In Trustmark Insurance Co. v John Hancock Life Insurance Co., (7th Cir. January 31, 2011), Trustmark and John Hancock entered a reinsurance agreement with a broad arbitration clause requiring arbitrators to be disinterested. When the parties disagreed about the meaning of a term in the contract, they submitted the dispute to an arbitral panel. Each party selected an arbitrator and the two arbitrators selected a third.

The arbitral award, which was confirmed in a district court, required Trustmark to pay Hancock. Trustmark refused to pay and Hancock initiated a second arbitration. Hancock chose as its arbitrator a member of the first arbitral panel, Mark Gurevitz. The panel first addressed what weight to give the prior arbitral decision. During the first proceeding, the parties agreed to a confidentiality clause that prevented the parties from disclosing the evidence, proceedings or award.

Gurevitz and the third arbitrator concluded that the confidentiality agreement allowed the second arbitral panel to consider evidence presented to the first arbitral panel. Trustmark responded by asking the district court to enjoin the arbitration so long as Gurevitz was on the arbitral panel because he was not disinterested. Trustmark further argued that the confidentiality agreement did not have an arbitration clause, so the second arbitral panel could not interpret or apply it.

The district court granted an injunction. First, it found that Gurevitz was not disinterested because he had knowledge of the first arbitration. It further found that the second arbitral panel could not consider decisions made by the first panel. Trustmark did not agree to arbitrate the meaning of the confidentiality agreement, so consequently it would suffer irreparable injury if it was forced to arbitration.

Hancock appealed and the Seventh Circuit reversed the decision of the district court. First, it found no irreparable injury. The only injury Trustmark could suffer from the arbitration was delay and costs, neither of which is irreparable. Since Trustmark agreed to a broad arbitration clause, its proper remedy was to seek denial of enforcement of the award when the arbitration finished. Second, the court found that Gurevitz was disinterested. A disinterested arbitrator has no financial or personal stake in the outcome. The court compared Gurevitz to a judge who presides over several cases arising from the same controversy and explained that knowledge of the dispute is not a personal or financial interest.

The court also held that the arbitral panel had the power to interpret the confidentiality agreement since arbitrators resolving a dispute can decide related questions and procedural issues. Further, the arbitration clause in question covered all disputes arising out of the original dispute and so the arbitral panel could decide the effect of the first award. If the arbitral panel exceeded its powers, the court could vacate the award when the proceedings were finished.

This decision supports the power of arbitrators to decide cases without the involvement of courts by ruling that parties cannot challenge rulings on procedural and ancillary issues until the proceedings have concluded. It also reinforces the discretion that parties have in choosing arbitrators.