Star Ins. Co. v. Nat'l Union Fire Ins. , 656 F. App'x 240 ( 2016 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0486n.06
Nos. 15-1403/1490
UNITED STATES COURT OF APPEALS FILED
FOR THE SIXTH CIRCUIT
Aug 18, 2016
DEBORAH S. HUNT, Clerk
STAR INSURANCE COMPANY et al., )
)
Plaintiffs-Appellants/ )
Cross-Appellees, ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
v. ) COURT FOR THE EASTERN
) DISTRICT OF MICHIGAN
NATIONAL UNION FIRE INSURANCE )
COMPANY OF PITTSBURGH, PA, )
) OPINION
Defendant-Appellee/ )
Cross-Appellant. )
)
Before: GUY, BOGGS, and MOORE, Circuit Judges.
KAREN NELSON MOORE, Circuit Judge. In 1999, Meadowbrook Insurance Group
(“Meadowbrook”)1 and National Union Fire Insurance Company of Pittsburgh, PA (“National
Union”) entered into a reinsurance agreement (the “Treaty”). The Treaty contained an
arbitration clause. In 2007, National Union accused Meadowbrook of overbilling and started to
withhold payment on claims. In 2011, Meadowbrook demanded that the parties arbitrate their
dispute. Pursuant to the Treaty, Meadowbrook and National Union entered into arbitration
before a three-member panel (the “Arbitration Panel”).
Meadowbrook alleges that that arbitration, which culminated in a Final Award ordering
Meadowbrook to pay National Union millions of dollars in damages, was fraught with
1
The four insurance companies that are appellants/cross-appellees in this case—Star Insurance Company,
Savers Property and Casualty Insurance Company, Ameritrust Insurance Corporation, and Williamsburg National
Insurance Company—refer to themselves, collectively, as Meadowbrook. Meadowbrook Br. at 4.
Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
misconduct. Meadowbrook draws particular attention to the fact that National Union’s party
arbitrator, Jonathan Rosen, communicated ex parte with National Union’s attorney, Neal Moglin,
while the arbitration was ongoing. National Union counters that Meadowbrook’s allegations are
meritless—the last-ditch attempts of a losing party trying to escape liability.
The district court sided with National Union. Although the district court initially granted
an injunction halting the arbitration after Meadowbrook brought the Arbitration Panel’s alleged
misconduct to light, we dissolved that injunction on jurisdictional grounds, and remanded with
instructions to dismiss without prejudice. After the Arbitration Panel issued a final award and
Meadowbrook filed suit again in the district court, the district court denied Meadowbrook’s
request to conduct discovery, and entered an order confirming in part the Arbitration Panel’s
Interim Final Award and Final Award.
Meadowbrook appeals, arguing that the district court erred when it confirmed in part the
Arbitration Panel’s two awards. Meadowbrook additionally argues that the district court
erroneously rejected its discovery request. National Union cross-appeals, taking issue with the
district court’s damages and prejudgment-interest calculations.
For the reasons set forth below, we REVERSE the district court’s judgment confirming
in part the Interim Final Award and Final Award and VACATE both awards.
I. FACTS AND PROCEDURE
This case’s history is complex, and the parties present dramatically different accounts of
that history in their briefs. Still, some things are clear. Meadowbrook and National Union
entered into the Treaty in 1999. Their arbitration commenced in 2011. Pursuant to two
scheduling orders that the Arbitration Panel issued, Meadowbrook and National Union agreed to
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terminate ex parte communications with members of the Arbitration Panel after filing their first
pre-arbitration-hearing briefs. National Union filed its pre-hearing brief on June 14, 2013.
The Arbitration Panel issued an Interim Final Award in National Union’s favor on July
23, 2013. That day, arbitrator Rosen communicated ex parte with National Union’s attorney,
Moglin. Rosen and Moglin spoke ex parte at least two more times: once on July 25, and again
on August 7.
On September 12, 2013, the district court entered an order enjoining further arbitration
proceedings. We dissolved the injunction on jurisdictional grounds and ordered dismissal of the
case without prejudice until the Arbitration Panel issued a final award. The Arbitration Panel
issued its Final Award—also in National Union’s favor—on July 25, 2014.
Meadowbrook filed a new suit in federal court on July 25, 2014. On October 2, 2014, the
district court denied Meadowbrook’s request to conduct discovery into the Arbitration Panel’s
alleged misconduct. Then, on March 31, 2015, the district court confirmed in part the
Arbitration Panel’s Interim Final Award and Final Award. National Union moved to amend that
confirmation order under Federal Rule of Civil Procedure 59(e), and the district court denied that
motion on January 27, 2016.
A. Facts
1. In 1999, National Union and Meadowbrook enter into a reinsurance
agreement that contains a binding arbitration clause.
In March 1999, Meadowbrook and National Union entered into the Treaty. R. 31-17
(Treaty) (Page ID #1934).2 Pursuant to the Treaty, National Union agreed to reinsure
Meadowbrook’s workers’-compensation insurance programs. Id. Arts. 1–2. (Page ID #1934).
2
Unless otherwise noted, all record citations are to the district-court docket in Star Insurance Company et
al. v. National Union Fire Insurance Company of Pittsburgh, PA, No. 2:14-cv-12915 (E.D. Mich.).
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Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
Put simply, the Treaty obligated Meadowbrook to cover the first $100,000 of any loss under
those programs, at which point Meadowbrook could recover any additional loss—up to a
$150,000 cap—from National Union. Id. Art. 2 (Page ID #1934).
The Treaty contained an arbitration clause: Article 21. Id. Art. 21 (Page ID #1942–43).
Article 21 provided, in relevant part:
. . . [A]ny dispute arising out of this Agreement . . . shall be submitted to the
decision of a board of arbitration composed of two arbitrators and an umpire.
Any such arbitration shall take place in Southfield, Michigan, unless otherwise
agreed, and shall be subject to the laws of the State of Michigan.
The members of the board of arbitration shall be active or retired disinterested
officials of the insurance or reinsurance companies . . . not under the control of
either party to this Agreement. Each party shall appoint its arbitrator and the two
arbitrators shall choose an umpire before instituting the hearing. . . . If the two
arbitrators fail to agree upon the appointment of an umpire within 60 days after
their nominations, each of them shall name three, of whom the other shall decline
two and the decision shall be made by drawing lots.
...
The board shall make its decision with regard to the custom and usage of the
insurance and reinsurance business. . . .
Id. (Page ID #1942–43).
2. In 2007, National Union accuses Meadowbrook of overbilling and refuses
to pay Meadowbrook’s claims, and in 2011 Meadowbrook demands that
the parties arbitrate their dispute.
National Union claims that, sometime in 2007, it discovered that Meadowbrook had been
overbilling. R. 12 (Br. In Support of Def.’s Mot. to Confirm Arbitration Awards at 5–6) (Page
ID #452–53). In response, National Union refused to pay any of Meadowbrook’s claims under
the Treaty. R. 47 (3/31/15 Op. and Order at 1–2) (Page ID #4297).
The dispute lasted for years. In February 2011, Meadowbrook demanded that the parties
enter into arbitration. R. 36-1 (Demand for Arbitration at 1) (Page ID #2297). Pursuant to
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Article 21 of the Treaty, Meadowbrook and National Union selected party arbitrators. R. 31-17
(Treaty Art. 21) (Page ID #1942). Meadowbrook picked Rex Schlaybaugh, a mergers-and-
acquisitions attorney. Meadowbrook Br. at 9; Nat’l Union Br. at 11. National Union selected
Rosen, who has worked in the reinsurance industry—as a lawyer, arbitrator, and corporate
executive—for decades. R. 13-4 (4/19/11 Letter from National Union to Meadowbrook at 1–3)
(Page ID #661–63).
Rosen and Schlaybaugh could not settle on an umpire. R. 12 (No. 2:13-cv-13807)
(9/12/13 Order at 3) (Page ID #413). After drawing lots, they elected Thomas Greene, who has
worked in the insurance and reinsurance industries since 1956. R. 13-5 (Greene Resume) (Page
ID #683); R. 12 (No. 2:13-cv-13807) (9/12/13 Order at 3) (Page ID #413).
3. After consulting Meadowbrook and National Union, the Arbitration
Panel issues two scheduling orders, both of which provide that ex parte
contacts should terminate after the parties file their opening briefs.
The Arbitration Panel—Greene, Schlaybaugh, and Rosen—met with counsel for
Meadowbrook and National Union at an organizational meeting on August 1, 2012. R. 9-2
(Organizational Meeting Tr.) (Page ID #344). During the meeting, the Arbitration Panel and
counsel for the parties discussed instituting a ban on ex parte communications. Moglin
suggested that ex parte communications “cease with the submission of the first brief.” Id. at 7
(Page ID #350). After that point, Moglin said, “the curtain would fall.” Id. at 8 (Page ID #351).
Meadbowbrook’s counsel, Douglas Young, responded that Moglin’s proposed cutoff date might
be too early; Young was concerned that the Arbitration Panel might have questions for the
parties after they submitted their initial pre-hearing briefs. Id. Rosen assured him that that
would not occur: “That wouldn’t happen. That never happens. . . . I’d never call you.” Id.
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Ultimately, the Arbitration Panel “ruled that ex parte communication[s would] cease with
the filing of the initial brief.” Id. at 8 (Page ID #351).
On August 21, 2012, the Arbitration Panel issued a Scheduling Order, which provided:
“Ex parte communications with any member of the [Arbitration] Panel shall cease upon the
filing of the parties’ initial pre-hearing briefs.” R. 31-18 (Scheduling Order at 5) (Page ID
#1959); see R. 13-18 (Meadowbrook Emergency Mot. to Stay at 2) (Page ID #868). On March
11, 2013, the Arbitration Panel issued a First Amended Scheduling Order that imposed an
identical ban on ex parte communications. R. 31-19 (First Amend. Scheduling Order at 4) (Page
ID #1965); see R. 13-18 (Meadowbrook Emergency Mot. to Stay at 2) (Page ID #868). Neither
the Scheduling Order nor the First Amended Scheduling Order stated when—or whether—ex
parte communications could resume.
4. In its pre-hearing briefs, National Union demands $1,584,113.96 in
damages plus interest.
On July 27, 2012—over a year before filing its pre-hearing brief—National Union filed a
Preliminary Statement that outlined, broadly, its claims in the arbitration. R. 41-14 (Nat’l Union
Preliminary Statement) (Page ID #3848). In a section titled “Relief Requested,” National Union
did not identify a specific damages figure, but instead wrote:
National Union seeks an Order from this Panel:
...
Requiring Meadowbrook to return to National Union all amounts improperly
collected from National Union under the Treaty from inception through the date
of this submission;
Requiring Meadowbrook to pay interest on all such improperly collected amounts
at a rate sufficient to compensate National Union for the lost use of those funds;
and
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Granting such other and further relief as this Panel deems appropriate.
Id. at 3 (Page ID #3850). National Union concluded its Preliminary Statement as follows:
“National Union reserves the right to amend its request for relief as appropriate if, in the course
of this arbitration, additional facts or issues come to light.” Id. at 4 (Page ID #3851).
In its June 14, 2013 Pre-Hearing Submission (i.e., its first pre-hearing brief), National
Union narrowed considerably the relief it was seeking. R. 41-9 (National Union Pre-Hr’g
Submission at 51–52) (Page ID #3410–11). There, National Union alleged that Meadowbrook
had overbilled National Union by $1,584,113.96. Id. at 52 (Page ID #3411). National Union
sought damages in that amount, plus at least $1,950,680.48 in interest. Id.
In its June 28, 2013 Pre-Hearing Reply Submission, National Union appeared to clarify
that Meadowbrook had overbilled for losses that it incurred through six of its workers’-
compensation programs. R. 41-10 (National Union Pre-Hr’g Reply Submission at 30) (Page ID
#3443). By Meadowbrook’s reading, in that document National Union took the position that
$1,584,113.96 (plus interest) set the outer limit of Meadowbrook’s damages liability—i.e., that
National Union was seeking damages for Meadowbrook’s overbilling in relation to six programs,
and only those six programs. See, e.g., Meadowbrook Br. at 9–11. National Union, in contrast,
argues that it never confined its damages request to those six workers’-compensation programs.
See, e.g., Nat’l Union Br. at 12–13.
5. After the Arbitration Panel issues an Interim Final Award in National
Union’s favor on July 23, 2013, Rosen and Moglin commence their ex
parte communications.
The arbitration hearing began in mid-July 2013. See R. 13-12 (7/16/13 Arbitration Hr’g
Tr.) (Page ID #750). In its closing argument, National Union urged the Arbitration Panel to
adopt one of two Proposed Orders. R. 13-13 (7/18/13 Nat’l Union Closing Slides at 62–63)
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(Page ID #816–17). “Version One” tracked the relief that National Union requested in its June
14, 2013 Pre-Hearing Submission: National Union demanded $1,584,113.96 in damages and
$1,950,680.48 in interest. Id. at 62 (Page ID #816). Version One also contained the following
provision: “[T]he Panel declares that National Union is not liable for any program in which
Meadowbrook has produced in this Arbitration insufficient contemporaneous documentation to
allow National Union to verify the percentage of the retained risk reported by Meadowbrook.”
Id. Finally, National Union requested to be reimbursed “for its attorneys’ fees and all costs
associated with th[e] Arbitration.” Id. National Union’s other Proposed Order—“Version
Two”—sought considerably broader relief: “full rescission” of the Treaty. Id. at 63 (Page ID
#817).
On July 23, 2013, the Arbitration Panel issued an Interim Final Award. R. 13-1 (7/23/13
Interim Final Award) (Page ID #499). The Arbitration Panel found for National Union, and
effectively adopted Version One of its Proposed Order. Id. In Paragraph Three of the Interim
Final Award, the Arbitration Panel ordered Meadowbrook to pay National Union $1,584,113.96,
plus $1,950,680.48 in interest; those figures, the Arbitration Panel wrote, were “capable of
immediate computation.” Id. at 1–2 (Page ID #499–500). However, in Paragraph Four of the
Interim Final Award, the Arbitration Panel added a caveat that held the potential to expand
dramatically Meadowbrook’s liability:
Notwithstanding the ruling . . . above, the [Arbitration] Panel declares that
National Union is not liable for any program in which Meadowbrook has
produced in this Arbitration insufficient documentation to allow National Union
to verify the percentage of the retained risk reported by Meadowbrook.
Meadowbrook is ordered to prepare within fourteen days a list of all programs
and provide all supporting documentation with respect to the program and
retained risk . . . . Any dispute over such retained risk and supporting
documentation will be adjudicated by the [Arbitration] Panel.
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Id. at 2 (Page ID #500).
The day the Arbitration Panel issued the Interim Final Award—July 23, 2013—Moglin
and Rosen communicated ex parte. R. 13-18 (Meadowbrook Emergency Mot. to Stay, Ex. B—
Moglin Timesheets (“Moglin Timesheets”) at 1) (Page ID #880). The two discussed the Interim
Final Award. Id. Moglin and Rosen spoke again, for a half-hour, on July 25. Id. at 2 (Page ID
#881).
6. After Meadowbrook files a supplemental brief pursuant to Paragraph
Four of the Interim Final Award, Rosen and Moglin again communicate
ex parte, and days later Rosen and Greene—but not Schlaybaugh—issue
an order striking that supplemental brief.
Over the course of one week in August 2013, Greene and Rosen issued two orders
without first hearing from Schlaybaugh, who was on vacation in northern Canada. Emails were
sent and missed; wires were crossed. In between, arbitrator Rosen and attorney Moglin
communicated ex parte.
August 6, 2013: Pursuant to the Arbitration Panel’s directive in Paragraph Four of the
Interim Final Award, Meadowbrook filed a supplemental brief on August 6, 2013. R. 44-1
(8/6/13 Meadowbrook Supp. Br.) (Page ID #4178). In this supplemental brief, Meadowbrook
purported to “address[] two categories of claim recoveries Meadowbrook believe[d] the
[Arbitration] Panel awarded Meadowbrook.” R. 44-1 (11/6/14 Meadowbrook’s Supp. Br. at 2)
(Page ID #4179).
August 7, 2013: One day later—August 7—Moglin and Rosen resumed their ex parte
communications. R. 13-18 (Moglin Timesheets at 3) (Page ID #882). That day, Moglin and
Rosen conducted an “extended telephone conference.” Id.
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August 9, 2013: On August 9, National Union filed an emergency motion to strike
Meadowbrook’s August 6 supplemental brief and to compel Meadowbrook to comply with the
Arbitration Panel’s Interim Final Award. R. 9-3 (8/9/13 Nat’l Union Mot. to Strike at 1) (Page
ID #363). National Union explained that, in its view, “time is very much of the essence here
since National Union wants to adhere to the schedule set by the [Arbitration] Panel (which
requires a substantive response from National Union by August 20th).” Id. Accordingly,
National Union requested that the Arbitration Panel:
. . . [I]ssue a ruling . . . [o]rdering that by no later than August 13, 2013,
Meadowbrook shall comply with Paragraph 4 of the Interim Final Award by
providing to the [Arbitration] Panel and National Union a detailed list of all
programs (and not merely those with outstanding balances) and all supporting
documentation with respect to such programs produced by Meadowbrook in
discovery in this arbitration proceeding that refer or relate to the percentage of
risk alleged to have been retained by Meadowbrook.
Id. at 8 (Page ID #370).
About three hours after National Union submitted its August 9 motion to strike, Rosen
emailed Schlaybaugh and Greene. R. 13-2 (Final Award, App., Ex. J—8/9/13 Panel Emails)
(Page ID #557). Rosen requested that the Arbitration Panel “speak as soon as possible about the
substance of” the motion to strike Meadowbrook’s brief. Id. Rosen added that he “was
appalled” by Meadowbrook’s apparent attempt to introduce new documents and “seek relief that
was clearly not part of or contemplated by” the Interim Final Award. Id.
Schlaybaugh, however, did not receive Rosen’s email—at least not right away. The same
day that National Union filed its motion to strike, August 9, Schlaybaugh left for a sailing trip to
Canada. R. 31-12 (10/6/14 Schlaybaugh Dec. ¶ 5) (Page ID #1875). Before departing,
Schlaybaugh instructed his assistant “to respond to any time-sensitive emails to inform the writer
that” Schlaybaugh would be out of contact during his vacation. Id. ¶ 6 (Page ID #1875).
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Greene responded to Rosen’s email on August 9, writing that he would be available for a
conference call “tomorrow, Sunday and Monday.” R. 13-2 (Final Award, App., Ex. J—8/9/13
Panel Emails) (Page ID #557).
August 10, 2013: On August 10, Greene sent a group text message to Schlaybaugh and
Rosen, asking Schlaybaugh if he would be available for a conference call on August 10, 11, or
12. R. 13-12 (Final Award, App., Ex. K—8/10/13 Text Message from Greene to Rosen and
Schlaybaugh) (Page ID #560). Meadowbrook asserts in its brief that the phone number to which
Greene sent that text message “is neither Schlaybaugh’s cell phone number . . . nor his work
number.” Meadowbrook Br. at 18 n.6.
August 12, 2013: On August 12, Schlaybaugh’s assistant emailed Rosen and Greene. R.
13-2 (Final Award, App., Ex. J—8/9/13 Panel Emails) (Page ID #557). She wrote: “Rex asked
me to let you know that he is in remote parts of Northern Canada with at best intermittent cell or
data availability through [August 15] so will be unable to connect with you by phone till later in
the week.” Id. Later that day, Schlaybaugh contacted his assistant, who told Schlaybaugh that
she had informed Rosen and Greene that Schlaybaugh would be unavailable “from August 9
through mid-week of August 12.” R. 31-12 (10/6/14 Schlaybaugh Dec. ¶ 7) (Page ID #1875).
About one hour after Schlaybaugh’s assistant emailed Rosen and Greene to tell them that
Schlaybaugh was out of the country, Rosen emailed Greene a draft order granting National
Union’s August 9 motion to strike. R. 13-2 (Final Award, App., Ex. L—8/12/13 Email from
Rosen to Greene) (Page ID #562). Rosen did not copy Schlaybaugh on that email. Id. Rosen’s
proposed order also modified Paragraph Four of the Interim Final Award to clarify that
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Meadowbrook was obligated to produce documents regarding all of the programs that the Treaty
covered:
. . . Meadowbrook is ordered to comply with Paragraph 4 of the Interim Final
Award by providing the [Arbitration] Panel and National Union by no later than
August 14, 2013 with a list of all programs (and not merely those with
outstanding balances) and all supporting documentation with respect to such
programs produced by Meadowbrook in discovery in this arbitration proceeding
that refer or relate to the percentage of risk alleged to have been retained by
Meadowbrook.
Id. Rosen also asked Greene to send an email to Schlaybaugh stating that unless Schlaybaugh
responded “by close of business” on August 12, Rosen and Greene would issue Rosen’s
proposed order. Id.
Greene emailed Schlaybaugh on August 12. R. 13-2 (Final Award, App., Ex. M—
8/12/13 Email from Greene to Schlaybaugh) (Page ID #564). Schlaybaugh did not immediately
respond.
That same day—August 12—Greene issued an order granting National Union’s August 9
motion to strike and ordering Meadowbrook “to comply with Paragraph 4 of the Interim Final
Award . . . by no later than August 14, 2013.” R. 13-2 (Final Award, App., Ex. Q—8/12/13
Order) (Page ID #582). Greene signed that order: “For the Panel.” Id.
August 13, 2013: On August 13, Meadowbrook filed an Emergency Motion for
Clarification and Additional Time to Respond. R. 13-2 (Final Award, App., Ex. R—8/13/13
Meadowbrook Mot.) (Page ID #584). Rosen emailed Greene and Schlaybaugh with a proposed
order denying Meadowbrook’s motion for clarification, but granting Meadowbrook time to
respond to the August 12 order. R. 13-2 (Final Award, App., Ex. S—8/13/13 Email from Rosen
to Panel) (Page ID #589). Greene—again, without hearing any input from Schlaybaugh—issued
an order consistent with Rosen’s email; the order directed Meadowbrook to comply with the
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Arbitration Panel’s August 12 order by August 19, 2013. R. 13-2 (Final Award, App., Ex. T—
8/13/13 Order) (Page ID #592). Like the August 12 order, Greene signed the August 13 order:
“For the Panel.” Id.
B. Procedural History
1. Meadowbrook files suit in Michigan state court, and unsuccessfully
moves the Arbitration Panel to reconsider its August 12 order striking
Meadowbrook’s supplemental brief.
On August 13, 2013, Meadowbrook filed a complaint against National Union in
Michigan’s Oakland County Circuit Court. R. 1-2 (No. 2:13-cv-13807) (Meadowbrook State-
Court Compl.) (Page ID #7). Meadowbrook argued, inter alia, that that court should vacate
entirely the Arbitration Panel’s Interim Final Award. Id. at 3–4 (Page ID #9–10). In support,
Meadowbrook wrote that it had recently learned that while the arbitration was pending, Rosen
and Moglin sat on a panel at a presentation at Moglin’s law office. Id. at 5–6 (Page ID #11–12).
Thus, Meadowbrook argued, the Arbitration Panel’s Interim Final Award was “the product of
evident partiality,” and thus void under Michigan Court Rule 3.602(J). Id. at 3, 6 (Page ID #9,
12).
About a week later—on August 19, 2013—Meadowbrook filed with the Arbitration
Panel a “Motion for Reconsideration of Panel’s 8-12-2013 Decision.” R. 13-2 (Final Award,
App. Ex. V—8/19/13 Mot. for Reconsideration) (Page ID #598). That same day, Meadowbrook
also circulated a response to the Arbitration Panel’s August 13 order. R. 41-23 (8/19/13
Meadowbrook Response) (Page ID #3970).
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2. After discovering that Rosen and Moglin had communicated ex parte,
Meadowbrook files an unsuccessful emergency motion to stay further
arbitration proceedings, but that motion draws a lengthy dissent from
Schlaybaugh.
Because the Interim Final Award provided that National Union could recover costs and
attorney’s fees from Meadowbrook, National Union submitted a bill of costs on August 12,
2013. R. 13-1 (7/23/13 Interim Final Award ¶ 5) (Page ID #500); Meadowbrook Br. at 21.
Moglin attached timesheets to that bill of costs—and those timesheets contained several entries
confirming that Moglin and Rosen had communicated ex parte after National Union filed its June
14 Pre-Hearing Submission. R. 13-18 (Moglin Timesheets at 1–3) (Page ID #880–82).
On August 21, 2013, Meadowbrook filed with the Arbitration Panel an Emergency
Motion to Stay All Proceedings. R. 13-18 (Meadowbrook Emergency Mot. to Stay) (Page ID
#867). Meadowbrook argued that, under Michigan law, the “impermissible ex parte
communications” between Rosen and Moglin “taint[ed] th[e] Panel beyond remediation, and
w[ould] most likely necessitate vacating the Interim Final Award.” Id. at 2 (Page ID #868).
Meadowbrook asked the Arbitration Panel to stay further proceedings so Meadowbrook could
investigate the full extent of Rosen’s ex parte contacts. Id. at 6 (Page ID #872).
On August 29, 2013, Greene issued an order that (1) denied Meadowbrook’s August 21
motion to stay; (2) denied Meadowbrook’s August 19 reconsideration motion, and (3) granted
National Union’s August 12 bill of costs. R. 13-2 (Final Award, App., Ex. W—8/29/13 Order at
1–2) (Page ID #609–10). In that order, Greene rejected Meadowbrook’s claim that Rosen’s ex
parte contacts with Moglin constituted grounds to stay the arbitration: “A review of the
Organizational Meeting transcript and Scheduling Orders entered in connection with this
proceeding readily establish that the prohibition on ex parte contact came to an end upon the
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[Arbitration] Panel ruling on the merits of this dispute” (i.e., when the Arbitration Panel issued
the Interim Final Award). Id. at 1–2 (Page ID #609–10).
The next day—August 30—Schlaybaugh filed a five-page dissent from the August 29
order. R. 31-6 (8/30/13 Schlaybaugh Dissent) (Page ID #1814). Schlaybaugh began by writing
that “the Majority”—i.e., Greene and Rosen—“ha[d] erred in their conclusion that no
impermissible communications have occurred.” Id. at 1 (Page ID #1814). Schlaybaugh added:
“The parties negotiated not one but two Scheduling Orders both of which contained expressed
prohibitions on ex parte communications after Prehearing Briefs were filed. Nothing could be
clearer about what the parties’ intentions were at the time.” Id. at 3 (Page ID #1816). As for the
August 29 order’s conclusion that the parties’ ex parte-communications ban ended after the
Arbitration Panel issued its Interim Final Award, Schlaybaugh wrote that such an interpretation
was inconsistent with both scheduling orders. Id.
On September 3, 2013, Greene circulated an email addressing Schlaybaugh’s August 30
dissent. R. 13-2 (Final Award, App., Ex. X—9/3/13 Greene Email) (Page ID #612). Regarding
Rosen’s ex parte contacts with Moglin, Greene wrote that both the Scheduling Order and the
First Amended Scheduling Order “only contemplated an ex parte preclusion until the conclusion
of the [arbitration] hearing.” Id. at 2 (Page ID #613).
3. National Union files a brief seeking $25,012,671.51 in damages and
removes Meadowbrook’s state-court suit to the Eastern District of
Michigan, where Meadowbrook obtains an injunction staying the
arbitration.
National Union responded to Meadowbrook’s August 19 submission on September 4,
2013. R. 41-21 (9/4/13 Nat’l Union Br.) (Page ID #3923). National Union argued that after
reviewing Meadowbrook’s August 19 brief, it had concluded that there were sixteen workers’-
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compensation programs for which Meadowbrook had overbilled National Union. Id. at 8 (Page
ID #3930). In total, National Union sought to recover $25,012,671.51 in damages as a result of
this overbilling. Id.
Two days later—on September 6, 2013—National Union removed Meadowbrook’s state-
court suit to the Eastern District of Michigan. R. 1 (No. 2:13-cv-13807) (Def.’s Pet. for
Removal) (Page ID #1). On September 10, 2013, Meadowbrook filed a motion for a temporary
restraining order and preliminary injunction in the district court. R. 4 (No. 2:13-cv-13807) (Mot.
for TRO and Prelim. Inj.) (Page ID #61). In a brief accompanying that motion, Meadowbrook
recounted what it had learned in the preceding weeks—namely, that Rosen and Moglin had
communicated ex parte and that Greene and Rosen had issued two orders without Schlaybaugh’s
input. R. 4 (No. 2:13-cv-13807) (Br. in Support of Mot. for TRO and Prelim. Inj. at 3–10) (Page
ID #68–75). Meadowbrook requested that the district court enjoin Greene and Rosen from
engaging in any further proceedings. Id. at 24 (Page ID #89).
The district court issued an order granting Meadowbrook’s motion for injunctive relief on
September 12, 2013. R. 12 (No. 2:13-cv-13807) (9/12/13 Order) (Page ID #411). The district
court first concluded that it had jurisdiction to grant the injunction, because the essence of
Meadowbrook’s claim concerned an alleged breach of a contract provision: Article 21 of the
Treaty. Id. at 7–9 (Page ID #417–19). Turning to the merits of Meadowbrook’s motion, the
district court reasoned that Meadowbrook had raised legitimate concerns about Rosen’s
partiality, and that Rosen’s ex parte contacts with Moglin appeared to have violated the express
terms of the First Amended Scheduling Order. Id. at 11–13 (Page ID #421–23).
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In an opinion dated April 9, 2014, a panel of this court dissolved the injunction, holding
that the district court lacked jurisdiction to enjoin the arbitration because the Arbitration Panel
had yet to render a final award. Savers Prop. & Cas. Ins. Co. v. Nat’l Union Fire Ins. Co., 748
F.3d 708, 722 (6th Cir. 2014).
4. After Meadowbrook unsuccessfully moves to disqualify Rosen, Greene
and Rosen—over Schlaybaugh’s dissent—issue a Final Award in
National Union’s favor.
On May 20, 2014—about a month after we dissolved the district court’s injunction—
Meadowbrook filed with the Arbitration Panel a Motion to Disqualify Arbitrator Rosen and to
Disband the Panel. R. 13-19 (5/20/14 Meadowbrook Mot. to Disqualify) (Page ID #895). The
Arbitration Panel denied that motion over Schlaybaugh’s dissent. R. 13-2 (Final Award, App.,
Ex. Y—6/19/14 Order) (Page ID #616).
The Arbitration Panel issued its Final Award on July 25, 2014. R. 13-2 (Final Award)
(Page ID #503). The Final Award ordered Meadowbrook to pay National Union: (1) an
additional $8,993,576.72, plus interest; (2) an as-yet-undetermined amount for Meadowbrook’s
overbilling in relation to three of its workers’-compensation programs; and (3) National Union’s
attorneys’ fees and costs. Id. at 2 (Page ID #504).
Rosen and Greene attached a lengthy Appendix, containing twenty-six exhibits, to the
Final Award. R. 13-2 (Final Award, App.) (Page ID #506). In the Appendix, they wrote that
they were both “profoundly disturbed by Meadowbrook’s attack on the reputations and integrity
of Umpire Greene and Arbitrator Rosen,” id. ¶ 1 (Page ID #506), and provided a detailed
timeline of how the arbitration had unfolded. Id. ¶¶ 2–29 (Page ID #506–12). The Appendix
also attempted to justify Rosen’s August 7, 2013 ex parte contact with Moglin:
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Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
Furthermore, inasmuch as Meadowbrook’s August 6, 2013, Paragraph 4
submission flew in the face of National Union’s counsel’s July 25, 2013 and
August 5, 2013 emails . . . National Union was logically compelled to react,
which given the circumstances, underpinned by Meadowbrook’s flagrant
discovery abuse, logically (and permissibly) required conferring with Arbitrator
Rosen as a pre-cursor to bringing the Motion. That is entirely consistent with the
motion protocol as respects ex parte communications that was ordered by the
[Arbitration] Panel at the Organizational Meeting as well as Arbitrator Rosen’s
function and role as National Union’s party appointed arbitrator, thus prompting
Umpire Greene in his September 3, 2013, communication to the parties to note
that the ex parte communication complained of “was not inappropriate and,
indeed, is what I would have expected in the circumstances” . . . . As such, the
[Arbitration] Panel majority remains steadfast in its rejection of Meadowbrook’s
allegations of improper behavior on Arbitrator Rosen’s part.
Id. ¶ 28 (Page ID #512).
In dissent, Schlaybaugh argued that the Final Award had the effect of expanding
Meadowbrook’s liability from roughly $1.5 million (the amount National Union demanded in its
Pre-Hearing Submission) to over $25 million. R. 31-26 (7/25/14 Schlaybaugh Dissent at 1)
(Page ID #2045).
5. Meadowbrook moves to vacate the Interim Final Award and Final
Award, and seeks to conduct discovery.
On July 25, 2014—the same day the Arbitration Panel issued the Final Award—
Meadowbrook filed a new complaint in the United States District Court for the Eastern District
of Michigan. R. 1 (7/25/14 Compl.) (Page ID #1). Meadowbrook urged the district court to
vacate the Interim Final Award and the Final Award under Michigan Court Rule 3.602(J). Id. at
4 (Page ID #4). Meadowbrook asserted several grounds for vacating the Arbitration Panel’s two
awards, including (1) Rosen’s ex parte contacts with Moglin and (2) Greene’s and Rosen’s
disenfranchisement of Schlaybaugh. Id. at 4–22 (Page ID #4–22).
On August 20, 2014, National Union responded by filing both an Answer and a Motion
to Confirm Arbitration Awards. R. 8 (Def.’s Answer) (Page ID #179); R. 12 (Mot. to Confirm)
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(Page ID #438). In its confirmation motion, National Union requested that the district court
order Meadowbrook to pay National Union $17,903,667.52—the balance that National Union
alleged was outstanding under the Interim Final Award and Final Award. Id. at 25 (Page ID
#472).
The following day, Meadowbrook filed a motion seeking leave to conduct expedited
discovery. R. 16 (Mot. for Leave to Conduct Immediate, Expedited Disc.) (Page ID #1307). In
a brief accompanying that motion, Meadowbrook requested that the district court hold in
abeyance National Union’s motion to confirm the Arbitration Panel’s two awards. R. 16 (Br. in
Support of Pltfs.’ Mot. for Leave to Conduct Immediate, Expedited Disc. at 8) (Page ID #1319).
6. The district court denies Meadowbrook’s discovery motion and enters an
order confirming in part the Interim Final Award and Final Award.
On October 2, 2014, the district court issued an order denying Meadowbrook’s request to
conduct discovery (the “October 2, 2014 Order”). R. 27 (10/2/14 Order at 1) (Page ID #1651).
Regarding Rosen’s ex parte communications with Moglin, the district court concluded that
Meadowbrook had “fail[ed] to allege specific instances of misconduct.” Id. at 5 (Page ID
#1655). Further, the district court read the Appendix to the Final Award as confirming that
Rosen spoke with Moglin just once, and that Meadowbrook had not demonstrated that that lone
communication was improper. Id. at 5–6 (Page ID #1655–56). As for Meadowbrook’s claim
that Greene and Rosen disenfranchised Schlaybaugh, the district court concluded that
Meadowbrook had “fail[ed] to develop this argument.” Id. at 6 (Page ID #1656).
On March 31, 2015, the district court issued an order granting in part National Union’s
motion to confirm the arbitration awards (the “March 31, 2015 Order”). R. 47 (3/31/15 Op. and
Order at 19) (Page ID #4314). That order reiterated the conclusion that the district court reached
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Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
in its October 2, 2014 Order: Meadowbrook had failed to allege improprieties sufficient to
vacate the Arbitration Panel’s Interim Final Award or Final Award. Id. at 3–12 (Page ID #4298–
307).
The district court did identify one error with the Arbitration Panel’s Interim Final Award
and Final Award: the Arbitration Panel had miscalculated the amount of prejudgment interest
that Meadowbrook owed National Union. Id. at 13–14, 16–17 (Page ID #4308–09, 4311–12).
The district court ordered the parties to return to arbitration in order to resolve any dispute over
this issue. Id. at 14, 17 (Page ID #4309, 4312).
Meadowbrook filed its notice of appeal on April 3, 2015. R. 49 (Notice of Appeal) (Page
ID #4317).
7. National Union unsuccessfully moves to amend the March 31, 2015
judgment under Rule 59(e)
On April 13, 2015, National Union filed a Rule 59(e) motion to amend the district court’s
March 31, 2015 judgment. R. 54 (4/13/15 Mot. to Amend) (Page ID #4421). In its
accompanying brief, National Union argued that it was in fact entitled to recover more than the
$17,903,667.52 it demanded in its motion to confirm. R. 54 (4/13/15 Br. in Support of Mot. to
Amend at 2–3) (Page ID #4429–30). The actual amount of National Union’s damages, the Rule
59(e) motion claimed, was $19,559,658.94. Id. at 2 (Page ID #4429). Meadowbrook
subsequently filed a notice of cross-appeal from the March 31, 2015 judgment—which it styled
“Defendant’s Notice of Appeal”—on April 24, 2015. R. 57 (Def.’s Notice of Appeal) (Page ID
#4499).
On January 27, 2016, the district court denied National Union’s motion to amend in a
written order (the “January 27, 2016 Order”). R. 69 (1/27/16 Order at 2) (Page ID #4652).
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Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
National Union filed an Amended Notice of Cross Appeal—in which National Union wrote that
it was appealing the district court’s January 27, 2016 Order and its March 31, 2015 judgment—
on February 4, 2016. R. 70 (Def.’s Amend. Notice of Cross-Appeal at 2) (Page ID #4662).
II. ANALYSIS
The procedural history of this case is complex, but at bottom the parties are challenging
three district-court orders:
1. The October 2, 2014 Order denying Meadowbrook’s discovery request.
Meadowbrook challenges this order.
2. The March 31, 2015 Order confirming in part the Arbitration Panel’s Interim
Final Award and Final Award. Both Meadowbrook and National Union
challenge this order.
3. The January 27, 2016 Order denying National Union’s Rule 59(e) motion to
amend the March 31, 2015 judgment. National Union challenges this order.
Our analysis begins and ends with the second of these orders. The district court erred
when it refused to vacate the Arbitration Panel’s Interim Final Award and Final Award, because
Rosen’s ex parte contacts with Moglin voided both awards. For that reason, we must reverse the
district court’s March 31, 2015 judgment, and vacate both of the Arbitration Panel’s awards.
Meadowbrook identifies seven flaws with the March 31, 2015 Order. One is clearly
meritorious: Meadowbrook argues that the district court should have vacated the Interim Final
Award and Final Award because Rosen and Moglin communicated ex parte. We agree.
The Treaty provides—and the parties agree—that Michigan law governs this appeal. R.
31-17 (Treaty Art. 21) (Page ID #1942). We review de novo the district court’s March 31, 2015
Order confirming in part the Interim Final Award and Final Award. See, e.g., City of Ann Arbor
v. Am. Fed’n of State, Cty., & Muni. Employees (AFSCME) Local 369, 771 N.W.2d 843, 854
(Mich. Ct. App. 2009). The scope of our review, however, “is narrowly circumscribed.” Id. In
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Michigan, “[j]udicial review of a binding arbitrator’s award is strictly limited by statute and
court rule.” Krist v. Krist, 631 N.W.2d 53, 57 (Mich. Ct. App. 2001).
Michigan Court Rule 3.602(J) lists four conditions that void an arbitration award:
On motion of a party, the court shall vacate an award if:
(a) the award was procured by corruption, fraud, or other undue means;
(b) there was evident partiality by an arbitrator appointed as a neutral, corruption
of an arbitrator, or misconduct prejudicing a party’s rights;
(c) the arbitrator exceeded his or her powers; or
(d) the arbitrator refused to postpone the hearing on a showing of sufficient
cause, refused to hear evidence material to the controversy, or otherwise
conducted the hearing to prejudice substantially a party’s rights.
Mich. Ct. R. 3.602(J)(2) (emphasis added).
National Union and Meadowbrook appear to agree that our authority to vacate the district
court’s judgment confirming in part the Interim Final Award and Final Award derives from Rule
3.602(J). Meadowbrook Br. at 32; National Union Br. at 33, 66; see also R. 1 (7/25/14 Compl.
at 4) (Page ID #4) (asking district court to vacate both awards pursuant to Rule 3.602(J)(2)(b)–
(d)). Neither party, however, identifies which of Rule 3.602(J)’s enumerated grounds covers
Meadowbrook’s strongest argument: that Rosen’s ex parte contacts with Moglin require us to
vacate the Interim Final Award and Final Award.
We think that Rule 3.602(J)(2)(b)—under which a Michigan court will vacate an award if
an arbitrator engaged in “misconduct prejudicing a party’s rights”—most clearly encompasses
such ex parte communications. See Kerezsi v. Kerezsi, No. 202876, 1999 WL 33446485, at *1
(Mich. Ct. App. Apr. 27, 1999) (identifying ex parte contact between party and arbitrator
“regarding the subject matter of an arbitration award” as a form of “misconduct” that voids the
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Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
award). Regardless of how we classify the ex parte contacts between Rosen and Moglin,
however, Michigan case law makes plain that we must vacate the Arbitration Panel’s two
awards, because these ex parte contacts clearly violated the parties’ scheduling orders.
To explain how we reach this conclusion, we start by examining Michigan law
interpreting the effect of ex parte communications during an arbitration. We then explain why
the ex parte communications between Rosen and Moglin warrant reversal here.
1. In Michigan, ex parte contacts between a party and an arbitrator are
grounds to vacate an arbitration award if those communications violate
the parties’ agreement to arbitrate.
Meadowbrook argues for a bright-line rule. Relying on the Michigan Supreme Court’s
opinion in Hewitt v. Village of Reed City, 82 N.W. 616 (Mich. 1900), Meadowbrook argues that
any ex parte contact between an arbitrator and a party while the arbitration is pending is grounds
for vacating an arbitration award. In the century-plus since Hewitt issued, Michigan courts have
retreated from its apparently absolute ban on ex parte communications. However, those courts
have settled on a middle-ground position that supports Meadowbrook: ex parte communications
between a party and an arbitrator void an arbitration award if those communications violate the
parties’ arbitration agreement.
We begin with Hewitt. Plaintiff Kate Hewitt injured herself while walking on a Village
of Reed City sidewalk. Id. at 616. The parties entered into arbitration, and the arbitrator found
for the village. Id. After the parties testified—but before the arbitrator rendered a decision—the
village’s president filed with the arbitrator “a memorandum of cases or authorities.” Id. The
Michigan Supreme Court concluded that that ex parte communication warranted vacating the
arbitration award, without first inquiring into whether the communication had prejudiced Hewitt:
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Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
The rule is very strict in excluding any communication to an arbitrator, made ex
parte after the case is submitted; and when such communication, which may
affect the result, is made, it is not usual to enter into an inquiry as to whether the
arbitrator was in fact influenced by it or not.
Id.
Although Hewitt is an old case, the Michigan Supreme Court recently issued an order
explicitly adopting Hewitt’s reasoning. See Gates v. USA Jet Airlines, Inc., 756 N.W.2d 83(Mem.) (Mich. 2008) (applying Hewitt and vacating arbitration award because party filed brief
with arbitrators after parties put on proof, which violated “express rules” arbitrators had laid out
before arbitration commenced), reversing Gates v. USA Jet Airlines, Inc., No. 272860, 2008 WL
314937 (Mich. Ct. App. Feb. 5, 2008).
After Gates, Michigan courts have refined Hewitt’s rule and taken the view that although
ex parte communications between a party and an arbitrator may not categorically be grounds for
vacating an arbitration award, such communications do void an award if they violate the parties’
arbitration agreement. See Cummings v. Cummings, No. 318724, 2015 WL 2412470, at *5
(Mich. Ct. App. May 19, 2015) (“There is no rule that ex parte contact between an arbitrator and
the parties requires that the award be vacated. . . . Rather, cases where the arbitration award was
vacated due to ex parte communication involved a violation of the arbitration agreement
prohibiting such conduct.” (internal citation omitted)); Cipriano v. Cipriano, 808 N.W.2d 230,
236 (Mich. Ct. App. 2010) (“[T]he definitive question is not whether there is a bright-line rule
but, rather, whether the ex parte contact violated the parties’ arbitration agreement.”).
2. Rosen’s ex parte communications with Moglin violated the plain terms of
the parties’ two scheduling orders.
In light of this Michigan arbitration law, the question before us is narrow: did Rosen’s ex
parte contacts with Moglin violate the parties’ agreement to arbitrate? We answer that question
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“yes.” At the August 1, 2012 organizational meeting, Meadowbrook and National Union agreed
to terminate ex parte communications with the Arbitration Panel after filing pre-hearing briefs.
The Arbitration Panel subsequently issued two scheduling orders that memorialized this
deadline. Rosen’s ex parte contacts with Moglin—which commenced one month after National
Union filed its first pre-hearing brief—violated that deadline. The district court erred on the
facts and the law when it held otherwise. As a result, we reverse the district court’s March 31,
2015 judgment and vacate the Arbitration Panel’s two awards.
Both the August 21, 2012 Scheduling Order and the March 11, 2013 First Amended
Scheduling Order forbade the parties from communicating ex parte with the Arbitration Panel
after filing their “initial pre-hearing briefs.” National Union filed its initial pre-hearing brief on
June 14, 2013. Rosen and Moglin communicated ex parte three times after June 14: once on
July 23, 2013 (the day the Arbitration Panel issued its Interim Final Award); once on July 25,
2013; and again on August 7, 2013 (the day after Meadowbrook filed its supplemental brief
pursuant to Paragraph Four of the Interim Final Award). Those ex parte communications clearly
violated both scheduling orders.
National Union counters this conclusion by highlighting a gap in the scheduling orders:
the orders stipulated when ex parte communications would cease, but never said when they
could resume. Nat’l Union Br. at 48. In support of this interpretation, National Union relies on
the justification that the Panel Majority—i.e., Greene and Rosen—provided in their Appendix to
the Final Award: that in the reinsurance-arbitration field, “it is generally recognized and
understood that once a panel issues a dispositive ruling on the merits of a matter following a
hearing, absent a panel order to the contrary, the preclusion on ex parte communications ceases
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Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
and the parties are free to communicate with their appointed arbitrators.” R. 13-2 (Final Award,
App. ¶ 27) (Page ID #512).3 Thus, National Union asserts that because “the Interim Final Award
disposed of all issues of liability between the parties,” it was “a ruling on the merits,” and neither
Rosen nor Moglin violated the scheduling orders when they communicated on (or after) the date
that the Interim Final Award issued. Nat’l Union Br. at 49; see also Duckert v. Duckert, No.
239952, 2003 WL 22221387, at *1–*2 (Mich. Ct. App. Sept. 25, 2003) (rejecting defendants’
claim that arbitrator’s ex parte communications warranted vacating arbitration award because,
unlike in Hewitt, there was no indication that arbitrator had ex parte contact with party before
issuing final opinion).
There are at least three reasons why National Union’s argument fails. First, National
Union’s reading of both scheduling orders is inconsistent with their plain language. Neither
order was ambiguous: the Scheduling Order and First Amended Scheduling Order forbade the
parties from communicating with the Arbitration Panel after submitting their first pre-hearing
briefs. National Union violated that unequivocal ban on ex parte communications three times.
Moreover, the parties and the Arbitration Panel—sophisticated businesspeople all, with extensive
experience conducting reinsurance arbitrations—settled on this ban at National Union’s urging.
It was Moglin who insisted that Meadowbrook and National Union terminate all contact with the
Arbitration Panel after the first briefs were filed. At bottom, the plain language of the
Scheduling Order and First Amended Scheduling Order forecloses National Union’s argument
3
National Union’s position on this issue conflicts with AIDA Reinsurance and Insurance Arbitration
Society (“ARIAS”) Rule 15.5, which provides that parties to a reinsurance arbitration should not communicate ex
parte with the panel “until the [p]anel issues its final award.” ARIAS, U.S. Rules for the Resolution of U.S.
Insurance and Reinsurance Disputes, R. 15.5, https://www.arias-us.org/pdfs/arias-rules-final.pdf (emphasis added).
National Union claims that Rule 15.5 was not in effect when the parties entered into arbitration in 2011, Nat’l Union
Br. at 52–53, a fact Meadowbrook does not dispute. Meadowbrook Reply Br. at 13 n.9. Nonetheless, we agree with
Meadowbrook that ARIAS Rule 15.5 belies National Union’s claim that Rosen’s ex parte contacts with Moglin
comported with common practices in the reinsurance-arbitration field. Meadowbrook Br. at 37 n.13.
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Nos. 15-1403/1490, Star Ins. Co. v. Nat’l Union Fire Ins.
that ex parte communications could resume after the Arbitration Panel issued its Interim Final
Award.
Second, National Union’s claim that the Interim Final Award was a “final” merits ruling
is at odds with the motivating intellectual impulse behind its briefing before us. National Union
has consistently maintained that the Interim Final Award was just that. By National Union’s
logic, the Interim Final Award contemplated an inchoate form of relief, and thus Meadowbrook
cannot claim unfair surprise over the fact that the Final Award appeared to increase,
dramatically, its damages liability. As Schlaybaugh wrote in his August 30, 2013 dissent, the
Interim Final Award left “critical issues” unresolved—issues, Schlaybaugh wrote, that
“amplifie[d] why the initial Award was designated as ‘Interim.’” R. 31-6 (8/30/13 Schlaybaugh
Dissent at 3) (Page ID #1816). Indeed, this is the reason why this court dissolved the district
court’s injunction. We reasoned that the district court lacked jurisdiction to enjoin the arbitration
in September 2013 because, at that point, the Arbitration Panel had issued only an Interim Final
Award. Savers Prop. & Cas. Ins. Co., 748 F.3d at 722. In reaching that conclusion, we
recognized that in the absence of a final award, “the arbitration was not complete.” Id. at 719.
Finally, although Greene and Rosen are certainly in a position to opine on standard
operating procedures in reinsurance arbitrations, so is Schlaybaugh. And in his August 30, 3013
dissent, Schlaybaugh contended that Rosen unequivocally violated the scheduling orders when
he communicated ex parte with Moglin. Id. at 1–4 (Page ID #1814–17). For all three reasons,
National Union’s reading of the scheduling orders’ bans on ex parte contact lacks merit.
The district court’s reasoning in its March 31, 2015 Order was just as problematic as
National Union’s justifications for these ex parte contacts. There, the district court cited no
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Michigan cases assessing the effect of ex parte communications on an arbitration award. R. 47
(3/31/15 Op. and Order at 6) (Page ID #4301). Instead, the court cross-referenced its October 2,
2014 Order denying Meadowbrook’s request to conduct discovery. Id. However, in this earlier
order, the district court also did not cite any Michigan case law when it held that Meadowbrook
could not conduct discovery into Rosen’s ex parte communications with Moglin. R. 27 (10/2/14
Order at 4–6) (Page ID #1654–56).
Instead, in its October 2, 2014 Order, the district court denied Meadowbrook relief based
on its conclusion that the Appendix to the Final Award exonerated Rosen. By the district court’s
reading, in the Appendix the Arbitration Panel majority—again, Greene and Rosen—stated that
Rosen had had one innocuous ex parte communication with Moglin. Id. at 5–6 (Page ID #1655–
56). Rosen, however, communicated ex parte with Moglin at least three times: once on July 23,
2013; again on July 25, 2013; and one final time on August 7, 2013. As Michigan law makes
plain, the prejudicial effect vel non of those communications is irrelevant. Rosen and Moglin
violated the scheduling orders, and as a result the district court should have vacated the
Arbitration Panel’s two awards. In reaching an opposite result, the district court erred on the law
and erred on the facts.
We hold that because Moglin’s ex parte communications with Rosen violated the plain
terms of the parties’ scheduling orders, Meadowbrook need not demonstrate prejudice for us to
vacate the Arbitration Panel’s two awards. Nonetheless, because National Union contends that
“the ex parte communications had no direct, prejudicial impact as to substantive decisions at
issue” in this case, National Union Br. at 51, we think it important to review briefly how the
arbitration unfolded after the Arbitration Panel issued its Interim Final Award on July 23, 2013.
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That day, Rosen and Moglin spoke ex parte in violation of both scheduling orders. They
discussed the Interim Final Award. Two days later, they spoke again. And two weeks after that
ex parte contact, when Meadowbrook filed its August 6 supplemental brief, Moglin and Rosen
resumed their ex parte communications. Days later, Greene issued an order—taken wholesale
from an email Rosen sent him—striking that supplemental brief, without first hearing from
Meadowbrook’s party arbitrator, Schlaybaugh. When Greene and Rosen issued a Final Award
over Schlaybaugh’s dissent about one year later, Meadowbrook found itself liable for millions
more than it had anticipated when the arbitration commenced. Put simply, this was an arbitration
in which “the coincidences all br[oke] one way.” Thomas Kinkade Co. v. White, 711 F.3d 719,
720 (6th Cir. 2013).
In sum, Rosen’s ex parte communications with Moglin violated the scheduling orders’
explicit bans on ex parte communications. For that reason, we reverse the district court’s March
31, 2015 judgment and vacate the Arbitration Panel’s two awards.
III. CONCLUSION
For the reasons set forth above, we REVERSE the district court’s March 31, 2015
judgment confirming in part the Arbitration Panel’s Interim Final Award and Final Award and
VACATE both awards.
29