Opposition Brief — Hartford Steam Boiler Inspection & Insurance v. Underwriters at Lloyd's & Companies Collective

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toma

No. 04-916

IN THE

Supreme Court of the United States

HARTFORD STEAM BOILER INSPECTION AND

INSURANCE COMPANY,

Petitioner

V.

UNDERWRITERS AT LLOYD’S AND

COMPANIES COLLECTIVE, et a/.,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME CouRT OF CONNECTICUT

BRIEF IN OPPOSITION

CLAYTON H. FARNHAM Linpa L. MoRKAN

Drew, Eckt & FARNHAM, LLP Counsel of Record

880 Wesi Peachtree Street PATRICK J. SWEENEY

P.O. Box 7600 JEFFREY J. WHITE

Atlanta, GA 30357 ROBINSON & CoLe LLP

(404) 885-1400 280 Trumbull Street

Hartford, CT 06103

(860) 275-8200

Counsel for Respondents

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COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

3 Mig eps

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QUESTION PRESENTED

Whether the Connecticut Supreme Court erred in

holding, consistent with every other court that has considered

the issue, that the doctrine of functus officio permits a remand

of an arbitration award to the arbitration panel which rendered

it, when the award is incomplete or unclear and, further, that

the arbitration award in this case was incomplete and,

therefore, susceptible to remand.

ii

CORPORATE DISCLOSURE STATEMENT

Respondent Underwriters at Lloyd’s and Companies

Collective have no corporate parents, nor is 10% or more of

their stock owned by a public company.

Respondent National Union Fire Insurance Company is a

wholly-owned subsidiary of American International Group.

Respondent International Fire Insurance Company has no

corporate parent, nor is 10% or more of its stock owned by a

public company.

Respondent Aetna Casualty & Surety Company n/k/a

Travelers Casualty Insurance Company of America has no

corporate parent. The St. Paul Travelers Companies owns

10% or more of its stock.

Respondent Home Insurance Company has no corporate

parent, nor is 10% or more of its stock owned by a public

company.

Respondent Zurich Insurance Company is a wholly-owned

subsidiary of Zurich Financial Service.

iil

TABLE OF CONTENTS

Oe ey | re

CORPORATE DISCLOSURE STATEMENT .....

UE I EOE ENED nn bese env nse veces.

TABLE OF CITED AUTHORITIES ............

ee oe ge ee) | gt |:

REASONS FOR DENYING THE PETITION

I. HSB HAS NOT RAISED A FEDERAL

QUESTION THAT INVOKES THE

JURISDICTION OF THIS COURT .......

A. The Connecticut Supreme Court Did Not

Base Its Decision on 9 U.S.C. § 10, But

Rathe: On The Doctrine Of Functus

a eta aly ak wae hak aay Ms

B. The Functus Officio Doctrine Was

Invoked Separately And Apart From

9 U.S.C. § 10 In Accordance With The

Parties’ Private Arbitration Agreement

2 2 86 6 6 Oe 4 2 6 Ew SO SS SS BOS SES: OS OO ROO

iv

Contents

Page

Il. CONTRARY TO HSB’S ASSERTIONS,

THERE IS NO INTER-CIRCUIT CONFLICT

o-2 69 2 £28 2 0 @ 2 Sa OOS OS SS EAE SS DS BE OES SSS. SD

15

A. The Ninth Circuit’s Holding in Western

Employers Is Not Applicable ........ 15

B. Other Federal Courts That Have

Addressed This Question Have Arrived

At The Same Conclusion As The

Connecticut Supreme Court ......... 19

Ill. THE REMAND OF AN INCOMPLETE

ARBITRATION AWARD TO THE ORIGINAL

PANEL FOR THE SOLE PURPOSE OF

CLARIFICATION ADVANCES THE GOALS

OF COMMERCIAL ARBITRATION ...... 23

ee a re re err re a irre 25

TABLE OF CITED AUTHORITIES

Page

CASES:

Colonial Penn Ins. Co. v. Omaha Indem. Co., 943

F260 347 COCR. I98U) cos ee ee ee passim

Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213

(GES 5 ive be eke ee eee 23

Domino Group, Inc. v. Charlie Parker Mem'l Found.,

965 F.26 417 (OG Ce. We a ok se 22

Galt v. Libbey-Owens-Ford Glass Co., 397 F.2d 439

C7 Ce. SIG osc eee 12, 19, 22, 24

Glass, Molders, Pottery, Plastics & Allied Workers

Int’l Union v. Excelsior Foundry Co., 56 F.3d 844

(7 CH. TOR ea eee 10-11, 13, 22

Green v. Ameritech Corp., 200 F.3d 967 (6th Cir.

yee rer ee ay err Pe ere et ee 12, 22

Hartford Steam Boiler Insp. and Ins. Co. v.

Underwriters at Lloyd’s and Cos. Collective, 857

we ee eee ne eee l

Hoffman v. Cargill, Inc., 59 F. Supp. 2d 861 (N.D.

Iowa 1999), rev'd on other grounds, 236 F.3d 458

Cee BED ck RG he eee ee 21

Hyle v. Doctor’s Assocs. Inc.198 F.3d 368 (2d Cir.

UN ela cored cece eee 10

vi

Cited Authorities

Page

International Bhd.. of Teamsters v. Silver State

Disposal Serv., Inc., 109 F.3d 1409 (9th Cir. 1997)

4006606006 48 0bseee ck Rae 9, 16, 17, 23

Kennecott Utah Copper Corp. v. Becker, 186 F.3d

1261 (iGG Coe. GRR as os ss rae xcceeueeenens 23

La Vale Plaza, Inc. v. Noonan, Inc., 378 F.2d 569

(36 Cet. 1967) «6 ciadeicueeee ee tea

Lanier v. Old Republic Ins. Co., 936 F. Supp. 839

(QLD. AD. 1906 6605 Sasa ese eee ep 4

M & C Corp. v. Edwin Behr GMBH & Co., 326 F.3d

71a Cs Cle. BERS) ova civcede kbs 9, 22

Office & Prof’! Employees Int'l Union, Local 471 v.

Brownville Gen. Hosp., 186 F.3d 326 (3d Cir.

LDF) o4saswes We ee eens aes ene 9, 12, 22

Sterling China Co. v. Glass, Molders, Pottery,

Plastics & Allied Workers, Lecal 24, 357 F.3d 546

(Gh GE. FOS) 6s visseaeskh acces 9, 10, 22

Trade & Transport, Inc. v. Natural Petroleum

Charterers Inc., 931 F.2d 191 (2d Cir. 1991) ...10, 13

SS OO

vil

Cited Authorities

Page

Tri-State Bus. Machs., Inc. v. Lanier Worldwide, Inc.,

221 F.3d 1015 (7th Cir. 2000) ............... 22

Volt Info. Sciences, Inc. v. Board of Trustees, 489

Cha ROOD + 6044 ¥5545005508hsaaeri 10, 13, 23

Western Employers Ins. Co. v. Jefferies & Co., Inc.,

958 F.2d 258 (9th Cir. 1992) .......... 15, 16, 17, 18

STATUTES:

38 2 oat See rn rrr rr err passim

ee ea A an oooh e en ada kheer eee uees 7,14

ee er er ee 5

Ce Se es OEE co ca vk wok baswsacwatess 5

OTHER AUTHORITIES:

17A Am. Jur. 2p Contracts § 371 (2004) ........ 13

BLack’s Law Dictionary 696 (8th Ed. 2004) ..... 10

17A C.J.S. Contracts § 348 (1999) ............. 13

11 Samuel Williston & Richard A. Lord, A TREATISE

ON THE Law OF ConTRACTs § 30.19 (4th ed. 1999)

PEE re eg oe a PC eaten aia gree ee 13

l

STATEMENT OF THE CASE

The arbitration at issue arose out of a dispute as to the

allocation of insurance coverage implicated by an August

1993 explosion at an Arkansas power generating plant.

Hartford Steam Boiler Insp. and Ins. Co. v. Underwriters at

Lloyd's and Cos. Collective, 857 A.2d 893 (Conn. 2004)

(reproduced in Petitioner’s Appendix (hereafter

“Pet. App.”) at 1-27). The parties to this action had each

issued insurance policies to the owners of the plant. Pet. App.

at 2. The petitioner, Hartford Steam Boiler Inspection and

Insurance Company (“HSB”) had issued a boiler and

machinery policy, and the respondents, Underwriters at

Lloyd’s and Companies Collective, et al. (“Lloyd’s’”), had

issued an “all-risks” property insurance policy. /d. After the

loss, HSB contended that the cause of the loss was an

explosion of gas or unconsumed fuel, a peril excluded from

its coverage and covered under Lloyd’s policy. Jd. at 40.

Lloyd’s contended that the loss was the “breakdown of a fired

vessel” excluded from the coverage provided by the

“all-risks” policy, and that the event did not involve a

combustion explosion that might otherwise render it a

covered loss. Jd.

The policies contained parallel “Loss Adjustment

Endorsements” which provided that, in the event of a

coverage dispute between the boiler and machinery carrier

and the “all-risks” carrier, each would pay half of the amount

in dispute and submit the matter to a panel of three arbitrators.

Accordingly, HSB paid the insured $10,933,435.86 and

Lloyd’s paid the insured $11,880,525.33, and they each

submitted their dispute as to allocation of coverage to a panel

of three arbitrators. /d. at 2, 41.

2

The parties agreed to a “Joint Statement of Issues” to be

decided by the Arbitrators. In January 1997, the Arbitrators

issued an Interim Award on the factual questions set forth in

the Statement of Issues. /d. at 3, 41-42. However, the parties

believed that certain questions remained unanswered, so, at

their request, the Arbitrators issued a “Supplemental and

Clarified Decision to the Answer of Issue iv of the January

9, 1997 Decision of Arbitrators.” /d.

While the Interim Award and Supplemental Decision

clarified the application of policy language to the incident,

they failed to specifically allocate repair and restoration costs

between the policies. Jd. Accordingly, the parties reopened

the arbitration, returning to the Arbitrators again for further

clarification. Jd. at 3-4, 42. For the purposes of this

resubmission, termed “Phase II Arbitration Re: Allocation

Issues,” the parties stipulated to a “Statement of Issues and

Procedural Time Line for Entergy Arbitration.” Jd. The parties

further agreed to “Revised Procedures to Govern Phase II

Arbitration Re: Allocation Issues.” /d.

On June 28, 2001, after six years of work and the two

previous Arbitrators’ decisions, the parties and the Arbitrators

reconvened for the Phase II hearing. Jd. at 4, 42. At the close

of evidence on the final day of the hearing, the Arbitrators

consulted with the parties regarding the form of the award to

be rendered. At the conclusion of the parties’ closing

statements, Frank Ockerby, the arbitration panel umpire

(apparently concerned with clarifying the Arbitrators’ duties

in properly adjudicating the matter), inquired of HSB’s

counsel what form the Arbitration Award should take.

Counsel for HSB replied: “The end point from the Panel is a

statement that someone pays someone and how much they

pay.” /d. at 5 n.4. The Arbitrators thereafter concluded the

hearings.

3

On October 24, 2001, the panel requested more time

within which to render its decision. The parties consented to

the Arbitrators’ request though no new deadline was

established for the issuance of a decision. The parties also

consented to the Arbitrators’ request to retain the services of

an accounting firm. Jd. at 37-38.

On January 24, 2002, the Arbitrators rendered an award

(“Award”). Id. at 4, 43. The Award specifically incorporated

the issues to be determined as outlined by the parties in the

scope of arbitration and, based on “cause of loss and policy

conditions,” assigned specific dollar amount attributable to

each such issue. /d. Thereafter, HSB moved to vacate the

Award on the ground that the Arbitrators had not complied

with section 4(d)_ of the submission which indicated that the

award should “contain facts and conclusions regarding the

- insurance policies ... as necessary to support the award.”

Id. at 4. Lloyd’s moved that the Award be confirmed or, in

the alternative, referred back to the Arbitrators for

clarification. /d.

Specifically, Lloyd’s argued that the Award did, in fact,

conform to the submission, thereby compelling confirmation

of the same. Further, Lloyd’s contended that HSB waived

any right to receive findings of fact by representing on the

record that it sought only “a statement that someone pays

someone and how much they pay.” /d. at 32-33. Alternatively,

Lloyd’s requested that the award be remanded to the panel.

Id. at 37. :

After briefing and oral argument, the superior court

(Rittenband, J.) issued an order remanding the award. The

4

court compared the award to the submission and concluded

that the Panel’s

findings are not sufficiently specific or

comprehensive to comply with the requirement

that all liability and allocation issues and coverage

issues be resolved, nor do the findings contain

sufficient findings of fact and conclusions

regarding the interpretation of the insurance

policies that are the subject of this arbitration as

necessary to support the award.

Id. at 37. The court, however, noted its reluctance to vacate

the award; instead opting to refer the award back to the

Arbitrators for clarification

because [vacating the award] would mean starting

over again, and the parties would lose all the work,

effort, etc. that covered six years of [the]

arbitration. In the interest of economy of the

parties, the Panel and judicial economy, it would

appear that a remand to the arbitrators would be

more practical and a better remedy than vacating

the awards.

Id. The superior court ordered the award to be returned to

“the Arbitration Panel for a rehearing and/or a clarification

of its awards so that it complies with the requirements of the

submissions and so that there be a sufficient finding of facts

and interpretations of the policies so as to fully comply with

the submissions.” /d. at 38-39. Finally, the court held that

HSB’s representations on the record regarding the final form

of the arbitration did not constitute waiver of its contractual

right to receive these findings of facts. Jd. at 33.

5

HSB thereafter appealed,' challenging the propriety of

the order to remand the award where the thirty day time period

for the Arbitrators’ decision had expired. /d. at 5. Lloyd’s

cross-appealed seeking confirmation of the award on the

ground that HSB had waived any objection to its form.

Id. at 5 n.4. Additionally, Lloyd’s argued that the superior

court’s order was not immediately appealable. /d. at 6.

In October 2004, the Connecticut Supreme Court issued its

decision, dismissing HSB’s appeal on the ground that it was

not taken from a final judgment.

The Supreme Court held that the judgment of the trial

court directing rehearing by the arbitration panel to clarify

its award constituted neither a final judgment nor an

appealable interlocutory order. Jd. at 1. Under Connecticut

law, an appeal can be taken only from an order “confirming,

vacating, modifying or correcting an award.” Conn. Gen. Stat.

§ 52-423. Holding that the superior court’s remand order was

none of these, the Supreme Court held that it was without

jurisdiction over HSB’s appeal (and Lloyd’s cross appeal).

Id. at 27.

In so holding, the Supreme Court categorically rejected

HSB’s claim that the superior court’s remand order was void.

HSB had argued that the sole means by which a superior

court could remand an arbitration award for a rehearing was

via Connecticut General Statutes section 52-418(b), which,

1. The appeal was later transferred to the Connecticut Supreme

Court on its own order. Pet. App. at 5.

2. Connecticut General S tatutes section 52-418(b) provides:

If an award is vacated and the time within which the

award is required to be rendered has not expired, the

(Cont'd)

6

HSB argued, was inapplicable because the thirty-day window

for remand had closed. Jd. at 5. The Supreme Court held

that: first, section 52-418(b) was not implicated in this case

because the superior court had not vacated the arbitration

award, only remanded it; and, second, that the doctrine of

functus officio provided sufficient authority for the remand.

Id. at 11-21. Because the superior court acted within its power

to remand the award for clarification, and the award had not

yet been vacated, confirmed, or modified, the Supreme Court

dismissed the appeal and cross appeal. /d. at 27.

REASONS FOR DENYING THE PETITION

I. HSB HAS NOT RAISED A FEDERAL QUESTION

THAT INVOKES THE JURISDICTION OF THIS

COURT

HSB’s petition hinges on one critical and wrongly

asserted premise: that the Connecticut Supreme Court has

re-written, in an ad hoc manner, the provisions of the Federal

Arbitration Act (“FAA”) to permit the remand of a dispute

to an arbitration panel, pursuant to 9 U.S.C. § 10(b)? even

(Cont'd)

court or judge may direct a rehearing by the arbitrators.

Notwithstanding the time within which the award is

required to be rendered, if an award issued pursuant to a

grievance taken under a collective bargaining agreement

is vacated, the court or judge shall direct a rehearing

unless either party affirmatively pleads and the court or

judge determines that there is no issue in dispute.

3. Section 10(b) provides: “If an award is vacated and the time

within which the agreement required the award to be made has not

expired, the court may, in its discretion, direct a rehearing by the

arbitrators.” ;

5

though the time for rendering the award has expired.

See Petition (hereafter “Pet.”) at 11-12. In HSB’s view, the

Connecticut Supreme Court, following the lead of several

federal circuits, improperly “affirmed an order remanding

the award, without vacating it, and without regard to any

temporal limitation upon the arbitrators’ ability to act (as set

forth in the arbitration agreement).” /d. at 15.

In its efforts to sound the “judicial lawmaking” alarm,

HSB distorts the decision of the Connecticut Supreme Court.

A balanced and fair reading of the Connecticut Supreme

Court’s decision reveals that the court neither explicitly nor

implicitly construed the provisions of 9 U.S.C. § 10, or any

other federal statute, for that matter. In fact, the Connecticut

Supreme Court held that the trial court did not vacate the

award and, therefore, 9 U.S.C. § 10 was inapplicable to the

dispute; rather, the trial court simply found the award to be

incomplete and remanded it back to the panel for clarification.

Pet. App. at 9-10. This remand was in accordance with the

principles of functus officio, a common law doctrine which

is independently implied in every arbitration agreement

_ unless an agreement provides otherwise. /d. at 11. Therefore,

because the terms of 9 U.S.C. § 10 are not even implicated

here, HSB has not met its burden of establishing that the

Connecticut Supreme Court has decided a federal question

that triggers the jurisdiction of this Court as set forth in

28 U.S.C. § 1257(a).

A. The Connecticut Supreme Court Did Not Base

Its Decision on 9 U.S.C. § 10, But Rather On The

Doctrine Of Functus Officio

In its petition, HSB vociferously argues that the

Connecticut Supreme Court has violated this Court’s mandate

8

to interpret federal statutes in accordance with their plain

meaning. In this vein, HSB maintains that the Connecticut

Supreme Court has engrafted a third statutory option onto

9 U.S.C. § 10, which allows for a remand of an award to the

original arbitration panel “without regard to whether the

arbitrators’ appointment has expired under the parties’

agreement.” Pet. at 3.

Yet, remarkably, HSB has overlooked the plain fact that

the Connecticut Supreme Court did not ground the trial

court’s authority to order a remand to the panel on any of the

provisions contained in 9 U.S.C. § 10. Indeed, the Supreme

Court specifically held that the trial court did not vacate the

arbitration award. Pet. App. at 9-10. The only substantive

analysis of 9 U.S.C. § 10 in the Supreme Court’s decision

appears in a footnote, wherein it held that the section was

not applicable to the case at hand.

Specifically, the Court opined:

[HSB] claims that federal cases permitting the

District Court to remand an award to the arbitrator

are inapposite in the present matter because the

cases do not “consider the temporal limitation on

the court’s authority to remand set out in 9 U.S.C.

10(b). . ..” We note that our determination that

the trial court remanded but did not vacate the

award renders inapplicable any time limitation

contained in § 10 (b). See Hoffmann v. Cargill,

Inc., 59 F. Supp.2d 861, 874 n.7 (N.D. lowa 1999)

(noting that 9 U.S.C. 10 [a][5], now codified at 9

U.S.C. § 10 [b] “will become pertinent here only

cor) serene . ni

9

if this court vacates the arbitration award in

question here”), rev'd on other grounds, 236 F.3d

458 (8th Cir. 2001).

Pet. App. at 21, n.16 (emphasis added). Thus, until such time

as the award is vacated, 9 U.S.C. § 10 is simply inapplicable.

Additionally, as HSB acknowledges, the Connecticut

Supreme Court, quoting a Third Circuit decision, freely

admitted that “there is no explicit provision in the [arbitration

act] [permitting] such a remand.” Pet. App. at 13 (quoting

Colonial Penn Ins. Co. v. Omaha Indem. Co., 943 F.2d 327,

333-34 (3d Cir. 1991)).

Nevertheless, HSB persists with its argument that the

Connecticut Supreme Court and at least three other circuit

courts of appeals have failed to reference section 10(b) in

cases involving a remand to the original arbitrators.

Pet. at 21 (citing Office & Prof’l Employees Int’l Union,

Local 471 v. Brownville Gen. Hosp., 186 F.3d 326 (3d Cir.

1999); Sterling China Co. v. Glass, Molders, Pottery, Plastics

& Allied Workers, Local 24, 357 F.3d 546 (6th Cir. 2004);

M & C Corp. v. Edwin Behr GMBH & Co., 326 F.3d 772

(6th Cir. 2003); Jnternational Bhd. of Teamsters v. Silver State

Disposal Serv., Inc., 109 F.3d 1409 (9th Cir. 1997)).

Notwithstanding these assertions, HSB ignores that the

Connecticut Supreme Court upheld the trial court’s authority

- to order a remand on a source that is independent of 9 U.S.C.

§ 10 (b); namely, the common law doctrine of functus Officio.

10

B. The Functus Officio Doctrine Was Invoked

Separately And Apart From 9 U.S.C. § 10 In

Accordance With The Parties’ Private

Arbitration Agreement

The functus officio doctrine, which has its roots in the

ancient common law, derives from the Latin meaning “having

performed his or her office” and has been defined as “‘having

fulfilled the function, discharged the office, or accomplished

the purpose, and therefore of no further force of authority.””

Pet. App. at 11 n.9 (quoting Sterling China, 357 F.3d at 553);

see also BLack’s Law Dictionary 696 (8th Ed. 2004). The

law implies the doctrine in all ‘arbitration agreements unless

an agreement provides otherwise. See, e.g., Pet. App. at 12,

n.11 (“[t]he doctrine of functus officio serves as a default

rule, and it applies only in the absence of an agreement

between the parties to the contrary”); see also Hyle v. Doctor’s

Assocs. Inc., 198 F.3d 368, 370 (2d Cir. 1999); Trade &

Transport, Inc. v. Natural Petroleum Charterers Inc., 931

F.2d 191, 195 (2d Cir. 1991); Colonial Penn, 943 F.2d at

333; Glass, Molders, Pottery, Plastics & Allied Workers

Int’l Union v. Excelsior Foundry Co., 56 F.3d 844, 848

4. This proposition is consistent with Volt Info. Sciences, Inc.

v. Board of Trustees, 489 U.S. 468 (1989), where this Court held

that

[a]rbitration under the [FAA] is a matter of consent, not

coercion, and parties are generally free to structure their

arbitration agreements as they see fit. Just as they may

limit by contract the issues which they will arbitrate. . .

so too may they specify by contract the rules under which

that arbitration will be conducted.

Id. at 479 (citation omitted).

—e ee

Ne re ence eee

11

| (7th Cir. 1995). The policy underlying the doctrine is an

“unwillingness to permit one who is not a judicial officer

and who acts informally and sporadically, to re-examine a

final decision which he has already rendered, because of the

potential evil of outside communication and unilateral

influence which might affect a new conclusion.” Colonial

Penn, 943 F.2d at 331-32 (internal quotation marks omitted).

In the arbitration context, the doctrine of functus officio

had been historically applied to arbitrations governed by the

common law. See, e.g., La Vale Plaza, Inc. v. Noonan, Inc.,

378 F.2d 569 (3d Cir. 1967) (applying Pennsylvania common

law). Importantly, for purposes of this case, courts that

applied this doctrine to common law arbitrations developed

certain exceptions to this prohibitory rule. These exceptions,

which have been most notably expounded by the Third Circuit

in La Vale Plaza, 378 F.2d at 569, provide that:

(1) an arbitrator “can correct a mistake which is

apparent on the face of his award”;

(2) “where the award does not adjudicate an issue

which has been submitted, then as to such issue

the arbitrator has not exhausted his function and

it remains open to him for subsequent

determination”;

(3) “[w]here the award, although seemingly

complete, leaves doubt whether the submission

has been fully executed, an ambiguity arises

which the arbitrator is entitled to clarify.”

Id. at 573 (emphasis added).

12

The third exception, which the Connecticut Supreme

Court applied in the case at hand, allows a court to remand

an incomplete or unclear arbitration award to the original

panel for the so/e purpose of clarification. As La Vale Piaza

made clear, “[t]he resolution of such an ambiguity is not

within the policy which forbids an arbitrator to redetermine

an issue which he has already decided, for there is no

opportunity for redetermination on the merits of what has

already been decided.” Id. (emphasis added).

While the functus officio doctrine and its exceptions were

historically applied to common law arbitrations, federal

courts have also relied on the doctrine in arbitrations

governed by federal arbitration statutes, including the FAA.

See, e.g., Pet. App. at 11, n.10; Ottley v. Schwartzberg, 819

F.2d 373, 375-77 (2d Cir. 1987); Office & Prof’l Employees,

186 F.3d at 331-32; Colonial Penn, 943 F.2d at 331;

Green v. Ameritech Corp., 200 F.3d 967, 977 (6th Cir. 2000);

Galt v. Libbey-Owens-Ford Glass Co., 397 F.2d 439, 442

(7th Cir. 1968); Lanier v. Old Republic Ins. Co., 936 F. Supp.

839, 845 n.11 (M.D. Ala. 1996) (citing cases).

In its petition, HSB has attacked the Connecticut

Supreme Court’s decision (and the federal precedent on

which it relies) by asserting that these cases simply have

engrafted a non-statutory remedy onto 9 U.S.C. § 10(b).

In so arguing, HSB overlooks two critical points. First, the

Connecticut Supreme Court explicitly held that section 10(b)

was not implicated in this case because the award was not

vacated. Pet. App. at 9-10; see also Galt, 397 F.2d at 442. ©

Second, and most importantly, the Connecticut Supreme

5. The Connecticut Supreme Court specified that the substance

of the award could not be revisited, oniy the missing information

could be supplied. Pet. App. at 20-21.

13

Court did not need to “engraft” the functus officio doctrine

onto section 10(b); application of the doctrine is a contractual

matter because it is implied in every arbitration agreement

unless provided otherwise. See, e.g., Pet. App. at 12, n.11;

Hyle, 198 F.3d at 370; Trade & Transport, Inc., 931 F.2d at

195; Colonial Penn, 943 F.2d at 333; Glass, Molders, Pottery,

Plastics & Allied Workers, 56 F.3d at 848°

As a result, in accordance with this Court’s long-standing

mandate that private parties may set the rules of their

arbitrations, the Connecticut Supreme Court properly

enforced the independent authority granted to it vis-a-vis the

parties’ private arbitration agreement. Pet. App. at 4; see also

Volt, 489 U.S at 478 (“[the FAA] simply requires courts to

enforce privately negotiated agreements to arbitrate, like

other contracts, in accordance with their terms”’).

Accordingly, in the case at the hand, the Connecticut

Supreme Court, relying on federal precedent, concluded that

6. Indeed, HSB appears to agree with this proposition as it noted

in its petition that:

It is an equally elementary principle of law that the

parties’ contract terms are deemed to incorporate existing

principles of law: “it is presumed that parties contract

with knowledge of, or in reliance on, existing law;

accorCcingly i is presumed that the parties had such law

in contemplation when the contract was made.” 17A

C.J.S. Contracts § 348 (1999); accord 11 Samuel

Williston & Richard A. Lord, A TREATISE ON THE LAW OF

ConTRACTs § 30.19, at 351-52 (4th ed. 1999); 17A Am.

Jur. 2p Contracts § 371 (2004).

Pet. at 22. Thus, HSB should have been aware that the functus officio

doctrine was a part of the parties’ agreement in this case.

14

the trial court had the power to remand an incomplete

arbitration award back to the panel for purposes of

“(clarifying] the factual basis for [the panel’s] allocation of

the sums representing each party’s liability . . . [as] there is

no question pertaining to [HSB’s] and the underwriters’

respective liability and the sums to be paid under the award.

...” Pet. App. at 21. The Court explained its reasoning for

allowing such a remand by noting:

Because the “third exception to the functus officio

doctrine ... permit[s] the arbitrator to complete

an assigned task”; Green v. Ameritech Corp., [200

F.3d 967, 977 (6th Cir. 2000)]; we believe that

this exception, as well as federal precedent

permitting a court to direct a clarifying remand,

enabled the trial court to order a rehearing for

clarification purposes without vacating the award.

Pet. App. at 21 (emphasis added).

In relying on federal precedent and the parties’ private

agreement, the Connecticut Supreme Court did not decide a

federai question worthy of this Court’s review. Pursuant to

28 U.S.C. § 1257(a), which HSB asserts as its jurisdictional

basis, this Court may review the Connecticut Supreme

Court’s decision only “where the validity of a ... statute of

the United States is drawn in question. .. .” 28 U.S.C. § 1257

(a) (emphasis added). The Connecticut Supreme Court neither

interpreted nor purported to apply 9 U.S.C. § 10 to the case

at hand=Rather, the court’s foray into federal matters was

merely tangential through its reference to federal precedent,

which only provided the necessary guidance for the

application of the functus officio doctrine to the private

arbitration agreement entered into by the parties. As a result,

15

the authority to remand the award for clarification arose from

the arbitration agreement itself, separate and apart from

9 U.S.C. § 10, thus not implicating this Court’s federal

question jurisdiction. The petition should be denied.

II. CONTRARY TO HSB’S ASSERTIONS, THERE IS

NO INTER-CIRCUIT CONFLICT

In an effort to make its petition appear attractive, HSB

boldly asserts that the Connecticut Supreme Court’s decision

“conflicts with a decision of the United States Court of

Appeals for the Ninth Circuit, and reflects general disarray

in the decisions of the federal courts of appeals and federal

district courts law.” Pet. at 18. In actuality, however, HSB’s

purported “conflict” is nothing more than smoke and mirrors.

The Ninth Circuit and countless other federal courts have all

ruled in a manner consistent with the decision of the

Connecticut Supreme Court. Simply stated, there is no

conflict for this Court to resolve.

A. The Ninth Circuit’s Holding in Western Employers .

Is Not Applicable

HSB’s “conflict” argument rests exclusively on one

Ninth Circuit case, Western Employers Ins. Co. v. Jefferies

& Co., Inc., 958 F.2d 258 (9th Cir. 1992). In Western

Employers, the parties, who were involved in an investment

relationship, executed a “Limited Trading Authorization,”

which included a standard agreement to arbitrate any disputes

under the rules of the National Association of Securities

Dealers (NASD). /d. at 259. Additionally, upon Western’s

request, the parties agreed to alter the standard agreement so

as to require the arbitrators to make certain findings of fact

and conclusions of law. /d. .

16

Throughout the subsequent arbitration proceedings,

Western’s counsel reminded the arbitrators about the parties’

agreement, which required the panel to make such findings.

In response, “[t]he Chairmen of the panel responded that the

panel was not bound by an agreement between [the parties].”

Id. at 260 (emphasis added.) Additionally, the panel also

indicated that it agreed with a representation made by defense

counsel that the NASD rules may not have permitted the

parties to enter into a contract that would be binding on the

arbitrators. Jd. Therefore, the pane! expressly refused to make

such findings of fact and law. /d.

In light of the panel’s express refusal to make such

findings, which clearly contravened the parties’ agreement,

the Ninth Circuit vacated the panel’s award, concluding that

“the NASD panel clearly failed to arbitrate the dispute

according to the terms of the arbitration agreement. In so

doing, the panel exceeded its authority under 9 U.S.C. § 10(d)

[currently § 10(a)(4)].” Jd. at 262. Notably, the Ninth Circuit

never mentioned the doctrine of functus officio or its

exceptions, but rather vacated the award in accordance with

the express terms of 9 U.S.C. § 10(a)(4). The omission of

any discussion relating to the functus officio doctrine may

be easily explained, however, as it appears that the parties

did not argue that the doctrine was relevant, perhaps because

there was simply nothing for the panel to clarify.

HSB maintains that Western Employers is

indistinguishable from this case and, therefore, is controlling.

Curiously, however, HSB has omitted any substantive

discussion in its petition of another Ninth Circuit case,

International Bhd. of Teamsters v. Silver State Disposal Serv.,

Inc., 109 F.3d 1409 (9th Cir. 1997), which was decided five

17

years after Western Employers.’ Indeed, this omission is

particularly surprising given the Connecticut Supreme

Court’s express reliance on /nternational Brotherhood in its

decision. Pet. App. at 18-21 & n.15.

In International Brotherhood, a union and an employer

participated in arbitration proceedings related to a grievance

filed after the employer terminated one of the union’s

members. 109 F.3d at 1410. The arbitrator determined that

the employee had been terminated without just cause and

thereby reinstated the employee. /d. Subsequently, a dispute

arose over whether the arbitration award entitled the

employee to receive back pay. Over the defendant’s objection,

the union requested that the arbitrator clarify her award. In

response, she acknowledged, “[M]y award was not clear in

regard to the reinstatement for [the grievant]... . In my

award, I intended for [the grievant] to receive back pay... .”

Td.

On appeal, the employer claimed that the arbitrator

lacked authority to clarify her award pursuant to the doctrine

of functus officio. The Ninth Circuit disagreed, noting that it

had previously adopted the three exceptions articulated in

La Vale Plaza, 378 F.2d at 573, which allowed “an arbitrator

[the opportunity to] correct a mistake which is apparent on

7. Although citing to /nternational Brotherhood in two string

Cites in its petition, Pet. at 15, 21, HSB never acknowledges that it is

a Ninth Circuit decision applying the functus officio doctrine, instead

creating an impression that Western Employers represents the totality

of Ninth Circuit law on the issue. Rather than confronting

International Brotherhood head-on, HSB attempts to hide it, in one

place even prefacing a string cite by saying that cases “principally

from the Third and Sixth Circuits” have applied the functus officio

doctrine — and then listing three cases each from the Third and Sixth

Circuits — but tucked neatly between them is a cite to the Ninth

Circuit’s decision in /nternational Brotherhood.

18

the face of his award, complete an arbitration if the award is

not complete, and clarify an ambiguity in the award.”

Id. at 1411 (emphasis added). Importantly, the Ninth Circuit

did not mention its holding in Western Employers or indicate

in any way that it was relevant to the matter at hand.

Accordingly, the Ninth Circuit concluded that “the

arbitrator’s clarification was permissible because it

completed the award.” /d.

In reaching its decision, the Ninth Circuit emphasized

that the arbitrator’s state of mind as to why back pay was not

awarded was relevant to the proceedings. Specifically, the

court noted that the arbitrator had indicated that she intended

to make such an award, but failed to do so, and that the

employer had “offered no evidence to refute the arbitrator’s

explanation of her state of mind at the time she executed the

initial award.” Jd. (emphasis added).’ Here, the Connecticut

Supreme Court concluded that the arbitrators’ states of mind

were similarly relevant, pointing out that HSB had not

presented any “evidence of wilfulness on behalf of the

arbitration panel to ignore or otherwise subvert the terms of

[the] arbitration agreement.” Pet. App. at 20-21 n.15 (relying

on International Brotherhood). —

8. In its petition to this court, HSB argues for the first time that

the arbitrators’ states of mind are irrelevant, noting that “nothing in

the text of the FAA conditions the remedy for a defective award on

whether the defect was the result of intentional misconduct or

inadvertent mistake.” Pet. at 19-20. HSB has overlooked, however,

that both the Ninth Circuit and the Connecticut Supreme Court

remanded matters for clarification not on the express provisions of

the FAA, but on the doctrine of functus officio, which was part of the

parties’ private agreements.

9. Indeed, Lloyd’s claims that HSB waived the contractual

provision requiring findings of fact and conclusions of law as a result

(Cont'd)

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19

Therefore, contrary to HSB’s assertions, the law in the

Ninth Circuit, as articulated in International Brotherhood,

is that absent a showing of an arbitrator’s express refusal to

make such findings, a remand for clarification is appropriate.

As a result, any purported “intra-circuit” conflict that may

have arguably existed prior to International Brotherhood has

since been resolved in a manner that is completely consistent

with the Connecticut Supreme Court’s decision in this case.

B. Other Federal Courts That Have Addressed This

Question Have Arrived At The Same Conclusion

As The Connecticut Supreme Court

Alternatively, HSB’s “broader” argument is that there is

“general disarray” in the federal courts regarding the practice

of remanding arbitration awards to the original panel for

clarification. While acknowledging that a number of courts

have agreed with the Connecticut Supreme Court’s decision,

HSB suggests that these cases were wrongly decided and that

only a small number of cases have been “faithful” to the

dictates of 9 U.S.C. § 10(b). Pet. at 20. For the latter

proposition, HSB cites two cases, both of which are easily

distinguishable.

Remarkably, the first case HSB cites is entirely consistent

with the Connecticut Supreme Court’s decision. Galt v.

Libbey-Owens-Ford Glass Co., 397 F.2d 439 (7th Cir. 1968).

In Galt, a contractor and subcontractor embroiled in a

commercial dispute submitted the dispute to arbitration

(Cont'd)

of statements made during the arbitration. See supra. Perhaps as a

result of HSB’s comments, the Arbitrators thought they were no longer

being asked to supply findings of facts: this claim is the subject of

Lloyd’s cross-appeal, which has yet to be resolved. Pet. App. at 27.

20

pursuant to the terms of the subcontract. After an initial award

was made, the subcontractor filed a motion to confirm the

award. /d. at 441. In response, the contractor filed a motion

seeking remand to the original arbitrators in order to

determine whether they considered a “payment clause”

contained in the subcontract, which the contractor had

asserted as a defense, but was not addressed by the panel. /d.

Concluding that “it was uncertain whether the arbitrators had

considered whether the payment clause was subject to

arbitration,” the district court remanded the matter to the —

original panel. Jd. at 441-42.

On appeal, the Seventh Circuit affirmed the district

court’s decision, expressly concluding (as the Connecticut

Supreme Court did in this case), that 9 U.S.C. § 10 did not

apply. Specifically, the court noted:

Section 10 of [the FAA] empowers district courts

to vacate awards and direct rehearings by the

arbitrators where a mutual, final, and definite

award was not made if the time for rendering the

award had not expired. Because the award did

not mention the payment clause, even though that

was one of the defenses presented to the arbitrators

by [the contractor], the award was not definite

within the meaning of Section 10 (d) [currently

§ 10 (a) (4)] of the Act.... It was entirely

appropriate for the District Court to let the

arbitrators explain whether they had interpreted

the payment clause. This method commendably

avoided any judicial guessing as to the meaning

of the award. See La Vale Plaza, Inc. v. R.S.

Noonan, Inc., 378 F.2d 569, 573 (3d Cir. 1967).

It did not constitute a judicial invasion of the

21

arbitrators’ province but rather served to give the

parties what they bargained for — a clear decision

from the arbitrators.

Id. at 442 (emphasis added). Thus, since the award omitted

any discussion of one of the contractor’s defenses, it was not

definite or complete within the meaning of 9 U.S.C. § 10

and, therefore, could be remanded to the panel for

clarification. Similarly, in this case, the Connecticut Supreme

Court also determined that 9 U.S.C. § 10 was inapplicable

because the arbitration award was incomplete. Therefore,

HSB’s reliance on Galt is not only curious but completely

contradicts any assertion that the federal case law is in a state

of disarray.

Similarly, HSB’s reliance on Hoffman vy. Cargill, Inc.,

59 F. Supp. 2d 861 (N.D. Iowa 1999), rev'd on other grounds,

236 F.3d 458 (8th Cir. 2001), is misplaced. In Hoffman, the

district court vacated an arbitration award based on two

“extra-statutory” grounds not explicitly mentioned in

9 U.S.C. § 10: (1) the award was “completely irrational”

because it was based on fundamental errors and unfounded

determinations of law and fact; and (2) the proceedings in

general were “fundamentally unfair.” Jd. at 895-96.'°

After vacating the award, the district court declined to direct

a rehearing in accordance with 9 U.S.C. 10 (a) (5) [currently

§ 10(b)] because the time for making such an award had

passed. /d. at 896.

While HSB seeks shelter within the court’s holding, it

has overlooked that the Hoffman court explicitly noted that

10. The Eighth Circuit subsequently reversed these findings and

ordered that the award be confirmed. Hoffman, 236 F.3d at 461-63.

ee

22

the temporal limitations contained in section 10 (b) “will

become pertinent hereonly if this court vacates the arbitration

award in question here.” /d. at 874 n.7 (emphasis added). As

noted previously, the Connecticut Supreme Court held that

section 10 (b) was inapplicable for this very reason, as the

trial court did not vacate the arbitration award. Pet. App. at

9-10.'' Therefore, Hoffman is irrelevant to the case at hand.

As a result, HSB has not provided this Court with any

authority for the proposition that there is “general disarray”

in the federal courts regarding the practice of remanding an

arbitration award under the functus officio doctrine. Rather,

it has been universally held by federal courts that such a

remand is appropriate. See, e.g., Ottley v. Schwartzberg, 819

F.2d 373, 376 (2d Cir. 1987); Office & Prof’l Employees Int'l

Union, Local 471 v. Brownville Gen. Hosp., 186 F.3d 326,

331-32 (3d Cir. 1999); Colonial Penn Ins. Co. v. Omaha

Indem. Co., 943 F.2d 327, 332-35 (3d Cir. 1991); La Vale

Plaza, Inc. v. Noonan, Inc., 378 F.2d 569, 573 (3d Cir. 1967);

Sterling China Co. v. Glass, Molders, Pottery, Plastics &

Allied Workers, Local 24, 357 F.3d 546, 553-55 (6th Cir.

2004); M & C Corp. v. Edwin Behr GMBH & Co., 326 F.3d

772, 782-83 (6th Cir. 2003); Green v. Ameritech Corp., 200

F.3d 967, 976-78 (6th Cir. 2000); Tri-State Bus. Machs., Inc.

v. Lanier Worldwide, Inc., 221 F.3d 1015, 1019 (7th Cir.

2000); Glass, Molders, Pottery, Plastics & Allied Workers

Int’l Union v. Excelsior Foundry Co., 56 F.3d 844, 846-848

(7th Cir. 1995); Galt v. Libbey-Owens-Ford Glass Co., 397

F.2d 439, 442 (7th Cir. 1968); Domino Group, Inc. v. Charlie

Parker Mem’! Found., 985 F.2d 417, 420 (8th Cir. 1993);

11. Again, the entire basis for the Connecticut Supreme Court

decision was that there was no final judgment because the award

was not vacated. Pet. App. at 27.

23

International Bhd. of Teamsters v. Silver State Disposal Serv.,

Inc., 109 F.3d 1409, 1411-12 (9th Cir. 1997); Kennecott Utah

Copper Corp. v. Becker, 186 F.3d 1261, 1270-71 (10th Cir.

1999); Lanier v. Old Republic Ins. Co., 936 F. Supp. 839,

845-46 & n.11 (M.D. Ala. 1996). In light of this breadth of

authority, it is clear that the federal courts have been

remarkably unified in their resolution of this issue. There is

no cause for this Court to grant the extraordinary remedy of

certiorari.

lil. THE REMAND OF AN INCOMPLETE

ARBITRATION AWARD TO THE ORIGINAL

PANEL FOR THE SOLE PURPOSE OF

CLARIFICATION ADVANCES THE GOALS OF

COMMERCIAL ARBITRATION

It is well established that judicial review of an arbitration

award must take into consideration and weigh two competing

policy goals. The first of these considerations is that the

underlying goal of arbitration is to encourage the expedient

and efficient resolution of commercial disputes. Volt, 489

U.S. at 478. Nonetheless, while arbitration is Clearly favored,

this Court has consistently held that “we must not .. . allow

the fortuitous impact of the Act on efficient dispute resolution

to overshadow the underlying motivation;” namely, the

“desire to enforce agreements into which parties had entered.”

Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 220 (1985).

By remanding an incomplete arbitration award for purposes

of clarification, the Connecticut Supreme Court’s decision

fully comported with both of these policy considerations.

In its petition, HSB has presented a “parade of horribles”

based on its unsupported notion that the Connecticut Supreme

Court permitted a remand without regard to the temporal

24

limitations contained in 9 U.S.C. § 10(b). In HSB’s view,

the Connecticut Supreme Court was “improperly” motivated

by a desire to effectuate federal and state policies that favor

arbitration as a means for the expedient resolution of

commercial disputes. Pet. at 24. As explained in Part II,

however, the Connecticut Supreme Court created no such

provision, but instead applied an exception to the doctrine

of functus officio, which was an implied part of the parties’

arbitration agreement. See supra.

As a result, contrary to HSB’s allegations, the

Connecticut Supreme Court faithfully followed this Court’s

mandate to enforce the terms of privately enforced

agreements. Pet. App. at 22-23. Indeed, the practice of

remanding arbitration awards for clarification inherently

ensures the enforcement of the parties’ agreement, as

“{s]uch a remand avoids the court’s misinterpretation of the

award and is therefore more likely to give the parties the

award for which they bargained.” Colonial Penn, 943 F.2d

at 334 (emphasis added); Pet. App. at 23; see also Galt, 397

F.2d at 442 (“[remand] did not constitute a judicial invasion

of the arbitrators’ province but rather served to give the

parties what they bargained for — a clear decision from the

arbitrators”).

Despite HSB’s numerous unsuccessful attempts to

interject claims of judicial lawmaking, purported conflicts,

and disarray in the federal courts, the fact remains that the

Connecticut Supreme Court’s decision is consistent not only

with a plethora of federal case law that spans the circuits,

but also is consistent with the parties’ private agreement.

25

CONCLUSION

For the reasons set forth above, the petition for certiorari

should be denied.

Respectfully submitted,

CLAYTON H. FARNHAM Linpa L. MorKAN

Drew, Eckt & FARNHAM, LLP Counsel of Record

880 West Peachtree Street PATRICK J. SWEENEY

P.O. Box 7600 JEFFREY J. WHITE

Atlanta, GA 30357 Rosinson & Coie LLP

(404) 885-1400 280 Trumbull Street

Hartford, CT 06103

(860) 275-8200

Counsel for Respondents