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A federal district court in New Jersey held that an arbitrator must decide whether to consolidate claims brought against separate parties under separate agreements. The Court followed the holdings of other courts which interpreted Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) to apply to consolidation issues.
In Markel International Insurance Co. v. Westchester Fire Insurance Co., No. 05-5522 (WHW), 2006 WL 2310788 (D.N.J. Aug. 10, 2006), Westchester filed a single arbitration claim against Markel and Lloyd’s seeking reimbursement pursuant to two separate reinsurance contracts. Markel and Lloyd’s moved to compel separate arbitrations, while Westchester moved to have its claims heard in a consolidated arbitration. The arbitration agreements at issue were silent on the issue of consolidation.
Applying the holding of the U.S. Supreme Court in Bazzle, the Court held that an arbitrator must decide whether Westchester’s claims should be consolidated or heard separately. Since Bazzle dealt with class arbitration, the Court looked to later decisions applying Bazzle to the issue of consolidation. In construing Bazzle, those decisions have held that the arbitrator must decide the consolidation question because it is a matter of contract interpretation, not a gateway matter of arbitrability. See Blimpie Int’l, Inc. v. Blimpie of the Keys, 371 F.Supp.2d 469 (S.D.N.Y. 2005); Yuen v. Superior Court, 18 Cal.Rptr.3d 127 (Cal.Ct.App. 2004). Citing the need for efficiency, the Court ordered a single arbitration panel to decide whether Westchester’s claims should be consolidated.
Parties can avoid unnecessary litigation over contact terms by easily addressing the consolidation issue and all other such issues in their arbitration agreements. This may be accomplished by incorporating arbitration rules that address the issue, such as the National Arbitration Forum Code of Procedure and its Rule 19.
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