819 F. Supp. 2d 270
S.D.N.Y.2011Background
- petitioners are London Market Reinsurers seeking to vacate a December 10, 2006 Powers Panel order and related Final Order terminating jurisdiction over a prepayment protocol in Treaty 101 with Century Indemnity; arbitration involved eight panels addressing asbestos claims, with an interim order permitting 106-day payment timelines and a 75%/disputed-portion scheme; the Powers Panel issued a Final Order terminating jurisdiction and incorporating the Interim Order; petitioners sought vacatur in 2010–2011; court analyzes whether to vacate under 9 U.S.C. § 10(a)(4) and whether the protocol is within arbitrators’ authority; panel’s decisions were later confirmed by the court cross-petition under CPLR § 7511(e) despite choice-of-law disputes; court denied vacatur and granted confirmation; opinion discusses the broad “honorable engagement” arbitration clause and the panel’s interpretation to effect the general purpose of the contract; the petition was filed within the CPLR limitations window but court ultimately treats the matter under FAA/Convention standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Powers Panel exceeded its powers by imposing a prepayment provision | LMCs claim the panel rewrote the contract with a new term | Century argues panel acted within authority to effect contract purpose | No, within authority; prepayment within panel’s interpretive power |
| Whether the issue of prepayment was properly presented to the arbitrators | LMCs claim they could not present evidence on prepayments | Century showed issue existed and was adequately framed | Issue presented; lack of witnesses does not bar panel’s remedy |
| Whether the prepayment provision is within the panel’s authority under the honorable engagement clause | Panel rewrote terms contrary to contract | Honorable engagement clause grants broad remedial discretion | Within authority; clause supports broad remedial discretion |
| Choice of law and timeliness of petition to vacate | CPLR should govern review and tolling should apply | FAA/Convention governs; timing not fatal to petition under standard | Court did not need to resolve; regardless, petition fails on substance of vacatur |
| Century’s cross-petition to confirm the arbitration award | Granted; vacatur denied; award confirmed |
Key Cases Cited
- Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9 (2d Cir. 1997) (limited review of arbitration awards; no review for merits)
- Barbier v. Shearson Lehman Hutton Inc., 948 F.2d 117 (2d Cir. 1991) (arbitration awards are reviewed narrowly)
- Banco de Seguros del Estado v. Mut. Marine Office, Inc., 344 F.3d 255 (2d Cir. 2003) (arbitrators may order remedies under an broad arbitration clause; vacatur limited)
- Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200 (2d Cir. 2002) (scope of arbitrators’ authority and essence-of-contract review)
- ReliaStar Life Ins. Co. v. EMC Nat'l Life Co., 564 F.3d 81 (2d Cir. 2009) (arbitrators must draw essence from contract; colorable justification standard)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (arbitration as a means to resolve disputes submitted by agreement)
- PMA Capital Ins. Co. v. Platinum Underwriters Berm., Ltd., 659 F.Supp.2d 631 (E.D. Pa. 2009) (honorable engagement clause limits to not rewrite contract; limits noted in PMA Capital)