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July 20, 2018

Intervention Denied in Proceeding to Confirm Arbitration Award

By S.I. Strong

On February 7, 2018, the Southern District of New York issued its decision in Eddystone Rail Company, LLC v. Jamex Transfer Services, LLC.The case arose from the efforts of several persons to intervene, the proposed intervenors, in an action for the purpose of objecting to the confirmation of a $139 million domestic arbitration award. The proposed intervenors claimed an interest in the subject matter of the proceeding based on a fear that the award might ultimately be enforced against them.

The district court recognized that the proposed intervenors had reason to be concerned that a judgment on the arbitration award would be enforced against them. The plaintiff Eddystone had filed a separate lawsuit against the proposed intervenors in Pennsylvania alleging that they had stripped Bridger Transfer Services (Bridger) of its assets, sold Bridger to a shell corporation, and then changed the shell corporation’s name to Jamex Transfer Services, LLC, the respondent in the arbitration (and defendant in the confirmation proceeding). In the Pennsylvania action, Eddystone was seeking to make the proposed intervenors liable for certain debts that Bridger owed to Eddystone on an alter ego theory.

Despite this financial “interest,” however, the district court denied intervention, stating that:

Assessed under Rule 24(b)’s framework, the Proposed Intervenors fail to demonstrate that their claim or defense shares a common question of law or fact with this confirmation proceeding.

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Actions to confirm arbitration awards . . . are straightforward proceedings in which no other claims are to be adjudicated. The confirmation of an arbitration award is a summary proceeding that merely makes what is already a final arbitration award a judgment of the court." . . . Inviting nonparties to this arbitration confirmation proceeding, whose interests are conditioned on the outcome of a separate, pending action in another jurisdiction, would unduly delay what is otherwise supposed to be a straightforward action. . . . Accordingly, the Proposed Intervenors’ request for permissive intervention is denied.

S.I. Strong is the Manley O. Hudson Professor at the University of Missouri, School of Law in Columbia, Missouri.