New York Federal Court Confirms Arbitration Award Where Plaintiff Offered No Grounds to Vacate, Modify, or Correct Award

Carlton Fields
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Carlton Fields

PB Life and Annuity Co. Ltd. brought this action seeking a declaratory judgment that a breach of contract dispute with Universal Life Insurance Co. was not subject to arbitration and must be litigated in federal or state courts in New York. Universal Life filed a motion to compel arbitration, and PB Life filed a motion for a preliminary injunction, which the parties later agreed would be converted into a motion for a permanent injunction.

We have previously addressed the district court’s May 12, 2020, decision granting Universal Life’s motion to compel arbitration and denying the plaintiff’s motion for a permanent injunction of the arbitration.

On June 2, 2020, the arbitral panel issued an interim award to Universal Life. Universal Life subsequently moved to confirm the arbitration award, and PB Life cross-moved to vacate the award on four grounds:

1. Whether the Panel Denied PB Life Due Process

PB Life argued that the arbitral panel denied it a fair opportunity to present its case under the Federal Arbitration Act and the New York Convention because PB Life was not given the opportunity to generate new independent expert reports showing the value of the trust assets, or the opportunity to obtain important discovery from Universal Life on the same issue. The court rejected PB Life’s argument, noting that the basis for the panel’s ruling was not the value of the assets in the trust account, but rather whether they were qualifying assets, and that the panel’s conclusion that they were not qualifying would not be undermined by evidence that the assets were valuable. The court found that PB Life “does little more than complain that the panel issued its interim award without conducting a full hearing on the merits of its defenses.”

2. Whether the Award Was Entered in Manifest Disregard of the Law

PB Life argued that the panel manifestly disregarded the law by finding irreparable harm when Universal Life sought money damages alone. The court found that PB Life failed to provide any law that is contrary to the panel’s decision or provide any basis for its assertion that the panel misapplied the law to find “immediate and irreparable loss or damage” other than its bare disagreement with the outcome.

3. Whether Recognition or Enforcement of the Award Would Be Contrary to Public Policy

PB Life argued that the award would be contrary to public policy under the Convention because its recognition or enforcement would require PB Life to violate a temporary restraining order entered by a North Carolina state court to which PB Life voluntarily subjected itself.

The court construed PB Life’s arguments in one of two ways:

  • First, that PB Life argued the temporary restraining order relieved it of its obligations under the reinsurance agreement. The court rejected this argument, finding that PB Life forfeited such an argument when it failed to raise this argument before the panel.
  • Second, that PB Life was in essence stating a restraint on the power of the court – that it would be contrary to public policy for the court to enter a judgment that would require PB Life to violate an order of another court. Again, the court rejected PB Life’s argument, finding that PB Life offered no reason to believe that the North Carolina state court would not honor the district court’s judgment, nor identified any public policy that prevents a second court from awarding judgment in favor of a party entitled to it simply because the defendant is subject to a prior court order from an earlier court that would make compliance difficult or impossible.

Simply put, PB Life had not identified any public policy that prevented the court from ordering interim relief in favor of Universal Life that the panel determined Universal Life was plainly entitled to under the Convention and the FAA. The panel found in favor of Universal Life, and under governing law, Universal Life was entitled to confirmation of the award. The court advised that to the extent the judgment conflicts with that of the temporary restraining order in the North Carolina court, PB Life has the means to address that conflict by either petitioning the North Carolina court for relief or, if the plaintiffs in the North Carolina proceeding can successfully resist, find another way to satisfy those parties.

4. Whether the Dispute Is Arbitrable

Lastly, PB Life argued that the dispute was not arbitrable because the arbitration clause of the reinsurance agreement was superseded by the trust agreement. The court stood by its original decision, which held that the reinsurance agreement and its arbitration clause were not superseded by the trust agreement and that the question of arbitrability was for the arbitrators to decide, who ultimately determined that the dispute was arbitrable. The court found that PB Life failed to show an “intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.”

Ultimately concluding that PB Life had not provided any ground to vacate, modify, or correct the award, the U.S. District Court for the Southern District of New York confirmed the arbitration award.

PB Life & Annuity Co. v. Universal Life Insurance Co., No. 1:20-cv-02284 (S.D.N.Y. July 30, 2020).

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Carlton Fields
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