The opinion of the court was delivered by: MILTON I. SHADUR
Act § 10(a) confers District Court jurisdiction, in diversity of citizenship cases, to vacate--under limited circumstances--the "awards" that have been made by arbitrators contractually designated by the disputants.
That designation of course accounts for Yasuda's having to label the arbitrators' actions that it now challenges as "awards," even though those actions are purely preliminary procedural rulings that have been announced by the arbitrators at an organizational meeting with counsel for Yasuda and CNA before the arbitration has actually begun (something that has not taken place even now):
1. a requirement that Yasuda post a Letter of Credit ("LOC") for something over $ 2.5 million (that represents the amount in dispute between the parties) before the arbitrators proceed with the underlying reinsurance controversy; and
2. a prohibition against Yasuda's sharing information obtained during the course of arbitration with any of its co-reinsurers--companies that were also participants in the same reinsurance agreements and that are currently involved in other arbitrations with CNA.
To begin with the easier issue first--the second ruling, spoken of in Petition P 9 as a "gag order"--only a scene from the theater of the absurd would portray such a wholly procedural and largely (though not entirely) discovery-oriented ruling as an "award" by the arbitrators. Even the most extraordinary distortion of the few precedent-creating cases that Yasuda's Mem. 5 has cited for the proposition that arbitrators' interim decisions can sometimes qualify as "awards" ripe for judicial review ( Pacific Reins. Management Corp. v. Ohio Reins. Corp., 935 F.2d 1019, 1023 (9th Cir. 1991); Island Creek Coal Sales Co. v. Gainesville, 729 F.2d 1046, 1049 (6th Cir. 1984); Sperry Int'l Trade, Inc. v. Government of Israel, 689 F.2d 301, 304 (2d Cir. 1982)) cannot elevate such a portion of the procedural ground rules for pre-hearing discovery and for the hearing itself to the level of an "award."
It should be added parenthetically that even if the challenged decision were somehow to be stretched into a judicially reviewable status, Yasuda would lose on the outset in terms of its complaint (Mem. 6) that "the gag order by the panel will unfairly inhibit the discovery of relevant facts." For one thing, no right of discovery exists in arbitration to begin with.
And for another, each of the reinsurance agreements in issue specifically provides (Petition Exs. A and C Art. 21, Exs. B and D Art. 22):
The rules and procedures for pre-hearing investigations shall be established by the board of arbitrators.
It is arrant nonsense to suggest that the now-challenged decision--part of those "rules and procedures"--did not "draw its essence from the contract" under which arbitration takes place ( United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38, 108 S. Ct. 364, 98 L. Ed. 2d 286 (1987), reconfirming the principle announced in the seminal decision in United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597, 4 L. Ed. 2d 1424, 80 S. Ct. 1358 (1960), one part of the Steelworkers Trilogy in which this Court's then law firm, and notably its then partners Arthur Goldberg, David Feller and Elliot Bredhoff, played a leading role).
But that merits-related comment is really unnecessary to the current decision. Because this Court clearly lacks subject matter jurisdiction over the complained-of ruling that bars Yasuda's sharing of information with its co-reinsurers, that facet of the Petition must be dismissed.
To return to the first part of the Petition, its challenge to the LOC requirement, that calls for a bit more extended treatment. In that respect Yasuda cites and appends one District Court decision, Recyclers Ins. Group, Ltd. v. Insurance Co. of N. Am., Misc. No. 91-503, 1992 U.S. Dist. LEXIS 8731, 1992 WL 150662 (E.D. Pa. June 15), that both (1) held that a like requirement imposed by an arbitration panel was an interim "award" subject to current judicial review under the Act and (2) vacated that "award" in reliance on Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125, 1133 (3d Cir. 1972). As our Court of Appeals has taken the occasion to remind all of us from time to time, District Courts' decisions do not make precedent even in their home territory, let alone on foreign soil. This Court is accordingly free to examine the issue independently.
Again as a preliminary sidelight, Yasuda's submission on this subject is really incomplete. It attaches a few pages from the transcript of the November 30, 1993 organizational conference (Petition Ex. I, Tr. 104-08) to show the 2-1 ruling of the arbitrators that has imposed the requirement that Yasuda post the LOC, with CNA having no right whatever to draw against it except with the arbitration panel's approval--a clear security measure, not at all an award on the merits of the Yasuda-CNA dispute. That excerpt then reflects the active involvement of Yasuda's counsel in discussing the terms and conditions and amount of the LOC. For aught that appears from the limited excerpt, Yasuda's now-advanced objection to the establishment of any LOC might thus well be one that it cannot raise on grounds of waiver or a like procedural bar. But for the present this Court will assume that earlier portions of the record not furnished by Yasuda would show its preservation of its right to object to the requirement.
But that aside, it is not entirely clear from what Yasuda has submitted that the LOC requirement qualifies as a judicially reviewable "award" for purposes of the Act. As already stated, Yasuda has cited three Court of Appeals decisions for the proposition that interim determinations by arbitrators, made well ahead of their decisions on the merits of the dispute submitted to them, may be reviewable as "awards" within the meaning of Act § 10(a). Each of those three cases dealt with arbitrators' rulings that altered the substantive positions of the disputants, in a way that the mere posting of the LOC here (with no power on CNA's part to draw on it) does not.