Carlton Fields

COURT DISMISSES SECOND-FILED REINSURANCE DISPUTE UNDER FIRST-FILED RULE THOUGH BOTH CASES ASSIGNED TO SAME JUDGE

June 20, 2016 by Carlton Fields

Earlier this month, a federal court in Pennsylvania faced the issue of whether it must file a second-filed suit even though the first-filed suit was transferred to the same court, and judge, as the second. The issue arose out of a dispute between St. Paul Fire & Marine Insurance Company (“St. Paul”) and the R&Q Reinsurance Company (“R&Q”) related to reinsurance obligations that R&Q assumed from the INA Reinsurance Company. After St. Paul sent R&Q a $4.4 million bill, both parties filed declaratory judgment actions in different courts.

R&Q filed first in the U.S. District Court for the Northern District of Illinois (the “Illinois Action”). St. Paul followed the next month in the U.S. District Court for the Eastern District of Pennsylvania (the “Pennsylvania Action”). Around the same time that St. Paul initiated the Pennsylvania Action, it filed a motion to transfer the Illinois Action to the Eastern District of Pennsylvania—which was granted six months later.

Federal courts typically follow the “first-filed rule” where the first court with possession of a dispute must decide it. However, cases of concurrent jurisdiction typically are pending in different courts—not before the same judge. With that in mind, Judge Berle M. Schiller of the Eastern District of Pennsylvania applied the same standards, applying a holding that “the procedural posture of the first-filed case on the date the second-filed action is dismissed is irrelevant to the analysis,” and finding that no exceptions to the first-filed rule applied. Thus, Judge Schiller dismissed the Pennsylvania Action under the first-filed rule on the basis that there was concurrent jurisdiction, even though he now had sole jurisdiction over both declaratory judgment actions.

St. Paul Fire & Marine Ins. Co. v. R&Q Reinsurance Co., No. 15-5528 (E.D. Pa. June 2, 2016).

This post written by Zach Ludens.

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COURT CONFIRMS ARBITRATION AWARD IN CHEMICAL TRANSPORT DISPUTE FINDING NO MANIFEST DISREGARD OF THE LAW

June 16, 2016 by Carlton Fields

ICC Chemical Corporation sued Nordic Tankers Trading A/S concerning a cancelled charter agreement. Per the agreement, Nordic was scheduled to have its vessel present at the port ready to be loaded with ICC’s chemical cargo. The vessel arrived six days late and ICC was forced to pay a higher price for the cargo as a result. Once the vessel arrived, ICC’s inspector tested the vessel’s tanks to avoid blending the chemical cargo. The inspector found some of the tanks to be “off-color.” Nordic attempted to wash the tanks several times, but the tanks continued to fail inspection tests. Nordic rejected further tank cleaning and requested cancellation of the agreement. ICC then initiated arbitration against Nordic alleging that it suffered significant losses as a result of Nordic’s allegedly wrongful cancellation. In arbitration, the panel issued an award in favor of Nordic, finding that they made every possible effort to present a clean and suitable vessel. ICC filed a motion in New York federal court to vacate the award, alleging that the panel committed a manifest disregard of the law by misallocating the burden of proof by requiring ICC to show that the cargo was not contaminated, rather than requiring Nordic to show due diligence in providing a seaworthy ship. The court found, however, that the record did not support an erroneous allocation of the burden of proof; the panel had determined that the dispute surrounded whether the cargo was contaminated, and appropriately placed the burden on ICC to show that it was not. Accordingly, the court found no manifest disregard and confirmed the award. ICC Chem. Corp. v. Nordic Tankers Trading A/S, Case No. 15-cv-9766-KPF (USDC S.D.N.Y. May 12, 2016).

This post written by Michael Wolgin.
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COURT DENIES MOTION TO ENFORCE JUDGMENT AND GRANTS MOTION TO STAY PENDING APPEAL IN CONTENTIOUS ARBITRATION CLAUSE DISPUTE

June 15, 2016 by Carlton Fields

We previously reported on the confirmation of three awards in a dispute between National Indemnity Company (“NICO”) and IRB Brasil Ressegurous S.A (“IRB”). In April, NICO submitted a motion for an award of its fees and costs incurred in different forums related to the dispute, and requested oral argument. The court has now denied the motion because it was “ill-timed and ill-conceived” and denied oral argument “given the extensive opportunity for briefing.” The court also granted IRB’s motion to stay the underlying judgment pending appeal, in a separate order entered on the same day. National Indemnity Co. v. IRB Brasil Ressegurous S.A., Case No. 15-cv-3975 (USDC S.D.N.Y. May 17, 2016) (Order on Motion for Fees) (Order on Motion for Stay Pending Appeal).

This post written by Michael Wolgin.
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UPDATE ON COVERED AGREEMENT NEGOTIATIONS BETWEEN THE U.S. AND THE EUROPEAN UNION

June 14, 2016 by Carlton Fields

As we previously reported in March 2016, the United States initiated discussions with the European Union to enter into a Covered Agreement addressing: (1) the equivalence of the U.S. insurance and reinsurance regulatory regime in the context of the EU’s Solvency II initiative; and (2) credit for reinsurance collateral requirements. The Dodd-Frank Act introduced Covered Agreements as a means for limited federal intrusion into the regulation of the business of insurance and reinsurance by the states.

On May 27, 2016, the United States and the European Union released another joint statement on their continued negotiations for a Covered Agreement. U.S. and EU representatives met in Washington, D.C. on May 24-25 to discuss the future bilateral agreement. Both sides agreed to continue in good faith to pursue an agreement on matters relating to group supervision, exchange of confidential information between supervisory authorities on both sides, and reinsurance supervision. U.S. and EU representatives expressed their commitment to pursuing an agreement that will improve regulatory and supervisory treatment for insurers and reinsurers. Both sides are considering next steps to ensure the advancement of negotiations.

This post written by Michael Wolgin.
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COURT CONSIDERS DEFENSES UNDER BOTH NEW YORK CONVENTION AND THE FAA IN CONFIRMING DOMESTIC ARBITRATION AWARD AGAINST FOREIGN PARTY

June 13, 2016 by Carlton Fields

Immersion Corporation, a U.S. company, had previously entered into a settlement with Sony, a Japanese company, regarding the latter’s alleged patent infringement. Subsequently, a dispute arose surrounding whether Sony was selling a “Royalty Bearing Product” within the meaning of the settlement agreement. An arbitration was held pursuant to the settlement agreement that found in favor of Immersion, which then sought to confirm the award in court. Sony put forth three grounds of opposition to the award: (1) under the New York Convention, the award was contrary to public policy because the arbitrator did not allow Sony to assert an “invalidity” defense; (2) under the FAA, the arbitrator impermissibly refused to hear evidence related to patent infringement that was pertinent and material to the controversy; and (3) under the FAA, the arbitrator committed a manifest disregard of the law “by failing to determine the extent of direct infringement as a necessary predicate for a finding of indirect infringement.”

In ruling on the petition, the court first determined that Sony appropriately argued defenses under both the New York Convention and the FAA. The former was appropriate, the court explained, because Sony is not a U.S. citizen. The FAA defenses were also appropriate under Ninth Circuit precedent because the arbitration had been held in the U.S. The court then turned to the defenses, and determined after a lengthy analysis that public policy had not been violated, that the arbitrator did provide a process to hear material evidence, and that the arbitrator had not committed a “manifest disregard” because it had in fact determined the necessary predicate of indirect infringement under the law. Accordingly, the court confirmed the award and denied Sony’s motion to vacate. Immersion Corp. v. Sony Comp. Entertainment America LLC, et al., Case No. 16-cv-00857 (USDC N.D. Cal. May 19, 2016).

This post written by Michael Wolgin.
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