Carlton Fields

ARBITRATION ROUND UP

September 16, 2010 by Carlton Fields

Manifest Disregard:

Paul Green School of Rock Music Franchising, LLC v. Smith, Case No. 09-2718 (3d Cir. Aug. 2, 2010) (affirming district court’s confirmation of arbitration award; holding no manifest disregard; declining to address whether the Third Circuit considers “manifest disregard” to be a valid ground for vacatur of an arbitration award under the FAA)

The Burton Corp. v. Shanghai Viquest Precision Industries, Co., Case No. 10 Civ. 3163 (USDC S.D.N.Y. August 3, 2010) (denying petition to vacate award; granting petition to confirm award; noting that in the Second Circuit, “manifest disregard” remains a valid ground for vacating arbitration awards; finding no manifest disregard; arbitrator did not exceed authority)

Kunz v. JHP Enterprises, LLC, Case No. 1:09CV115 (USDC D. Utah August 9, 2010) (granting motion to confirm FINRA award; no manifest disregard)

Ozormoor v. T-Mobile USA, Inc., Case No. 08-11717 (USDC E.D. Mich. August 19, 2010) (denying motion to vacate award; arbitrator did not exceed authority; no manifest disregard; upholding one-year limitation provision in arbitration agreement)

Westerlund v. Landmark Aviation, Case No. CV09-0686 (USDC C.D. Cal. August 9, 2010) (denying motions to vacate and motion to modify award; granting motion to confirm award; no manifest disregard; award not “completely irrational”; arbitrator did not exceed powers)

Choice of Law:

Idea Nuova, Inc. v. GM Licensing Group, Inc., Case No. 09-3652 (2d Cir. Aug. 9, 2010) (affirming district court’s (1) dismissal of complaint to vacate or modify arbitration award and (2) confirmation of award; concluding that by agreeing to submit disputes “to AAA arbitration for resolution,” the parties incorporated the AAA Commercial Arbitration Rules into their agreement)

Johnson v. Rosenfeld, Case No. 08-56911 (9th Cir. Aug. 13, 2010) (affirming district court’s confirmation of award and application of choice of law provision; holding that arbitrator did not violate California disclosure rules nor exceed his powers under California arbitration procedure)

Overlapping Remedies:

Kaliroy Produce Co. v. Pacific Tomato Growers, Inc., Case No. CIV 10-160 (USDC D. Az. Aug. 4, 2010) (denying motion to vacate award; granting petition to confirm award; holding that New York Convention’s remedies are not exclusive of remedies under the FAA; among other rulings: no manifest disregard, no violation of public policy, award did not “fail to draw its essence” from arbitration agreement; no evident partiality; Notice of Appeal to Ninth Circuit)

F. Hoffmann-La Roche Ltd. v. Qiagen Gaithersburg, Inc., Case No. 09 Civ 7326, 7396 (USDC S.D.N.Y. Aug. 11, 2010) (denying motion to vacate international arbitration award; granting motion to confirm award; finding that matter was “international” under the New York Convention but that FAA also applied; no manifest disregard; arbitrator did not exceed authority)

This post written by Michael Wolgin.

REINSURER ORDERED TO PAY $1.4 MILLION IN PRE-JUDGMENT INTEREST

September 15, 2010 by Carlton Fields

Massachusetts Mutual Life Insurance Company was awarded in excess of $1.4 million in pre-judgment interest, on a $32 million breach of contract award against its reinsurer, Employers Reinsurance Corporation. A Missouri federal court applying Connecticut law analyzed the issue under equitable principles, and found that the Connecticut statute authorizing pre-judgment interest sets a maximum of ten percent interest, but that the Court may, in its discretion, award a lesser amount. The Court found that the appropriate interest rate to be applied in the case was the one-year constant maturity Treasury rate adopted into the federal statute governing pre-judgment interest (and attested to in an affidavit indicating the current Treasury rate). The Court dated the accrual of interest back to April, 2006, when Employers Re stopped making reimbursement payments to Mass Mutual, which payments the Court previously held were required under the parties’ reinsurance treaty. Employers Reinsurance Corp. v. Massachusetts Mutual Life Ins. Co., No. 06-0188 (USDC W.D. Mo. August 19, 2010)

This post written by John Pitblado.

POST-DODD-FRANK REGULATORY DEVELOPMENTS

September 13, 2010 by Carlton Fields

The implementation of the Dodd-Frank Act (“DFA”) is underway with a flurry of rulemaking and other activity.

NAIC and state actions

Although the DFA did not include any significant requirements with respect to reinsurance collateral requirements, it did include a provision prohibiting states from denying credit for reinsurance if the domiciliary state of the ceding insurer recognizes such credit under certain circumstances. In light of the NAIC’s prior Reinsurance Regulatory Modernization Act (“RRMA”), which is the subject of prior blog entries, this DFA provision, Florida’s existing reinsurance collateral reduction provision (69O-144.007) and the perceived interest of states in moving forward with “individual state-based reinsurance collateral reduction reforms,” the NAIC’s Financial Regulation Standards and Accreditation Committee has made an “informal request” to the Reinsurance Task Force “to consider which key elements of the [NAIC’s RRMA] should be considered in reviewing any individual state initiates, and whether these key elements should be incorporated into the Credit for Reinsurance Model Law and Regulation.” An initial draft recommendation has been exposed for comment, with the comment period expiring September 16, 2010. This document contains many similarities to the Florida regulation, and specifically cites to the Florida regulation. Meanwhile, the New York Insurance Department has published a Notice of Proposed Rulemaking for proposed amendments to New York’s reinsurance collateral requirements. A summary and impact statement for the proposed New York amendment have been published. It appears that rather than promoting uniform collateral reform, the NAIC will be permitting state-by-state variations with some form of guidance.

On another front, at its 2010 Summer Meeting last month, the NAIC’s Executive Committee formed a special task force to consider the issues relating to surplus lines premium taxes raised by the DFA.

Federal actions

As the Office of National Insurance Office and the Financial Stability Oversight Council are being organized, one point of interest for those in the reinsurance and insurance industries is the rulemaking with respect to swaps and other financial products. The principal focal points of those efforts are the SEC and the CFTC. The SEC has issued a press release concerning its comment process and the CFTC and the SEC have published their comment topic lists and schedules. In addition, the CFTC and SEC held a joint swap roundtable.

This post written by Rollie Goss.

SEVENTH CIRCUIT: COURTS MUST DETERMINE WHETHER A CONTRACT EXISTS BEFORE ENTERING STAY

September 9, 2010 by Carlton Fields

Recently, the Seventh Circuit issued an opinion in Janiga v. Questar Capital Corp. on the issue of whether the court or an arbitrator is responsible for deciding whether a particular document signed by the parties constitutes a contract and, if so, whether that contract includes an arbitration clause. The Court of Appeals – noting that arbitration itself is a matter of contract – determined that the District Court must decide whether a contract exists before it decides whether to stay an action and order arbitration. The question of enforceability, however, falls squarely on the arbitrator. Applying governing state law on the formation of contracts, the Seventh Circuit then ruled that Janiga had signed a valid contract and thus assented to arbitration. The case was remanded for further proceedings consistent with the opinion. Janiga v. Questar Capital Corp., Case No. 09-2982 (7th Cir. Aug. 2, 2010).

This post written by John Black.