As we previously advised on our , regarding Credit for Reinsurance to bring Michigan into compliance with the NAIC Credit for Reinsurance Model Law and Model Regulation. The changes became effective on January 2, 2019.
This case involved a consumer, Charleene Novic, who obtained a credit card from Credit One. The card holder agreement contained an arbitration clause that stated “[c]laims subject to arbitration include … disputes related to … enforceability or interpretation of this Agreement.” After Novic accrued a past-due balance, Credit One sold the account to a debt collector. Novic claimed that the past-due balance was the result of fraudulent charges. The debt collector sued Novic in Maryland state court regarding the outstanding balance, and the Maryland court ruled in favor of Novic. Novic then initiated an action against Credit One in Maryland state court, alleging violations of the Fair Credit Reporting Act by failing to conduct a reasonable investigation of her claim that she did not owe the past-due balance. The action was removed to federal court. Credit One moved to compel arbitration under the terms of the card holder agreement. The Maryland district court denied the motion to compel, finding that Credit One lost its right to compel arbitration after it assigned Novic’s account for collection. Credit One appealed to the Fourth Circuit, arguing that an arbitrator should decide the “gateway” issue of whether Novic’s claims are subject to arbitration.
The Fourth Circuit agreed with Credit One. The Court noted that parties may consent to arbitrate the gateway issue of arbitrability, which allows the arbitrator, rather than the courts, to determine the arbitrator’s jurisdiction. The Court, however, noted that any delegation of the issue of arbitrability must be set out in “clear and unmistakable” language in the parties’ agreement. With respect to the arbitration clause at issue, the Fourth Circuit then concluded that it “unambiguously require[d] arbitration of any issues concerning the ‘enforceability’ of the arbitration provisions entered into by the respective parties.” Thus, the Fourth Circuit vacated the Maryland district court’s judgment and remanded to the district court for entry of a stay of court proceedings and for an order compelling arbitration.
We have previously reported on Odyssey Reinsurance’s Continuing efforts to collect a $3.2 million default judgment against Richard And Diane Nagby in our blog on numerous occasions. See
Odyssey’s efforts continue in the California federal court. On November 7, 2018, the court issued a temporary restraining order and order to show cause regarding certain California property. See . More recently, on January 4, 2019, the court issued an order compelling transfer of funds from a bank account. See .
Odyssey Reinsurance Co. v. Nagby, No. 16-CV-3038-BTM (S.D. Cal. Nov. 7, 2018 and Jan. 4, 2019).
The background of this case in California federal court is that The Hartford (“Hartford”) issued reinsurance billings to Employers Insurance Company of Wausau (“Wausau”) for settlement payments made to one insured under nineteen different reinsurance treaties between Wausau and three of Hartford’s affiliates, which billings were denied by Wausau. In response, Hartford demanded arbitration and requested that the parties consolidate all the related disputes in a single arbitration. Wausau, in response, proposed that the parties agree to three arbitrations and identified three arbitrators for three separate panels for each of the three Hartford affiliates involved. Hartford refused and identified one arbitrator for a single arbitration and if other arbitrations were necessary, the same arbitrator was identified as arbitrator for such other arbitrations. Wausau’s arbitrators then requested that Hartford’s arbitrator select umpires for three separate arbitrations. In response, Hartford again requested that the parties agree to a methodology to select a single panel to decide how the matter should be consolidated. Wausau then filed four separate petitions in three jurisdictions to compel arbitration: one in California federal court, two in Massachusetts state court and one in Connecticut state court. In the California action, which involved one treaty, Hartford cross-moved to compel a single arbitration in order to adjudicate the parties’ dispute regarding consolidation and, in the alternative, a motion to stay pending arbitration of related proceedings.
As an initial matter, the California federal court noted that the issue of whether arbitrations may be consolidated is a question for the arbitrators and not the court to decide. However, the court noted that the parties remained at an impasse due to Hartford’s insistence of one consolidated arbitration. The court then rejected Hartford’s argument that its three affiliates who had entered into the nineteen treaties could act as a single party for the purpose of seeking reimbursement from Wausau. Noting that it was limited to the terms of the agreements, the court stated that Hartford was only named in two of the nineteen treaties, that the treaties entered into by two of the affiliates required arbitration in Massachusetts and the others required arbitration in Los Angeles. The court also noted that each of the treaties was a separate agreement, with different arbitration clauses. The California federal court then found that the treaty before it contained an arbitration clause which provided a procedure for selecting an umpire, and that once that panel is in place, it can decide the issue of consolidation. Accordingly, the court granted Wausau’s petition to compel appointment of an arbitrator, and denied Hartford’s motions to compel and stay pending arbitration of related proceedings.
This case relates to a dispute between Eastern European Engineering Ltd. (“EEEL”) and Vijay Construction (Proprietary) Ltd. (“VCL”), both of which are incorporated in the Seychelles, arising out of the construction of a hotel resort and spa. In 2011, the parties had entered into six materially identical contracts. Disputes arose and EEEL eventually terminated the contracts. EEEL referred the disputes to an International Chamber of Commerce (“ICC”) arbitration seated in Paris. A sole arbitrator was appointed, who issued an award in November 2014 in EEEL’s favor (the “Award”).
VCL challenged the Award in the French courts on three grounds. The French court dismissed VCL’s challenge. Although VCL initially appealed that decision, it did not purse the appeal and it was subsequently dismissed in May 2017. Concurrently, in January 2015, VCL also initiated proceedings in the Seychelles, seeking to set aside the Award on essentially the same grounds as those on which the challenges were based in the French proceedings. In April 2017, the Seychellois court dismissed all of VCL’s challenges and held that the Award was enforceable. VCL, however, successfully appealed that decision because, under Seychellois law, there is no power to order enforcement on the basis that the New York Convention had been previously repudiated by the Seychelles. The merits of the substantive grounds of the lower court’s decision were not considered in the appeal.
In August 2015, EEEL successfully obtained an order from the English High Court to enforce the Award in England and Wales and to enter judgment against VCL (the “August 2015 Order”). In October 2015, VCL applied under section 103 of the Arbitration Act 1996 to set aside the August 2015 Order. That application was stayed while the French and the Seychellois proceedings were pending. EEEL argued that VCL’s application should be denied because of issue estoppel and public policy on finality. As to issue estoppel, EEEL argued that the conditions were satisfied because the decision of the French court was a final merits decision in a court of competent jurisdiction between the same parties.
The English High Court denied VCL’s application to set aside the August 15 Order. First, the English court agreed that, in relation to VCL’s challenge based on jurisdiction, VCL was estopped as VCL’s argument in the English proceeding appeared to be exactly the same as that which was made in the French proceeding. As to VCL’s challenge on the ground of procedural unfairness, the court found that VCL’s argument was “slightly different” in the English proceeding, and thus the court considered the merits of the challenges. In considering each of VCL’s challenges, the court found that they failed. Thus, the English court did not have to reach the question of public policy on finality. It, however, noted that it would “have concluded that the balance came down in favor of upholding the public policy on finality,” explaining that the facts here, where VCL had sought to raise substantially the same challenges to the Award in two other courts, one of which had a full evidentiary hearing, “are circumstances which would weigh very heavily against allowing VCL a third challenge.”