The US Supreme Court recently granted an extension of time to file a cert petition in connection with a Second Circuit case involving fascinating FAA issues. The cert petition was originally due last week.
The Second Circuit’s decision in Bakoss v. Certain Underwriters at Lloyds of London, 707 F.3d 140 (2d Cir. 2013), involves disability insurance purchased by a doctor. The insurance contract provided that each party had the right to choose its own doctor to determine whether the insured was “totally disabled,” and in the event of disagreement between the two doctors, the two doctors would choose a third doctor, whose decision on this narrow issue would be final and binding.
This clause raises two important questions under the FAA. First, is this submission of a limited, narrow issue to a third party considered an arbitration under the meaning of the FAA? As I explained in my book, the FAA’s drafters did not include a definition of arbitration, which seems to be a glaring omission. In fact, there is some evidence that the drafters explicitly rejected trying to define arbitration. One of the main architects behind the FAA, Charles Bernheimer, desired the statute to address more technical, detailed aspects of arbitration, while the principal drafter of the FAA, Julius Cohen, rejected Bernheimer’s suggestion and believed the statute did not have to be so detailed. Also, the drafters of the FAA recognized that the statute was a work-in-progress that would have to be eventually amended in light of further experience. However, Congress has never significantly amended the FAA. Although the drafters may have had in mind a certain view of arbitration when enacting the statute, there has been a proliferation of different methods of dispute resolution, and it is important to clarify what dispute resolution methods are covered by the FAA (e.g., whether non-binding dispute resolution methods are arbitration; whether an integrated, multiple step dispute resolution process can be considered arbitration under the FAA).
Second, the Second Circuit case involves an important question of whether state law or federal law should provide the definition of arbitration under the FAA. The Second Circuit noted a circuit split on this issue of which law controls, and the Second Circuit ultimately chose federal law to define the meaning of arbitration under the FAA.
The Supreme Court extended the doctor’s time to file a cert petition from April 23, 2013, until June 7, 2013. This cert petition will be one to watch.