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Archive for the ‘Federal Rules of Civil Procedure’ Category

Can a Party Obtain Post-Judgment Relief from a Confirmed Arbitration Award Procured by Fraud?

May 26th, 2015 Arbitration Practice and Procedure, Arbitration Risks, Asbestos-Related Claims, Bad Faith, Confirmation of Awards, Corruption or Undue Means, Definition of Occurrence, Federal Courts, Federal Rules of Civil Procedure, Final Awards, Grounds for Vacatur, United States Court of Appeals for the Second Circuit, United States District Court for the Southern District of New York Comments Off on Can a Party Obtain Post-Judgment Relief from a Confirmed Arbitration Award Procured by Fraud?

Introduction

Relief from an Arbitration Award Procured by Fraud

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Section 10(a)(1) of the Federal Arbitration Act authorizes Courts to vacate arbitration awards that were “procured by fraud, corruption or undue means.”  9 U.S.C. § 10(a)(1). (For a discussion of Section 10(a)(1), see L. Reins. & Arb. Law Forum post here.) But a motion to vacate an arbitration award procured by fraud (or otherwise) is subject to a strict three-month deadline, and Section 10, unlike certain of its state-law counterparts, does not provide for tolling of the three-month deadline on the ground the challenging party did not know or have reason to know it had grounds to allege the arbitration award was procured by fraud. Compare 9 U.S.C. § 10(a)(1) with 2000 Revised Uniform Arbitration Act § 23(b) (Uniform Law Comm’n 2000) (If “the [movant] alleges that the award was procured by corruption, fraud, or other undue means, [then, in that].  .  .   case the [motion] must be made within 90 days after the ground is known or by the exercise of reasonable care would have been known by the [movant].”);  1955 Uniform Arbitration Act § 12(b) (Uniform Law Comm’n 1955) ( “[I]f predicated upon corruption, fraud or other undue means, [the motion to vacate] shall be made within ninety days after such grounds are known or should have been known.”).

Once an award has been confirmed, it has the same force and effect as any other judgment of the court. See 9 U.S.C. § 13. Federal Rule Civ. P. 60(b) provides that “[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or
proceeding for the following reasons:.  .  .  (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party.  .  .  .” Fed. R. Civ. P. 60(c) provides that “[a] motion under Rule 60(b) must be made within a reasonable time—and for reasons (1), (2), and (3) [i.e., fraud, misrepresentation or misconduct] no more than a year after the entry of the judgment or order or the date of the proceeding.” Fed. R. Civ. P. 60(c).

So can a challenging party obtain relief from a confirmation judgment if: (a) an award-challenging party contends the Court entered judgment oin an arbitration award procured by fraud; (b) by extension, the judgment confirming the award was itself procured by fraud; (c) the award-challenging party did not know or have reason to know it was at the wrong end of an arbitration award procured by fraud until after the three-month statute of limitations for vacating an award had elapsed; and (d) the award-challenging party makes a timely motion for post-judgment relief under Fed. R. Civ. P. 60(b)? According to a district court judge of the U.S. District Court for the Southern District of New York, the answer is “no.”

 

Arrowood Indem. Co. v. Equitas Insurance Ltd., No. 13-cv-7680 (DLC), slip op. (S.D.N.Y. May 14, 2015)

No Post-Judgment Relief from Arbitration Award Procured by Fraud (Alleged or Otherwise)

Background

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Arrowood arose out of an excess-of-loss treaty Arrowood’s predecessor(s) in interest had entered into with Underwriters at Lloyd’s in the 1960s. The terms of the treaty were apparently part of, or incorporated into, a “Global Slip,” which the Court, without much elaboration, described as “a complex contractual  reinsurance program.” The Global Slip was first negotiated in 1966 and effective January 1, 1967 through December 31, 1968. It was apparently renewed a number of times thereafter, though the court does not say for what period or periods. The renewal agreements were “substantially similar” although they “contain[ed] new contractual language.” Slip op. at 2.

The Global Slip covered (apparently among other things) losses in excess of $1 million incurred under Arrowood’s casualty insurance policies under three different types of coverage. At issue was “Common Cause Coverage,” which covered losses arising out of an “occurrences” during the contract term, provided the occurrence or occurrences were the “probable common cause or causes” of more than one claim under the policies. The Global Slip also contained a “First Advised” clause, which said that “this Contract does not cover any claim or claims arising from a common cause, which are not first advised during the period of this Contract.”

yay-1299629-digitalLike so many other liability insurers, Arrowood began receiving, adjusting and settling asbestos bodily injury claims beginning in the 1980s. Underwriters at Lloyd’s London insisted that Arrowood present its asbestos reinsurance claims on a per claimant per exposure-year basis, absorbing one $1 million retention each year against the total asbestos claim liabilities allocated to that year under the Underwriters’ per claimant per exposure-year allocation methodology.

In 2008 Arrowood, after reviewing the contract language, stopped using exclusively the Underwriters-prescribed asbestos personal-injury claim reinsurance allocation methodology, which it had followed for almost 25 years, and began presenting a number of claims under the Common Cause Coverage provision of the Global Slip . Because those claims were not, “first advised” in the years 1967 or 1968, the Underwriters denied them.

The Arbitration and Confirmation Proceedings

One of the parties demanded arbitration in October 2010, and a tripartite panel was appointed. The Underwriters argued, among other things, that: (a) the parties’s 25-year course of dealing evidenced a binding agreement on how asbestos claims would be presented to the Underwriters; (b) some claims fell exclusively under employer’s liability coverage; and (c) Common Cause Coverage  did not apply because the requirements of the First Advised Clause were not satisfied. Continue Reading »

What can a Federal Arbitration Act Practitioner Learn from an ERISA MPPAA Pension Plan Arbitration Case?

May 5th, 2015 Appellate Practice, Arbitration Practice and Procedure, Arbitration Risks, Awards, ERISA, Federal Arbitration Act Enforcement Litigation Procedure, Federal Courts, Federal Rules of Civil Procedure, Judicial Review of Arbitration Awards, Labor Arbitration, Managing Dispute Risks, MPPAA Arbitration, Practice and Procedure, United States Court of Appeals for the Fourth Circuit Comments Off on What can a Federal Arbitration Act Practitioner Learn from an ERISA MPPAA Pension Plan Arbitration Case?

 Fourth Circuit Says Proceeding to Overturn ERISA MPPAA Pension Plan Dispute Arbitration Award is Commenced by Filing a Complaint—not a Federal Arbitration Act Application, Petition or Motion

Introduction

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“Sorry, I’m a bit of a stickler for paperwork. Where would we be if we didn’t follow the correct procedures?”

Sam Lowry (played by Jonathan Pryce ), Brazil (1985)

Dystopian-future bureaucratic procedure may be one thing, but federal court litigation procedure is quite another—not because of where we might or might not be if we don’t follow it—but simply because not following it can have disastrous consequences. That is true in spades in Federal Arbitration Act enforcement litigation, where proceedings to enforce arbitration agreements and awards are governed by a strange amalgam of procedural rules derived from the Federal Arbitration Act, the Federal Rules of Civil Procedure and district court local rules. See Fed. R. Civ. P. 1, 2, 3, 6(c), 7, 8, 9, 10, 12, 15, 43(c) & 81(a)(6)(B); 9 U.S.C. §§ 6, 9, 10, 11, 12 & 13; see, e.g., IFC Interconsult v. Safeguard Int’l Partners, 438 F.3d 298, 308-09 (3rd Cir. 2006); Productos Mercantiles Industriales, S.A.  v. Faberge USA, Inc., 23 F.3d 41, 46 (2d Cir. 1994).

On April 21, 2015 the U.S. Court of Appeals for the Fourth Circuit decided Freight Drivers and Helpers Local Union No. 557 Pension Fund v. Penske Logistics LLC,  ___ F.3d ___, No. 14-1464, slip op. (4th Cir. April 21, 2015), a case that helps illustrate the risks associated with assuming that the Federal Rules of Civil Procedure’s liberal pleading and amendment rules apply to applications for relief under the Federal Arbitration Act. As it turns out, the appellant did nothing wrong by assuming that the Federal Arbitration Act’s procedural rules did not trump Federal Rules of Civil Procedure, because the case fell under the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”), and the district court erred by interpreting the MPPAA to require compliance with Federal Arbitration Act litigation procedure rules.

The MPPAA was enacted to strengthen the Employee Retirement Income Security Act (“ERISA”)’s provisions designed to protect multi-employer pension plans (i.e., collectively bargained pension plans funded by multiple employers, which are generally participants in the same industry).  It features a mandatory arbitration requirement applicable to disputes about collectively bargained pension plans funded by multiple employers, including disputes about an employer’s withdrawal liability—that is the amount an employer must contribute to  the fund when it stops participating in it.

It requires a party seeking judicial review of an award to do so in 30-days and, as we’ll see, it contains a provision that at first glance appears to make the Federal Arbitration Act’s litigation procedure rules applicable to judicial review of an MPPAA arbitration award. The Court held that under the MPPAA, the Federal Arbitration Act governed only arbitration procedure, not litigation procedure, and that accordingly, the award challenger’s amended complaint related back to the timely-filed original one.

yay-608942-digitalEndingFreight Drivers illustrates how important compliance with Federal Arbitration Act procedures can be, especially given the short limitation periods applicable to motions to confirm, vacate, modify and correct awards.  Had the Federal Arbitration Act’s litigation procedures applied, then the plaintiff’s “amended complaint” might have been deemed time-barred on the ground that Fed. R. Civ. P. 15(c)’s relation-back provisions apply to pleadings only, and under the Federal Rules of Civil Procedure, and the Federal Arbitration Act, the amended complaint had to be deemed to be a motion, not a pleading. As we’ll see, that’s what the district court concluded, and the Fourth Circuit decided the case on the sole ground that the Federal Arbitration Act did not apply to MPPAA litigation procedure. Continue Reading »