The last instalment of this post discussed how arbitrator selection and arbitrator appointment works in practice. This segment addresses the FAQ “Does Section 5 of the Federal Arbitration Act Authorize a Court to Appoint a Replacement Arbitrator if an Arbitrator on a Three-Person Panel Dies Prior to the Panel Making an Award?”
Does Section 5 of the Federal Arbitration Act Authorize a Court to Appoint a Replacement Arbitrator if an Arbitrator on a Three-Person Panel Dies Prior to the Panel Making an Award?
Under Second Circuit authority courts are not permitted to appoint a replacement arbitrator on a three-person panel if an arbitrator dies prior to the panel making a final award. The arbitration must start anew before a new panel.
If an arbitrator dies prior to the panel making a partial final award, then the original award stands, but the parties are required to constitute a new panel to arbitrate the issues that the partial final award did not resolve.
It is unlikely that Courts in the Seventh and Eighth Circuit will adopt this rule, and whether any others will adopt remains to be seen.
The last instalment of this post discussed Section 5, the circumstances under which Courts can appoint arbitrators under Section 5, what papers are filed on a Section 5 application, and what the application should show.
This segment addresses the FAQ “How does Section 5 Work in Practice?” Next we’ll address the FAQ “Does Section 5 of the Federal Arbitration Act Authorize a Court to Appoint a Replacement Arbitrator if an Arbitrator on a Three-Person Panel Dies Prior to the Panel Making an Award?”
The Arbitrator Selection Process
Once arbitration is demanded, the arbitrator selection process begins.
Arbitration agreements address arbitrator selection in different ways. Sometimes parties simply agree that the process set forth in arbitrator provider rules applies. Sometimes parties specify their own method of selection, and sometimes by their agreement they modify an otherwise agreed provider-rule-governed selection procedure.
The qualifications of the arbitrators, the number of arbitrators to serve, and the procedures (if any) to apply if the parties reach an impasse, are key components of the selection process.
For illustration purposes only let’s consider how, for example, arbitrator selection may work under what we sometimes refer to as the traditional, industry tripartite arbitrator selection model. While that model may vary according to the parties’ agreement, typically it requires the party demanding arbitration to appoint a party appointed arbitrator, and for the other party to appoint its own party appointed arbitrator within X days.
The two appointed arbitrators then select an umpire. Sometimes the parties agree that the appointed arbitrators select three umpire candidates each, strike two from the other’s list, and resolve the tie by coin flip, Dow Jones pick (last digit odd or even), or a like tie-breaking procedure.
If the other party fails to appoint timely its arbitrator, then the party demanding arbitration gets to appoint that arbitrator, and the arbitration may proceed even if the other party refuses to participate.
In administered arbitration, single arbitrators are often appointed by the arbitration provider generating a list of an odd number of arbitrator candidates and allowing the parties to strike an even number of candidates, with the remaining candidate being appointed as an umpire. Sometimes provision is made for the arbitration provider to submit an additional list if one or both parties request it.
These are simply examples of how arbitrator selection may proceed. If you’ve agreed to administered arbitration, be sure to check provider rules, for they typically specify the number of arbitrators to serve, their qualifications, how they are to be selected, in situations where the parties do not otherwise agree.
In our recent post on the Merion Construction case (here), we were pretty critical of New Jersey’s Superior Court, Appellate Division, for reversing a trial court decision confirming a modified arbitration award, finding it should have been vacated and the original award confirmed. Today’s post takes a brief look at a decision by another state’s Appellate Division—New York’s Supreme Court, Appellate Division, First Department—which held that another construction-industry award should be vacated.
In Merion Construction the New Jersey Appellate Division thought the arbitrator had no authority to correct his award to reflect the rulings he intended to make on two issues the parties had submitted to him. Re Colorado Management, LLC v. Lea Power Partners, LLC, ___ A.D.3d ___, ___, 2014 N.Y. Slip Op. 01253 at 1-3 (1st Dep’t Feb. 20, 2014), held that a final arbitration award had to be vacated because the arbitrator had no authority to rule upon an issue that was not presented to him in light of the parties’ submissions and a ruling made in the same proceeding by a predecessor arbitrator.
While Merion Construction got an “F,” Colorado Management gets at least an “A-,” and perhaps even an “A.” Continue Reading »
The United States Court of Appeals for the Second Circuit has held that, “absent special circumstances,” a new panel must be convened when a party-appointed arbitrator dies before the panel renders a final award. See Marine Products Export Corp. v. M.T. Globe Galaxy, 977 F.2d 66, ___ (1992). But in Insurance Co. of North Am. v. Public Serv. Mut. Ins. Co., ___ F.3d. ___, slip op. (2d Cir. June 23, 2010) the Court held that when a vacancy is caused by an arbitrator’s resignation, a new panel need not be convened and the trial court may either appoint an arbitrator pursuant to 9 U.S.C. § 5, or direct one of the parties to do so. Continue Reading »
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