Monday, May 22, 2006

Seventh Circuit Holds that Arbitrator Must Determine Whether Agreement Consolidates Arbitrations

Per Employers Ins. Co. of Wausau v. Century Indem. Co., 443 F.3d 573 (7th Cir. Apr. 4, 2006):
Wausau incorrectly characterizes the consolidation question as a question of arbitrability. Cases since First Options [of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)], have helped clarify which questions qualify as “arbitrability” questions. In Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002), the Court explained:

. . . The Court's case law . . . makes clear that, for purposes of applying the interpretive rule, the phrase “question of arbitrability” has a far more limited scope. The Court has found the phrase applicable in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate.Id. at 83-84.

. . . The Court also explained that “[t]he phrase ‘question of arbitrability’ is not applicable in other kinds of general circumstances where parties would likely expect that an arbitrator would decide the gateway matter.” Id. For example, “‘procedural’ questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to decide.” Id. (quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964)) (emphasis added). . . .

We find based on Howsam that the question of whether an arbitration agreement forbids consolidated arbitration is a procedural one, which the arbitrator should resolve. It does not involve whether Wausau and Century are bound by an arbitration clause or whether the arbitration clause covers the Aqua-Chem policies. Instead, the consolidation question concerns grievance procedures-i.e., whether Century can be required to participate in one arbitration covering both the Agreements, or in an arbitration with other reinsurers.


Post a Comment

<< Home