Recently, in Argonaut Ins. Co. v. Century Indemnity Co., No. 05-5355 (E.D. Pa. September 5, 2007), the United States District Court for the Eastern District of Pennsylvania was asked to determine which of four arbitration panels should decide the question of whether individual arbitration proceedings should be consolidated. Argonaut Insurance Company (“Argonaut”) had filed a petition to compel Century Indemnity Company (“Century”) to arbitrate three reinsurance claims in separate arbitration proceedings and to dismiss a fourth consolidated arbitration proceeding initiated by Century that involved those same three claims plus sixteen other disputed claims involving reinsurance agreements between the parties that were part of the same reinsurance program. Century then cross-petitioned to compel Argonaut to participate in a single consolidated arbitration of the three claims and sixteen other pending claims.
The parties agreed that in accordance with the United States Court of Appeals for the Third Circuit’s recent decision in Certain Underwriters at Lloyd’s London v. Westchester Fire Ins. Co., 489 F.3d 580 (3d Cir. 2007), the issue of whether arbitration proceedings should be individual or consolidated was a procedural question to be decided by the arbitration panel itself. The issue before the court was which of the arbitration panels should determine the issue of consolidation.
Both Argonaut and Century advocated that the first panel that was completely formed should decide the threshold question of consolidation, which the court referred to as a “first in time” rule. However, the parties disagreed as to which of the panels was the first in time to be formed. Citing to Certain Underwriters, as well as to recent Supreme Court cases, the court held that whether distinct disputes involving reinsurance claims may be consolidated before a single arbitration panel is not one of the narrow circumstances that present gateway questions of arbitrability for a court’s determination.
The court recognized that the principles of efficiency strongly favored a single arbitration panel’s determination of whether consolidation of the reinsurance claims was appropriate. However, the court felt persuaded by the applicable statute and case law, together with the parties’ contractual language, to reject a “first in time” rule and compelled all four arbitration panels to proceed and resolve the consolidation issues together. Click here to review a copy of the district court’s decision.
