Trustmark Insurance v. John Hancock Life Insurance
2011 U.S. App. LEXIS 1931
| 7th Cir. | 2011Background
- Two insurance companies (Trustmark and Hancock) disputed whether Trustmark must reinsure certain risks labeled 'London Market Retrocessional Excess of Loss' under their 1997 agreements.
- An initial tripartite arbitration panel issued a March 2004 award favorable to Hancock and was confirmed by a district court.
- Trustmark later refused to pay Hancock's bills, prompting a new arbitration in October 2004 and a challenge that included alleging fraud for nondisclosure of four documents during discovery.
- Trustmark sought to disqualify arbitrator Mark S. Gurevitz due to knowledge of the prior arbitration and appealed for an injunction blocking the new panel from proceeding.
- The district court granted the injunction, ruling Gurevitz was not disinterested and that the second panel could not consider the first panel's decision or the confidentiality agreement.
- Hancock appealed, and the Seventh Circuit reversed, holding the injunction improper and that arbitrators may interpret the confidentiality agreement and proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Irreparable injury standard for injunction | Trustmark claims irreparable harm if arbitration proceeds. | Hancock argues no irreparable harm; arbitration should proceed. | Irreparable harm not shown; injunction improper. |
| Disinterested arbitrator standard | Gurevitz's knowledge disqualifies him as disinterested. | Knowledge about the dispute is permissible; disinterested means lack of financial stake. | Gurevitz is disinterested; knowledge not a disqualifying interest. |
| Authority to interpret confidentiality agreement | Confidentiality agreement not within arbitration clause; panel cannot interpret it. | Arbitrators may resolve ancillary questions affecting their task, including interpretation. | Arbitrators may construe and apply the confidentiality agreement. |
| Review of procedural rulings during arbitration | District court should defer to panel's conclusions and bar reconsideration. | Court can review procedural aspects under FAA if arbitrators exceed powers. | Arbitrators may decide procedural questions; court may review only to set aside award at end. |
Key Cases Cited
- AT&T Technologies v. Communications Workers of America, 475 U.S. 643 (U.S. Supreme Court 1986) (irreparable injury limited; arbitration context)
- PaineWebber Inc. v. Farnam, 843 F.2d 1050 (7th Cir. 1988) (irreparable injury not presumed in arbitration)
- Graphic Communications Union v. Chicago Tribune Co., 779 F.2d 13 (7th Cir. 1985) (delay and cost of adjudication not irreparable injury)
- Sphere Drake Insurance Ltd. v. All American Life Insurance Co., 307 F.3d 617 (7th Cir. 2002) (private arbitrators may have reputational interest; knowledge not disqualifying)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. Supreme Court 2002) (arbitrators resolve procedural questions under FAA)
- Consolidation Coal Co. v. United Mine Workers, 213 F.3d 404 (7th Cir. 2000) (arbitrators' power to interpret and manage arbitration)
- Merit Insurance Co. v. Leatherby Insurance Co., 714 F.2d 673 (7th Cir. 1983) (arbitration boundaries and disqualification standards)
- Liteky v. United States, 510 U.S. 540 (U.S. Supreme Court 1994) (knowledge or experience does not automatically disqualify)