In the

United States Court of Appeals

For the Seventh Circuit

No. 09-3682

TRUSTMARK INSURANCE CO.,

Plaintiff-Appellee,

v.

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.),

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 09 C 3959—James B. Zagel, Judge.

ARGUED JANUARY 6, 2011—DECIDED JANUARY 31, 2011

Before EASTERBROOK, Chief Judge, and CUDAHY and

ROVNER, Circuit Judges.

EASTERBROOK, Chief Judge. Two insurance companies

agreed in 1997 that Trustmark would reinsure some

risks underwritten by John Hancock. The details of the

parties’ multiple contracts are unimportant for our purposes. It is enough to say that the insurers disagree

about the meaning of “London Market Retrocessional

Excess of Loss business”, which Trustmark need not
2 No. 09-3682

reinsure. The parties submitted their dispute to arbitration under the contracts’ broad arbitration clauses. In

March 2004 a tripartite panel (one arbitrator selected by

each side, and these two selecting a third, called the

umpire) made its award, supporting Hancock’s view of

Trustmark’s obligations. The award was confirmed by

a district court. 2004 U.S. Dist. LEXIS 11370 (N.D. Ill.

June 17, 2004).

Trustmark was dissatisfied and refused to pay the

bills that Hancock sent on the view that the confirmed

award governed all of the parties’ dealings. This led

Hancock to commence a new arbitration in October 2004.

Trustmark responded by arguing (among other things)

that Hancock had secured the March 2004 award by

failing to disclose four documents during arbitral discovery, an omission that Trustmark labeled “fraud.”

Hancock named as its arbitrator Mark S. Gurevitz, who

had participated in the first arbitration as well.

Trustmark picked a person who had not participated

in the earlier proceeding. The two party-chosen

arbitrators selected a neutral umpire. One of the first

issues the three-person panel had to tackle was what

weight to give the 2004 decision. Hancock contended

that it was largely dispositive; Trustmark contended

that it should be ignored and the proceedings restarted

from scratch. Consideration of this point was complicated by a confidentiality agreement that the

parties had reached during the first proceeding. This

agreement—which did not include its own arbitration

clause—prevented Trustmark and Hancock from disclosing the evidence, proceedings, and award. The
No. 09-3682 3

parties debated whether this agreement covered all disclosures, even to lawyers and successor arbitrators, or

only disclosures to the outside world (such as the firms’

business rivals and the press). Gurevitz and the umpire

concluded that the arbitrators themselves (and the parties’ lawyers) are entitled to know and consider the

evidence presented, and the results reached, in the

first arbitration.

Before the panel commenced its hearing on the merits,

Trustmark launched this suit under the diversity jurisdiction. The suit, filed in 2009, initially asked the court

to vacate the decision that had confirmed the 2004

award. That request is so obviously untimely—the time

to appeal the district judge’s decision had expired five

years earlier, and Fed. R. Civ. P. 60(b) does not allow

that decision to be reopened—that Trustmark soon reformulated its principal contention, asking the court

to enjoin further arbitration as long as Gurevitz remains

a member of the new panel. The contracts require all

three arbitrators to be “disinterested”. Trustmark contended that Gurevitz is not, because he knows what

happened in the first arbitration. It also insisted

that the new arbitral panel is not entitled to form or act

on any view about the meaning of the confidentiality

agreement, because that agreement does not include an

arbitration clause. Only a judge, Trustmark insisted, can

determine what the confidentiality agreement requires.

The district court agreed with Trustmark and issued

an injunction. 680 F. Supp. 2d 944 (N.D. Ill. 2010). The

judge wrote that Gurevitz is not “disinterested” because
4 No. 09-3682

he knows what happened during the first arbitration

and could be called as a fact witness about those proceedings. The judge also ruled that the second panel

is not entitled to consider the decision made by the

first panel. The injunction stopped the arbitration in its

tracks. Hancock has appealed.

Equitable relief depends on irreparable injury, and the

first question we must address is whether Trustmark

showed any. Here is the district court’s entire discussion of that subject:

Trustmark cannot be forced to arbitrate issues

that it did not agree to arbitrate. See AT&T Technologies v. Communications Workers of America, 475

U.S. 643, 648 (1986). “Forcing a party to arbitrate

a matter that the party never agreed to arbitrate,

regardless of the final result through arbitration

or judicial review, unalterably deprives the

party of its right to select the forum in which it

wishes to resolve disputes[,]” causing irreparable

harm. Chicago School Reform Bd. of Trustees v. Diversified Pharmaceutical Services, Inc., 40 F. Supp. 2d

987, 996 (N.D. Ill. 1999). This is a harm faced

uniquely by Trustmark if it is denied relief and

such harm tips the scale in favor of granting injunction. This irreparable harm, coupled with

Trustmark’s success on the merits, militates in

favor of granting an injunction in this case.

680 F. Supp. 2d at 949. There are two principal problems

with this understanding.
No. 09-3682 5

First, Trustmark did agree to arbitrate the question

whether the contracts provide reinsurance for certain

risks. Yet the district court blocked rather than enforced that contractual undertaking.

Second, the proposition that going forward with an

arbitration “unalterably deprives the party of its right to

select the forum”—a proposition for which the court

did not cite any statute or appellate decision—is false.

Once the arbitration ends, a party that believes the proceeding flawed because the arbitrators exceeded their

remit has a simple remedy: a proceeding under the

Federal Arbitration Act to deny enforcement to the

award. See 9 U.S.C. §10(a)(4) (award may be set aside

“where the arbitrators exceeded their powers”). If the

award should be set aside, litigation in the proper

forum would ensue.

The only potential injury from waiting until the arbitrators have made their award is delay and the out-ofpocket costs of paying the arbitrators and legal counsel.

Long ago the Supreme Court held that the delay

and expense of adjudication are not “irreparable injury”—if they were, every discovery order would cause

irreparable injury. See, e.g., Petroleum Exploration, Inc.

v. Public Service Commission, 304 U.S. 209, 222 (1938);

Renegotiation Board v. Bannercraft Clothing Co., 415 U.S. 1, 24

(1974); FTC v. Standard Oil Co., 449 U.S. 232, 244 (1980).

We held in PaineWebber Inc. v. Farnam, 843 F.2d 1050 (7th

Cir. 1988), and Graphic Communications Union v. Chicago

Tribune Co., 779 F.2d 13 (7th Cir. 1985), that the sort of

argument Trustmark advances in its effort to establish

“irreparable injury” is frivolous.
6 No. 09-3682

We could stop here, but the district court’s decision

leaves a cloud over this arbitration and the reputation

of arbitrator Gurevitz, a reputation that Trustmark

seems determined to tarnish. We therefore add that the

district court erred on the merits in addition to mistakenly believing that Trustmark has established irreparable injury.

The contracts require all three arbitrators to be “disinterested.” When used with respect to adjudication, this

word means lacking a financial or other personal stake

in the outcome. See generally Caperton v. A.T. Massey

Coal Co., 129 S. Ct. 2252 (2009). Norms of insurance-industry arbitration track this understanding. ARIAS•U.S.,

Practical Guide to Reinsurance Arbitration Procedure §2.3

(rev. ed. 2004) (“disinterest” means no financial stake in

the outcome and not being under a party’s direct control).

Gurevitz does not have any stake in the outcome of

this arbitration. Like any other privately appointed arbitrator, he does have a reputational interest: if his decision disappoints the person who put him on the panel,

he is less likely to be selected as an arbitrator in the

future. Federal judges, by contrast, serve during good

behavior and need not worry about how their decisions

may affect their careers. But the interest in potential

future employment is endemic to arbitration that

permits parties to choose who will decide. See Sphere

Drake Insurance Ltd. v. All American Life Insurance Co., 307

F.3d 617, 622 (7th Cir. 2002) (“evident partiality” for

arbitrators means acts that simultaneously show support

for one side and disregard the rules; party-appointed
No. 09-3682 7

arbitrators can’t be dismissed on the ground that they

are inclined to support the party who named them).

Sometimes parties agree that arbitrators will be named

by independent entities, such as the American Arbitration Association, but Trustmark and Hancock reserved

the power of appointment. A court cannot properly deem

the interest in reemployment created by this arrangement a disqualifying event.

Instead of asking whether Gurevitz had a financial or

other personal stake in the outcome, the district judge

asked whether he had knowledge about the dispute.

Answering yes, the judge deemed the knowledge a form

of prohibited “interest.” As we observed in Sphere

Drake, however, private parties often select arbitrators

precisely because they know something about the controversy. 307 F.3d at 620. Arbitration need not follow the

pattern of jury trials, in which a factfinder’s ignorance

is a prime desideratum. Nothing in the parties’ contract

requires arbitrators to arrive with empty heads. Federal

judges, of all people, should not confuse knowledge

with a disqualifying “interest.” For judges regularly

hear multiple suits arising from the same controversy.

The district judge who resolved this very dispute also

entered the order enforcing the 2004 award. If knowing

about what happened in 2004 is an impermissible “interest,” or makes the person a “fact witness” about what had

occurred in 2004, then the district judge should have

stepped aside from the current suit. Yet that was not

required. Knowledge acquired in a judicial capacity

does not require disqualification. See Liteky v. United

States, 510 U.S. 540 (1994). Likewise with knowledge

acquired in arbitration.
8 No. 09-3682

Arbitrator Gurevitz is as “disinterested” as the district

judge himself and just as entitled to participate. That

Gurevitz signed the confidentiality agreement does not

affect this conclusion; he signed as an adjudicator. The

district judge himself implemented the confidentiality

agreement, in a similar adjudicatory capacity, when

confirming the first panel’s award. 2004 U.S. Dist. LEXIS

11370 at *4–5. If there is any difference between the two

adjudicators, Gurevitz has the stronger entitlement to

participate in this second round, because as we stressed

in Sphere Drake it takes more to disqualify an arbitrator

than to disqualify a judge. 307 F.3d at 621. See also

Merit Insurance Co. v. Leatherby Insurance Co., 714 F.2d 673

(7th Cir. 1983). No party in federal court is entitled to

pick his judge, but contracts allowing parties to choose

their arbitrators are common; these parties’ arrangement

instantiates the practice. When one party is entitled to

choose its own arbitrator, and in doing so follows all

contractual requirements, a court ought not abet the

other side’s strategy to eject its opponent’s choice.

The district judge also erred in concluding that the

arbitrators are powerless to construe the confidentiality

agreement. True, that agreement lacks its own arbitration clause, but the parties did agree to arbitrate their

disputes about reinsurance. Arbitrators who have been

appointed to resolve a commercial dispute are entitled

to resolve ancillary questions that affect their task. See

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002).

What’s more, the confidentiality agreement—a standard

form in insurance arbitration, signed while the arbitration was under way—is closely related to the substance
No. 09-3682 9

of the first arbitration and presumptively within the

scope of the reinsurance contracts’ comprehensive arbitration clauses, which cover all disputes arising out of

the original dispute. Cf. Sweet Dreams Unlimited, Inc. v.

Dial-A-Mattress International, Ltd., 1 F.3d 639, 642 (7th

Cir. 1993).

Suppose that Trustmark and Hancock had agreed to

use the procedural rules of the American Arbitration

Association, but had not included a separate arbitration

clause in that contract. The panel could interpret and

apply the AAA’s rules; a party dissatisfied by a procedural ruling could not run to a federal district court

and get review in mid-arbitration, one ruling at a time,

just because neither the AAA’s rulebook nor the contract

adopting them had a freestanding arbitration clause.

So, too, with the terms of the Federal Arbitration Act.

Several parts of this statute govern the management of

arbitration. For example, §7 says that arbitrators may

summon witnesses and require them to bring documents.

9 U.S.C. §7. The Act is a statute; naturally it does not

contain an arbitration clause; yet no one supposes (at

least, no one should suppose) that every time an arbitrator

summons (or doesn’t summon) a witness, or decides

which documents the parties must produce, one or both

of the contestants can get immediate review in a federal

district court. That would be the end of arbitration as a

speedy and (relatively) low-cost alternative to litigation.

Arbitrators are entitled to decide for themselves those

procedural questions that arise on the way to a final

disposition, including the preclusive effect (if any) of an
10 No. 09-3682

earlier award. Consolidation Coal Co. v. United Mine

Workers, 213 F.3d 404, 407 (7th Cir. 2000); Chicago Typographical Union v. Chicago Sun-Times, Inc., 860 F.2d

1420, 1424 (7th Cir. 1988). If in doing so the arbitrators

exceed their powers, the court may vacate the award at

the end of the proceeding. 9 U.S.C. §10(a)(4). But among

the powers of an arbitrator is the power to interpret

the written word, and this implies the power to err; an

award need not be correct to be enforceable. See, e.g.,

Major League Baseball Players Ass’n v. Garvey, 532 U.S. 504

(2001). It is enough if the arbitrators honestly try to

carry out the governing agreements. “[T]he question

for decision by a federal court asked to set aside an arbitration award . . . is not whether the arbitrator or arbitrators erred in interpreting the contract; it is not whether

they clearly erred in interpreting the contract; it is not

whether they grossly erred in interpreting the contract;

it is whether they interpreted the contract.” Hill v.

Norfolk & Western Ry., 814 F.2d 1192, 1194–95 (7th Cir.

1987). See also, e.g., Operating Engineers Local 139 v. J.H.

Findorff & Son, Inc., 393 F.3d 742 (7th Cir. 2004). When

this arbitration resumes, the panel is entitled to follow

its own view about the meaning of the confidentiality

agreement; it need not knuckle under to the district

judge’s prematurely announced understanding.

REVERSED

1-31-11