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Merit Ins. Co. v. Leatherby Ins. Co.

714 F.2d 673 (1983)

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Merit Ins. Co. v. Leatherby Ins. Co.

United States Court of Appeals for the Seventh Circuit

714 F.2d 673 (1983)

Facts

Merit Insurance Company (plaintiff) sued Leatherby Insurance Company (defendant) for fraudulent inducement of their contract. The federal district court found that the contract’s arbitration clause required Merit to submit the dispute to arbitration. Merit and Leatherby picked two of the three arbitrators, and those two selected Jack Clifford to round out the panel. The lengthy arbitration process ended in a large damages award for Merit, which it sought to enforce in court. Leatherby moved to vacate the award, on the grounds that Clifford improperly concealed his prior business relationship with Merit’s president, Stern. The relationship had ended 14 years previously and was not particularly close. Clifford’s fellow arbitrators testified that Clifford never showed any sign of bias. The district court initially upheld the arbitrators’ award but later changed course and vacated it. Merit appealed to the Seventh Circuit.

Rule of Law

Issue

Holding and Reasoning (Posner, J.)

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