ARIAS•U.S.
2015 Fall Conference
New York
The “Functus Officio” Doctrine:
Hearing Completion and Post-Hearing Issues
Deidre Derrig – Corporate Counsel, Allstate
John L. Jacobus – Partner, Steptoe & Johnson LLP
David A. Thirkill - ARIAS•U.S. Certified Arbitrator & Umpire
November 12, 2015
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2015 ARIAS-US / FALL CONFERENCE
HEARING COMPLETION AND POST-HEARING REMEDIES
PART I: FACT PATTERN & KEY QUESTIONS
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HEARING COMPLETION AND POST-HEARING REMEDIES
FACT PATTERN
• A deluxe cruise liner, The Sea Venture,
was involved in an accident. The
insurer, Maritime Insurance, paid the
claim, but the reinsurer, Historic Re,
refused cover based on (alleged)
material non-disclosures at cession
regarding the age of the hull and the use
of old, refurbished diesel engines.
• The parties arbitrated the dispute, and
the Panel issued a “Final Award” in
favor of the reinsurer, Historic Re, but
permitted the submission of affidavits of
costs from which it would “confirm the monetary amounts due to Historic Re as a result of
these proceedings.”
• After the issuance of the “Final Award,” a key witness contacted the Panel with evidence
favorable to the cedent. The evidence, which showed that full disclosure of the risks may have
occurred, likely may have changed the outcome of the arbitration.
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HEARING COMPLETION AND POST-HEARING REMEDIES
FACT PATTERN
Hearing
Record Closed
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“Final Award”
with Affidavit of
“Costs” to
Follow
New Evidence
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New Award
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2015 ARIAS-US / FALL CONFERENCE
HEARING COMPLETION AND POST-HEARING REMEDIES
KEY QUESTIONS
• Did the Panel have the legal authority to consider post-arbitration evidence on
the substantive issues in the case? Or did the Panel cease to function as a legal
entity following the issuance of the “Final Award” pursuant to the functus
officio doctrine?
• If the Panel were not to consider the “new” evidence, would that result be
compatible with the duty of the Panel to ensure that the proceedings meet the
standard of fundamental fairness?
• Did the Panel’s statement in the award acknowledging that the underwriting
file was incomplete invite the submission of new evidence?
• Does the fact that the Panel retained jurisdiction over costs have any bearing
on the Panel’s ability to consider the new evidence?
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HEARING COMPLETION AND POST-HEARING REMEDIES
KEY QUESTIONS
• Would the answers to these questions differ if the Panel had issued an “Interim
Final Award”?
• Would the answers to these questions differ if the reinsurer had already sought
to confirm the award on the substantive issues in a court of competent
jurisdiction? Could the Panel act in parallel?
• Was it permissible for the Panel to retain jurisdiction over disputes related to
costs?
• Should the reinsurer wait to confirm the award until the cost portion of the
case is decided?
• Would it make sense for the parties to have requested “bifurcated” hearings on
liability and costs?
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HEARING COMPLETION AND POST-HEARING REMEDIES
KEY QUESTIONS
• What is the effect of the open questions on the Panel?
• Does the Panel’s retention of jurisdiction impact ex parte communications
between a party and its appointed arbitrator?
• Does the Panel’s retention of jurisdiction only for the awarding of costs
restrict the Panel members from serving in other arbitrations until the
arbitration is finally concluded?
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HEARING COMPLETION AND POST-HEARING REMEDIES
PART II: LEGAL PRINCIPLES
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HEARING COMPLETION AND POST-HEARING REMEDIES
LEGAL PRINCIPLES
• Functus Officio
• Definition
• Functus Officio Generally
• Exceptions
• Mistake apparent on the face of an award
• Award does not adjudicate a submitted issue
• Award is ambiguous and requires clarification
• Other Factors Affecting Functus Officio
• Confirmation of an award
• Retaining jurisdiction over sub-issues
• Retaining jurisdiction over implementation of a remedy
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HEARING COMPLETION AND POST-HEARING REMEDIES
FUNCTUS OFFICIO - GENERALLY
Black’s Law Dictionary (9th ed. 2009) defines “functus officio” as follows:
• Latin for “having performed his or her office.”
• An officer or official body “without further authority or legal competence
because the duties and functions of the original commission have been fully
accomplished.”
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HEARING COMPLETION AND POST-HEARING REMEDIES
FUNCTUS OFFICIO – GENERALLY
• “According to the doctrine, once an arbitrator has made and published a final award[,] his
authority is exhausted and he is functus officio [‘having performed his office’] and can do nothing
more in regard to the subject matter of the arbitration.” Hill v. Wackenhut Serv. Intern., 971 F.
Supp. 2d 5, 12 (D.D.C. 2013).
• “The policy underlying this general rule is an ‘unwillingness to permit one who is not a judicial
officer and who acts informally and sporadically, to re-examine a final decision which he has
already rendered, because of the potential evil of outside communication and unilateral influence
which might affect a new conclusion.’” Colonial Penn Ins. Co. v. Omaha Indem. Co., 943 F.2d
327, 331-32 (3d Cir. 1991).
• Parties may, however, empower arbitrators to reconsider an award. See, e.g., T. Co Metals, LLC
v. Dempsey Pipe & Supply, Inc., 592 F.3d 329, 342-43 (2d Cir. 2010).
• Courts may also remand an award to an arbitrator for clarification if they find the award
ambiguous in some way. U.S. Energy Corp. v. Nukem, Inc., 400 F.3d 822, 830-31 (10th Cir.
2005).
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FUNCTUS OFFICIO - EXCEPTIONS
• Courts commonly describe functus officio as having three exceptions:
1. An arbitrator “can correct a mistake which is apparent on the face of his award”
2. “[W]here the award does not adjudicate an issue which has been submitted, then as
to such issue the arbitrator has not exhausted his function and it remains open to
him for subsequent determination”
3. “[W]here the award, although seemingly complete, leaves doubt whether the
submission has been fully executed, an ambiguity arises which the arbitrator is
entitled to clarify.”
Colonial Penn. Ins. Co. v. Omaha Indem. Co., 943 F.2d 327, 332 (3d Cir. 1991).
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FUNCTUS OFFICIO - EXCEPTIONS
1) Mistake Apparent on the Face of an Award
• Courts generally limit this exception to “clerical mistakes or obvious errors in
arithmetic computation.” Colonial Penn. Ins. Co., 943 F.2d at 332.
• Newly discovered evidence suggesting the arbitrator’s decision was erroneous
does not create a mistake on the face of the award. McClatchy Newspapers v.
Cent. Valley Typographical Union, 686 F.2d 731, 733–34 & n.1 (9th Cir.
1982).
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FUNCTUS OFFICIO - EXCEPTIONS
2) Award Does Not Adjudicate a Submitted Issue
• Theory behind this exception “is that the arbitration agreement between the
parties is still in force and the arbitrator's power over the remainder of the
unresolved submission continues.” Local 825, 825A, 825B, 825R, & 825RH
of Int’l. Union of Operating Engineers v. Tuckahoe Sand & Gravel, 2007 WL
1797657, *7 (D.N.J. 2007) (quoting Teamsters Local 312 v. Matlack, Inc., 118
F.3d 985, 992 (3d Cir. 1997)).
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FUNCTUS OFFICIO - EXCEPTIONS
3) Clarification of an Ambiguous Award
• “Ambiguity, however, requires something more substantial than a
disagreement between the parties. Rather, the award must be ‘so ambiguous
that a court is unable to discern how to enforce it,’” Duke Energy Intern. Peru
Investments No. 1 Ltd. v. Republic of Peru, 892 F. Supp. 2d 53, 57 (D.D.C.
2012) (quoting Telenor Mobile Comms. AS v. Storm LLC, 351 Fed.Appx.
467, 469 (2d Cir. 2009)).
• An award may become ambiguous because of circumstances discovered after
it is issued. Office & Prof'l Emps. Int'l Union, Local No. 471 v. Brownsville
Gen. Hosp., 186 F.3d 326, 332 (3d Cir. 1999). For example, new information
may reveal that the awarded remedy is no longer feasible. Id.
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HEARING COMPLETION AND POST-HEARING REMEDIES
FUNCTUS OFFICIO - EXCEPTIONS
• 3) Clarification of an Ambiguous Award (cont’d)
• “Courts usually remand to the original arbitrator for clarification of an
ambiguous award when the award fails to address a contingency that later
arises or when the award is susceptible to more than one interpretation.”
Green v. Ameritech Corp., 200 F.3d 967, 977 (6th Cir. 2000).
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OTHER FACTORS AFFECTING FUNCTUS OFFICIO
• Court confirmation of an award:
• Courts are unlikely to find exceptions to functus officio once a court has confirmed
an award. Legion Ins. Co. v. VCW, Inc., 198 F.3d 718, 720 (8th Cir. 1999); see also
Brown v. Witco Corp., 340 F.3d 209, 221 (5th Cir. 2003).
• Retaining jurisdiction over sub-issues:
• Functus officio may apply to partial awards if it is clear that the arbitrator intends for
those partial awards to be final. Legion Ins. Co., 198 F.3d at 720. This could
include, for example, a determination of liability issued before a determination of
damages.
• Retaining jurisdiction over implementation of remedy:
• An arbitrator’s retention of jurisdiction to oversee the implementation of a remedy
does not affect an award’s finality. Kalyanaram v. Amer. Ass’n of Univ. Professors
of NY Inst. of Tech., Inc., 742 F.3d 42, 51 (2d. Cir. 2014) (citing Burns Int'l Sec.
Servs., Inc. v. United Plant Guard Workers of Am., 47 F.3d 14, 16 (2d Cir. 1995)).
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Federal Arbitration Act (9 U.S.C. § 10)
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HEARING COMPLETION AND POST-HEARING REMEDIES
PART III: COSTS
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HEARING COMPLETION AND POST-HEARING REMEDIES
KEY QUESTIONS
• What categories of expenditures are covered by an award of costs?
• How should costs be apportioned in a multi-issue case where a single party
did not prevail on every issue?
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LEGAL PRINCIPLES
• Costs
• Costs Generally
• Attorneys’ Fees
• Determining the “prevailing party”
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COSTS – GENERALLY
• Like with other aspects of arbitration, the parties may set by agreement what
expenditures are included as “costs” to be borne by the losing party.
• In arbitrations, “costs” most typically include:
• fees to governing bodies (e.g., American Arbitration Association)
• expenses incurred in managing the arbitration (e.g., venue, food, possibly
experts or witnesses)
• the arbitrator’s fees.
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COSTS – ATTORNEYS’ FEES
• As a default rule, “costs” typically do not include attorneys’ fees, unless some specific
authority provides otherwise.
• Authority to grant attorneys’ fees may come from:
• Contractual agreement between the parties (including incorporation of any arbitral
body rules that permit the grant of attorneys’ fees).
• Governing substantive law (e.g., state arbitration statutes).
• Post-contract acquiescence to attorneys’ fees (e.g., seeking attorneys’ fees against
the other party). McDaniel v. Bear Stearns & Co., Inc., 196 F. Supp. 2d 343, 364-65
(S.D.N.Y. 2002).
• Inherent power, when imposing sanctions for bad faith. ReliaStar Life Ins. Co. of
N.Y. v. EMC Nat. Life Co., 564 F.3d 81, 86 (2d Cir. 2009).
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COSTS – PREVAILING PARTY
• In the absence of controlling statutes, rules, or contractual provisions, arbitrators have
discretion in how to divide costs and expenses between parties. Vigorito v. UBS
PaineWebber, Inc., 477 F. Supp. 2d 481, 488 (D. Conn. 2007) adhered to on
reconsideration, 557 F. Supp. 2d 303 (D. Conn. 2008).
• If the arbitration agreement contains a section allocating costs between the parties in an
ambiguous way, the arbitrator will have authority to interpret that section of the
agreement. Softkey, Inc. v. Useful Software, Inc., 756 N.E.2d 631, 634 (Mass. App.
2001).
• Outside of arbitrations, courts have reached differing conclusions about who is a
“prevailing party” when both sides obtain some sort of relief. Outcomes may depend
on the particular statute being considered.
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PART IV: LAW IN ACTION
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LAW IN ACTION
Sample Case
Century Indemnity Co. v. AXA Belgium,
2012 WL 4354816 (S.D.N.Y. 2012)
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