The opinion of the court was delivered by: Judge James B. Zagel
MEMORANDUM OPINION AND ORDER
At issue in this case is whether Defendant John Hancock Life Insurance Company ("Hancock"), through certain 1997 reinsurance contracts with Plaintiff Trustmark Insurance Company ("Trustmark"), ceded to Trustmark "retrocessional business" in addition to the "direct business" that both parties agree was part of the deal.*fn1 These reinsurance contracts each contain a mandatory arbitration clause for disputes relating to the interpretation or performance of the agreements, including their "formation or validity, or any transaction" arising under the agreements. The contract specifies that "[a]ll arbitrators and their companies must be disinterested in the outcome of the arbitration." Hancock initiated arbitration (the "First Arbitration") in 2002, after Trustmark refused to honor billings associated with Hancock's retrocessional business. Hancock's party-appointed arbitrator was Mark S. Gurevitz. As part of this arbitration, the parties entered into a Confidentiality Agreement, under which the documents exchanged, testimony given, and the ultimate award were subject to confidentiality. Each arbitrator also signed the Agreement, which did not contain an arbitration clause. In March 2004, after a two-week hearing, the arbitration panel found that retrocessional business was "covered and properly ceded to the contracts in dispute." On June 17, 2004 I issued an order confirming the award and its confidentiality, pursuant to the Confidentiality Agreement.
Following the First Arbitration, Hancock sent Trustmark a new billing which was once again disputed by Trustmark. Hancock, again, initiated arbitration (the "Second Arbitration"), and appointed Gurevitz, who also served on the panel of the First Arbitration. In December 2005, the parties conducted an organizational meeting, at which Trustmark representatives expressed some concern with regard to Gurevitz's ability to honor the Confidentiality Agreement he had signed. Gurevitz expressed that although he "would scrupulously abide by confidentiality," he might find it "hard to segregate, difficult to deal with" particular knowledge he had from the First Arbitration that other panelists in the Second Arbitration did not have. After questioning by Trustmark representatives, Trustmark agreed to the appointment.
During the Second Arbitration, Hancock, over Trustmark's objection, requested that the panel "expressly authorize the use of all materials from [the First Arbitration], without limitation[,]" so that the parties could avoid relitigating issues decided in the First Arbitration -namely, whether retrocessional business was covered by the contracts. Hancock's arbitrator, Gurevitz, despite being a signatory to the Confidentiality Agreement, did not recuse himself from the deliberations as to whether the second panel could grant such a request. Gurevitz, joined by the Umpire, Frank Haftl, issued Interim Award #10, in which the Panel "accept[ed] and extend[ed] the confidentiality of the [F]irst [A]rbitration to the two members of the current arbitration (Mr. Haftl and Mr. [Jack] Koepke [Trustmark's appointed arbitrator]) who were not parties to the previous arbitration." Approximately one month later, Hancock requested that the second panel issue an order prohibiting Trustmark from litigating nineteen matters that it argued were resolved by the first panel. After receiving briefing on the issue, the panel, in a 2-to-1 decision, with Gurevitz and Haftl in the majority, ruled that Trustmark was precluded from relitigating numerous issues, including the claim that retrocessional business was not covered by the reinsurance contracts.
Trustmark argues that in the First Arbitration, Hancock fraudulently concealed certain evidence material to the question of whether retrocessional business was properly ceded under the contracts, thereby procuring the First Arbitration's result by fraud. According to Trustmark, the preclusion order by the second panel is therefore tainted and the Second Arbitration should be enjoined to stop Hancock from furthering its fraudulent scheme. Trustmark now moves to enjoin further breaches of the Confidentiality Agreement (the initial breaches of which resulted in the preclusion order), obstruction of access to documents relating to the terms of the reinsurance agreement, and participation in the Second Arbitration with any of the panel members currently on the second panel. Since the Motion for Preliminary Injunction was filed, Hancock has agreed to abandon its preclusion claim, allowing the parties to relitigate, in light of allegedly concealed (and newly revealed) evidence, the question of whether the retrocessional business was properly ceded to Trustmark. Hancock has also agreed to participate in further discovery, again in light of the newly revealed documents. For these reasons, Trustmark's first two requests for relief are moot and I need not address their supporting arguments, including the allegations of fraud.*fn2
As to enjoining the scheduled Second Arbitration, Trustmark bases its motion on two grounds. First, Trustmark maintains an injunction is necessary to prevent the second panel from resolving disputes between the parties over the Confidentiality Agreement, which, Trustmark asserts, is not subject to arbitration. Second, Trustmark argues that Gurevitz breached the Confidentiality Agreement when he participated in deliberations on the issue of whether it should be extended, also necessitating injunction in order to put an end to Gurevitz's arbitral services, as he is no longer "disinterested."
For the following reasons, Trustmark's motion is granted in that I am enjoining the parties' participation in the Second Arbitration with Gurevitz on the panel. However, I decline to find that umpire Haftl and Trustmark's party-appointed arbitrator Jack Koepke need be removed from the Panel.
In seeking a preliminary injunction, Trustmark must demonstrate (1) a likelihood of success on the merits; and (2) the absence of a remedy at law or irreparable harm if injunction is denied. See Plummer v. American Inst. Of Certified Public Accountants, 97 F.3d 220, 229 (7th Cir. 1996); and Ty, Inc. v. Jones Group, Inc., 237 F.3d 891, 895 (7th Cir. 2001). If these conditions are met, the court must next "consider the irreparable harm that the nonmoving party will suffer if preliminary relief is granted, balancing such harm against the irreparable harm the moving party will suffer if relief is denied[,]" as well as the public interest in granting or denying the injunction. Ty, Inc., 237 F.3d at 895 (citing Storck USA, L.P. v. Farley Candy Co., 14 F.3d 311, 314 (7th Cir. 1994)). The court must then weigh all the factors employing a "sliding scale" approach - "the more likely the plaintiff will succeed on the merits, the less the balance of irreparable harms need favor the plaintiff's position." Id.
Trustmark seeks to enjoin the Second Arbitration on the ground that the Confidentiality Agreement is non-arbitrable. Trustmark seeks to disqualify Gurevitz on the grounds that: (1) he is not a "disinterested" party, as required under the reinsurance contracts; and (2) he has disclosed confidential information from the First Arbitration to the second panel.
Hancock maintains that this challenge is premature under Smith v. Am. Arbitration Ass'n, Inc., 233 F.3d 502, 506 (7th Cir. 2000), which stated that the time to challenge an arbitration on any grounds is post-award. However, the Seventh Circuit in Duthie v. Matria Healthcare, Inc., 540 F.3d 533 (7th Cir. 2008), affirmed a pre-award injunction where the arbitration clause did not provide for the arbitration of a specific dispute at issue. Trustmark cites Duthie, arguing that its challenge to Hancock is not premature, and that parties may bring pre-award challenges based on contract claims, in other words, those not grounded in the FAA. Trustmark maintains that it is not challenging Gurevitz's partiality or bias, but rather the Panel's infection by Gurevitz's breach of the Confidentiality Agreement. Trustmark's Underwriting Agreement with Hancock requires the arbitration of disputes by arbitrators who are "disinterested in the outcome of the arbitration." Trustmark maintains that Gurevitz can in no way be "disinterested" in construing the Confidentiality Agreement to which he is a party.
Trustmark argues that Gurevitz is not "disinterested" for two reasons: (1) he construed the terms of the Confidentiality Agreement to which he is a party, and (2) he served as Hancock's ...