Confidentiality or Confirmation: The Complications of Confirming Confidential Arbitration Awards after Eagle Star Ins. Co. V. Arrowood Indemnity Co

Article excerpt

This article originally appeared in the November 2013 Insurance and Reinsurance Committee newsletter.

THE final step for many parties involved in arbitrations is to seek confirmation of a favorable final award in the relevant state or federal court, allowing the award to be treated as a judgment of the court in any future disputes or enforcement actions. This confirmation is typically sought pursuant to the powers granted to the courts under the Federal Arbitration Act ("FAA") or the state law equivalent. But, if the arbitration award was issued in a previously confidential arbitration proceeding, do the parties involved need to recognize the potential that the previously confidential arbitration award might become publically available as a result of the strong presumptions in favor of public access to judicial documents which exist in the federal and state court systems? After the Southern District of New York's recent decision in Eagle Star Ins. Co. Ltd. v. Arrowood Indemnity Co., (1) it seems the answer is clearly "yes."

In Eagle Star, the court was faced with a motion to test the appropriateness of sealing from the public certain documents in the court file, including the final arbitration award, brought by parties that were not part of the original confidential arbitration proceeding. Even though all of the parties involved in the previously confidential arbitration universally supported the attempt to keep the arbitration information filed with the court confidential, the court, nonetheless, ordered all of the arbitration information, including the arbitration award itself, to be made publically available. In doing so, the Eagle Star court confirmed that absent a particularly compelling special interest in maintaining confidentiality, parties that file motions to confirm confidential arbitration awards ought to expect that the public will be allowed access to the arbitration information filed with the motion to confirm, including the award itself.

For attorneys practicing in the arbitration arena, the Eagle Star decision presents a reminder that even when all parties to an arbitration have agreed to hold arbitration information confidential, the public court systems are not obliged to honor these private agreements. Courts have a general obligation to make judicial documents available to the public and have established strong presumptions assuring the public access to such judicial documents. Faced with this reality, an attorney with a favorable, but confidential, arbitration award, must inform his or her client that attempting to seek to confirm the award in federal or state court may result in having the award made public. Whether this is a real concern or not is, of course, dependent on the particular circumstances. But, there can be no doubt after Eagle Star that attorneys need to recognize that any arbitration information that is filed with the court as part of a motion to confirm may no longer be confidential.

I. Setting for the Eagle Star Decision

Eagle Star Insurance Company Limited ("Eagle Star") and Home and Overseas Insurance Company Limited ("Home and Overseas") (collectively "Eagle Star/Home and Overseas") had received a favorable arbitration award against Arrowood Indemnity Company ("Arrowood") in a dispute involving the interpretation of a reinsurance treaty that Eagle Star/Home and Overseas had entered with Arrowood. The dispute that Arrowood had with Eagle Star/Home and Overseas concerned the interpretation and application of a certain section of its reinsurance treaty as it related to particular claims that Arrowood had paid to General Motors, Anco Insulators and Graybar Electric. The award of the arbitration panel confirmed that Arrowood's attempted presentation of these claims under the terms of the reinsurance treaty were not appropriate.

At the beginning of the arbitration between Arrowood and Eagle Star/Home and Overseas, the parties had entered into a confidentiality agreement, agreeing that all arbitration information generated during the arbitration would be held confidential. …