Burlington Insurance v. TRYGG-Hansa Insurance Co. AB , 45 F. App'x 245 ( 2002 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
THE BURLINGTON INSURANCE 
COMPANY; FIRST FINANCIAL
INSURANCE COMPANY; BURLINGTON
INSURANCE GROUP, INCORPORATED,
Plaintiffs-Appellees,
 No. 01-2341
v.
TRYGG-HANSA INSURANCE COMPANY
AB,
Defendant-Appellant.

Appeal from the United States District Court
for the Middle District of North Carolina, at Durham.
William L. Osteen, District Judge.
(CA-99-334-1)
Argued: May 8, 2002
Decided: September 4, 2002
Before WILKINSON, Chief Judge, and WILKINS and
LUTTIG, Circuit Judges.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Andrew S. Amer, SIMPSON, THACHER & BART-
LETT, New York, New York, for Appellant. Margaret A. Dale, SOL-
OMON, ZAUDERER, ELLENHORN, FRISCHER & SHARP, New
2 BURLINGTON INSURANCE v. TRYGG-HANSA INSURANCE
York, New York, for Appellees. ON BRIEF: Marci R. Etter, SIMP-
SON, THACHER & BARTLETT, New York, New York; Josiah S.
Murray, III, NEWSOM, GRAHAM, HEDRICK & KENNON, P.A.,
Durham, North Carolina, for Appellant. Louis M. Solomon, Steven H.
Holinstat, SOLOMON, ZAUDERER, ELLENHORN, FRISCHER &
SHARP, New York, New York; Catharine B. Arrowood, Brian D.
Darer, PARKER, POE, ADAMS & BERNSTEIN, L.L.P., Raleigh,
North Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Appellant Trygg-Hansa Insurance Company AB (Trygg-Hansa)
contends that the district court erred in modifying an award issued by
an arbitration panel. Finding no prejudicial error, we affirm.
I.
In 1991, Trygg-Hansa and Appellee Burlington Insurance Group,
Incorporated (BIG) entered into a memorandum of understanding
contemplating various joint ventures. Trygg-Hansa then signed rein-
surance contracts with two BIG subsidiaries, Appellees The Burling-
ton Insurance Company (BICO) and First Financial Insurance
Company (FFICO). The terms of these relationships were later modi-
fied by a document titled "Reconfirmation of Agreement" (the ROA).
Disputes arose under the ROA and, in 1999, Appellees filed suit
against Trygg-Hansa and simultaneously filed a demand for arbitra-
tion. Trygg-Hansa moved to stay the judicial proceedings pending the
completion of arbitration, and the district court granted a stay as to
some issues but ordered discovery to proceed as to others. Trygg-
Hansa challenged the limits of this stay by interlocutory appeal. This
BURLINGTON INSURANCE v. TRYGG-HANSA INSURANCE 3
court upheld Trygg-Hansa’s challenge and ordered the district court
to stay all proceedings pending arbitration. See Burlington Ins. Co. v.
Trygg-Hansa Ins. Co. AB, 9 Fed. Appx. 196, 204 (4th Cir. 2001) (per
curiam) (unpublished decision).
By the time this court announced its decision, the arbitration panel
(the Panel) had already issued its award (the Award). The Panel found
that Appellees made "material misrepresentations" justifying an
award in favor of Trygg-Hansa. J.A. 750-51. The Award also con-
tained the following paragraph, which bore the heading "Limitation
of Panel’s Jurisdiction":
The Panel has been made aware of the fact that Judge
Osteen of the U.S. District Court has specifically ordered
that the Panel has no jurisdiction as to the validity of the
Reconfirmation of Agreement. . . . Therefore, despite the
fact that the Panel finds that there were certain material
misrepresentations by representatives of BIG, [BICO] and
[FFICO] and a consequent breach of the duty of utmost
good faith involving matters related to the negotiation and
implementation of the Reconfirmation of Agreement, the
Panel is constrained from granting any relief requested by
Trygg-Hansa other than that directly related to the [Rein-
surance Contracts].
Id. at 745-46 (emphasis added).
When Trygg-Hansa moved to confirm the Award, the Appellees
filed a cross-motion asking the district court to modify the Award by
striking the emphasized portion of the passage quoted above (the Dis-
puted Finding). The court granted Appellees’ cross-motion. Trygg-
Hansa then took an immediate appeal. See 9 U.S.C.A. § 16(a)(1)(E)
(West 1999).
II.
Section 11 of the Federal Arbitration Act (FAA) authorizes district
courts to modify arbitration awards in limited circumstances. The rel-
evant portion of this provision allows modification when "the arbitra-
4 BURLINGTON INSURANCE v. TRYGG-HANSA INSURANCE
tors have awarded upon a matter not submitted to them, unless it is
a matter not affecting the merits of the decision upon the matter sub-
mitted." 9 U.S.C.A. § 11(b) (West 1999). We hold that the modifica-
tion here was erroneous under § 11(b) but that the error was harmless.
By its plain language, § 11(b) allows a district court to strike an
"award[ ]" that (i) relates to "a matter not submitted" for arbitration
and (ii) "affect[s] the merits of the decision upon the matter submit-
ted." We question whether the Disputed Finding constitutes an award,
rather than a mere finding, but the parties have not raised this issue
and we will not consider it. We also need not consider whether the
Disputed Finding involves "a matter not submitted" for arbitration,
because we conclude that the finding did not "affect[ ] the merits of
the decision upon the matter submitted." The record contains no evi-
dence that the Disputed Finding affected the ultimate determination
of the parties’ rights; on the contrary, the remedies awarded closely
track the findings of fact that appear earlier in the Panel opinion.
Thus, the Disputed Finding does not satisfy the second requirement
of § 11(b), and the decision to strike the finding was therefore errone-
ous.
Although the modification of the Award was erroneous under
§ 11(b) because the Disputed Finding did not affect the Panel’s dispo-
sition, the error was harmless for the same reason. Trygg-Hansa com-
plains that it has been deprived of an opportunity to rely on the
Disputed Finding for collateral estoppel purposes in the judicial phase
of this dispute, but the Disputed Finding could have no collateral
estoppel effect in any event, as the Panel expressly disavowed any
authority to resolve the question implicated in that finding. See First
Union Commercial Corp. v. Nelson, Mullins, Riley & Scarborough
(In re Varat Enters.), 81 F.3d 1310, 1315 (4th Cir. 1996) (stating that
collateral estoppel applies to issues that were "actually and necessar-
ily determined by a court of competent jurisdiction" in prior proceed-
ings (internal quotation marks omitted)). Consequently, Trygg-Hansa
has not been prejudiced by the modification of the Award.
We recognize that our reasoning would apply to virtually all modi-
fications that violate the second prong of § 11(b) and that such viola-
tions are therefore effectively immune from appellate review. We
believe, however, that this result does not nullify the second require-
BURLINGTON INSURANCE v. TRYGG-HANSA INSURANCE 5
ment of § 11(b), but instead advances the congressional purposes
underlying the FAA in general and § 11 in particular. Challenges to
inconsequential portions of arbitral awards wastefully prolong litiga-
tion, and appeals relating to such challenges compound that wasteful-
ness. We believe that Congress included the second requirement in
§ 11(b) precisely to avoid such waste. See Arbitration of Interstate
Commercial Disputes: Joint Hearings Before the Subcomms. of the
Comms. on the Judiciary, 68th Cong. 36 (1924) (brief submitted by
Julius Henry Cohen, general counsel for the New York State Cham-
ber of Commerce) (noting importance of limiting judicial review of
arbitral awards).* Application of the harmless error doctrine prevents
a second generation of waste from spawning a third.
III.
For the foregoing reasons, we affirm the decision of the district
court striking a portion of the Award.
AFFIRMED
*We acknowledge with gratitude the research assistance provided by
the staff of the Fourth Circuit Library