United States District Court, N.D. Illinois, Eastern Division
ZURICH AMERICAN INSURANCE COMPANY and AMERICAN ZURICH INSURANCE COMPANY, Petitioners,
TRENDSETTER HR, LLC, TSL STAFF LEASING, INC. and TREND PERSONNEL SERVICE, Respondents.
MEMORANDUM OPINION AND ORDER
D. LEINENWEBER, JUDGE
the Court is a Motion to Confirm the Arbitration Award [ECF
No. 75] filed by Zurich American Insurance Company and
American Zurich Insurance Company (collectively,
“Zurich”). For the reasons stated below, the
Motion is granted.
parties agree as to the operative facts. Trendsetter HR and
Trend Personnel Services (collectively “Trend”)
contracted with Zurich for worker's compensation
insurance. During each year between 2011 and 2015, the two
companies executed a written policy agreement - four total
agreements over the four-year period. The parties also
entered into various “Program Agreements”
clarifying the terms of the initial workers compensation
policies. Each Program Agreement includes an arbitration
clause, by which the parties agreed that “[a]ny dispute
arising out of the interpretation, performance or alleged
breach of this Agreement, shall be settled by binding
arbitration administered by the American Arbitration
Association (AAA) under its Commercial Arbitration Rules. . .
.” (ECF No. 75, Ex. 1, at 65). The arbitration clause
defines the terms of arbitration, including the method for
requesting arbitration and the makeup of the arbitration
panel. The clause dictates that the panel is to consist of an
arbitrator selected by each party and an impartial arbitrator
selected by the two previously selected arbitrators. The
arbitration clause further allows for confirmation of an
award “in any court having jurisdiction.”
2015, Zurich filed for arbitration of a payment dispute.
Trend filed objections with the AAA challenging, among other
things, the AAA's jurisdiction, and seeking separate
arbitrations under each of the four Program Agreements. In
September 2015, the AAA concluded that Zurich had complied
with the AAA's filing requirements and that arbitration
would continue in a consolidated proceeding in front of one
arbitration panel. Subsequently, Zurich and Trend each
selected an arbitrator and the two arbitrators agreed on an
impartial third panel member. As arbitration commenced, Trend
participated in the arbitration proceedings through counsel
and at the same time actively opposed the arbitration by
filing a Complaint against the AAA in Texas state court (the
“Texas action”). The Texas action did not name
Zurich as a party but sought a Temporary Restraining Order
(“TRO”) against the AAA to enjoin the arbitration
proceedings. The Texas court granted the TRO in September
2015, and it expired less than a month later.
light of Trend's filing of the Texas action, Zurich filed
a Petition to Compel Arbitration in this Court. In November
2015, the Court granted Zurich's Motion to Compel
Arbitration. The Court enjoined Trend from interfering with
the arbitration proceedings, including further pursuance of
the Texas action.
parties returned to arbitration. Predicting future legal
resistance, Zurich petitioned the arbitrators to order Trend
to produce a pre-hearing security for the amount Zurich
sought to be awarded through arbitration. In June 2016, the
arbitrators ordered Trend to produce a pre-hearing security
in the amount of $4, 597, 779.06. To date, Trend has not put
forth any money. Zurich seeks to compel payment of the
pre-hearing security in accordance with 9 U.S.C. § 9.
Trend argues that the award should be vacated pursuant to 9
U.S.C. § 10(a)(4).
Federal Arbitration Act (“FAA”), 9 U.S.C. §
1, et seq., governs arbitration agreements in
contracts affecting interstate commerce. See, Wisconsin
v. Ho-Chunk Nation, 512 F.3d 921, 936 n.5 (7th Cir.
2008). “Insurance compan[ies] doing business across
state lines engage in interstate commerce.”
Humana Inc. v. Forsyth, 525 U.S. 299, 306 (1999).
The insurance agreements in dispute were executed across
state lines (Zurich from Illinois and Trend from Texas).
Therefore, the arbitration clauses are governed by the FAA.
See, Humana Inc., 525 U.S. at 306. Under the FAA, if
the agreement provides for confirmation of an arbitration
award by a specific court, that court must confirm
the award unless certain statutory exceptions apply.
See, 9 U.S.C. § 9. These exceptions are defined
in Sections 10 and 11 of the FAA.
pre-hearing security, like the one awarded to Zurich by the
arbitration panel, is an “award” for purposes of
the FAA. See, Yasuda Fire & Marine Ins. Co. of
Europe, Ltd v. Cont'l Cas. Co., 37 F.3d at 347-48
(holding that an “interim order of security”
“constitutes an ‘award' under [9 U.S.C.
§ 10]”). Thus, the Court must affirm the award
unless a statutory exception applies. See, 9 U.S.C.
§ 9. Section 10(a)(4) is one such exception. It allows a
court to 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.” “A party seeking relief
under [Section 10(a)(4)] bears a heavy burden.”
Oxford Health Plans LLC v. Sutter, 133 S.Ct. 2064,
court may vacate an arbitration award only if the arbitration
panel's decision to grant the award does not draw its
essence from the agreement between the parties.”
Yasuda Fire & Marine Ins. Co. of Europe, Ltd v.
Cont'l Cas. Co., 37 F.3d 345, 349 (7th Cir. 1994).
“Factual or legal errors by arbitrators - even clear or
gross errors - do not authorize courts to annul
awards.” Gingiss Int'l, Inc. v. Bormet, 58
F.3d 328, 333 (7th Cir. 1995) (internal quotations omitted).
Where a contract's validity is disputed in arbitration
instead of the validity of the arbitration clause only,
courts will defer to the judgment of the arbitrators.
See, Faulkenberg v. CB Tax Franchise Sys., LP, 637
F.3d 801, 811 (7th Cir. 2011).
Trend contends that the arbitrators exceeded their authority
because the prehearing security does not “draw its
essence” from the Program Agreements. Strong deference
is given to decisions made by arbitrators. See, Oxford
Health Plans LLC, 133 S.Ct. at 2068. “It is only
when the arbitrator must have based his award on
some body of thought, or feeling, or policy, or law that is
outside the contract . . . that the award can be said not to
‘draw its essence from the [parties'
agreement].'” Ethyl Corp. v. United
Steelworkers of Am., 768 F.2d 180, 184-85 (7th Cir.
1985) (emphasis in original) (citation omitted). The Court
finds support for the award in the Program Agreements and the
arbitration clause contained therein. See, Butler Mfg.
Co. v. United Steelworkers of Am., 336 F.3d 629, 632-33
(7th Cir. 2003).
the Program Agreements do not specifically mention a
prehearing security as a remedy available to the parties,
this is not dispositive. In Yasuda, the Seventh
Circuit emphasized the importance of a “wide range of
remedies” to successful arbitration. Yasuda,
37 F.3d at 351. The court noted that just because specific
remedies have not been articulated in the parties'
agreement, “does not mean remedies are not
available.” Id. The court reasoned that,
“[i]f an enumeration of remedies were necessary, in
many cases the arbitrator would be powerless to impose any
remedy, and that would not be correct. Since the arbitrator