NewYork Federal Court Compels Arbitration and Refuses to Consider Speculative Request Relating to Identity of Alleged Real-Party-In-Interest

Nat'l Fire Ins. Co. of Pittsburgh, PA v. Fed. Ins. Co., No. 16-CV-8821 (VEC), 2017 U.S. Dist. LEXIS 88470 (S.D.N.Y. Jun. 8, 2017).

A New York federal court compelled arbitration and stated that it would not rule on a speculative question relating to the real-party-ininterest when it was not clear how the parties were planning to raise that question. The parties had executed three agreements, between 1986 and 1989, under which defendant reinsured certain excess workers' compensation policies. The reinsurer argued that it was a "front" for a syndicate or pool of reinsurers.

A dispute arose relating to the payment of a claim. Although the parties disagreed over which agreement applied, all three agreements contained an arbitration provision. The parties began negotiating the terms of the arbitration proceedings. But the parties' discussions broke down when the reinsurer wanted to identify the syndicate members as other interested entities on a questionnaire to be sent to potential neutrals. As a result, cedent filed a petition to compel the reinsurer to proceed with the arbitration, arguing that the reinsurer was trying to add or substitute the syndicate as a party. The reinsurer filed a cross-petition to compel arbitration seeking, among other things, to compel the parties to arbitrate who were the real parties in interest.

The court noted that the real-party-in-interest issue could present a question of arbitrability, but that it would depend on if and how the reinsurer presented the real-party-in-interest issue in the arbitration proceedings, which was, at that time, entirely speculative. Indeed, it was not clear if the reinsurer wanted to add the syndicate as a party, raising a question of procedure, or substitute them as a party, raising a question of arbitrability. Thus, given the federal policy favoring arbitration, the court granted the cedent's petition to compel arbitration and granted in part the reinsurer's petition to compel arbitration.