Global Arbitration Review Article: ‘Bad Faith’ Costs Decision Upheld


Last week, the Global Arbitration Review published an interesting article about a recent case, ReliaStar Life Ins. Co, of N.Y. v. EMC Nat’l Life Co., No. 07-0828 (2nd Cir. Apr. 9, 2009).

As previously blogged here, in ReliaStar, the Second Circuit held that inclusion in an arbitration agreement of a broad statement that each party will bear the expenses of its own arbitrator and attorney’s fees, does not deprive the arbitration panel of authority to award those expenses as a sanction against a party whom the panel determines failed to arbitrate in “good faith.” The court explained that an arbitrators’ finding of “bad faith” gives rise to an exception to the general rule that each party bears their own expenses. Thus, the arbitration panel did not exceed its authority in awarding attorney’s and arbitrator’s fees.

The article quotes attorney Philip J. Loree, Jr., co-founder of our LinkedIn Commercial and Industry Arbitration and Mediation Group and contributor to this blog:

Writing shortly after the appeal court’s decision, Philip Loree Jr of New York firm Loree & Loree, said the court had “violated New York contract interpretation rules.” He said that, according to New Yorklaw, “to ascertain whether a contract is ambiguous, courts are required to focus on what is said, not what is omitted.” “Given that the pre-eminent purpose of the Federal Arbitration Act is to enforce the parties’ arbitration agreement as written, this case may be one of those rare Second Circuitdecisions that warrant rehearing and reversal en banc,” he added.

Find the article (subscription only) here: ‘Bad Faith’ Costs Decision Upheld, Global Arbitration Review, July 13, 2009. Also, read Phillip J. Loree, Jr. summary here, critique here, and recent mention of the case here.

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