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Phila. Elec. Co. v. Nuclear Elec. Ins. Ltd.

Issue Discussed: Res Judicata / Collateral Estoppel

Submitted by Aluyah I. Imoisili, Jamie E. Sutton*

Date Promulgated: March 4, 1994


Phila. Elec. Co. v. Nuclear Elec. Ins. Ltd.
, 845 F. Supp. 1026 (S.D.N.Y. 1994)

Court: United States District Court, Southern District of New York

Issues Decided: Whether an arbitration panel deliberately disregarded clearly applicable law in finding that an unconfirmed prior arbitration award collaterally estopped a claim, and whether arbitrators exceeded their authority in making that decision.

Key Holding

A electrical utility company that owns and operates nuclear plants brought a declaratory judgment action against its insurer concerning the issue of the collateral estoppel effect of a prior arbitration award among the parties.  A prior arbitration had determined that three shutdowns of one of the company’s nuclear plants were not caused by intergranular stress corrosion cracking damage to its recirculation piping system.  In a subsequent arbitration, a different panel applied collateral estoppel and barred claims against the insurer with respect to another shutdown nuclear plant.  The utility company sought to vacate the second panel’s award.

The court upheld that the arbitration award.  The court reasoned that the panel did not exhibit a manifest disregard of the law, because New York case law supported the proposition that an unconfirmed arbitration award can have collateral estoppel effect in subsequent arbitrations.  Moreover, the panel did not exceed their authority applying collateral estoppel because in doing so was consistent with its broad contractual authority under the insurance policy.

Key Takeaways

Under New York law, unconfirmed arbitration awards may have a collateral estoppel effect in subsequent arbitrations.  A panel’s application of collateral estoppel will not constitute “exceeding their authority” or a “manifest disregard of the law.”

 

* Aluyah I. Imoisili is a Partner and Jamie E. Sutton is an Associate at Greenberg Gross LLP, where they specialize in commercial litigation and arbitration.