Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Insurance Company of North America v. Public Service Mutual Insurance Co.

June 23, 2010

INSURANCE COMPANY OF NORTH AMERICA, NOW KNOWN AS CENTURY INDEMNITY COMPANY, AND INA REINSURANCE COMPANY, NOW KNOWN AS R&Q REINSURANCE COMPANY, PETITIONERS-APPELLANTS,
v.
PUBLIC SERVICE MUTUAL INSURANCE COMPANY, RESPONDENT-APPELLEE.



SYLLABUS BY THE COURT

Appellants Insurance Company of North America and INA Reinsurance Company (collectively, "INA") appeal from a judgment of the district court (Harold Baer, Jr., Judge), granting Appellee Public Service Mutual Insurance Company's Rule 60(b)(2) motion based on newly discovered evidence that an arbitrator who had resigned was, in fact, able to rejoin the arbitration panel prior to the district court's decision on whether to convene a new panel or order a replacement arbitrator. We conclude that the rule articulated in Marine Products Export Corp. v. M.T. Globe Galaxy, 977 F.2d 66 (2d Cir. 1992) -- that, absent "special circumstances," if a vacancy arises on an arbitral panel due to the death of an arbitrator prior to the rendering of an award, a new panel should be convened -- does not apply to a vacancy occasioned by a resignation, and that, in the instant case, the district court's decision either to reappoint the arbitrator who had resigned, or, in the alternative, to direct INA to appoint a replacement was proper pursuant to 9 U.S.C. § 5.

AFFIRMED.

The opinion of the court was delivered by: Gerarde. Lynch, Circuit Judge

Argued: March 12, 2010

Before: JACOBS, Chief Judge, LYNCH, Circuit Judge, and RESTANI, Judge.*fn1

Appellants Insurance Company of North America and INA Reinsurance Company appeal (collectively, "INA") from a judgment of the district court (Harold Baer, Jr., Judge), granting Appellee Public Service Mutual Insurance Company's ("PSMIC") Rule 60(b)(2) motion based on newly discovered evidence that an arbitrator who had resigned was, in fact, able to rejoin the arbitration panel prior to the district court's decision on whether to convene a new panel or order a replacement. We conclude that the rule articulated in Marine Products Export Corp. v. M.T. Globe Galaxy, 977 F.2d 66 (2d Cir. 1992) -- that, absent "special circumstances," if a vacancy arises on an arbitral panel due to the death of an arbitrator prior to the rendering of an award, a new panel should be convened -- does not apply to a vacancy occasioned by a resignation, and that, in the instant case, the district court's decision either to reappoint the arbitrator who had resigned, or, in the alternative, to direct INA to appoint a replacement was proper pursuant to 9 U.S.C. § 5. We therefore affirm the district court's order.

BACKGROUND

I. The Resignation of the Arbitrator

PSMIC commenced arbitration against INA in April 2007 seeking reimbursement under reinsurance contracts for payments made to its insured for the settlement of certain pollution claims. The arbitration commenced before a three-member panel consisting of an arbitrator appointed by INA, John Sullivan; an arbitrator appointed by PSMIC, Thomas Tobin; and an umpire, Roger Moak. The panel supervised a substantial amount of discovery, received briefing, and held oral argument on PSMIC's motion for summary judgment regarding what it deemed to be INA's chief legal defense. On April 7, 2008, the panel granted PSMIC's motion for summary judgment rejecting INA's defense. All three members of the panel, including Sullivan, INA's appointed arbitrator, signed the order.

INA moved for reconsideration of this order on April 18, 2008, and a briefing schedule was set.However, on May 2, 2008, while the motion for reconsideration was pending, Sullivan advised the parties and the other panel members that he had been diagnosed with cancer, that he was to undergo a course of treatment that was to last approximately six weeks, and that he was doubtful he could perform in a professional or timely manner. The parties accepted his resignation.

The parties and remaining panel members disagreed as to how to proceed. On May 5, 2008, the remaining panel members ordered INA to appoint a replacement arbitrator. INA responded the same day, stating that it was unsure whether it would be proper for Sullivan to be replaced, and suggesting that a new panel might have to be constituted. The following day, PSMIC responded that it would be unwilling to convene a new panel, and argued that Sullivan should be replaced either by INA or by a court.

To avoid any "potential assertion of waiver," PSMIC included Sullivan on the email. INA wrote back a few hours later reiterating its position that it was still deciding whether to replace Sullivan or constitute a new panel, and adding that:

Mr. Sullivan has resigned and copying him on communications does not change his status. Additionally, in light of Mr. Sullivan's health situation, one would have hoped that PSMIC realizes that he has more urgent concerns th[a]n this matter. Indeed, given the situation, it is both legally improper and morally repugnant to continue to involve Mr. Sullivan.

INA added that "[s]o that Mr. Sullivan need not be bothered further, [INA] will agree that PSMIC has not waived any rights by failing to include him in further communications and hopefully, out of simple human decency, PSMIC will refrain from copying him." PSMIC apparently internalized this reproach and refrained from contacting Sullivan.

The parties were unable to reach agreement on whether to replace Sullivan or convene a new arbitral panel. The remaining panel members found that PSMIC had "substantive rights," and that it would be "unduly prejudiced" if an entirely new panel were convened instead of simply replacing Sullivan and continuing the process. However, they acknowledged that INA refused to proceed in this fashion and suggested the parties seek guidance from a court.

Following this, INA filed a petition in the Southern District of New York for a stay of arbitration and an order disqualifying the panel and compelling the arbitration to start over with a new panel. PSMIC filed a cross-petition to compel INA to proceed before the two remaining panel members and a substitute for Sullivan, and to confirm the panel's April 7, 2008 summary judgment order.

II. The December 10, 2008 Decision

The district court consulted the "general rule" that absent "special circumstances," "where one member of a three-person arbitration panel dies before the rendering of an award and the arbitration agreement does not anticipate that circumstance, the arbitration must commence anew with a full panel." Trade & Transport, Inc. v. Natural Petroleum Charterers Inc., 931 F.2d 191, 193-94 (2d Cir. 1991). Applying that rule to the context of Sullivan's resignation, the district court granted INA's petition for a new panel. The court acknowledged the potential for abuse and manipulation intrinsic in permitting a losing party a "'second bite at the apple'" upon resignation of his or her arbitrator, but found that because "there is no suggestion of any misconduct here and neither party disputes the severity of [the] health condition that forced Mr. Sullivan to resign," and because the resignation had occurred while a motion for reconsideration was being considered and there had been no "partial final award" granted by the panel, the arbitration should commence anew. The court concluded that it would be "unfair to ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.