The Court explained its reasoning in two steps.įirst, the Court said that the parties’ broad arbitration clause conferred upon the panel the “inherent authority. The Second Circuit reversed the District Court’s order vacating the Fee and Cost Ruling. The District Court vacated the Fee and Cost Ruling and confirmed the balance of the Final Award. Reliastar petitioned the United States District Court for the Southern District of New York for an order confirming the Final Award and EMC counter-petitioned for an order vacating the Fee and Cost Ruling. The majority explained that it awarded fees because EMC’s conduct in the arbitration was allegedly “‘lacking in good faith.'” Slip op. After further briefing, a majority of the panel entered a final award in favor of Reliastar (the “Final Award”), requiring EMC to pay arbitrator and attorney fees in the amount of $3,169,496, and costs in the amount of $691,903.75 (the “Fee and Cost Ruling). The parties agreed that EMC could move for reconsideration of the fee and cost ruling and, if necessary, challenge it in court. A majority of the panel, without explanation, awarded ReliaStar attorney and arbitrator fees and costs. After discovery and a hearing, the panel issued an interim award finding that the Reinsurance Agreements remained in force and directing EMC to pay Reliastar more than $21 million in overdue balances, plus interest. The parties submitted to arbitration a dispute concerning the alleged termination of the Reinsurance Agreements. and related outside attorneys’ fees, and shall jointly and equally bear with the other party the expenses of the third arbitrator.” Section 10.4 contained a choice-of-law clause, which said “ny arbitration instituted pursuant to this Article shall be held in New York, New York, or another site mutually agreed upon by the parties and the laws of the State of New York and to the extent applicable, the Federal Arbitration Act, shall govern the interpretation and application of this Agreement.” The Reinsurance Agreements contained broad, identical arbitration clauses, which required arbitration “n the event of any dispute or differences arising hereafter between the parties with reference to any transaction under or relating in any way to this Agreement.” Section 10.3 of the arbitration agreements (the “Fee and Expense Provision”) said that “ach party shall bear the expense of its own arbitrator. In life reinsurance parlance, the term “coinsurance” refers to a form of proportional reinsurance, and should not be confused with its direct insurance counterpart (which, in any event, has various meanings depending on the type of direct insurance involved). (“EMC”), one reinsuring business in force as of January 1, 1998, another reinsuring business written on or after Janu(the “Reinsurance Agreements”). (“ReliaStar”) entered into a two coinsurance agreements with EMC National Life Co. In December 1997 ReliaStar Life Insurance Co. Our critical analysis will be provided in a subsequent post. This post briefly discusses the majority and dissenting opinions. and related outside attorneys’ fees, and shall jointly and equally bear with the other party the expenses of the third arbitrator.” ReliaStar Life Ins. The Court held that an arbitration panel was authorized to award under the bad faith exception to the American Rule attorney and arbitrator fees to a ceding company in a case where the parties had agreed that “ach party shall bear the expense of its own arbitrator. On April 9, 2009 the United States Court of Appeals for the Second Circuit decided a case that may significantly expand the power of arbitrators to award attorney and arbitrator fees in cases involving reinsurance and other contracts.
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