Alex Silverman

Tenth Circuit Finds Non-Signatory May Compel Arbitration Based on Equitable Estoppel

January 21, 2022 by Alex Silverman

Defendant SemGroup Corp. and intervenor-defendant Cypress Environmental Management-TIR appealed an Oklahoma district court order denying their motions to compel arbitration. The plaintiff, Robert Ferrell, was a Cypress employee. He and Cypress entered into an employment agreement containing an arbitration clause, but SemGroup was not a party to that agreement. After Ferrell filed a putative class action against SemGroup, SemGroup moved to dismiss and compel arbitration, relying on the arbitration clause in the Ferrell/Cypress employment agreement. Cypress intervened, and both Cypress and SemGroup moved to dismiss and compel arbitration, arguing: (1) there was a question of arbitrability to be decided by the arbitrator as to whether a delegation clause in the arbitration agreement applied to non-signatories, such as SemGroup; and (2) arbitration of Ferrell’s claims was required based on theories of equitable estoppel. The district court denied the motions to compel, ruling that, based on Belnap v. Iasis Healthcare, 844 F.3d 1272 (10th Cir. 2017), the court, not the arbitrator, is required to decide the arbitrability issue. The court also rejected the movants’ estoppel arguments, finding they did not justify estopping Ferrell from avoiding arbitration.

On appeal, the Tenth Circuit held initially that the district court misapplied Belnap, clarifying that in Belnap the court “expressly declined to consider” whether responsibility for determining if a non-signatory may compel arbitration must be delegated to the arbitrator. The Tenth Circuit declined to decide that issue here as well, ruling instead that the motion to compel should have been granted based on equitable estoppel. Noting that the posture and issues in this case were nearly identical to those raised in a prior Tenth Circuit decision also involving Cypress, the court found the Oklahoma Supreme Court would recognize a “concerted misconduct estoppel” theory where, as here, a signatory (Ferrell) asserted allegations of “substantially interdependent and concerted misconduct” by a non-signatory (SemGroup) and another signatory (Cypress). This case, the court ruled, is “precisely the type of lawsuit that ‘concerted misconduct estoppel’ was designed to address.” As such, the Tenth Circuit reversed and remanded the district court order, finding Ferrell should be estopped from avoiding arbitration.

Ferrell v. Cypress Environmental Management-TIR, LLC, No. 20-5092 (10th Cir. Nov. 30, 2021).

Texas Department of Insurance Adopts New Reinsurance Regulations for Reciprocal Insurers

January 19, 2022 by Alex Silverman

In November 2021, the Texas Department of Insurance adopted new administrative reinsurance regulations relating to reciprocal reinsurers. The rules took effect on January 1, 2022.

Section 7.615 (28 Tex. Admin. Code § 7.615) largely mirrors NAIC Model Regulation #786, and adds a new way for ceding insurers to receive credit for reinsurance ceded to non-U.S. assuming reinsurers domiciled in a “reciprocal jurisdiction,” as defined by Texas Annotated Insurance Code section 493.108, which also became effective on January 1, 2022. The ceding reinsurer is eligible to receive the credit if it meets certain requirements and conditions, including satisfying minimum capital, surplus, and solvency requirements; agreeing to submit to jurisdiction in the state of Texas; and various other rules set forth in section 493.108 and section 7.615(c).

Section 7.616 (28 Tex. Admin. Code § 7.616) is substantially similar to NAIC Model Regulation #787, the purpose of which is to establish standards governing reserve financing arrangements for certain life insurance policies. Certain types of reinsurance treaties are exempt from the new rule, as set forth in section 7.616(c).

SDNY Confirms $500M Arbitration Award, Rejects Claim of Arbitrator Impartiality

December 15, 2021 by Alex Silverman

Petitioner Andes Petroleum Ecuador Ltd. moved to confirm a $500 million arbitration award arising from a contract dispute involving hydrocarbon development in the Ecuadorian Amazon. The respondent, Occidental Exploration and Production Co., moved to vacate the award, citing the alleged impartiality of its own party-appointed arbitrator, Robert Smit. During the selection process, Smit disclosed that he knew Andres Petroleum’s lead counsel, Laurence Shore, from attending arbitration conferences. Occidental took issue with Smit’s failure to disclose that he and Shore were also appointed to serve on the same panel of the International Chamber of Commerce. Noting that a court’s review of an arbitration award is “severely limited,” the district court found no basis for Occidental’s claim of impartiality. The court found no evidence to suggest that any arbitrator acted fraudulently by virtue of his incomplete or nondisclosures. In addition, the court held that there was no indication of arbitrator misconduct or impartiality by virtue of Smit’s professional relationship with Shore, noting that the Federal Arbitration Act “does not proscribe all personal or business relationships between arbitrators and the parties.” Absent evidence that the arbitral proceedings themselves lacked fundamental fairness, the court granted Andres Petroleum’s petition to confirm the award and denied Occidental’s cross-motion to vacate.

~~Andes Petroleum Ecuador Ltd. v. Occidental Exploration & Production Co.~~, No. 1:21-cv-03930 (S.D.N.Y. Nov. 15, 2021).

Tenth Circuit Finds Equitable Estoppel Theories Allowed Non-Signatory to Rely on Arbitration Clause, Reverses Order Denying Motion to Compel Arbitration

December 14, 2021 by Alex Silverman

Plaintiffs Darrell Reeves and James King worked at Enterprise Products Partners through separate third-party staffing companies. Each plaintiff had a separate employment contract with his respective staffing company, which required the employee to individually arbitrate any claim arising out of the employment with the relevant staffing company. Reeves commenced a collective action claim against Enterprise to collect unpaid overtime wages. King later joined the putative collective action. Enterprise moved to compel arbitration of the action based on the arbitration clauses in the plaintiffs’ individual employment agreements. The district court denied the motion, finding that Enterprise was not a signatory to the employment agreements in which the arbitration clauses were contained.

The issue on appeal was whether certain equitable estoppel theories allowed Enterprise to assert the arbitration clauses in the plaintiffs’ employment agreements, even as a non-signatory to those agreements. Enterprise argued that Oklahoma law required the district court to apply a “concerted misconduct” or “intertwined claims” theory of equitable estoppel. The Tenth Circuit Court of Appeals agreed, finding two Oklahoma appellate courts had already adopted the concerted misconduct theory and that the Oklahoma Supreme Court appeared to approve of the intertwined claims theory. The Tenth Circuit also agreed with Enterprise that these theories are put in use for precisely the circumstances presented here. The court explained that the plaintiffs’ claims alleged substantially interdependent and concerted misconduct by both Enterprise and the respective staffing companies, which were the companies that actually paid the plaintiffs, not Enterprise. The Tenth Circuit therefore reversed and remanded the district court’s order denying Enterprise’s motion to compel arbitration.

Reeves v. Enterprise Products Partners, LP, No. 20-5020 (10th Cir. Nov. 9, 2021).

Fifth Circuit Affirms Order Confirming International Arbitration Award, Ending Decades-Old Maritime Injury Litigation

November 2, 2021 by Alex Silverman

Vinod Kumar Dahiya was injured in late 1999 while on a ship en route to Louisiana. At the time, he was employed by Neptune Shipmanagement Services and assigned to a vessel with interests held by the remaining plaintiffs. An arbitration clause in Dahiya’s employment contract required arbitrating any dispute arising out of the contract in Singapore or India. Following a rollercoaster of litigation in Louisiana state and federal courts over the course of two decades, including a state court trial and judgment for Dahiya that was later reversed, the dispute was ultimately arbitrated in India. In 2020, Dahiya obtained an arbitration award against Neptune for roughly $130,000. Neptune and the other plaintiffs later filed this action in Louisiana district court to confirm the award and enjoin Dahiya from pursuing further litigation against the non-Neptune plaintiffs. The district court granted summary judgment to the plaintiffs.

On appeal, Dahiya challenged the Indian award on the following grounds: (1) the district court lacked subject matter jurisdiction; (2) the arbitration clause was unenforceable because Neptune never signed the employment contract; and (3) the district court erred in finding the award prevented him from pursuing litigation against non-Neptune plaintiffs that were not parties in the arbitration. The Fifth Circuit disagreed in all respects. On the jurisdictional point, the court rejected the notion that the district court lost jurisdiction when it remanded the pre-arbitration litigation to state court in 2002, finding that a remand order in an earlier case had no preclusive effect with respect to a new case, with new issues, and thus a new basis for conferring federal jurisdiction. Conversely, the court found that earlier state court rulings did have preclusive effects as to Dahiya’s second and third arguments. Unlike the jurisdictional issue, the court explained that Louisiana state courts had already addressed and rejected the exact arguments Dahiya was now raising. The court therefore affirmed the district court order in its entirety.

Neptune Shipmanagement Services PTE, Ltd. v. Dahiya, No. 20-30776 (5th Cir. Oct. 1, 2021).