In IRB-Brasil Resseguros SA v Nat'l Indem. Co., (S.D.N.Y. Nov. 29, 2011), National Indemnity Company (NICO) commenced two separate arbitrations against IRB-Brasil Resseguros SA (IRB) in a dispute over reinsurance coverage obligations. One arbitration was in London (Arbitration 1) and the other in New York (Arbitration 2). Arbitration 1 was dismissed for lack of jurisdiction and NICO commenced a new arbitration in New York (Arbitration 3) under the same policy as Arbitration 1.

The arbitration clause governing the dispute provided that both sides would select a party-appointed arbitrator and that the two party-appointed arbitrators would select a third neutral arbitrator as umpire. If the party-appointed arbitrators could not agree on the umpire, then both sides would propose two candidates for umpire and each side would strike one candidate. The umpire would then be selected "by drawing lots" from the two remaining candidates.

For Arbitration 2, IRB appointed James White and nominated William Trutt and Jonathan Rosen for umpire. NICO appointed James Dowd and nominated Caleb Fowler and Dan Schmidt for umpire. For Arbitration 3, IRB also appointed James White and NICO appointed Jonathan Rosen. IRB objected because it had nominated Rosen as an umpire candidate for Arbitration 2 and it then filed a petition with the district court to disqualify Rosen from serving in Arbitration 3 and to compel consolidation of Arbitrations 2 and 3.

The court denied the petition but suggested that NICO's appointment of Rosen for Arbitration 3 be counted as an effective strike of Rosen as IRB's umpire nominee in Arbitration 2. The parties followed this suggestion to strike Rosen, and IRB also struck Fowler as NICO's umpire nominee. This left Trutt, nominated by IRB, and Schmidt, nominated by NICO, as umpire candidates. NICO, however, objected to drawing lots until IRB's nominee completed a questionnaire. Then NICO's party-appointed arbitrator resigned, at NICO's request, and was replaced with Rosen.

Still unable to assemble a tribunal, the parties retuned to the district court for assistance. The court relied on section 5 of the Federal Arbitration Act (FAA), which authorises US district courts to facilitate the appointment of the arbitral tribunal in accordance with the parties' agreement.

The court first denied IRB's petition to prohibit NICO from changing its party-appointed arbitrator for Arbitration 2 or, alternatively, to allow IRB to appoint the replacement. Noting that IRB pointed to no case where a court did not allow a party to replace an arbitrator after its initial choice resigned, the court explained that doing so here would deprive NICO of an advocate on the panel and be inconsistent with the underlying goal of balanced deliberation. The court did, however, express concern that NICO forced resignation of its initial choice. Since the panel was not constituted, substitution would not be prejudicial and would facilitate consolidation of the two arbitrations.

The court then dismissed NICO's cross-petition to have IRB's umpire candidate disqualified because he was under the control of IRB. The court rejected NICO's argument because it was not supported by the alleged facts and NICO cited no case law that supported its argument. Further, case law in the Second Circuit clearly precludes parties from challenging the partiality of an arbitration panel under the FAA until after an award has been issued.

Next, the court granted NICO's request to have IRB's umpire candidate for Arbitration 2 respond to a questionnaire. It found that the parties modified the selection procedure to require umpire candidates to answer questionnaires. Finally, the court granted IRB's request to stay Arbitration 3 pending a consolidation decision from Arbitration 2.

This case demonstrates that despite reluctance to interfere with arbitration proceedings, US courts may assist in implementing an arbitration clause's method of arbitrator selection. If this process breaks down, courts may be willing to intervene to protect the integrity of the arbitral process.