In a recent reinsurance case, a Massachusetts federal court denied a pre-award petition of a cedent to remove the reinsurer’s party-appointed arbitrator, finding that the Federal Arbitration Act (the “FAA”) did not authorize the court to remove an arbitrator before a final arbitration award has been issued.
With respect to the challenge to the reinsurer’s party-appointed arbitrator, the parties disputed whether the arbitrator qualification requirements of the arbitration clause in the agreement at issue precluded the appointment of an arbitrator that previously worked for entities that once were, but no longer are, affiliates of the cedent. The Massachusetts federal court first analyzed whether the FAA authorized the pre-award removal of an arbitrator. The cedent argued, in support of its pre-award petition for removal of the arbitrator, that the prohibition on judicial intervention is limited to pre-award challenges for arbitrator bias and that there is an exception for pre-award judicial removal of an arbitrator based on the failure to meet the criteria specified in the arbitration clause. The court rejected this argument, finding that “challenges to a party-appointed arbitrator, such as allegations of bias, are properly considered by courts only at the conclusion of the arbitration,” and that the FAA “provides no express authorization for pre-award judicial intervention regardless of the grounds for removal.” The court also rejected the cedent’s argument that permitting a pre-award challenge supports the goals of speed and efficiency that arbitration and the FAA were intended to foster. Thus, the Massachusetts federal court held that it did not have the authority under the FAA to remove the reinsurer’s arbitrator prior to the conclusion of the arbitration and directed the parties to proceed with the arbitration.
John Hancock Life Ins. Co. (U.S.A.) v. Employers Reassurance Corp., No. 15-cv-13626 (USDC D. Mass. Jun. 21, 2016).