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You are here: Home / Archives for Michael Wolgin

Michael Wolgin

Fifth Circuit Affirms Federal Court’s Injunction Of State Court Proceeding That Attempted To Stay Arbitration

May 7, 2018 by Michael Wolgin

The case originated from the alleged violation of a noncompete and nonsolicitation agreement between the Shaw Group, later partially acquired by Aptim Corporation, and Dorsey McCall, its former employee. Shaw originally filed the case in state court, but after Aptim’s acquisition, Shaw moved to dismiss its state action while Aptim pursued a federal court action to enforce the arbitration clause in McCall’s employment contract Aptim initiated arbitration, but the state court ordered the arbitration stayed, finding that Shaw and Aptim waived arbitration by filing suit in state court. The district court for the Eastern District of Louisiana, however, declined to abstain from proceeding with its case, and then compelled arbitration and entered an order staying the state court proceeding. McCall appealed.

On appeal, the Fifth Circuit explained that “[w]hether to abstain is not a question answered by the recitation of ‘a mechanical checklist’ but instead rests ‘on a careful balancing of the important factors as they apply in a given case, with the balance heavily weighted in favor of the exercise of jurisdiction.’” The Fifth Circuit weighed the factors and affirmed the district court’s decision against abstention based in part on the strong federal policy favoring arbitration. Notably, the Fifth Circuit was not persuaded by the fact that the state court’s order staying arbitration preceded the federal court’s ruling compelling arbitration, as the former was not a final judgment. The Fifth Circuit also agreed with the district court that Aptim had not waived arbitration since Aptim demanded arbitration only one month after the state court action had begun, and McCall could not demonstrate the he was prejudiced. Aptim Corp. v. McCall, Case No. 17-30772 (USDC E.D. La. Apr. 17, 2018).

This post written by Gail Jankowski.

See our disclaimer.

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

Court Vacates Arbitration Award In Crop Insurance Dispute That Awarded Remedies Preempted By Federal Law

April 19, 2018 by Michael Wolgin

The plaintiff, a farming company, demanded arbitration against Diversified Crop Insurance Services over the nonpayment of federally reinsured claims. The plaintiff brought several claims under policies it had purchased from Diversified, to which Diversified denied coverage, due to a misstatement of the farm’s location and a separate clerical omission as to the number of acres covered, both of which were allegedly errors committed by Diversified’s agent. The arbitrator found for the plaintiff and trebled damages against Diversified.

When the plaintiff moved to confirm the award, the court considered whether the arbitrator exceeded her authority by basing her decision on extra-contractual state law remedies, which are preempted by federal law associated with Diversified’s reinsurance coverage from the Federal Crop Insurance Corporation. The court found that the arbitrator did exceed her authority by finding that “the farm was uninsured, and therefore not covered by the policy, yet award[ing] damages in negligence, breach of fiduciary duty, and constructive fraud because she attributed the lack of coverage to Diversified and its agents.” The court found further evidence of the arbitrator’s exceeding the scope of her authority in the fact that she trebled the awards under North Carolina’s Unfair and Deceptive Trade Practices Act. As such, the court vacated the award. Williamson Farm v. Diversified Crop Insurance Services, Case No. 5:17-CV-513-D (USDC E.D.N.C. Mar. 26, 2018).

This post written by Gail Jankowski.

See our disclaimer.

Filed Under: Confirmation / Vacation of Arbitration Awards

West Virginia Amends Credit For Reinsurance Statute To Conform To NAIC Model, Effective January 1, 2019

April 18, 2018 by Michael Wolgin

West Virginia House Bill 4230, approved by Governor Justice on March 27, amends the statutory requirements relating to when an insurer may claim credit for reinsurance to conform to the NAIC model law. The bill establishes requirements for:

  • Domestic insurers to be allowed credit;
  • Reinsurers to meet in order for credit to be granted to ceding insurers;
  • The location where assets that provide security to fund United States obligations must be maintained by a non-United States insurer or reinsurer;
  • The filing and valuation of claims; and
  • Provision of an asset or reduction from liability for reinsurance ceded by a domestic insurer.

The bill also provides for the distribution of assets of an insolvent non-United States insurer or reinsurer, in addition to providing the Insurance Commissioner with authority to promulgate related legislative and emergency rules.

The bill takes effect January 1, 2019 and applies to all cessions under reinsurance agreements that have an inception, anniversary, or renewal date on or after that date.

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

Filed Under: Accounting for Reinsurance, Reinsurance Regulation

Fourth Circuit Dismisses Appeal Of Order Compelling Arbitration In Voluntarily Dismissed Class Action

April 17, 2018 by Michael Wolgin

This case arose from a putative class action alleging claims against Groupon on the basis of its reimbursement policies. After the trial court ordered the parties to arbitrate pursuant to an arbitration clause in the parties’ agreement, the plaintiff moved to amend the arbitration order, requesting that the district court dismiss her complaint with prejudice, advising the court that she would not pursue arbitration due to its costs outweighing her potential recovery. After the court dismissed the case, the plaintiff appealed the arbitration ruling, contending that the Fourth Circuit had jurisdiction over her appeal under 28 U.S.C. § 1291, which gives appellate courts jurisdiction of appeals from “final decisions” of district courts.

The plaintiff’s appeal was stayed pending a decision by the U.S. Supreme Court in Microsoft Corp. v. Baker as to whether a voluntarily dismissed action is final for purposes of 28 U.S.C. § 1291. Following the Supreme Court’s ruling that a voluntary dismissal does not qualify as a final decision, the Fourth Circuit followed the high court’s precedent and dismissed the appeal. Keena v. Groupon, Inc., Case No. 16-1973 (4th Cir. Mar. 27, 2018).

This post written by Gail Jankowski.

See our disclaimer.

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

Court Applies The “Intertwined-Ness Test” To Find That A Non-Signatory Could Invoke Equitable Estoppel To Compel Arbitration

April 16, 2018 by Michael Wolgin

The court applied a two-part “intertwined-ness test” to determine whether an arbitration agreement allowed a non-signatory to invoke equitable estoppel to compel arbitration. The first prong of the test examines whether the claims advanced by the signatory to the arbitration agreement arise under the same subject matter of the agreement. The second prong asks whether the non-signatory has a “close relationship” to a signatory of the agreement.

The first prong is heavily fact dependent. Here, the court held it was met because the “bulk of Plaintiffs’ claims … [arose] from the formation, execution, and existence of the Reinsurance Agreements,” which contained the arbitration agreement. The court was also influenced by the fact that the plaintiffs simultaneously filed a complaint in court and a demand for arbitration, both of which provided nearly identical factual allegations, alleged injuries, and theories of the case.

The second prong “is centered on the role of the non-signatory defendants when the misconduct occurred.” The court noted that an agency relationship between the non-signatory and a signatory may be sufficient to permit the non-signatory to compel arbitration. The fact that the plaintiffs also connected the non-signatory defendants to a signatory through conspiracy allegations clinched the matter for the court. The defendants had the requisite “close relationship” with a signatory to allow them to compel arbitration. Bankers Conseco Life Insurance Company v. Feuer, Case No. 16-Civ-7646 (USDC S.D.N.Y. Mar. 15, 2018).

This post written by Benjamin E. Stearns.

See our disclaimer.

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

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