20-1946 (L) ExxonMobil Oil Corporation v. TIG Insurance Company

In the United States Court of Appeals For the Second Circuit

August Term, 2021 Nos. 20-1946 (L), 21-2658 (Con.)

EXXONMOBIL OIL CORPORATION, Petitioner-Appellee,

v.

TIG INSURANCE COMPANY, Respondent-Appellant.

On Appeal from the United States District Court for the Southern District of New York

ARGUED: MAY 10, 2022 DECIDED: AUGUST 12, 2022

Before: WALKER, NARDINI, and MENASHI, Circuit Judges.

TIG Insurance Company (“TIG”) appeals from a judgment and order of the United States District Court for the Southern District of New York (Edgardo Ramos, Judge, and Mary Kay Vyskocil, Judge, respectively). TIG asserts that Judge Ramos erred in ordering it to arbitrate a coverage dispute with ExxonMobil Oil Corporation (“Exxon”). Even if it was required to arbitrate, TIG contends that Judge Ramos erred in awarding Exxon prejudgment interest when confirming the arbitral award. After entering judgment, and after TIG had appealed, the district court clerk notified the parties that it was brought to Judge Ramos’s attention that he owned stock in Exxon when he presided over the case. Nothing in the record suggests that Judge Ramos was aware of his conflict at the time he rendered his decisions, and the parties do not suggest otherwise. TIG moved in the district court to vacate the judgment. The case was reassigned to Judge Vyskocil, who denied the motion to vacate. TIG appealed from that denial as well. We hold that vacatur was not required because this case presents only questions of law, and a non-conflicted district judge reviewed the case de novo. As to the merits, we hold that the district court did not err in compelling arbitration because the parties were subject to a binding arbitration agreement, but that the district court erred in ordering TIG to pay pre-arbitral-award interest. Accordingly, we AFFIRM the district court’s denial of the motion to vacate and the district court’s order compelling arbitration, REVERSE in part its decision granting Exxon’s request for prejudgment interest, and REMAND to the district court for further proceedings consistent with this opinion.

DANIEL M. SULLIVAN (Daniel P. Goldberg, Alison B. Miller, and Denisha S. Bacchus, on the brief), Holwell Shuster & Goldberg LLP, New York, NY, for Respondent- Appellant.

DONALD W. BROWN (Allan B. Moore, Covington & Burling LLP, Washington,

2 DC, P. Benjamin Duke, Andrew W. Hahn, Covington & Burling LLP, New York, NY, on the brief), Covington & Burling LLP, San Francisco, CA, for Petitioner-Appellee.

WILLIAM J. NARDINI, Circuit Judge:

This case involves two distinct issues. First, we consider

whether vacatur is required where judgment was entered by a first

district judge who belatedly realized that he had a conflict of interest,

and a second non-conflicted judge then reviewed the merits of that

decision de novo. Second, if vacatur is unwarranted, we determine the

existence and scope of an arbitration agreement between the parties.

TIG Insurance Company (“TIG”) appeals from a judgment and

order of the United States District Court for the Southern District of

New York (Edgardo Ramos, Judge, and Mary Kay Vyskocil, Judge,

respectively). TIG asserts that Judge Ramos erred in ordering it to

arbitrate a coverage dispute with ExxonMobil Oil Corporation

(“Exxon”). Even if it was required to arbitrate, TIG further contends,

3 Judge Ramos erred in awarding Exxon prejudgment interest when

confirming the arbitral award.

After entering judgment, and after TIG initially appealed, the

district court clerk notified the parties that it had been brought to

Judge Ramos’s attention that he owned stock in Exxon when he

presided over the case. Nothing in the record suggests that Judge

Ramos was aware of his conflict at the time he rendered his decisions,

and the parties do not suggest otherwise. TIG moved in the district

court to vacate the judgment. The case was reassigned to Judge

Vyskocil, who denied the motion to vacate. TIG appealed from that

denial as well.

We AFFIRM the district court’s denial of the motion to vacate.

Vacatur was not required because this case presents only questions of

law, and a non-conflicted district judge reviewed the case de novo. As

to the merits, we AFFIRM the district court’s order compelling

arbitration and REVERSE in part its decision granting Exxon’s request

4 for prejudgment interest and REMAND to the district court for

further proceedings consistent with this opinion.

I. Background

A. The TIG insurance policy

TIG issued an excess insurance policy (the “Policy”), insuring

Exxon for liability for damages from personal injury or property

damage resulting from the use of Exxon’s products. 1 The coverage

was limited to $25 million.

The Policy states that it should be “construed in an evenhanded

fashion as between the Insured and the Company; without limitation,

where the language of this Policy is deemed to be ambiguous or

otherwise unclear, the issue shall be resolved in the manner most

consistent with the relevant provisions, stipulations, exclusions and

conditions (without regard to authorship of the language, without

1 The Policy was initially issued to Mobil Corporation, which was later acquired by Exxon Corporation, becoming the ExxonMobil Oil Corporation. For convenience, we refer to the insured party as “Exxon.” 5 any presumption or arbitrary interpretation or construction in favor

of either the Insured or the Company and without reference to parol

evidence).” Joint App’x at 38.

The Policy contained customized language regarding

arbitration. The parties deleted a provision in the original Policy form

that would have clearly constituted a binding arbitration agreement,

which stated that “[a]ny dispute arising under this Policy shall be

finally and fully determined in London, England under the

provisions of the English Arbitration Act of 1950.” Id. at 37. Instead

of this stock provision, the parties added Endorsement No. 11—

“Alternative Dispute Resolution Endorsement” (the “ADR

Endorsement”). Id. at 60. Because the ADR Endorsement is the crux

of the dispute on appeal, we set it out in full below:

ALTERNATIVE DISPUTE RESOLUTION ENDORSEMENT

If the Company and the Insured disagree, after making a good faith effort to reach an agreement on an issue concerning this policy, either party may request that

6 the following procedure be used to settle such disagreement:

1. The Company or the Insured may request of the other in writing that the dispute be settled by an alternative dispute resolution (“ADR”) process, selected according to the procedures described herein.

2. If the Company and the Insured agree to so proceed, they will jointly select an ADR process for settlement of the dispute.

3. ADR processes which may be used may include but are not limited to mediation, neutral fact- finding and binding arbitration (as described in paragraph (4)). By agreement of the parties, the services of the American Arbitration Association, Judicial Arbitration & Mediation Services Inc., Endispute Inc., or the Center for Public Resources Inc. may be used to design or to implement any ADR process.

4. If the parties cannot agree on an ADR process within 90 days of the written request described in paragraph (1), the parties shall use binding arbitration. The arbitration shall be conducted by a mutually acceptable arbitrator to be chosen by the parties. Neither party may unreasonably withhold consent to the selection of an arbitrator; however, if the parties cannot select an arbitrator within 45 days after binding arbitration is selected

7 under paragraph (2) or is [sic] the ADR process because of this paragraph, the selection of the arbitrator shall be made by one of the consultants listed in paragraph (3). The arbitration proceeding shall take place in or in the vicinity of New York and will be governed by such rules as the parties may agree. The parties expressly waive any pre- hearing discovery about the dispute, including examination of documents and witnesses. It is expressly agreed that the result of such binding arbitration shall not be subject to appeal by either party.

5. All expenses of the ADR process will be shared equally by both parties.

6. It is expressly agreed that any decision, award, or agreed settlement made as a result of an ADR process shall be limited to the limits of liability of this Policy.

7. Any statutes of limitations which may be applicable to the dispute shall be tolled, from the date that the Company and the Insured agree to follow the selection procedures described herein with respect to such dispute, until and including the date that such ADR process is concluded.

Id.

8 B. Procedural history

In the 1990s, Exxon faced a series of lawsuits related to its use

of methyl tertiary-butyl ether (MTBE) as a gasoline additive. As a

result of these suits, by 2019, Exxon had paid $46 million in

settlements and faced judgments totaling over an additional $269

million. It sought indemnification from TIG under the Policy, but TIG

disputed that the Policy covered the MTBE suits. The parties engaged

in settlement discussions, which ended on November 30, 2016, when

TIG filed suit in the New York Supreme Court seeking a declaration

that the Policy did not cover the MTBE-related losses. Nine days later,

Exxon sent a letter “formally invok[ing] its contractual right under the

Policy and Federal law to settle the parties’ disagreement over

coverage under the Policy for Exxon[]’s MTBE insurance claim by

binding arbitration.” Joint App’x at 82. Exxon filed a petition to

compel arbitration in federal district court the same day. Exxon also

asked the court to enjoin TIG from pursuing its New York declaratory

judgment action. 9 1. The district court grants the petition to compel arbitration

In support of its petition to compel arbitration, Exxon argued—

and the district court (Judge Ramos) agreed—that the ADR

Endorsement amounted to a binding arbitration agreement. The

court focused on the first clause in paragraph 2 of the ADR

Endorsement: “If the [C]ompany and the [I]nsured agree to so

proceed, they will jointly select an ADR process for settlement of the

dispute.” Spec. App’x at 24; see Joint App’x at 60. It concluded that

the conditional introductory phrase (“If the Company and the

Insured agree . . .”) referred only to the second clause in that sentence

(“they will jointly select . . . .”). Spec. App’x at 24. Thus, the ADR

Endorsement would allow the parties to use any ADR procedure on

which they jointly agreed. If one party requested ADR and the parties

could not jointly agree on the ADR process, however, the ADR

Endorsement “defaults to binding arbitrations.” Spec. App’x at 25.

10 In so ruling, the district court rejected TIG’s argument that the

introductory clause in paragraph 2 meant that the entire ADR

Endorsement procedure (not just the joint selection process) is

triggered only if the parties agree to settle their dispute via ADR. The

district court reasoned that New York courts read contracts to “give

force and effect to all of [their] provisions,” and reading the

introductory clause as TIG urged would mean the ADR Endorsement

would not “have any binding effect absent some further agreement.”

Spec. App’x at 25 (citing Trump-Equitable Fifth Ave. Co. v. HRH Constr.

Corp.,

(1st Dep’t), aff'd,

(1985)). The

ADR Endorsement would be “an unenforceable and superfluous

agreement to agree, under which neither party could require any

form of ADR absent some further agreement.”

The court also

noted that its interpretation was “consistent with the federal policy in

favor of construing arbitration clauses broadly.” Spec. App’x at 25–

26. The court thus granted the petition to compel arbitration, stayed

11 all proceedings in the case, and retained jurisdiction to address other

issues that might arise after the arbitrators rendered any awards. Id.

2. The arbitral tribunal rules in favor of Exxon

On August 7, 2019, the arbitral tribunal ruled in favor of Exxon.

It held that Exxon’s total liability exceeded $350 million, therefore

reaching and exhausting TIG’s excess layer of liability coverage. It

thus awarded Exxon the full $25 million allowed under the Policy.

Before the tribunal, Exxon also sought prejudgment interest. The

tribunal held that it lacked jurisdiction to grant Exxon’s request. It

explained that “[a]n arbitral award is [an] all-inclusive term” that

includes “damages, interest, costs and legal fees that a panel may

determine is owing on a claim.” Joint App’x at 164. The ADR

Endorsement stated “that any decision, award, or agreed settlement

made as a result of an ADR process shall be limited to the limits of

liability of this Policy.” Joint App’x at 60. Accordingly, the tribunal

concluded it was “foreclosed from awarding more than [the] limit of

liability in the TIG’s policy of $25 million.” Joint App’x at 164. It 12 explained in a footnote, though, that one New York Appellate

Division opinion “seem[ed] to imply that where the arbitrator would

lack jurisdiction or be prohibited from making an award of pre-

judgment interest and the claimant could not have sought an award

of interest, the claimant is not foreclosed from seeking such pre-

judgment interest in a subsequent court proceeding to confirm an

award.” Joint App’x at 165 n.4 (citing Levin & Glasser, P.C. v. Kenmore

Prop., LLC,

, 445–46 (1st Dep’t 2010)).

3. The district court confirms the arbitral award and grants prejudgment interest

On November 21, 2019, Exxon moved in the district court to

confirm the arbitral award and sought prejudgment interest. TIG

cross-moved to vacate the award. The district court (Judge Ramos)

granted Exxon’s motion and denied TIG’s on May 18, 2020.

13 ExxonMobil Oil Corp. v. TIG Ins. Co., No. 16-9527,

(S.D.N.Y. May 18, 2020) (Exxon I). 2

The district court held that it had authority to award

prejudgment interest where the arbitral tribunal had not. Under New

York law, the district court explained, prejudgment interest is

ordinarily mandatory on damages awarded as a result of a breach of

performance of a contract. Although parties may contract around the

requirement, courts apply a clear-statement rule for contracts

purporting to waive that mandatory requirement. The district court

ultimately concluded that paragraph 6 of the ADR Endorsement was

not sufficiently clear to infer that the parties intended to waive their

right to prejudgment interest. The court explained that “a reasonable

businessperson considering whether to agree to the Policy would

likely have read the ADR Endorsement not to prevent a court from

2 TIG does not challenge the portion of the district court’s opinion confirming the arbitral award. 14 awarding interest if TIG were found to owe the entire policy limit in

damages.” Id. at *9. Accordingly, the court awarded Exxon 9% per

annum interest for the period between TIG’s breach of contract and

the date of the arbitral award. The court also awarded Exxon 9% per

annum interest from the date of the award through the date of the

court’s judgment. The court directed the parties to submit a proposed

judgment reflecting this calculation. On May 26, 2020, the court

entered judgment against TIG “in the amount of $33,010,245.90,

representing the $25,000,000 awarded in the Award, plus pre-

judgment interest on that amount . . . at the rate of 9% per annum in

the amount of $8,010,245.90.” Spec. App’x at 49.

On June 19, 2020, TIG filed a notice of appeal. It stated that it

was appealing from (1) the order of the district court compelling

arbitration; and (2) the district court’s order granting Exxon’s motion

to confirm the arbitral award, denying TIG’s motion to vacate the

arbitral award, and granting Exxon prejudgment interest. In its

15 opening brief, TIG dropped its challenge to the portion of the district

court’s decision granting Exxon’s motion to confirm the arbitral

award and denying TIG’s motion to vacate the award.

4. The district court discloses Judge Ramos’s conflict of interest

On July 29, 2021, the Clerk of Court for the Southern District of

New York sent the parties a letter disclosing that it had been brought

to Judge Ramos’s attention that he had owned stock in ExxonMobil

Corporation while the case was pending before him. Although he

reported that his stock ownership did not affect his decisions in the

case, he recognized that such ownership would have required his

recusal. Accordingly, Judge Ramos directed the Clerk to notify the

parties of the conflict. Citing Advisory Opinion 71 from the Judicial

Conference Codes of Conduct Committee, which deals with

disqualification that is not discovered until after a judge has

participated in a case, the letter invited the parties “to respond to

Judge Ramos’ disclosure of a conflict in this case.” Vacatur App’x at

16 11. In response, TIG filed a motion in the district court to vacate the

judgment. We held TIG’s original appeal in abeyance pending the

district court decision as to whether to deny the motion or issue an

indicative ruling stating that the district court would grant the motion

if we remanded for that purpose. 3

On September 28, the Wall Street Journal published an article

reporting that “[m]ore than 130 federal judges ha[d] violated U.S. law

and judicial ethics by overseeing court cases involving companies in

which they or their family owned stock.” James V. Grimaldi, Coulter

Jones & Joe Palazzolo, 131 Federal Judges Broke the Law by Hearing Cases

Where They Had a Financial Interest, Wall St. J., Sept. 28, 2021. The

3 If a party files a motion for relief from judgment under Federal Rule of Civil Procedure 60(b) after filing a notice of appeal, but within 28 days of the entry of judgment, the motion suspends the effect of the notice of appeal until the district court rules on the post-judgment motion. Fed. R. App. P. 4(a)(4)(B)(i). If such a motion is filed more than 28 days after judgment is entered, the district court is without jurisdiction to grant the motion while the appeal is pending. Under Rule 62.1, a district court may nevertheless “(1) defer considering the motion; (2) deny the motion; or (3) state either that it would grant the motion if the court of appeals remands for that purpose or that the motion raises a substantial issue.” 17 article reported that Judge Ramos had held “between $15,001 and

$50,000 of Exxon stock” when he ruled in Exxon’s favor. Id. The

article reported that the Clerk of Court notified the parties in this case

of the conflict after the newspaper had contacted Judge Ramos to ask

about the apparent conflict.

The district court clerk reassigned the case to Judge Mary Kay

Vyskocil, who reviewed the merits of the case de novo and denied

TIG’s motion to vacate on October 14, 2021. ExxonMobil Oil Corp. v.

TIG Ins. Co., No. 16-9527,

, at *4 (S.D.N.Y. Oct. 14,

2021) (Exxon II). Judge Vyskocil acknowledged that Judge Ramos

“should have recused himself from this matter upon its assignment

to him” under both

(a) and the Code of Conduct for

United States Judges, Cannons 2(A) and 3(C)(1)–(2). Id. at *2. She

explained that harmless error review applies to violations of § 455(a).

Id. Thus, Judge Vyskocil explained that she would deny the motion

to vacate if she agreed that Judge Ramos’s rulings were correct

18 “because Respondent would not have been harmed as regards this

proceeding.” Id.

After reviewing all of the relevant court documents, Judge

Vyskocil agreed with Judge Ramos’s reasoning and denied the

motion to vacate. She adopted Judge Ramos’s orders granting

Exxon’s motion to compel and awarding prejudgment interest. TIG

filed a new notice of appeal from Judge Vyskocil’s decision.

II. Discussion

We consider first whether Judge Ramos’s conflict of interest

required Judge Vyskocil to vacate the judgment and restart the entire

case anew. Because we conclude that it did not, we then consider

whether the district court erred in compelling arbitration and

awarding prejudgment interest.

A. Remedy for the violation of

(a)

TIG argues that we need not consider the merits of its original

appeal because we must vacate the district court’s judgment in light

of Judge Ramos’s financial interest in Exxon. We disagree. 19 Both statutes and court rules govern questions of judicial

recusal when a disqualifying conflict is discovered after a judge enters

a ruling. The baseline rule is provided by

(a), which

states that “[a]ny justice, judge, or magistrate judge of the United

States shall disqualify himself in any proceeding in which his

impartiality might reasonably be questioned.” The Supreme Court

has explained that “Section 455 does not, on its own, authorize the

reopening of closed litigation” but “Federal Rule[] of Civil Procedure

60(b) provides a procedure whereby, in appropriate cases, a party

may be relieved of a final judgment.” Liljeberg v. Health Servs.

Acquisition Corp.,

(1988). “We review a district

court’s decision on a Rule 60(b) motion for abuse of discretion. A

court abuses its discretion when (1) its decision rests on an error of

law or a clearly erroneous factual finding; or (2) cannot be found

within the range of permissible decisions.” In re Terrorist Attacks on

Sept. 11, 2001,

(2d Cir. 2013) (cleaned up).

20 Although a judge must recuse when there is a disqualifying

conflict, the proper remedy varies when such a conflict is discovered

after the judge’s ruling. In Liljeberg, a district court judge ruled after

a bench trial in favor of a party to a real estate transaction in a manner

that benefited a private university. Although the university was not

a party to the suit, it had negotiated with one of the parties and

maintained an interest in the transaction at issue. The losing party

subsequently learned that the district judge had been on the board of

trustees for the university when he presided over the case. It moved

to vacate the judgment under Rule 60(b)(6)—which permits relief for

“any other reason that justifies” it—on the basis that the judge was

disqualified under § 455(a). The Fifth Circuit held that the judge’s

conflict created an appearance of impropriety and that the

appropriate remedy was to vacate his decision.

The Supreme Court agreed that disqualification was required,

and that vacatur was justified in light of several factors. The Court

21 emphasized first that “[s]cienter is not an element of a violation of

§ 455(a).” Liljeberg,

. Section 455(a) is intended to

“avoid even the appearance of partiality,” so “recusal is required even

when a judge lacks actual knowledge of the facts indicating his

interest or bias in the case if a reasonable person, knowing all the

circumstances, would expect that the judge would have actual

knowledge.”

at 860–61 (emphasis added) (quoting Health Servs.

Acquisition Corp. v. Liljeberg,

(5th Cir. 1986)). When

a judge violates § 455, a new, unconflicted judge may, but is not

required to, vacate the judgment or any decisions rendered by the

conflicted judge. Liljeberg,

. Whether vacatur is

appropriate must be evaluated on a case-by-case basis:

[I]n determining whether a judgment should be vacated for a violation of § 455(a), it is appropriate to consider the risk of injustice to the parties in the particular case, the risk that the denial of relief will produce injustice in other cases, and the risk of undermining the public’s confidence in the judicial process.

Id. at 864.

22 TIG contends that Judge Vyskocil erred by failing to explicitly

consider the factors that the Supreme Court laid out in Liljeberg. As

we have emphasized, § 455(a) “deals exclusively with appearances.”

United States v. Amico,

(2d Cir. 2007). “Its purpose is

the protection of the public’s confidence in the impartiality of the

judiciary.”

Although the Supreme Court in Liljeberg did not set

forth a definitive test for assessing when vacatur is required, see

Liljeberg,

(describing the factors as “appropriate to

consider” (emphasis added)), it is preferable for a court reviewing a

potential violation of § 455(a) to explicitly discuss how the factors

from Liljeberg apply.

The decision here could have benefited from a more detailed

discussion, but Judge Vyskocil’s analysis addressed the Liljeberg

factors. Judge Vyskocil explicitly weighed the likelihood of harm to

the parties as a result of Judge Ramos’s conflict, including

reconsidering portions of Judge Ramos’s decisions that TIG had not

23 challenged on appeal. See, e.g., Exxon II,

, at *3

(“[T]he Court concludes that Respondent was not harmed by Judge

Ramos’ Order granting Petitioner’s Motion to Confirm the

Arbitration Award.”). She also directly addressed the public’s

perception of the court. Id. *2. While the purposes of § 455 might be

better served by a more thorough discussion that addressed each

Liljeberg factor individually and at greater length, we cannot conclude

Judge Vyskocil’s decision was procedurally deficient.

We turn, then, to the substance of TIG’s motion to vacate. Judge

Ramos held between $15,001 and $50,000 in stock in Exxon’s parent

company when he issued his decisions in this case. His failure to

recuse himself was indisputably a serious error. As Judge Vyskocil

recognized, violations of § 455(a) are harmful because “the integrity

of the judicial process is paramount and the potential damage from

impairment of the public confidence in the judicial process is a serious

concern.” Id. Once such an error occurs, the analysis that we carry

24 out is an exercise in mitigation aimed at restoring the public’s

confidence in the courts and protecting litigants’ access to fair,

efficient, and unbiased adjudication. Applying the principles from

Liljeberg, we conclude that vacatur was not required in light of Judge

Vyskocil’s de novo review. 4

First, there is little “risk of injustice” to TIG absent vacatur.

Liljeberg,

. This case presents purely legal questions of

contract interpretation: whether the Policy includes a binding

arbitration agreement, and whether the language of the Policy waives

the parties’ rights to prejudgment interest. Judge Vyskocil considered

4 TIG argues that Judge Vyskocil’s review was not truly de novo, and that she afforded some unspecified measure of deference to Judge Ramos’s decision. But Judge Vyskocil explained that she had “reviewed the Petition to Compel Arbitration, the Motions, and relevant filings in this proceeding, as well as the Orders and Opinions issued by Judge Ramos.” Exxon II,

, at *2. We discern nothing in Judge Vyskocil’s opinion suggesting that she gave any weight—let alone undue or conclusive weight—to Judge Ramos’s reasoning. We reject the contention that a district court must turn a blind eye to the proceedings that occurred in a case before a potentially conflicted judge. Appellate courts routinely consider district courts’ decisions in the course of conducting de novo review. Judge Vyskocil did not err in framing her opinion in the context of Judge Ramos’s earlier decisions. 25 the issues afresh and rendered an independent decision after

reviewing the record. TIG offers no basis to conclude that Judge

Vyskocil’s opinion was in any way tainted by Judge Ramos’s conflict,

nor does it identify any argument that it was unable to make as a

result of the procedure used in this case. There is no reason to force

the parties to relitigate the entire case, likely causing significant delay,

in the absence of any basis to conclude that doing so would lead to a

more just outcome.

Next, TIG argues that denying its request to vacate the

judgment would produce injustice in other cases because litigants

would be disincentivized from examining grounds for disqualifying

conflicted judges if they thought courts would not take such motions

seriously. See id. at 868 (“[P]roviding relief in cases such as this will

not produce injustice in other cases; to the contrary, the Court of

Appeals’ willingness to enforce § 455 may prevent a substantive

injustice in some future case by encouraging a judge or litigant to

26 more carefully examine possible grounds for disqualification and to

promptly disclose them when discovered.”). The risk of harm in

future cases is minimal here, though, because the district court

disclosed the conflict as soon as Judge Ramos became aware of it, and

because TIG has had ample opportunity to challenge Judge Ramos’s

rulings both in the district court and on appeal.

Finally, declining to vacate the judgment here does not risk

further “undermining the public’s confidence in the judicial process.”

Id. at 864. To be sure, this case has already drawn significant public

attention, see Grimaldi et al., supra p. 17, and Judge Ramos’s failure to

recuse himself before ruling was a significant error. Our task now is

to determine how best to move forward and preserve the public’s

confidence in our federal courts. As noted earlier, this case presents

pure questions of law; the district court was tasked with determining

what the language in the parties’ contract means. Although Judge

Ramos addressed that question while conflicted, an unconflicted

27 district judge then gave the case a fresh look—that is, she reviewed

his decision de novo. 5 Now, on appeal, three more unconflicted judges

review the parties’ arguments—again de novo—to decide what the

contract means. This procedure assures that the final disposition of

the case is not affected by any conflict of interest. Indeed, the

questions have now been reviewed by four disinterested judges. The

public also has an interest in speedy adjudication of disputes, an

interest that would not be furthered by forcing the parties to re-brief

the same issues for a third time. We therefore conclude that declining

to vacate the judgment poses little additional risk to the public’s

confidence in the judiciary.

In sum, the Liljeberg factors weigh against vacatur. This case

presents purely legal questions which were reviewed completely

5 We note that nothing in the record suggests that Judge Ramos was aware of his conflict at the time he rendered his decisions, and the parties do not suggest otherwise. It was nonetheless appropriate for a second district judge to review the case de novo because § 455 is designed to “avoid even the appearance of partiality.” Liljeberg,

(emphasis added). 28 afresh by a district judge who had no conflicts. Vacating the judgment

would delay the case for months or longer, all to no benefit. We are

satisfied that Judge Ramos’s conflict did not influence Judge

Vyskocil’s decision, nor will it affect our disposition of this case.

Accordingly, we affirm Judge Vyskocil’s denial of TIG’s motion to

vacate the judgment and turn to the merits of the appeal.

B. The ADR Endorsement

Exxon argues, and the district court agreed, that the ADR

Endorsement is a binding arbitration agreement. TIG contends that

the ADR Endorsement simply reflects those procedures that govern

if one party requests ADR and the counterparty agrees. Neither

party’s interpretation is entirely satisfactory. But where Exxon’s

reading is strained, TIG’s directly contradicts the language of the

ADR Endorsement. And “when you have eliminated the impossible,

whatever remains, however improbable, must be the truth.” Arthur

Conan Doyle, The Sign of Four 93 (1890) (emphasis omitted).

Accordingly, we conclude that the ADR Endorsement is a binding 29 arbitration agreement and affirm the district court’s order compelling

arbitration.

“We review de novo the grant of a motion to compel

arbitration.” Cooper v. Ruane Cunniff & Goldfarb Inc.,

(2d Cir. 2021); see Harrington v. Atl. Sounding Co.,

(2d

Cir. 2010) (“The determination of whether parties have contractually

bound themselves to arbitrate a dispute is a determination involving

interpretation of state law and hence a legal conclusion also subject to

de novo review.” (cleaned up)). “In deciding a motion to compel

arbitration, courts apply a standard similar to that applicable for a

motion for summary judgment. Courts must consider all relevant,

admissible evidence submitted by the parties and contained in

pleadings, depositions, answers to interrogatories, and admissions on

file, together with affidavits, and must draw all reasonable inferences

in favor of the non-moving party.” Cooper, 990 F.3d at 179–80 (cleaned

up).

30 Although “the Federal Arbitration Act (‘FAA’) embodies a

national policy favoring arbitration[,] . . . a court may order arbitration

of a particular dispute only where the court is satisfied that the parties

agreed to arbitrate that dispute.”

(cleaned up). “Courts

consider two factors when deciding if a dispute is arbitrable:

(1) whether the parties agreed to arbitrate, and, if so, (2) whether the

scope of that agreement encompasses the claims at issue.”

(internal quotation marks omitted). Because “arbitration is simply a

matter of contract between the parties . . . [t]he threshold question of

whether the parties indeed agreed to arbitrate is determined by state

contract law principles.” Nicosia v. Amazon.com, Inc.,

(2d Cir. 2016) (cleaned up). The Policy here provides that it is

“governed by and construed in accordance with the internal laws of

the State of New York.” Joint App’x at 38. The key question is

whether the parties agreed to arbitrate at all.

31 Under New York law, “insurance contracts must be interpreted

according to common speech and consistent with the reasonable

expectation of the average insured.” Dean v. Tower Ins. Co. of N.Y.,

(2012). Courts in New York avoid construing

contracts in ways that “would leave contractual clauses

meaningless.” Two Guys from Harrison-NY, Inc. v. S.F.R. Realty Assocs.,

(1984).

Ordinarily, “ambiguities in an insurance policy are to be

construed against the insurer.” Dean,

(cleaned up).

Here, though, the Policy expressly states that it should be “construed

in an evenhanded fashion” and ambiguities must be resolved “in the

manner most consistent with the relevant provisions, stipulations,

exclusions and conditions (without regard to authorship of the

language, without any presumption or arbitrary interpretation or

construction in favor of either the Insured or the Company and

without reference to parol evidence).” Joint App’x at 38.

32 1. TIG’s view

TIG argues that the ADR Endorsement creates a three-step

procedure for ADR that permits, but does not require, arbitration.

First, the preamble and paragraph 1 of the ADR Endorsement

state that, in the event of a dispute, either party “may request” to

settle the dispute via ADR “in writing.” Joint App’x at 60. Second,

the introductory phrase in paragraph two (“If the Company and the

Insured agree to so proceed”) means that the remaining procedures

apply only if the requestee agrees to the settle the dispute via ADR.

See id. ¶ 2. Finally, if the parties agree to ADR but cannot agree on the

format within 90 days, then paragraph 4 dictates that the parties

“shall use binding arbitration.” Id. ¶ 4.

TIG notes that we have recognized the validity of contracts that

permit arbitration only if both parties agree to arbitrate a given

dispute. In Gangemi v. General Electric Company, an arbitration

agreement between a company and union provided that a dispute

about the “interpretation and application” of the contract “may be 33 submitted to arbitration only after it has been properly processed in

accordance with the provisions of Article III and with prior written

mutual agreement” of the parties.

, 863 n.2 (2d Cir. 1976).

In contrast to that provision, the contract specified that a grievance

“involving a disciplinary penalty . . . may be submitted to arbitration”

if it remains disputed after it is processed through an administrative

procedure.

The union moved to compel arbitration on non-

disciplinary topics to which the company would not agree. The

district court held that the language of the contract made arbitration

mandatory and granted the motion to compel.

. We

reversed. We explained that the arbitration clause did not include the

“‘broad’ or ‘standard’ mandatory arbitration clause common to many

collective bargaining agreements.”

. Because the parties’

dispute was not a disciplinary grievance, for which arbitration would

have been “concededly mandatory,” it was subject to arbitration

34 “only by consent” of both parties.

. “[C]ourts are powerless,

absent such consent, to compel arbitration.” Id.

2. Exxon’s view

In Exxon’s view the parties are set inexorably on the path to

arbitration once either party requests to settle a dispute by ADR,

unless the parties jointly adopt another ADR procedure. Exxon

contends that the introductory clause of paragraph 2 (“If the

Company and the Insured agree to so proceed”) applies to the second

clause in that paragraph (“they will jointly select an ADR process for

settlement of the dispute”) rather than what came before. Joint App’x

at 60. Thus, on Exxon’s read, paragraph 2 means that the parties may

select an ADR procedure other than arbitration if they agree on an

alternative.

If they do not “agree to so proceed”—i.e., to select an

alternative—then paragraph 4 clarifies that the default is arbitration.

The first sentence of that paragraph provides: “If the parties cannot

agree on an ADR process within 90 days of the written request 35 described in paragraph (1), the parties shall use binding arbitration.”

Id. Exxon argues that TIG’s interpretation would render this sentence

mere surplusage. Under TIG’s reading, Exxon contends, a party

could always avoid binding arbitration by withholding its consent to

engage in the ADR selection procedure at all unless the counterparty

agreed to something other than arbitration.

3. Exxon’s view is a permissible interpretation of the Policy

Ultimately, neither party’s read is without flaw. For its part,

Exxon struggles to contend with the ostensibly permissive language

in the Preamble and paragraph 1 of the ADR Endorsement. Joint

App’x at 60. Exxon asserts that this language is consistent with the

parties’ intention to enter a binding arbitration agreement, relying on

Loc. 771, I.A.T.S.E., AFL-CIO v. RKO Gen., Inc., WOR Div.,

(2d Cir. 1977). There, we noted that an arbitration clause

stating that a dispute “may be submitted to arbitration . . . [is] the

standard form for the submission of all disputes to an arbitrator.” Id.

36 (cleaned up). But the word “may” means “ha[s] permission to.” May,

Merriam-Webster Unabridged Dictionary,

https://unabridged.merriam-webster.com/unabridged/may. In the

“standard form” of a mandatory arbitration agreement we considered

in Local 771, the “may” preceded submit.

. Thus, one

party had “permission to” submit a claim to arbitration unilaterally.

In contrast, here, the “may” precedes request. One party “has

permission to” ask the other party to proceed via ADR. The

introductory paragraphs of the ADR Endorsement, standing alone,

suggest that either party may request arbitration, but neither party

can require it.

But we cannot read the introductory paragraphs of the ADR

Endorsement in isolation, and the problems for TIG arise in the first

sentence of paragraph 4: “If the parties cannot agree on an ADR

process within 90 days of the written request described in paragraph

(1), the parties shall use binding arbitration.” Joint App’x at 60

37 (emphasis added). The natural meaning of this sentence is that the

clock on arbitration starts ticking when one party requests ADR,

regardless of whether the counterparty accedes to that request.

Exxon’s reading of the ADR Endorsement may have its

challenges, but TIG’s directly contradicts the plain language of

paragraph 4. Faced with a choice between an interpretation that is

difficult and another that is precluded by the text of the contract, we

must adopt the former. We therefore hold that the ADR Endorsement

functions as a binding arbitration agreement. When one party

requests to settle a dispute via ADR, the parties have 90 days to

choose the format. If they fail to do so, they must arbitrate.

TIG points to two features of the contract that it says support

its view that the ADR Endorsement is permissive. While both are

arguably in tension with the conclusion that the ADR Endorsement is

mandatory, neither is irreconcilable. First, TIG notes that, under the

ADR Endorsement, applicable statutes of limitations are tolled “from

38 the date that the Company and the Insured agree to follow the

selection procedures.” Joint App’x at 60. Because the provision ties

the tolling of any statutes of limitations to the agreement between the

parties, TIG contends, such an agreement must be necessary to trigger

the procedures described in the ADR Endorsement.

TIG

presupposes that the parties intended to toll applicable statutes of

limitations in every case where ADR would be used, but it cites no

evidence to support that assumption. We conclude that paragraph 7

applies only when the parties reach an agreement to select an ADR

procedure under paragraphs 2 and 3.

If the parties fail to reach an

agreement, thereby defaulting to arbitration, then any applicable

statutes of limitations continue to run.

Second, TIG argues that the parties’ decision to delete a form

mandatory arbitration clause suggests that they intended the ADR

Endorsement to be different and therefore permissive. The Policy

form originally contained a provision stating that “[a]ny dispute

39 arising under this Policy shall be finally and fully determined in

London, England under the provisions of the English Arbitration Act

of 1950.” Joint App’x at 37. The parties agreed to delete that

arbitration provision and replace it with the ADR Endorsement.

Although the parties may have intended to adopt something other

than a binding arbitration agreement, that is not the only inference—

or even the strongest inference—that the change would support. For

example, the change may have been due to a shift in the parties’ venue

preference (the ADR Endorsement moved the venue for arbitration

from London to New York), the desire for more efficient dispute

resolution (the ADR Endorsement waives the parties’ right to any pre-

hearing discovery), or a change in the parties’ preference for the rules

that would apply to the arbitration (the ADR Endorsement eliminated

any reference to the English Arbitration Act, instead specifying that

the parties would agree on the rules that applied). We cannot

conclude that the parties’ decision to adopt the ADR Endorsement

40 implies that they intended to enter something other than a mandatory

arbitration agreement.

In sum, while Exxon’s reading of the ADR Endorsement is

difficult in some respects, it is reconcilable with the provision’s text.

TIG’s is not. We hold that the ADR Endorsement amounts to a

mandatory arbitration agreement, and that the district court did not

err in granting Exxon’s motion to compel arbitration.

C. Prejudgment interest

TIG next argues that, even if the district court properly granted

Exxon’s motion to compel arbitration, it erred in granting pre-award

interest beyond the Policy limit of $25 million when it confirmed that

award. “The award of interest is generally within the discretion of

the district court and will not be overturned on appeal absent an

abuse of discretion.” New England Ins. Co. v. Healthcare Underwriters

Mut. Ins. Co.,

, 602–03 (2d Cir. 2003).

In New York, by statute, the default rule is that pre-award

interest “shall be recovered upon a sum awarded because of a breach 41 of performance of a contract.”

(a). Interest

accrues “from the earliest ascertainable date the cause of action

existed,”

§ 5001(b), and is generally mandatory. J. D'Addario & Co.

v. Embassy Indus., Inc.,

(2012); see also New England

Ins. Co.,

. Pre-award interest “is not a penalty,” and is

intended to “compensate the wronged party for the loss of use of the

money.” J. D’Addario & Co., 20 N.Y.3d at 117–18.

Statutory pre-award interest is not required or available,

however, where the parties’ contract is “sufficiently clear” that

statutory interest was not “contemplated by the parties at the time the

contract was formed.” Id. at 118. In J. D’Addario, for example, a real

estate buyer placed a down payment in escrow before closing. Id. at

116. The buyer then breached the contract and failed to attend the

closing. Id. at 117. The contract specified that, in the event of a breach,

liquidated damages was the “sole remedy” and “sole obligation,” and

that each party had “no further rights” beyond bank interest on the

42 down payment in escrow. Id. at 118. The New York Court of Appeals

held that this language was “sufficiently clear” to establish that the

parties intended to waive their rights to statutory pre-award interest.

Id. The court rejected the plaintiff’s “contention that the contract

never expressly mentioned statutory interest, and that therefore their

right thereto was not waived.” Id.

Here, paragraph 6 is a “sufficiently clear” statement of the

parties’ intent to waive their right to statutory interest in arbitration

to the extent that the interest plus the principal award would exceed

the Policy limit of $25 million. That paragraph provides:

It is expressly agreed that any decision, award, or agreed settlement made as a result of an ADR process shall be limited to the limits of liability of this Policy.

Joint App’x at 60. Exxon acknowledges that the phrase “any decision,

award, or agreed settlement” includes the principal amount of $25

million that it won in arbitration. The arbitral panel concluded that

“[b]ased on the insurance contract to which the parties entered . . . [it]

43 lack[ed] the jurisdiction to make an award that exceeds the limits of

the TIG policy.” Joint App’x at 163–64 ¶ 137. The panel explained

that “[a]rbitral award is an all-inclusive term” and that a reasonable

business person would understand it includes not only damages, but

“interest, costs and legal fees.” Id. at 164 ¶ 139. We agree with the

panel’s analysis and conclude that the language of the ADR

Endorsement clearly waived the parties’ rights to obtain pre-award

interest in the arbitral proceeding.

Exxon argues that the arbitral panel declined to grant pre-

award interest because it determined that it lacked jurisdiction to do

so, not because it concluded that the parties waived their rights to pre-

award interest entirely, and so the district court could award it. But

under the language of the Policy, that is a distinction without a

difference. “The scope of [an] arbitrator’s authority must be

determined from the language of the agreement, using accepted rules

of contract law.” CBA Indus., Inc. v. Circulation Mgmt., Inc., 578

(2d Dep’t 1992). Here, the contract limited the

recovery available “as a result of an ADR process” to the Policy limit,

thereby restricting the arbitral panel’s authority to grant any award

beyond that amount. But a proceeding to confirm an arbitral award

“ordinarily is a summary proceeding that merely makes what is

already a final arbitration award a judgment of the court.” Citigroup,

Inc. v. Abu Dhabi Inv. Auth.,

(2d Cir. 2015) (cleaned

up). We hold that paragraph 6 of the ADR Endorsement waives the

parties’ rights to pre-award interest beyond the Policy limit under

(a), either in the arbitration itself or in the

subsequent proceeding to confirm the award. Accordingly, we

reverse the judgment of the district court to the extent that it granted

interest through the date that the arbitral panel entered its award.

We reach a different conclusion with respect to interest

accruing after the arbitral panel entered its award. New York

recognizes two distinct periods of “prejudgment interest.” First,

45 interest accrues under

(b) “from the earliest

ascertainable date the cause of action existed” until the date the award

is granted. Once the award is entered, interest accrues “upon the total

sum awarded . . . from the date the verdict was rendered or the report

or decision was made to the date of entry of final judgment.”

§ 5002. The arbitral panel’s award was a “report or decision” within

the meaning of the statute. See E. India Trading Co. v. Dada Haji

Ebrahim Halari,

(1st Dep’t 1952), aff’d,

(1953); Durant v. Motor Vehicle Accident Indemnification Corp.,

(2d Dep’t 1964), modified on other grounds,

(1965). “Under New York law, post-verdict prejudgment interest

is mandatory.” Adrian v. Town of Yorktown,

(2d Cir.

2010). Unlike the arbitral award, which was plainly a “decision,

award, or agreed settlement made as a result of an ADR process,”

Joint App’x at 60 ¶ 6, post-award prejudgment interest is a statutory

requirement that falls inherently outside an arbitrator’s authority and

46 within the authority of the courts. The ADR Endorsement does not

clearly waive the parties’ rights to interest accruing after the arbitral

panel issued its decision. 6 Accordingly, we remand to the district

court to calculate the interest accruing from August 7, 2019, the date

on which the arbitral panel rendered its decision, through the date of

judgment.

III. Conclusion

In sum, we hold as follows:

(1) The district court did not err in denying TIG’s motion to

vacate the judgment in light of Judge Ramos’s conflict;

(2) Because the parties’ ADR Endorsement amounts to a

binding arbitration agreement, the district court did not

err in compelling arbitration; and

6 Nor does it waive the parties’ rights to post-judgment interest. See

(a). 47 (3) The district court erred in ordering TIG to pay pre-

arbitral-award interest, but properly required TIG to pay

interest for the period between the arbitral panel’s award

and the entry of judgment in the district court.

We therefore AFFIRM the district court’s denial of the motion

to vacate and the district court’s order compelling arbitration,

REVERSE in part its decision granting Exxon’s request for

prejudgment interest, and REMAND to the district court for further

proceedings consistent with this opinion.

48