Arrowood Indemnity Company v. Equitas Insurance Limited et al
OPINION AND ORDER....Underwriters' January 20, 2015 motions for relief pursuant to Rule 60(b)(3) and for post-judgment discovery are denied. (Signed by Judge Denise L. Cote on 5/14/2015) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ARROWOOD INDEMNITY COMPANY, formerly
known as ROYAL INDEMNITY COMPANY,
EQUITAS INSURANCE LIMITED, CERTAIN
UNDERWRITERS AT LLOYD’S OF LONDON,
(and Syndicates set forth on Schedule :
OPINION AND ORDER
For petitioner Arrowood Indemnity Company, formerly known as
Royal Indemnity Company:
Michele L. Jacobson
Beth K. Clark
STROOCK & STROOCK & LAVAN LLP
180 Maiden Lane
New York, NY 10038
For respondents Equitas Insurance Limited, Certain Underwriters
at Lloyd’s of London, et al.:
Lloyd A. Gura
Amy J. Kallal
MOUND COTTON WOLLAN & GREENGRASS
One New York Plaza
New York, NY 10004
DENISE COTE, District Judge:
Respondents Equitas Insurance Limited and Certain
Underwriters at Lloyd’s of London ("Underwriters") seek relief
from a final judgment pursuant to Federal Rule of Civil
Procedure 60(b)(3), as well as post-judgment discovery, alleging
misconduct by petitioner in procuring an arbitration award
confirmed by this Court in January 2014.
Indemnity Company ("Arrowood") opposed these motions on February
6, 2015, and they were fully submitted on February 13, 2015.
For the following reasons, Underwriters’ motions are denied.
Arrowood and Underwriters are both in the business of
insurance, and Underwriters provides “reinsurance” services.
Reinsurance allows insurers to transfer their risk of losses
under a policy or policies to another insurer.
In the 1960s,
Arrowood entered into a reinsurance agreement with Underwriters.
In general terms, this was an “excess of loss” agreement, under
which Underwriters agreed to indemnify Arrowood for losses
pursuant to certain of Arrowood’s insurance policies if those
losses exceeded a specific fixed amount, or “retention.”
The parties’ agreement was embodied in a complex
contractual reinsurance program called the “Global Slip.”
Negotiations for the first iteration of the Global Slip took
place in late 1966, and that contract was effective from January
1, 1967 to December 31, 1968.
It was thereafter replaced by
substantially similar agreements containing new contractual
One provision of the Global Slip covered losses incurred
under Arrowood’s casualty insurance policies -- that is,
insurance policies covering injury -- if those losses exceeded
In order to recover casualty insurance, Arrowood
had to satisfy contractual terms under one of three types of
coverage; of particular relevance here is “Common Cause
Coverage,” which provides for losses arising from “occurrences”
during the term of the contract that are the “probable common
cause or causes” of more than one claim.
The Common Cause
Coverage provision includes a clause stating, in pertinent part,
that “this Contract does not cover any claim or claims arising
from a common cause, which are not first advised during the
period of this Contract” (the “First Advised Clause”).
In the 1980s, Arrowood began incurring liabilities as a
result of asbestos injury claims submitted by its policyholders.
At Underwriters’ insistence, it billed its claims to
Underwriters on an individual and per-year basis, which imposed
a $1 million retention for its total recovery per year.
2008, after almost 25 years of this billing practice, and after
its review of the contractual language at issue, Arrowood
presented a number of its asbestos claims to Underwriters under
the Common Cause Coverage provision.
that the First Advised Clause required any Common Cause claims
to be noticed during the original contract period, namely the
years 1967 and 1968.
They denied Arrowood’s claim.
The parties commenced arbitration in October 2010, presided
over by a three-arbitrator panel (the “Panel”).
presented numerous arguments, including that a different binding
agreement existed between Arrowood and Underwriters, that
certain coverage was limited to employer liability claims, and
that the First Advised Clause precluded recovery under the
Common Cause Coverage.
Arrowood argued that the First Advised
Clause was intended only to prevent recovery on known losses
whose “common cause” occurred before the term of the original
Extensive discovery and document production followed;
Arrowood produced over 300,000 pages of documents, including
contemporaneous evidence of the parties’ understanding of the
First Advised Clause during contract negotiations.
did, however, object to the production of documents relating to
“other reinsurers” and “other claims,” and accordingly did not
produce them. 1
Among other things, Arrowood stated that “there
[was] not a single fact to support” Underwriters’ interpretation
of the First Advised Clause.
Arbitration proceedings took place in New York City in
March and April of 2013.
During the eight-day hearing, numerous
Underwriters chose not to move to compel these categories of
evidence. When the parties did move to compel other documents
related to third parties, the Panel denied such motions.
exhibits were presented and numerous witnesses testified to the
meaning of the First Advised Clause.
In its decision of April
4, 2013, the Panel agreed that Arrowood’s interpretation was
more reasonable, setting forth its reasoning in some detail and
observing that Underwriters “presented no evidence” by which the
Panel might conclude otherwise.
It rejected all of
Underwriters’ other arguments with respect to the asbestos
claims and accordingly awarded Arrowood $44,808,973.
30, 2013, Arrowood sought confirmation of its award in the
Southern District of New York.
The parties subsequently
notified the Court that they had entered a stipulation by which
Underwriters would not oppose the confirmation.
issued on January 21, 2014 and the case was closed.
Months later, Underwriters began communicating with other
reinsurers who were party to the Global Slip and who had
prevailed in their arbitration proceedings against Arrowood.
December 19, 2014, Underwriters obtained a document, produced by
Arrowood in a different action, that allegedly puts the lie to
Arrowood’s argument in theirs.
According to Underwriters, this
document -- a letter created by a reinsurance broker in 1987
(the “Letter”) -- “sets out in unequivocal terms the very same
interpretation of the First Advised Clause that Underwriters
propounded to the arbitration panel.”
The Letter was written to
a third-party reinsurer and was written to assist in a
contemporaneous 1987 claim, not one of those at issue in the
It described in some detail the broker’s
then-understanding of the reasons for and history of the First
Underwriters consider the Letter responsive to
Underwriters’ discovery request for documents concerning Common
Cause Coverage and the First Advised Clause.
On December 29,
they sent a letter to Arrowood expressing concern that the
Letter had not been produced during arbitration and requesting
immediate access, under the Global Slip’s audit clause, to all
documents related to Common Cause Coverage and the First Advised
In reply, Arrowood explained that it considered the
Letter -- written to a third party pursuant to a claim not at
issue in the arbitration -- one of the documents Arrowood had
objected to producing, and furthermore that it opposed
Underwriters’ request to an audit as overbroad.
filed this motion on January 20, 2015.
The Federal Rules of Civil Procedure provide a mechanism
for seeking relief from a judgment procured by fraud.
60(b)(3) provides that a court “may relieve a party or its legal
representative from a final judgment” in cases of “fraud
(whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party.”
Rule 60(b)(3) motion cannot be granted absent clear and
convincing evidence of material misrepresentations and cannot
serve as an attempt to relitigate the merits.”
Univ., 865 F.2d 478, 484 (2d Cir. 1989).
Fleming v. N.Y.
Relief under Rule
60(b) is “generally not favored and is properly granted only
upon a showing of exceptional circumstances.” Ins. Co. of N. Am.
v. Pub. Serv. Mut. Ins. Co., 609 F.3d 122, 131 (2d Cir. 2010)
The judgment at issue here was entered to confirm an
Arrowood sought enforcement of the
arbitration award pursuant to the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21
U.S.T. 2517 (the “New York Convention”), as implemented by the
Federal Arbitration Act (“FAA”), 9 U.S.C. § 201, et seq.
domestic terms of the FAA apply to international awards made in
the United States.
See Scandinavian Reinsurance Co. v. Saint
Paul Fire & Marine Ins. Co., 668 F.3d 60, 71 (2d Cir. 2012).
Federal Rule of Civil Procedure 81(a)(6) provides that the Rules
“govern proceedings under” the FAA, “except as [it] provide[s]
“[W]here the FAA's procedures are in
conflict with those of the civil rules, the former control.”
ISC Holding AG v. Nobel Biocare Fin. AG, 688 F.3d 98, 114 (2d
Section 10 of the FAA provides specific, enumerated grounds
upon which an arbitration award may be vacated.
Among the FAA’s
grounds for vacatur are that “the award was procured by
corruption, fraud, or undue means.”
9 U.S.C. § 10(a)(1). 2
FAA imposes a strict time limit on any motion to vacate.
“Notice of a motion to vacate . . . an award must be served upon
the adverse party or his attorney within three months after the
award is filed or delivered,”
id. § 12, and “a party may not
raise a motion to vacate, modify or correct an arbitration award
after the three month period has run.”
Wallace v. Buttar, 378
F.3d 182, 197 (2d Cir. 2004) (citation omitted).
Underwriters allege that Arrowood intentionally withheld
the Letter during the arbitration proceedings and deliberately
made false statements to the Panel.
In so doing, they rightly
acknowledge that Rule 60(b)(3) cannot be used to challenge
directly the arbitration proceedings or the resultant award.
Instead, they argue that Arrowood’s alleged misconduct was not
confined to the arbitration proceeding, but rather “continued
into the judicial proceeding to confirm the award.”
to escape the three month limitation imposed by the FAA on
Vacatur may be sought pursuant to the New York Convention only
under the domestic laws of the country in which the award is
made. Yusuf Ahmed Alghanim & Sons v. Toys "R" Us, Inc., 126
F.3d 15, 23 (2d Cir. 1997). Here, the award was made in the
United States, and that law is the FAA.
motions to vacate an arbitration award fails.
proceeding in this case was a summary affair, the judgment
undisputed and stipulated to.
However they choose to
characterize it, the essence of Underwriters’ complaint is that
there was misconduct in the arbitration proceedings, not in the
summary proceedings before this Court to obtain a confirmatory
The Second Circuit has previously confronted the
interaction between 9 U.S.C. § 10 and the Federal Rules, and has
found Rule 60(b) a procedurally improper means of redressing
alleged wrongs or oversights in arbitration proceedings.
1962, the Circuit was asked to vacate a labor arbitration
decision pursuant to Rule 60(b), on the grounds of newly
discovered evidence. 3
Bridgeport Rolling Mills Co. v. Brown, 314
F.2d 885 (2d Cir. 1963) (per curiam).
According to the court,
the fact that the party seeking to vacate the award “may have
had, or may now have, sufficient evidence to justify [a
different result] is irrelevant to the issues the arbitrator
heard and has no bearing upon the arbitrator's determination.”
Id. at 885-86.
It held that “the parties, having agreed to an
arbitration of their differences, are bound by the arbitration
The appellant had also cited 9 U.S.C. § 10’s provision on fraud
before the district court, but the Circuit largely confined its
decision to the Rule 60 issue.
award made upon the testimony before the arbitrator.”
The Second Circuit has also affirmed a lower court ruling
that “[u]nder Rule 81(a)(3) . . . Rule 60(b) is unavailable . .
. in contesting the arbitrators' decision.”
Cook Chocolate Co.,
a Div. of World's Finest Chocolate v. Salomon Inc., 748 F. Supp.
122, 125 (S.D.N.Y. 1990), aff'd sub nom. Cook Chocolate Co. v.
Salomon Inc., 932 F.2d 955 (2d Cir. 1991). 4
Other Circuits concur.
For example, a Fourth Circuit
holding that, because the FAA “contains exclusive procedures for
vacating arbitration awards, Rule 60(b)(1) is inapplicable” for
that purpose, e.spire Commc’ns, Inc. v. CNS Commc’ns, 39 Fed.
App’x. 905, 912 (4th Cir. 2002) (per curiam), has been cited
favorably in the Second Circuit.
See ISC Holding, 688 F.3d at
123 (Straub, J., concurring in part and dissenting in part on
The D.C. Circuit has observed that there is
“substantial cause for not applying Rule 60(b) remedies to final
Washington-Baltimore Newspaper Guild,
Local 35 v. Washington Post Co., 442 F.2d 1234, 1239 (D.C. Cir.
The Second Circuit has repeated, in a footnote, that an
underlying district court opinion found that plaintiff “could
have sought relief from the federal judgments confirming and
enforcing the award in federal court through Fed.R.Civ.P.
60(b)(3).” Karaha Bodas Co. v. Perusahaan Pertambangan Minyak
Dan Gas Bumi Negara, 500 F.3d 111, 118 n.9 (2d Cir. 2007). As
the Court reads it, this observation does not constitute an
endorsement of the practice of using Rule 60(b)(3) to revisit
the propriety of arbitration awards.
1971); but see Baltia Air Lines, Inc. v. Transaction Mgmt.,
Inc., 98 F.3d 640, 642 (D.C. Cir. 1996) (stating that Rule 60(b)
can be “an appropriate vehicle by which to challenge a judgment
confirming an arbitration award” but not addressing Rule 60(b)’s
interaction with Section 10 of the FAA).
The Ninth Circuit has decided a case with facts
substantially similar to those here.
In Lafarge Conseils Et
Etudes, S.A. v. Kaiser Cement & Gypsum Corp., 791 F.2d 1334 (9th
Cir. 1986), Kaiser Cement filed a Rule 60(b) motion to set aside
a judgment confirming an arbitration award against it a year
after the date of judgment.
Id. at 1339.
Kaiser argued that it
had discovered new evidence, invoking Rule 60(b)(2), and that
certain evidence that was presented was patently the product of
fraud, invoking Rule 60(b)(3).
Id. at 1338-39.
denied the motion, concluding that parties may not “collaterally
attack [an arbitration] award under the guise of a motion to set
aside the judgment confirming the award.”
Id. at 1339.
[t]he [F]ederal Arbitration Act provides the exclusive
grounds for challenging an arbitration award within
its purview. Once an arbitrator has rendered a
decision the award is binding on the parties unless
they challenge the underlying contract to arbitrate
pursuant to section 2 or avail themselves of the
review provisions of sections 10 and 11. Otherwise,
the three month notice requirement of section 12 for
appeal of an award on section 10 or 11 grounds would
be meaningless if a party to the arbitration
proceeding could bring an independent action asserting
such claims outside of the statutory time period
provided for in section 12.
Id. at 1338-39 (citation omitted).
These decisions and their reasoning are adopted here.
81 provides that the grounds listed in 9 U.S.C. § 10 -- and,
where applicable, those in the New York Convention -- are the
exclusive means of addressing and redressing wrongdoing in an
The FAA prescribes a specific period
during which challenges to an arbitration award may be made
based on misconduct or fraud during the arbitration proceedings.
Permitting Rule 60(b)(3) challenges to confirmation judgments on
the theory that alleged misconduct in an arbitration proceeding
“continued” into the judgment proceeding upends the FAA’s strong
deference to the process and substance of arbitration as a form
of dispute resolution. 5
The cases cited by Underwriters in
support of their position are either unpersuasive or not in
Underwriters cite a countervailing doctrine. In Commercial
Union Ins. Co. v. Lines, 378 F.3d 204 (2d Cir. 2004), the Second
Circuit reversed confirmation of an award where “the arbitrators
[had] found fraud” during arbitration. It held that to confirm
an arbitration award where fraud may have prejudiced a party
might “violate the principle, fundamental in our jurisprudence,
that a wrongdoer shall not be permitted to profit through his
own wrongdoing.” Id. at 208. That case presented very
different facts. Underwriters here allege fraud; the tribunal
in Commercial Union found that there was fraud. More to the
point, Underwriters here rely here on Rule 60(b)(3); Commercial
Union was decided under the FAA. As explained above, Rule
60(b)(3) cannot be used to pry open a judgment in this manner.
conflict with this reading of the interaction between Rule
60(b)(3) and the FAA. 6
Underwriters’ January 20, 2015 motions for relief pursuant
to Rule 60(b)(3) and for post-judgment discovery are denied.
New York, New York
May 14, 2015
United States District Judge
For example, Rule 60(b)(6) has been used to correct a
mathematical error in a judgment confirming an arbitration
award, Clarendon Nat. Ins. Co. v. TIG Reinsurance Co., 183
F.R.D. 112, 117 (S.D.N.Y. 1998), and Rule 60(b)(5) has been used
to grant partial relief where some of the judgment had been
satisfied. AIG Baker Sterling Heights, LLC v. Am. Multi-Cinema,
Inc., 579 F.3d 1268, 1273 (11th Cir. 2009).
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