In the Matter of The Arbitration Between Gen. Sec. Nat'l Ins. Co.

• Decision Date: 29 April 2011
• Docket Number: No. 10 CV 8682 (NRB).,10 CV 8682 (NRB).
• Citation: 785 F.Supp.2d 411
• Parties: In the Matter of the ARBITRATION BETWEEN GENERAL SECURITY NATIONAL INSURANCE COMPANY, Petitioner,andAEQUICAP PROGRAM ADMINISTRATORS, Respondent.
• Court: U.S. District Court — Southern District of New York

785 F.Supp.2d 411

In the Matter of the ARBITRATION BETWEEN GENERAL SECURITY NATIONAL INSURANCE COMPANY, Petitioner,andAEQUICAP PROGRAM ADMINISTRATORS, Respondent.

No. 10 CV 8682 (NRB).

United States District Court, S.D. New York.

April 29, 2011.

Bruce M. Friedman, Gerald A. Greenberger, Rubin, Fiorella & Friedman, LLP, New York, NY, for Petitioner.

Emily A. Hayes, Fred N. Knopf, Wilson Elser Moskowitz Edelman & Dicker LLP, White Plains, NY, for Respondent.

MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD, District Judge.

Petitioner General Security National Insurance Company (“General Security”) has petitioned this Court for an order confirming an arbitration award pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. In opposition, respondent AequiCap Program Administrators (“AequiCap”) contends that this Court should deny General Security's petition and should vacate a portion of the arbitration award. Specifically, AequiCap argues that the arbitration panel exceeded its authority and acted in manifest disregard of clear law by awarding attorney's fees to General Security.

For the reasons stated herein, we reject AequiCap's arguments and grant General Security's petition to confirm the arbitration award.

BACKGROUND

Petitioner General Security is an insurance company that is organized under the laws of Delaware and has its principal place of business in New York. Respondent AequiCap is an insurance managing general agency that is organized under the laws of, and has its principal place of business in, Florida. (Petition to Confirm Arbitration Award (“Pet.”) ¶¶ 1–2.) On June 20, 2003, General Security and AequiCap entered into the Amended Contingent Commission Agreement (“ACCA”). The ACCA provides, among other things, that AequiCap will reinsure General Security's losses and specifies a payment formula. (Pet. Ex. 1.)

Paragraph 13 of the ACCA provides that: “[a]ny disputes arising under this Agreement are subject to the arbitration clause in the Underwriting Agreement.” The Underwriting Agreement was a preexisting agreement, which was entered into by General Security, General Security Property and Casualty Company, and AequiCap on January 1, 1997.¹ (Pet. ¶ 6 & Ex. 2.)

Section XII (C) of the Underwriting Agreement, which is incorporated into the ACCA, sets forth the parties' agreement to arbitrate (“Arbitration Clause”). The Arbitration Clause provides that:

[i]n the event that any disagreement or dispute shall arise as to the effect or interpretation of any of the terms, provisions or conditions of this Agreement, or as to the performance of either party under this Agreement, the parties hereto shall submit such disagreement or dispute for resolution to a panel of three disinterested arbitrators who shall be experienced in the fields of insurance and the American Agency system. One arbitrator shall be appointed by [AequiCap] and one by [General Security].... A third wholly disinterested arbitrator ... shall be selected by the parties' two arbitrators within thirty (30) days of the submission for arbitration.... The arbitration panel shall make its decision with regard to the provisions of this Agreement and the custom and usage of the insurance business to the extent not inconsistent with the provisions of this Agreement. The arbitration panel shall issue its decision in writing based on a hearing to be held in New York City in which evidence may be introduced without following the strict rules of evidence, but in which cross examination and rebuttal shall be allowed. The panel shall make its decision within sixty (60) days following the termination of the hearing unless the parties agree to an extension. The majority decisions of the panel shall be final and binding upon all parties to the proceeding. Judgment may be entered upon the award of the panel in any court having jurisdiction thereof.

(Pet. ¶ 6 & Ex. 2.)

The ACCA itself does not include a choice of law provision. However, the Underwriting Agreement includes such a provision, which is set forth in section XII(I) of the Underwriting Agreement. The choice of law provision recites that:

[t]his Agreement shall be interpreted in accordance with the laws of the State of New York with respect to matters concerning General Security Property and Casualty Company and the laws of the State of New York with respect to matters concerning [General Security].

(Declaration of Emily A. Hayes in Support of Memorandum of Law in Opposition to Petition to Confirm Arbitration Award (“Hayes Decl.”) Ex. B.)

On November 10, 2009, General Security made a demand for arbitration pursuant to the Arbitration Clause. In its demand, General Security sought reimbursement of $426,802, an amount that it alleged AequiCap owed to it under the ACCA. (Pet. ¶ 7.) After General Security submitted its demand for arbitration, AequiCap asserted a counterclaim, in which AequiCap alleged that General Security and/or its third-party claim administrator negligently handled claims. (Pet. ¶ 10.)

On February 26, 2010, a three-person arbitration panel, which included two party-appointed arbitrators and a neutral umpire, was constituted (“Panel”). (Pet. ¶¶ 8–9.) According to the Petition, in the months that followed, the parties conducted discovery on General Security's claim and on AequiCap's counterclaim. (Pet. ¶ 11.)

Thereafter, General Security filed a motion for summary judgment on its claim. In connection with the motion, the Panel conducted a hearing and received briefing from the parties.² (Pet. ¶ 12.) On October 18, 2010, following the hearing, the Panel issued an award to General Security, which provided that:

(1) [General Security's] Motion for Summary Judgment is granted.

(2) [AequiCap] shall pay [General Security] the principal amount of $426,802.00, and pre-award interest in the amount of 5% calculated from thirty (30) days after each invoice was rendered.

(3) [AequiCap] shall pay the total amount of this Award to [General Security] within thirty (30) days of the date of this Award. (4) Post–Award interest on the amount awarded in paragraph 2, computed at the rate of 7%, shall commence running thirty (30) days after the date of this Award.

(4) [General Security] is also awarded its attorney's fees and disbursements incurred in connection with its prosecution of this arbitration in an amount to be determined at the hearing on this matter.³

(Pet. ¶¶ 11–12 & Ex. 3.) The Panel did not address AequiCap's counterclaim in its October 18, 2010 award. However, on October 21, 2010, the Panel issued an order permitting AequiCap to withdraw its counterclaim without prejudice. (Pet. ¶¶ 12–13.)

On October 25, 2010, the Panel conducted a hearing to determine the amount of the attorney's fees to be awarded to General Security. At the hearing, AequiCap moved for reconsideration of the fee award, arguing for the first time that the Panel lacked authority to award attorney's fees. (Pet. ¶ 14; Hayes Decl. Ex. D; Friedman Aff. Ex. 1.) The Panel did not rule on AequiCap's motion during the hearing. However, on October 27, 2010, the Panel issued an order directing both parties to furnish written submissions regarding the propriety of the fee award. (Pet. ¶¶ 15–16.) On November 16, 2010, after receiving both parties' supplemental submissions, the Panel denied AequiCap's motion for reconsideration and awarded General Security $239,946 as compensation for “attorneys' fees and disbursements incurred” in connection with the arbitration. (Pet. ¶ 16.)

General Security filed the instant petition to confirm the arbitration award the following day. As noted above, AequiCap opposed General Security's petition and specifically requested in its opposition that the Court vacate the Panel's attorney's fee award.

To date, AequiCap has not made payment on the arbitration award, including on the undisputed portion of the award.

DISCUSSION

I. Legal Standard

“It is well established that courts must grant an arbitration panel's decision great deference.” Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir.2003); see also Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir.1993) (“Arbitration awards are subject to very limited review in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation.”). Indeed, “confirmation of an arbitration award ‘is a summary proceeding that merely makes what is already a final arbitration award a judgment of the court.’ ” D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 110 (2d Cir.2006) (quoting Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir.1984)).

Under the Federal Arbitration Act, a court “must grant” a petition to confirm an arbitration award “unless the award is vacated, modified, or corrected.” 9 U.S.C. § 9.⁴ Section 10 of the Federal Arbitration Act specifies the narrow grounds for vacating an arbitration award. 9 U.S.C. § 10; see also Folkways Music, 989 F.2d at 111. Pursuant to § 10, a court may vacate an arbitration award in four specific situations:

(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.9 U.S.C. § 10(a); see also AT & T Mobility LLC v. Concepcion, 563 U.S. ––––, 131 S.Ct. 1740, 1752, 179 L.Ed.2d 742 (2011) (“[R]eview under § 10 focuses on misconduct rather than mistake.”); Duferco, 333 F.3d at 388 (“The Federal Arbitration Act ... permits vacatur of an arbitration award...