Reinsurance Focus

Following is a summary of selected court opinions addressing requests for confirmation and vacation of arbitration awards.

Manifest disregard

NYKCool A.B. v. Pacific Fruit, Inc., No. 11-4246 (2d Cir. Jan 16, 2013) (affirming judgment by S.D.N.Y. confirming an arbitration award based on finding that defendant did not establish a “manifest disregard of the law,” or that the panel exceeded its authority or that the panel denied defendant a fundamentally fair hearing)

Murray v. Citigroup Global Markets, Inc., No. 11-4355 (6th Cir. Jan. 10, 2013) (affirming district court’s denial of plaintiff’s motion to vacate or modify an arbitration award; court could not determine whether the panel acted in “manifest disregard of the law” because plaintiff did not request a reasoned award from the panel)

Swarm, LLC v. Cohen, Case No. 10-03188 (C.D. Cal. Dec. 7, 2012) (granting defendants’ motion to confirm final arbitration award based on finding that arbitrator’s application of the alter ego doctrine, finding of a written agreement, and reliance on the same evidence presented by plaintiff for two different claims is not a “manifest disregard of the law” under the FAA)

Ometto v. ASA Bioenergy Holding A.G., Case No. 12-1328 (S.D.N.Y. Jan. 9, 2013) (denying petitioners’ motion to vacate two arbitration awards and granting respondents’ motion to confirm the awards based on finding that petitioners’ grounds for vacatur were without merit, including allegations that the tribunal’s chairman was partial, the tribunal acted in manifest disregard of the law, and the awards were procured through fraud)

Budget Blinds Inc. v. LeClair, Case No. 12-1101 (C.D. Cal. Jan. 16, 2013) (denying petition to vacate arbitration award and granting cross-petition to confirm award, on grounds that petition to vacate did not establish “manifest disregard of the law” or that arbitrator exceeded her authority and was merely an attempt to re-litigate the arbitrator’s factual findings)

Fuchs & Associates, Inc. v. Lesso, No. B239246 (Cal. Ct. App. Jan. 8, 2013) (affirming trial court’s judgment confirming an arbitration award based on finding that the arbitrator did not exceed his authority and there was no “manifest disregard of the law”)

Exceeding authority

Brotherhood of Locomotive Engineers and Trainmen v. United Transportation Union, No. 11-4177 (6th Cir. Dec. 5, 2012) (affirming district court’s reinstatement of arbitration award following magistrate judge’s vacatur; arbitration board did not exceed its jurisdiction when it interpreted contractual provisions)

Zhao v. Ming Due International Trade, Inc., No. B236813 (Cal. Ct. App. Jan. 7, 2013) (affirming trial court’s judgment confirming an arbitration award based on finding that arbitrator did not exceed the scope of his power by denying plaintiff’s motion for an uncontested arbitration, especially since the parties stipulated to binding arbitration in which the arbitrator would control the proceedings in “his sole discretion”)

Disclosure inadequacy

Gray v. Chiu, No. B238304 (Cal. Ct. App. Jan. 22, 2013) (reversing trial court’s denial of appellant’s petition to vacate a medical malpractice arbitration award on grounds that the arbitrator violated the disclosure provisions of the California Arbitration Act and the California Ethics Standards for Neutral Arbitrators in Contractual Arbitrations by failing to disclose that counsel for the defendant was affiliated with the abritrator’s firm)

Re-litigating arbitrators’ decisions

Citigroup Global Markets, Inc. v. Bock, Case No. 10-24157 (S.D. Fla. Jan. 17, 2013) (confirming FINRA arbitration award and denying respondent’s motion to vacate the award as an attempt to “re-litigate discovery decisions that were properly before the arbitration panel”)

Untimely vacation request

Domnarski v. UBS Financial Services, Inc., Case No. 12-30139 (D. Mass. Jan. 23, 2013) (denying plaintiff’s motion to vacate a FINRA arbitration award and allowing defendant’s motion to confirm the award because plaintiff filed her motion outside the 3 month limitations period established by the FAA)

Foreign Arbitration Awards – jurisdiction

Covington Marine Corp. v. Xiamen Shipbuilding Industry Co., No. 12-30383 (5th Cir. Dec. 21, 2012) (affirming district court’s decision to deny confirmation of a foreign arbitral award under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards against a Chinese shipbuilding company and the People’s Republic of China due to lack of personal and subject matter jurisdiction)

This post written by Abigail Kortz.

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Plaintiff USA Chiropractic commenced arbitration proceedings against PIP carrier NJ Re-Insurance Co., seeking coverage under an assignment of rights for medical treatment provided to NJ-Re’s insured. The arbitrator entered an award dismissing the claim, holding that USA Chiropractic lacked standing because it had not complied with the insurer’s appeals process before demanding arbitration. USA Chiropractic sought vacatur and also sued arbitration tribunal NAF in state court, arguing that the arbitrator had misapplied the law. The court denied plaintiff’s claims, holding that USA Chiropractic lacked standing for failure to follow NJ-Re’s pre-arbitration appeals process and, further, that NAF was immune from suit. The appellate court affirmed, finding that the trial court did not exceed its authority in denying USA Chiropractic’s request to set aside the award and that it was thus unnecessary to reach plaintiff’s appeal regarding whether NAF was an indispensable party to the litigation. USA Chiropractic v. NJ Re-Insurance Co., No. A-3108-11T1 (N.J. Ct. App. Dec. 14, 2012).

This post written by Ben Seessel.

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Evident Partiality, Fraud, Corruption, Undue Means

Dubois v. Macy’s Retail Holdings, Inc., Case No. 11-4904 (USDC E.D.N.Y. Sept. 13, 2012) (accepting magistrate’s report and recommendation denying motion to vacate, no corruption, fraud, undue means, or evident partiality; granting motion to confirm)

Burbach Aquatics, Inc. v. Huntley Illinois Park District, Case No. 12-6613 (USDC N.D. Ill Nov. 21, 2012) (denying motion to vacate, no evident partiality, no manifest disregard of the law)

Gambino v. Alfonso Electrical Services, Case No. 10-10860 (USDC D. Mass. Nov. 20, 2012) (granting motion to vacate, evident partiality where arbitrator owed fiduciary duty as trustee to prevailing party)

Failure or Refusal to Hear Material Evidence

Allstate Ins. Co. v. GEICO, No. D36443 (N.Y. App. Div. Oct. 9, 2012) (reversing trial court decision granting motion to vacate for failure or refusal to hear evidence, reinstating and confirming award)

Exeeding Scope of Submission

Integrated Construction Enterprises, Inc. v. Bradley Sciocchetti, Inc., No. A-2511-10T4 (N.J. App. Div. Nov. 20, 2012) (affirming denial of vacatur, arbitrator did not exceed powers by awarding prevailing party costs associated with arbitration, no evident mathematical error in damages award)

Arbitration Procedure

OneBeacon America Insurance Co. v. Swiss Reinsurance America Corp., Case No. 12-5043 (USDC S.D.N.Y. Oct. 19, 2012) (granting petition for appointment of neutral third arbitrator for tri-partite panel)

Hofer Builders, Inc. v. Captstone Building Corp., Case No. 12-1367 (USDC E.D. La. Nov. 20, 2012) (denying interlocutory motion to vacate arbitrator decision denying summary judgment, as decision did not constitute a “final award”)

Oakley Fertilizer, Inc. v. Hagrpota for Trading & Distribution, Ltd., Case No. 11-7799 (USDC S.D.N.Y. Nov. 16, 2012) (granting motion to confirm award under Convention on Recognition and Enforcement of Foreign Arbitral Awards and the FAA, where losing party in arbitration was refusing to pay award)

Choice Hotels International, Inc. v. Jai Shree Navdurga, LLC, Case No. 11-2893 (USDC D. Md. Nov. 29, 2012) (confirming award by default judgment, denying motion for costs not pled in initial complaint)

This post written by John Pitblado.

See our disclaimer.

In a perfunctory order, a court has confirmed an award related to amounts owed under facultative reinsurance certificates in connection with asbestos injuries and lawsuits dating back to 1980. In 2003, the reinsurer had agreed to pay a portion of the claims, subject to the terms of the underlying commercial liability insurance policy. When the reinsured submitted a claim after the reinsurance attachment point was reached in 2009, however, the reinsurer refused to pay. The parties arbitrated the dispute, and a final award in the reinsured’s favor was issued in June 2011. The reinsured then successfully petitioned the court to confirm the award, arguing that the reinsurer was estopped from contesting it, having failed to object to the award within three months of its entry. ACE Property & Casualty Insurance Co. v. Global Reinsurance Corp. of America, Case No. 1:11-cv-06945 (USDC S.D.N.Y. July 25, 2012).

This post written by Michael Wolgin.

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Employment Disputes

Mesa Airlines, Inc. v. Air Line Pilots Association International, Case No. 2:11-cv-02106 (USDC D. Ariz. Sept. 14, 2012) (granting summary judgment upholding labor arbitration award; arbitrator’s reinstatement of airline pilot did not exceed jurisdiction by ignoring language of collective bargaining agreement, did not violate public policy, and did not exhibit bias by ignoring evidence).

Hamerslough v. Hipple, Case No. 1:10-cv-03056 (USDC S.D.N.Y. Oct. 25, 2012) (denying petition to vacate award; granting cross-petition to confirm award; award providing additional commissions to former salesperson, but only based on revenue collected prior to termination, was not based on arbitrator “exceeding their powers,” was not a “manifest disregard,” and was not contrary to public policy, including determination that salesperson was not “prevailing party” for purposes of awarding attorney’s fees).

Class Waiver

Webster v. Freedom Debt Relief, LLC, Case No. 1:12-cv-01654 (USDC N.D. Ohio Sept. 25, 2012) (denying petition to vacate award finding that underlying agreement precluded class arbitration; arbitrator did not commit “manifest disregard”).

Exceeding Authority/Manifest Disregard

Estate of Wildhaber v. Life Care Centers of America, Case No. 2:10-cv-00015 (USDC D. Nev. Oct. 23, 2012) (granting application for confirmation of award; denying motion to vacate and modify award; award for $1.5 million for pain and suffering and statutory double damages was not excessive for wrongful death, elder abuse, and elder neglect; no “manifest disregard” for award of prejudgment interest on attorney’s fees, statutory double damages, and grief and sorrow).

Day & Zimmerman, Inc. v. SOC-SMG, Inc., Case No. 2:11-cv-06008 (USDC E.D. Pa. Oct. 22, 2012) (granting motion to confirm award; denying motion to vacate award; rejecting argument that filing of “complaint” to vacate award instead of “motion” under FAA was grounds for dismissal of action, but confirming award because arbitrators did not exceed authority and other vacatur arguments were not viable under FAA).

Oehme, Van Sweden & Associates, Inc. v. Maypaul Trading & Services Ltd., Case No. 1:12-cv-00005 (USDC D.D.C. Nov. 6, 2012) (granting motion to confirm award; denying motion to vacate award; non-signatory bound to arbitration agreement under “apparent agency”; arbitrator did not commit “manifest disregard”).

CD&L Realty LLC v. Owens-Illinois, Inc., Case No. 1:11-cv-07248 (USDC D.N.J. Sept. 25, 2012) (granting motion to confirm award after removal; denying vacatur; arbitrator did not exceed authority, or violate public policy; plaintiff could not challenge arbitrator’s rejection of fraud and breach of contract claims for legal or factual error).

Procedural Issues

Degrate v. Broadcast Music Inc., Case No. 1:12-cv-01700 (USDC S.D.N.Y. Oct. 25, 2012) (dismissing sua sponte pro se petition to vacate award as untimely; deadlines for petition under state law and FAA would not be extended due to “unique circumstances” or “equitable tolling”).

Nuzzi v. Coachmen Industries, Inc., Case No. 3:09-cv-00116 (USDC N.D. Ind. Oct. 26, 2012) (denying motion to vacate award; action stayed against entities that filed Chapter 7 bankruptcy, but would proceed against viable defendant parent company; perceived “unfairness” of summary arbitration procedures not viable grounds for vacatur under FAA; arbitrator did not commit “manifest disregard”).

This post written by Michael Wolgin.

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The First Circuit affirmed a district court’s denial of a motion to vacate an arbitration award issued in a dispute between Bangor Gas, a pipeline owner, and H.Q. Energy, a natural gas supplier, concerning responsibility for certain costs regulated by the Federal Energy Regulatory Commission. The arbitration panel designed a remedy consistent with the FERC’s shipper-must-have-title rule, but that placed Bangor at risk for violating a different FERC regulation. Following the arbitration award’s issuance, Bangor received guidance from the FERC staff that the panel’s remedy “would violate the Commission’s posting and bidding regulations.” While the First Circuit does not recognize “manifest disregard of the law” as a valid ground for vacating an arbitral award, it analyzed the award as if the doctrine applied since there is a circuit split on the issue. The court determined that the arbitrators did not disregard the law because the FERC’s intentions were not clear cut. The staff’s guidance is not binding on FERC and the arbitrators provided for the contingency of a violation in the award. Bangor Gas Co. v. H.Q. Energy Servs. (U.S.) Inc., No. 12-1386 (1st Cir. Sept. 26, 2012).

This post written by Abigail Kortz.

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Employer Southwestern Electric Cooperative entered into an agreement with the International Brotherhood of Electrical Workers, Local 702 regarding the number of union members’ sick days. The agreement included a grievance procedure and an arbitration process for grievances that could not be resolved internally. A union employee sought thirteen weeks of sick leave; Southwestern and the union deadlocked on whether the employees’ request should be granted. The dispute was submitted to arbitration and the arbitrator sided with the employee.

Southwestern moved to vacate, arguing that the arbitrator’s award did not draw its essence from the parties’ agreement and, further, that the arbitrator exceeded his authority in rendering the award. The court denied the motion to vacate, finding that the arbitrators’ decision “had a plausible foundation in the agreement.” The court further held that the challenge to the award was “substantially without merit” as the court could not “discern how [Southwestern] could logically believe that th[e] dispute was not subject to arbitration.” Accordingly, it granted the union’s motion for sanctions under Federal Rule of Civil Procedure 11, ordering Southwestern to pay the union’s fees and costs in defending the motion to vacate. Sw. Elec. Coop., Inc. v. Int’l Bhd. of Elec. Workers, Local 702, Case No. 11-1047 (USDC S.D. Ill. August 27, 2012).

This post written by Ben Seessel.

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The Eleventh Circuit Court of Appeals affirmed a Florida federal court’s confirmation of an award from an international arbitration, which was challenged by Triangula Pisos E Paineis, LTDA (“Triangulo”), the party against whom the award was made. Triangulo contended that the award should be vacated under a provision of the Federal Arbitration Act allowing vacatur based on an arbitrator’s refusal to hear evidence pertinent to the controversy. Without deciding whether the FAA even applied, as Triangulo had argued, the Court held that even if it did, Triangulo failed to make the requisite showing to demonstrate that the arbitrator had in fact refused to hear pertinent evidence. It affirmed the trial court’s denial of vacatur and confirmation of the award against Triangulo. Triangulo Pisos E Paineis, LTDA v. BR-111 Imports & Exports, Inc., No. 12-10776 (11th Cir. Aug. 24, 2012).

This post written by John Pitblado.

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Reinsurer AXA and insurers New Hampshire Insurance Company, American Home Insurance Company, and National Union Fire Insurance Company arbitrated a dispute over reinsurance coverage of primary policies that had been underwritten by AIG’s Energy Division in 1996/1997 and 1997/1998. The arbitration was only commenced after years of contentious litigation over coverage-related issues. The arbitration panel issued an award, largely in favor of AXA. AXA petitioned to have the arbitration award confirmed under the FAA. The insurers stipulated to the award’s confirmation, but both sides asked the court to keep the award out of the public court record. When the award was filed with the Petition to confirm the award, the court granted the request of the parties to seal the award. In the order confirming the award, however, the court denied the request to keep the award sealed, without any discussion of the reasons for its change of position, and directed the clerk to unseal the award, which is now public. In re AXA Versicherung AG, Case No. 12-6009 (USDC S.D.N.Y. Sept. 6, 2012).

This post written by Ben Seessel.
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Century Indemnity Company brought a petition to confirm three foreign arbitral awards it secured against AXA Belgium. AXA cross-petitioned to vacate the awards. Both parties filed motions to seal certain documents submitted to the court in light of a confidentiality agreement covering the arbitrations. The parties’ dispute centered on claimed underpayments by AXA, and alleged offsets AXA claimed it was entitled to, which it claimed negated amounts owed to Century under certain reinsurance treaties. Century initiated multiple arbitrations arising throughout the history of the parties’ payment disputes, which arbitrations were ultimately consolidated. The consolidated arbitration hearing took place in 2011. In February 2012, the panel rendered a decision favorable to Century, including a bad faith finding against AXA which resulted in an order of $250,000, or the amount of Century’s fees and costs, whichever was lesser. AXA challenged the award under the FAA, but the Court held that it failed to demonstrate the panel exceeded its authority under the submission, or that its decision was in manifest disregard of the law. The Court also addressed both parties’ motion to seal the record, finding neither demonstrated sufficient bases to seal, given the strong presumption in favor of public access to court files. Century Indemnity Co. v. AXA Belgium, No. 11 Civ. 7263 (USDC S.D.N.Y. Sept. 24, 2012).

This post written by John Pitblado.

See our disclaimer.