Summary
rejecting parties' statutory argument and finding no manifest disregard of the law where arbitrator specifically considered statute
Summary of this case from Passa v. City of ColumbusOpinion
CIVIL ACTION NO. 97-3622
August 28, 2003
ORDER
AND NOW, this ___ August, 2003, upon consideration of Arizona Premium Finance Co., Inc.'s motion to vacate the award in favor of Lincoln General Insurance Co., enter judgment against Lincoln General Insurance Co. and to confirm the award against Personal Surplus Lines Insurance Agency (Document No. 34), the responses of Personal and Lincoln thereto (Document Nos. 36 and 35), and Arizona's reply (Document No. 38), IT IS HEREBY ORDERED that the motion to vacate and to enter judgment against Lincoln is DENIED and the motion to confirm the award against Personal is GRANTED.
This action involves the very complicated financial arrangements among Arizona, an insurance premium finance company, Personal, an insurance broker, and Lincoln, an insurance company. The dispute arose as a result of Arizona's claim for the return of unearned premiums and commissions in connection with over 400 insurance policies that were cancelled prior to the expiration of their term. When the parties realized that it would be impossible for a jury to determine the complicated financial arrangements among the parties which determined the amount and payment of the unearned premiums and commissions and apply those determinations to an individual calculation for each of the 400 policies, they agreed to binding arbitration and requested the court to appoint a certified public accountant to conduct the arbitration, which it did. After extended submission of documents and other evidence, and argument by the parties, the arbitrator issued his final award on February 26, 2003, which generated the instant motions.
Because neither Arizona nor Personal has persuaded this court that the arbitrator "manifestly disregarded the law," his award will be confirmed.
The Federal Arbitration Act ("FAA") provides that the district court wherein an arbitrator's award was made may vacate that award in any of the following 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.A § 10(a) (WEST 2003).
In addition to these four delineated circumstances, our Court of Appeals has held that where an arbitrator's decision reflects a "manifest disregard for the law," the district court may vacate his award. Swift Industries, Inc. v. Botany Industries, Inc., 466 F.2d 1125, 1130 (3d Cir. 1972). However, "`[i]t has been held that a "mere error in the law or failure on the part of arbitrators to understand or apply the law" will not justify judicial intervention, and that the courts' function in confirming or vacating a commercial award is "severely limited.'"" Id. (citing Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123 (3d Cir. 1969) which in turn cited Wilko v. Swan, 346 U.S. 427, 436 (1953)). Stated differently, "[a] court does not review the award to ascertain whether the arbitrator has applied the correct principles of law." News America Publications, Inc. v. Newark Typographical Union, Local 103, 918 F.2d 21, 24 (3d Cir. 1990) (citing United Steel Workers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 598 (1960)). This "singularly undemanding" rule, id., is consistent with the strong "`federal policy favoring arbitration,' [which] requir[es] that `we rigorously enforce agreements to arbitrate.'" Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 226 (1987) (citations omitted).
Both Arizona and Personal claim that the arbitrator manifestly disregarded Pennsylvania's Insurance Premium Finance Company Act, PA. STAT. ANN. tit. 40, § 3311 (WEST 2003), by requiring Personal rather than Lincoln to repay plaintiff those premiums that Arizona originally paid but which were unearned as a result of the early cancellation of the policy. Section 3311 provides that "[w]henever a financed insurance contract is canceled, the insurer shall return whatever gross unearned premiums are due under the insurance contract to the insurance premium finance company for the account of the insured or insureds as soon as reasonably possible, but in no event shall the period for payment exceed 60 days after the effective date of cancellation." Id. The arbitrator found that "Lincoln complied with the Statute when it credited Personal, Arizona's agent, with the net unearned premium and when Lincoln switched paying the gross unearned premium directly to Arizona. Arizona's Instructions and Rate Book specifically references the crediting method of payment to a producer (Personal)." PL Mot. and Brief in Support of Vacating the Award, Exh. C at 2 (Doc. #33) (providing a copy of the arbitrator's findings). Thus, the arbitrator did not manifestly disregard the statute, but explicitly dealt with it as applied to the financial arrangements among the parties.
Although both Arizona and Personal argue that the statute does not allow for this delegation, neither party cited a provision of the statute or case law interpreting the statute prohibiting it. More importantly, however, the parties argument — at its best — amounts only to an allegation that the arbitrator committed legal error, which does not suffice to evidence a manifest disregard of the law. Furthermore, despite the parties' protestations that the arbitrator did not specifically cite the section of Arizona's Instruction and Rate Book upon which he relied, he was under no obligation to do so. See Enterprise Wheel, 363 U.S. at 598 ("Arbitrators have no obligation to the court to give their reasons for an award."); O.K. Securities, Inc. v. Professional Planning Associates, Inc., 857 F.2d 742, 747 (11th Cir. 1988) (same); Prudential-Bache Securities, Inc. v. Tanner, 72 F.3d 234, 240 n. 9 (1st Cir. 1995) (same); Willemijn Houdsterma at schappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2nd Cir. 1997) (same); Stroh Container Co. v. Delphi Industries, Inc., 783 F.2d 743, 750 (8th Cir. 1986) (same).
In addition to these arguments, Personal alleges that the arbitrator failed "to set deadlines for the submission of documentation" which "caused [him] to enter an award not based on all of the evidence and contrary to the Federal Arbitration act." Def. Mot. and Brief in Support of Vacating the Award (Doc. #37). First, as regards the arbitrator's procedural choices, "`matters of procedure lie within the discretion of the arbitrators.'"Smith, Breslin Assoc. v. Meridian Mortgage Corp., 1997 WL 158119 at *6 (E.D. Pa. April 7, 1997), aff'd without opinion, 135 F.3d 766 (1997) (quoting Checkrite of San Jose v. Checkrite, Ltd., 640 F. Supp. 234, 236 (D. Colo. 1986)). Even if that were not the case, however, Personal has offered no evidence to indicate that the arbitrator failed to postpone the proceedings "without just cause." Indeed, Personal never addresses, let alone contests, the fact that it failed to respond or even acknowledge receipt of the arbitrator's "requests for information and commentary" contained in his correspondences of May 28, 2002, November 25, 2002, December 23, 2002, and January 16, 2003. Personal Resp. to Lincoln General Mot., Exh. G (providing a copy of the arbitrator's response to Personal's request for admission of additional evidence). The only justification for this delinquency appears in a letter from Personal to the arbitrator, in which Personal writes that, because of pending state litigation regarding this matter, it had not had time to respond. Personal Resp. to Lincoln General Mot., Exh. F ("Unfortunately, I was unable to respond sooner since I was on trial in the matter of Lincoln General v. Arizona Premium Finance and the decision is still pending before Judge Bernard Moore in Montgomery County."). The court is utterly unimpressed with the justification that Personal was basically too busy to — at the very least — request an extension upon receipt of any of this correspondence. Moreover, Arizona takes the complete opposite tack by complaining that the arbitrator took too long to conclude the proceedings.
It should also be noted that this court has little authority with which to review an arbitrator's findings of fact. Indeed, our Court of Appeals has held that "[o]ur review of the arbitrator's factual findings is not whether those findings were supported by the weight of the evidence or even whether they were clearly erroneous. All that is required is some support in the record." Tanoma Mining Co., Inc. v. Local Union No. 1269, United Mine Workers of America, 896 F.2d 745, 748 (3d Cir. 1990). Indeed, the court has held that "[i]n an arbitration case a court cannot act as a legal screen to comb the record for technical errors in the receipt or rejection of evidence by arbitrators, who in most cases are laymen. A fair accommodation between the words of the statute and the characteristic nature of arbitration would require that such an error must be one that is not simply an error of law, but which so affects the rights of a party that it may be said that he was deprived of a fair hearing." Newark Stereotypers' Union No. 18 v. Newark Morning Legder Co., 397 F.2d 594, 599 (3d Cir. 1968). Here, it can hardly be said that the parties did not receive a fair hearing, when they were afforded numerous opportunities to be heard, Personal's decision not to avail itself of those opportunities notwithstanding.
For these reasons, the arbitrator's award will be confirmed.
Upon consideration of the motion of Lincoln to remove from civil suspense file and to confirm final arbitration award (Document No. 32) and the responses of Arizona and Personal (Document Nos. 33 and 37),
IT IS HEREBY ORDERED that:
1. The motion to remove from the civil suspense file is GRANTED and the action is restored to the court's active docket.
2. The motion to confirm the final arbitration award is GRANTED and the arbitration award is hereby confirmed and judgment is entered in favor of Lincoln General Insurance Co. and against Arizona Premium Finance Co., Inc. on Arizona's claims against Lincoln and in favor of Arizona Premium Finance Co., Inc. and against Personal Surplus Lines, Inc. in the amount of $210,004.00 plus interest at the rate of 6% per annum from March 31, 2003 until paid.