Arbitration in general is intended as an alternative to litigation in the courts. For good reasons, courts rarely intervene in pending arbitrations and instead require the parties, under most circumstances, to wait for a final award before seeking redress for perceived grievances in the arbitration process. Indeed, the Federal Arbitration Act, 9 U.S.C. § 1, et seq. (“FAA”), which governs arbitrations implicating to interstate commerce, provides that agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,” and provides only limited grounds on which an arbitration award can be disturbed.
Nevertheless, several recent court decisions suggest that mid-arbitration court intervention is becoming slightly more common. This development might be attributable to the tendency of arbitrations to be more contentious than in the past. Most of these disputes have arisen around the construction of tripartite arbitration panels commonly found in U.S. reinsurance contracts. And in one unusual case, one arbitrator resigned and counsel for one party was disqualified by a federal district court. Three factual scenarios have led to court intervention in pending arbitrations:
- An arbitrator dies or resigns;
- One party seeks to disqualify the other party’s arbitrator; and
- One party seeks to disqualify the other party’s counsel.
This article will deal with the first scenario.
The death or resignation of an arbitrator has resulted in several recent interesting decisions that have resulted in competing views on whether an arbitration panel should be entirely reconstituted or simply continue with a replacement for the departed arbitrator.
Death Be Not Proud: The “General Rule” or “Special Circumstances”?
Some jurisdictions have adopted and followed what is known as the “general rule”: if an arbitrator dies during the arbitration proceedings, and the arbitration agreement does not state a method for replacing the deceased arbitrator, the court has discretion to instruct the parties to appoint an entirely new arbitration panel. See Cia De Navegacion Omsil, S. A. v. Hugo Neu Corp., 359 F. Supp. 898, 899 (S.D.N.Y. 1973); Marine Products Exp. Corp. v. M.T. Globe Galaxy, 977 F.2d 66, 68 (2d Cir. 1992). An early application of the “general rule,” although it was not given that title until sometime later, was articulated in Cia De Navegacion Omsil, S.A. v. Hugo Neu Corp., 359 F. Supp. at 899. The Southern District of New York ordered the parties to select a new arbitration panel and commence a new arbitration proceeding when an arbitrator died before a final award. Id. at 899. The plaintiff petitioned the court to allow for one new arbitrator to be appointed, arguing that no substantive issues had been decided and all evidence and testimony could be provided to the replacement arbitrator in order for him to become familiar with the proceedings. Id. The court, however, was concerned with the potential for undue influence from the remaining two arbitrators and ordered the parties to select an entirely new panel. Id. While the court recognized that a new panel would create “inefficiency,” allowing replacement of a single arbitrator appointment would impose a disadvantage for the defendant. Id. Thus, the court concluded that it was not “fair or fitting to impose the risk” of undue influence by “judicial command,” and ordered the parties to commence an entirely new arbitration proceeding in accordance with the arbitration agreement. Cia, 359 F. Supp. at 899.
For the full article, refer to page 34 in the Spring 2016 issue. https://www.airroc.org/assets/docs/matters/airroc%20matters%20spring%202016%20vol%2012%20no%201.pdf
