In the Spring 2016 issue of AIRROC Matters, we featured Part 1 of a multipart arbitration series by Michael Goldstein and Dan Endick titled, “When Courts Peek Under the Arbitral Veil: the Role of the Courts in Managing Your Reinsurance Arbitration”. The following article is Part 2, “Who’s Your Counsel.” The final article in the series – Part 3 – will appear in a subsequent issue of AM, titled, “Who’s Your Arbitrator.”
Much less common, but noteworthy nonetheless, are decisions resulting in disqualification of arbitration counsel mid-arbitration. Similar to disqualification motions for arbitrators, the typical motion concerns possible conflicts of interest or inappropriate communications with the panel. Different from arbitrator disqualification, however, is the fact that courts have expressly stated that arbitration panels are not empowered to decide issues concerning attorney disqualification.
For instance, in Munich Reinsurance Am., Inc. v. ACE Prop. & Cas. Ins. Co., the court was presented with the issue of whether disqualification of an attorney was a matter for the arbitration panel or the court. Munich Reinsurance Am., Inc. v. ACE Prop. & Cas. Ins. Co., 500 F. Supp. 2d 272, 274 (S.D.N.Y. 2007). There, a formal demand for arbitration was issued in January 2006. The respective party-arbitrators were selected in September 2006, but the parties were unable to agree on an umpire. Id. at 273. During a dispute as to how to select the umpire, ACE demanded that Saul Ewing, counsel for Munich, withdraw as counsel. Id. ACE argued that Saul Ewing had represented ACE in a prior matter and had potentially prejudicial information. Id. ACE filed a motion to disqualify Saul Ewing as counsel for Munich in the Pennsylvania Court of Common Pleas and Munich filed a petition for the appointment of an umpire pursuant to the agreement in the Southern District of New York. Id.
The Southern District of New York denied the petition for appointment of an umpire, holding that it would not appoint an umpire while a disqualification motion was pending before the Pennsylvania Court of Common Pleas. Id. at 275. Critical to the Southern District’s analysis was the question of whether the disqualification could simply be decided in the arbitration once an umpire had been appointed, as Munich contended. The Southern District disagreed, reasoning that, while arbitration is a favored form of dispute resolution, the scope of review that is permitted to arbitrators is limited to matters that the parties intended to arbitrate. Id. at 274. The court thus concluded that: “disqualification of an attorney for an alleged conflict of interest, is a substantive matter for the courts and not arbitrators.” Id. at 275. Therefore, the court held that the disqualification motion was properly before the Pennsylvania Court of Common Pleas, meaning that appointment of an umpire by the court while such motion was pending would not be appropriate. Accordingly, the Southern District denied Munich’s petition and dismissed the action.
The facts of Munich were very straightforward. There was simply a claim that the attorney representing an adverse party had confidential information by virtue of having previously represented the moving party, and therefore should be disqualified under ordinary conflict of interest rules. While the ruling in Munich seems straightforward, another case arose in the Southern District of New York where a court was asked to review actions by a law firm that did not trigger conflict of interest rules. Instead, the claim was that a law firm should be disqualified for violating arbitration and legal ethics rules.
For the full article, refer to page 30 in the Summer 2016 issue. https://www.airroc.org/assets/docs/matters/airroc%20summer%202016%20vol%2012%20no%202.pdf
