National Union Fire Insurance Company of Pittsburgh, PA. v. Source One Staffing LLC
Filing
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MEMORANDUM OPINION AND ORDER: The Court exercises its authority under the FAA and the terms of the parties' arbitration agreement and appoints Elizabeth Thompson as umpire. As that is the sole relief sought by National Union, the Clerk of Cour t is directed to close the case, without prejudice to either party reopening it within thirty days if Ms. Thompson does not or cannot accept appointment as the umpire. To be clear, any application to reopen must be filed within thirty days of this Order; any application to reopen filed thereafter may be denied solely on that basis. (Signed by Judge Jesse M. Furman on 10/13/2016) (kgo)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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NATIONAL UNION FIRE INSURANCE COMPANY :
OF PITTSBURGH, PA,
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Petitioner,
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-v:
:
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SOURCE ONE STAFFING LLC,
:
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Respondent.
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:
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10/13/2016
16-CV-6461 (JMF)
MEMORANDUM OPINION
AND ORDER
JESSE M. FURMAN, United States District Judge:
This case, familiarity with which is presumed, relates to an arbitration proceeding
between Petitioner National Union Fire Insurance Company (“National Union”) and Respondent
Source One Staffing, LLC (“Source One”). Pursuant to the terms of their arbitration agreement,
each party has selected an arbitrator. Under the terms of the agreement, those arbitrators were
supposed to appoint a third arbitrator, the umpire, but they have not done so. Frustrated by the
delay, National Union now asks the Court to appoint the umpire. In doing so, it relies on both
the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq., and the language of the parties’
agreement. Section 5 of the former directs a district court to “designate and appoint an arbitrator
. . . or umpire, as the case may require,” upon “the application of either party to the controversy”
following “a lapse in the naming of an arbitrator . . . or umpire.” 9 U.S.C. § 5. And the parties’
agreement provides that, “if the two arbitrators fail to agree on a third arbitrator within 30 days
of their appointment, either party may make application” to this Court (or any other “court of
competent jurisdiction in the City, County, and State of New York”). (Docket No. 5 (“Hart
Decl.”), Ex. 2 (“Addendum”) § 5).
Upon review of the parties’ submissions (Docket Nos. 1, 4, 5, 20, 21, 22 & 27), the Court
concludes that it can and should exercise its authority under both the FAA and the parties’
agreement to appoint an umpire. National Union appointed its arbitrator on February 26, 2016.
(Hart Decl., Ex. 3 (“2016 E-mail Correspondence”) at 4-5). It took almost two months, and
several e-mail exchanges, before Source One appointed its arbitrator, on April 20, 2016. (Id. at
2-5). Pursuant to the parties’ agreement, the deadline to appoint the umpire was therefore May
20, 2016. (Addendum § 5; see also Hart Decl., Ex. 1 (“Payment Agreement”) at 8). Yet it was
not until May 27, 2016, that the party-appointed arbitrators even exchanged lists of potential
umpires. (Hart Decl. ¶ 3). Since that time, Source One and its chosen arbitrator have largely
failed to engage in the process of selecting the umpire — despite repeated demands from
National Union and the filing of this lawsuit. (Docket No. 4 (“Pet.’s Mem.”) at 6-7; see also
Hart Decl., Exs. 5-6). In these circumstances, it is appropriate for the Court to step into the
breach. See In re Salomon Inc . Shareholders’ Derivative Litigation, 68 F.3d 554, 560 (2d Cir.
1995) (interpreting the term “lapse” in Section 5 of the FAA to mean “a lapse in time in the
naming of the arbitrator or in the filling of a vacancy on a panel of arbitrators, or some other
mechanical breakdown in the arbitrator selection process” (internal citation and quotation marks
omitted)); In re Arbitration Between Nat’l Union Fire Ins. Co. of Pittsburgh, P.A. v. Personnel
Plus, Inc., 954 F. Supp. 2d 239, 249 (S.D.N.Y. 2013) (appointing an umpire in a case involving
the same contractual language as here and where, as here, the party-chosen arbitrators had failed
to select the umpire within thirty days). Doing so gives effect to the parties’ agreement to
arbitrate, which is being frustrated by Source One’s pattern of obstruction. See generally Stolt-
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Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682 (2010) (stating that, when enforcing
an arbitration agreement, courts “must give effect to the contractual rights and expectations of
the parties”).
The question, then, is which of the ten candidates proposed by the parties should be
selected. The Court starts, as it must, with the parties’ arbitration agreement. See, e.g., In re The
Travelers Indem. Co., 3:04-mc-196 (TPS), 2004 WL 2297860, at *3 (D. Conn. Oct. 8, 2004); In
re Arbitration, 954 F. Supp. 2d at 249. It provides that qualified arbitrators “must be executive
officers or former executive officers of property or casualty insurance or reinsurance companies
or insurance brokerage companies, or risk management officials in an Industry similar to [Source
One’s].” (Payment Agreement at 8). In light of that provision, three of Source One’s proposed
umpires — Jane Marie Downey, Olie Jolstad, and William Hager — are demonstrably
unqualified. (Hart Decl., Exs. 12-14; see also Pet.’s Mem. 13). And while the other two —
Jeffrey Posner and Kevin Quinley — are technically qualified, they are far less experienced with
respect to arbitrations generally, and insurance arbitrations specifically, than all of the candidates
proposed by National Union. (See Pet.’s Mem. 13). Of National Union’s proposed candidates,
the Court believes that Elizabeth Thompson is the most appropriate choice. She meets the
requirements of the parties’ agreement and, having previously served as an umpire in sixty-eight
arbitrations concerning insurance and re-insurance disputes and as a party-appointed arbitrator in
thirty such proceedings (see id. at 12; Hart Decl., Ex. 10), she plainly has sufficient experience to
manage the parties’ arbitration. See In re The Travelers Indem. Co., 2004 WL 2297860, at *3
(noting that an appointing court should consider “the umpire’s need to manage the arbitration
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process in an organized, efficient, and fair manner” where, as here, no organization has been
appointed to serve as an administrator).1
Accordingly, the Court exercises its authority under the FAA and the terms of the parties’
arbitration agreement and appoints Elizabeth Thompson as umpire. As that is the sole relief
sought by National Union, the Clerk of Court is directed to close the case, without prejudice to
either party reopening it within thirty days if Ms. Thompson does not or cannot accept
appointment as the umpire. To be clear, any application to reopen must be filed within thirty
days of this Order; any application to reopen filed thereafter may be denied solely on that basis.
SO ORDERED.
Dated: October 13, 2016
New York, New York
In her questionnaire, Ms. Thompson discloses that she has previously served as both a
party-appointed arbitrator and an umpire in arbitrations involving National Union’s parent
company, AIG Insurance, and that she has dealt with National Union’s party-appointed arbitrator
previously, both on prior arbitration panels and through an arbitration association in which both
are members. (Hart Decl., Ex. 10). Such contacts are undoubtedly commonplace among
arbitrators experienced in the insurance and reinsurance realms, and they do not appear to have
been substantial enough to raise questions about Ms. Thompson’s impartiality. Cf. Scandinavian
Reinsurance Co. v. St. Paul Fire & Marine Ins. Co., 668 F.3d 60, 64 (2d Cir. 2012) (discussing
the high standard of “evident partiality” in the context of reviewing an arbitration award).
Moreover, Source One makes no argument about Ms. Thompson’s partiality (let alone
qualifications), thereby waiving any such objection.
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