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An arbitrator, and not the court, should decide consolidation issues, and the court will not appoint an umpire for parties when the parties’ agreement provides a method for doing so, a federal court in California held.
In Clearwater Insurance Co. v. Granite State Insurance Co., Nos. C 06-4472 SI, C 06-4500 SI,C 06-4501 SI, C 06-4502 SI, 2006 WL 2827872 (N.D. Cal. Oct. 2, 2006), Clearwater petitioned the Court to compel arbitration of disputes with Granite and three other insurance companies.
The parties’ contracts contained identical arbitration clauses, which provided that a panel of three arbitrators would resolve any disputes. Each party would select an arbitrator, and those two arbitrators would in turn select the third arbitrator (the umpire). However, the two party-selected arbitrators could not agree on an umpire.
Meanwhile, a fifth and allegedly similar case was filed in a Massachusetts state court, which Granite moved to consolidate and requested this Court to stay proceedings in all cases pending the resolution of consolidation motion in Massachusetts.
The Court denied Granite’s motion to stay proceedings, noting that “the issue of consolidation is one for arbitration panels, and not the courts, to decide.” Therefore, the Court found no reason to not proceed with its obligation under the Federal Arbitration Act (FAA) to compel arbitration.
Additionally, the Court refused to appoint a third arbitrator for the parties, citing the FAA, 9 U.S.C. § 5, which states that “[i]f in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed.”
Therefore, while the Court did direct the parties to follow a strict timeline for selecting the umpire, it refused to appoint an umpire for them unless the parties still failed to agree after following the court-ordered procedures.
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