Mountain Valley Prop., Inc. v. Applied Risk Servs., Inc., No. 16-2189, 2017 U.S. App. LEXIS 12575 (1st Cir. Jul. 13, 2017).
The First Circuit Court of Appeals affirmed an order denying a motion to vacate an arbitration award. The insured entered into a comprehensive insurance program with a series of affiliated companies, which included a three-year reinsurance participation agreement. That reinsurance participation agreement included an arbitration clause and a mandatory Nebraska choice of law clause.
The insured was unhappy with the program and brought suit against all the affiliated companies, including the counterparty to the reinsurance participation agreement for breach of contract and various tort claims. The case was removed to federal court and a motion was made to compel arbitration of the claims against and by the parties to the reinsurance participation agreement. The district court referred the claims under the reinsurance participation agreement to a single arbitrator to determine whether the claims were arbitrable. The arbitrator found that the claims under the reinsurance participation agreement were not arbitrable because of reverse preemption under the Nebraska Uniform Arbitration Act, Neb. Rev. Stat., 25-2601-22, which precludes arbitration under an insurance policy (preempting the Federal Arbitration Act).
A motion to vacate the arbitrator's award was denied by the district court and this appeal ensued. In affirming the denial of the motion to vacate, the circuit court rejected the claims under the manifest disregard of the law ground for vacatur (which the court assumed was still valid, but made no finding). The court found that the arbitrator carefully analyzed the cases and determined that the dispute was not arbitrable as a matter of law. The court noted that it was not determining whether the arbitrator's decision was correct, because the courts are not in the business of hearing claims of factual or legal error by an arbitrator.
The court also rejected the argument that the arbitrator exceeded his powers. The court stated that the arbitrator decided the precise question asked by the district court whether the dispute was arbitrable. Given that the arbitrator produced a well-reasoned award, the motion to vacate was properly denied.