Second Circuit Rules on Expenses of Arbitration

Today, the Second Circuit decided ReliaStar Life Ins. Co, of N.Y. v. EMC Nat’l Life Co., No. 07-0828 (2nd Cir. Apr. 9, 2009).

The court held that inclusion in an arbitration agreement of a broad statement that each party will bear the expenses of its own arbitrator and attorney’s fees does not deprive the arbitration panel of authority to award those expenses as a sanction against a party whom the panel determines failed to arbitrate in “good faith.”

The court explained that an arbitrators’ finding of bad faith gives rise to an exception to the general rule that each party bears their own expenses. Thus, the arbitration panel did not exceed its authority in awarding attorney’s and arbitrator’s fees.

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