Arbitration Friendly? Obama Nominates New York Federal Judge with an ADR History (Web)

This morning’s nomination of Second U.S. Circuit Court of Appeals Judge Sonia Sotomayor to the U.S. Supreme Court ended weeks of speculation on the potential replacement for Associate Justice David H. Souter, who will retire at the end of the term next month.

Sotomayor has been a federal judge for the better part of two decades, and has an ADR history.

As an associate and partner in New York’s Pavia & Harcourt, she concentrated on intellectual property law, and international litigation and arbitration of commercial and commodity export trading. During her tenure on the U.S. District Court for New York’s Southern District (1992-1998), and on the Second Circuit appeals court for the past 11 years, Sotomayor has issued several opinions involving arbitration, both directly and indirectly.

Summaries of some of her notable commercial ADR opinions appear below.

Scotusblog.com , which closely monitors the U.S. Supreme Court, reports that Sotomayor, a New York City native, has written more than 150 opinions since joining the Second Circuit in 1998. Two of her decisions, the website reports, have been overturned by the Supreme Court. In the reversals, Scotusblog notes that Sotomayor’s opinion was rejected by the Supreme Court’s more conservative majority, and adopted by its more liberal dissenters--including Souter, who she would replace.

Sotomayor is a Princeton University and Yale Law School graduate. She would be the third woman Supreme Court justice, and the Court’s first Latina.

Her most prominent arbitration matter was raised this morning by President Obama in introducing her as his first Court nominee–though the case is notable for reasons far removed from the ADR arena.

Silverman v. Major League Baseball Player Relations Committee Inc. , 880 F.Supp. 246 (2d Cir.1995), effectively ended the 1995 baseball strike. In the case, the National Labor Relations Board argued that baseball team owners had violated the National Labor Relations Act by unilaterally eliminating salary arbitration for some reserve players, competitive bargaining for certain free agents, and an anti-collusion provision in the players' collective bargaining agreement, all before an impasse had been reached .

Then-District Court Judge Sotomayor held that the NLRB had reasonable cause to believe that baseball owners committed unfair labor practices both by eliminating the free agency system and the salary arbitration provisions of the expired collective bargaining agreement.

She ruled that “interest arbitration clauses”–that is, provisions pertaining to disputes over terms of new or renewal contracts usually involving mechanisms for resolving future disputes--can remain effective after the expiration of collective bargaining agreements where the clauses are so intertwined with and inseparable from the proposed contract’s obligatory terms and conditions that they take on the characteristics of the mandatory subjects themselves.

After her March 1995 order forcing the owners to rescind their unilateral moves and bargain in good faith, the players voted to return to camp and begin the season, after abandoning the 1994 season the previous August.

Here are three more Sotomayor arbitration opinions, in chronological order:

North River Insurance Co. v. Allstate Insurance Co. , 866 F. Supp. 123 (1994): This case, decided by Sotomayor also when she was a U.S. District Court judge, is a precursor to an issue that loomed large in the U.S. Supreme Court nearly a decade later, in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003). In that case, the Court, in a plurality opinion, sent arbitrability issues to the tribunal, not the court.

The plaintiffs under reinsurance contracts wanted collateral estoppel to bar defendant Allstate from seeking further arbitration of liability issues in a dispute over the nature and extent of Allstate’s reinsurance obligations to the plaintiffs.

Allstate moved to stay the litigation pending arbitration. Sotomayor granted Allstate’s motion for arbitration, holding that the issue of whether the court or an arbitration panel should determine the preclusive effect of the earlier arbitration in a current reinsurance dispute between the parties was an arbitrability issue that was to be determined by federal, not state law.

She also held that under a broad arbitration clause, the preclusive effect of an earlier arbitration on the pending arbitrations was for the arbitrators to decide, not the court.

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In the Matter of Arbitration between Carina Int’l Shipping Corp. and Adam Maritime Corp., 961 F.Supp. 559 (1997): As a federal district court judge, Sotomayor strongly backed a deferential judicial position toward an arbitration award under the Federal Arbitration Act. In the case, a ship owner successfully petitioned the federal district court, via Sotomayor, to confirm an arbitration award, despite a charter company’s challenges to the award.

In confirming the award, Sotomayor found that the arbitration panel didn’t exceed its powers by accepting the vessel owner’s claim amendment after the hearings closed. She also held that the charter company waived its right to claim misconduct by the panel in not reopening the hearings for discovery on the new claim because the charter company had not made a request to reopen.

She wrote that the charter company didn’t prove misconduct under the FAA based on the contention that the panel chairman had financial problems that caused him to expedite his fee payment, and affected his decision not to reopen the hearings.

“Even accepting that the chairman of the panel acted in unseemly haste to be paid his fee,” wrote Sotomayor, “[the charter company’s] statements that financial need motivated the arbitrator's award is at best conclusory.” Sotomayor also found that the charter company didn’t prove “evident partiality”--an FAA standard for overturning arbitration awards--because a panel member was a former associate of the owner’s law firm.

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In Astra Oil Co. Inc. v. Rover Navigation Ltd., 344 F.3d 276 (2d Cir. 2003), Second Circuit Judge Sotomayor wrote a unanimous 2-0 panel opinion (a third panel member died while the opinion was being prepared) vacating a district court decision that declined to order arbitration with a nonsignatory.

Astra Oil petitioned the court to compel Rover Navigation, a tanker shipping company, to arbitrate claims for monetary damages relating to Rover Navigation's untimely shipment of petroleum products. Even though Astra was not a signatory to a contract that contained the arbitration clause–the contract dealt with the charter of a Rover Navigation vessel--Sotomayor compelled Rover Navigation to arbitrate because Astra was an affiliate of the signatory charter party, and Astra's claims were inextricably intertwined with the charter party under its contract with Rover Navigation.

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More tomorrow.

–By Russ Bleemer, Editor, Alternatives, and Andrew Gange, CPR Intern