Court Refuses to Allow Cumulative Evidence in Motion to Disqualify Counsel in Arbitration Dispute

NORTHWESTERN NAT’L INS. CO. V. INSCO, LTD. (No. 11 Civ. 1124 (SAS), November 9, 2011)

On October 3, 2011 the U.S. District Court for the Southern District of New York (“the court”) issued an Opinion and Order granting Northwestern National Insurance Company’s (“NNIC”) motion to disqualify the law firm of Freeborn and Peters, LLP (“Freeborn”) from continued representation of Insco, Ltd. (“Insco”) in an ongoing arbitration dispute between the parties.  In response, Insco sought leave of the court to file additional evidence in support of its motion for reconsideration.  On November 9, 2011 the court determined that Insco’s proposed additional evidence was merely cumulative of evidence already before the court and denied Insco’s motion for leave.

The dispute between NNIC and Insco arises out of a reinsur­ance agreement between the parties whereby NNIC agreed to reinsure a portion of the risks insured by Insco.  Pursuant to that agreement, Insco sought reimbursement from NNIC after it reimbursed an insured for thousands of claims relating to asbestos exposure.  NNIC denied reimbursement and the parties submit­ted the matter to arbitration as required by their reinsurance agreement.  Pursuant to the arbitration provision of that agreement, each party selected an arbitrator and a third impartial umpire was selected by a lottery. 

On February 11, 2011, with the arbitration ongoing, Insco’s arbitrator shared 182 pages of private email communications between the three arbitration panel members with Freeborn.  Insco’s arbitrator allegedly believed the emails demonstrated bias on the part of the umpire.  Freeborn reviewed the emails and thereafter sent a letter to the members of the arbitration panel and NNIC demanding the immediate resignation of the arbitrators, but only Insco’s arbitrator resigned.  NNIC complained to the arbitration panel about the emails in Insco’s possession and the umpire agreed that obtaining such communications was a “massive violation.” 

On June 20, 2011 the arbitration panel issued an Order in which it described the release of the intra-panel communications as “highly inappropriate,” but nevertheless determined to “continue to decide the case on the facts and evidence presented.”  In response, NNIC moved the court to disqualify Freeborn.  The court determined that Freeborn’s actions did indeed warrant disqualification and granted NNIC’s motion.  Thereafter, Insco moved for leave to file the documents shared by its arbitrator as additional evidence in support of its motion for reconsideration of the court’s decision to disqualify Freeborn.

The court denied Insco’s motion for leave on November 9, 2011.  According to the court, “the major grounds justifying reconsideration are an intervening change in controlling law, the availability of new evidence, or the need to correct a clear error on prevent manifest injustice.”  Courts will only consider new evidence where the movant demonstrates that the evidence existed at the time of the court’s decision, that movant was justifiably ignorant of its existence, that the evidence is in admissible form and of such importance that it probably would have changed the outcome, and that the evidence is not merely cumulative or impeaching.

In this case the court determined that the new evidence presented by Insco, if admitted, would be merely cumulative of evidence already before the court and would not change the outcome of the case.  The court held that because the new evidence would not provide any information that was not previously before the court it cannot be filed in connection with Insco’s motion for reconsideration.

For a copy of the decision click here 

Matthew Cabral and Jonathan Kuller

 

 

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