In a recent decision by the United States District Court for the Southern District of New York, the court held that, despite the confidential nature of arbitration proceedings, a party seeking to confirm an arbitration award in court must establish some justifiable reason as to why the award and any documents filed in conjunction with the petition to confirm should remain confidential in order to overcome the strong presumption against sealing judicial records and prevent public access. Global Reinsurance Corp.-U.S. Branch v. Argonaut Ins. Co., No. 07 Civ. 8196 (PKC) and 07 Civ. 8350 (PKC) (S.D.N.Y. Apr. 18, 2008).
Global Reinsurance Corporation—U.S. Branch filed a petition to confirm arbitration awards entered in its favor against its retrocessionaire, Argonaut Insurance Company. In conjunction with its petition, Global filed a motion to seal those awards. The court initially granted Global’s motion to seal, finding that it overcame the presumption in favor of the public’s access to judicial documents because disclosure of certain portions of the arbitration awards potentially impaired Global’s negotiating position with respect to reinsurance contracts entered into with its other retrocessionaires.
Argonaut moved the court to reconsider its ruling and unseal the arbitration awards. Upon reconsideration, the court reversed its prior decision and found that Global could not establish that disclosure of the awards would cause it direct or immediate harm. In particular, the court found unpersuasive Global’s argument that the court’s refusal to seal the awards would potentially impair the exchange of information between parties to a reinsurance agreement due to the fear of ultimate disclosure. The court held that this argument could not overcome the strong presumption of access afforded to documents filed in court.
Secondary to the court’s analysis was also the fact that, by moving to confirm the arbitration awards, Global was asking the court to render a final judgment “under the pain of” the court’s contempt power, akin to a request for an injunction under Rule 65 of the Federal Rules of Civil Procedure. Rule 65 mandates that every injunction “state its terms specifically” and “describe in reasonable detail…the act or acts restrained or required.” The court noted that a final judgment that incorporates another document by reference, such as a sealed arbitration award, would “run afoul” of Rule 65’s requirements. As such, the court found that where a party seeks to confirm an arbitration award, the public usually has a right to know specifics as to what the court has done.
The Global Reinsurance Corp. decision recognized that confidentiality is one of the principle advantages of arbitration and a reason why parties often seek to resolve their disputes in the arbitral forum, as opposed to litigation. Nonetheless, the case makes clear that a party seeking to seal an arbitration award, at least in the federal district courts in New York, will likely have to establish some justifiable reason to overcome the presumption in favor of the public access in order to prevail on a motion to seal.
