U.S. Supreme Court Declares That Arbitration Awards May Be Attacked or Confirmed in Any District with Jurisdiction; Actions Involving Arbitration Awards Need Not Be Brought Where Arbitration Took Place

Cortez Byrd Chips, Inc. v. Bill Harbert Construction Co., 120 S.Ct. 1331, 68 U.S.L.W. 4214 (U.S. Supreme Court-March 21, 2000) Although not an insurance case as such, the United States Supreme Court's recent decision in Cortez Byrd Chips will undoubtedly affect the litigation and dispute resolution posture insurance coverage actions and underlying bodily injury, personal injury, professional liability, or errors and omissions actions that may be subject arbitration agreements. As most lawyers and businesspersons are aware, arbitration clauses have been used with increasing frequency in commercial transactions. The typical arbitration clause provides that any dispute or out of or relating to the agreement is subject binding arbitration rather than litigation. Since the mid-1980s, the Supreme Court has been very supportive this movement toward privatized dispute resolution and has tended enforce these agreements rigorously under the authority the Federal Arbitration Act (FAA), originally passed in 1926, which provides that any arbitration agreement contained in a contract involving interstate commerce may be specifically enforced by court order compelling any resistant parties the agreement arbitrate. See 9 U.S.C. [ss][ss]1-15. By definition, arbitration agreements are contained in contracts. As a result, a substantial number arbitration clauses will not implicate insurance because breach contract claims are generally not covered under general liability policies. However, many the claims arising out contractual relations gone sour can implicate insurance through claims defamation, advertising injury, professional negligence, dishonesty, and so on. As a result, claims implicating insurance may be involved in arbitration. Notwithstanding that the parties at the outset a contract consent arbitration, after a claim arises, one or more parties may see an advantage in seeking avoid arbitration or challenge an adverse arbitration decision. As a result, a good deal litigation can attend arbitration. Generally, a party seeking enforce an arbitration clause can seek a court order compelling cooperation from the resisting party in any court that has personal and subject matter jurisdiction over the resisting party. The FAA is not itself an independent source federal jurisdiction. Thus, going federal court over arbitration normally requires that the disputants be citizens different states and that the amount in controversy exceed the federal jurisdictional minimum $75,000. Even if federal jurisdiction is lacking, the FAA applies in state court proceedings provided that there is the requisite connection interstate commerce, a standard met relatively easily under the Court's modern precedents about what constitutes interstate commerce. Arbitration clauses may also contain choice law clauses governing the dispute or other agreements affecting the dispute such as waiver or certain defenses, evidentiary admissions, or expansion or limitation remedies normally permitted under the chosen law or general commercial principles. As a result, a signatory an arbitration clause may find itself, after the fact, less than enthused about arbitration, all which heightens the tactical litigation surrounding arbitration. In addition, the conduct the arbitration itself may give rise concerns. …