The opinion of the court was delivered by: Berman, District Judge.
On February 15, 2002, Petitioner moved in this Court for an
order permanently enjoining further arbitration and vacating
part of the Award ("Petitioner's Motion").*fn3 On March 8,
2002, Respondents cross-moved for an order confirming the Award,
imposing sanctions on Petitioner for "act[ing] unreasonably,
vexatiously and in bad faith in [attempting] to enjoin the
ongoing arbitration," and sealing the record (of the arbitration
and court proceedings) ("Respondents' Cross-Motion"). On March
20, 2002, Petitioner submitted a reply ("Petitioner's Reply")
and, on March 26, 2002, Respondents submitted a reply of their
own ("Respondents' Reply").
For the reasons set forth below, the Court (i) denies
Petitioner's motion to enjoin the arbitration; (ii) denies
Petitioner's motion partially to vacate the Award; (iii) grants
Respondents' Cross-Motion to confirm the Award; (iv) denies
Respondents' motion to impose sanctions; and (v) grants in part
Respondents' motion to seal the record.
EMLICO is a mutual insurance company which was formed in
Massachusetts in 1927. Petitioner's Motion at 6. EMLICO's sole
commercial policyholder is GE. Id. Commercial Union, an
insurance company based in Massachusetts, issued contracts to
EMLICO reinsuring a portion of EMLICO's liability to GE
("Reinsurance Contracts"). Id. at 5. Beginning in 1992,
pursuant to the Reinsurance Contracts, EMLICO sought to recover
from Commercial Union amounts it had paid to GE for asbestos and
environmental clean-up claims. Shally Decl. ¶ 4.
EMLICO was domiciled in Massachusetts until June 1995, when,
with the authorization of the Massachusetts and Bermuda
insurance regulatory authorities, it reorganized its business
operations and moved its domicile to Bermuda (i.e. it
"redomesticated"). Shally Decl. ¶ 5; Petitioner's Motion at 6-7.
On October 20, 1995, EMLICO filed a "winding-up petition" in the
Supreme Court of Bermuda ("Bermuda Court") declaring insolvency.
See Winding-Up Petition dated October 20, 1995, Ex. 10 to
Shally Decl. On September 12, 1996, the Bermuda Court appointed
Respondents, as "Joint Permanent Liquidators," to manage
EMLICO's "winding up" process. See Order of the Bermuda Court
dated October 20, 1995, Ex. 11 to Shally Decl.
On July 1, 1997, the Panel determined that the arbitration
should proceed in three phases. Interim Order of Panel dated
July 1, 1997, Ex. A to Affidavit of Lawrence I. Brandes dated
February 14, 2002 ("Brandes Aff."). In Phase I, the Panel would
"hear Commercial Union's global defenses under the reinsurance
contracts," and determine whether the "reinsurance contracts
[were to] be rescinded." Id. In Phases II and III, the Panel
would "determine [Commercial Union's] liability to EMLICO for
asbestos [and] environmental clean-up claims." Shally Decl. ¶
By order dated October 31, 2001 ("Phase I Order"), denied
Commercial Union's claim for rescission of the Reinsurance
Contracts. Phase I Order, Ex. B to Brandes Affidavit, at 2.
Commercial Union had argued that the Reinsurance Contracts
should be rescinded principally because "redomestication to
Bermuda and the formation of EMLICO, Ltd. were fraudulent. . . .
[EMLICO] moved to Bermuda to avoid being liquidated in
Massachusetts[,] because [EMLICO] and GE . . . believed a
liquidation in Bermuda would be more advantageous to them and
more disadvantageous to reinsurers." Petitioner's Motion at 2.
1) "While the Panel is in unanimous agreement that:
a) EMLICO deceived the Massachusetts Commissioner
of Insurance and Bermuda authorities ...