Carlton Fields

UNITED STATES TO SIGN COVERED AGREEMENT WITH EUROPEAN UNION

July 16, 2017 by Carlton Fields

The U.S. Department of the Treasury and the U.S. Trade Representative have ended the speculation about the fate of the Covered Agreement negotiated by the Obama Administration with the European Union by announcing their intention to sign the agreement. The Covered Agreement covers prudential measures regarding insurance and reinsurance, including the issue of the requirement for collateral for ceding insurers to claim financial statement credit for reinsurance provided by non-U.S. reinsurers and what may be a functional substitute for a declaration of equivalence of the U.S. insurance/reinsurance market for purposes of Solvency II. The announcement states that “the Administration also plans to issue a U.S. policy statement on implementation.” It will be interesting to see whether the implementation statement addresses the substance of any of the criticisms of the Covered Agreement. The Covered Agreement has been approved by the E.U. Council, although the European Parliament may be asked to approve it as well.

This post written by Rollie Goss.
See our disclaimer.

FEDERAL COURT RETAINS JURISDICTION OVER ACTION STAYED FOR ARBITRATION, PRE-EMPTING STATE COURT

July 12, 2017 by Carlton Fields

Following Davis’s filing of a federal lawsuit alleging state malpractice and breach of contract claims, as well as federal Fair Housing Act and Civil Rights Act claims, the Court ordered the action be stayed pending arbitration, and the suit was “administratively dismissed without prejudice subject to full reinstatement upon the completion of the required arbitration” of the disputes arising from Fenton’s representation of Davis.

Davis was awarded damages for malpractice, but the arbitration panel denied her other claims. Fenton then sued Davis in state court, seeking to have the arbitration award vacated or at least reduced. Davis moved to reinstate her federal suit, and Fenton failed to attend the hearing, resulting in default and confirmation of the award. Fenton sought to vacate the default judgment and remand the case to state court “on the ground that the district court lacked jurisdiction because he (Fenton) had filed his state lawsuit challenging the arbitration award prior to Davis’s having moved the district court to re-open the case.”

The District Court refused, reminding the parties that “I was the one that enforced the defendants’ request for arbitration and I sent the case for arbitration. So it would seem to me, because I retained jurisdiction, that any request to vacate the arbitration award that the plaintiff won should have come to this Court and not to some [state court] judge.” Fenton appealed the ruling to the Seventh Circuit, which agreed with the trial court: “the judge had jurisdiction over the case at the time it was filed, as it raised questions of federal law, and the judge’s order staying the case (or equivalently, administratively dismissing it subject to reinstatement at the conclusion of arbitration) retained jurisdiction to confirm or vacate an arbitral award.” Davis v. Fenton, et al., Nos. 16-2121, 16-2165 (USCA 7th Cir. May 26, 2017).

This post written by Nora A. Valenza-Frost.
See our disclaimer.

APPELLATE COURT UPHOLDS ARBITRATION AWARD IN FACE OF MANIFEST DISREGARD OF LAW AND PUBLIC POLICY ARGUMENTS

July 11, 2017 by Carlton Fields

An arbitration panel entered an award in a legal malpractice matter in favor of the claimant and the attorneys and law firm moved to vacate the award. The district court denied the motion to vacate, and the Ninth Circuit affirmed. The court of appeals rejected two proffered bases for vacation: (1) that the panel’s finding that the claim was not barred by a one year statute of limitation amounted to manifest disregard of law; and (2) that the alleged perjury of a witness in an underlying action justified vacature on the basis that the award violated public policy.

The Court held that even if the panel had made an error of law in its finding that the claim was not barred by the statute of limitation, the record did not reflect a factual basis for a finding that it had manifestly disregarded the law by “intentionally” disregarding the law, and that the movants had failed to carry their burden to prove manifest disregard. Without a reasoned award or a hearing transcript specifically providing a record on this issue proving manifest disregard may be a challenge.

With respect to the public policy ground for vacation, the Court found that the panel expressly considered the claim of perjury and questioned the witness concerning the allegedly perjured testimony. The Court declined to vacate the award on this basis because doing so “would require the Court to revisit the arbitrator’s findings of fact and conclusions of law with respect to Defendant’s perjury argument put forth to the arbitrator ….”

The court of appeal did partially vacate the district court’s ruling. The arbitrator had awarded pre-judgment interest from June 30, 2011. The defendants did not challenge that part of the award in the motion to vacate the award, but after the award was confirmed contended, in a FRCP 59(e) motion to amend the judgment, that pre-judgment interest should have run from a later date, July 30, 2014. The district court granted that motion. The court of appeals vacated that ruling, holding that the Rule 59(e) motion amounted to a late and improper attempt to circumvent the provisions of the Federal Arbitration Act. Demartini v. Johns, Nos. 15-15205, 16-15078, 16-15134 (9th Cir. June 7, 2017).

This post written by Rollie Goss.
See our disclaimer.

COURT CONFIRMS INTERIM ARBITRATION AWARD REQUIRING POSTING OF PRE-HEARING SECURITY

July 10, 2017 by Carlton Fields

Respondent moved for an immediate stay of an arbitration of claims relating to the purchase of insurance and to vacate the panel’s interim award requiring the posting of pre-hearing security. Petitioner moved to confirm the interim award.

Respondent’s sole basis for vacating the interim award was that the panel issued its interim award without conducting a full hearing on the merits of its defenses. It predicated this request upon 9 U.S.C. § 10(a)(3), contending that the arbitrator refused to hear evidence pertinent and material to the controversy, relying on Home Indem. Co. v. Affiliated Food Distributors, Inc., 1997 WL 773712 (S.D.N.Y. Dec. 12, 1997). The panel distinguished Home Indemnity, in which the arbitration panel had “specifically conditioned . . . discovery on [the] posting of security,” and refused “even a threshold review of the underlying dispute,” finding instead that the panel in this matter had “expressly ordered that discovery proceed while the motion for pre-hearing security was litigated” and that Petitioner “produced over 40,000 pages of discovery… prior to the interim award… unlike the panel in Home Indemnity, the panel here provided [Respondent] with adequate opportunity to present its evidence and argument,” including “extensive briefing and oral argument.”

The court further commented that “[b]y its very nature, … a request for pre-hearing security is made on a limited record at an early stage of the arbitration proceedings and may be ordered before a full hearing on all defenses.” The court confirmed the panel’s interim award. Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Source One Staffing LLC, Case No. 16-6461 (USDC S.D.N.Y. May 17, 2017).

This post written by Nora A. Valenza-Frost.
See our disclaimer.

COURT COMPELS DISCOVERY OF REINSURANCE ALLOCATION INFORMATION

July 7, 2017 by Carlton Fields

In an action involving claims under facultative reinsurance for the reinsurance of asbestos risks, the reinsurer sought discovery of documents concerning the allocation of losses among the reinsurers on the program, and concerning other reinsurance. The court, in a perfunctory Order, granted the motion to compel with respect to the allocation of asbestos losses to other reinsurers in the program at issue, but denied the motion to compel with respect to information regarding other reinsurance. Lamorak Insurance Co. v. Everest Reinsurance Co., Case No. 15-13425 (USDC D. Mass. May 26, 2017).

This post written by Rollie Goss.
See our disclaimer.