Savers Property & Casualty Insurance v. National Union Fire Insurance , 748 F.3d 708 ( 2014 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 14a0067p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
SAVERS PROPERTY AND CASUALTY INSURANCE CO.; ┐
STAR INSURANCE COMPANY; AMERITRUST │
INSURANCE CORPORATION; WILLIAMSBURG │
NATIONAL INSURANCE CO.; │ Nos. 13-2288/2289
Plaintiffs-Appellees, │
>
│
│
v.
│
│
NATIONAL UNION FIRE INSURANCE COMPANY OF │
PITTSBURG, PA, │
Defendant-Appellant. │
┘
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit
No. 2:13-cv-13807—Victoria A. Roberts, District Judge.
Argued: March 21, 2014
Decided and Filed: April 9, 2014
Before: COLE and ROGERS, Circuit Judges; HOOD, District Judge.*
_________________
COUNSEL
ARGUED: Michael M Conway, FOLEY & LARDNER LLP, Chicago, Illinois, for Appellant.
Keefe A. Brooks, BROOKS WILKINS SHARKEY & TURCO PLLC, Birmingham, Michigan,
for Appellees. ON BRIEF: Michael M Conway, Jonathan W. Garlough, FOLEY &
LARDNER LLP, Chicago, Illinois, Scott T. Seabolt, FOLEY & LARDNER LLP, Detroit,
Michigan, for Appellant. Keefe A. Brooks, BROOKS WILKINS SHARKEY & TURCO PLLC,
Birmingham, Michigan, Stephanie A. Douglas, BUSH SEYFERTH & PAIGE PLLC, Troy,
Michigan, for Appellees.
*
The Honorable Joseph M. Hood, United States District Judge for the Eastern District of Kentucky, sitting
by designation.
1
Nos. 13-2288/2289 Savers Prop. & Cas. Ins. Co., et al. v. Nat’l Union Fire Ins. Page 2
_________________
OPINION
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COLE, Circuit Judge. National Union Fire Insurance Company (“National Union”)
appeals the grant of a preliminary injunction that halted an ongoing arbitration proceeding with
Savers Property and Casualty Insurance Company, et al. (collectively, “Meadowbrook”).
Because arbitration’s essential virtue is resolving disputes straightaway, judicial review of
arbitral awards is extremely narrow and exceedingly deferential. In the absence of a final
arbitration award, the district court should not have interjected itself into this private dispute.
Accordingly, we reverse the judgment, dissolve the injunction, and remand for dismissal.
I. BACKGROUND
A. Factual Background
The underlying dispute that gave rise to this arbitration stems from a contract for
reinsurance (the “Treaty”) between National Union and Meadowbrook. The Treaty required
both parties to submit any reinsurance disputes to a three-member arbitration panel that would
“make its decision with regard to the custom and usage of the insurance and reinsurance
business” after entertaining evidence and conducting a hearing. The majority decision of the
panel was to be final and binding upon all parties to the proceeding, and either side could seek
judicial confirmation in any court of competent jurisdiction. Meadowbrook initiated this
arbitration in February 2011 to settle matters surrounding its alleged practice of overbilling
National Union for certain reinsurance programs.
As is customary in the reinsurance industry, the arbitration clause from the Treaty
established a tripartite method of arbitration. Under this system, the panel was to be comprised
of “two arbitrators and an umpire” who were “active or retired disinterested officials of the
insurance or reinsurance companies, or Underwriters at Lloyd’s, London, not under the control
of either party to this Agreement.” Each party was to appoint its own arbitrator, and then the two
party-appointed arbitrators would select a neutral umpire. In the event that the party-appointed
arbitrators disagreed in selecting an umpire, each side was to submit a list of three candidates,
Nos. 13-2288/2289 Savers Prop. & Cas. Ins. Co., et al. v. Nat’l Union Fire Ins. Page 3
from which the opposing arbitrator would strike two. The umpire would then be chosen by lot
from the remaining name on each list.
National Union named Jonathan Rosen as its arbitrator, and Meadowbrook named Rex
Schlaybaugh. After the two men deadlocked in selecting an umpire, the parties exchanged slates
of candidates and asked them to complete a questionnaire detailing their experience and
connections with the parties and their arbitrators. Thomas Greene—who was ultimately selected
as umpire—disclosed that he was a personal friend of National Union’s arbitrator. Greene also
disclosed that, like Rosen, he was a member of the reinsurance industry group ARIAS, a not-for-
profit corporation that publishes guidelines and best practices for reinsurance arbitrations.
Despite Greene’s connections to Rosen, Meadowbrook selected Greene from the slate of
individuals put forward by National Union, and after casting lots, he was named umpire.
The panel held an organizational meeting on August 1, 2012, at which it adopted the first
of two scheduling orders with identical language regarding ex parte communications. Those
orders stated, “Ex parte communications with any member of the Panel shall cease upon the
filing of the parties’ initial pre-hearing briefs.” The filing date for pre-hearing briefs and the
attendant cut-off date for ex parte communications was June 14, 2013. Soon after, the panel
conducted a hearing, and on July 23 issued a unanimous “Interim Final Award” resolving all
issues of liability in favor of National Union.
The panel did not, however, calculate a final damages award at that time. Instead, the
panel ordered Meadowbrook to pay National Union $1,950,680.48 for damages that were
“capable of immediate calculation,” and, in an effort to mete out a final award, ordered
Meadowbrook to provide supporting documentation with respect to other reinsurance programs
and their retained risk. The panel also ordered Meadowbrook to reimburse National Union for
its attorneys’ fees and costs. The panel denied all other requests for relief, ordered
Meadowbrook to pay the sum-certain damages within fourteen days, and retained jurisdiction
only to “adjudicat[e] those items requiring additional submissions”—i.e., to calculate National
Union’s damages prior to issuing a final arbitration award.
The Interim Final Award was silent with respect to the ban on ex parte communications
that had gone into effect on June 14. Nevertheless, National Union’s attorney and Arbitrator
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Rosen resumed ex parte communications immediately following issuance of the award, which
National Union maintains was permissible under the panel’s scheduling orders and the customs
and practices of the reinsurance industry. National Union disclosed these very communications
when it submitted its Bill of Costs to Meadowbrook and the panel. Meadowbrook, however,
argues that the communications were prohibited by the scheduling orders.
On August 6, Meadowbrook filed a supplemental submission to the panel in response to
Paragraph 4 of the Interim Final Award, which had directed Meadowbrook to provide supporting
documentation so that the panel could calculate National Union’s final damages. After
consulting with Arbitrator Rosen, National Union’s attorney filed a motion to strike
Meadowbrook’s submission, alleging that the document was “insufficient.” Umpire Greene
responded to the parties’ filings in an August 12 order signed, “For the Panel.” In that order,
Greene stated that “[t]he Panel . . . by majority, strikes [Meadowbrook’s submission] in its
entirety as being non-responsive to and non-compliant with Paragraph 4 of the Interim Final
Award.” The order instructed Meadowbrook to file a conforming submission or risk a damages
calculation based solely on National Union’s submissions.
The next day, Meadowbrook filed an emergency motion to clarify the panel’s prior ruling
and to extend the deadline for its replacement submission. Greene again responded in an August
13 order signed, “For the Panel.” Greene stated that “the majority rules as follows,” before
clarifying what documentation must be submitted and granting the request for additional time to
replace the stricken submission. Meadowbrook was given until August 19, 2013, to submit the
supporting documentation the panel had requested in its Interim Final Award.
Meadowbrook alleges that both panel orders disenfranchised Schlaybaugh, who was on
vacation at the time the orders were adopted and did not participate in deliberations on either
matter. National Union rejects any contention that Schlaybaugh was disenfranchised; National
Union argues that Greene issued the orders without Schlaybaugh’s participation because swift
action was required, and even then, only after repeated attempts to communicate with him
proved fruitless. National Union also notes that Schlaybaugh’s participation would not have
altered the orders because under the Treaty, a two-member majority may rule for the panel.
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B. Procedural Background
Unsatisfied with the panel’s procedural orders, Meadowbrook filed a complaint in
Michigan state court seeking to vacate the Interim Final Award on the grounds that Umpire
Greene and Arbitrator Rosen exceeded their authority under the Treaty and that Rosen displayed
evident partiality. The crux of Meadowbrook’s complaint was that Rosen failed to disclose that
he had been a guest speaker at a conference with National Union’s attorney during the course of
the arbitration. Meadowbrook alleged it would have moved to disqualify Rosen and Greene had
it known of Rosen’s speaking engagements. When Meadowbrook learned that Rosen and
National Union’s attorney had resumed their ex parte communications following issuance of the
Interim Final Award, Meadowbrook amended its state-court complaint to reflect those facts.
Simultaneously, Meadowbrook protested the panel’s orders within the arbitration
proceeding itself by filing a motion for reconsideration and a motion to stay all proceedings.
Meadowbrook raised the same arguments it pressed in state court—namely, that Rosen failed to
disclose his participation in a reinsurance industry educational seminar held at the law offices of
National Union’s attorney, and that Rosen and National Union’s attorney engaged in improper ex
parte communications following issuance of the Interim Final Award.
By a 2-1 vote, the arbitration panel denied both motions. As to Meadowbrook’s first
argument, regarding disclosure of Rosen’s speaking engagements, Greene and Rosen ruled for
the panel as follows:
The Panel sees no merit in Meadowbrook’s complaint that Arbitrator
Rosen did not disclose his participation at the AIRROC regional education
seminar held at Foley & Lardner’s offices earlier this year. That [National
Union’s attorney] also participated at AIRROC’s invitation as a panelist at that
seminar in a segment separate and distinct from Mr. Rosen’s segment is of
absolutely no moment or relevance in relation to this proceeding and did not, in
the Panel’s view, constitute a matter requiring disclosure . . . .
Greene and Rosen also rejected Meadowbrook’s claim that Rosen violated the rules
governing ex parte communications, ruling as follows:
The Panel sees no merit in Meadowbrook’s complaint that Arbitrator
Rosen’s communications with [National Union’s attorney] and his colleagues
after issuance of the Interim Final Award constituted a breach of the rules
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governing ex parte contact in this proceeding. A review of the Organizational
Meeting transcript and Scheduling Orders entered in connection with this
proceeding readily establish that the prohibition on ex parte contact came to an
end upon the Panel ruling on the merits of this dispute. That was occasioned upon
the issuance of the Interim Final Award, which fully and finally resolved all
liability aspects attendant to this dispute. . . . This conclusion not only comports
with the parties’ expressed intentions relative to ex parte contact with the party
appointed arbitrators, but is consistent with the Panel’s intent and understanding
of its orders governing ex parte contact as well as the customs and practices
existing in the conduct of reinsurance arbitrations.
Schlaybaugh dissented. He felt that the scheduling orders were clear on their face and
that the ex parte communications between Rosen and National Union’s attorney violated those
orders. Moreover, Schlaybaugh was “troubled” that the other panel members issued the
underlying procedural orders without his participation and input. Accordingly, he would have
found a violation of the scheduling orders, stayed the arbitration, and ordered limited discovery
“to determine the extent and subject of all ex parte communications and affiliations that may
exist or existed and have not been disclosed.”
After the panel denied Meadowbrook’s motions, National Union responded to
Meadowbrook’s revised Paragraph 4 submission. National Union requested that the panel order
Meadowbrook to pay reinsurance reimbursements in excess of $25 million dollars. Faced with
this potential liability, Meadowbrook moved the state court to stay the arbitration in order to
challenge the fundamental fairness of the proceedings.
National Union then removed the case to federal district court based on diversity of
citizenship. Despite acknowledging that courts are generally prohibited from reviewing
arbitration proceedings until a final award has been issued, the district court determined it could
review the matter by re-casting Meadowbrook’s challenge as a breach of contract dispute
regarding the rules under which the arbitration was to proceed. The court then concluded that
injunctive relief was proper because Meadowbrook was likely to suffer irreparable harm from
such a sizeable financial liability and was likely to succeed on the merits “in a breach of contract
action” predicated on Schlaybaugh’s purported disenfranchisement and Rosen’s ex parte
communications. The court also concluded that there would be no substantial harm to National
Nos. 13-2288/2289 Savers Prop. & Cas. Ins. Co., et al. v. Nat’l Union Fire Ins. Page 7
Union, and that public policy favored issuance of the injunction. Accordingly, the court enjoined
the panel from issuing any further orders without the court’s approval.
C. The Instant Appeal
National Union timely appealed, arguing that under the Federal Arbitration Act (“FAA”),
9 U.S.C. § 1 et seq., parties to an ongoing arbitration may not challenge the fairness of the
proceedings or the partiality of the arbitrators until after the conclusion of the arbitration and the
rendition of a final award. In the alternative, National Union argues that the district court abused
its discretion in granting the preliminary injunction. We have jurisdiction under 28 U.S.C.
§ 1292(a)(1) and 9 U.S.C. § 16(a)(2) to consider National Union’s appeal.
II. STANDARD OF REVIEW
We review de novo whether a district court may entertain a motion for preliminary
injunctive relief in an arbitration proceeding. Performance Unlimited, Inc. v. Questar
Publishers, Inc., 52 F.3d 1373, 1378 (6th Cir. 1995). We review the grant of a preliminary
injunction for abuse of discretion, examining the district court’s legal conclusions de novo and
its factual findings for clear error. Obama for Am. v. Husted, 697 F.3d 423, 428 (6th Cir. 2012).
In this review, we look to the same four factors the district court considered in determining
whether to grant the injunction, and the plaintiff bears the burden of establishing its entitlement
to the relief requested. Autocam Corp. v. Sebelius, 730 F.3d 618, 624 (6th Cir. 2013).
III. ANALYSIS
A. Choice of Law
At the outset, the parties disagree (at times) over the substantive law we must apply in
this appeal. National Union argues that the FAA applies. Meadowbrook asserts, however, that
under the choice-of-law provisions from the Treaty, Michigan law governs our review. Despite
this assertion, Meadowbrook grounds its arguments almost entirely on federal caselaw
interpreting the FAA. The district court’s analysis was equally muddled—relying, at times, on
both the FAA and Michigan law to support its review and issuance of the injunction.
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Although the FAA generally preempts inconsistent state laws and governs all aspects of
arbitrations concerning “transaction[s] involving commerce,” parties may agree to abide by state
rules of arbitration, and “enforcing those rules according to the terms of the agreement is fully
consistent with the goals of the FAA.” Muskegon Cent. Dispatch 911 v. Tiburon, Inc., 462 F.
App’x 517, 522–23 (6th Cir. 2012) (quoting 9 U.S.C. § 2 and Volt Info. Scis., Inc. v. Bd. of Trs.
of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)); see also Uhl v. Komatsu Forklift
Co., Ltd., 512 F.3d 294, 302–03 (6th Cir. 2008); Ario v. Underwriting Members of Syndicate 53
at Lloyds for 1998 Year of Account, 618 F.3d 277, 288–89 (3d Cir. 2010). The central inquiry in
this choice-of-law determination is whether the parties unambiguously intended to displace the
FAA with state rules of arbitration. Muskegon, 462 F. App’x at 523. Here, the parties did just
that. Under the Treaty’s general choice-of-law provision and the arbitration clause, both parties
agreed that any arbitration shall be “subject to the laws of the State of Michigan.” The Treaty
neither refers to the FAA nor otherwise suggests that the parties sought to invoke its provisions.
Accordingly, the parties unambiguously intended to displace the federal standard with Michigan
law, and Michigan law governs our review. Id.Nevertheless, because the Michigan Arbitration Act, Mich. Comp. Laws § 600.5001 et
seq.,1 and Michigan Court Rule 3.602 are “almost identical to the FAA in all relevant respects,”
Uhl, 512 F.3d at 303, this choice-of-law determination bears little impact on our analysis or
disposition. As in Uhl, the statutory language at issue here is nearly identical under federal and
state law. Compare 9 U.S.C. § 10(a), with Mich. Ct. R. 3.602(J)(2) (governing the vacatur of
arbitration awards). Given the similarities between federal and state law, the lack of caselaw
interpreting Michigan Court Rule 3.602 in the context of mid-arbitration judicial review, and the
parties’ heavy reliance upon cases applying the FAA, we will generally consider National
Union’s appeal with respect to cases interpreting the FAA. See Uhl, 512 F.3d at 303. However,
we will consider specific application of Michigan law where the relevant provisions differ in
substance.
1
The Michigan Legislature enacted a uniform arbitration act in 2012 that repealed the state’s previous
arbitration regime. See Uniform Arbitration Act, 2012 Mich. Pub. Act No. 371 (codified at Mich. Comp. Laws
§§ 691.1681–.1713). However, the Act provided that the old regime would govern arbitration proceedings
commenced prior to July 31, 2013. Mich. Comp. Laws § 691.1713. We therefore look to that regime, which
incorporated Michigan Court Rule 3.602, in this appeal. See Mich. Comp. Laws § 600.5021 (repealed 2012); Mich.
Ct. R. 3.602(A) (“This rule governs statutory arbitration under MCL 600.5001-600.5035.”).
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B. Judicial Review was Improper Before Issuance of a Final Arbitration Award
Based upon the text, structure, and purpose of the FAA, which all foster a speedy and less
formal method of dispute resolution, we conclude that the district court erred in entertaining this
interlocutory challenge to an ongoing arbitration proceeding. Parties to an arbitration generally
may not challenge the fairness of the proceedings or the partiality of the arbitrators until the
conclusion of the arbitration and the rendition of a final award. Because Meadowbrook’s
arbitration was ongoing, and because the panel had not yet issued a final award, the district court
erred by prematurely interjecting itself into this private dispute.
Congress enacted the FAA in 1925 to counter widespread judicial hostility to private
arbitration agreements. AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745 (2011). The
overarching purpose of the FAA, evident in its text and structure, “is to ensure the enforcement
of arbitration agreements according to their terms so as to facilitate streamlined proceedings.”
Id. at 1748. This “body of federal substantive law of arbitrability” applies to any arbitration
agreement within the coverage of the FAA and presumptively governs in both state and federal
court. See Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Thus,
we have long recognized that the FAA “manifests ‘a liberal federal policy favoring arbitration
agreements,’” Masco Corp. v. Zurich Am. Ins. Co., 382 F.3d 624, 626 (6th Cir. 2004) (quoting
Moses H. Cone Mem’l Hosp., 460 U.S. at 24), and several states, including Michigan, have
followed Congress’s lead by enacting arbitration acts that largely mirror the FAA. See Uhl,
512 F.3d at 303 (“Michigan’s arbitration law is almost identical to the FAA in all relevant
respects.”); see also Phillip J. DeRosier, Judicial Review of Arbitration Awards Under Federal
and Michigan Law, Mich. B.J., Feb. 2013, at 34, 36 (“[T]he Michigan court rules [governing
arbitration] ostensibly mirror the FAA.”).
Arbitration under the FAA is contract-driven and principally “a matter of consent.”
EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002); accord Rent-A-Center, West, Inc. v.
Jackson, 130 S. Ct. 2772, 2776 (2010). “The point of affording parties discretion in designing
arbitration processes is to allow for efficient, streamlined procedures tailored to the type of
dispute.” AT&T Mobility, 131 S. Ct. at 1749. Moreover, the informality of arbitration “is itself
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desirable” because it “reduc[es] the cost and increase[es] the speed of dispute resolution.” Id.(citing 14 Penn Plaza LLC v. Pyett, 556 U.S. 247, 257 (2009)).
To maintain “arbitration’s essential virtue of resolving disputes straightaway,” courts
may vacate an arbitration award “only in very unusual circumstances.” Oxford Health Plans
LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013) (internal quotation marks omitted). As the Supreme
Court has explained, “[i]f parties could take full-bore legal and evidentiary appeals, arbitration
would become merely a prelude to more cumbersome and time-consuming judicial review
process.” Id. (internal quotation marks omitted). Accordingly, the FAA and Michigan’s
arbitration law contemplate only two stages at which courts may become involved in arbitration
proceedings. At the outset of any dispute, the laws authorize courts to decide certain “gateway
matters” of arbitrability, “such as whether the parties have a valid arbitration agreement at all or
whether a concededly binding arbitration clause applies to a certain type of controversy.” Id. at
2068 n.2. (internal quotation marks omitted); see 9 U.S.C. §§ 3–4 (authorizing courts to entertain
challenges to the arbitrability of a given dispute by granting motions to stay judicial proceedings
or compel arbitration); Mich. Ct. R. 3.602(B)–(C) (same). Then, at the conclusion of an
arbitration proceeding, courts are authorized to enter an order confirming, vacating, or modifying
the award, but even so, awards may be disrupted only under narrow circumstances. See 9 U.S.C.
§§ 9–11; Mich. Ct. R. 3.602(I)–(K); Oxford Health Plans, 133 S. Ct. at 2068.
Between these two stages, however, the laws are largely silent with respect to judicial
review. Over the years, our court and several of our sister circuits have interpreted that silence
and the overall structure of the FAA to preclude the interlocutory review of arbitration
proceedings and decisions. See Quixtar, Inc. v. Brady, 328 F. App’x 317, 320 (6th Cir. 2009)
(“[C]ourts generally should not entertain interlocutory appeals from ongoing arbitration
proceedings.”); see also, e.g., Blue Cross Blue Shield of Mass., Inc. v. BCS Ins. Co., 671 F.3d
635, 638 (7th Cir. 2011) (observing “that judges must not intervene in pending arbitrations” and
noting that “[r]eview comes at the beginning or the end, but not in the middle” of arbitration);
Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 488 (5th Cir. 2002) (“We find
no authority under the FAA for a court to entertain such challenges [to the arbitrator selection
process or the unfairness of an arbitration] prior to [the] issuance of the arbitral award.”);
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Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 941 (4th Cir. 1999) (“[F]airness objections should
generally be made to the arbitrator, subject only to limited post-arbitration judicial review as set
forth in section 10 of the FAA.”); LaPrade v. Kidder Peabody & Co., Inc., 146 F.3d 899, 903
(D.C. Cir. 1998) (“The Arbitration Act contemplates that courts should not interfere with
arbitrations by making interlocutory rulings . . . .”); Folse v. Richard Wolf Med. Instruments
Corp., 56 F.3d 603, 605 (5th Cir. 1995) (“By its own terms, § 10 [of the FAA] authorizes court
action only after a final award is made by the arbitrator.”); Michaels v. Mariforum Shipping,
S.A., 624 F.2d 411, 414 & n.4 (2d Cir. 1980) (“Under the Federal Arbitration Act . . . a district
court does not have the power to review an interlocutory ruling by an arbitration panel. . . .
Similarly, it is well established that a district court cannot entertain an attack upon the
qualifications or partiality of arbitrators until after the conclusion of the arbitration and the
rendition of an award.”); Travelers Ins. Co. v. Davis, 490 F.2d 536, 541–42 (3d Cir. 1974)
(same).
In addition to these textual and structural considerations, there are sound policy
reasons—all of which support the purposes underlying the FAA—for generally withholding
judicial review until the conclusion of an arbitration proceeding. See, e.g., Trustmark Ins. Co. v.
John Hancock Life Ins. Co., 631 F.3d 869, 874 (7th Cir. 2011) (observing that if parties could
obtain interlocutory review of arbitral decisions, “[t]hat would be the end of arbitration as a
speedy and (relatively) low-cost alternative to litigation”); Gulf Guar. Life Ins., 304 F.3d at 492(“[A] prime objective of arbitration law is to permit a just and expeditious result with a minimum
amount of judicial interference . . . any other such rule could spawn endless applications to the
courts and indefinite delay . . . .” (internal quotation marks omitted)); Michaels, 624 F.2d at 414(“[A] district court should not hold itself open as an appellate tribunal during an ongoing
arbitration proceeding, since applications for interlocutory relief result only in a waste of time,
the interruption of the arbitration proceeding, and delaying tactics in a proceeding that is
supposed to produce a speedy decision.” (internal quotation marks and ellipsis omitted)).
Under this statutory framework, Meadowbrook’s request that the district court intervene
to halt this ongoing arbitration proceeding was plainly improper. When the parties inked their
reinsurance Treaty, they explicitly agreed to be bound by Michigan law, which mirrors the FAA
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in all relevant respects, during any subsequent arbitration. By initiating this arbitration,
Meadowbrook “thereby implicitly agreed to defer judicial review until after the conclusion of
the . . . Arbitration.” Quixtar, 328 F. App’x at 322. Only when the panel ruled against
Meadowbrook did it think better of the arrangement and decide to “help itself to an interlocutory
appeal.” Blue Cross, 671 F.3d at 637. Tellingly, Meadowbrook acknowledged in its amended
state-court complaint that “if it is determined that this action is premature because no ‘final’
award has been rendered, then this action should be dismissed without prejudice.”
We agree with Meadowbrook’s initial concern. Here, the arbitration panel issued an
interim award resolving only the matter of liability; the panel retained jurisdiction to compute
National Union’s damages. Under these circumstances, the arbitration was not complete because
there was no “final” award. See, e.g., Michaels, 624 F.2d at 413–14 (“Generally, in order for a
claim to be completely determined, the arbitrators must have decided not only the issue of
liability of a party on the claim, but also the issue of damages.”); accord Union Switch & Signal
Div. Am. Standard, Inc. v. United Elec., Radio & Mach. Workers of Am., Local 610, 900 F.2d
608, 610–12 (3d Cir. 1990) (collecting cases and holding under “the complete arbitration rule”
that an arbitration award is not final where it determines liability but not damages); Millmen
Local 550, United Bhd. of Carpenters & Joiners of Am. v. Wells Exterior Trim, 828 F.2d 1373,
1376 (9th Cir. 1987) (same). Accordingly, Meadowbrook’s action was premature.
C. Interlocutory Judicial Review was Improper Under 9 U.S.C. § 2The district court recognized the general prohibition on interlocutory review of
arbitration proceedings but granted the injunction anyway under a strained reading of
Meadowbrook’s pleadings and 9 U.S.C. § 2. See Star Ins. Co. v. Nat’l Union Fire Ins. Co. of
Pittsburg, PA, No. 13-13807, 2013 WL 5182745, at *4 (E.D. Mich. Sept. 12, 2013) (concluding
that courts may conduct interlocutory review “if the [arbitration] agreement is subject to attack
under general contract principles” (internal quotation marks omitted)). But on appeal,
Meadowbrook does not argue that interlocutory review was proper under § 2. In fact,
Meadowbrook has never invoked § 2, which pertains only to the revocability of an arbitration
agreement under traditional contract defenses, as a basis to justify its request for injunctive relief.
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Therefore, under the appellate waiver doctrine, “we need not review this aspect of the district
court’s decision.” Radvansky v. City of Olmstead Falls, 395 F.3d 291, 310–11 (6th Cir. 2005).
Nevertheless, we address this portion of the district court’s decision to resolve any
ambiguity over the type of judicial review that 9 U.S.C. § 2 does and does not permit. In doing
so, we conclude that the district court erred in relying on § 2 to permit interlocutory review of the
arbitration proceedings. Section 2 of the FAA provides that a written arbitration agreement
“shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity
for the revocation of any contract.” 9 U.S.C. § 2; see also Mich. Comp. Laws § 600.5001(2)
(repealed 2012) (same). This provision was intended to place arbitration agreements on the
“same footing as other contracts” and thereby overcome judicial hostility to arbitration. H.R.
Rep. No. 68-96, at 1–2 (1924). Accordingly, § 2 preserves “generally applicable contract
defenses” to arbitration agreements, such as fraud or duress. See AT&T Mobility, 131 S. Ct. at
1748. By its limitation to grounds that justify “revocation of any contract,” the text of § 2 simply
provides that an arbitration agreement, like any other contract, is subject to rescission or
invalidation if there is a defect in the underlying contract containing the agreement to arbitrate.
Corey v. NYSE, 691 F.2d 1205, 1212 (6th Cir. 1982).
Nothing in the text or history of the FAA suggests that § 2 was intended to displace
§ 10’s limitation on judicial review of non-final awards. Id. Challenging the fairness of an
arbitration proceeding or the partiality of an arbitrator is different in kind than challenging the
underlying contract that contained the agreement to arbitrate. See Aviall, Inc. v. Ryder Sys., Inc.,
110 F.3d 892, 895 (2d Cir. 1997) (“Although the FAA provides that a court can vacate an award
where there was evident partiality or corruption in the arbitrators, it does not provide for pre-
award removal of an arbitrator. Thus, an agreement to arbitrate before a particular arbitrator may
not be disturbed, unless the agreement is subject to attack under general contract principles as
exist at law or in equity.” (citations, brackets, and internal quotation marks omitted)). As the
Fifth Circuit explained, courts may adjudicate claims regarding the partiality of an arbitrator
prior to issuance of a final award “only when there is a claim . . . that there was ‘fraud in the
inducement’ or some other ‘infirmity in the contracting process’ regarding the parties’
establishing arbitral qualifications” that could serve to invalidate the agreement to arbitrate. Gulf
Nos. 13-2288/2289 Savers Prop. & Cas. Ins. Co., et al. v. Nat’l Union Fire Ins. Page 14
Guar. Life Ins., 304 F.3d at 491 (emphasis added) (quoting Aviall, 110 F.3d at 896). In contrast,
“a court may not entertain [pre-award] disputes over the qualifications of an arbitrator to serve
merely because a party claims that enforcement of the contract by its terms is at issue.” Id.In this case, the district court’s decision falls on the wrong side of the line. See Star Ins.
Co., 2013 WL 5182745, at *4 (“[T]his dispute surrounds a contract provision in the Treaty
establishing the rules under which the arbitration is to proceed . . . . Whether that contract
provision has been breached is at issue.”). Meadowbrook never alleged that the Treaty itself was
unenforceable under traditional contract defenses; nor did Meadowbrook ever avail itself of the
provisions from 9 U.S.C. § 2. Therefore, the district court erred in relying on that provision to
entertain Meadowbrook’s premature challenge to the fairness of the proceedings and the
partiality of the arbitrators. Those issues are properly raised in a motion to vacate under 9 U.S.C.
§ 10 or Michigan Court Rule 3.602(J) following the conclusion of the proceedings and the
issuance of a final arbitration award. See Gulf Guar. Life Ins., 304 F.3d at 490–91.
D. Meadowbrook’s Arguments in Support of Interlocutory Review are Without Merit
Meadowbrook fails to cite a single decision from this circuit or any other in which a court
halted an ongoing arbitration proceeding under circumstances similar to those presented here.
Instead, Meadowbrook points to a string of cases involving judicial review of interlocutory
arbitral awards on the availability of class arbitration and argues that those cases permit the type
of mid-arbitration review at issue here. We are not persuaded.
Meadowbrook’s principal argument is that because the Supreme Court has “interjected
itself” into ongoing arbitrations in other contexts, the district court was likewise permitted (if not
required) to do so here, provided that Article III ripeness requirements were satisfied. See Stolt-
Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 670 n.2 (2010); see also Oxford Health
Plans, 133 S. Ct. at 2068. What Meadowbrook overlooks is that in both cases involved
arbitration agreements that expressly provided for interlocutory judicial review of certain arbitral
decisions. Thus, at the time the parties formed their contracts, they agreed to judicial review
prior to the issuance of a final arbitration award. But that is not the class of cases to which
Meadowbrook’s arbitration belongs.
Nos. 13-2288/2289 Savers Prop. & Cas. Ins. Co., et al. v. Nat’l Union Fire Ins. Page 15
By way of example, in Stolt-Nielsen, the Supreme Court silently accepted that even
during an ongoing arbitration, 9 U.S.C. § 10 represents a proper vehicle to challenge an
interlocutory arbitration award on the availability of class arbitration, assuming ripeness. See
559 U.S. at 670 & n.2; see also Oxford Health Plans, 133 S. Ct. at 2067–68 (entertaining an
appeal from a motion to vacate an arbitrator’s interlocutory award on the availability of class
arbitration). But in Stolt-Nielsen, the parties expressly agreed that their arbitration would be
governed by the Commercial Arbitration Rules of the American Arbitration Association
(“AAA”), which incorporate the AAA’s Supplementary Rules for Class Arbitrations. Stolt-
Nielsen, 559 U.S. at 668; see also Oxford Health Plans, 133 S. Ct. at 2067. The AAA’s
Supplementary Rules in turn provide for two stages of interlocutory judicial review: once after
the arbitrator determines, as a threshold matter, whether the applicable arbitration clause permits
the arbitration to proceed on behalf of or against a class (the “Clause Construction Award”) and
again after the arbitrator determines if the arbitration should indeed proceed as a class arbitration
(the “Class Determination Award”).2
Given the contractual nature of arbitration, it is no surprise that the Supreme Court has
enforced these arbitration agreements, which call for interlocutory judicial review, according to
their terms. See Rent-A-Center, 130 S. Ct. at 2776 (“The FAA reflects the fundamental principle
that arbitration is a matter of contract. . . . The FAA thereby places arbitration agreements on an
equal footing with other contracts and requires courts to enforce them according to their terms.”).
Our own caselaw tracks this policy of permitting interlocutory judicial review where the parties’
arbitration agreement expressly provides for it, assuming other Article III requirements are
satisfied. See Dealer Computer Servs., Inc. v. Dub Herring Ford (DCS-II), 623 F.3d 348 (6th
Cir. 2010) (accepting that the district court could consider a motion to vacate a Class
Determination Award under 9 U.S.C. § 10 if the motion satisfied ripeness concerns); Dealer
2
Supplementary Rule 3 states, “The arbitrator shall stay all proceedings following the issuance of the
Clause Construction Award for a period of at least 30 days to permit any party to move a court of competent
jurisdiction to confirm or to vacate the Clause Construction Award. Am. Arbitration
Ass’n, Supplementary Rules for Class Arbitrations, Rule 3 (2003), available at
http://www.adr.org/aaa/ShowPDF?url=/cs/groups/commercial/documents/document/dgdf/mda0/~edisp/adrstg_0041
29.pdf [hereinafter “Supplementary Rules”]. Rule 5 likewise provides, “The arbitrator shall stay all proceedings
following the issuance of the Class Determination Award for a period of at least 30 days to permit any party to move
a court of competent jurisdiction to confirm or to vacate the Class Determination Award. Supplementary Rules,
Rule 5(d).
Nos. 13-2288/2289 Savers Prop. & Cas. Ins. Co., et al. v. Nat’l Union Fire Ins. Page 16
Computer Servs., Inc. v. Dub Herring Ford (DCS-I), 547 F.3d 558 (6th Cir. 2008) (holding the
same for Clause Construction Awards). Like the parties in Stolt-Nielsen and Oxford Health
Plans, the parties in the DCS line of cases agreed in their underlying arbitration agreement to be
bound by the AAA’s Commercial Arbitration Rules, including the Supplementary Rules. DCS-
II, 623 F.3d at 349–50; DCS-I, 547 F.3d at 559, 562. Thus, the DCS parties likewise agreed to
interlocutory judicial review of certain arbitral decisions. See Supplementary Rules 3, 5(d).
Meadowbrook draws the wrong lesson from these cases and assumes that because its
request for relief was purportedly ripe, the district court was empowered to conduct interlocutory
judicial review of an ongoing arbitration proceeding. On the contrary, ripeness is a necessary
condition to confirming or vacating an interlocutory arbitral ruling, just as ripeness is a necessary
condition for pursuing any case in federal court. Thomas v. Union Carbide Agric. Prods. Co.,
473 U.S. 568, 579–80 (1985); Bigelow v. Mich. Dept. of Natural Res., 970 F.2d 154, 157 (6th
Cir. 1992). But ripeness alone is not a sufficient condition for interlocutory judicial review of
arbitral decisions. Absent express or implied consent in the underlying agreement to arbitrate,
federal courts may not graft a provision for interlocutory judicial review onto the otherwise
straight-forward regime contemplated by the FAA and the Michigan Arbitration Act. Both laws
generally call for judicial review only at the beginning of an arbitration, to decide certain
gateway matters of arbitrability, or at the end of an arbitration, to confirm, vacate, or modify a
final arbitration award. Where the parties agree to arbitrate a matter under either the FAA or the
Michigan Arbitration Act alone, as National Union and Meadowbrook did here, we must enforce
their contract according to its terms. See Rent-A-Center, 130 S. Ct. at 2776.
D. This Award was Not “Final” for Purposes of Island Creek Coal Sales
Finally, we acknowledge that our court does not exalt form over function in determining
whether an arbitration award is “final” for purposes of judicial review. Island Creek Coal Sales
Co. v. City of Gainsville, Fla., 729 F.2d 1046, 1049 (6th Cir. 1984) (holding that an “interim
award” that finally and definitively disposed of a separate, discrete, self-contained issue may be
confirmed “notwithstanding the absence of an award that finally disposes of all the claims that
were submitted to arbitration” (internal quotation marks omitted)), abrogated on other grounds
by Cortez Byrd Chips, Inc. v. Bill Harbert Constr. Co., 529 U.S. 193 (2000).
Nos. 13-2288/2289 Savers Prop. & Cas. Ins. Co., et al. v. Nat’l Union Fire Ins. Page 17
But Meadowbrook does not argue that the Interim Final Award or the panel order
denying Meadowbrook’s motion for reconsideration and motion to stay the proceedings qualifies
as a “final” award under Island Creek Coal Sales. Nor could Meadowbrook. None of the
awards in question “finally and definitively dispose[d] of a separate independent claim.” Id.Accordingly, the awards fail to satisfy the complete arbitration rule, and judicial review was
improper at this stage of the proceedings.
IV. CONCLUSION
For the foregoing reasons, we reverse the judgment of the district court, dissolve the
injunction, and remand the case for dismissal without prejudice. This is not to suggest that
Meadowbrook is without remedy, or that the arbitrators’ decision-making will forever be
protected from judicial review. Meadowbrook is entitled to its day in court to challenge the
fairness of the proceedings and the partiality of the arbitrators—just not until the panel has
concluded its work and issued a final award.