April 28th, 2009
Arbitrability, Authority of Arbitrators, Awards, Life Reinsurance, New York Court of Appeals, United States Court of Appeals for the Second Circuit
Introduction
We recently reported on ReliaStar Life Ins. Co. v. EMC National Life Co., ___ F.3d ___, ___ (2009) (Raggi, J.) (blogged here), in which the United States Court of Appeals for the Second Circuit held that an arbitration panel was authorized to award under the bad faith exception to the American Rule attorney and arbitrator fees to a ceding company in a case where the parties had agreed that “[e]ach party shall bear the expense of its own arbitrator. . . and related outside attorneys’ fees, and shall jointly and equally bear with the other party the expenses of the third arbitrator.” This post takes a critical look at ReliaStar.
The Second Circuit is one of the most influential and respected Circuit Courts of Appeal in the United States, yet on occasion even this prestigious court renders a decision that is open to question. ReliaStar is one of those decisions. The majority opinion lost sight of what the parties agreed about the arbitrators’ power to award attorney fees. Rather than adhere to the plain meaning of the parties’ agreement as required by New York law, the Court construed an unambiguous limitation on arbitral authority to mean something other than what it said.
No doubt that the Court believed that its decision would encourage resort to arbitration by construing arbitral authority broadly. But the Court would have done a far better job encouraging resort to arbitration had it simply enforced the parties’ agreement as written. One of the most attractive features of arbitration is that parties get to dictate how they want their dispute decided, including, among other things, how best to allocate the costs, fees and expenses of deciding it. But that feature falls by the wayside if courts cannot be relied upon to enforce arbitration agreements as written. Continue Reading »
April 27th, 2009
General, Legislative Developments
You can read our Arbitration Fairness Act guest-blog post (available here) on Victoria Van Buren’s excellent ADR blog, Disputing. Look for Victoria’s guest-blog post on manifest disregard of the law next week in the Loree Reinsurance and Arbitration Law Forum.
April 26th, 2009
General, Legislative Developments, Life Reinsurance, United States Court of Appeals for the Second Circuit
From time-to-time the Loree Reinsurance and Arbitration Law Forum will be featuring guest bloggers. We are honored that Victoria Van Buren of Disputing has accepted our invitation to guest blog, and expect within the next week or so to feature her post concerning Fifth Circuit standards of review under Section 10(a)(4) of the Federal Arbitration Act in the wake of Citigroup Global Markets, Inc. v. Bacon, ___ F.3d ___ (5th Cir. 2009), in which the Court held that manifest disregard of the law is no longer an independent ground for vacatur under the Federal Arbitration Act. We expect that Victoria will be submitting other guest blog posts in the future, and look forward to featuring them. We shall also be inviting others to guest blog here at the Forum. Continue Reading »
April 21st, 2009
Arbitrability, Authority of Arbitrators, Awards, Life Reinsurance, Reinsurance Arbitration, United States Court of Appeals for the Second Circuit
Introduction
On April 9, 2009 the United States Court of Appeals for the Second Circuit decided a case that may significantly expand the power of arbitrators to award attorney and arbitrator fees in cases involving reinsurance and other contracts. The Court held that an arbitration panel was authorized to award under the bad faith exception to the American Rule attorney and arbitrator fees to a ceding company in a case where the parties had agreed that “[e]ach party shall bear the expense of its own arbitrator. . . and related outside attorneys’ fees, and shall jointly and equally bear with the other party the expenses of the third arbitrator.” ReliaStar Life Ins. Co. v. EMC National Life Co., ___ F.3d ___, ___ (2009) (Raggi, J.). This post briefly discusses the majority and dissenting opinions. Our critical analysis will be provided in a subsequent post. Continue Reading »
April 18th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court
What Does the Arbitration Fairness Act of 2009 Have to Say About Commercial and Industry Arbitration Involving Sophisticated Parties?
Part V: Summing Up
This is the final part of our multi-part post on the Arbitration Fairness Act of 2009 (the “Fairness Act”). We did not address all aspects of the Fairness Act, but focused our attention on whether the Act may change the status quo in arbitrations involving only sophisticated, commercial entities.
So what does the Arbitration Fairness Act of 2009 have to say about commercial and industry arbitration involving sophisiticated parties? If you have been following our last six posts, you know the answer is not clear, and that the only thing that can be said with any degree of certainty is that the Fairness Act will result in litigation between sophisticated parties concerning the continuing viability of two fairly settled principles of arbitration law – severability and what we refer to as the Own Jurisdiction Rule. That may be good news to some and bad news to others. Continue Reading »
April 16th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court
Will the Arbitration Fairness Act of 2009 Apply to Nondomestic Agreements and Awards Falling Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards?
Introduction
In Parts I and II we discussed how the Arbitration Fairness Act of 2009 (the “Fairness Act”) will likely lead to litigation concerning whether, and if so, to what extent, Proposed Section 2(c) abrogates: (a) the severability doctrine; and (b) the rule that arbitrators may determine their own jurisdiction if the parties clearly and unmistakably agree, with that determination subject only to deferential judicial review (the “Own Jurisdiction Rule”). In Parts IIIA-C we discussed two constructions of Proposed Section 2(c): one that would abrogate severability and the Own Jurisdiction Rule in all cases falling under Chapter 1 of the FAA (the “Broad Construction”); and one that would limit the scope of Proposed Section 2(c) to Chapter 1 cases where one of the parties contends that the arbitration agreement requires arbitration of a consumer, employment, franchise or statutory civil rights dispute (the “Narrow Construction”).
In this Part IV we consider whether Proposed Section 2(c) of the Fairness Act applies to agreements and awards falling under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention” or the “Convention”), which are governed by Chapter 2 of the FAA. While the matter is not entirely free from doubt, Proposed Section 2(c) of the Fairness Act will probably be construed not to apply to awards and agreements falling under the New York Convention. Thus, the doctrine of severability and the Own Jurisdiction Rule will probably continue to apply in cases falling under FAA Chapter 2, even if courts adopt the Broad Construction of the Fairness Act in cases governed by Chapter 1. Continue Reading »
April 11th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court
Part IIIC: Is the Narrow Construction Sustainable?
Introduction
In Part IIIB (here) we discussed in general terms the “Narrow Construction” of the Arbitration Fairness Act of 2009 (the “Fairness Act”), which would limit the scope of Proposed Section 2(c) to situations where the party resisting arbitration claims that the arbitration agreement requires predispute arbitration of consumer, franchise, employment or statutory civil rights disputes. We also set forth the five premises on which the Narrow Construction is based. This Part IIIC addresses the validity of those premises. [Because this post frequently refers to Proposed Section 2 and its subsections, we have reproduced at the end the pertinent parts of Proposed Section 2.]
The Narrow Construction is fairly complex. A court choosing it would have to determine each of its five premises to be valid. In addition, the validity of Premise 3 is interlinked to that of Premise 5: Premise 3 is easier to accept when viewed without regard to Premise 5 and Premise 5 is harder to accept when viewed in isolation from Premise 3. If a court believes that Premise 3 is reasonable, but has reservations about its validity, when it considers Premise 3 in conjunction with Premise 5, it may conclude that both are invalid. But if it is confident that Premise 3 is valid, that confidence might lead it to conclude that Premise 5 is valid. These are important considerations that a party advocating one construction or the other should take into account in structuring its argument. Continue Reading »
April 7th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments, United States Supreme Court
On April 4 we reported on 14 Penn Plaza LLC v. Pyett, ___ U.S. ___ (2009) (Thomas, J.) (available here), as did many others last week. Professor Sarah Cole of the ADR Prof Blog published a thoughtful and well-written piece on Pyett (available here), which raised some interesting questions. For example, Professor Cole observed that “if the Arbitration Fairness Act passes, it would not surprise me to see a subsequent effort to overturn the Pyett decision.” As discussed in a series of posts we are publishing on the Fairness Act (Part I available here), the Act would render arbitration agreements falling within the scope of the FAA invalid and unenforceable to the extent they require predispute arbitration of consumer, employment, franchise and statutory civil rights disputes. Continue Reading »
April 6th, 2009
Arbitrability, Authority of Arbitrators, Legislative Developments
Part IIIB: Interpreting Proposed Section 2(c) Narrowly
Introduction
In Part IIIA we discussed what we call the “Broad Construction” of the Arbitration Fairness Act of 2009, and showed how the Act could be construed to abrogate in all commercial disputes: (a) the doctrine of severability; and (b) deferential review under the Federal Arbitration Act (“FAA”) of arbitrator determinations of arbitrability in cases where the parties clearly and unmistakably submit arbitrability questions to the arbitrators (the “Own Jurisdiction Rule”). In this Part IIIB and in Part IIIC we discuss the “Narrow Construction”, which would limit the scope of Proposed Section 2(c) to situations where the party resisting arbitration claims that the arbitration clause requires predispute arbitration of consumer, franchise, employment or statutory civil rights disputes. Continue Reading »
April 4th, 2009
Arbitrability, Authority of Arbitrators, United States Supreme Court
On April 1 the United States Supreme Court decided 14 Penn Plaza LLC v. Pyett, ___ U.S. ___ (2009) (Thomas, J.), an interesting case that highlights some of the differences between labor arbitration governed by the National Labor Relations Act (“NLRA”) and arbitration governed by the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (the “FAA”). The question before the Court was whether “a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate [Age Discrimination in Employment Act (“ADEA”)] claims is enforceable as a matter of federal law.” Slip op. at 25. Reversing the United States Court of Appeals for the Second Circuit, the Court said “yes.” See slip op. at 25. Continue Reading »
