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Clarendon Nat’l Ins. Co. v. TIG Reinsurance Co.

Issue Discussed: Functus Officio

Submitted by Linsey M. Routledge, Troy Shuman

Date Promulgated: December 3, 1998

 

Clarendon Nat’l Ins. Co. v. TIG Reinsurance Co., (183 F.R.D. 112)

Case Number: 97 CIV. 5911

Court: United States Court for the Southern District of New York

Issue Decided: Does the functus officio doctrine prevent a Panel from correcting an error on the face of the award after a court confirms the portion of the award containing the error?

Short Answer: Not necessarily.

Submitted by: This case involved a 1987 Portfolio Reinsurance Agreement, which transferred 300 reinsurance contracts from Clarendon to TIG. The parties disputed various aspects of the transfer and arbitration was commenced in 1992.  A hearing was held and the panel issued an award addressing three separate issues. The Court confirmed the award as to one of the three issues (by which TIG recovered about $4.8 million from Clarendon, plus pre- and post-judgment interest).  The Court remanded the matter to the Panel for clarification regarding the remaining issues.

On remand before the arbitration panel, Clarendon argued that the confirmed portion of the award contained a computational error. TIG ignored the computation issue and solely briefed the panel on the aspects of the award that were the subject of the court’s remand.  Ultimately, the panel issued an award that corrected the computation error.

In addressing whether or not the functus officio doctrine prevented the panel from correcting its computation error in the confirmed portion of the award, the court explained that the functus officio doctrine is a concept existing at common law. Under this doctrine, once a panel has issued a final award, the panel lacks any further authority to act unless: 1) the panel is correcting an error apparent on the face of the award; 2) the award does not adjudicate the issue submitted; or 3) the award leaves doubt or ambiguity.

The court explained that the policy justification for the rule is grounded in the perception that arbitrators are “ad-hoc” judges unusually susceptible to outside influence. The court further explained that this view was motivated by judicial antagonism toward arbitration and demonstrative of previous judicial hostility toward arbitration.

Ultimately, the Court held that the facts before it called for an expansion of the exceptions to the functus officio doctrine and also called into question the continued vitality of the functus officio doctrine. The Court noted that the computational error was squarely before the panel and its correction of that error did not change the spirit of the award. Clarendon’s motion to confirm the amended award and to modify the judgment was therefore granted, and TIG’s cross-motion to vacate the amended award was denied. However, the Court emphasized that its opinion should not be interpreted to enable panels to alter previous rulings carte blanche.

 

[1] Linsey M. Routledge is Senior Counsel and Troy Shuman is an Associate at Clyde & Co US LLP.