Arbitration

Insurer Appeals Evident Partiality Finding That Overturns Arbitration Award

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By Ugonna Kanu

A New York federal court has overturned an arbitration award brought against Lloyd’s of London underwriters on the ground of evident partiality of one of the tribunal members who failed to disclose his relationship with the respondent, Florida-based Insurance Company of Americas.

ICA has filed an appeal from a decision vacating the award in favor of Lloyd’s to the Second U.S. Circuit Court of Appeals. ICA claimed that New York U.S. District Court Judge Vernon S. Broderick confused the need for its party arbitrator’s “disinterestedness” with the need to be impartial.

ICA filed its brief July 20.

Broderick’s decision in Certain Underwriting Members at Lloyd’s of London v. Ins. Co. of the Americas, Case No: 1:16-cv-00323 (March 31)(available at http://bit.ly/2uIGkqY), was based on the evidence that the party-appointed arbitrator failed to disclose his relationship with the party that appointed him even after several opportunities were provided for such disclosure.

Broderick found that the “undisclosed relationships are significant enough to demonstrate evident partiality,” and vacated the award requiring Lloyd’s-represented reinsurance contracts to pay excess claims on two injury cases insured by ICA.

ICA argued that that “the only arbitrator qualification” for its tribunal pick “is that he be disinterested, which . . . means solely [a lack of] financial or other personal stake in the outcome.”

ICA also contended that other circuit courts “have found that evident partiality standards either do not apply or are even more relaxed in the case of party appointed arbitrators in tripartite industry arbitrations.”

District Court Judge Broderick adopted the evident partiality test set out in Three S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 530 (4th Cir. 2007(available at http://bit.ly/2vasPRv), to determine this case. The test includes four factors: the extent of the arbitrator’s personal interest in the proceedings; how direct the arbitrator’s relationship is with the party he was alleged to favor; the connection of the relationship to the arbitrator; “and the proximity in time between the relationship and the arbitration proceeding.”

In the case, the arbitrator and the ICA not only share the same building, but also the same suite. ICA’s treasurer and secretary, also a director of the company, is additionally the chief financial officer of the arbitrator’s company. The arbitrator had a business connection between the ICA president and others whose names were repeatedly mentioned during the arbitration, providing the arbitrator an ample opportunity to disclose, which he didn’t.

Finally, when the arbitrator was expressly asked of his business relationship with ICA, he said he had none.

Applying these factors, the federal district court held that the non-disclosure demonstrates evident partiality and is sufficient ground to vacate the award, which the court viewed a nondomestic award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention.

The reasoning, according to the opinion, was that, considering the relationship between the arbitrator and ICA, “a reasonable person would have to conclude that [the] arbitrator who failed to disclose under such circumstances was partial to one side.”  Applied Indus. Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., 492 F.3d 132, 137 (2d Cir. 2007).

The opinion, however, noted that Lucent Techs. Inc v. Tatung Co., 379 F.3d 24, 28, 30 (2d Cir. 2004) held that the court didn’t “establish a per se rule requiring vacatur of an award whenever an undisclosed relationship is discovered.”

The appeal was filed on April 20. In its July brief asking the Second Circuit to reinstate the award, ICA returns to the distinction between disinterestedness and neutrality.

“The only neutrality requirement was disinterestedness—the lack of personal or financial stake in the outcome,” the brief noted, adding: “But the district court did not vacate the award on the ground that the party-appointed arbitrator failed to disclose matters that would require a reasonable person to conclude that the arbitrator had a financial or personal interest in the outcome. It vacated based on relationships that were irrelevant to the disinterestedness requirement.”

The ICA brief asking the Second Circuit to consider the case emphasized that “there is no evidence that the arbitrator had a personal or financial interest in the outcome.”

The author is an attorney in Nigeria who has just completed her L.L.M. in Dispute Resolution at the University of Missouri-Columbia School of Law.  She is a CPR Institute 2017 summer intern.

 

House Passes Resolution to Override CFPB Mandatory Arbitration Rule

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On July 25, and by a vote of 231-190, the U.S. House of Representatives relied upon the authority provided by the Congressional Review Act to pass a “resolution of disapproval” (H.J. Res. 111) to revoke the CFPB final arbitration rule published on July 19, 2017. The White House also issued a statement of support for the resolution.

The CRA requires both the House and Senate to pass a resolution of disapproval within 60 legislative days; the Senate vote on a similar resolution is expected to take place in September.

For a summary of the Democratic response to the House’s action, see Ballard Spahr’s Consumer Finance Monitor, “House Financial Services Committee Democratic Staff Report on CFPB Assails Republicans, Defends CFPB and Arbitration Rule,” by Barbara S. Mishkin.

For a review of how these issues have unfolded, see also CPR Speaks’ earlier posts on the CFPB Rule, “CFPB Announces Final Rule Barring Mandatory Arbitration in Consumer Financial Contracts” and “Congress Responds Rapidly to Block CFPB Rule Banning Mandatory Arbitration Clauses.”

Congress Responds Rapidly to Block CFPB Rule Banning Mandatory Arbitration Clauses

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On Monday, July 10, the Consumer Financial Protection Bureau announced its new rule preventing banks and credit card companies from using mandatory arbitration clauses in new customer accounts.

On Tuesday, July 11, and as predicted on “CPR Speaks,” Congress moved to stop the CFPB final rule. Arkansas Republican Sen. Tom Cotton announced he was drafting a resolution to get the new CFPB rule rescinded using the Congressional Review Act. Pennsylvania Republican Sen. Pat Toomey, Chair of the Subcommittee on Financial Institutions and Consumer Protection, is reported to be considering a similar step.

The newly popular 1996 Congressional Review Act—see the “CPR Speaks” link above–provides expedited  procedures through which the Senate may overrule regulations issued by federal agencies by enacting a joint resolution.

Characterizing the CFPB as having gone “rogue,” and its new rule as an “anti-business regulation,” Cotton is stressing the benefits of arbitration, as well as consumers’ capacity to make business decisions.

Financial Services Committee Chairman Jeb Hensarling, R., Texas, is also publicly criticizing the rule as bureaucratic and beneficial only to class action trial attorneys. He is urging Congress to work with President Trump to reform the CFPB and excessive administration by government. As also mentioned in yesterday’s post, in April Hensarling proposed H.R. 10, the Financial CHOICE Act of 2017, which would repeal the CFPB’s authority to restrict arbitration. The bill has been referred to the Senate Committee on Banking, Housing, and Urban Affairs.

It remains to be seen whether the CFPB’s new rule will survive these and other potential congressional and court challenges. Much will depend upon the Senate and how many Republicans switch sides on this issue. Please stay tuned to this space for important developments.

SEC Office of Investor Advocate Praises Securities Arbitration Clinics

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By Jill Gross

Congress created the Office of the Investor Advocate of the Securities and Exchange Commission in the Dodd-Frank Act in 2010 to, among other things, “(A) assist retail investors in resolving significant problems such investors may have with the Commission or with self-regulatory organizations (SROs); (B) identify areas in which investors would benefit from changes in the regulations of the Commission or the rules of SROs…” Exchange Act §  4g(4). In turn, the Investor Advocate appointed an Ombudsman to “act as a liaison between the Commission and any retail investor in resolving problems that retail investors may have with the Commission
or with SROs.” Exchange Act § 4(g)(8)(A). Both the Investor Advocate and the Ombudsman are required to submit reports to Congress on their activities. This week, the Office of the Investor Advocate submitted its Report on Objectives for fiscal year 2018, which included the Ombudsman’s Report.

In her Report, the Ombudsman addresses several items of interest to the dispute resolution community. First, the Report (p. 23) describes how her office is monitoring whether recommendations from the FINRA Dispute Resolution Task Force Report have been implemented in ways that help retail investors. She expresses concerns about elements of customer arbitrations at FINRA, offering another voice to the ongoing efforts to improve the fairness of securities arbitration.

Second, in recommending that the FINRA Investor Education Foundation support ongoing operations of law school securities clinics, the Ombudsman details (p. 24) the value that these clinics offer retail investors:

The Ombudsman is concerned about the challenges faced by investors—especially pro se investors who face sophisticated opposing counsel representing broker-dealer firms in a forum that has become increasingly complex—when the life savings of the investor are at stake and there is little ground for appeal. Investor rights clinics fill a critical void by supplying information and advocacy services to vulnerable retail investors in need. Competent representation of retail investors in FINRA’s dispute resolution forum is a critically important step in helping vulnerable retail investors protect their rights. These clinics and the investors they serve merit the Foundation’s support.

Third, the Ombudsman describes (p. 24) her Office’s new outreach program to the clinics, including visits with students at Pace Law’s Investor Rights Clinic and the University of Miami School of Law Investor Rights Clinic.  The Report praises the investor education work of the students, and emphasizes the importance of providing investors with representation in arbitration. The SEC’s spotlight on these law school securities clinics celebrates the tremendous work that law students do in representing investors in their disputes with their brokerage firms!

Jill I. Gross is a nationally known expert in the field of securities dispute resolution and a professor at Pace Law School. Her complete bio can be found HERE. This post was originally published in Indisputably and is reprinted with permission.  

U.S. Court of Appeals Upholds Trial Court’s Sanctions Against Attorney for Frivolous Arguments Seeking to Avoid Arbitration Agreement

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By Mark Kantor

The US Court of Appeals for the Seventh Circuit, in Appeal of Jana Yocum Rine in Hunt v. Moore Brothers, No. 16-2055 (June 27, 2017), recently upheld sanctions imposed by the trial court against an attorney personally for her frivolous arguments seeking to avoid an arbitration agreement in a contract between an independent trucker and a trucking company.  The appellate opinion is available at http://cases.justia.com/federal/appellate-courts/ca7/16-2055/16-2055-2017-06-29.pdf?ts=1498759242.

Very briefly, the trial court had required Ms. Rine, counsel for Mr. Hunt, to pay $7,500 in legal fees and expenses incurred by Moore Brothers defending against frivolous claims in a complaint filed by Ms. Rine in District Court and frivolous arguments that the arbitration agreement in the contract between Hunt and Moore Brothers was unenforceable, including a claim that the trucking company was holding Hunt “in peonage.”

James Hunt worked as a truck driver in Nebraska. On July 1, 2010, he signed an Independent Contractor Operating Agreement with Moore Brothers, a small company located in Norfolk, Nebraska.  Three years later, Hunt and Moore renewed the Agreement.  Before the second term expired, however, relations between the parties soured.  Hunt hired Attorney Jana Yocum Rine to sue Moore on his behalf.  She did so in federal court, raising a wide variety of claims, but paying little heed to the fact that the Agreements contained arbitration clauses.  Rine resisted arbitration, primarily on the theory that the clause was unenforceable as a matter of Nebraska law.  Tired of what it regarded as a flood of frivolous arguments and motions, the district court granted Moore’s motion for sanctions under 28 U.S.C. § 1927 and ordered Rine to pay Moore about $7,500.  The court later dismissed the entire action without prejudice.

****

The relevant part of the arbitration clauses in the Agreements reads as follows:

This Agreement and any properly adopted Addendum shall constitute the entire Agreement and understanding between us and it shall be interpreted under the laws of the State of Nebraska. … To the extent any disputes arise under this Agreement or its interpretation, we both agree to submit such disputes to final and binding arbitration before any arbitrator mutually agreed upon by both parties.

When Rine decided to take formal action on Hunt’s part, she ignored that language and filed a multi‐count complaint in federal court.  The complaint was notable only for its breadth: it accused Moore of holding Hunt in peonage in violation of 18 U.S.C. § 1581 (a criminal statute), and of violating the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962; the federal antitrust laws, 15 U.S.C. §§ 1, 4, 14; the Illinois Employee Classification Act, 820 ILCS 185/1 et seq.; and for good measure, the Illinois tort of false representation.

The Court of Appeals, and the District Court before then, concluded that Rine had blown up a simple commercial dispute beyond all rational proportion; “This was a simple commercial dispute between Hunt and Moore, but one would never know that from reading Rine’s complaint.  She blew it up beyond all rational proportion.”

Writing for a unanimous appellate panel, Chief Justice Wood upheld the trial court’s imposition of sanctions against Rine personally as “within the district court’s broad discretion, in light of all the circumstances of this case….”

We have no need to consider whether the sanctions imposed by the district court were also justified under the court’s inherent power.  See Chambers v. NASCO, Inc., 501 U.S. 32, 45–46 (1991).  Nor are we saying that the district court would have erred if it had denied Moore’s sanctions motion.  We hold only that it lay within the district court’s broad discretion, in light of all the circumstances of this case, to impose a calibrated sanction on Rine for her conduct of the litigation, culminating in the objectively baseless motion she filed in opposition to arbitration.  We therefore AFFIRM the district court’s order imposing sanctions.

The judicial decisions in Hunt v. Moore Brothers are yet another illustration of the increasing peril to counsel personally in US Federal courts if the attorney pursues a frivolous “take no prisoners” approach seeking to avoid arbitration.

 

Mark Kantor is a CPR Distinguished Neutral. Until he retired from Milbank, Tweed, Hadley & McCloy, Mark was a partner in the Corporate and Project Finance Groups of the Firm. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). Additionally, Mr. Kantor is Editor-in-Chief of the online journal Transnational Dispute Management.

This material was first published on OGEMID, the Oil Gas Energy Mining Infrastructure and Investment Disputes discussion group sponsored by the on-line journal Transnational Dispute Management (TDM, at https://www.transnational-dispute-management.com/), and is republished with consent.

Third Circuit Clarifies its Standard on Motions to Compel

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By Ugonna Kanu

The Third U.S. Circuit Court of Appeals recently held that a federal district court had erred when it denied an employer’s motion to dismiss a suit before the court had determined the fate of its motion to compel arbitration. The case was Silfee v. Automatic Data Processing Inc.; ERG Staffing Service LLP, No. 16-3725 (3d. Cir. June 13, 2017)(unpublished)(available at http://bit.ly/2rUZpln).

A unanimous Third Circuit panel ruled, in an unpublished decision, that the trial court first must determine the motion to compel arbitration before the motion to dismiss.

The plaintiff in Silfee filed suit against his former employer for violating Pennsylvania law on payroll practices. ERG, a Dickson City, Pa.-based employment agency, filed a motion to compel arbitration “arguing that the arbitration agreement between Silfee and ERG’s payroll vendor precluded Silfee’s suit against ERG,” according to the opinion.

ERG moved to dismiss Silfee’s suit. The district court, however, placed a hold on compelling arbitration, and denied the motion to dismiss the suit.

The Third Circuit panel opinion, written by Circuit Judge Thomas M. Hardiman, of Pittsburgh, distinguished between the case and Guidotti v. Legal Helpers Debt Resolution L.L.C., 716 F.3d 764, 771 (3d Cir. 2013)(available at http://bit.ly/1pXcNnD), in which the Third Circuit held that where it is apparent that a party’s claims are subject to an enforceable arbitration clause, a motion to compel arbitration should be considered without discovery delay under Federal Rule of Civil Procedure 12(b)(6).

But, where the agreement to arbitrate is unclear, or the plaintiff facing the motion to compel has provided “additional facts sufficient to place the agreement to arbitrate in issue,” then the court may order limited briefing and discovery on the issue of arbitrability, and assess the question under a summary judgment standard of Rule 56, the opinion explained.

Before Guidotti’s application, the panel opinion noted that the FAA provides a gateway test. It says that a trial court must make an inquiry under Federal Arbitration Act Section 4 where there is a motion to compel arbitration.

Section 4, the opinion emphasized, provides that “[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court . . . for an order directing that such arbitration proceed in the manner provided for in such agreement.”

Plaintiff Silfee didn’t produce “additional facts sufficient to place the agreement to arbitrate in issue”—the Guidotti standard to get past a motion to dismiss. As a result, the Third Circuit ruled, the court should have applied the Rule 12(b)(6) standard.

While the appeals panel stopped short of dismissing Silfee’s suit and compelling arbitration, it remanded the case to the U.S. District Court with an order to consider the parties’ “competing arguments regarding arbitrability” under ERG’s motion to compel.

The author is a CPR Institute Summer 2017 intern.

DOJ to NLRB: You’re On Your Own in the Supreme Court

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CLASS WAIVER/MANDATORY ARBITRATION CASES

By Nicholas Denny

In the clearest illustration so far of the Trump Administration’s evolving hands-off policy toward mandatory arbitration clauses and class action waivers, the U.S. Solicitor General authorized the National Labor Relations Board (NLRB) last week to represent itself in one of three consolidated arbitration cases to be heard by the U.S. Supreme Court this fall.

At the same time, the U.S. Department of Justice, which had been representing the board in NLRB v. Murphy Oil USA Inc., No. 16-307 (U.S. Supreme Court docket page at http://bit.ly/2kOPxal) until last week, switched sides in the case, filing an amicus brief backing the employer in the matter.

Justice, via the friend-of-the-court briefs, is now advocating against the NLRB, and against its previous position.

The case—along with its companions, Ernst & Young v. Morris, No. 16-300 (Docket page at http://bit.ly/2kLxCEg) and Epic Systems Corp. v. Lewis, No. 16-285 (Docket page at http://bit.ly/2kFVxm6)—asks whether mandatory arbitration clauses as a condition of employment bar individual employees from pursuing work-related claims on a collective or class basis under the National Labor Relations Act (NLRA). Mandatory arbitration clauses are used throughout employment settings and apply to employees regardless of titles or union affiliation; two of the three cases involve white-collar office workers.

The Supreme Court will hear the consolidated cases in the term beginning in October.

The issue in the consolidated cases is whether employers can continue to unilaterally require that employees agree to a mandatory arbitration clause in employment contracts. Often, these clauses are non-negotiable: either employees accept the employer’s terms or the employer finds someone else to hire.

The Supreme Court must decide which of two laws controls: the National Labor Relations Act, 29 U.S.C. § 151, et seq., or the Federal Arbitration Act, at 9 U.S.C. § 1 et seq. Under the NLRA, an employee’s rights to collective bargaining and action are protected. Under the FAA, however, an employment contract that includes a mandatory arbitration clause binds the worker to arbitrate with the employer instead of litigating in court, and is accompanied by a waiver barring the employee from bringing a class-action suit in favor of an individualized process.

As a result, arbitration clauses can deliver a one-two punch: (1) workers arbitrating individually may have less power, because they are not operating as part of a collective whole as contemplated by the NLRA, and (2) a worker may be less likely to find counsel because arbitration awards are perceived to be much smaller than court and class-action outcomes—meaning a lawyer working for a portion of the settlement would be less likely to take the case.

On the other hand, employers contend that mandatory arbitration clauses protect the company and benefit the employee. They argue that arbitration clauses ensure a speedier and more cost-effective conclusion to conflicts: class actions are harder and more costly to fight than arbitrations.

The disagreement over the use of mandatory arbitration clauses has arisen in the political arena, too. While the Obama Administration focused on pro-employee, anti-mandatory arbitration policies that prohibited employers from unilaterally waiving workers’ rights to concerted action under the NLRA, the Trump Administration is leaning toward an employer-centric policy by permitting mandatory arbitration clauses in employment contracts and as a condition of hiring.

This drastic shift in policy culminated with Friday’s news that the NLRB will represent itself, and that the Department of Justice would switch sides. The NLRB, as an autonomous government entity, is tasked with protecting “the right of employees to engage in protected concerted activities—group action to improve wages, benefits, and working conditions and to engage in union activities and support a union,” according to its website, as well as protecting the right of workers to refrain from engaging in protected concerted or union activities.

While the Justice Department prosecutes on behalf of the nation as well as defends government agencies, it is exceedingly rare for it to withdraw its representation of an agency it had been representing and subsequently file a brief in opposition to the position had it previously taken.

The Justice Department amicus brief switching sides in Murphy Oil is available at http://bit.ly/2sUnFbL.  The NLRB’s June 16 announcement that it would represent itself without Justice Department support can be found on the board’s website at http://bit.ly/2traH2s.

The move, however, is consistent with another recent Trump Administration policy shift on arbitration. In early June, the Centers for Medicare and Medicaid Services, an arm of the U.S. Department of Health and Human Services, withdrew a 2016 Obama Administration position prohibiting mandatory arbitration clauses in long-term care nursing home contracts.

CMS’s new position allows arbitration agreements provided that the provisions are written in plain language, and explained to and accepted by the applying resident.  Among other conditions, the CMS requires that the nursing home retain a copy of the signed agreement and post a notice that details the nursing home’s arbitration policy.

In addition, House Republicans introduced the “Financial CHOICE Act” earlier this month, a proposed law that aims to dismantle the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank is an extensive law that was passed to ensure higher accountability in the U.S. financial sector after the economic recession of 2008 and it was endorsed by former President Obama.

Among its many goals, Dodd-Frank pointed its then-new Consumer Financial Protection Bureau at pre-dispute mandatory arbitration clauses in consumer finance contracts. A lengthy study concluded last year by the CFPB resulted in a promise to finalize regulations that would ban the use of predispute mandatory arbitration in consumer financial contracts, such as cellphone agreements.

But should the “Financial CHOICE Act” become law, it likely would allow financial institutions to include mandatory arbitration clauses in their consumer contracts and agreements, and negate the CFPB efforts.

President Trump’s stance on mandatory arbitration clauses is becoming clear. Whether the clauses are legal in the employment context, and whether they will withstand Supreme Court scrutiny, are developing issues that are expected to be answered within the year. Watch CPR Speaks for updates.


The author is a CPR Institute Summer 2017 intern.

California Appeals Panel Declines to Compel Arbitration in a Nursing Home Case

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By Lyn Lawrence

The author is a CPR Institute Summer 2017 Intern.

California’s Third Appellate District has refused an appeal to compel arbitration in Hutcheson v. Eskaton FountainWood Lodge, No. C074846 (Cal. A.D.3d. June 14, 2017)(available at http://bit.ly/2rxIc1T), a nursing home dispute in which family members of a deceased former resident sought to sue the residential care facility for elder abuse, fraud and negligence.

The decedent, Barbara Lovenstein, granted a health care power of attorney to her niece, Robin Hutcheson, and a personal care power of attorney to her sister, Jean Charles. Charles transferred Lowenstein to Eskaton FountainWood Lodge, a residential care and assisted living facility in Orangevale, Calif., and entered into the admission agreement.

After the Lovenstein died, Hutcheson and Charles instituted legal proceedings against FountainWood, which submitted a motion to compel arbitration. A trial court denied the motion.  The court found that Charles acted beyond the powers of her personal care power of attorney when entering into the admission agreement, making the arbitration clause invalid.

FountainWood approached the Third Appellate District to overturn the trial court’s decision. But a unanimous three-judge panel affirmed, based on its interpretation of California’s Power of Attorney Law and Health Care Decisions Law, holding that the decision to admit the deceased was a health care decision, not within Charles’ personal care POA.

The court concluded that the trial court was correct in denying the defendant’s motion to compel arbitration.

It can be inferred from the judgment that the court would have compelled arbitration had Hutcheson, who held the health care power of attorney, entered into the admission agreement. The court stated that, “There is no evidence in the record that Hutcheson, Lovenstein’s attorney-in-fact for health care under the health care POA, was involved in any of the decisions and actions regarding Lovenstein’s admission, stay at, or discharge from FountainWood.”

The California case denying the care facility’s motion to compel arbitration runs counter to two recent events with national implications that backed arbitration for conflicts related to nursing home patients.

Hutcheson follows just a month after the U.S. Supreme Court held that the Kentucky Supreme Court’s interpretation of the state’s power-of-attorney law discriminated against arbitration.

See Kindred Nursing Centers v. Clark, No. 16-32 (May 15)(available at http://bit.ly/2pCk94L) (for analysis, “SCOTUS Says States Can’t Discriminate Against Arbitration, Directly or Indirectly,” CPR Speaks blog (May 16)(available at http://bit.ly/2rxGFeB).

In addition, the Center for Medicare and Medicaid Services, a part of the U.S. Department of Health and Human Services, rescinded its 2016 ban on including mandatory arbitration provisions in nursing home agreements early this month (see CMS fact sheet at http://go.cms.gov/2sA2Wae).

Thoughts on Non-Administered Arbitration

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johnwelborn By

Non-administered arbitration (“NAA”) is an informal dispute resolution process designed to proceed without the involvement of a separate administering entity. The arbitrator and parties administer the proceedings.

The proceedings may be guided by a procedure the parties define, or the parties may agree to use institutional rules and procedures such as Rules for Non-Administered Arbitration published by the International Institute for “alternative” Conflict Prevention and Resolution (“CPR”). The objective is a dispute resolution process that is truly alternative – more efficient, flexible and expeditious than both adversarial litigation and formal administered arbitration.

I was recently an arbitrator in an NAA proceeding under the CPR Rules. This posting provides some of my reactions.

Avoid litigation in disguise

The effectiveness of the NAA alternative is only as good as the joint effort of all participants – the parties, their representatives and the arbitrator. Everyone involved in a non-administered arbitration proceeding must share the objective and make certain that the speed, flexibility and efficiency that the NAA process offers are realized and that the proceeding doesn’t devolve into litigation in disguise.

Parties who agree contractually to resolve their disputes in an NAA process seek a non-appealable, binding, just and fair result. That’s the low hanging fruit. Those contracting parties also deserve fruit higher up the tree – they deserve a dispute resolution proceeding that is focused, flexible, and less costly and time-consuming than formal administered arbitration or litigation. Everyone involved has an obligation to work to that end.

The approach

An important factor in meeting that obligation is how each participant approaches the NAA proceeding. Helena Tavares Erickson, a Senior Vice President at CPR, published an article on point some time ago (2006). Among her several valuable messages is the view that those involved must approach the dispute “as a problem to be solved, not a contest to be won.”

I agree. Contests to win are more expensive, more time consuming and less controllable than joint problem solving efforts. The benefits of an NAA proceeding are best realized in a problem solving context.

The schedule – agree and stick to it

As soon as the parties acknowledge the existence of a dispute to be arbitrated under NAA rules, they engage a mutually acceptable arbitrator. Then all concerned, including the arbitrator, should quickly (within days, not weeks or months) confer and agree to a date for a substantive hearing on the issues. This date should be written in stone, i.e., should be changed only (i) due to force majeure events and (ii) if and when not changing the date would mean genuine prejudice to a party.

The date should be realistic in terms of time needed for preparation. The original agreement which calls for dispute arbitration may provide unrealistic timing, e.g., 60 days to select and appoint an arbitrator and get to hearing on complicated factual/legal matters. It’s fine to override that prior agreement in the face of an actual dispute.

What shouldn’t be overridden is the clear intent of the parties to have the dispute heard and resolved quickly. Not getting to a substantive hearing on the merits of the dispute many months or more after arbitrator appointment is not the expeditious, economical dispute resolution process the parties originally bargained for.

Core issues – early identification and focus

Identification of the core issues in dispute, and early focus on those issues, can and should happen in arbitration, especially NAA. The flexibility to make this happen is a major advantage of the NAA process.

To get there, the parties and their representatives need to find the courage to work together to prioritize the factual and legal issues that comprise the dispute. This makes it possible to bring these core issues to the arbitrator for preliminary, non-binding review, or perhaps even for formal determination. Either way, the expertise of the arbitrator, the primary reason he/she was retained, is taken advantage of early on, and the possibility of mediation, or even settlement, of the entire dispute is increased.

If the parties and their representatives are reluctant to single out core issues for early scrutiny, the arbitrator should be ready to encourage them in that direction. The arbitrator needs to be sensitive to the time/cost value of bringing his/her expertise into the dispute in a constructive way early on.

This preliminary issue review requires two things:

1. Confidence on the part of the arbitrator — the ability to express a high level opinion (make a call) based on the experience and expertise that he/she is bringing to the table without first having to see every possible bit of data or hear every possible legal argument.
2. Parties and party representatives who are willing to listen and act on the arbitrator’s early stage opinion regardless of whether they agree that this preliminary arbitrator opinion is binding.

Atmosphere – informal, open

This is a challenge, especially for lawyers trained in the courtroom. I’m not suggesting that everyone arrive at each session in blue jeans and flip-flops. I am suggesting that the participants strive for an atmosphere that is conducive to problem solving, that fosters professionalism as well as mutual respect and friendliness, and that leaves room for important openness and listening.

For the parties and their representatives, this requires:

• Self-control in terms of what each participant brings to the table,
• Fewer motions and objections in response to what has been put on the table,
• The courage to make their own conscience-guided determinations of what is truly relevant and helpful to the effort, and
• Confidence that the arbitrator is good enough not to need formal motions in order to see every weakness in what has been presented.

For the arbitrator, this is about not letting evidentiary issues get in the way. Let your experience, judgment and expertise (the qualities that brought you to this proceeding in the first place) tell you what you don’t need to know or listen to in order to do your job.

The record – do we need one?

The reasons for making a record in a formal dispute resolution proceeding don’t exist in an NAA proceeding. There won’t be an appeal on the merits of the final award, so that’s not a reason. Preserving a possible challenge to the final award based on arbitrator conflict or bias is also not a valid reason for a record. The potential for such a challenge should be raised and resolved long before the proceeding commences. That leaves the possible need for a record for reference purposes for final briefing and arguments to the arbitrator, and the making of the record can be tailored to that need.

So, this is not to advocate that NAA proceedings not be recorded. I am suggesting that the participants first work together to determine why a record is needed. They should then tailor the making of the record to the identified need before engaging in the expense and the additional logistics of making a record of all evidentiary presentations.

CPR is a leading NAA advocate. Their website is a valuable tool for those interested.

In summary

• The benefits of an NAA proceeding are best realized in a flexible, problem solving context.
• The judicial process, the formal administered arbitration process, and all of the evidentiary and other rules and procedures that go along with those processes, are designed for win-lose contests. They don’t allow for the flexibility that is an important benefit of an NAA proceeding, and they cost money and consume time.
• Participants (parties, representatives and arbitrators) who are committed to the expediency and effectiveness of the NAA process must avoid engaging in litigation in disguise. They should welcome and take full advantage of the flexibility that comes from working together to solve a problem.

John F. (Jeff) Welborn is Special Counsel at Welborn Sullivan Meck & Tooley. He specializes in serving as a mediator/facilitator in disputes that involve (U.S. and international) oil and gas, mining or other natural resource matters.  He has almost 40 years of experience in oil & gas and mining transactions and matters, both in the U.S. and globally, in natural resource regulatory matters and in negotiating and drafting natural resource development agreements, financing arrangements, and conveyance documents.

Copyright (2016) John F. (Jeff) Welborn – Welborn Sullivan Meck & Tooley, P.C.  All Rights Reserved. This post originally appeared on the firm’s blog at http://www.wsmtlaw.com/ and is republished with permission.

CASE SUMMARY: Pershing LLC v. Kieback et al – Rare US Federal Court Ruling Assessing When Tribunal’s Rejection of Discovery Request May Constitute Improper Refusal to Hear Evidence Justifying Vacatur

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Kantor Photo (8-2012)By Mark Kantor

Last week, the US District Court for the District of Louisiana issued a ruling in Pershing LLC v. Kieback et al (Judge Lance M. Africk, Civ. Act. No. 14-2549, May 22, 2017, available at https://scholar.google.com/scholar_case?case=5882751863819676163&hl=en&as_sdt=20006) confirming the arbitration award by a Financial Industry Regulatory Authority (“FINRA”) arbitration panel, notwithstanding efforts to vacate the award on grounds that the arbitral panel’s failure to require production of certain documents in discovery, or to even review those documents in camera before denying a motion to compel production, constituted “misconduct … in refusing to hear evidence pertinent and material to the controversy” under the US Federal Arbitration Act (FAA), “evident partiality” on the part of the arbitrators, and “manifest disregard of the law.”

This decision is one of the rare US Federal court rulings assessing when a tribunal’s rejection of a discovery request may constitute an improper refusal to hear evidence justifying vacatur.  As you will see, the Louisiana Federal District  Court set the standard high.

The dispute arose out of R. Allen Stanford and Stanford Financial Group’s fraudulent Ponzi scheme (https://en.wikipedia.org/wiki/Allen_Stanford) resulting in Stanford being ordered by law enforcement agencies to disgorge $6.7 billion  and pay a $5.9 billion fine.

A number of retired individuals living in Louisiana (the “Louisiana Retirees”) who had invested in Stanford certificates of deposit brought FINRA arbitrations for an aggregate of about $80 million in damages against Pershing LLC (“Pershing”), the clearing broker for the Stanford Group, alleging due diligence and non-disclosure theories on the basis of which the clearing broker might be held liable for a portion of the damages caused by the fraud (footnotes and many citations omitted from quotations).

They claim that Pershing, as Stanford Group Company’s clearing broker, failed to exercise due diligence in its business relationship with Stanford Group Company and failed to disclose adverse financial information which would have resulted in the Ponzi scheme being uncovered sooner than it was.

Pershing naturally presented defenses to those claims.

The Retirees’ claims were all consolidated into a single arbitration hearing, a process that (by the way) may be worth exploring by readers interested in the relationship between consolidation in arbitration and class arbitration.

During the arbitration, the Louisiana Retirees sought discovery, including document production.  As to certain of the documents covered by a discovery demand, Pershing asserted two privileges; the attorney-client privilege and a US financial services regulatory privilege known as the “Suspicious Activity Report (“SAR”) privilege” established by US Federal regulation to protect financial institutions who are required to report suspicious financial activities to Federal enforcement officials.  The arbitration panel upheld those assertions of privilege.

The arbitration panel held that Pershing was not required to produce to the Louisiana Retirees certain categories of documents which Pershing claimed were privileged. The documents consist inter alia of emails which Pershing claimed were protected under the attorney-client privilege and “Incident Reports” which Pershing says it uses to begin the process of internally investigating potential suspicious activity. Pershing claims the second category of documents are protected by the SAR privilege.

After extensive hearings, the arbitral panel ruled in favor of Pershing on the merits.

After a two week hearing at which the panel heard over 1,600 pages of testimony from fifteen witnesses and considered over 900 separate exhibits, the panel ruled in Pershing’s favor.

Pershing then sought confirmation of the FINRA award in the District Court.  The Louisiana Retirees sought vacatur.  The District Court was therefore faced with the need to balance two oft-argued principles in confirmation/vacatur proceedings; “an arbitration panel’s decision cannot be overturned simply because it was incorrect. …. But under the Federal Arbitration Act (FAA), an arbitration panel’s refusal to hear evidence material and pertinent to the controversy can result in vacatur of the arbitration award when the refusal deprived a party of a fundamentally fair hearing.

The Louisiana Retirees primarily argued that the arbitration was “fundamentally unfair” due to their inability to obtain and present the documents withheld by Pershing from document production.

The Louisiana Retirees first argue that the panel’s decision should be vacated pursuant to section 10(a)(3) of the FAA because the panel denied the Louisiana Retirees access to key documents, and the withholding of the documents was prejudicial to the Louisiana Retirees to the extent it rendered the arbitration proceeding fundamentally unfair. Their position is essentially that the Louisiana Retirees were unable to prove their case and were unable to refute false testimony offered by Pershing witnesses during the arbitration proceeding because they did not have certain documents which they have now had an opportunity to review.

In particular, the Retirees pointed to the decision by the arbitral panel not to review the documents in camera before upholding the privilege claims and to their substantive privilege rulings.

The prejudice claimed by the Louisiana Retirees really stems from two separate decisions of the arbitration panel: (1) the decision not to review the documents in camera before deciding whether Pershing should produce them; and (2) the decision on the merits of the claimed privileges.

In an earlier decision in the judicial confirmation/vacatur proceedings, Judge Africk of the District Court had previously allowed limited discovery by the Louisiana Retirees.  When faced with the same assertions of privilege by Pershing, the Court itself reviewed the documents in camera (unlike the arbitral panel) to determine whether they were covered by the SAR privilege under federal law.  In its consequent ruling on privilege (available at https://scholar.google.com/scholar_case?case=17082729013022954526&hl=en&as_sdt=20006), the District Court upheld most of Pershing’s privilege assertions but concluded that some of the documents (or parts thereof) were not privileged and should have been disclosed.

After closely reviewing the documents produced for in camera review by Pershing, the Court finds that the Incident Reports at Tabs 1-67 bear no arguable relationship to the claims or defenses in this case and are not discoverable for that reason. On the other hand, the Court finds that the Incident Reports at Tabs 68-74 should be produced, as they are relevant to the claims and/or defenses of the Defendants in this case and are not privileged. Additionally, the redacted version of the Summary Reports that correlate to Tabs 68-74 should be produced, as should the redacted versions of Tabs 1-14 of the Summary Reports produced in Pershing’s third production on March 14, 2017.

Judge Africk ordered those documents turned over to the Louisiana Retirees as part of the judicial vacatur proceedings.  The Retirees then relied upon the fact that the arbitral tribunal had neither reviewed those documents in camera nor required them to be produced in document production as their basis for arguing fundamental prejudice.  As the Court noted in its subsequent decision last week, “Now the question is simply whether, considering the produced documents in conjunction with the record of the arbitration proceeding, the Louisiana Retirees have satisfied one of the recognized grounds for vacating an arbitration award.”

The Louisiana Retirees assert three bases for vacatur in this lawsuit. According to their motion, they contend “(1.) that the arbitration proceeding was fundamentally unfair because severe prejudice occurred to the Louisiana Retirees when Pershing did not disclose to the Louisiana Retirees [certain documents which were not produced by Pershing until this Court ordered them produced in this lawsuit]; (2.) the obvious partiality and bias of the arbitrators because of the apparent `assumed veracity’ of Pershing when the Panel allowed Pershing to serve as the judge and jury on defining the scope of the documents withheld under attorney client privilege and the SARs/AML privilege; and (3.) that the Panel committed manifest error reviewing the evidence that was actually presented to the arbitration hearing based upon the review standard of the Second Circuit because of the application of New York Law.”

Judge Africk addressed the Retirees’ “fundamentally unfair” presentation first.  He rejected the Retirees’ arguments.  The Judge began by repeating the commonly-accepted “exceedingly narrow” standard for vacatur of an arbitration award in FAA jurisprudence.

“In light of the strong federal policy favoring arbitration, judicial review of an arbitration award is extraordinarily narrow.” …. “Under this review, an award may not be set aside for a mere mistake of fact or law.” …. “Instead, Section 10 of the FAA provides the only grounds upon which a reviewing court may vacate an arbitrative award.”

Looking at the argument that the panel’s failure to review the documents in camera before ruling on the privilege justified vacatur, the District Court ruling noted that the FINRA arbitration rules do not require in camera review.  Moreover, commented the Court, the overall discovery process was not fundamentally unfair (“A FINRA arbitration panel has great latitude to determine the procedures governing their proceedings and to restrict or control evidentiary proceedings.”).

With respect to the first decision—not to review the documents in camera—the Court observes that nothing in the FINRA arbitration rules requires in camera review prior to ruling on a discovery motion. To the extent the Louisiana Retirees claim that the manner in which the panel resolved discovery issues rendered the proceeding fundamentally unfair, the Court rejects that argument. Even if this Court would have proceeded differently, this Court cannot conclude that the entire arbitration proceeding was tainted because of it. See Bain Cotton Co. v. Chesnutt Cotton Co., 531 F. App’x 500, 501 (5th Cir. 2013) (“Regardless whether the district court or this court—or both—might disagree with the arbitrators’ handling of Bain’s discovery requests, that handling does not rise to the level required for vacating under any of the FAA’s narrow and exclusive grounds.”).

“A FINRA arbitration panel has great latitude to determine the procedures governing their proceedings and to restrict or control evidentiary proceedings.” …. Indeed, even in federal court the decision whether to conduct an in camera inspection is wholly within the discretion of the district court. …. The record reveals that discovery was extensively litigated before the panel, which decided six motions to compel, received multiple rounds of briefing from the parties, and held a telephonic hearing to address the SAR privilege and the request for an in camera review. …. Ultimately, the Louisiana Retirees received over 121,000 documents from Pershing totaling over 635,000 pages. …. The discovery process was not fundamentally unfair. See Prestige Ford v. Ford Dealer Computer Servs., Inc., 324 F.3d 391, 395 (5th Cir. 2003) (abrogated on other grounds) (“In the case at hand, hearings were held and each disputed item was given consideration by the panel; thus, more than adequate opportunity was afforded to the parties and the minimum standards of fundamental fairness were met.”).

Having disposed of the Retirees’ complaint based on the failure of the panel to review the documents in camera before ruling, the Court then turned to the second assertion of fundamental unfairness – the panel’s merits decision that the attorney-client privilege and the SAR privilege shielded all of the documents withheld by Pershing.  Here too, Judge Africk was not persuaded that the tribunal’s decision deprived the Retirees of a fair hearing. The District Court considered that the documents not disclosed during the arbitration were cumulative of documents that were produced (“The documents produced to the Louisiana Retirees in this litigation are cumulative of the documents produced to the Louisiana Retirees in the arbitration proceeding. …  There is no reasonable basis to suggest that if the new documents had been produced during the arbitration proceeding, the result would have been different.”).

With respect to the second decision complained of by the Louisiana Retirees— the panel’s decision that the attorney-client privilege and the SAR privilege shielded all of the documents withheld by Pershing—the Court also concludes that the decision did not render the arbitration proceeding fundamentally unfair. …. Even if this Court disagrees with the arbitration panel regarding the appropriate scope of those privileges, the Court does not find that the Louisiana Retirees were deprived of a fair hearing as a result of the decision.

The documents produced to the Louisiana Retirees in this litigation are cumulative of the documents produced to the Louisiana Retirees in the arbitration proceeding. A review of the record shows that Pershing produced a vast amount of material during the arbitration proceeding which evidenced that high-level Pershing employees were aware as early as 2006, to one degree or another, of potential “red flags” regarding Stanford Group Company. …. The Louisiana Retirees marshaled this evidence in support of their position that Pershing knew or should have known that there were serious questions about Stanford Group Company’s legitimacy during the period that the Ponzi scheme was in operation, and that Pershing should have done more sooner to raise the alarm regarding Stanford Group Company. The arbitration panel rejected the Louisiana Retirees’ arguments. There is no reasonable basis to suggest that if the new documents had been produced during the arbitration proceeding, the result would have been different.

Because the Louisiana Retirees were able to introduce comprehensive evidence supporting their theory of the case, the deprivation of additional arguably relevant evidence did not deprive the Louisiana Retirees of a fair hearing.

The Judge in any event also assessed whether the evidence in the withheld documents about Pershing’s knowledge regarding Stanford’s suspicious behavior was a primary focus of the arbitration.  Judge Africk ruled it was not.  Moreover, the additional evidence would not have shown a direct conflict with testimony of Pershing witnesses.

To the extent the Louisiana Retirees argue that the newly produced documents directly contradict the testimony of Pershing witnesses in the arbitration, the Court finds the Louisiana Retirees’ position to be a mischaracterization of the record. Pershing witnesses acknowledged that there were concerns raised regarding Stanford Group Company as early as 2006. The primary focus of the arbitration proceeding was not whether Pershing had notice of suspicious behavior by Stanford Group Company, but rather whether Pershing acted reasonably to address their concerns and—more importantly—even if Pershing acted unreasonably, whether Pershing violated any legal duty owed to the Louisiana Retirees. (Pershing argued during the arbitration that Pershing could have no liability for fraud committed by Stanford Group Company even if Pershing should have discovered that fraud or done more to prevent it). All of these issues were exhaustively litigated.

Importantly, the Court also pointed out that, if there were ambiguities in the record, any “doubts or uncertainties must be resolved in favor of upholding the arbitration award.”  Applying this legal standard, the Court rejected the Retirees’ vacatur argument.

The Louisiana Retirees also packaged the same underlying situation as an argument that, by not reviewing the withheld documents in camera, the arbitrators evidenced partiality on the part of the arbitrators. The Retirees’ “evident partiality” attack actually involved three separate issues; (1) the in camera issue, (2) the fact that the then-CEO of Pershing had been a member of the FINRA Board of Governors, and (3) the fact that Pershing had presented a defense in the arbitration (the so-called “FINRA defense”) that regulatory examination and enforcement failures (i.e., alleged misconduct by FINRA and the Securities Exchange Commission (SEC) in failing to promptly identify the Stanford Ponzi scheme) meant that FINRA and the SEC should be held equally responsible for the failure to discover the Ponzi scheme earlier.

The Louisiana Retirees next argue that the panel’s decision should be vacated pursuant to section 10(a)(2) of the FAA because there was evident partiality or corruption by the arbitrators. They say the bias was made evident in three ways. First, the Louisiana Retirees claim that the panel’s failure to conduct the in camera review proves the panel was biased in favor of Pershing. Second, the Louisiana Retirees argue the panel was biased because the CEO of Pershing during the relevant time period, Richard Brueckner, was a former member of the FINRA Board of Governors. Third, the Louisiana Retirees contend that the panel was inclined to rule in favor of Pershing because Pershing asserted a so-called “FINRA defense,” in which Pershing supposedly argued to the panel that regulator misconduct or negligence served as a defense to Pershing, i.e. that if Pershing was liable to the Louisiana Retirees then FINRA and the SEC must be deemed equally culpable for failing to discover the Ponzi scheme sooner.

Judge Africk did not accept any of these arguments by the Retirees.  With respect to the claim that the the arbitrators showed bias by declining in camera review, the Judge referred back to his conclusion that the tribunal’s conduct did not produce an unfair hearing.

The Court has already addressed the Louisiana Retirees’ argument that the panel should have reviewed Pershing’s documents in camera. The FINRA rules do not require such an in camera review, and placed in the context of the lengthy discovery proceedings as a whole the panel’s decision not to review the documents does not suggest bias.

The Court then disposed of the other two assertions of bias (“that they strenuously objected to Mr. Brueckner [the former Pershing CEO who had been on the FINRA Board] not testifying in person in the order desired by the Louisiana Retirees during the arbitration proceeding, and that they objected to Pershing advancing the FINRA defense”).  With respect to the issue of the former CEO not be compelled to testify, Judge Africk declined to consider that the former CEO’s position on the FINRA Board produced any partiality on the part of the arbitrators appointed by FINRA.

As for Mr. Brueckner’s relationship with FINRA, the U.S. District Court for the Southern District of New York recently rejected an identical argument by a losing party to an arbitration, and the Court finds its reasoning persuasive and applicable here. See Freedom Inv’rs Corp. v. Hadath, 2012 WL 383944, at *5 (S.D.N.Y. Feb. 7, 2012) (“Blumenschein’s service on FINRA’s Board of Governors is insufficient to meet the objective test for assessing bias. Pinter has not made any showing that an individual member of the FINRA Board of Governors, or indeed the Board of Governors as a whole, has any influence over the selection of FINRA [Dispute Resolution] arbitrators, their compensation, or their assignment to panels. At the very most, he has raised the specter of an appearance of bias, insufficient grounds for disturbing an arbitration award.”).

The last bias claim put forward by the Louisiana Retirees, based on the “FINRA defense,” fared no better (“Even if Pershing had notified the regulators of any concerns it had regarding Stanford Group Company, it would not have made a difference in terms of shutting down the Ponzi scheme because the regulators and law enforcement agencies already knew far more about Stanford Group Company than anything Pershing could have reported.”).

Finally, with respect to the alleged bias created by the FINRA defense, the Court finds the Louisiana Retirees’ characterization of the defense somewhat misleading. This defense—one of many advanced by Pershing—was essentially a causation argument: Even if Pershing had notified the regulators of any concerns it had regarding Stanford Group Company, it would not have made a difference in terms of shutting down the Ponzi scheme because the regulators and law enforcement agencies already knew far more about Stanford Group Company than anything Pershing could have reported. However the defense is characterized, the Court is not at all convinced that Pershing’s assertion of a particular legal theory demonstrates that the arbitration panel was biased.

Notably, the District Court independently ruled that these “evident partiality” arguments had been waived by the Louisiana Retirees.  Once again, a positive response by counsel to the formula question put by the arbitral panel at the end of the hearings (did they receive “a full and fair opportunity to present their case”) played an important role.

At the beginning of the arbitration hearing, counsel for the Louisiana Retirees stated that they accepted the panel. At the end of the arbitration hearing, counsel for the Louisiana Retirees agreed that they had enjoyed “a full and fair opportunity” to present their case. …. Counsel for the Louisiana Retirees even thanked the panel for its time. … (“We appreciate y’all’s efforts.”). At that point, the Louisiana Retirees already knew of all the panel’s decisions described above, yet they failed to object. It was only once the arbitration panel ruled against them that the bias argument emerged. The waiver rule is designed to prevent just such a circumstance from occurring.

The Louisiana Retirees also made a “manifest error” argument, arguing that, by operation of choice of law principles, the judge-made New York law “manifest error” ground for vacatur was applicable in the Louisiana District Court.  The District Court rejected the choice of law argument, holding instead that the position in the US Circuit Court of Appeals for the 5th Circuit against any “manifest error” vacatur ground was binding.  Moreover, in a brief footnote, Judge Africk also held that “Regardless, this Court finds no circumstances evidencing manifest disregard of the law by the arbitration panel.”

The principal import of this ruling lies in the willingness of the District Court to conclude, in the face of its own prior ruling that some of the withheld documents should have been produced, that vacatur was still not appropriate.  But, to reach that conclusion, the Court found it necessary to rely in part on its own conclusion that the information in those documents was cumulative of information already in the arbitration record so that no fundamental unfairness had occurred.  The decision therefore has something for everyone in future disputes on each side of this issue.  Of course, it is not unlikely the Louisiana Retirees will appeal Judge Africk’s decision to the for the 5th Circuit Court of Appeals.  So, there may very well be more to come later this year.

 

Mark Kantor is a CPR Distinguished Neutral. Until he retired from Milbank, Tweed, Hadley & McCloy, Mark was a partner in the Corporate and Project Finance Groups of the Firm. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). Additionally, Mr. Kantor is Editor-in-Chief of the online journal Transnational Dispute Management.

This material was first published on OGEMID, the Oil Gas Energy Mining Infrastructure and Investment Disputes discussion group sponsored by the on-line journal Transnational Dispute Management (TDM, at https://www.transnational-dispute-management.com/), and is republished with consent.