iStock_000010333799_SmallYou are involved in a reinsurance dispute in arbitration. Both sides have named their party-appointed arbitrators and have exchanged umpire candidates. One side rejects the other side’s candidates because the objecting party believes that one or more of the candidates does not qualify as an arbitrator under the terms of the arbitration clause in the reinsurance contract. After a number of attempts to resolve the situation, the non-objecting party insists that its candidates are qualified and demands that the objecting party move forward with the umpire selection process. The objecting party refuses to go forward with what it believes are unqualified candidates and goes to court to seek judicial assistance in completing the panel selection process. Can the court appoint the umpire?

This is the question that the Second Circuit Court of Appeals answered in a summary order without precedential effect. In Odyssey Reins. Co. v. Certain Underwriters at Lloyd’s London, 14-2840-cv, 2015 U.S. App. LEXIS 15052 (2d Cir. Aug. 26, 2015), the district court answered the question in the negative and denied the petition to appoint the umpire. On appeal, the circuit court reversed and remanded the matter back to the district court to appoint the umpire under Section 5 of the Federal Arbitration Act (“FAA”).

While the circuit court’s decision has no precedential effect, the lessons from the case are worth consideration. The court made it clear that Section 5 of the FAA gives the district court the authority to resolve the parties’ deadlock over the appointment of the umpire. The rub here was the qualification issue. The district court denied the request because of case law rejecting a pre-award challenge to the qualifications of arbitrators. The circuit court specifically indicated that it was not reaching the issue of whether a pre-award challenge to qualifications could be made, but focused on the clear impasse between the parties in the selection of the umpire. The court found the refusal to go forward because of the qualifications disagreement was a deadlock that amounted to a lapse in the naming of an arbitrator and fit within the scope of the district court’s authority under Section 5. This delay in appointing the umpire and proceeding with the arbitration was, according to the court, “the precise situation Section 5 was designed to address.”

A couple of interesting footnotes. First, the court stated that the district court did not have to select the umpire only from the objector’s list of candidates. The implication here is that the district court could use the objector’s list, the non-objecting party’s list or its own list of candidates. Parties need to consider the ramifications of this power.

Second, the circuit court conceded that the district court implicitly had to make its appointment considering each individual candidate’s qualifications under the reinsurance contract. The circuit court viewed this authority as incidental to the appointment role under Section 5 and distinct from the question of whether the court could have entertained a challenge to the qualifications of a specific umpire candidate.