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Archive for the ‘Evident Partiality’ Category

All Eyes on Americo. . . .SCOTUS Expected to Rule on Petition for Certiorari at Upcoming May 14, 2015 Conference

May 12th, 2015 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration as a Matter of Consent, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Awards, Confirmation of Awards, Contract Interpretation, Evident Partiality, Judicial Review of Arbitration Awards, State Courts Comments Off on All Eyes on Americo. . . .SCOTUS Expected to Rule on Petition for Certiorari at Upcoming May 14, 2015 Conference

yay-677327-digitalOn March 28, 2015 we reported (here) that the U.S. Supreme Court had asked for a response to the petition for certiorari in Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014). In Americo the Texas Supreme Court held that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. The parties’ agreement, among other things, incorporated the American Arbitration Association (the “AAA”)’s rules, which at the time the parties entered into the contract followed the traditional, industry arbitration principle that party-appointed arbitrators may be partial, under the control of the appointing party or both. But by the time the dispute arose the AAA Rules had been amended to provide that the parties are presumed to intend that appointed arbitrators must be neutral.

Five Justices of the nine-member Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the AAA had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See 440 S.W.3d at 25. (Copies of our Americo posts are here and here.)

yay-34842-e1424841353823The losing party is requesting Supreme  Court review to determine whether the Texas Supreme Court should have deferred to the AAA’s decision on disqualification rather than independently determining whether the parties intended to require party-appointed arbitrators to be neutral. The petition argues that there is a split in the circuits on the issue.

At this week’s May 14, 2015 conference, the Court will presumably decide whether or not to grant certiorari.

In our March 28, 2015 post (here) we argued  that Americo‘s unique facts make it poor candidate for certiorari. At the time the parties agreed to arbitrate, the AAA rules “provided that ‘[u]nless the parties agree otherwise, an arbitrator selected unilaterally by one party is a party-appointed arbitrator and not subject to disqualification pursuant to Section 19.'” 440 S.W.3d at 23 (quoting AAA Commercial Rule § 12 (1996)). Section 19 permitted the AAA to disqualify neutral arbitrators for partiality, but, under Section 12, absent an agreement to the contrary, party-appointed arbitrators were not subject to disqualification under Rule 19. When the AAA Rules were amended to reverse the traditional presumption about partiality of party-appointed arbitrators, the Rules were also amended to authorize the AAA to determine whether party-appointed arbitrators were neutral.

yay-8590418-digitalThis is one of those (relatively rare) cases where a question of arbitrability—that is, whether the parties agreed to delegate to the AAA the authority to make a final and binding determination on whether a party-appointed arbitrator may be disqualified—is intertwined so inextricably with the merits of the dispute alleged to be arbitrable that, for all intents and purposes, the arbitrability and merits questions are identical. In other words, the AAA’s authority to disqualify turns on whether the parties agreed to neutral or non-neutral party-appointed arbitrators–the precise issue the petition claims the AAA should itself decide. In situations like these, the court cannot abdicate its duty to determine arbitrability, even if that means deciding some or all of the disputes that are alleged to be arbitrable. See, generally, Litton Financial Printing Div. v. National Labor Relations Board, 501 U.S. 190, 208-09 (1991).

Of course, the Supreme Court may believe otherwise, or may have other reasons for wanting  to grant certiorari.  But in any event, we’ll probably know by Monday, May 18, 2015 whether the Court will take the case.

 

Photo Acknowledgements:

All photos used in the text portion of this post are licensed from Yay Images and are subject to copyright protection under applicable law. Text has been added to images 1 and 3 (counting from top to bottom). Hover your mouse pointer over any image to view the Yay Images abbreviation of the photographer’s name.

United States Supreme Court Requests Response to Petition for Certiorari in Texas Party-Appointed Arbitrator Qualification Case

March 28th, 2015 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Arbitration Provider Rules, Arbitrator Selection and Qualification Provisions, Authority of Arbitrators, Awards, Contract Interpretation, Evident Partiality, Grounds for Vacatur, Judicial Review of Arbitration Awards, State Arbitration Law, State Courts, Texas Supreme Court, United States Supreme Court 2 Comments »

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On June 20, 2014 the Texas Supreme Court held in Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014), that an arbitration award had to be vacated because it was made by a panel not constituted according to the parties’ agreement. The parties’ agreement, among other things, incorporated the American Arbitration Association (the “AAA”)’s rules, which at the time the parties entered into the contract followed the traditional, industry arbitration principle that party-appointed arbitrators may be partial, under the control of the appointing party or both. But by the time the dispute arose the AAA Rules had been amended to provide that the parties are presumed to intend that appointed arbitrators must be neutral.

Five Justices of the nine-member Court determined that the parties had agreed that party-appointed arbitrators need not be impartial, only independent. Because the AAA had, contrary to the parties’ agreement, disqualified the challenging party’s first-choice arbitrator on partiality grounds, the panel that rendered the award was not properly constituted and thus exceeded its powers. See 440 S.W.3d at 25. (Copies of our Americo posts are here and here.)

The losing party has petitioned the United States Supreme Court for a writ of certiorari, arguing that the Court should determine whether the Court should have deferred to the AAA’s decision on disqualification rather than independently determining whether the parties intended to require party-appointed arbitrators to be neutral. Continue Reading »

HarrisMartin Reinsurance Conference Postscript

September 28th, 2011 Events, Evident Partiality, Grounds for Vacatur, United States Court of Appeals for the Fifth Circuit, United States Court of Appeals for the Second Circuit Comments Off on HarrisMartin Reinsurance Conference Postscript

On September 22-23, 2011, a number of experienced reinsurance industry executives and  in-house counsel, and a small group of outside counsel (yours truly included), spoke at the HarrisMartin Publishing-sponsored reinsurance conference, “Reinsurance Summit:  Fresh Perspectives on the Reinsurance Front,” which took place at the Loews Philadelphia Hotel.  (Our pre-conference, August 22, 2011 post (here) sets forth the conference program agenda.)

As expected attendance was modest – no doubt the result of the cost-cutting mandated by economic conditions, coupled with reduced reinsurance-dispute frequency and severity — but the conference was nevertheless a great success.  The presentations were thoughtful, interesting and professionally useful, and the smaller group of attendees not only facilitated robust – and sometimes, spirited – discussions during the program, but also provided a relaxed atmosphere conducive to networking during the breaks.  I, for one, returned home with “fresh perspectives” on a number of reinsurance-related issues, and those perspectives have proved to be good fodder for brainstorming. Continue Reading »

New York Law Journal Article: “Arbitrator Evident Partiality Standard Under Scrutiny in ‘Scandinavian Re'”

May 20th, 2011 Appellate Practice, Arbitration Practice and Procedure, Ethics, Evident Partiality, Grounds for Vacatur, Practice and Procedure, Reinsurance Arbitration, United States Court of Appeals for the Second Circuit, United States Court of Appeals for the Seventh Circuit, United States District Court for the Southern District of New York, United States Supreme Court Comments Off on New York Law Journal Article: “Arbitrator Evident Partiality Standard Under Scrutiny in ‘Scandinavian Re'”

On May 18, 2011 the New York Law Journal published in its Outside Counsel section an article I wrote, which argues that the United States Court of Appeals for the Second Circuit should reverse the district court’s judgment in Scandinavian Reinsurance Co. v. Saint Paul Fire & Marine Ins. Co.,  No. 09 Civ. 9531(SAS), 2010 WL 653481, at *8 (S.D.N.Y. Feb. 23, 2010), appeal pending No. 10-910-cv (2d Cir.). 

The article is reprinted below with permission, and I would like to thank Elaine Song, a member of the New York Law Journal’s editorial staff, for her assistance and work in getting this published in New York’s leading legal trade publication.   Continue Reading »

The Seventh Circuit Issues a Landmark Reinsurance Arbitration Opinion in Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.): Part III.A

March 9th, 2011 Arbitration Practice and Procedure, Awards, Ethics, Evident Partiality, Practice and Procedure, Reinsurance Arbitration, United States Court of Appeals for the Second Circuit, United States Court of Appeals for the Seventh Circuit, United States District Court for the Southern District of New York Comments Off on The Seventh Circuit Issues a Landmark Reinsurance Arbitration Opinion in Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.): Part III.A

Should the Second Circuit Reverse the District Court’s Judgment in Scandinavian Reinsurance Co. v. Saint Paul Fire & Marine Ins. Co.?

I.       Introduction

Parts I and II of this three-part post discussed Chief Judge Frank H. Easterbrook’s decision in Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.), No. 09-3682, 2011 WL 285156 (7th Cir. Jan. 31, 2011), and said that Trustmark, in conjunction with  Sphere Drake Ins. Co. v. All American Life Ins. Co., 307 F.3d 617, 622 (7th Cir. 2002) (Easterbrook, J.),  demonstrates that the district court should not have vacated on evident partiality grounds the arbitration award in Scandinavian Reinsurance Co. v. Saint Paul Fire & Marine Ins. Co, No. 09 Civ. 9531(SAS), 2010 WL 653481 (S.D.N.Y. Feb. 23, 2010).     This Part III.A explains some of the reasons why that is so.  Continue Reading »

The Seventh Circuit Issues a Landmark Reinsurance Arbitration Opinion in Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.): Part II

February 24th, 2011 Arbitrability, Arbitration Agreements, Arbitration Practice and Procedure, Authority of Arbitrators, Evident Partiality, Practice and Procedure, United States Court of Appeals for the Fifth Circuit, United States Court of Appeals for the Second Circuit, United States Court of Appeals for the Seventh Circuit Comments Off on The Seventh Circuit Issues a Landmark Reinsurance Arbitration Opinion in Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.): Part II

I.  Introduction

Part I (here) briefly discussed Chief Judge Frank H. Easterbrook’s decision in Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.), No. 09-3682, slip op. (7th Cir. Jan. 31, 2011), and its implications on the pending Second and Fifth Circuit appeals in  Scandinavian Reinsurance Co. v. Saint Paul Fire & Marine Ins. Co, No. 09 Civ. 9531(SAS), 2010 WL 653481 (S.D.N.Y. Feb. 23, 2010), and Dealer Computer Svcs., Inc. v. Michael Motor Co., No. H-10-2132, slip op. (S.D. Tex. December 29, 2010).  This Part II examines in some detail Trustmark’s background and rationale, and Part III will focus on Trustmark’s implications on the Scandinavian Re and Dealer Computer appeals.

II.  Trustmark Background

The following facts were gleaned from both the district court and Seventh Circuit opinions (the district court opinion is reported at 680 F. Supp. 2d 944 and can be found here): Continue Reading »

The Seventh Circuit Issues a Landmark Reinsurance Arbitration Opinion in Trustmark Ins. Co. v. John Hancock Life Ins. Co. (U.S.A.)

February 23rd, 2011 Arbitration Practice and Procedure, Authority of Arbitrators, Evident Partiality, Grounds for Vacatur, Practice and Procedure, United States Court of Appeals for the Fifth Circuit, United States Court of Appeals for the Second Circuit, United States Court of Appeals for the Seventh Circuit 1 Comment »

Chief Judge Frank H. Easterbrook of the United States Court of Appeals for the Seventh Circuit is not only a brilliant judge, writer and law professor, but a master of (among many other things) arbitration law.  He understands better than most judges how commercial arbitration is supposed to work, what the Federal Arbitration Act is supposed to achieve, and how to implement the Act to ensure the parties get not only what they bargained for, but also the potential to realize the benefits that private, voluntary dispute resolution can offer.  His arbitration-law opinions are clearly written, imbued with common and commercial sense, and seem purposely designed to make sometimes elusive concepts readily understandable to courts, arbitrators, parties and counsel.  They tend to ensure that the objective, reasonable expectations of the parties are enforced, not frustrated.  Continue Reading »

Arbitration Nuts & Bolts: Vacating Arbitration Awards – Part III.B: Evident Partiality (Enforcing the Parties’ Expectations of Neutrality)

January 12th, 2010 Awards, Evident Partiality, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure 3 Comments »

Introduction

Part III.A of the evident partiality segment of this series discussed the parties’ reasonable expectations of neutrality.  Today we consider how those expectations are enforced. 

“Evident partiality” challenges typically arise out of one of two scenarios.  First, there are “presumed bias” cases in which the arbitrator’s relationship to the parties or the controversy would lead a reasonable person to conclude that the arbitrator was biased, even though the challenger cannot prove actual bias.    Second, there are evident partiality challenges based on allegations of actual bias.  For example, suppose a neutral said on the record during the proceedings prior to deliberations:  “Party A, frankly I have distrusted your company’s business motives for many years, but hearing your witnesses’ testimony has simply confirmed what I’ve suspected all along.”  While the chances of an arbitrator making such a statement (let alone on the record) are exceedingly slim to non-existent, it would provide the basis for an evident partiality challenge (which would probably succeed) based on proof of actual bias. 

The difference between “presumed” and “actual” bias is simply one of proof.  One is based on circumstantial evidence and the other on direct evidence.  Our focus will be on “presumed bias” cases, because they arise with greater frequency.  Actual bias is very difficult to prove, and if it or something approaching it can be established, then that proof would in any (or most any) event meet the standards necessary to establish evident partiality.    Continue Reading »

Arbitration Nuts & Bolts: Vacating Arbitration Awards – Part III.A: Evident Partiality (Expectations of the Parties)

January 4th, 2010 Awards, Evident Partiality, Grounds for Vacatur, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure 6 Comments »

Introduction

In this Part III of our Nuts & Bolts feature on vacating arbitration awards (Parts I and II  here and here) we consider the second statutory ground for vacating an award under the Federal Arbitration Act:  “where there was evident partiality…in the arbitrators…” 9 U.S.C. 10(a)(2).  What constitutes “evident partiality” or arbitral bias has been the subject of numerous judicial decisions setting forth various standards and applying them to a wide range of fact patterns.  The decisions are not easy to reconcile (some may, indeed, be irreconciliable) and generally the standards are of limited utility in practice.  Matters are complicated by judicially-created rules concerning disclosure of potential conflicts of interest and the consequences that may or may not flow from a breach of those rules.  To say “evident partiality” is an elusive subject understates the case.        Continue Reading »