935 F.2d 1019 (9th Cir. 1991), 88-6242, Pacific Reinsurance Management Corp. v. Ohio Reinsurance Corp.

Docket Nº:88-6242, 88-6560 and 89-55550.
Citation:935 F.2d 1019
Party Name:PACIFIC REINSURANCE MANAGEMENT CORP.; Mission Insurance Company, Plaintiffs-Appellees, v. OHIO REINSURANCE CORP.; Walton Insurance Ltd.; Abeille-Paix Reassurances; Hamburg International Reinsurance Company; Hassneh Insurance Company of Israel Ltd.; Seguros America S.A., Defendants-Appellants.
Case Date:June 05, 1991
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1019

935 F.2d 1019 (9th Cir. 1991)

PACIFIC REINSURANCE MANAGEMENT CORP.; Mission Insurance

Company, Plaintiffs-Appellees,

v.

OHIO REINSURANCE CORP.; Walton Insurance Ltd.;

Abeille-Paix Reassurances; Hamburg International

Reinsurance Company; Hassneh Insurance Company of Israel

Ltd.; Seguros America S.A., Defendants-Appellants.

Nos. 88-6242, 88-6560 and 89-55550.

United States Court of Appeals, Ninth Circuit

June 5, 1991

Argued and Submitted Jan. 9, 1991.

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[Copyrighted Material Omitted]

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Elliott M. Kroll, Kroll & Tract, Los Angeles, Cal., Barry L. Weissman, Knapp, Petersen & Clarke, Universal City, Cal., for defendants-appellants.

Linda M. Lasley, Buchalter, Nemer, Fields & Younger, Los Angeles, Cal., for plaintiffs-appellees.

Appeal from the United States District Court for the Central District of California.

Before ALARCON, NORRIS and WIGGINS, Circuit Judges.

WIGGINS, Circuit Judge:

Ohio Reinsurance Corp., et al. appeals the district court's denial of a partial stay of arbitration, confirmation of the arbitration panel's Interim Final Order (IFO), and the district court's supersedeas bond order pending appeal of the IFO. The Federal Arbitration Act, 9 U.S.C. Sec. 1 et seq., does not confer independent jurisdiction on the federal courts. General Atomic Co. v. United Nuclear Corp., 655 F.2d 968, 969 (9th Cir.1981), cert. denied, 455 U.S. 948, 102 S.Ct. 1449, 71 L.Ed.2d 662 (1982). However, diversity jurisdiction exists in this case, 28 U.S.C. Sec. 1332, and the appeal was timely. This court has jurisdiction under 28 U.S.C. Sec. 1292 governing appeals from interlocutory orders. We hold that the denial of partial stay of arbitration is not appealable. We reverse in part and affirm in part the district court's confirmation of the IFO, and the district court's supersedeas bond order.

BACKGROUND

The appellants, Ohio Reinsurance Corp., et al., were members of a reinsurance pool managed by the appellee, Pacific Reinsurance Management Corporation (PRMC). Each of the appellants executed a Management Agreement authorizing PRMC to develop, underwrite, and manage reinsurance business in their behalf. PRMC accepted much of its business in the name of one of the pool members, Mission Insurance Company. Unhappy with that practice and other matters, appellants sued PRMC for fraud and other wrongful conduct, seeking rescission of the Agreements and damages for any money due third parties from the pool. The district court ordered arbitration

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under the arbitration provisions of the Management Agreements.

During the arbitration, the panel retained outside counsel to help it set up an escrow account for damages that might be due PRMC under the Agreements. The appellants petitioned the district court to grant a partial stay of the arbitration to prevent PRMC from asserting what appellants argued were non-arbitrable claims. The appellants also sought a ruling that the retention of outside counsel by the panel was an improper delegation of authority. The district court denied the petition. The appeal from that denial is the first of the three considered in this consolidated appeal. (No. 88-6242).

In July, 1988, the arbitration panel issued an Interim Final Order (IFO) setting up an escrow account with the balances apparently due from appellants to PRMC if the Management Agreements prove valid after further investigation. The appeal from the district court's confirmation of the IFO is the second of the three considered in this consolidated appeal. (No. 88-6560).

The third appeal is from the order of the district court requiring supersedeas bonds for the full amount of the escrow order ($20,222,000) pending appeal of the IFO. (No. 89-55550).

DISCUSSION

I. THE DISTRICT COURT'S DENIAL OF A PARTIAL STAY

The 1988 amendments to the Federal Arbitration Act (FAA) added a new section to the Act, the relevant part of which prohibits an appeal from a district court's denial of a stay of arbitration:

... [A]n appeal may not be taken from an interlocutory order-- ...

(4) refusing to enjoin an arbitration that is subject to this title.

9 U.S.C. Sec. 15(b)(4). Because this amendment addresses remedies and procedures and does not alter substantive rights, it applies retroactively. Nichols v. Stapleton, 877 F.2d 1401, 1403 (9th Cir.1989). Therefore, this court has no jurisdiction over appeal No. 88-6242.

II. THE DISTRICT COURT'S POWER TO REVIEW THE INTERIM FINAL ORDER

The appellants argue that the IFO was a non-final award of the kind that is not confirmable under Ninth Circuit caselaw construing the FAA. The FAA allows a district court to vacate an award that is not a "mutual, final, and definite award upon the subject matter submitted...." 9 U.S.C. Sec. 10(d). The Ninth Circuit has said that because of the Congressional policy favoring arbitration when agreed to by the parties, judicial review of non-final arbitration awards "should be indulged, if at all, only in the most extreme cases." Aerojet-General Corp. v. American Arbitration Ass'n, 478 F.2d 248, 251 (9th Cir.1973) (arbitrator's choice of locale reviewed only for bad faith or exceeding authority); see also Millmen Local 550 v. Wells Exterior Trim, 828 F.2d 1373, 1377 (9th Cir.1987) (arbitrators' decision determining liability, but not remedy was not final and not confirmable); Sunshine Mining Co. v. United Steelworkers, 823 F.2d 1289, 1295 (9th Cir.1987) (final award that depended on future psychiatric examination should be remanded, not confirmed).

In Millmen and Sunshine, we refused to review awards that decided only part of the substantive issues submitted to arbitration. In contrast, the IFO in this case does not attempt to address, even partially, the substantive issues before the arbitrators--the validity and application of the Management Agreements. Rather, the IFO is in the nature of a preliminary injunction. It is temporary equitable relief that requires the appellants to place $20,222,000 in escrow pending the arbitrators' decision regarding the validity of the Management Agreements. Whether temporary equitable relief that is necessary to prevent a potential...

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