The opinion of the court was delivered by: Ruben Castillo, United States District Judge
MEMORANDUM OPINION AND ORDER
Petitioners Certain Underwriters at Lloyd's, London who participated in
47, 219, 227, 376, 490, 506, 529, 590, 672, 727, 807, 923,
947, 991, 994, 1003, 1027, 2003, 2027, 2227, 2376, 2490, 2506, 2591, 2923
and 2947 ("Underwriters") and UnionAmerica Insurance Company, Limited
("UnionAmerica") (collectively "Reinsurers") seek confirmation of an
arbitral award arising out of a dispute with BCS Insurance Company
("BCS"). BCS, in turn, seeks to vacate portions of the arbitrators' June
27, 2002 award, primarily alleging that the panel exceeded its powers.
For the reasons set forth below, the Court grants Reinsurers' motion to
confirm the arbitration award, (R. 18-1), and denies BCS' motion to
vacate portions of the award, (R. 22-1).
This dispute arises out of a series of reinsurance agreements between
BCS and Reinsurers.*fn1 Under the agreements, Reinsurers provided BCS
with coverage for 100% of the risk of certain warranty contracts
administered by Insurance Specialists, Inc. ("ISI"). Reinsurers allege
that because BCS failed to oversee ISI, which improperly administered the
warranty program, the fund intended to cover all the claims was
exhausted, leading Reinsurers to pay out millions of dollars.
Eventually, Reinsurers stopped payment under the agreements when they
allegedly discovered that BCS made misrepresentations in obtaining the
reinsurance coverage. Reinsurers argued that the reinsurance agreements
should be rescinded or that BCS alone should be responsible for ISI's
maladministration, and demanded arbitration. BCS sought to resolve the
dispute in Missouri state court, but this Court compelled arbitration on
March 29, 2001, in accordance with the parties' agreement.*fn2 (R. 11,
Mar. 29, 2001 Order.)
On April 15, 2002, the parties began an eight-day hearing in Chicago,
Illinois before a three-person panel of arbitrators with extensive
experience in the reinsurance industry. Testimony addressed both the
Reinsurers' rescission claim as well as their maladministration claims.
Reinsurers offered the testimony of accountant Richard Larry Johnson to
support their maladministration claims; BCS did not call an expert
witness to respond to Johnson's testimony. On the fourth day of the
hearing, the Panel denied the Reinsurers' request for recission. Thus, at
the close of the hearing, the Panel had only to decide the
maladministration claims. The Panel requested post-hearing briefing on
issues including "the question of ISI and whose agent ISI was." (R. 27,
Pet'rs. Mem., Ex. C, Hr'g Tr. at 2059.) In their post-hearing brief,
Reinsurers discussed the law of agency with reference to the Restatement
(Second) of Agency, caselaw from Indiana, New Jersey, Illinois and the
United Kingdom as well as industry custom. (R. 27, Pet'rs. Mem., Ex. B,
Post-Hr'g Br. at 4-5, 10-22.) BCS too
discussed the law of agency in its
post-hearing brief, citing general propositions of law, the Restatement,
caselaw from Tennessee, Oregon and other states as well as appealing to
"business fairness." (R. 23, Ex. 5, Post-Hr'g Br. at 13-22.)
On June 27, 2002, the panel issued its decision, which in relevant
part, denied Reinsurers' recission claim and granted Reinsurers' request
for damages related to ISI's payment of uncovered claims, unreported
claims, late reported claims, unreported premiums and lost investment
income in the amount of $4,816,769.00. The panel noted that its decision
"reflects the panel's evaluation of the relative responsibilities of the
parties for the problems resulting from the Reinsurance Agreements." (R.
18, Pet. to Confirm, Ex. D, Decision, ¶ 5.) The panel retained
jurisdiction "to resolve future disputes relating to the Reinsurance
Agreements." (Id. at ¶ 8.) Currently before the Court are Reinsurers'
petition to confirm the arbitration award and BCS' motion to vacate
portions of the award.
Because not all parties to this dispute are United States citizens, the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
("Convention"), implemented at Chapter 2 of the Federal Arbitration Act
("FAA"), 9 U.S.C. § 201-208, applies to the instant dispute. See lain
v. Mere, 51 F.3d 686, 689 (7th Cir. 1995). Pursuant to the Convention's
implementing legislation, the reviewing court should confirm the
arbitration award unless one of the grounds for refusal or deferral of
recognition specified in Article V of the Convention is present.
9 U.S.C. § 207. In particular, Article V (1)(e) provides that an
award should not be confirmed if it has been set aside under the law of
the country where the award was made. Thus, the Convention allows for
vacation of the award under domestic law, in this case the FAA.*fn3 See
Yusuf Ahmed Alghamm & Sons, W.L.L. v. Toys "R" Us, Inc., 126 F.3d 15,
20-23 (2d Cir. 1997); Lander Co. v. MMP Invs., Inc., 107 F.3d 476, 478
(7th Cir. 1997).
Under section 10 of the FAA, the reviewing court may vacate an award
"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. § 10(a)(4). Yet, the traditional
presumption is that a "mere ambiguity in the opinion accompanying an
award, which permits the inference that the arbitrator may have exceeded
his authority, is not a reason for refusing to enforce the award." Geneva
Secs., Inc. v. Johnson, 138 F.3d 688, 692 (7th Cir. 1998) (citing United
Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 598
(1960)). In short, this Court's scope of review of the panel's decision
is "grudgingly narrow." Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250,
1253 (7th Cir. 1994).
Throughout their briefs and when it appears to favor their argument,
both parties also cite sections of the Illinois International Commercial
Arbitration Act ("IICAA"). The IICAA, based on the United Nations
Commission on International Trade Law (UNCITRAL) Model Law on
International Commercial Arbitration, became effective in 1998. See 710
ILCS 30/1-1 et seq. It covers international commercial arbitrations like
the present one that are held in Illinois and subject to an
agreement between the United States and another country. 710 ILCS 30/1-5.
Even though federal law is not meant to exclusively govern arbitration, see
Volt Info. Scis., Inc. v. Bd. of Trs. of Stanford Univ., 489 U.S. 468,
477 (1989), the Illinois General Assembly altered or disregarded the
UNCITRAL Model Law to make it conform with federal arbitration law. See
Illinois Enacts International Commercial Arbitration Act, 10 World Arb.
& Mediation Rep. 4 (Jan. 1999). Thus, the IICAA is essentially a
BCS seeks to vacate paragraphs five and eight of the panel's decision
under § 10(a)(4) of the FAA. 9 U.S.C. § 10(a)(4). BCS argues that
paragraph five awarding over $4,000,000.00 in damages to Reinsurers should
be vacated because: (1) it is an indefinite award incapable of
enforcement; (2) the award was based on a damages opinion inadmissible
under Illinois law; and (3) the panel exceeded its authority by making a
"rough justice" compromise and not adhering to Illinois contract law.
Reinsurers in turn respond that: (1) the award is a definite one based on
the claims submitted to the panel; (2) under Illinois law the panel had
the power to admit any evidence; and (3) the panel did not make a
compromise decision, and BCS waived its right to argue for the
application of the "strict rule of law." 710 ILCS 30/25-5(c). BCS also
seeks to vacate paragraph eight, in which the panel retained jurisdiction
over future disputes relating to the Reinsurance Agreements.
First, BCS argues that the monetary award to Reinsurers in paragraph
five is indefinite because Reinsurers have ongoing contractual payment
obligations to BCS against which the award should be offset. As such, BCS
urges the Court to view the award in paragraph five as a credit against
the $2 million that Reinsurers allegedly owe BCS, and not as a lump sum
payable to Reinsurers. This Court, however, can only vacate an award on
the grounds of indefiniteness if it is not sufficiently clear and
specific enough to be enforced. IDS Life Ins. Co. v. Royal Alliance
Assocs., 266 F.3d 645, 650 (7th 2001). In other words, we must find that
the arbitrators "left unresolved a portion of the parties' dispute." Id.
BCS' claim of indefiniteness fails because the panel's decision
resolved the claims submitted to the panel. Reinsurers and BCS'
post-hearing briefs clearly set out the relief requested by each party.
Specifically relevant to the instant dispute, BCS requested that the panel
reiterate its denial of Reinsurers' recission claim and grant or deny
Reinsurers' damages claims based on ISI's maladministration; Reinsurers'
requested specific damages amounts for ISI's maladministration. The
panel's resulting decision addressed the concerns enumerated by the
parties, denying the recission claim and delineating the parameters of the
coverage under the Reinsurance Agreements, as well as awarding Reinsurers
over $4 million for ISI's maladministration. In short, the monetary award
clearly resolved the parties' dispute over ISI's maladministration, and
the remainder of the panel's decision made clear that the Reinsurance
Agreements remain in effect subject to the limitations in the decision.
Trusting that the parties will abide by the decision ...