District Court Concluded that Confidentiality Agreement Executed as Part Of Arbitration is Not Subject to Arbitration

TRUSTMARK INSURANCE CO. V. JOHN HANCOCK LIFE INSURANCE CO.  (CIVIL ACTION NO. 09-3959. JANUARY 21, 2010

The parties to a reinsurance contract disagreed regarding whether certain businesses were part of the reinsurance contracts. As a result, they agreed to arbitration. As part of the arbitration, the parties entered into a Confidentiality Agreement under which the documents and the ultimate findings were subject to confidentiality. The arbitrators also signed the Confidentiality Agreement.

After that arbitration, another dispute arose and the parties again turned to arbitration. One of the parties selected an arbitrator from the first arbitration. The arbitrator was subject to the Confidentiality Agreement. While the second party was concerned with the arbitrator's ability to honor the agreement and the arbitrator himself expressed concern that it might be difficult to segregate the information, he was ultimately appointed.

At arbitration, the party prevailing in the first arbitration sought to "authorize use of all materials from the First Arbitration," and prohibit the matters resolved by the first panel from being relitigated. The arbitrator-in-common did not recuse himself from those deliberations, and the second panel determined that the Confidentiality Agreement extended to the second arbitration. The party aggrieved by the first arbitration (and breach of the Confidentiality Agreement) sought to enjoin the second arbitration on the basis that the Confidentiality Agreement was not subject to arbitration, and that the arbitrator-in-common breached the Confidentiality Agreement by ruling on extending the Confidentiality Agreement.

The court held that because the Confidentiality Agreement contained no arbitration clause, the parties could not be forced to arbitrate issues that they did not agree to arbitrate and granted the injunction.

The arbitration panel’s authority originates from the terms and conditions of the contract in question. If the arbitration provision does not include the necessary language to incorporate agreements which arise out of the dispute, courts may not extend the scope of the arbitration agreement to related agreements. Here, the parties could have included a provision to ensure the intent of the parties.

 For a copy of this decision, click here: http://tinyurl.com/rr-February-2010-Edition