By Louis M. Solomon
Ins. Ltd. v. Century Indemnity Co., 10 Civ. 7866 (S.D.N.Y. July 2011)(NRB) [enhanced version available to lexis.com subscribers], addresses cross-petitions to
vacate and confirm an arbitral award. The case addresses several typical
issues arising in such proceedings but also others of note to topics we have
posted about recently and that are important to international litigation and
The proceeding arises out of the
reinsurance arbitrations related to the "unanticipated flood" of asbestos
bodily injury cases filed in the 1990s-early 2000s. The reinsurance
treaty at issue contained standard language for such contracts that "liability
of the Reinsurers shall follow that of the [insurance] Company in every
case". The arbitration clause, also typical, not only provided for
arbitration but directed that the arbitrators "shall interpret this Agreement
as an honorable agreement and shall make their award with a view to affecting
the general purpose of this Agreement in a reasonable manner, rather than in
accordance with a literal interpretation of the language". But the
Agreement also mandated that the "arbitration law of New York State shall
govern such arbitration".
Among the noteworthy discussions in
the decision affecting international practice are:
First, the Court upheld the panel's
importation of a clause into one of the contracts even though it was absent
from the language.
Second, the Court discussed but did
not decide the issue whether New York's Civil Practice Law and Rules or the
Federal Arbitration Act's time period applied for when a petition needed to be
filed to challenge the award. Under the CPLR an application to vacate
needs to be filed within 90 days after issuance (or perhaps delivery, if
different) of the award. The Court did not identify a time period by
which an award need be challenged under the FAA. Ultimately the Court
found no grounds to vacate and so didn't decide the issue.
Third, in reiterating the narrow
grounds for challenging an arbitral award under either New York or FAA law, the
Court stated that "neither party suggests that the application of the CPLR would
materially alter our substantive standard of review". The Court found
that the New York Convention's standard applied since the award "arises out of
a commercial relationship not entirely between citizens of the United States".
Fourth, the Court confirmed that
"[i]t is indisputable that arbitrators have no authority to rule on an issue
not submitted to them". For this the Court cited First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) ("arbitration is 'a way to resolve
those disputes - and only those disputes - that the parties have agreed to
submit to arbitration'").
when the Court denied the petition to vacate, the Court simultaneously
confirmed the award. That, the Court said, is the law both under the CPLR
and the FAA. N.Y.: C.P.L.R. § 7511(e)16 ("[U]pon the denial
of a motion to vacate or modify, [a court] shall confirm the
award."). FAA: Hall St. Assocs., L.L.C. v. Mattel, Inc., 552
U.S. 576 (2008) [enhanced version / unenhanced version available from lexisONE Free Case Law] ("On application for an order
confirming the arbitration award, the court 'must grant' the order 'unless the
award is vacated, modified, or corrected as prescribed [by the FAA]...There is
nothing malleable about 'must grant,' which unequivocally tells courts to grant
confirmation in all cases, except when one of the 'prescribed' exceptions
applies.") (quoting 9 U.S.C. § 9).
Sixth, in one of the
most timely parts of the decision, which addresses the issue of whether confidential
arbitrations remain confidential once they become judicial proceedings to
confirm or vacate or enforce (on which we have posted here and here), the Court stated:
that petitioners believed that they would be able to bring this case under seal
and entirely outside of the public's eye. While we ultimately allowed the
parties to redact their publicly-filed submissions, we rejected their attempt
to use the court system in a private manner. In recent years, judges in
this Court have become more sensitive to these issues. See, e.g., Standard
Chartered Bank Int'l (Americas) v. Calvo, 757 F. Supp. 2d 258 (S.D.N.Y. 2010) [enhanced version ] (opinion by Part I Judge rejecting
attempt to file action to enjoin arbitration under seal); Century Indem. Co. v.
Certain Underwriters at Lloyd's, et al., No. 11 Civ. 1034 (NRB) (Part I Judge rejecting attempt to
file petition to confirm arbitration award under seal). It is worth noting,
however, that petitioners opted to continue with this case even after we made
it clear that the record would not remain sealed.
The Court didn't address the
question of how much choice the parties has to "to continue with this
case . . .," when the alternative is either not to move to vacate or not
to move to confirm the arbitral award.
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