Michael Wolgin

COURT UPHOLDS ATTORNEY-CLIENT PRIVILEGE IN REINSURANCE DISPUTE, REJECTING ASSERTION OF THE CRIME-FRAUD EXCEPTION AND QUESTIONS SURROUNDING THE SOURCE OF THE PRIVILEGED MATERIAL

February 23, 2017 by Michael Wolgin

The case involves a dispute over Utica Mutual Insurance Company’s claims for reinsurance proceeds from Munich Re. One of Munich Re’s defenses in the litigation asserts that Utica “strategically orchestrated a settlement structure” with its insured “for the sole purpose of either creating reinsurance coverage which did not exist or maximizing a reinsurance recovery to which, in good faith, Utica is not entitled.” To support its defense, Munich Re sought to compel production from Utica of certain redacted handwritten notes that were written on a draft mediation statement that Utica claims were authored by an attorney from the law firm that represented it during the underlying insurance coverage dispute between Utica and its insured. Munich Re based its motion to compel the document on (1) the “crime fraud exception” to the attorney-client privilege, and (2) Utica’s inability to specifically identify the author of the handwritten notes.

The magistrate judge denied Munich Re’s motion to compel, and the district court affirmed the decision. Regarding the crime-fraud exception, the court found no clear error in the magistrate’s finding that Munich Re failed to establish that the handwritten notes were made in furtherance of Utica’s alleged attempt to defraud its reinsurers. And regarding the unknown identity of the notes, the court upheld the magistrate’s conclusion that the notes were authored by an attorney, notwithstanding that one of Utica’s outside attorneys testified that the notes were not in his handwriting or in the handwriting of one of his partners. The court upheld the magistrate’s ruling that “the identity of the attorney was irrelevant because the contents of the notes clearly establish that this was a notation by a lawyer for Utica relating to the reinsurance implications of [the] settlement.” Utica Mutual Insurance Co. v. Munich Reinsurance America, Inc., Case No. 6:12-CV-196 (USDC N.D.N.Y. Apr. 25, 2016; Jan. 13, 2017) (Magistrate Ruling & Order on Appeal).

This post written by Gail Jankowski.

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NINTH CIRCUIT AFFIRMS ORDERS DENYING ARBITRATION IN TWO CLASS ACTION LAWSUITS AGAINST SAMSUNG

February 22, 2017 by Michael Wolgin

The Ninth Circuit issued two similar opinions arising out of Samsung’s appeals of orders denying arbitration in two putative class actions filed against it. The claims against Samsung allege that the smartphone maker misrepresented the performance of the Galaxy S3 and S4 smartphones. Samsung attempted to compel arbitration based on an arbitration clause in the “Product Safety and Warranty Brochure” included in the packaging of the phones. Applying California law, the Ninth Circuit found that the arbitration clause in the warranty brochures was not binding on the plaintiffs with respect to the claims here. The court further held that Samsung failed to establish an exception to the rule that an offeree’s silence cannot satisfy affirmative consent. Further, the court held that the brochure was not an “in-the-box” contract. The Ninth Circuit also rejected Samsung’s argument that it could rely on the arbitration provisions in the plaintiffs’ respective customer agreements with their cell phone carriers; Samsung was neither a signatory to, nor a third-party beneficiary of those agreements. Norcia v. Samsung Telecommunications America, LLC, Case No. 14-16994 (9th Cir. Jan. 19, 2017); Dang v. Samsung Electronics Co., Ltd., Case No. 15-16768 (9th Cir. Jan. 19, 2017).

This post written by Michael Wolgin.

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THIRD CIRCUIT AFFIRMS REJECTION OF CLASS ARBITRATION WHERE EMPLOYMENT AGREEMENT WAS SILENT ON WHETHER ARBITRATION COULD PROCEED ON A CLASS BASIS

February 21, 2017 by Michael Wolgin

Plaintiffs, former staffing managers of defendants’ international staffing agency, alleged that defendants misclassified them as overtime-exempt employees in violation of the Fair Labor Standards Act. Following earlier rulings of the trial court permitting an arbitrator to determine the availability of class arbitration, the Third Circuit established precedent that it was the role of the court, not the arbitrator, to make this determination. The trial court then found that the relevant employment agreements did not specifically provide for class arbitration, and therefore no class arbitration could go forward. At issue on appeal were first, whether the availability of class arbitration was indeed for the court or the arbitrator to decide; and second, whether the trial court erred in determining that the parties’ agreements did not permit class arbitration.

Regarding the issue of availability of class arbitration, the Third Circuit reaffirmed its previous decision that the question of arbitrability of class claims is for the court, and not the arbitrator to decide. As to the issue of whether the employment agreements permitted class arbitration, the court held that silence regarding class arbitration generally indicates a prohibition against it. Moreover, the court stated that “[e]ven assuming arguendo that class arbitration may be permitted without express authorization in an arbitration clause, Plaintiffs ha[d] set forth nothing suggestive of any implicit intent to permit class arbitration here.” The court therefore affirmed the dismissal of the case due to the lack of authority to hold a class arbitration. Opalinski v. Robert Half Int’l Inc., Case No. 15-4001 (3d Cir. Jan. 30, 2017).

This post written by Gail Jankowski.
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COMMUTATION, SETTLEMENT, AND RELEASE AGREEMENT OF THE HOME INSURANCE COMPANY APPROVED

February 2, 2017 by Michael Wolgin

A New Hampshire court has approved the commutation, settlement, and release agreement between The Home Insurance Company (in Liquidation) and Providence Washington Insurance Company (PWIC), as successor to Unigard Mutual Insurance Company, which merged with Seaton Insurance Company.

Home entered liquidation in 2003, and the New Hampshire Insurance Commissioner was appointed as Liquidator. Prior to the merger of PWIC with Seaton, the Liquidator entered into a separate commutation agreement effective March of 2015 as to all PWIC business. The instant commutation agreement (approved in December 2016), provides for the commutation of all of Home’s ceded and assumed business to/from Seaton (pre-merger), as well as resolution of all of Seaton’s contribution claims against Home (which related to increased payments Seaton made to insureds common to both parties as the result of Home’s insolvency). A redacted copy of the commutation agreement, with economic terms removed, was filed with Home’s motion for approval. In re Liquidation of The Home Insurance Co., 217-2003-EQ-00106 (N.H. Sup. Ct. Dec. 12, 2016) (order approving commutation); Motion for Approval (Oct. 18, 2016).

This post written by Brooke L. French.

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COURT APPLIES THE “LOOK THROUGH” APPROACH TO FAA SECTION 10 PETITIONS IN DETERMINING SUBJECT MATTER JURISDICTION

February 1, 2017 by Michael Wolgin

Plaintiffs, members of the Harman family, sold their family farm and sought investment advice from defendant Wilson-Davis. The Harmans claimed they were damaged after making certain investments due to forged financial statements by Wilson-Davis, and that Wilson-Davis spoliated evidence pertaining to those investments. At arbitration, the panel found no liability against Wilson-Davis. The Harmans then sought to vacate the panel’s award.

The court considered whether it had subject matter jurisdiction, and whether there were sufficient grounds to vacate the award under either public policy grounds or section 10 of the FAA. Regarding subject matter jurisdiction, the court analyzed whether it could “look through” the face of the petition to vacate the award, and find jurisdiction based on whether federal-law claims were raised in the underlying arbitration. (There is a split among the federal circuits as to whether a court may look through a section 10 petition to vacate an award in order to find federal question jurisdiction; the Supreme Court previously applied “look through” only under section 4.) The Tenth Circuit, in which the district court in this matter is located, has not yet addressed the issue. The court here sided with the Second Circuit, and not the opposing view of the Third and Seventh Circuits, holding that applying the “look through” approach to the entire FAA was the only logical construction of the law, notwithstanding differences in statutory language between sections 4 and 10. The court, however, denied the Harmans’ petition because it found no public policy or statutory grounds supporting vacatur. Harman v. Wilson-Davis & Co., Case No. 2:2016-cv-00229-CW (USDC D. Utah Jan. 6, 2017).

This post written by Gail Jankowski.

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