Business Litigation & Dispute Resolution

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MONTH-IN-BRIEF (Dec 2019)

Dispute Resolution

New York Federal Court Holds Arbitration Panel Was Not Functus Officio

By Leslie A. Berkoff, Moritt Hock & Hamroff LLP

In a recent decision by the Southern District of New York in the case of  Chicago Ins. Co. v. General Reins. Corp., 18-CV-10450 (JPO), 2019 U.S. Dist. LEXIS 182764 (S.D.N.Y. Oct. 22, 2019), the Court considered whether a dispute arising after an arbitration of a billing dispute between a cedent and a reinsurer was covered by a specific reservation of jurisdiction by an original arbitration panel and whether the subsequent dispute was one arising out of that final award.  The issues presented required the Court to determine if the original panel was functus officio or whether it was the appropriate panel to hear the current dispute.

In resolving the dispute in favor of the reinsurer, the Court found that the cedent's argument that the original panel was functus officio failed as this panel had reserved jurisdiction to hear any subsequent disputes and as such under Section 4 of the Federal Arbitration Act (“FAA”) the aggrieved party (i.e. the reinsurer) had appropriately sought to compel arbitration under an existing agreement. The Court found the question of arbitrability to be the primary focal point here.  In fact, the Court found that the argument of functus officio raised by the cedent was not appropriate, as clearly the original panel’s role had not terminated in light of the reservation of jurisdiction clause.  Moreover, the Court noted that the cedent had already consented to such continuing jurisdiction in the initial arbitration. 

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