Massachusetts Federal Court Rejects Pre-Award Challenge Based On Arbitrator Qualifications

A Massachusetts federal court recently denied a pre-award petition to remove a party-appointed arbitrator finding that the Federal Arbitration Act (FAA) did not authorize the court to order arbitrator removal before a final arbitration award has been issued. The parties disputed whether the qualification requirements of the arbitration clause in the reinsurance agreement (the “Agreement”) precluded the appointment of an arbitrator that previously worked for entities that once were, but longer are, affiliates of the cedent. Notwithstanding this disagreement, the court’s opinion analyzed whether the FAA authorized pre-award removal of an arbitrator. The cedent argued that the general rule barring pre-award removal of arbitrators was limited to challenges based on bias but this prohibition should not apply where removal is based on the failure to meet the arbitrator qualification criteria in the Agreement. The court rejected this argument finding that the FAA “provides no express authorization for pre-award judicial intervention regardless of the grounds for removal.” The court noted that whether an arbitrator satisfies the criteria of the Agreement is a question of the arbitrator’s capacity to serve just as much as a challenge based on an arbitrator’s bias is a question of capacity to serve. The court also rejected the cedent’s argument that permitting a pre-award challenge supports the goals of speed and efficiency that arbitration and the FAA were intended to foster. According to the court, such a rule was inconsistent with just and expeditious resolution of disputes with minimum judicial interference since it would “spawn endless applications [to the courts] and indefinite delay.” The court concluded that the cedent’s arguments for pre-award judicial intervention were not supported by the FAA, public policy, or case law, and the court directed the parties to proceed with the arbitration. The court’s opinion in John Hancock Life Ins. Co. (U.S.A.) v. Employers Reassurance Corp., No. 15-cv-13626 (D. Mass. Jun. 21, 2016), can be found here.