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SOUTH CAROLINA DISTRICT COURT FINDS THERE IS NO SEPARATE CAUSE OF ACTION FOR APPORTIONMENT UNDER SOUTH CAROLINA’S CONTRIBUTION AMONG TORTFEASORS ACT

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Plaintiff Companion Property and Casualty Insurance Company (“Companion”) participated in a fronted insurance program with Redwood and Freestone. Reinsurance collateral trusts were established for Companion’s benefit and maintained by defendant U.S. Bank as trustee. Companion authorized Redwood and Freestone to administer the trusts’ assets by giving direction to U.S. Bank. One such direction was to authorize certain third-parties who could act for Redwood and Freestone with regard to each trust account. Through the direction of Redwood, Freestone and their authorized third-parties, U.S. Bank made certain investments which were ultimately to the detriment of the trusts. U.S. Bank then made claims against the third-parties for apportionment, contribution and indemnification for its liability to Companion. The third-party defendants moved to dismiss all of U.S. Bank’s claims.

U.S. Bank asserted that third-party defendants are responsible for damages alleged by Plaintiff Companion pursuant to South Carolina Code § 15-38-15 which addresses apportionment of percentages of liability among tortfeasors responsible for less than fifty percent of total fault.

Analyzing South Carolina’s Contribution Among Tortfeasors Act (“SCCATA”), the Court noted that “apportionment” as it appeared in the statute occurred only after the jury “(a) has awarded damages to a plaintiff, (b) has determined any comparative negligence by the plaintiff, and then (c) only after motion by the defendant.” Unlike SCCATA’s statutory language for other causes of action – for example contribution – which described the relief as an action or right to contribution, such verbiage was not present in the provision of SCCATA concerning apportionment. The Court also noted SCCATA referred to “the total percentages of fault attributed to the plaintiff and the defendants must be one hundred percent” – but there was no mention of any fault allocation to third-party defendants. U.S. Bank’s claim for contribution was therefore dismissed.

Companion Property and Casualty Insurance Company v. U.S. Bank National Association, 3:15-cv-01300 (USDC D.S.C. May 27, 2016)

This post written by Nora A. Valenza-Frost.

See our disclaimer.

THE FIFTH CIRCUIT UPHOLDS ARBITRATION AWARD, FINDING THAT ARBITRATOR DID NOT MANIFESTLY DISREGARD THE LAW AND THAT THE AWARD DID NOT VIOLATE PUBLIC POLICY

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On May 23, 2016, the Fifth Circuit upheld an arbitrator’s approximate $1.45 million award in favor of McKool Smith P.C., a law firm who represented Curtis International Ltd., a Canadian electronics wholesaler, in patent infringement cases.

The background of the case is as follows. McKool Smith represented Curtis in two patent litigations which were filed in 2013, and settled in January 2014. Curtis and McKool Smith then had disputes over unpaid invoices. McKool Smith commenced arbitration, seeking approximately $1.3 million in unpaid legal invoices, plus expert witness fees, along with pre and post-award interest. The arbitrator awarded the firm the full $1.45 million requested. McKool Smith then moved in Texas federal court to confirm the award, but Curtis filed a cross-motion to vacate it, arguing that the award was contrary to public policy, that the arbitrator had exceeded his powers and that the arbitrator had manifestly disregarded Texas state law by allowing the firm to collect fees that involved the use of unauthorized experts and that had been block-billed. The Texas federal court confirmed the award. In particular, the district court found that Curtis’ arguments that the award violated public policy and was in manifest disregard of the law rested on non-statutory grounds for vacatur that the Fifth Circuit had previously foreclosed. Curtis appealed to the Fifth Circuit, asserting that the arbitrator exceeded his powers within the meaning of the Federal Arbitration Act (the “FAA”) because the arbitration agreement between the parties incorporated Texas law, and the arbitrator manifestly disregarded that law in issuing the award and that the award violated public policy.

In an unpublished decision, the Fifth Circuit noted that it had previously held that the statutory grounds set forth in the Federal Arbitration Act (the “FAA”) are the exclusive means for vacatur under the FAA. However, the Court declined to decide whether manifest disregard of law and public policy fall within those FAA’s statutory grounds, saying it “need not decide this issue today.” The Court noted that Curtis had not shown any ground to vacate the award, holding that “Curtis fails to overcome our deferential standard of review and to demonstrate that the arbitrator manifestly disregarded the law or issued the arbitration award in violation of public policy.” Thus, the Fifth Circuit upheld the award. On June 6, 2016, Curtis filed a petition for rehearing, which was denied by the Fifth Circuit on June 21, 2016.

McKool Smith, P.C. v. Curtis International Ltd., No. 15-11140 (5th Cir. May 23, 2016).

This post written by Jeanne Kohler.

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ILLINOIS FEDERAL COURT RULES THAT CEDENT’S CLAIMS ARE TIME-BARRED

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Our prior discussion of this case, and relevant background, can be found here. In 2012, Pine Top Receivables of Illinois, LLC (“PTRIL”) brought an action against Banco de Seguros del Estado (“Banco”) to recover sums purportedly due under certain reinsurance treaties. Banco moved for summary judgment on the grounds that claims were time-barred. Each of the treaties governed how the parties would settle claims between them. Four of the five treaties at issue mandated quarterly account statements, with Banco typically required to either object to the claims referenced in the statement after receipt thereof or pay the outstanding balances within three months of the end of each quarter. Under the fifth treaty, the balance for claims owed thereunder became “immediately due” once proof of the underlying loss payment was provided to Banco.

Banco argued that the subject claims accrued, and the operative statute of limitations period began, once payments became due under the above-referenced provisions. As all of the claims at issue in the lawsuit were billed to Banco outside the applicable limitations period, Banco argued that the claims were time-barred. In opposition, PTRIL asserted that the original cedent’s entrance into liquidation tolled the running of the statute of limitations for the subject claims. The court, however, rejected this argument, holding that the relevant provisions in the treaties governed the date on which the claims accrued, without regard to the cedent’s liquidation, thus rendering the claims untimely under Illinois law. Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, No. 12-cv-6357 (USDC N.D. Ill. May 31, 2016).

This post written by Rob DiUbaldo.

See our disclaimer.

NINTH CIRCUIT REMANDS DISPUTE OVER ARBITRATION, FINDING THAT THIRD PARTY MAY BE ABLE TO ASSERT ARBITRATION PROTECTIONS

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Late last month, the Ninth Circuit reversed a decision out of the Western District of Washington finding that a third party was not able to assert an arbitration provision. The underlying claim revolved around premium text messaging services, and a putative class action was brought against the companies that serve as billing aggregators for the content providers. The billing aggregators filed a motion to compel arbitration, attempting to utilize an arbitration provision contained in the terms and conditions of a content provider. The lower court denied the motion to compel arbitration, finding that the billing aggregators were not intended third-party beneficiaries to the terms and conditions and, therefore, could not assert the arbitration provision contained in a contract to which they were not a party.

On appeal, the Ninth Circuit issued a per curiam opinion holding that the district court was incorrect and that it was possible for third parties to claim the benefits of a contract under Washington law, so long as “the terms of the contract necessarily require the promisor to confer a benefit upon a third person.” Here, the terms and conditions between the content providers and consumers provided in one section that the consumer waived all claims “against . . . any of the content provider’s suppliers,” and provided in another section that “any dispute will be resolved by binding arbitration.” Given that the terms and conditions could reasonably be interpreted to inure to the benefit of the content provider’s suppliers, the Ninth Circuit returned the case to the lower court for determinations of whether the billing aggregators were the content provider’s suppliers and whether the consumer assented to the terms and conditions.

Geier v. m-Cube Inc., No. 13-36080 (9th Cir. May 26, 2016) (per curiam).

This post written by Zach Ludens.
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NEW HAMPSHIRE BILL AMENDS CREDIT FOR REINSURANCE LAWS

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New Hampshire recently amended its credit for reinsurance laws for domestic ceding insurers, revising RSA § 405:47 as follows:

“No credit under this section shall be allowed, as an admitted asset or deduction from liability, to any ceding insurer for reinsurance, unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance shall be payable by the assuming insurer on the basis of the claims allowed against the ceding insurer in the insolvency proceedings, under contract or contracts reinsured, without diminution because of the insolvency of the ceding insurer…”

Specific exceptions to the above include so-called cut-through arrangements (where the reinsurer/assuming insurer assumes a domestic cedent’s policy obligations to direct insured(s)) or where the reinsurance agreement expressly provides for another payee of such reinsurance in the event of the insolvency of the cedent. The revised statute further provides that a reinsurance contract may require that the “domiciliary liquidator or receiver” of any insolvent cedent provide written notice to the reinsurer within a specific or reasonable period of time of any claim implicating the reinsurance that is filed in court or with the liquidator/receiver. If, during the pendency of the claim, a reinsurer seeks to investigate the claim and interpose certain defenses on the cedent’s behalf, the reinsurer can intervene in the proceeding in which the claim is pending and assert certain defenses unless barred by the applicable reinsurance agreement. The expenses incurred by the reinsurer in these situations are payable up to the amount of the expenses or amount of the “benefit produced”, whichever is less, as expenses of the receivership. The revised statute has an effective date of July 26, 2016. N.H. HB 1403, Ch. 144, May 27, 2016.

This post written by Rob DiUbaldo.
See our disclaimer.