Michael Wolgin

NINTH CIRCUIT HOLDS PAGA CLAIMANTS MAY BE COMPELLED TO ARBITRATE

April 3, 2017 by Michael Wolgin

Terminix appealed from a district court order denying its motion to compel arbitration of a former employee’s representative claim under California’s Private Attorneys General Act (PAGA) alleging that Terminix failed to provide workers with proper breaks, payment, and pay stubs. On appeal, the Ninth Circuit reversed and remanded. It found persuasive Terminix’s argument that the district court erred in concluding that PAGA claims categorically cannot proceed to arbitration. Specifically, the district court reasoned that a PAGA claim “belongs to the state, and the state has not waived the judicial forum” even where an employee signs an employment contract requiring arbitration of PAGA claims. The Ninth Circuit disagreed and found that individual employees can bind the state to an arbitral forum. Specifically, the court reasoned “[a]n individual employee, acting as an agent for the government, can agree to pursue a PAGA claim in arbitration” and clarified that the California Supreme Court’s Iskanian ruling holds only that a complete waiver of the right to bring a PAGA claim is invalid. Valdez v. Terminix Int’l Co. Ltd. P’ship, Case No.15-56236 (9th Cir. Mar. 3, 2017).

This post written by Gail Jankowski.

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COURT FINDS THAT ARBITRATION AWARD THAT INTERPRETED CONTRACT “TERMINATION” TO INCLUDE CONTRACT “EXPIRATION” WAS NOT A “MANIFEST DISREGARD OF THE LAW”

March 16, 2017 by Michael Wolgin

Former franchisees filed a petition to vacate an arbitration award entered in favor of their former franchisor which enforced a 2-year non-compete provision in the parties’ franchise agreement when the agreement expired. The arbitrator had determined that the non-compete provision applied, notwithstanding that the provision contemplated applying upon the agreement’s “termination,” and did not refer to the agreement’s “expiration.” The franchisees argued that the arbitrator committed a “manifest disregard of the law,” and that the award “failed to draw its essence” from the parties’ agreement. The court determined that “both readings [were] plausible,” and therefore the award “derived from the essence of the Franchise Agreement.” The court continued, “Where the arbitrator did not act with ‘manifest disregard of the law” there was “no basis to vacate the award.” The court further upheld the arbitrator’s decision to enforce the 2-year non-compete provision from the date the franchisees started to comply with the agreement’s post-expiration terms, rather than from the (earlier) date that the agreement expired. That decision, the court explained, also “comported with the law and thus did not exhibit ‘manifest disregard of the law.’” The court therefore denied the petition to vacate the award, and granted the petition to confirm the award. Frye v. Wild Bird Centers of America, Inc., Case No. 8:16-cv-03216 (USDC D. Md. Feb. 14, 2017).

This post written by Michael Wolgin.

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UPDATE ON LIQUIDATION OF THE HOME INSURANCE COMPANY

March 15, 2017 by Michael Wolgin

The New Hampshire liquidation court approved the commutation, settlement, and release agreement between The Home Insurance Company (liquidating) and Pennsylvania Manufacturers Association Insurance Company (PMAIC). The commutation agreement was approved February 10, 2017 and provides for the commutation of all of Home’s ceded and assumed business to or from PMAIC, as well as the resolution of all of PMAIC’s contribution claims against Home. A redacted copy of the commutation agreement, with economic terms removed, was filed with Home’s motion for approval. Additionally, in New York, in a contested claim between the liquidator and a Danish non-admitted reinsurer, the court approved the reinsurer’s posting of a security bond in the stipulated amount of $259,886.13. In re Liquidation of The Home Insurance Co., 217-2003-EQ-00106 (N.H. Sup. Ct. Feb. 10, 2017) (order approving commutation); Motion for Approval (Dec. 15, 2016); Sevigny v. Trygvesta Forsikring A/S, Case No. 16 Civ. 4874 (USDC S.D.N.Y. Jan. 30, 2017) (stipulation and bond); (Feb. 14, 2017) (bond).

This post written by Gail Jankowski.

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NINTH CIRCUIT REAFFIRMS ISKANIAN RULE, REJECTS WAIVER OF REPRESENTATIVE ACTION UNDER PAGA

March 14, 2017 by Michael Wolgin

Defendants appealed an order from a California federal district court that denied their motion to compel individual arbitration of a former employee’s representative claim under California’s Private Attorney General Act (PAGA). On appeal, the defendants argued that the plaintiff’s arbitration agreement, wherein she agreed to arbitrate all disputes regarding her employment on an individual basis, applied to her PAGA claim as well. The Ninth Circuit affirmed the district court’s order denying defendants’ motion to compel arbitration. The panel reaffirmed the Iskanian rule, which holds that under California law, an employment agreement that compels the waiver of representative claims under the PAGA, is contrary to public policy and therefore unenforceable. Hernandez v. DMSI Staffing, LLC, Case No. 15-15366 (9th Cir. Feb. 16, 2017).

This post written by Gail Jankowski.

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FLORIDA DEPARTMENT OF REVENUE ISSUES ADVISEMENT DETERMINING THAT A REINSURER AND ITS CEDENTS DID NOT HAVE NEXUS IN FLORIDA FOR TAX PURPOSES

March 13, 2017 by Michael Wolgin

On January 13, 2017, the Florida Department of Revenue issued a Technical Assistance Advisement regarding whether a reinsurer had nexus with the state of Florida that would require it to file a corporate income tax return and whether the Florida activities of the reinsurer’s ceding companies made Florida the location of the reinsurer’s and cedents’ regional home office. As to both questions, the DOR answered in the negative.

First, the DOR concluded that the reinsurer did not have nexus with the state because the reinsurer was not an approved reinsurer registered with the Florida Office of Insurance Regulation, and the reinsurer did not reinsure policies of insurers that were domiciled or commercially domiciled in Florida. Next, the DOR found that the ceding companies did not have a regional home office in Florida because – even though the ceding companies performed in Florida many activities traditionally carried out in a regional home office, such as selling insurance or approving or rejecting coverage, Florida was not the domicile or nerve center of the ceding companies.

Recognizing the term “regional home office” to have no definition, the DOR looked to the Department’s previous definition of the residence of a corporation as (1) a corporation’s domicile, or (2) with respect to diversity jurisdiction, “as the nerve center of the corporation”. The DOR then found that this standard was not met. The ceding companies’ “activities are not performed entirely for three states, or two states and one or more foreign countries … less than 5% of the ceding insurer’s underwriters are located in Florida … all national advertising [ ] is handled outside Florida … [and] the Florida office location only performs activities authorized by the home office.” In reaching this conclusion, the DOR further recognized as important the strict construction of taxing statutes in favor of the taxpayer. Florida Dept. of Revenue Technical Assistance Advisement – 17C1-001 (Jan. 13, 2017).

This post written by Brooke L. French.

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