## Facts

- Certain Underwriters at Lloyd’s London (Underwriters) entered into a reinsurance contract (treaty) with Argonaut Insurance Company (Argonaut).
- The treaty’s arbitration clause required a three-member panel: each side would appoint one arbitrator, and those two would select a third arbitrator (an umpire).
- The clause included a timing/default term: if a party refused or failed to appoint its arbitrator within 30 days after a demand, the party requesting arbitration could nominate both party-appointed arbitrators.
- A dispute arose under the treaty, and on August 4, 2004, Argonaut demanded arbitration and asked Underwriters to appoint its arbitrator within 30 days.
- Underwriters responded on August 6, 2004 with its own demand letter, asserting that Argonaut also had 30 days to name its arbitrator.
- Underwriters named an arbitrator on September 3, 2004.
- Argonaut did not name an arbitrator by September 6, 2004 (the 30th day after Underwriters’ August 6 demand).
- On September 6, 2004, Underwriters invoked the default clause and named a second arbitrator (purporting to name both party-appointed arbitrators).
- On September 7, 2004, Argonaut emailed that September 6 was Labor Day in the United States and argued the deadline extended to September 7; it nominated an arbitrator that day.
- Underwriters filed a petition in federal court under 9 U.S.C. § 5 seeking an order confirming the two arbitrators it had appointed under the default mechanism.
- The parties disputed what law governed the appointment dispute: Underwriters argued federal common law under the Federal Arbitration Act (FAA), while Argonaut argued California law.
- The district court granted summary judgment to Underwriters, applied federal law, and confirmed Underwriters’ two appointments; Argonaut appealed.

## Issues

1. Whether federal common law under the FAA, rather than California law, governs a petition under 9 U.S.C. § 5 concerning the parties’ arbitrator-appointment procedure.
2. Whether the treaty’s default provision allowing the demanding party to nominate both party-appointed arbitrators is enforceable.
3. Whether Argonaut’s appointment on September 7 was timely when the 30-day deadline fell on Labor Day, and whether Underwriters properly invoked the default clause on September 6.

## Decision

- The Seventh Circuit affirmed the district court’s summary judgment for Underwriters.
- The court held that federal common law developed under the FAA governed the arbitrator-selection dispute presented in a § 5 petition, rather than California law.
- The court enforced the treaty’s appointment procedure as written, including the 30-day deadline and the default mechanism permitting the requesting party to name both party-appointed arbitrators after the other side failed to act in time.
- The court rejected Argonaut’s argument that the deadline automatically extended because the 30th day was a U.S. holiday, concluding that the contract did not incorporate such an extension rule.
- Underwriters’ invocation of the default clause and its nomination of the second arbitrator on September 6 were valid; Argonaut’s September 7 nomination came too late.

## Legal Principles

- In an FAA § 5 proceeding about selection of arbitrators, federal law governs enforcement of the parties’ agreed selection method, unless the contract clearly and specifically selects a different law for arbitration procedure.
- Courts enforce arbitration clauses according to their terms, including stated time limits for naming arbitrators and bargained-for default consequences when a party does not appoint within the specified period.
- A contractual term allowing the requesting party to appoint both party-appointed arbitrators upon the other party’s failure to appoint within 30 days is enforceable under the FAA.
- Absent contractual language addressing holidays or business-day computation, a court will not insert a holiday-extension rule into a privately negotiated arbitrator-appointment deadline.
- Section 5 authorizes a court to resolve breakdowns in the appointment process and to give effect to the contract’s selection mechanism so arbitration can proceed with a properly constituted panel.

## Conclusion

In *Certain Underwriters at Lloyd’s London v. Argonaut Insurance Co.*, the Seventh Circuit held that federal common law under the FAA governed a § 5 dispute about arbitrator appointment in a reinsurance treaty, enforced the treaty’s 30-day deadline and default clause as written, and affirmed an order confirming two party-appointed arbitrators nominated by Underwriters after Argonaut failed to appoint within the contractual time limit.


Certain Underwriters at Lloyd's London v. Argonaut Insurance Co., 500 F.3d 571 (2007)