Sixth Circuit Refuses To Permit Judicial Review Prior To Conclusion Of Reinsurance Arbitration Proceeding

The Sixth Circuit recently reversed a district court’s decision to stay arbitration proceedings in a dispute concerning allegations of overbilling on a reinsurance program. The arbitration clause from the treaty established a tripartite method of arbitration – one arbitrator selected by each side and one neutral umpire. During the course of the arbitration (and before rendition of a final award), one of the parties contended that its selected arbitrator had been disenfranchised by the other two arbitrators and that inappropriate ex parte communications had occurred. A lawsuit was filed in Michigan state court, seeking to vacate an interim award on the grounds that the two arbitrators had exceeded their authority under the treaty and that the umpire had displayed evident partiality. The case was removed to federal court, where the district court recast the challenge as a breach of contract dispute regarding the rules under which the arbitration was to proceed, and it granted an injunction to stay the arbitration. On appeal, the Sixth Circuit reversed, concluding that the district court erred by prematurely interjecting itself into the private dispute, noting that parties to an arbitration generally may not challenge the fairness of the proceedings or the partiality of the arbitrators until the conclusion of the arbitration and the rendition of a final award. The Sixth Circuit made a point to disagree with the district court’s application of 9 U.S.C. § 2, noting that “[n]othing in the text or history of the FAA suggests that § 2 was intended to displace § 10’s limitation on judicial review of non-final awards.” Savers Property & Casualty Insurance Co. v. National Union Fire Insurance Co. of Pittsburgh, PA, Nos. 13-2288/2289 (6th Cir. Apr. 9, 2014).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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