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You are here: Home / Archives for Michael Wolgin

Michael Wolgin

Ninth Circuit Upholds Denial Of Judgment Creditor’s Request For Rescission Of Quota-Share Reinsurance Agreement

May 30, 2018 by Michael Wolgin

Defendant National Farm Financial Corp. agreed to sell Business Alliance Insurance Co. (BAIC) to PSM Holding Corp. After National Farm walked away from the deal, PSM sued National Farm, BAIC, and BAIC’s president, Larry Chao, in the District Court for the Central District of California alleging breach of contract. A jury found in favor of PSM and awarded it $40 million.

After taking possession of BAIC, PSM and BAIC entered into an intercompany quota share reinsurance agreement (QSA). The district court’s ruling was then reversed on appeal and remanded, and upon remand, the court concluded that the defendants were entitled to specific restitution of the BAIC shares and an accounting of the profits earned while PSM held BAIC, diminished by expenses necessarily incurred in the protection of the property and the payment of taxes and liens. Thereafter, the defendants filed a motion for an award of PSM’s profits totaling $14 million. PSM opposed the motion, arguing that it actually suffered a $1.5 million loss as a result of its temporary possession and control of BAIC and sought to rescind the QSA. The court decided that defendants would receive the return of BAIC’s shares, but that PSM would receive restitution of $1.1 million. The court also held that PSM could not rescind the QSA.

The parties cross-appealed to the Ninth Circuit, which concluded that the district court erred in allowing PSM – the judgment creditor – to recover in restitution. Regarding rescission of the QSA, however, the Ninth Circuit affirmed, agreeing with the district court that the QSA could not be rescinded since it was “an improvement” to BAIC rather than a necessary cost of protecting BAIC. PSM Holding Corp. v. Nat’l Farm Fin. Corp., Case Nos. 15-55026, 15-55941 (9th Cir. Mar. 7, 2018).

This post written by Gail Jankowski.

See our disclaimer.

Filed Under: Contract Interpretation, Reinsurance Avoidance, Week's Best Posts

Supreme Court Upholds Employee Individualized Arbitration Agreements Against Challenges Based On The National Labor Relations Act

May 29, 2018 by Michael Wolgin

The U.S. Supreme Court ruled that agreements between an employer and an employee providing for individualized arbitration do not violate the National Labor Relations Act (NLRA). We previously reported on the conflicting cases pending before the Supreme Court here.

Justice Gorsuch, writing for the Court, explained that Congress instructed the courts to uphold arbitration agreements through the Federal Arbitration Act and nothing in the NLRA (or its predecessor, the Norris-La Guardia Act) requires the contrary. The dissent, written by Justice Ginsberg, focuses in large part on the policy motivating the enactment of the NLRA, and finds that the “adhesive waivers” at issue here were the type of employer action the NLRA was meant to counteract. Justice Ginsberg’s dissent argues that class actions are the type of “other concerted activities for the purpose of … mutual aid or protection” shielded by § 7 of the NLRA. Justice Gorsuch, however, points out that § 7 “focuses on the right to organize unions and bargain collectively…. But it does not express approval or disapproval of arbitration. It does not mention class or collective action procedures. It does not even hint at a wish to displace the Arbitration Act – let alone accomplish that much clearly and manifestly, as our precedents demand.” Although the NLRA protects employees’ right to organize unions, it does not speak to their right to arbitrate collectively. Therefore it does not conflict with and override the FAA. As such, the NLRA presented no obstacle to the Court’s enforcement of the “liberal federal policy favoring arbitration agreements” embodied in the FAA. Epic Systems Corp. v. Lewis, Case No. 16-285 (USSC 2018).

This post written by Benjamin E. Stearns.

See our disclaimer.

Filed Under: Arbitration Process Issues, Week's Best Posts

Tax Counsel Ordered To Produce Documents Related To Odyssey Reinsurance’s Continuing Quest To Collect $3.2 Million Default Judgment Against Richard And Diane Nagby

May 10, 2018 by Michael Wolgin

Odyssey Reinsurance Company (“Odyssey”) has obtained an order compelling John Scannell to produce subpoenaed documents related to Odyssey’s efforts to collect a $3.2 million judgment rendered against Richard and Diane Nagby. The judgment stems from a reinsurance contract between Odyssey and Cal-Regent Insurance Services. We previously wrote about this dispute here.

Scannell objected that the documents were protected by California’s taxpayer privilege. California courts have determined the state’s taxation statutes provide the privilege “to encourage the voluntary filing of tax returns and truthful reporting of income,” thereby facilitating tax collection. The privilege may be overcome where it is intentionally waived, the gravamen of the lawsuit is inconsistent with the privilege, or by a public policy “greater than that of the confidentiality of tax returns.”

The court found the privilege was overcome in this matter, which it described as an effort by Odyssey “to recover that money from sources that it contends have actively endeavored to thwart collection efforts.” As such, the Nagby’s privacy concerns “shrink in the shadow of the public policy subversion” that would result if their effort to hide behind the privilege were successful.

In addition, the court determined that Scannell had waived any objection to the subpoena under Federal Rule of Civil Procedure 45 by failing to raise it within 14 days of service of the subpoena. The waiver may be overcome by demonstrating that the failure to assert the objection was due to unusual circumstances and a good cause, but Scannell could not meet either requirement. Odyssey Reinsurance Co. v. Nagby, Case No. 16-CV-3038-BTM (USDC S.D. Cal. March 29, 2018).

This post written by Benjamin E. Stearns.

See our disclaimer.

Filed Under: Discovery

Kansas Enacts Captive Insurance Act

May 9, 2018 by Michael Wolgin

On April 12, 2018, Kansas Governor Jeff Colyer signed into law SB 410– a bill establishing the Captive Insurance Act, which creates two new types of captives – branch and special purpose – and specifies the regulatory structure for each. The bill also raises the minimum capital and surplus requirements a pure captive insurance company must possess and maintain from $100,000 to $250,000.

The bill also creates the Captive Insurance Regulatory and Supervision Fund within the State Treasury and amends current insurance laws relating to companies subject to premium taxes by specifying the tax rate for direct premiums and assumed reinsurance premiums, as well as the maximum tax for each year, and requiring the tax to be calculated annually unless prorated for multi-year policies or contracts.

The bill also permits the insurance commissioner to adopt rules and regulations establishing standards for pure captives. KS SB 410 (April 12, 2018) (regulation and legislative analysis).

This post written by Gail Jankowski.

See our disclaimer.

Filed Under: Reinsurance Regulation

Decade-Long Battle Between Policyholder, Reinsurer, And Retrocessionaire To Continue As Reinsurer Files Notice Of Appeal

May 8, 2018 by Michael Wolgin

A Brazilian mining and steelmaking company (Companhia Siderurgica Nacional, S.A. (“CSN”)), a Brazilian insurance company (IRB Brazil Resseguros, S.A. (“IRB”)), and an American insurance company (National Indemnity Company (“NICO”)) have been locked in battle for a decade over liability stemming from a $167 million loss suffered by CSN. We have previously written about this litigation here.

On January 23rd, the Southern District of New York ordered IRB to pay NICO $5 million pursuant to an arbitration award. On February 22, 2018 IRB appealed this order to the Second Circuit. On March 26th a $5.55 million supersedeas bond was filed with the court on behalf of IRB to stay execution of the order pending the outcome of the appeal. National Indemnity Co. v. IRB Brazil Resseguros, S.A., No. 15-CV-3975 (USDC S.D.N.Y. Feb. 22, 2018 & March 26, 2018).

This post written by Benjamin E. Stearns.
See our disclaimer.

Filed Under: Arbitration Process Issues, Confirmation / Vacation of Arbitration Awards, Jurisdiction Issues, Week's Best Posts

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