Opinion ID: 173592
Heading Depth: 2
Heading Rank: 3

Heading: Post-arbitration litigation

Text: The primary insurers have been in liquidation proceedings in the Commonwealth Court of Pennsylvania since mid-2003. Following the arbitration award, on August 6, 2008, Ario (as liquidator on behalf of the primary insurers) filed a motion to confirm in part, and to vacate in part, the award as part of the liquidation proceedings. Shortly thereafter, the reinsurers removed the case to the District Court for the Eastern District of Pennsylvania pursuant to the removal provision in 9 U.S.C. § 205, [6] and filed a motion to confirm the award. The parties do not dispute that the award falls under the Convention; they part on whether the FAA and Convention's enabling legislation contained in Chapter 2 of the FAA applies (including 9 U.S.C. § 205). [7] See 9 U.S.C. § 202; Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 449 & n. 13 (3d Cir.2003) (listing four factors to determine whether an arbitration agreement falls under the Convention). On September 29, 2009, Ario filed a motion to remand the case to state court, which the reinsurers opposed. Ario's motion was premised on the argument that the parties had selected the Pennsylvania Uniform Arbitration Act (PUAA), 42 Pa. Cons.Stat. Ann. § 7301 et seq., to govern the arbitration. Therefore, he argued, the parties had opted out of the FAA in its entirety (including 9 U.S.C. § 205), and the District Court lacked subject matter jurisdiction. That Court denied the motion to remand in a five-page opinion, easily conclud[ing] that it had jurisdiction over the case pursuant to § 205 because the case related to an arbitration award falling under the Convention. It reasoned that (1) the authority cited by Ario did not address the Court's jurisdiction, and (2) Ario had not even attempt[ed] to address why [it] lack[ed] jurisdiction under the real test for making that determination. Having failed in his attempt to remand the case, Ario continued to pursue his motion to vacate the award (in opposition to the reinsurers' motion to confirm the award). He argued that the parties had opted out of FAA vacatur standards in favor of the standards set forth by the PUAA. Applying his interpretation of the PUAA vacatur standards, he urged that the award be vacated based on perceived weaknesses in Mr. Crane's testimony and other documentary evidence. The District Court denied Ario's motion to vacate the award and granted the reinsurers' motion. It concluded that review was governed by the FAA, not the PUAA. Applying the FAA and confirming the award, it rejected Ario's contention that there was no evidence to support the award. Following the District Court's rulings, the reinsurers moved for sanctions pursuant to Federal Rule of Civil Procedure 11 against Ario and his counsel, Pepper Hamilton, for both (1) the motion to remand, and (2) the motion to vacate the award. The District Court granted the motion in part and denied it in part. Finding no basis in existing law for [Ario] to assert there was no jurisdiction, and noting that Ario did not argue that he was trying under Rule 11(b)(2) to extend or modify existing law, or create new law, the Court decided that the imposition of attorney's fees was an appropriate sanction. It also determined that the Rule 11 sanction would fall on Ario's attorneys alone (and not on Ario). However, the District Court did not find a Rule 11 violation on account of the filings contesting the arbitration award because, in the Court's view, it was legally and objectively reasonable for Ario to challenge the award on the basis that Mr. Crane had no personal recollection of the circumstances leading up to the reinsurance agreements. These consolidated cross-appeals followed.