Reinsurance Focus

In this dispute between two parties to a joint venture agreement, one party filed a lawsuit and the other submitted an arbitraiton demand. Motions were filed to stay the lawsuit pending arbitration and to stay the arbitration. The motions were assigned to a magistrate judge. The magistrate judge concluded that arbitration was optional under the agreement and granted the plaintiff’s motion to stay the arbitration. The defendant contested this decision, but the district court stated that this decision was not “clearly erroneous or contrary to law.” In a case of first impression to the federal courts of appeal, the First Circuit held that the correct standard of review for a district judge’s review of a magistrate judge’s ruling on a motion to stay pending arbitration was whether the ruling was contrary to law. The First Circuit further stated that, for questions of law, no practical difference exists between review under the “contrary to law” and de novo standards. Next, in interpreting the arbitration provision at issue, the First Circuit concluded that a statement that the parties had the right to seek legal and equitable relief merely granted the authority to award such relief to the arbitrator, and did not make a provision that the parties “shall” arbitrate disputes permissive. The First Circuit thus reversed the decision and remanded to the district court for the entry of an order staying the litigation. PowerShare, Inc. v. Syntel, Inc., No. 09-1625 (1st Cir. Mar. 1, 2010).

This post written by Dan Crisp.