by James M. Gaitis According to the Heisenberg Uncertainty Principle, (1) the position and momentum of an object cannot simultaneously be precisely known and (2) even more tantalizing, the more precisely one property (whether position or momentum) can be measured, the less precisely can the other. For those that seek overall clarity as to what is going on at the particle and wave level of physics (and perhaps in their everyday lives), the Uncertainly Principle ensures ambiguity at best. And so it is as well with American arbitration law and, most importantly, American arbitration vacatur law and the ever-endearing question regarding when arbitral awards may be vacated on the grounds of arbitrator acts “in excess of arbitral authority” or in “manifest disregard of the law.” Every time the position and momentum of the law begin finally to appear to be fixed and resolved by one or more judicial decisions, a new measurement (usually in the form of yet another judicial decision) shows how inaccurate and far off our expectations and understanding really were. Enter into the cosmos of arbitration law and theory the recent, “Not for Publication” decision of the Federal Court of Appeals for the Third Circuit in PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd., 2010 WL 4409655 (3rd Cir., Nov. 8, 2010). PMA Capital serves as the most recent proof that the Arbitration Uncertainty Principle is alive and well, but only because the Third Circuit arguably succeeded in a brief, two-page decision to bring the possibility of rational measurement back into the calculus. For PMA Capital is more consistent with traditional arbitration law concepts and principles, and thereby more precise in its measurement of how arbitration law and practice should work, than the many errant and wayward decisions that have preceded it in recent years. Some of us who, from time to time, delve into the archived depths of traditional arbitration law cannot help but wonder why it is that American courts have long forgotten the meaning and existence of the time-honored distinction between “restricted” and “unrestricted” arbitration submissions. At one time, that distinction was of paramount importance in determining whether a court could properly vacate an arbitration award for legal error or, in some instances, even for errors in the application of controlling facts. In “unrestricted submissions” the parties granted the arbitrator authority to decide the issues based on principles of equity and fairness rather than on the application of a particular law; the arbitrators in essence were free to act ex aequo et bono. In contrast, in “restricted submissions” the parties generally required that the arbitrator’s decision be based on the application of a particular jurisdictional law or principle. The lucid and thorough discussion of these principles in Justice Story’s 1814 opinion in Kleine v. Catara, 14 F. Cas. 732 (C.C.D. Mass. 1814) shows, however, that even when an arbitrator was vested with broader authority under an unrestricted submission, that authority was not absolutely unfettered. Instead, as Justice Story noted, once an arbitrator elected to apply a particular law in a case governed by an unrestricted submission, the ensuing award nonetheless was subject to vacatur when the arbitrator was “mistake[n]” as to the correct application of that law. In other words, by entering into an unrestricted submission parties did not agree that arbitral mistakes would be utterly insulated from vacatur proceedings. Some semblance of rationality must still prevail. These same principles came to bear in PMA Capital. The arbitration provision contained within the parties’ reinsurance contract in PMA Capital in essence was an unrestricted submission. The provision directed the arbitrators to interpret this Agreement as an honorable engagement and not merely as a legal obligation. They are relieved of all judicial informalities and may abstain from following the strict rules of law. They will make their award with a view to effecting the general purpose of the Agreement in a reasonable manner rather than in accordance with the literal interpretation of the language. PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd., 659 F.Supp.2d 631, 636 (E.D.Penn 2009). The reinsurance contract, itself, contained a deficit carry forward provision that the arbitrators apparently deemed to be inequitable or unfair. And the arbitrators thus issued an award that effectively wrote the provision out of the contract. After discussing the niceties of manifest disregard of the law and acts in excess of arbitral authority, the district court vacated the award on the ground that “the award was not rationally derived from the parties’ submissions” and the Third Circuit Court of Appeals agreed, approving the district court’s conclusion that “No court has held that such a clause gives arbitrators the right to re-write the contract they are charged with interpretation,” especially when the contract itself requires the enforcement of the very contractual provision the arbitrator chose to ignore “by ordering unrequested relief and rewriting material terms of the contract they purported to implement.” The Third Circuit thus noted: “That the honorable engagement clause permitted the arbitrators to stray from judicial informalities did not give them authority to re-invent the contract before them, or to order relief no one requested.” 2010 WL 4409655 at *2. The determinative principle that an arbitrator’s decision must be “within the submission” is a time-honored concept found in some of the most frequently cited cases, one such case being Burchell v. Marsh, 58 U.S. (17 How.) 344, 349050 (1854), which is often wrongly cited for a quite contrary proposition. Most importantly, it was this principle that drove the United States Supreme Court to famously observe in Wilko v. Swan, that “[i]n unrestricted submission . . . the interpretations of the law by the arbitrators in contrast with manifest disregard are not subject, in the federal courts, to judicial review for error in interpretation.” 346 U.S. 427, 436 (1953). In making this observation (which has a far more subtle meaning than is now attributed to it), the Wilko Court not only expressly relied on the Kleine and Burchell decisions mentioned above but, also, on a […]
Continue reading...A new paper is available from S.I Strong, Associate Professor of Law at the University of Missouri and contributor to this blog, entitled Class Arbitration Outside the United States: Reading the Tea Leaves. The paper was initially presented at the International Chamber of Commerce’s (ICC) Thirtieth Anniversary Annual Meeting on Multiparty Arbitration, held last December in Paris. The finished work appears in Dossier VII: Arbitration and Multiparty Contracts, published earlier this year by the ICC Institute of World Business Law. Here is the abstract: This draft paper, which is expected to be published in 2010 by the ICC Institute of World Business Law in Dossier VII – Multiparty Arbitration, discusses the question of whether and to what extent class arbitration (also known as class action arbitration) will expand beyond the borders of the United States and the ways in which the device might change to suit the needs of different legal systems. In so doing, the paper discusses recent empirical evidence involving the increasing availability of collective relief in the judicial context in systems around the world and argues that courts, arbitrators and parties outside the United States are unlikely to adopt the U.S. model of class arbitration but will instead create into a new form of multiparty arbitration that is more appropriately termed “collective arbitration,” due to anticipated similarities to various forms of collective redress in different legal systems. The discussion also considers the policy rationales affecting the decision to create or utilize a form of collective arbitration as well as the theoretical debates that affect the expansion of class or collective arbitration into new jurisdictions. The paper is available without charge from Social Science Research Network and may be read here. Other papers by Professor Strong can be found here. Last week, Disputing posted here about an international class arbitration article recently written by Professor Strong, From Class to Collective: The De-Americanization of Class Arbitration. Technorati Tags: ADR, law, arbitration
Continue reading...Another United States jurisdiction has adopted a mediation process to address the ongoing foreclosure crisis. The District of Columbia (D.C.) Council approved the “Saving D.C. Homes from Foreclosure Act of 2010,” earlier this month. The measure requires lenders to participate in six months of mediation with a homeowner prior to foreclosure. According to the Washington Post: Mediation allows the borrower and the lender’s representative to negotiate, with the guidance of an impartial go-between, over possible alternatives to a foreclosure, such as a loan modification. But neither side can be compelled to agree to a mediated solution. The District Mayor signed the Act into law on Thursday. The new requirement, managed by D.C.’s Department of Insurance, Securities and Banking, will affect more than 3,000 homes currently in foreclosure. Unlike other jurisdictions, D.C. does not require the courts to review foreclosure cases. Consequently, the foreclosure process can proceed quite quickly. Under the new law, a lender seeking to foreclose on a delinquent homeowner must notify the homeowner of the option to participate in mediation when a “Notice of Default” is sent. DS News magazine reports: The borrower must opt to participate in the mediation process within 30 days of receiving the information in the mail, by returning the necessary forms and paying a $50 fee. A mediation administrator will schedule a mediation session soon after the borrower opts into the program. The mediation session will be conducted by the administrator and the lender and borrower or their representatives must attend the meeting. The lender will be charged fines of $500 for missing the meeting or failing to bring required documents. If the borrower misses the meeting, the matter will be terminated and lenders may proceed with the foreclosure. D.C.’s new law follows closely behind a foreclosure mediation law implemented on July 1st in neighboring Maryland. Maryland’s law requires a lender pursuing foreclosure to send the homeowner a “Request for Mediation” form when it starts court proceedings. After that, “Homeowners have 15 days in which to file the request with the Circuit Court and must pay a non-refundable fee of $50.” The entire Washington Post article may be read here and the DS News magazine article may be read here. Disputing has discussed foreclosure mediation programs in several states recently including Nevada, Connecticut, Florida and Hawaii. Technorati Tags: ADR, law, mediation
Continue reading...by Peter S. Vogel Michael Geigerman was the Moderator for a half seminar at the Washington University School of Law regarding complexities created by eDiscovery and Social Media on October 29, 2010. Mr. Geigerman is a full-time Mediator in St. Louis, the Managing Director of United States Arbitration & Mediation Midwest, Inc. (USA&M Midwest Inc.), and is an Adjunct Professor at the Washington University School of Law where he runs the ABA Negotiation and Mediation Competitions. USA&M Midwest Inc. and the Washington University Law Dispute Resolution Program regularly present the Missouri Best Practices Seminars, and the proceeds from the Seminars are all donated to charities. eDiscovery: Ethical Considerations, ADR and Social Media I was honored to speak at this Seminar and my speech included a discussion regarding how Social Media is creating an ocean of electronic evidence which impacts all litigation. As a consequence, Mediators and Arbitrators must be aware of eDiscovery in every case, and also be alert to how Social Media affects the litigants. Obviously Social Media communications impacts ethical considerations for lawyers and neutrals alike, and being thoughtful about what we say in emails and post on Facebook or LinkedIn is essential in today’s environment. Also I included a discussion about the use of Mediation Conferences directed at managing eDiscovery called eMediation for which I credit my good friend Allison Skinner, who is a full time neutral and continues to teach eDiscovery at the University of Alabama School of Law as an Adjunct Professor. Finally, I discussed my experiences as a Special Master in eDiscovery disputes for more than 20 years. eDiscovery Panel Discussion Following my remarks about Social Media and eDiscovery I was the Moderator of a distinguished panel including US District Judge E. Richard Webber, Eric Holland, and Kevin Fritz who responded to the audience and discussed ADR issues concerning eDiscovery, Social Media, and Special Masters. Since this Seminar was a sell-out with standing room only, you can image there was a lively and candid discussion about Rule 26(f) conferences, eDiscovery, ADR, and specific active cases in metropolitan St. Louis. Mandatory Mediation Conferences in Missouri In 2009 Mr. Geigerman was appointed by the Missouri Supreme Court to the Commission on ADR and the Seminar included a panel discussion about revisions to ADR Rule 17 which would make Mediation Conferences mandatory in Missouri. Mr. Geigerman led a discussion by a panel of ADR Commission members including Professor Karen Tokarz (Washington University School of Law), Richard Sher, and Maurice Graham. Generally the Commission members and the audience were very enthused by the prospect of making Mediation Conference mandatory for disputes over $25,000. Peter S. Vogel is a trial partner at Gardere Wynne Sewell LLP where he is Chair of the Electronic Discovery Group and Co-Chair of the Technology Industry Team. Before practicing law he worked as a computer programmer, received a Masters in Computer Science, and taught graduate courses in information systems. For 12 years he served as the founding Chair of the Texas Supreme Court on Judicial Information Technology which is responsible for helping automate the Texas court system and putting Internet on the desktops of all 3,200 judges. Peter has taught courses on the Law of eCommerce at the SMU Dedman School of Law since 2000. Many of Peter’s topics are discussed on his blog www.vogelitlawblog.com. Technorati Tags: special masters, ADR, law, arbitration, Mediation
Continue reading...Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.
Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.