Savers Prop. & Cas. Ins. Co. v. Nat'l Union Fire Ins. Co. of Pittsburg

• Decision Date: 20 May 2014
• Docket Number: 13–2289.,Nos. 13–2288,s. 13–2288
• Parties: SAVERS PROPERTY AND CASUALTY INSURANCE CO.; Star Insurance Company; Ameritrust Insurance Corporation; Williamsburg National Insurance Co., Plaintiffs–Appellees, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, PA, Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

748 F.3d 708

SAVERS PROPERTY AND CASUALTY INSURANCE CO.; Star Insurance Company; Ameritrust Insurance Corporation; Williamsburg National Insurance Co., Plaintiffs–Appellees,

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, PA, Defendant–Appellant.

Nos. 13–2288, 13–2289.

United States Court of Appeals,Sixth Circuit.

Argued: March 21, 2014.

Decided and Filed: April 9, 2014.

Rehearing En Banc Denied May 20, 2014.^*

ARGUED:Michael M. Conway, Foley & Lardner LLP, Chicago, Illinois, for Appellant. Keefe A. Brooks, Brooks Wilkins Sharkey & Turco PLLC, Birmingham, Michigan, for Appellees. ON BRIEF:Michael M. Conway, Jonathan W. Garlough, Foley & Lardner LLP, Chicago, Illinois, Scott T. Seabolt, Foley & Lardner LLP, Detroit, Michigan, for Appellant. Keefe A. Brooks, Brooks Wilkins Sharkey & Turco PLLC, Birmingham, Michigan, Stephanie A. Douglas, Bush Seyferth & Paige PLLC, Troy, Michigan, for Appellees.

Before: COLE and ROGERS, Circuit Judges; HOOD, District Judge. ^**

OPINION

COLE, Circuit Judge.

National Union Fire Insurance Company (“National Union”) appeals the grant of a preliminary injunction that halted an ongoing arbitration proceeding with Savers Property and Casualty Insurance Company, et al. (collectively, “Meadowbrook”). Because arbitration's essential virtue is resolving disputes straightaway, judicial review of arbitral awards is extremely narrow and exceedingly deferential. In the absence of a final arbitration award, the district court should not have interjected itself into this private dispute. Accordingly, we reverse the judgment, dissolvethe injunction, and remand for dismissal.

I. BACKGROUND

A. Factual Background

The underlying dispute that gave rise to this arbitration stems from a contract for reinsurance (the “Treaty”) between National Union and Meadowbrook. The Treaty required both parties to submit any reinsurance disputes to a three-member arbitration panel that would “make its decision with regard to the custom and usage of the insurance and reinsurance business” after entertaining evidence and conducting a hearing. The majority decision of the panel was to be final and binding upon all parties to the proceeding, and either side could seek judicial confirmation in any court of competent jurisdiction. Meadowbrook initiated this arbitration in February 2011 to settle matters surrounding its alleged practice of overbilling National Union for certain reinsurance programs.

As is customary in the reinsurance industry, the arbitration clause from the Treaty established a tripartite method of arbitration. Under this system, the panel was to be comprised of “two arbitrators and an umpire” who were “active or retired disinterested officials of the insurance or reinsurance companies, or Underwriters at Lloyd's, London, not under the control of either party to this Agreement.” Each party was to appoint its own arbitrator, and then the two party-appointed arbitrators would select a neutral umpire. In the event that the party-appointed arbitrators disagreed in selecting an umpire, each side was to submit a list of three candidates, from which the opposing arbitrator would strike two. The umpire would then be chosen by lot from the remaining name on each list.

National Union named Jonathan Rosen as its arbitrator, and Meadowbrook named Rex Schlaybaugh. After the two men deadlocked in selecting an umpire, the parties exchanged slates of candidates and asked them to complete a questionnaire detailing their experience and connections with the parties and their arbitrators. Thomas Greene—who was ultimately selected as umpire—disclosed that he was a personal friend of National Union's arbitrator. Greene also disclosed that, like Rosen, he was a member of the reinsurance industry group ARIAS, a not-for-profit corporation that publishes guidelines and best practices for reinsurance arbitrations. Despite Greene's connections to Rosen, Meadowbrook selected Greene from the slate of individuals put forward by National Union, and after casting lots, he was named umpire.

The panel held an organizational meeting on August 1, 2012, at which it adopted the first of two scheduling orders with identical language regarding ex parte communications. Those orders stated, “ Ex parte communications with any member of the Panel shall cease upon the filing of the parties' initial pre-hearing briefs.” The filing date for pre-hearing briefs and the attendant cut-off date for ex parte communications was June 14, 2013. Soon after, the panel conducted a hearing, and on July 23 issued a unanimous “Interim Final Award” resolving all issues of liability in favor of National Union.

The panel did not, however, calculate a final damages award at that time. Instead, the panel ordered Meadowbrook to pay National Union $1,950,680.48 for damages that were “capable of immediate calculation,” and, in an effort to mete out a final award, ordered Meadowbrook to provide supporting documentation with respect to other reinsurance programs and their retained risk. The panel also orderedMeadowbrook to reimburse National Union for its attorneys' fees and costs. The panel denied all other requests for relief, ordered Meadowbrook to pay the sum-certain damages within fourteen days, and retained jurisdiction only to “adjudicat[e] those items requiring additional submissions”—i.e., to calculate National Union's damages prior to issuing a final arbitration award.

The Interim Final Award was silent with respect to the ban on ex parte communications that had gone into effect on June 14. Nevertheless, National Union's attorney and Arbitrator Rosen resumed ex parte communications immediately following issuance of the award, which National Union maintains was permissible under the panel's scheduling orders and the customs and practices of the reinsurance industry. National Union disclosed these very communications when it submitted its Bill of Costs to Meadowbrook and the panel. Meadowbrook, however, argues that the communications were prohibited by the scheduling orders.

On August 6, Meadowbrook filed a supplemental submission to the panel in response to Paragraph 4 of the Interim Final Award, which had directed Meadowbrook to provide supporting documentation so that the panel could calculate National Union's final damages. After consulting with Arbitrator Rosen, National Union's attorney filed a motion to strike Meadowbrook's submission, alleging that the document was “insufficient.” Umpire Greene responded to the parties' filings in an August 12 order signed, “For the Panel.” In that order, Greene stated that “[t]he Panel ... by majority, strikes [Meadowbrook's submission] in its entirety as being non-responsive to and non-compliant with Paragraph 4 of the Interim Final Award.” The order instructed Meadowbrook to file a conforming submission or risk a damages calculation based solely on National Union's submissions.

The next day, Meadowbrook filed an emergency motion to clarify the panel's prior ruling and to extend the deadline for its replacement submission. Greene again responded in an August 13 order signed, “For the Panel.” Greene stated that “the majority rules as follows,” before clarifying what documentation must be submitted and granting the request for additional time to replace the stricken submission. Meadowbrook was given until August 19, 2013, to submit the supporting documentation the panel had requested in its Interim Final Award.

Meadowbrook alleges that both panel orders disenfranchised Schlaybaugh, who was on vacation at the time the orders were adopted and did not participate in deliberations on either matter. National Union rejects any contention that Schlaybaugh was disenfranchised; National Union argues that Greene issued the orders without Schlaybaugh's participation because swift action was required, and even then, only after repeated attempts to communicate with him proved fruitless. National Union also notes that Schlaybaugh's participation would not have altered the orders because under the Treaty, a two-member majority may rule for the panel.

B. Procedural Background

Unsatisfied with the panel's procedural orders, Meadowbrook filed a complaint in Michigan state court seeking to vacate the Interim Final Award on the grounds that Umpire Greene and Arbitrator Rosen exceeded their authority under the Treaty and that Rosen displayed evident partiality. The crux of Meadowbrook's complaint was that Rosen failed to disclose that he had been a guest speaker at a conference with National Union's attorney during the course of the arbitration. Meadowbrook alleged it would have moved to disqualify Rosen and Greene had it known of Rosen's speaking engagements. When Meadowbrook learned that Rosen and National Union's attorney had resumed their ex parte communications following issuance of the Interim Final Award, Meadowbrook amended its state-court complaint to reflect those facts.

Simultaneously, Meadowbrook protested the panel's orders within the arbitration proceeding itself by filing a motion for reconsideration and a motion to stay all proceedings. Meadowbrook raised the same arguments it pressed in state court—namely, that Rosen failed to disclose his participation in a reinsurance industry educational seminar held at the law offices of National Union's attorney, and that Rosen and National Union's attorney engaged in improper ex parte communications following issuance of the Interim Final Award.

By a 2–1 vote, the arbitration panel denied both motions. As to Meadowbrook's first argument, regarding disclosure of Rosen's speaking engagements, Greene and Rosen ruled for the panel as follows:

The Panel sees no merit in Meadowbrook's complaint that Arbitrator Rosen did not disclose his participation at the AIRROC regional education seminar held at Foley & Lardner's offices earlier this year. That [National Union's attorney] also participated at AIRROC's invitation as a panelist at that seminar in a segment separate and...