989 F. Supp. 2d 143
D. Mass.2013Background
- Allstate and OneBeacon are parties to reinsurance contracts requiring arbitration before a three-member Board (two party-appointed arbitrators and an umpire) using a contractually agreed Umpire Selection Protocol.
- Protocol requires no ex parte communications with umpire candidates, completion of an ARIAS-based questionnaire, and that the umpire be a disinterested current or former insurance/reinsurance officer.
- OneBeacon’s supplemental arbitration demand included an addendum disclosing that OneBeacon had proposed Charles Ehrlich as umpire; Ehrlich was notified of his appointment on July 15, 2013.
- Allstate learned Ehrlich had been the nominating party, objected and asked Ehrlich to withdraw; Ehrlich declined and the arbitration panel proceeded to organize.
- Allstate sued to enjoin arbitration, remove the umpire, and compel arbitration in accordance with the Protocol; OneBeacon cross-moved to compel arbitration.
- The district court held a preliminary-injunction hearing and denied Allstate’s motions (temporary restraining order, preliminary injunction, and permanent injunction); OneBeacon’s cross-motion was denied as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OneBeacon breached the Umpire Selection Protocol by informing Ehrlich he was nominated | OneBeacon’s disclosure and contact with Ehrlich violated the Protocol and industry custom, corrupting umpire selection | No specific contractual provision was breached; ARIAS guidelines not incorporated; pre-award bias challenges are impermissible | Court: No breach shown; Allstate’s claim is effectively a pre-award bias challenge and unlikely to succeed on merits |
| Whether the court should enjoin arbitration and remove the umpire pre-award | Arbitration must be enjoined to preserve impartial process; irreparable harm will result if arbitration proceeds | Pre-award removal for alleged bias is generally disallowed; adequate remedy exists post-award via §10 challenge | Court: No irreparable harm shown; post-award challenge is adequate; injunction denied |
| Whether customs/industry guidelines (ARIA-US) can supply contractual obligations | ARIAS-US customs establish that nominees should not be told who nominated them and should inform interpretation of the Protocol | Guidelines were not incorporated into the parties’ contract and cannot create enforceable obligations | Court: Industry guidelines not part of the agreement; cannot serve as basis for breach |
| Whether an exception permits pre-award review of arbitrator impartiality | Allstate seeks exception to permit pre-award disqualification because nomination disclosure purportedly taints process | OneBeacon relies on authority that pre-award bias challenges are inappropriate except in narrow circumstances | Court: No applicable exception; pre-award disqualification not warranted here |
Key Cases Cited
- Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008) (standard for preliminary injunction requires likelihood of success and irreparable harm)
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Univ., 489 U.S. 468 (1989) (courts can order arbitration to proceed according to agreement terms)
- Smith v. Am. Arbitration Ass'n, Inc., 233 F.3d 502 (7th Cir. 2000) (challenge to arbitrator’s impartiality generally must await final award)
- Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476 (5th Cir. 2002) (limits on pre-award review of arbitrator capacity/bias)
- McLaughlin Gormley King Co. v. Terminix Int'l Co., L.P., 105 F.3d 1192 (8th Cir. 1997) (pre-award injunction may be appropriate when arbitration would be futile because dispute is non-arbitrable)
- Societe Generale de Surveillance, S.A. v. Raytheon Euro. Mgmt. & Sys. Co., 643 F.2d 863 (1st Cir. 1981) (recognizes narrow exceptions to preaward non-review in arbitration)