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April 2015: Second Circuit Arbitration Victory

April 2015

The firm obtained an important victory for its client Abu Dhabi Investment Authority (“ADIA”) when, on January 14, 2015, a panel of the Second Circuit (Circuit Judges Wesley, Hall, and Lynch) unanimously held that the All Writs Act, 28 U.S.C. § 1651, cannot be used to enjoin an arbitration on the grounds that the claims were or should have been raised in a prior arbitration.

ADIA commenced an arbitration against Citigroup, alleging breach of a contract between the parties concerning a substantial investment ADIA had made in Citigroup. Citigroup then filed suit in the U.S. District Court for the Southern District of New York, arguing that ADIA was barred from bringing claims that were, or could have been, raised in an earlier arbitration between the parties, and seeking to enjoin the current arbitration under the court’s extraordinary All Writs Act power. Relying on several Second Circuit precedents, ADIA argued that any preclusion argument advanced by Citigroup could be addressed only by the arbitrators in the second arbitration, not by a court, given the parties’ contractual agreement to arbitrate all disputes. The district court agreed with ADIA and dismissed Citigroup’s complaint.

Citigroup appealed to the Second Circuit, emphasizing that precedents upon which ADIA and the district court had relied had not specifically addressed the All Writs Act. Indeed, the Second Circuit had arguably left the issue open in a 2011 decision. In a published opinion, authored by Circuit Judge Hall, the Second Circuit affirmed the district court’s judgment dismissing Citigroup’s complaint. In addition to citing its own prior precedent, the Second Circuit relied on several decisions by other Circuits, as well as the general policy in favor of submitting to arbitrators (rather than a court) issues in dispute, where the parties’ contract contains a broadly worded arbitration clause.