Arbitration Award Ruled a Nonconfidential Judicial Record

• Pages: 26-26
• Date: 01 April 2023
• Author: Ashlee E. Hamilton
• Subject Matter: Civil Law

Arbitration Award

Ruled a Non-

conf‌idential Judicial

Record

By Ashlee E . Hamilton, Litigation

News Contributing Editor

Attorneys, beware: An arbitration award

may not be as secret as you think. In

Pennsylvania National Mutual Casualty

Insurance Group v. New England

Reinsurance Corp., a federal appellate

court armed a ruling that unsealed an

arbitration award based on a common-

law right of access to judicial records.

ABA Litigation Section leaders say the

case serves as a reminder to practitio-

ners that arbitration, contrary to popu-

lar belief, is not necessarily entitled to

conf‌identiality.

An insurance company arbitrated a

contractual dispute with two reinsur-

ance companies over the insurance

company’s entitlement to proceeds

based on claims it made to the rein-

surers. The arbitration panel issued an

award to the insurance company.

The insurance company f‌iled a peti-

tion in the U.S. District Court for the

Middle District of Pennsylvania to con-

f‌irm and reduce the arbitration award

to a judgment, as required by the

Federal Arbitration Act. The insurance

company moved to seal the copy of the

arbitration award attached to its peti-

tion, which the district court granted.

But before the reinsurers responded to

the petition to conf‌irm, the parties set-

tled. The insurance company withdrew

its petition to conf‌irm, and the district

court took no action on the petition.

One of the insurance company’s

reinsurers, which did not participate

in the arbitration, moved to intervene

and to unseal the award. The district

court denied the motion after applying

the “Pansy factors,” which are “used to

determine whether to modify a conf‌i-

dentiality order issued under Federal

Rule of Civil Procedure 26(c).”

The U.S. Court of Appeals for the

Third Circuit reversed and instructed

the district court to apply the common-

law right of access analysis to deter-

mine whether to unseal the award.

Under the analysis, if a document is

a “judicial record,” the document is

presumed to be open to the public.

This presumption can be overcome by

showing a clearly def‌ined and serious

injury resulting from disclosure. Only

then does the court determine if the

harm from the alleged injury outweighs

the presumption of access.

On remand, the district court

granted the reinsurer’s motion to

unseal, and the Third Circuit armed,

holding that the f‌iling of a document

gives rise to a presumptive right of

public access, irrespective of the pur-

pose of the f‌iling or the court’s use

of the document. Although the insur-

ance company asserted that disclosure

might cause other reinsurers to forgo

payment, the court noted missing infor-

mation as to how many relationships

could be impacted, what amount of

money would be at stake, what types of

actions other parties might pursue, and

what the likelihood of success of any

such actions would be. Thus, the dis-

trict court did not abuse its discretion

in asserting that the insurance company

demonstrated no clearly def‌ined injury.

Litigation Section leaders are not

surprised by this result. “The appellate

court gave [the insurance company]

the opportunity to show an overriding

interest in maintaining the conf‌iden-

tiality of the award and [the insur-

ance company] was unable to do so,”

remarks MitchellL. Marinello, Chicago,

IL, cochair of the Section’s Alternative

Dispute Resolution Committee. “It was

somewhat unique that [the insurance

company] applied to f‌ile [the award]

under seal and the court granted it,”

adds Betsy A. Hellmann, New York, NY,

cochair of the Section’s Alternative

Dispute Resolution Committee. “At

least in New York, it is usually a very

high bar to get something f‌iled under

seal in federal court—for example, to

protect patent secrets or super-sensi-

tive pricing information,” she explains.

Section leaders remind practitio-

ners that arbitration proceedings are

not necessarily conf‌idential. “There’s

a common misperception among the

public and many lawyers that arbitra-

tion is conf‌idential,” Hellmann remarks.

“In most of the arbitration institutions’

rules, the obligation of conf‌identiality

applies to the arbitrators, but it does

not bind the parties to conf‌identiality.”

Federal Court Holds

Whistleblower Must

Arbitrate Claims

By Andrew K. Robertson, Litigation

News Contributing Editor

A federal court of appeals held that a

statutory right to a jury trial does not

preclude the enforcement of an arbi-

tration agreement. The appeals court

reasoned that the language of a statute

protects only the “rights” and “rem-

edies” provided by the statute, not the

right to “judicial enforcement.” ABA

Litigation Section leaders agree that

the court of appeals followed the law;

however, the opinion raises serious

public policy concerns.

In Robertson v. Intratek Computers,

Inc., the defendant employer f‌ired its

employee, the plainti. Not long before

his f‌iring, the plainti f‌iled a whistle-

blower complaint with the Oce of the

Inspector General for the Department

of Veterans Aairs (VA). The plain-

ti alleged that the employer bribed

VA ocials to secure “lucrative gov-

ernment contracts” and that a VA

employee accepted the bribes.

During the whistleblower investiga-

tion, the plainti f‌iled suit in the U.S.

District Court for the Western District

of Texas against the employer and

the VA employee, claiming that the

employer f‌ired him in violation of 41

U.S.C. § 4712. Section 4712 allows either

party to request a jury trial and includes

an anti-waiver provision. The plainti

requested a jury trial. However, the

district court ordered the claims to be

resolved through arbitration because

of an arbitration agreement signed

between the employer and the plainti.

On appeal, the U.S. Court of Appeals

for the Fifth Circuit held that sec-

tion 4712 did not allow the plainti to

escape the arbitration agreement that

he signed. However, the arbitration

agreement applied only to the plain-

ti’s claims against the employer and

not his claims against the VA employee

because the VA employee was not a

signatory of the arbitration agreement.

Relying on the U.S. Supreme Court’s

decision in Compu Credit v. Greenwood,

the Fifth Circuit noted that under the

Federal Arbitration Act (FAA), courts

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