysis.
• In Lagstein v. Certain Underwriters at Lloyds of London, Case No. 03-1075 (USDC D. Nev., Aug. 15, 2007), an insurance bad faith case, the arbitration panel awarded $900,000 in compensatory damages, $1.5 million in bad faith compensatory/emotional distress damages, $4 million in punitive damages and $350,000 in attorneys’ fees. The district court found that this award “shocks the Court’s conscience, is biased, and cannot stand.” The court further found that the damages were unsupported by the record and in manifest disregard of law, that the punitive damage award exceeded the jurisdiction of the arbitration since it awarded damages for a time period that the parties had expressly agreed was beyond the scope of the arbitration, and that the size of the punitive damage award was excessive.
• In Hendrik Delivery Service, Inc. v. St. Louis Post-Dispatch LLC, Case No. 07-1516 (USDC E.D. Mo. Oct. 19, 2007), the court confirmed an arbitration award of $892,000 in compensatory and $750,000 of punitive damages in a business dispute. The losing party sought to vacate the award, essentially arguing that the arbitrator made the wrong decision. The court found no manifest disregard of law, and refused to vacate the award.
• In Van Pelt v. UBS Financial Services, Inc., Case No. 05-477 (USDC W.D. N.C. Oct. 12, 2007), the court denied a motion to vacate an arbitration award of $2.4 million for wrongful termination of a financial advisor. The employer contended that the award should be vacated because: (1) the award was not drawn from the essence of a contract; (2) the panel manifestly disregarded the law; (3) the panel exceeded its power in making the award; and (4) the award violated public policy. The court denied the request to vacate the award. The critical point in this opinion is that since the award was not a reasoned award, and hence the panel did not explain the bases for its decision, there was an insufficient record upon which to vacate the award.