Michael Wolgin

SECOND CIRCUIT AFFIRMS ARBITRATION AWARD FINDING NO DISREGARD OF MERGER AGREEMENT OR MANIFEST DISREGARD OF DELAWARE LAW

November 2, 2017 by Michael Wolgin

In a summary order, the Second Circuit affirmed a judgment confirming an arbitral award of damages for breach of a merger agreement between respondents Sirona Dental Systems, Inc. and Arges Imaging Inc. (“Sirona”) and petitioners, former shareholders of Arges Imaging Inc. On appeal, Sirona argued that the lower court should have vacated the award because the arbitrator (1) disregarded the plain terms of the agreement when it concluded that petitioners were entitled to recover a $3 million bonus based on the proven accuracy of their dental-imaging product and (2) manifestly disregarded Delaware’s prohibition on speculative damages in awarding petitioners approximately $4 million under a provision tied to the dental-imaging product’s expected revenues.

The Second Circuit found that the arbitrator did not disregard the plain terms of the agreement and similarly did not manifestly disregard Delaware law in its damages calculation. On the first issue, the Second Circuit found that “[w]hether or not we would ourselves construe the Agreement” as the arbitrator did was inapposite; “the arbitrator’s interpretation was supported by at least a ‘barely colorable justification,’ which suffices to confirm the award.” On the second issue, the Second Circuit rejected Sirona’s argument that the arbitrator ignored Delaware law, instead finding that the arbitrator cited Delaware precedent proscribing awards of “speculative” damages and concluding that petitioners’ damages calculations met Delaware’s requirement that “damages be shown with reasonable certainty.” Moreover, the Second Circuit found that the arbitrator did not disregard the general rule in Delaware prohibiting damages based on evidence of expected profits from a new business or technology. Bergheim v. Sirona Dental Systems Inc., Case No. 17-548-cv (2d Cir. Oct. 11, 2017).

This post written by Gail Jankowski.

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NATIONAL FLOOD INSURANCE PROGRAM REAUTHORIZED THROUGH DECEMBER 8, 2017

November 1, 2017 by Michael Wolgin

On September 8, 2017, Congress passed legislation extending the National Flood Insurance Program until December 8, 2017. The program was set to expire at the end of September. The extension was part of a continuing resolution raising the debt limit and funding the U.S. government. No changes to the flood insurance program were made, although reforms may be coming in the future. US HR 601 (Sept. 8, 2017).

This post written by Michael Wolgin.

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COURT CONFIRMS ARBITRATOR’S ENTRY OF INTERIM PRELIMINARY INJUNCTION, HOLDING THAT THE AWARD WAS SUFFICIENTLY “FINAL”

October 31, 2017 by Michael Wolgin

This case concerns a 10-year agreement by which plaintiff, an endodontist, contracted to perform consulting services for defendant Dentsply, a business that manufactured and sold endodontic products for the dental industry. The agreement prohibited plaintiff from disclosing any confidential information about Dentsply’s business affairs or from competing with Dentsply for three years after the termination of the agreement. But immediately prior to the end of the 10-year term of the agreement, plaintiff brought suit contending that the confidentially and non-compete provisions of the agreement were unenforceable, and seeking declaratory and injunctive relief. The case proceeded to arbitration during which the arbitrator sided with Dentsply and enjoined plaintiff from breaching the confidentiality and non-compete provisions. Dentsply then filed a motion to confirm the arbitrator’s preliminary injunction award.

Plaintiff opposed Dentsply’s motion, asserting a number of arguments based on the notion that the preliminary injunction was not sufficiently final to be confirmed by the court. The court rejected each of plaintiff’s arguments and then considered “whether, in the absence of binding Supreme Court or Tenth Circuit precedent, the Court should join the district and circuit courts that have considered interim arbitral awards final for the purposes of judicial review and confirm the Ruling.” The court decided to join those courts and confirmed the arbitrator’s preliminary injunction. The court reasoned that the interim arbitration ruling “finally and definitively enjoin[ed] plaintiff from breaching the 2007 agreement’s confidentiality and non-compete provisions during the pendency of the arbitration, and if the Ruling [was] not enforced, a subsequent award of injunctive relief to defendant may be rendered meaningless.” Moreover, the Court reasoned that the Ruling was “not a preliminary or procedural trifle, and expending the judicial resources to confirm it does not frustrate our arbitration system’s goal of expediency.” Instead, the Court found, “confirming the Ruling [gave] teeth to the arbitrator’s interim award of equitable relief, thereby promoting arbitration as an efficacious and reliable alternative to the litigation process.” Johnson v. Dentsply Sirona Inc., Case No. 16-CV-0520-CVE-PJC (USDC N.D. Okla. Sept. 27, 2017).

This post written by Gail Jankowski.

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U.S. COVERED AGREEMENT POLICY STATEMENT AFFIRMS U.S. STATE-BASED REGULATION OF INSURANCE

October 30, 2017 by Michael Wolgin

We have posted several times on the negotiation and finalization of the Covered Agreement (“the Agreement”) negotiated by the Obama Administration and approved by the Trump Administration with the European Union. The agreed text of the Agreement was released in January of this year, and the House Financial Services Committee held a hearing on the Agreement the following month. The Trump Administration’s decision to sign the Agreement was announced in July, and included a statement that the U.S. would issue a “U.S. policy statement on implementation.” That statement intrigued many, prompting speculation as to the positions that would be taken in that policy statement. We posted an analysis of the complicated timeline for the implementation of the Agreement later that month.

In conjunction with the signing of the Agreement on September 22, the U.S. released the anticipated policy statement. The policy statement is not remarkable, and is based upon a theme that the Agreement affirms, preserves, and builds upon the U.S. state-based structure for the regulation of the business of insurance. The policy statement summarizes various provisions of the Agreement, stating in part that the Agreement:

with respect to the collateral requirement, “does not prevent a state insurance regulator from imposing non-collateral requirements that do not have substantially the same regulatory impact as collateral requirements as conditions for ceding companies to enter into reinsurance agreements with EU reinsurers or to allow credit for such reinsurance, if the state insurance regulator applies the same requirements in the case of reinsurance agreements with U.S. reinsurers domiciled in that state;”
does not prevent parties to reinsurance agreements to contractually require collateral for reinsurance;
excludes the US parent of US-domiciled reinsurers from the need to comply with the requirements of Solvency II just because it has an affiliate doing business in the EU; and
preserves the authority of the states (in conjunction with the NAIC) to set capital requirements for US insurance groups.

The principal text of the Conclusion section of the policy statement provides:

The Agreement supports the principles specified in the Presidential Executive Order on Core Principles for Regulating the United States Financial System (Feb. 3, 2017) by enabling U.S. companies to be competitive with foreign firmshttps://www.reinsurancefocus.com/wp-admin/edit.php in domestic and foreign markets; advancing U.S. interests in international financial regulatory negotiations and meetings; and making regulation efficient, effective, and appropriately tailored. The United States looks forward to promoting the interests of U.S. stakeholders, U.S. insurance regulators, and the U.S. economy as the Agreement is implemented. The United States also shares with the EU the goal of protecting insurance and reinsurance consumers while respecting one another’s system for supervision and regulation.

This post written by Rollie Goss.
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DELAWARE GOVERNOR SIGNS LAW CREATING STREAMLINED AND INEXPENSIVE REGULATORY REGIME FOR DORMANT CAPTIVE INSURANCE COMPANIES

October 5, 2017 by Michael Wolgin

The bill defines a dormant captive insurance company as one that (1) did not contract for any direct premium or reinsurance premium for a full calendar year, (2) is not obligated as an insurance company under any contract of insurance or reinsurance during any year it is a dormant captive, and (3) has provided written notice to the Commissioner of its intent to be a dormant captive. Among various provisions, the bill requires a dormant captive to possess and maintain $25,000 in unimpaired capital and surplus (or such other amount determined by the Commissioner), and exempts a dormant captive from the payment of premium tax, the filing of annual statements, the preparing of audited financial statements, and obtaining statements of actuarial opinion. Del. HB 87 (eff. Aug. 31, 2017).

This post written by Nora A. Valenza-Frost.

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