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Manifest Disregard of the Law | Manifest Disregard of the Agreement | Second Circuit Remands Award to Arbitrator for Do-Over

October 25th, 2019 Authority of Arbitrators, Award Vacated, Awards, Challenging Arbitration Awards, Contract Interpretation, Enforcing Arbitration Agreements, Exceeding Powers, FAA Chapter 1, Federal Arbitration Act Enforcement Litigation Procedure, Federal Arbitration Act Section 10, Grounds for Vacatur, Manifest Disregard of the Agreement, Manifest Disregard of the Law, Uncategorized, United States Court of Appeals for the Second Circuit, Vacate Award | 10(a)(4), Vacate Award | Manifest Disregard of the Law, Vacatur No Comments »
Second Chance to Make Award not in Manifest Disregard of Law or Agreement

Arbitrators are human and occasionally they make awards that cannot be squared with logic and law, and courts may, in appropriate circumstances, vacate those awards as being in manifest the agreement, or in some circuits, in manifest disregard of the law. The U.S. Court of Appeals for the Second Circuit considered such an award in Weiss v. Sallie Mae, Inc., ___ F.3d ___, No. 18-2362, slip op. (Sept. 12, 2019), and solved the problem in a way that imposed minimal costs and delay on the parties and, at the same time, gave effect to the parties’ reasonable contractual expectations, including that the arbitrator would make an award with a colorable basis in the law or the parties’ agreement, not one in manifest disregard of the law or the agreement. It is therefore a good example of a case that promotes arbitration as an alternative to litigation.

Background

W is a student-loan borrower who in 2011 defaulted on a loan issued by S (N is the successor of S, but we shall refer to both as “S”). W gave S her phone number (“Phone Number 1”) when she obtained the loan and consented to S contacting her via an automatic telephone dialing system (“ATDS”). S made ATDS calls to her using Phone Number 1 prior to her default on the loan in 2011.

Also prior to her 2011 default W obtained a second telephone number (“Phone Number 2”) but did not give S consent to contact her on that number via an ATDS.

After W’s 2011 default, S contacted W seven or eight times a day at Phone Number 2 via an ATDS, attempting to collect the debt. S made 774 ATDS calls to Phone Number 2 during the period September 16, 2011 through July 1, 2013.

The Arbitration

A dispute arose between W and S about whether S’s ATDS calls had violated the Telephone Consumer Protection Act (“TCPA”) and W commenced an action in the U.S. District Court for the Western District of New York. The action was stayed after the parties stipulated to arbitration pursuant to an arbitration agreement in a student-loan promissory note.

The Award: Was it in Manifest Disregard of the Law or the Agreement?

Final Award 2 - yay-15399450

Following a hearing an arbitrator made an award granting W $108,000 in statutory damages under the TCPA. But the award held that W was a class member in a class action that S had settled. The class-action settlement (the “Arthur Settlement”) “included as a class member, ‘any person who received ATDS calls from [S] between October 27, 2005 and September 14, 2010.’” Slip op. at 5 (citation omitted).

W did not contend that the calls S made to Phone Number 1 violated the TCPA (W had consented to those calls), and W contended that, accordingly, she was not bound by the settlement, even though she had received ATDS on Phone Number 1 during the specified period. The arbitrator, however, found that argument “‘unpersuasive,’” and “ruled that Weiss was a class member and that ‘the proof was conclusive that [S] provided [W] with the required notice of the settlement and of her rights and obligations under the terms of the settlement.’” Slip op. at 5-6 (citation omitted).

The Arthur Settlement “notice offered class members the opportunity to file a ‘consent Revocation’ document by September 15, 2012; absent such a filing, ‘the ATDS calls would not stop and the borrower’s prior consent to give them [sic] would be deemed to have been given.’” Slip op. at 6 (citation omitted; bracketed text in original).  

While W contended that she was not aware of the Arthur Settlement, S testified that notice was successfully emailed to W.

The agreement implementing the Arthur Settlement featured a general release, “under which class members were ‘deemed to have fully released and forever discharged [S]’. . . from any and all claims and causes of action, inter alia, ‘that arise out of or are related in any way to the use of an [ATDS]. . . used by any of the Released Parties in connection with efforts to contact or attempt to contact Settlement Class Members including, but not limited to, claims under or for violations of the [TCPA].’” Slip op. at 6 (citations omitted; some bracketed text in original).

Even though the general release, to which the arbitrator determined W was bound, deemed W to have “waived ‘any and all’ TCPA claims effective the date of final judgment in the Arthur Settlement action[,]” the arbitrator’s award did not acknowledge the existence of that release. Slip op. at 6-7. “Instead,” said the Court, “the arbitrator interpreted [W]’s failure to submit a consent revocation pursuant to the Arthur class notice as precluding recovery for any calls placed to [Phone Number 2] after the September 15, 2012 deadline but also as permitting recovery for ATDS calls placed to [Phone Number 2] between September 6, 2011, and September 16, 2012.” Slip op. at 7.

The arbitrator awarded TCPA statutory damages in the amount of $108,500 ($500 per call for 217 calls during the applicable period). W moved to confirm the award and S cross-moved to vacate it.

The district court vacated the award, finding that “by neglecting to ‘apply—or even address—an explicit, unambiguous term of the settlement agreement,’ which “clearly and unambiguously bars recovery for claims until and including the date of the agreement,’ the arbitrator manifestly disregarded the law.” Slip op. at 7. W appealed.

The Second Circuit Decision: Remand to Arbitrator to Permit Him to Make an Award not in Manifest Disregard of the Law or the Agreement

Court Decisions | Manifest Disregard of the Law | Manifest Disregard of the Agreement

The Second Circuit agreed with much of the district court’s reasoning but disagreed on the remedy. Instead of vacating the award outright on the manifest disregard of the law or manifest disregard of the agreement grounds, the Second Circuit vacated the district court’s judgment and remanded the case to the district court with instructions to the district court to remand the matter to the arbitrator with instructions to clarify whether the class notice was or was not sufficient and, if determined to be sufficient, then to construe the general release provision in the first instance and to vacate or modify the arbitral award if necessary.” Slip op. at 14 (citation omitted). “The arbitrator,” said the Court, “shall be instructed either to interpret and apply the terms of the Arthur Settlement agreement’s general release provision or to explain why that provision does not bar [W’s] claims.” Slip op. at 15.

The Second Circuit also provided for streamlined district court, and if necessary, appellate, review of the arbitrator’s decision after remand, providing that “the district court shall thereafter rule on any subsequent objections to the arbitrator’s decision, which objections may be advanced by appropriate motion of either party.” Slip op. at 15. “Any appeal from the district court’s decision. . . ,” explained the Court, “may be advanced by letter notice to the Clerk of this Court without necessity of filing a new notice of appeal, and that appeal shall be assigned to this panel.”

The Second Circuit’s Rationale for its Decision: Arbitrator’s Failure to even Mention General Release Made it Impossible to Determine whether Award Colorably based in Contract or in Manifest Disregard of the Law/Manifest Disregard of the Agreement

The Court explained that “the arbitrator construed the Arthur class notice as establishing [W]’s consent to receive future ATDS calls, but he determined that such consent could not be applied retroactively to bar her recovery for calls placed prior to the revocation deadline.” Slip op. at 10. W made two arguments in an effort to justify the arbitrator’s decision: (a) the arbitrator interpreted the Arthur Settlement class notice and an arbitrator’s “misinterpretation of what amounts to a contractual provision does not provide sufficient grounds for vacatur under the FAA[]”; and (b) the class notice was not binding on her because it failed to “satisfy due process[,]” an argument that was essentially a “collateral attack on the sufficiency of” the notice. Slip op. at 11.

While the legal premise of W’s first argument was correct—”interpretation of the contract terms is within the province of the arbitrator and will not be overruled simply because [the Court] disagree[s] with that interpretation[,]” slip op. at 11 (citations and quotations omitted)—as the district court concluded, “‘this [was] not a case where the arbitrator’s interpretation of the contract was simply incorrect’ as ‘the arbitrator’s decision here ignored and contradicted an unambiguous term of the agreement[,]” that is, “the general release embodied in the Arthur Settlement.” Slip op. at 11.

For “even if the arbitrator believed that the class notice entitled [W] to recover for ATDS calls made prior to the consent revocation deadline, it is impossible to square that conclusion with the general release provision[,]” which “bar[s] [W]’s recovery for ‘any and all’ TCPA claims.” Slip op. at 11-12. The Court said that is “especially true given that the parties agreed in their arbitration agreement that ‘[t]he arbitrator shall follow applicable substantive law to the extent consistent with the FAA.” Slip op. at 12.

“Because,” concluded the Court, “the arbitrator did not even mention the release in his decision, we are unable to ascertain from the record whether the arbitrator in fact based his decision on the four corners of the Arthur Settlement agreement and its accompanying class notice, as [W] appears to contend, or whether he instead discarded the agreement in favor of his own policy preferences.’” Slip op. at 12. (quoting Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 671-72 (2010).

As respects W’s argument (b), concerning class notice sufficiency, the “arbitrator expressly found that despite some of the ‘confusing’ terms of the Arthur Settlement agreement, ‘the proof was conclusive’ that [W] received ‘the required notice of the settlement and of her rights and obligations under the terms of the settlement.’” Slip op. at 12 (citation omitted). But the arbitrator “appeared to base his award on the fact that the class notice only apprised [W] of her consent to receive a subset of ATDS—those placed prospectively.”

“If. . . the arbitrator,” said the Court, “were of the view that the class notice did not satisfy due process, as [W] contends, then the arbitrator, in following applicable substantive law, would seemingly be obliged to hold that [W] could not be bound by any of the Arthur Settlement terms.” Slip op. at 12-13 (citation omitted).

The notice issue “is an all-or-nothing inquiry[,]” but “[i]nstead the arbitrator’s finding that the class notice ‘does not state that the recipient (i.e., [W]) will be deemed to have given prior consent to the making of calls by [S]’ appears to rest on a parsing of the applicable law grounded neither in a constitutional due process analysis nor in a faithful exercise in contract interpretation.” Slip op. at 13 (citation omitted). That would mean the award was both in manifest disregard of the law and in manifest disregard of the agreement.

The Court said its “concern [was] reinforced by” where in the arbitrator’s opinion the discussions of notice of settlement versus express and implied consent to ATDS calls appeared. Slip op. at 13. The discussion of settlement notice was “addressed up front as the first of the ‘issues considered’ by the arbitrator.” Slip op. at 13. The issues of express and implied consent to calls were discussed in subsequent “separate sections of the arbitrator’s opinion that address the merits of [S]’s defense to [W]’s TCPA claims.” Slip op. at 13.

But “[o]nce the arbitrator made the determination that ‘Weiss was adequately advised of the terms of the settlement and of the requirement that she revoke any consent given to [S] to place ATDS calls to [Phone Number 2],’ that conclusion would seem to obviate not only the arbitrator’s subsequent analysis concerning whether [S] had met its burden of proving Weiss’s consent but also any further determination as to the effect of the class notice.” Slip op. at 13-14. Put differently, “if the arbitrator intended to deem the class notice insufficient, he did not say so in his threshold analysis regarding the settlement’s applicability and strongly implied the opposite.” Slip op. at 14.  

Because of the award’s “incoherence,” and because the Court could not determine adequately whether the arbitrator based his decision on the class notice and Arthur Settlement agreement terms, the Court vacated the district court’s decision and remanded the case to the district court with directions to remand to the arbitrator “to construe the general release in the Arthur Settlement in the first instance and, if necessary, to vacate or modify the arbitral award.” Slip op. at 15.

Want to learn more about manifest disregard of the agreement and manifest disregard of the law? Read here, here, here, here, here, here, here, and here.

Photo Acknowledgments

The photos featured in this post are licensed from Yay Images and are subject to copyright protection under applicable law.  

Confluence of the Arcane: Headings Clauses, Arbitration Law and Reinsurance

November 28th, 2016 Arbitrability, Arbitration Agreements, Arbitrator Selection and Qualification Provisions, Contract Interpretation, Reinsurance Contracts, Uncategorized, United States Court of Appeals for the Second Circuit Comments Off on Confluence of the Arcane: Headings Clauses, Arbitration Law and Reinsurance

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Introduction

A Headings Clause typically provides that contract provision headings and captions are for reference purposes only, and do not negate, modify or otherwise affect the provisions to which they relate. While arguments can be made for or against Headings Clauses, they are fairly common in commercial contracts.

Contract dispute outcomes rarely turn on the interpretation or application of these clauses. But on November 16, 2016, the U.S. Court of Appeals for the Second Circuit decided Infrassure, Ltd. v. First Mutual Trasp. Assur. Co., No. 16-306, slip op. (2d Cir. 2016) (summary order), which not only turned on the meaning and application of a headings clause, but did so in the context of an arbitration-law dispute in a reinsurance case. A confluence of the arcane, indeed!

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Infrassure: Background

Infrassure was a dispute between the parties to a facultative reinsurance contract. The facultative reinsurance contract (the “Certificate”) contained two different arbitration clauses. One was in the body of the pre-printed contract (the “Form Arbitration Clause”). The other was in Endorsement No. 2 (the “Endorsement No. 2 Arbitration Clause”). Endorsement No. 2 was titled “LONDON ARBITRATION AND GOVERNING LAW (UK AND BERMUDA INSURERS ONLY).”

The Form Arbitration Clause provided for arbitration of “any dispute arising out of the interpretation, performance or breach of this Certificate.” It designated a specific set of arbitration rules to govern the arbitration, and provided that “[a]ll arbitrators will be disinterested active or former officers of insurance or reinsurance companies.”

The Endorsement No. 2 Arbitration Clause provided for arbitration of “[a]ny dispute, controversy or claim arising out of or relating to this agreement or the breach, termination or invalidity thereof,” and prescribed different arbitration rules. It did not require arbitrators to be active or former officers of insurance or reinsurance companies.

Which Arbitration Clause Applies?

The parties disputed which arbitration clause applied. Reinsurer Infrassure, Ltd. (“Infrassure” or the “Reinsurer”), argued for the Form Arbitration Clause, with its more stringent arbitrator qualification requirements. Cedent First Mutual Transportation Assurance Company (“First Mutual” or the  “Cedent”), a New York State captive insurer of the Metropolitan Transportation Authority, apparently wanted to appoint (or nominate) arbitrators or arbitrator candidates who were not current or former officers or directors of insurance or reinsurance companies. It therefore argued that the Endorsement 2 Arbitration Clause applied.

Infrassure, which is a Swiss company, argued that the Endorsement No. 2 Arbitration Clause did not apply because the title of the endorsement contained the parenthetical limitation “(UK and Bermuda Insurers only)” (the “Parenthetical Limitation”). It asserted in the alternative that the Endorsement No. 2 Arbitration Clause should be construed to impose the same arbitrator qualification criteria as the Form Arbitration Clause imposed.

The Headings Clause

Headings ClauseFirst Mutual argued that the Certificate’s headings clause (the “Headings Clause,” which the Court refers to as the “Titles Clause”) rendered inapplicable the Parenthetical Limitation. The Headings Clause stated: “The several titles of the various paragraphs of this Certificate (and endorsements … attached hereto) are inserted solely for convenience of reference and will not be deemed in any way to limit or affect the provisions to which they relate.”

“This argument [was] thin,” observed the Court, but a reported opinion was in order, because the dispute “requires us to construe wording that apparently has not been construed before, and that is in a contract that may share features with other standard forms and endorsements.” Slip op. at 4.

Court Holds that Headings Clause did Not Strip the U.K.-and-Bermuda-Insurer-only Limitation on the Scope of Endorsement No. 2

The Court, in an opinion by Circuit Judge Dennis Jacobs (an esteemed member of the reinsurance bar before he was appointed to the Second Circuit), held that the Headings Clause was “unambiguous,” but did not negate the Parenthetical Limitation, even though that limitation appeared in the heading or title of Endorsement No. 2.

The Parenthetical Limitation, said the Court, “is not part of the title itself, though it shares the same line and bolded format.” The Heading Clause’s “purpose.  .  .  is not to strip away an express indication as to the context in which a particular provision operative, but to ensure that the text of a provision is not discounted or altered by the words of its  heading.” Slip op. at 4.

Court finds Further Support for its Conclusion by Applying First Mutual’s Heading Clause Interpretation to other Contract Provisions

The Court found confirmation of the accuracy of its conclusion “by consulting other [Certificate] provisions,” including “critical” ones, which would “would have no meaning at all if the Titles Clause were mechanically applied.” Id.

To illustrate, the Court referred to paragraph 14 of the Certificate, which, states:

Program Policy Limits

Various as per the attached schedule.

Id. (emphasis in original)

The Court observed that applying the Ceding Company’s interpretation of the Headings Clause to Paragraph 14 would reduce that paragraph to “the cryptic provision, ‘Various as per the attached schedule.’” Id. The “heading ‘Program Policy Limits,’ instructs the reader that the phrase ‘Various as per the attached schedule refers to program policy limits, as opposed to some other concern of the reinsurance agreement.” Id. That heading, said the Court, does not purport to contradict, alter or otherwise ambiguate the text that follows, but explains what the otherwise contextually ambiguous (indeed, meaningless) text was intended to mean in the context of the whole contract.

According to the Court, “other provisions beside Paragraph 14 likewise would be rendered meaningless if the [Headings Clause] were applied in the way pressed by First Mutual.” Slip op. at 4.

Given the Court’s holding, it was unnecessary to consider Infrassure’s alternative argument that the arbitrator selection provisions of the Form Arbitration Agreement should be made part of the Endorsement No. 2 Arbitration Agreement. All the Court had to say about this argument was “we need not reach [it], which  is just as well for well for Infrassure.” Slip op. at 5.

 

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. The Yay Images abbreviations of the photographer’s name for each of the three images, in order of their appearance, are:

Image 1: VIPDesignUSA

Image 2: steheap

Image 3: speedfighter

 

 

 

No Good Deed Should Go Unpunished: Functus Officio and Merion Constr. Mgt., LLC v. Kemron Environmental Serv., Inc.—Part I

May 3rd, 2014 American Arbitration Association, Appellate Practice, Arbitrability, Arbitration Agreements, Arbitration and Mediation FAQs, Arbitration Practice and Procedure, Arbitration Provider Rules, Authority of Arbitrators, Awards, Construction Industry Arbitration, Final Awards, Functus Officio, Grounds for Vacatur, Judicial Review of Arbitration Awards, New Jersey State Courts, Practice and Procedure, State Arbitration Statutes, State Courts, Uncategorized Comments Off on No Good Deed Should Go Unpunished: Functus Officio and Merion Constr. Mgt., LLC v. Kemron Environmental Serv., Inc.—Part I

Courts usually err in favor of not vacating awards in close cases. As a result, Courts usually vacate awards only where there is a very clear, fundamental disconnect between the award and the parties’ arbitration agreement. Vacating an award in those circumstances enforces the parties’ agreement to arbitrate, which is exactly what the Federal Arbitration Act (“FAA”) and state arbitration codes are supposed to do. (See, e.g., L. Reins. & Arb. L. Forum post here.)

Today’s case, Merion Constr. Mgt., LLC v. Kemron Environmental Serv., Inc., No. A-2428-12T4, slip op. (N.J. App. Div. March 13, 2014), involved two disputed awards: the original arbitration award (the “Original Award”) and a subsequent, modified award (the “Modified Award”). The arbitrator (the “Arbitrator”) issued the Modified Award to correct a mistake in the Original Award, which had inadvertently omitted items of claimed damage that one of the parties had requested the Arbitrator to award. The Arbitrator said he intended to include those damage items in the Original Award. The Modified Award thus accurately reflected the parties’ agreement and submission and the Original Award did not.

Which Award should have been confirmed? Relying on the functus officio doctrine, and an American Arbitration Association (“AAA”) Rule concerning arbitral modification and correction of awards, the intermediate state appellate court reversed a trial court judgment confirming the Modified Award, and held that the Original Award should have been confirmed.

A few years back the Chief Justice of the United States Supreme Court prefaced one his opinions with the following truism: “People make mistakes. Even administrators of ERISA plans.” Conkright v. Frommert, 559 U.S. 506, 509 (2010) (Roberts, C.J.). Had Merion Construction been decided correctly, then the New Jersey appellate court might have prefaced its opinion with a similar truism: “People make mistakes. Even arbitrators.” But based on how the case was decided a more fitting preface would have been: “No good deed should go unpunished. Even those perpetrated by arbitrators.” Continue Reading »

International Institute for Conflict Prevention and Resolution Publishes Philip J. Loree Jr.’s October 2010 Article on Granite Rock Co. v. International Brotherhood of Teamsters

October 7th, 2010 Uncategorized Comments Off on International Institute for Conflict Prevention and Resolution Publishes Philip J. Loree Jr.’s October 2010 Article on Granite Rock Co. v. International Brotherhood of Teamsters

The October 2010 issue of Alternatives to the High Cost of Litigation, the excellent newsletter of the International Institute for Conflict Prevention and Resolution (”CPR”), featured an article I wrote on the United States Supreme Court’s decision in Granite Rock Co. v. International Brotherhood of Teamsters, No. 08–1214 (June 24, 2010).  The article is entitled “Despite Granite Rock’s Procedural Dodge, Court Issues A Straightforward Decision on Bargaining Agreements,” 28 Alternatives 175 (October 2010).   

The article discusses Granite Rock in detail, and argues, among other things, that:

the Court deliberately dodged consideration of an important factor in the case — a signed contract that potentially could have answered the question — by reflexively applying a procedural rule that forced the court to put the fact aside, instead of remanding for proper consideration.

.  .  .  . 

The tradeoff the Court made when it elevated institutional concerns over deciding a case based on its undisputed facts was not a fair one.  While the Court pointed out that consideration of the belatedly raised argument would have resulted in the Court ruling for the first time on an issue not considered by the Ninth Circuit, and perhaps not one fully briefed, that justification presupposes that consideration of the retroactive CBA would have required intensive analysis of a controversial issue.

But there was no real controversy here.  The plain terms of a fully executed contract clearly and unambiguously contravened the key assumption on which the majority opinion rested:  that there was a formation-date dispute. 

28 Alternatives at 175 & 178.  

The article is the second of a two-part series.  The first part discussed and critically analyzed the Supreme Court’s decision in Rent-A-Center, West Inc. v. Jackson, No. 09-497 (June 21, 2010).  That part was entitled “Rent-A-Center‘s Roadmap Extends Beyond Contracts.  .  .  To Congress and the Supreme Court’s New Term,” 28 Alternatives 154 (September 2010) (blogged here). 

Alternatives also recently published two other articles I wrote earlier this year, both of which were featured as cover stories:  “Stolt-Nielsen Delivers a New FAA Rule — And then Federalizes the Law of Contracts,” 28 Alternatives 121 (June 2010), and “It’s Time for Doctrines:  The Supreme Court Wrestles with ‘Severablility’ and the ‘Clear and Unmistakable Standard,” 28 Alternatives 73 (March 2010) (blogged here and here).

Alternatives is a subscription-only publication. Subscription information is available at this page, as well as at the publisher’s, John Wiley & Sons’s, website here.

I would like once again to take this opportunity to thank CPR, and Russ Bleemer, Editor of Alternatives, for their kind assistance and support in featuring my articles.   CPR is one of the most prestigious ADR organizations in the United States, and, as I have said before, Russ is a very intelligent, dedicated and professional editor with whom it is a pleasure to work.

A Very Brief Look at the Arbitration-Related Provisions of the Dodd-Frank Act

July 30th, 2010 Uncategorized Comments Off on A Very Brief Look at the Arbitration-Related Provisions of the Dodd-Frank Act

On July 21, 2010 President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) (here).  Title X of the Dodd-Frank Act created the Bureau of Consumer Financial Protection (the “Bureau”), which has jurisdiction over consumer contracts for the sale of financial products and services. 

Section 1028 of the Dodd-Frank Act directs the Bureau to study mandatory, pre-dispute arbitration in contracts under its jurisdiction and report back to Congress.  The agency will then be authorized to either ban or regulate pre-dispute arbitration clauses in contracts under its jurisdiction, provided that the “Bureau finds that such prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers.”  The Bureau’s findings must “be consistent” with its study. 

Section 921 of the Dodd-Frank Act likewise authorizes the Securities and Exchange Commission (“SEC”) to “prohibit, or impose conditions or limitations on the use of, agreements that require customers or clients of any broker, dealer, or municipal securities dealer to arbitrate any future dispute between them arising under the Federal securities laws, the rules and regulations hereunder, or the rules of a self-regulatory organization if it finds that such prohibition, imposition of conditions, or limitations are in the public interest and for the protection of investors.’’ Section 921 also authorizes the SEC to ban or regulate pre-dispute arbitration in contracts between “customers or clients of any investment adviser.” 

In addition, Section 1414 of the Dodd-Frank bans pre-dispute arbitration in residential mortgages and home-equity loans, and Section 922 renders unenforceable pre-dispute agreements to arbitrate whistleblower claims.

How Will Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp. Change Reinsurance Arbitration Practice?

June 4th, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Consolidation of Arbitration Proceedings, Reinsurance Arbitration, Uncategorized, United States Supreme Court Comments Off on How Will Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp. Change Reinsurance Arbitration Practice?

Part III

A.   Introduction

In Part I (here) we explained why the standard for challenging an award based on its outcome is important in reinsurance arbitration practice.  And, after briefly reviewing pre-Stolt-Nielsen law on outcome-based standards of review, we explained how Stolt-Nielsen has established for the lower courts a fairly searching standard of review.  Part II (here) explored the legal and practical implications of that standard of review.    

This Part III turns to the other key area that will likely change because of Stolt-Nielsen:  Consolidated reinsurance-arbitration practice. 

As most reinsurance practitioners know, there is a brief history relevant to this subject and that will be the focus of this post.  For to fully understand the implications of Stolt-Nielsen on consolidated reinsurance-arbitration practice, it is necessary to understand how the pre-Stolt-Nielsen practice evolved. 

Parts IV (here) and V (here, here and here) will address how Stolt-Nielsen will likely change consolidated reinsurance-arbitration practice, and what the implications of those changes are to the industry.  Continue Reading »

Richard Faulkner and Philip J. Loree Jr. Quoted in Business Insurance on Rent-A-Center West v. Jackson

May 8th, 2010 Uncategorized Comments Off on Richard Faulkner and Philip J. Loree Jr. Quoted in Business Insurance on Rent-A-Center West v. Jackson

Our friend Richard Faulkner, a partner in the Richardson, Texas law firm of Blume Faulkner, P.L.L.C., I, and others were quoted in a Business Insurance article on the Rent-A-Center West v. Jackson case pending in the United States Supreme Court.  The article is available here

Richard’s quote was “The 9th Circuit’s decision flies in the face of virtually every well-reasoned decision on arbitrability and jurisdiction[.]”  I could not agree with him more. 

For those of you that do not know Richard, he has decades of experience in the arbitration, mediation and ADR fields and is a contributing author to Elkouri & Elkouri, How Arbitration Works (6th Ed.).   His practice includes acting as a neutral arbitrator or mediator, serving on construction dispute boards, and representing clients in domestic and international arbitration-law-related matters.   Recently he represented Dub Herring Ford Lincoln-Mercury, Inc. before the United States Supreme Court as an amicus curiae in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., which was decided on April 27, 2010. 

My more modest sound bite was: “There’s a lot of attention being paid to this case because it’s very frequent that you have challenges to arbitration agreements on unconscionability grounds made by employees and consumers.” 

The Supreme Court is expected to issue its decision in this controversial case by the end of this term in late June.  We believe there is a good chance that at least five members of the Court will vote for a reversal, but that outcome is by no means a foregone conclusion.  Whatever the result, you will certainly hear about it here at the Forum.

Arbitration Nuts & Bolts: Vacating Arbitration Awards — Part II: Corruption, Fraud and Undue Means

December 19th, 2009 Awards, Grounds for Vacatur, Nuts & Bolts, Nuts & Bolts: Arbitration, Practice and Procedure, Uncategorized 5 Comments »

In this Part II of our Nuts & Bolt feature on vacating arbitration awards (Part I is here) we briefly look at the first statutory ground for vacating an award under the Federal Arbitration Act:  where “[t]he award was procured by corruption, fraud, or undue means. . . .”  9 U.S.C. 10(a)(1).  Cases vacating awards on Section 10(a)(1) are rare, probably because the circumstances that would trigger relief are themselves rare.     

Section 10(a)(1) is an excellent expression of how Section 10 is designed to provide relief in situations where putting a court’s  imprimatur on an award would deprive one of the parties of the benefit of its freely-bargained-for arbitration agreement.   It says that corruption, fraud, or undue means in the procurement of an award, whether perpetrated by the arbitrators or a party, spoils the award (assuming the aggrieved party timely moves to vacate).  There is nothing particularly controversial about that; we suspect few would contend that parties who agree to arbitrate impliedly consent to arbitration resulting in an award procured through outright chicanery.    Continue Reading »

Oral Argument Today in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp.

December 9th, 2009 Uncategorized 2 Comments »

Today the United States Supreme Court is hearing argument in the one Federal Arbitration Act case it has agreed to hear this Term:  Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198).  We have written extensively on Stolt-Nielsen, which concerns whether class arbitration may be imposed on parties whose contracts are silent on that point.  (Posts available here,  here, here, here, here, here, here, here and here.) Once the oral argument transcript is available, and we have time to digest it, we shall report back to readers.

Stay tuned….

Global Arbitration Review Publishes Article on Hansen v. Everlast and Quotes Philip J. Loree Jr.

November 3rd, 2009 Arbitrability, Authority of Arbitrators, Awards, Functus Officio, New York Court of Appeals, Nuts & Bolts: Arbitration, Uncategorized, United States Court of Appeals for the Second Circuit Comments Off on Global Arbitration Review Publishes Article on Hansen v. Everlast and Quotes Philip J. Loree Jr.

Readers may recall our recent post on the New York Court of Appeals’ decision in Re Joan Hansen & Co v. Everlast World’s Boxing Headquarters Corp., ___ N.Y.3d ___, slip op. (Oct. 15, 2009), a case which demonstrates how important the parties’ submission is in determining arbitral authority.  The Court held that, after an award, a party cannot reopen an arbitration proceeding to request that the arbitrators decide an issue that had not previously been submitted to the arbitrators.  A copy of our post is here.  

On November 2, 2009 Kyriaki Karadelis of the U.K.-based trade publication Global Arbitration Review (“GAR”)  (website here) wrote what I thought was a concise and insightful article on the case.  And we would have said that even if she had not quoted some of our comments in her article!  But she did, and we’re flattered by that. 

With Global Arbitration Review’s permission, and with the required copyright disclaimer, we have posted the article as a “Slide Share Presentation” in my LinkedIn profile, which you can view by clicking here.  Also posted there (again with GAR’s permission and the required disclaimer) is a Global Arbitration Review Article on the United States Court of Appeals for the Second Circuit’s decision in  ReliaStar Life Ins. Co. v. EMC National Life Co., ___ F.3d ___, ___ (2009) (Raggi, J.) (blogged here and 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.”  We reported on GAR’s article concerning ReliaStar case here, which also quotes some of our comments on that case. 

We ask our readership to remember that GAR is a subscription-only publication and that it has copyrights in these posted materials.  GAR has authorized us to post them online and distribute them for marketing purposes, but that authorization does not extend to others not similarly situated.  Please do the right thing and respect GAR’s copyrights — GAR has to make a living just like the rest of us!