The opinion of the court was delivered by: SUZANNE CONLON, District Judge
MEMORANDUM OPINION AND ORDER
In January 2000 and again in 2001, Continental Casualty Company
("CCC") purchased aggregate loss reinsurance from Scandinavian
Reinsurance Company ("Scan Re"). The terms of the aggregate loss
reinsurance were set out in two agreements. Each of the
agreements contained an arbitration clause providing that any
dispute between the parties would be resolved by final and
binding arbitration before a three-member panel. In early 2002,
Scan Re alleged that CCC violated the terms of the agreements.
The parties were unable to resolve the dispute and Scan Re
demanded arbitration on November 21, 2003. A three-member panel
issued an award on March 23, 2005. Responding to a request for
clarification, the panel issued a second award on April 16, 2005.
CCC moves to confirm both arbitration awards and enter a monetary
judgment in its favor, including post-judgment interest. Scan Re
cross-petitions to confirm the March 23, 2005 award and requests
the court to order a return of its letter of credit.*fn1 BACKGROUND
I. March 23, 2005 Final Arbitration Award
Following ten months of discovery and extensive briefing, the
arbitration hearing commenced on March 14, 2005 and continued
through March 17, 2005 before the panel of three arbitrators. The
panel issued its award on March 23, 2005. The panel's findings
1. The 2000 and 2001 Excess of Loss Treaties inure
respectively to the benefit of the 2000 and 2001
Aggregate Stop Loss Treaties.
2. The proper Subject Earned Premium for the
Aggregate Stop Loss Treaties shall be defined as
follows: All E & S earned premium after deducting
product specific reinsurance and Non-Standard Auto
but before XOL premium.
3. Scan Re shall maintain letters of credit to secure
its obligations pursuant to this Award and under the
appropriate Articles of the 2000 and 2001 Aggregate
Stop Loss Treaties.
4. CCC shall pay a margin, determined as of December
31, 2004, in accordance with the provisions of this
5. CCC shall restate past reports and submit future
reports consistent with this Award.
* * *
7. The panel will retain jurisdiction of this matter
for 30 days following the date of this Award in order
to clarify an[y] issues that may arise from the
wording of the Award.
8. Any relief requested by the parties and not
specifically granted herein is denied.
CCC Mot. at Ex. C.
On March 25, 2005, pursuant to paragraph 7 of the March 23rd
award, CCC requested clarification. In its request, CCC set out
its understanding of the definition of "Subject Premium and Subject Loss." In addition, it applied its interpretations
and calculated that Scan Re immediately owed $27,880,734.00. CCC
also submitted a proposed "Amended Final Award" including the
amounts to be paid to CCC under its calculations.
In response to CCC's request for clarification, the panel
declined to adopt CCC's proposed amended final award. Instead,
the panel issued a second "Final Award" on April 16, 2005. The
April 16th award provided:
1. The Panel's Final Award was composed as a
declaratory judgment as to how various treaty
provisions applied to the facts and issues raised
during the course of this arbitration. It did not
make findings on amounts due from Scan Re to CCC and
thus cannot consider the confirmation of such amounts
presented by CCC for approval as a "clarification."
The Panel expects that the parties can determine the
appropriate financial result flowing from the Award
once the methodology used by CCC to recast amounts
due from Scan Re is considered.
2. The methodology used by CCC in its letter and
exhibits dated March 25, 2005 to calculate Subject
Premium and Subject Loss, and all related
calculations, for the 2000 and 2001 Aggregate Stop
Loss Treaties are conceptually consistent with the
Final Award issued by the Panel.
CCC. Mot. at Ex. F.
Judicial review of an arbitration award is extremely limited.
Moseley, Hallgarten, Estabrook & Weeden, Inc. v. Ellis,
849 F.2d 264, 267 (7th Cir. 1988); Bargenquast v. Nakano Foods,
Inc., 243 F. Supp. 2d 772, 774 (N.D. Ill. 2002). "Judicial
review of arbitration awards is narrow because arbitration is
intended to be the final resolution of disputes. Arbitrators do
not act as junior varsity trial courts where subsequent appellate
review is readily available to the losing party." Nat'l Wrecking
Co. v. Int'l Brotherhood of Teamsters, 990 F.2d 957, 960 (7th
Cir. 1993). A court has no authority to alter an arbitration award or substitute its
judgment for that of the arbitrator. Ethyl Corp. v. United
Steelworkers of America, 768 F.2d 180, 183-84 (7th Cir. 1985),
cert. denied, 475 U.S. 1010 (1985).
I. Validity of the July 16th Award
CCC argues that the panel issued its final award in two parts,
on March 23rd and April 16th, 2005, and moves to confirm both
parts of the award. In response, Scan Re moves to confirm only
the March 23rd award. Scan Re argues that the first award
resolved all disputed issues, and under the doctrine of functus
officio, the panel no longer had jurisdiction to "reconsider"
the award. According to Scan Re, the July 16th award was not part
of the panel's final judgment but simply affirmed the March 23rd
award, noting that it was composed as a declaratory judgment.
The functus officio doctrine prohibits an arbitrator from
reconsidering or amending an award once a final decision has been
rendered. Glass, Molders, Pottery, Plastics and Allied Workers
Int'l Union, et al. v. Excelsior Foundry Co., 56 F.3d 844, 845
(7th Cir. 1995) (arbitrators should have the power to reconsider
their opinions within a reasonable amount of time) ("Excelsior
Foundry"); Massachusetts Casualty Ins. Co. v. North American
Reassurance Co., Civ. No. 89 C 7744, 1990 WL 7176, at *3 (N.D.
Ill. Jan. 17, 1990). "The doctrine is jurisdictional and
recognizes that the arbitrator's authority is entirely terminated
by the completion and delivery of an award." Massachusetts
Casualty Ins. Co., 1990 WL 7176, at *3. As an exception to
functus officio, arbitrators have well established authority to
issue a supplemental award clarifying or explaining the original
award. Excelsior Foundry Co., 56 F.3d at 848; Unionamerica
Ins. Co. v. Allstate Ins. Co., 302 F. Supp. 2d 865, 868 (N.D.
Ill. 2004) ("[u]nder certain circumstances, an arbitral panel may
be given an opportunity to explain or clarify its ruling); see
also Arch Dev. Corp. v. Biomet, Inc., No. 02 C 9013, 2003 WL 21697742, at *5 (N.D. Ill. July 30, 2003). The
power of arbitrators to clarify an award must be exercised within
a reasonable period of time. Excelsior Foundry, at 848.
By issuing the July 16th award, the arbitration panel did not
reconsider or amend the March 23rd award in violation of functus
officio. The second award clarifies the meaning of the March
23rd award within the allowable exception. Arch Dev. Corp.,
2003 WL 21697742, at *5. If an arbitration award is unclear or
ambiguous, an arbitrator is required to provide clarification.
See Arch Dev. Corp., 2003 WL 21697742, at *5. In response to
CCC's request for clarification and confirmation of its
calculations, the July 16th award explains that the panel "did
not make findings on amounts due from Scan Re to CCC and thus
cannot consider the confirmation of such amounts." CCC Mot. at
Ex. F. The amended award explicitly states that it is ...