The case is General Re Life Corp. v. Lincoln National Life Insurance Co., issued on November 28. This case involves reinsurance, a topic that is foreign to many lawyers. Bottom line: after the arbitration panel issued its award, the panel (over a dissent) issued a clarification in light of ambiguities in the original arbitration ruling. Once an arbitration ruling issues, the parties may ask the district court to confirm it. The party that objected to the clarification told the district court that the clarified ruling exceeded the arbitrator's limited authority. The Second Circuit (Pooler, Wesley and Chin) says:
A district court’s authority to vacate an award “is strictly limited in order to facilitate the purpose underlying arbitration: to provide parties with efficient dispute resolution, thereby obviating the need for protracted litigation.”
We call this the functus officio doctrine, which says that "once arbitrators have fully exercised their authority to adjudicate the issues submitted to them, their authority over those questions is ended, and the arbitrators have no further authority, absent agreement by the parties, to redetermine those issues.” Are there any exceptions to this rule? The Third, Fifth, Sixth, Seventh, and Ninth Circuits in recognize "an exception to functus officio where an arbitral award 'fails to address a contingency that later arises or when the award is susceptible to more than one interpretation.” The Second Circuit adopts that exception as well, which "furthers the well‐settled rule in this Circuit that when asked to confirm an ambiguous award, the district court should instead remand to the arbitrators for clarification." So here is the rule:
An arbitrator does not become functus officio when it issues a clarification of an ambiguous final award as long as three conditions are satisfied: (1) the final award is ambiguous; (2) the clarification merely clarifies the award rather than substantively modifying it; and (3) the clarification comports with the parties’ intent as set forth in the agreement that gave rise to arbitration. This narrowly drawn rule ensures that in those circumstances where an arbitral body issues an ambiguous award and must issue a clarification, it will do so in keeping with the twin objectives of arbitration: “settling disputes efficiently and avoiding long and expensive litigation.”What it means for the parties in this case is that the district court got it right when it said the arbitrators were allowed to issue the clarification. The district court ruing is affirmed.