863 F.3d 90
1st Cir.2017Background
- Mountain Valley Property, Inc. (MVP) bought a multi-line insurance/product package (SolutionOne®) from Applied entities; MVP also entered a three-year Reinsurance Participation Agreement (RPA) with AUCRA containing a mandatory arbitration clause and a Nebraska choice-of-law clause.
- MVP sued Applied in Maine state court alleging overcharges, unlawful fees, and that AU was not authorized to transact insurance in Maine; Applied removed to federal court and counterclaimed for unpaid premiums.
- District court referred arbitrability issues against AUCRA to an arbitrator. The arbitrator concluded the dispute was not arbitrable because the McCarran-Ferguson Act made Nebraska law (the NUAA) reverse-preempt the Federal Arbitration Act (FAA), and the NUAA bars arbitration of insurance-policy disputes.
- AUCRA moved to vacate the arbitration award under the FAA; the district court denied the motion to vacate and denied transfer; Applied appealed the denial.
- The First Circuit assumed jurisdiction for decision on the merits, reviewed under the very limited standards for vacating arbitration awards (including the manifest-disregard gloss), and affirmed the denial to vacate.
Issues
| Issue | Plaintiff's Argument (MVP) | Defendant's Argument (Applied) | Held |
|---|---|---|---|
| Whether arbitrator manifestly disregarded law by refusing to apply FAA/Mastrobuono and refusing to enforce arbitration clause | FAA should govern; Mastrobuono means FAA trumps conflicting state law absent explicit contractual reservation | Mastrobuono applies and requires arbitration despite Nebraska choice-of-law clause lacking an explicit FAA waiver | Arbitrator reasonably distinguished Mastrobuono and applied McCarran-Ferguson/American Bankers framework; no manifest disregard |
| Whether McCarran-Ferguson/NUAA preempt FAA and bar arbitration of insurance dispute | NUAA does not bar arbitration here (implicit) | NUAA, as a state insurance law enacted to regulate insurance, is reverse-preempted by McCarran-Ferguson such that FAA does not apply | Arbitrator found McCarran-Ferguson applies and NUAA precludes arbitration; court found the arbitrator’s reasoning colorable and not vacatable |
| Whether arbitrator exceeded his powers by deciding arbitrability | N/A (MVP sought court resolution) | Arbitrator exceeded authority by refusing to enforce the arbitration clause | Arbitrator was authorized to decide arbitrability and did not exceed powers; his decision was within scope |
| Whether court may vacate award under FAA or manifest-disregard doctrine | FAA vacatur standards apply; manifest-disregard not met | Applied argued vacatur appropriate under manifest-disregard and §10 | Court held manifest-disregard not shown; even assuming the doctrine survives, arbitrator’s legal reasoning was colorable and not palpably faulty |
Key Cases Cited
- American Bankers Ins. Co. of Fla. v. Inman, 436 F.3d 490 (5th Cir.) (framework for McCarran-Ferguson reverse-preemption analysis)
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995) (contracting parties’ intent relevant to FAA preemption issues)
- Hall Street Assocs., LLC v. Mattel, Inc., 552 U.S. 576 (2008) (limits on judicial expansion of vacatur grounds under FAA)
- McCarthy v. Citigroup Global Markets, Inc., 463 F.3d 87 (1st Cir.) (articulation of manifest-disregard standard as judicial gloss)
- Advest, Inc. v. McCarthy, 914 F.2d 6 (1st Cir.) (discussing limited judicial review of arbitration awards)
- First State Ins. Co. v. Nat'l Cas. Co., 781 F.3d 7 (1st Cir.) (describing the extremely limited authority to vacate arbitration awards)