As usual, Monday is quiet, since the only cases to report are from late Thursday and Friday. There are a couple of appraisal cases, which discuss the difference between that process and arbitration. There is a case on an arbitrator’s power to reform a contract. Also, I have used this lull to list some other resources I find interesting.
May an arbitrator reform a contract?
Tokio Marine Specialty Ins. Co. v. South Chicago Property Maintenance Co., Ltd., 2020 U.S. Dist. LEXIS 182904 (N.D. Ohio) (Oct. 2, 2020) is a routine competence-competence case based on the parties’ incorporation of the AAA rules. There are two interesting aspects, though, that make the case worth reading. First, Judge Loi succinctly lays out the steps for determining whether to compel arbitration.
- First – Did the parties agree to arbitrate?
- Second – What is the scope of the agreement?
- Third – If federal statutory claims are asserted, did Congress intend those claims to be non-arbitrable? (Query – would the same analysis apply to state law statutory claims?)
- Fourth – If the court concludes that some, but not all of the claims, must be arbitrated, does the court stay the remainder of the proceeding?
While the court relies upon Sixth Circuit precedent for this four-prong analysis, it is a good decision tree in any application to send a dispute to arbitration.
The other interesting issue is contained in dictum. The case arose because the parties disagreed over whether a premises environmental coverage policy provided for remediation of “historical pollutants” on South Chicago’s property. Tokio Marine denied coverage under the policy language and also argued that, to the extent that the endorsement terms covered South Chicago’s claim, the policy should be reformed to reflect what it called “the parties’ actual agreement that the Policy should not provide [such] coverage. . . .” Because the court refers the issue of arbitrability to the arbitrator, it does not reach this question. However, in a footnote (love those footnotes!), Judge Loi states that, absent a prohibition in the arbitration clause proscribing reformation, an arbitrator may exercise that power. Attention, contract drafters, think about whether you want to prohibit arbitrators from rewriting your client’s agreement.
Property damage policies may contain a provision providing for the appointment of an “appraiser” and/or an “umpire” to resolve a dispute over the amount of a covered loss. Cincinnati Ins. Co. v. St. Louis Produce Markets, 2020 U.S. Dist. LEXIS 182099 (E.D. Mo.) (Oct. 1, 2020) limits the role of the appraisers and umpires to the determination of the amount of loss, not coverage or causation. Otherwise, according to the court, they “masquerad[e] as unapproved and statutorily disallowed arbitrators.”
Liberty Mutual Group v. Mayes, 2020 U.S. Dist. LEXIS 183442 (W.D. La.) (Sept. 15, 2020), an older case that was just published, deals with federal subject matter jurisdiction over an action to compel an appraisal. Applying the test which the Fifth Circuit (along with the Second and Third) utilizes in actions to compel arbitration, Magistrate Judge Hayes holds that the amount in dispute is determined by considering the amount of the potential award. Applying this standard to an appraisal proceeding, she holds that the amount in controversy equals the amount at issue under the insurance policies.
ICC rules and competence-competence
In Wireless, LLC v. Nokia of Am. Corp., 2020 U.S. LEXIS 181867 (M.D. Fla.) (Sept. 1, 2020), another decision just published on Friday, defendant sought to compel arbitration of a contract dispute arising out of the installation of cell towers. The agreement provided for arbitration under the rules of International Chamber of Commerce. Since those rules, like those of the AAA, provide that issues of jurisdiction are decided by the arbitral tribunal, Magistrate Judge Klindt holds that arbitrability is for resolution by the arbitrator.
Other Resources – There is a well-worn adage for dinner speakers – “Don’t acknowledge anybody, because you’re sure to miss somebody.” Despite that advice, let me give you some resources that are worth your attention.
The terrific podcast, Arbitration Station, is back from summer break. While it focuses largely on international arbitration, there is also generally applicable conversation.
The Silicon Valley Arbitration and Mediation Center (“SVAMC”) has published a white paper addressing the underutilization of arbitration by technology companies. While the paper specifically addresses international arbitration, its discussion applies to domestic proceedings, as well.
Strict Scrutiny is an often-snarky look at arguments before and opinions by SCOTUS. The podcast is always worth listening to and will be particularly relevant as Schein moves forward.
I have previously suggested the Creighton University – NCMR website adrhub.com. It continues to be a great source for keeping up to date on speakers, educational opportunities and scholarship on arbitration and mediation.
Have a good week. I hope your inbox did not fill up too much over the weekend. See you Wednesday.