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PARTY’S PREVIOUSLY WAIVED RIGHT TO ARBITRATE “REVIVED” AFTER AMENDED COMPLAINT

November 29, 2011 by Carlton Fields

Sara Krinsk filed a putative class action lawsuit against SunTrust Bank, alleging that it improperly revoked a line of credit on her home, based on an alleged company wide policy to dispatch with certain credit risks after issues with collateralized mortgage debt came to light in 2008 and 2009. After participating in the litigation for nine months, and after plaintiff amended her complaint greatly enlarging the putative class, SunTrust moved to compel arbitration based on the arbitration provision in the parties’ contract, which also precluded class arbitration. The district court denied the motion, finding SunTrust had waived its right to arbitrate due to its participation in the litigation to that point. SunTrust appealed, arguing that the Plaintiff’s amendment of her complaint shortly before SunTrust moved to compel arbitration revived its right to arbitrate anew. The Eleventh Circuit agreed, finding the case presented “one of those limited circumstances” warranting revival of arbitration rights because the amended complaint significantly altered the scope of the case. Krinsk v. Suntrust Banks, Inc., No. 10-11912 (11th Cir. Sept. 7, 2011)

This post written by John Pitblado.

Filed Under: Arbitration / Court Decisions, Arbitration Process Issues

APPEALS COURT REVERSES TRIAL COURT’S ORDER VACATING ARBITRATION AWARD AS INSUFFICIENTLY “REASONED”

November 28, 2011 by Carlton Fields

A federal circuit court of appeals reversed a lower court order vacating an arbitration award because the arbitrators had “exceeded their powers” by purportedly failing to provide a “reasoned award” as agreed upon by the parties. Cat Charter, LLC and its principals initiated an arbitration against Multihull Technologies, Inc. and its owner to resolve a dispute involving the construction of a yacht. The parties requested a “reasoned award” from the panel. According to the district court, the arbitrators failed to deliver an award that was sufficiently “reasoned,” exceeding their powers under Federal Arbitration Act section 10(4)(a). The court of appeals analyzed what it termed the “spectrum of increasingly reasoned awards” that runs from a “standard award,” which merely announces a decision, to “findings of fact and conclusions of law,” which requires “relatively exacting” detail. The appellate court found that a “reasoned award” was somewhere in the middle of the spectrum and that the panel’s award, though “it could have provided more,” gave a sufficiently detailed explanation to be considered “reasoned.” The appeals court reinstated the award, noting that if the parties had desired more detail, they could have requested that the arbitrators provide “findings of fact and conclusions of law.” Cat Charter 11th Cir 7.13.11, No. 10-11674 (11th Cir. July 13, 2011).

This post written by Ben Seessel.

Filed Under: Arbitration / Court Decisions, Arbitration Process Issues, Confirmation / Vacation of Arbitration Awards, Contract Interpretation

SETTLEMENT REACHED IN ASBESTOS LIABILITY REINSURANCE DISPUTE

November 25, 2011 by Carlton Fields

A suit filed late last year by two subsidiaries of Chartis, Inc. against their reinsurer, Transport Insurance Co, was recently settled and dismissed. The underlying complaint alleged that Transport failed to reinsure in excess of $4.5 million in connection with asbestos claims paid under commercial umbrella liability policies. The parties filed a stipulation of dismissal on October 11, 2011 and an order dismissing the case was entered two days later. Insurance Co. of the State of Pennsylvania v. Transport Ins. Co., Case No. 2:10-cv-09830 (USDC C.D. Cal. Oct. 13, 2011).

This post written by Michael Wolgin.

Filed Under: Reinsurance Claims

PREMATURE TO RULE ON EFFECT OF UNUTILIZED REINSURANCE ON OTHER INSURANCE CLAUSE BEFORE LOSSES ESTABLISHED

November 23, 2011 by Carlton Fields

In ruling on cross motions for summary judgment, the U.S. District Court for the Western District of Michigan considered a request for a declaration regarding the application of an “Other Insurance” clause in a Directors and Officers liability insurance policy. The insurer (F&D) requested a declaration that any coverage available under the policy is limited to the amount in excess of the $1.25 million of unutilized reinsurance coverage available to the insured (Michigan Millers) from its reinsurer (Employers Reinsurance Corporation). The District Court denied the request for declaration, finding it premature. The court explained that because of the different nature of the F&D and ERC policies, the Other Insurance clause may have to operate as a reimbursement scheme rather than an outright excess insurance provision. So, prior to losses being established, it is premature to rule on the effect of the Other Insurance clause. Michigan Millers Mutual Insurance Co. v. Fidelity and Deposit Co. of Maryland, No. 09-596 (W.D. Mich. Aug. 15, 2011).

This post written by John Black.

Filed Under: Contract Interpretation

COURT DISTINGUISHES CONCEPCION WHERE ARBITRATION OF INDIVIDUAL CLAIMS WAS “INFEASIBLE”

November 22, 2011 by Carlton Fields

A state court recently distinguished the U.S. Supreme Court’s Concepcion decision in upholding a prior order that found that arbitration agreements that precluded class arbitration were void as against public policy. A putative consumer class action was brought against Dell Inc. by plaintiffs who had agreed to arbitrate disputes only on an individual basis – and not as a class action. Dell initially prevailed in arbitration, but the appellate court subsequently reversed the award, holding that the agreement barring class arbitration violated state public policy and was unenforceable. After the appellate court issued its ruling, the U.S. Supreme Court decided the Concepcion case, which held the FAA preempts state laws that preclude class action waivers. Arguing that Concepcion rejected the appellate court’s decision in this case, Dell renewed its underlying motion to confirm the arbitration award. The court denied Dell’s motion, distinguishing Concepcion on its facts. Whereas the plaintiffs in Concepcion had sizable individual claims and a favorable procedure in place to arbitrate individual claims, the plaintiffs in this case had small individual claims and no favorable individual claim resolution procedure. State policy against a class waiver prevailed in this case because arbitration of individual claims was “infeasible as a matter of fact” leaving no “federal interest with which the state law might conflict.” Since this rationale arguably is similar to those underlying state law provisions vulnerable under Conception, it will be interesting to see whether this position prevails. Feeney v. Dell, Inc., Case No. MICV 2003-01158 (Mass. Super. Ct. Sept. 30, 2011).

This post written by Michael Wolgin.

Filed Under: Arbitration Process Issues, Week's Best Posts

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