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UK HIGH COURT ORDERS “FURTHER REASONS” IN EXPERT DETERMINATION

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In March, the United Kingdom’s High Court ruled that courts have the authority to order further explanations from the umpire in an expert determination. The parties in this case entered into an agreement whereby the claimant, Halifax Life Limited (“Halifax”) agreed to reinsure the defendant’s business. A dispute arouse as to the precise balance of premium payable for the reinsurance. Pursuant to the agreement, an umpire was appointed, who would act as an expert, not an arbitrator, whose decision would be binding on the parties. In September, 2006, the umpire issued a ruling. The claimants, unsatisfied with the ruling, challenged the umpire’s determination on several grounds.

Mr. Justice Cresswell found that the reasons given by the umpire for arriving at his decision were inadequate under the circumstances. Although Justice Cresswell declined to make a declaration that the expert determination was not binding, he referred to section 70(4) of the Arbitration Act of 1996, which allows a court to order the tribunal to state the reasons in detail where it appears that the award does not contain sufficient detail to enable the matter to be properly considered. Justice Cresswell stated that “[i]t would be highly anomalous if an expert’s failure to give reasons caused the determination not to be binding, when this is not the position in the case of arbitration awards.” Instead, he adjourned the hearing and directed the umpire to state further reasons for his ruling. Halifax v. Equitable Life Assurance Society, [2007] EWHC 503 (Mar. 13, 2007).

THIRD CIRCUIT DISMISSES SHAREHOLDER’S COMPLAINT AGAINST LIQUIDATOR

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This appeal arose out of the liquidation of an insolvent insurer, Colonial Assurance Company (“Colonial”). The Plaintiff, a Colonial shareholder, litigated for years in the Pennsylvania state courts to fight the liquidation plan proposed by Pennsylvania. After his objections were dismissed in that forum, he filed an action in United States District Court alleging that the Defendants violated his civil rights, engaged in a civil conspiracy, and breached their fiduciary duties in relation to the Colonial liquidation. The District Court dismissed his claims under the Rooker-Feldman doctrine, alternatively holding that his claims were barred by the doctrine of res judicata.

On appeal, the Third Circuit concluded that this was not an appropriate case for the application of the Rooker-Feldman doctrine because the Plaintiffs’ Complaint was directed at conduct that preceded the state-court judgment. The Court explained that the Rooker-Feldman doctrine, which prevents inferior federal courts from sitting as appellate courts for state court judgments, does not apply when a party complains of an injury “not caused by the state-court judgment but instead attributable to defendants’ alleged. . .violations that preceded the state-court judgment.” (citations omitted). Nevertheless, the Third Circuit held that dismissal was appropriate because the Plaintiff’s claims were barred by the doctrine of res judicata. All of the elements of res judicata were satisfied, because the parties to the two actions were identical, all of the claims were actually litigated in the prior state court action, and determination of the claims was necessary to the entry of the judgment by the state court. Mazzella v. Commonwealth of Pennsylvania, Case No. 06-2325 (3d Cir. Apr. 17, 2007).

Court dismisses RICO and antitrust claims (again) in insurance brokerage litigation

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The District Court Judge in the Insurance Brokerage Antitrust Litigation MDL action has again dismissed the RICO and Sherman Act claims asserted by the Plaintiffs. Separate opinions were issued with respect to the antitrust claims and the RICO claims. Both types of claims have been dismissed, before, and in both of the recent opinions, the Court stated that it would give the Plaintiffs “one final opportunity” to amend their claims. In re Insurance Brokerage Antitrust Litigation, MDL Docket No. 1663 (USDC D.N.J. April 5, 2007). There are prior posts to this blog with respect to this action, dated September 14, 2006 and October 16, 2006.

PRIVILEGE DISPUTES CONTINUE IN “RENT-A-CAPTIVE” CASE

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Diane Koken, the Pennsylvania Insurance Commissioner, is the Statutory Liquidator for Legion Insurance Company and Villanova Insurance Company. In this case, Koken, as Liquidator, sought to recover more than $4 million in premiums and commissions allegedly due to the insurance companies pursuant to a Limited Agency Agreement between Legion and American Patriot Insurance Agency (“Patriot”). Patriot denied liability, alleging Legion perpetrated a fraud upon Patriot in relation to a “Rent-a-Captive” workers’ compensation program. During depositions of two of Legion’s former executives, Defendants’ counsel attempted to inquire into this fraud issue, but counsel for the Liquidator objected on the basis of attorney-client privilege. Defendants filed a motion to overrule the Liquidator’s claim of privilege pursuant to the crime/fraud exception, which the court denied in May 2006. That decision was affirmed in December 2006.

The defendants recently asked the court to overrule the Liquidator’s claim of privilege as to conversations between Legion’s Executive Vice President, Glenn Partridge, and Legion’s General Counsel, Andrew Walsh. While the court agreed that conversations with Mr. Walsh were not per se privileged, the court stated it was not in a position to determine whether the privilege applied because Mr. Partridge has not been deposed. The court agreed to postpone Mr. Partridge’s deposition pending a ruling on the Liquidator’s motion for summary judgment. Koken v. American Patriot Ins. Agency, Inc., Case No. 05-C-1049 (N.D.Ill. March 23, 2007).

SOCIETY OF LLOYDS’ ACTION FOR RECOGNITION OF FOREIGN COUNTRY JUDGMENT SURVIVES MOTION TO DISMISS

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In September 2006, the Society of Lloyds filed an Amended Complaint in a Florida District Court seeking recognition and enforcement of a foreign country judgment under Florida Statutes. The Defendant, Robert Sumerel, moved to dismiss the case as barred by the statute of limitations, asserting that the Amended Complaint is a common law civil action, not a statutory cause of action. The court disagreed, finding that the Amended Complaint did plead a statutory cause of action, and therefore the statute of limitations argument failed. Society of Lloyds v. Robert Sumerel, Case No. 2:06-cv-329-FtM-29DNF (USDC M.D. Fla. April 10, 2007).