Carlton Fields

AMICO DISPUTES CASH HOLDINGS IN MANHATTAN RE REHABILITATION

October 17, 2011 by Carlton Fields

In response to a rehabilitation plan for Delaware insurance company Manhattan Re proposed by its receiver, American Motorists Insurance Company (a reinsurer of Manhattan Re) filed objections with the Delaware Court of Chancery. AMICO argued that the plan should be rejected because the receiver improperly intended to dispose of certain cash holdings that AMICO claimed constituted cash collateral under its reinsurance agreements with the company. Additionally, AMICO moved to have the parties’ dispute referred to arbitration, and for a preliminary injunction to preserve the disputed cash until arbitration is resolved. The court found that Delaware law permits enforcement of the arbitration clause in the reinsurance agreement which compelled the parties to arbitrate their dispute over the cash. Additionally, the court issued a partial stay of the proceedings pending resolution of the arbitration. In re Rehabilitation of Manhattan Reinsurance Co., No. 2844 (Del. Ct. Ch. Oct. 4, 2011).

This post written by John Black.

COURT REFUSES TO COMPEL ARBITRATION ABSENT SUFFICIENT PROOF THAT PLAINTIFF WAS BOUND BY ARBITRATION CLAUSE

October 13, 2011 by Carlton Fields

Plaintiff brought a putative class action lawsuit alleging violations of the Telephone Consumer Protection Act of 1991. Plaintiff claimed that she received numerous debt collection calls to her cell phone, notwithstanding that she never owned a credit card issued by Citibank. Citibank moved to compel arbitration, arguing that plaintiff held a ConocoPhilips branded credit card it had issued and that plaintiff’s written card agreement contained a governing arbitration clause. The court denied Citibank’s motion to compel, holding that Citibank had produced only representative samples of card agreements in support of its motion, and insufficient information to link such a card agreement to an account held by plaintiff. Gonzalez v. Citigroup, Inc., Case No. 2:11-00795 (USDC E.D. Cal. Sept. 19, 2011).

This post written by Ben Seessel.

COURT ALLOWS DISCOVERY OF ARBITRATOR FOR VACATUR CLAIM BASED ON EVIDENT PARTIALITY

October 12, 2011 by Carlton Fields

Chartis insured Lasalle Bank under certain surplus lines policies covering Lasalle’s business trusts. The insurance policies contained mandatory arbitration agreements. After a dispute arose between the parties, Chartis initiated a tripartite arbitration through the AAA as per the agreement. The arbitration entailed more than sixty (60) days of evidentiary hearings, which concluded on September 22, 2010. During the pendency of the arbitration, Chartis discovered that Charles Ennis, one of the three agreed-upon arbitrators, had concealed a past adversarial relationship with Chartis affiliates, and requested his removal through the AAA. After reviewing supplemental disclosures by Ennis, the AAA rejected Chartis’ request and the arbitration was concluded. The panel thereafter issued an award, and the parties and arbitrators entered into a Confidentiality Order. Chartis immediately filed an action in court to vacate the award, based in part on Ennis’ purported “evident partiality.” Chartis moved to seal the award pursuant to the Confidentiality Order, and also moved for permission to seek limited discovery on Ennis’ prior adversarial relationship with the Chartis affiliates. The court denied the motion to seal, but allowed Chartis the opportunity to redact specified portions of the award. The Court granted Chartis’ motion for discovery of Ennis’s past adversarial relationship to Chartis affiliates. Chartis Specialty Ins. Co. v. Lasalle Bank, N.A., C.A. No. 6103-VCN (Del. Ch. July 29, 2011).

This post written by John Pitblado.

STATE COURT INTERVENES TO FACILITATE SELECTION OF NEUTRAL ARBITRATOR

October 11, 2011 by Carlton Fields

Arrowood Indemnity Co. filed suit in state court, complaining that Clearwater Insurance Co. failed to name three neutral umpire candidates in accordance with the parties’ arbitration agreement. Arrowood asked the court to issue orders facilitating the designation of a neutral arbitrator. Clearwater moved to dismiss, arguing that the court lacked subject matter jurisdiction because the FAA, which undisputedly governed, does not allow for pre-award challenges to an arbitration panel. The court denied Clearwater’s motion, holding that the FAA does not preclude state court involvement in procedural pre-arbitration matters and that it should intervene to facilitate the selection of a neutral arbitrator to protect the integrity of the arbitration process. To court directed the parties to schedule an evidentiary hearing where Clearwater could make challenges to a slate of neutral arbitrators proposed by Arrowood. Arrowood Indem. Co. v. Clearwater Ins. Co., Case No. 11-6018055-S (Conn. Super. Ct. July 26, 2011).

This post written by Ben Seessel.

EIGHTH CIRCUIT AFFIRMS DECISION AGAINST REINSURER UNDER “FOLLOW THE SETTLEMENTS” DOCTRINE

October 10, 2011 by Carlton Fields

The Eighth Circuit Court of Appeals affirmed judgment in favor of Massachusetts Mutual Life Insurance Company (“Mass Mutual”) in a case brought against it by its reinsurer, Employers Reinsurance Company (“ERC”). ERC and Mass Mutual were parties to an Excess Disability Income Reinsurance Agreement. ERC and Mass Mutual later entered into a Claim Review Agreement, allowing ERC to make non-binding settlement recommendations. After Mass Mutual revealed some of its own claims reporting errors to ERC, ERC concluded that Mass Mutual had breached the reinsurance treaty and sued Mass Mutual, asserting breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory claims. Mass Mutual countered, making similar claims against ERC. The parties cross-moved for summary judgment and the trial court granted Mass Mutual’s motion and denied ERC’s. ERC appealed, but the Eighth Circuit Court affirmed the trial court’s decision and findings that the reinsurance agreement contained a “follow the settlements” provision, and that this ultimately allowed Mass Mutual to settle claims as it saw fit, whether or not the CRA required it to consider ERC’s non-binding recommendations. (We posted on the District Court’s decisions four times: September 15, 2010 (pre-judgment interest), July 12, 2010 (1292(b) appeal certification request), November 20, 2008 (reconsideration and appeal certification) and September 2, 2008 (summary judgment). Employers Reinsurance Co v. Massachusetts Mutual Life Ins. Co., No. 10-3099 (8th Cir. Sept. 7, 2011).

This post written by John Pitblado.