Unpublished Disposition, 930 F.2d 31 (9th Cir. 1991)

MEMORANDUM^* 

This appeal stems from a decision rendered by an Arbitration Panel requiring Everett Cash Mutual Insurance Company ("Everett Cash") and Westmoreland Casualty Insurance Company ("Westmoreland") to pay outstanding balances to, and settle future accounts with, Zale Indemnity Company ("Zale"). When Zale petitioned the District Court for an Order confirming the award, Everett Cash and Westmoreland (the Reinsurers) cross-petitioned to vacate the award. The district court confirmed the award but did not enter the Order proposed by Zale which included the dollar amount purportedly owed. The Reinsurers appealed to this court and Zale cross-appealed. We affirm the district court's confirmation of the award but remand in order that the amounts due Zale may be definitely determined by arbitration.

Although the district court's decision is reviewed de novo, Sunshine Mining Co. v. United Steelworkers of America, 823 F.2d 1289, 1293 (9th Cir. 1987), the scope of judicial review of arbitration awards is extremely narrow. Inter-City Gas Corp. v. Boise Cascade Corp., 845 F.2d 184, 187 (8th Cir. 1988); Sunshine Mining Co., 823 F.2d at 1293. Specifically, it is settled that " [t]he reviewing court should not concern itself with the 'correctness' of an arbitration award ... [T]he courts will not review the merits of the dispute." Thompson v. Tega-Rand Int'l, 740 F.2d 762, 763 (9th Cir. 1984) (citations omitted). In contractual disputes, the reviewing court "will not set aside the arbitration's award even though we might have interpreted the contract differently." Inter-City Gas Corp., 845 F.2d at 187 (citation omitted).

The Reinsurers argue that the parties had expressly agreed to bifurcate the hearing, the first hearing being devoted exclusively to the question of Landmark's agency for Zale, and the second to the issue of rescission of, or liability under, the Agreement. Of course, this is true. However, the panel's decision that Landmark was acting "in its own interest in soliciting Westmoreland and Everett Cash to join its pool" effectively disposed of the issue of liability. While the Reinsurers might legitimately challenge the accuracy of the panel's initial findings, the panel acted within its authority. Under the panel's reasonable--albeit not necessarily correct--interpretation of the contracts, the facility was a genuine pool operated by Landmark rather than a simple retrocessionary agreement between Zale on the one hand and the Reinsurers on the other.

The Reinsurers further argue that the arbitrators impermissibly disregarded the terms of their contracts with Zale, pointing to contractual language providing that the agreements "will not apply" to specified exclusions. The question we face is whether the award does or does not "draw its essence" from the contract. See Inter-City Gas Corp., 845 F.2d at 187; Sunshine Mining Co., 823 F.2d at 1293. The standard, however, remains one of high deference to the arbitrators, and mere misconstrual of a contract does not warrant vacating an award.

Although this is a closer question, we again decline to disturb the panel's conclusion. The panel based its decision on its interpretation of the pooling arrangement as a whole--that is, the agreements between Westmoreland, Everett Cash and Landmark, the agreement between Zale and Landmark, and the overall understanding emerging from the respective conduct of the parties. The Reinsurers have offered their own, plausible interpretation of the contract. But they have not established that the panel itself was doing anything other than interpretation. Deference to arbitration commands that judicial inquiry on this point cease.

Two basic principles underlying arbitration are at odds on this point: on the one hand, concern for efficient administration and respect for the arbitration process; on the other hand, the need for final, complete awards. The district court, faced with this dilemma, chose an intermediary course, confirming the award while referring any future disputes regarding amounts owed to Zale to the panel.

The problem with this approach is that it amounts to a retention of jurisdiction by the arbitration panel which is "inconsistent with a final and binding decision." Millmens Local 550, United Bhd. of Carpenters & Joiners v. Wells Exterior Trim, 828 F.2d 1373, 1375 (9th Cir. 1987) (labor arbitration). Neither simple confirmation of the award nor incorporation of Zale's proposed dollar amount is a satisfactory solution. The former deprives the parties of a final and binding award; the latter prevents the Reinsurers from presenting their evidence on this issue. Indeed, more than a "ministerial" act--like the mathematical computation of undisputed figures--remains to be performed, as the Reinsurers have objected to Zale's assessment of damages.

Bearing in mind that " [r]emand to an arbitrator for clarification and interpretation is not unusual in judicial enforcements," McClatchy Newspapers v. Central Valley Typographical Union No. 46, Etc., 686 F.2d 731, 734 n. 1 (9th Cir.), cert. denied, 495 U.S. 1071 (1982), we remand to the district court so that the amounts due to Zale may be determined by arbitration.

The district court's modification of the award, simply taking note of the order of the Pennsylvania Commonwealth Court, does not affect any of the issues in controversy. It does not conflict with the substance of the award. Accordingly, Zale's request that the matter be remanded so that reference to Westmoreland's insolvency be expunged is hereby denied.¹ 

CONCLUSION

The Reinsurers' request that the award be vacated is denied. The case is remanded for a definite determination of the damages through arbitration.

AFFIRMED in part and REMANDED.