Opinion ID: 1364007
Heading Depth: 2
Heading Rank: 1

Heading: The Resignation of the Arbitrator

Text: PSMIC commenced arbitration against INA in April 2007 seeking reimbursement under reinsurance contracts for payments made to its insured for the settlement of certain pollution claims. The arbitration commenced before a three-member panel consisting of an arbitrator appointed by INA, John Sullivan; an arbitrator appointed by PSMIC, Thomas Tobin; and an umpire, Roger Moak. The panel supervised a substantial amount of discovery, received briefing, and held oral argument on PSMIC's motion for summary judgment regarding what it deemed to be INA's chief legal defense. On April 7, 2008, the panel granted PSMIC's motion for summary judgment rejecting INA's defense. All three members of the panel, including Sullivan, INA's appointed arbitrator, signed the order. INA moved for reconsideration of this order on April 18, 2008, and a briefing schedule was set. However, on May 2, 2008, while the motion for reconsideration was pending, Sullivan advised the parties and the other panel members that he had been diagnosed with cancer, that he was to undergo a course of treatment that was to last approximately six weeks, and that he was doubtful he could perform in a professional or timely manner. The parties accepted his resignation. The parties and remaining panel members disagreed as to how to proceed. On May 5, 2008, the remaining panel members ordered INA to appoint a replacement arbitrator. INA responded the same day, stating that it was unsure whether it would be proper for Sullivan to be replaced, and suggesting that a new panel might have to be constituted. The following day, PSMIC responded that it would be unwilling to convene a new panel, and argued that Sullivan should be replaced either by INA or by a court. To avoid any potential assertion of waiver, PSMIC included Sullivan on the email. INA wrote back a few hours later reiterating its position that it was still deciding whether to replace Sullivan or constitute a new panel, and adding that: Mr. Sullivan has resigned and copying him on communications does not change his status. Additionally, in light of Mr. Sullivan's health situation, one would have hoped that PSMIC realizes that he has more urgent concerns th[a]n this matter. Indeed, given the situation, it is both legally improper and morally repugnant to continue to involve Mr. Sullivan. INA added that [s]o that Mr. Sullivan need not be bothered further, [INA] will agree that PSMIC has not waived any rights by failing to include him in further communications and hopefully, out of simple human decency, PSMIC will refrain from copying him. PSMIC apparently internalized this reproach and refrained from contacting Sullivan. The parties were unable to reach agreement on whether to replace Sullivan or convene a new arbitral panel. The remaining panel members found that PSMIC had substantive rights, and that it would be unduly prejudiced if an entirely new panel were convened instead of simply replacing Sullivan and continuing the process. However, they acknowledged that INA refused to proceed in this fashion and suggested the parties seek guidance from a court. Following this, INA filed a petition in the Southern District of New York for a stay of arbitration and an order disqualifying the panel and compelling the arbitration to start over with a new panel. PSMIC filed a cross-petition to compel INA to proceed before the two remaining panel members and a substitute for Sullivan, and to confirm the panel's April 7, 2008 summary judgment order.