Carlton Fields

SECOND CIRCUIT AFFIRMS COURT’S CONFIRMATION OF MULTIPLE ARBITRATION AWARDS

January 18, 2018 by Carlton Fields

This matter involved appeals by appellant Best Made Floors Inc. (“Best Made”) from a December 22, 2016 corrected judgment of a district court confirming two arbitration awards in favor of appellees, and from the district court’s denial of its motion to vacate a third arbitration award in favor of the appellees.

Three arbitration hearings on claims asserted against Best Made, which resulted in three arbitration awards in favor of the appellees. On November 3, 2015, the arbitrator found that Best Made failed to pay an employee for 98 hours of work and ordered that Best Made pay $5,399.60 in wages, less statutory deductions (“November 3 Award”). On June 7, 2016, the arbitrator found that Best Made violated collective bargaining agreement procedures for cash payments and ordered that Best Made pay a $50,000 penalty (“June 7 Award”). On August 15, 2016, the arbitrator also found that Best Made failed to remit required payments to appellees and ordered that Best Made pay $20,424.55 (“August 15 Award”). Best Made attended only the first hearing, which culminated in the November 3 Award. Best Made sought to vacate all three awards, which was denied by order dated November 23, 2016, and the district court confirmed the November 3 and August 15 Awards. A corrected judgment was then entered on December 22, 2016, which also confirmed only the November 3 and August 15 Awards, and did not address the June 7 Award. Best Made then appealed. After the notice of appeal was filed, on June 10, 2017, the arbitrator issued a new award superseding the June 7 Award, and which reduced the original $50,000 penalty to $10,000. No party had moved to confirm or vacate the June 10, 2017 Award.

On appeal, Best Made argued that the three initial arbitration awards should be vacated because: (1) the arbitration procedures were fundamentally flawed; (2) the arbitrator was biased; (3) the appellee provided inadequate notice of a hearing; and (4) the appellee committed fraud by failing to present Best Made’s evidence to the arbitrator at the hearings that Best Made failed to attend. The Second Circuit concluded that these arguments were without merit, that Best Made had not established that the arbitration proceedings were fundamentally unfair, and that the district court properly confirmed the awards. N.Y. City District Council of Carpenters et al. v. Best Made Floors, Inc., No. 16-4281 (2nd Cir. Dec. 15, 2017).

This post written by Jeanne Kohler.
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EIGHTH CIRCUIT UPHOLDS DISMISSAL OF CLAIM AGAINST DEPARTMENT OF HEALTH & HUMAN SERVICES UNDER ACA TRANSITIONAL REINSURANCE PROGRAM FOR LACK OF SUBJECT MATTER JURISDICTION

January 17, 2018 by Carlton Fields

Seeking reimbursement of fees paid, allegedly by mistake, under the transitional reinsurance program in the Patient Protection and Affordable Care Act (“ACA”), the trustees of the Twin City Pipe Trades Welfare Fund’s sued the U.S. Department of Health and Human Services to recoup the payment. The Fund argued the Administrative Procedure Act (“APA”) waived the Department of Health & Human Services’ sovereign immunity. The district court held that sovereign immunity was waived by the APA only if the suit challenges final agency action, seeks relief other than money damages, and the plaintiff has no other adequate remedy in a court. 5 U.S.C. §§ 702, 704. Finding that the Complaint sought money damages, and that without sovereign immunity the suit should have been filed in the United States Court of Federal Claims, the district court found that the APA did not waive sovereign immunity and dismissed the Complaint. The Eighth Circuit found the district court’s decision well-reasoned and affirmed.

Trustees of the Twin City Pipe Trades Welfare Fund, et al. v. Price, No. 16-403 (8^th Cir. Nov. 27, 2017).

This post written by Nora A. Valenza-Frost.
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FIFTH CIRCUIT AFFIRMS COURT’S AUTHORITY TO RULE ON QUESTION OF ARBITRABILITY AND FINDS INJUNCTIVE RELIEF WAS NOT SUBJECT TO ARBITRATION

January 16, 2018 by Carlton Fields

A Texas federal court determined that, pursuant to the parties’ contract, the dispute was not arbitrable because the plain language of the arbitration clause expressly excluded suits that involved requests for injunctive relief, despite the incorporation of the AAA Rules. The clause stated as follows:

This Agreement shall be governed by the laws of the State of North Carolina. Any dispute arising under or related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property of Pelton & Crane), shall be resolved by binding arbitration in accordance with the arbitration rules of the American Arbitration Association.

Defendants argued that, “under the plain language of the clause, disputes about arbitrability do not fall within the carve-out and thus, belong to the arbitrator.” Plaintiff, on the other hand, argued that “the structure of the specific carve-out at issue here leads to the natural reading that the AAA Rules only apply to the category of cases that are subject to binding arbitration under the Dealer Agreement – namely, those outside of the contract’s express carve-out.”

The District Court held that the arguments for arbitrability were “wholly without merit” based on the plain language of the arbitration clause itself and thus fell squarely within the “wholly groundless” exception created by Douglas v. Regions Bank, 757 F. 3d 460 (5th Cir. 2014). On appeal, the Fifth Circuit Court of Appeals affirmed, stating that, “[t]he mere fact that the arbitration clause allows [Plaintiff] to avoid arbitration by adding a claim for injunctive relief does not change the clause’s plain meaning.”

Archer and White Sales, Inc. v. Henry Schein, Inc., et al., No. 16-41674 (5th Cir. Dec. 21, 2017).

This post written by Nora A. Valenza-Frost.
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SPECIAL FOCUS: TREASURY REPORT MAY PROVIDE A PREVIEW OF THE TRUMP ADMINISTRATION’S INSURANCE REGULATORY AGENDA

January 2, 2018 by Carlton Fields

We earlier posted on a report issued by the U.S. Treasury Department that might provide a preview of the Trump Administration’s agenda for the insurance industry. A more detailed analysis of that report appears in a Special Focus article.

This post written by Rollie Goss.
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MAGISTRATE JUDGE RECOMMENDS DENYING APPLICATION FOR $305M REINSURANCE JUDGMENT

December 27, 2017 by Carlton Fields

A Magistrate Judge in the U.S. District Court for the Southern District of New York has recommended that a default judgment totaling more than $221 million be entered against the Islamic Republic of Iran and in favor of insurers who paid claims to their insureds for property damage, business interruption and other losses arising out of the terrorist attacks on 9/11. In doing so, however, the magistrate also recommended denying the insurers’ application for an additional $305 million reflecting payments made under reinsurance contracts.

The plaintiff-insurers argued that they were entitled to all amounts they were compelled to expend under applicable policies of insurance and reinsurance resulting from 9/11. The court concluded, however, that the insurers were only entitled to recover under the doctrine of subrogation. The court explained that subrogation allows an insurer to “stand in the shoes” of its insured for purposes of seeking payment from third-parties whose wrongdoing caused the losses for which the insurer was obligated.

While finding that the insurers were subrogated to over $221 million in damages under direct insurance policies, the court recommended denying their application for over $305 million in losses incurred under reinsurance contracts with primary insurers that paid claims relating to 9/11. Noting that reinsurance contracts operate solely between the reinsurer and the reinsured primary insurer, the court stated that there is no contractual privity between a reinsurer and the policyholder who suffered the initial loss. Because the damaged policyholders have no rights under the reinsurance contracts at issue, the magistrate judge found that plaintiffs, as reinsurers, have no subrogation rights as to the 9/11-related losses sustained by these policyholders.

In re Terrorist Attacks on September 11, 2001, Case No. 04-cv-05970 (USDC S.D.N.Y. Nov. 27, 2017).

This post written by Alex Silverman.
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