Rob DiUbaldo

COURT REJECTS MOTION TO SEAL SUMMARY JUDGMENT EXHIBITS WHEN MOVING PARTY FAILS TO PROVIDE SUFFICIENT FACTUAL JUSTIFICATION FOR SUCH SEALING

June 13, 2017 by Rob DiUbaldo

Utica Mutual Insurance Company’s request that numerous exhibits filed in support of summary judgment be sealed has been rejected by a federal district court, which found that Utica’s general statements about the documents were insufficient to allow the court to “make the ‘specific, on-the-record findings’ required to seal judicial documents.”

Utica and Munich Reinsurance America, Inc. are on opposing sides of two related lawsuits regarding Utica’s attempt to seek reimbursement for asbestos claims under two reinsurance contracts. Both parties moved for summary judgment, and Utica moved to have numerous exhibits in support of these motions filed under seal on the basis that they contained privileged communications with in-house and/or outside attorneys, referred to such privileged information, or contained attorney’s handwritten notes protected by the work product doctrine.

The court began by describing the standards for such a sealing motion, noting the “strong presumption of access” that attaches to documents filed in connection with a summary judgment motion and that overcoming this presumption requires a party to provide facts sufficient to allow the court to make “specific, on-the-record findings . . . demonstrating the closure is essential to preserve higher values and narrowly tailored to serve that interest.” Utica’s explanations, the court found, were not specific enough to meet this standard. In its descriptions of attorney-client communications, the court found that Utica did not explain who all of the recipients were or show that the communications were intended to be or were kept confidential. Regarding attorney notes, the court found that Utica did not indicate whether they were fact or opinion work product. Similarly, the court found that Utica did not specify whether other documents it wished to file under seal were protected by attorney-client privilege or the work product doctrine and otherwise failed to provide information sufficiently specific for the court to determine which documents contained protected information or to narrowly tailor a sealing order to protect that information. However, the court allowed Utica to file as exhibits certain briefs from prior litigation in the same redacted form that they were previously filed.

Utica Mutual Insurance Company v. Munich Reinsurance America, Inc., No. 6:12-CV-00196 (BKS/ATB) (N.D.N.Y. April 26, 2016)

This post written by Jason Brost.

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IAIS PROPOSES REVISIONS TO INSURANCE CORE PRINCIPLE 13 ON REINSURANCE

June 12, 2017 by Rob DiUbaldo

The International Association of Insurance Supervisors (“IAIS”) recently released proposed revisions to the existing version of its Insurance Core Principle 13 regarding “Reinsurance and Other Forms of Risk Transfer.” The proposal involves a fairly significant re-working of the structure of certain ICP 13 sections, as well as important substantive updates. At the outset, the proposal would revise the description of what ICP covers, from supervisors “set[ting] standards” for the use of reinsurance and other forms of risk transfer in order to ensure that insurers adequately control and transparently report their risk transfer programs, to supervisors “requir[ing] the insurer to manage effectively” its use of reinsurance and other forms of risk transfer. Other noteworthy changes include (but are not limited to):

inserting a list of factors to inform a supervisor’s assessment of a ceding insurer’s reinsurance program;
recommending the group-wide supervisor of an insurance group require the reinsurance strategy of the insurance group to address a designated set of issues;
specifying supervisors require ceding insurers to establish effective internal controls over the implementation of their reinsurance program;
including credit risk posed by a reinsurer (and ways for ceding insurer to mitigate reinsurer credit risk), as well as operational risk related to contract documentation, as characteristics of the reinsurance program that should be included in a ceding insurer’s capital assessment;
requiring ceding insurers to demonstrate the economic impact of risk transfers originating from reinsurance contracts (as opposed to requiring transparency to allow the supervisor to understand the economic impact);
eliminating statement that binding documentation requirements are questions of jurisdictional contract law;
requiring ceding insurers to consider the impact of their reinsurance programs in liquidity management (as opposed to the supervisor assessing whether cedants control their liquidity position to take account of risk transfers); and
inserting a section regarding considerations for supervisors of insurers ceding risks to SPEs.

The IAIS held a public background call on June 5, 2017 to introduce the public consultation package and to receive initial feedback. Interested parties may submit feedback on the proposed revisions to the IAIS online through July 31, 2017.

This post written by Thaddeus Ewald .
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COURT DECLINES TO VACATE ARBITRAL DECISION IN FACE OF SEVEN CHALLENGES MADE BY PRO SE PLAINTIFF

May 25, 2017 by Rob DiUbaldo

Last month the Southern District of New York granted DCH Auto Group’s motion to confirm a favorable arbitral decision dismissing a pro se plaintiff’s arbitration with prejudice, over a host of different challenges seeking vacatur of that decision. The plaintiff, Marciano, brought workplace discrimination claims against DCH. During the course of the litigation, plaintiff was represented intermittently by outside counsel, notified of various discovery delinquencies, made multiple requests for extensions of time to comply with said deficiencies or other deadlines, and was warned at least twice that no further extensions would be granted. The arbitrator ultimately dismissed the arbitration with prejudice based on these factors, as well as the detriment DCH faced with having to defend a case that had already been litigated for two-and-a-half years but not proceeded beyond discovery.

The court systematically rejected all seven of Marciano’s challenges to the arbitration decision. First, the court found no wrongdoing by DCH where the AAA made a mistake in providing a pre-corrected version of the arbitration decision. Second, the court rejected the claim that the arbitrator was guilty of misconduct for failure to hear evidence because the allegedly ignored evidence was unsolicited, submitted long after the operative deadline, and the arbitral decision was likely already made before the submission. Third, there was no non-speculative evidence of bias by the arbitrator. Fourth, the allegedly improper ex parte communications did not prejudice Marciano because they were mainly comprised of exchanges between DCH and the AAA (not the individual arbitrator), contained non-dispositive procedural questions, and were not “untoward.” Fifth, the court rejected Marciano’s challenge that DCH’s participation in the arbitration required vacatur. Sixth, the arbitrator was justified in refusing Marciano’s request to further postpone the arbitration proceedings because of the numerous extension requests that had been granted throughout the proceedings and because Marciano had adequate notice and ample time to respond by the deadlines. Finally, the court found no manifest disregard of the law on the arbitrator’s behalf and noted that Marciano failed to, despite notice, adequately respond to discovery inquiries regarding her disability status—a threshold issue in the case. Accordingly, the court granted DCH’s motion to confirm and denied Marciano’s motion to vacate.

Marciano v DCH Auto Grp., Case No. 11-9635 (USDC S.D.N.Y. Apr. 27, 2017)

This post written by Thaddeus Ewald .

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COURT REJECTS CLAIM THAT ARBITRATOR’S RULING WAS IN MANIFEST DISREGARD OF THE LAW

May 24, 2017 by Rob DiUbaldo

A court has granted a petition to confirm an arbitration award despite the defendant’s argument that the arbitrator acted in manifest disregard of the law. While acknowledging questions regarding the continuing viability of manifest disregard for the law as a basis for vacating arbitration awards, the court decided the case assuming that it is still the law, but found that the developer had not met the heavy burden of showing “that the arbitrator knew the applicable law, and yet chose to ignore it.”

The case arose from a claim by the plaintiff, an architect, that the defendant, a developer, failed to pay for the architect’s services and used its drawings without authorization. The defendant argued that five decisions of the arbitrator showed manifest disregard for the law: (1) awarding damages for debts incurred before the developer was formed, in contravention of the developer’s operating agreement; (2) awarding lost profits, despite a contractual waiver of consequential damages; (3) awarding copyright damages despite a lack of evidence that the drawings were copyrightable; (4) awarding two sets of copyright damages for the same drawings; and (5) deciding the copyright question despite it being outside the scope of the arbitration clause.

The court found that the defendant failed to meet its burden regarding the third and fourth decisions regarding copyright damages because it failed to raise these issues during arbitration. Regarding the award for debts incurred before the developer’s formation, the court found that it was not clear whether the arbitrator’s decision was based on veil piercing, a finding that a contract other than the operating agreement was controlling, or concessions by the defendant in testimony, and thus manifest disregard for the law had not been shown. As to the award of lost profits, the court found that the contract that contained the waiver of consequential damages contained other provisions suggesting that this waiver did not apply to lost profits. Finally, regarding the arbitrator’s authority over copyright infringement claims, the court found the contract language was broad enough and the case law cited by the parties was unclear enough to make it impossible to say that the arbitrator’s decision showed manifest disregard for the law.

The Knabb Partnership v. Home Income Equity, LLC, Civil Action No. 17-373 (E.D. Pa. April 19, 2017)

This post written by Jason Brost.

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THIRD CIRCUIT PERMITS LIMITED DISCOVERY ON ISSUE OF VALIDITY OF ARBITRATION AGREEMENT

May 23, 2017 by Rob DiUbaldo

In an unpublished opinion, the Third Circuit affirmed a decision denying a defendant bank’s motion to dismiss a consumer complaint in favor of arbitration when the contract containing the arbitration clause was not referenced in or attached to the complaint, agreeing that the plaintiff should be allowed to engage in limited discovery on the issue of the validity of the arbitration agreement.

The plaintiff, a customer of the defendant bank, sued alleging that the defendant’s overdraft protection program violated federal law and breached a contract with the plaintiff. According to the defendant, it had three contracts with the plaintiff: an account agreement, an overdraft protection agreement, and a service agreement related to electronic money transfers. The plaintiff alleged the existence of the account and overdraft protection agreements, but her complaint did not mention the service agreement, and the plaintiff filed a declaration stating that she had no recollection of seeing or agreeing to the service agreement. The account agreement did not contain an arbitration agreement and the overdraft protection agreement was not part of the record, such that the disputed service agreement was the only source of any provision purportedly requiring plaintiff to arbitrate the dispute.

The defendant argued that the trial court had “usurped the role of the arbitrator,” because, under the terms of the arbitration agreement, questions over the validity of the contract were for the arbitrator to decide. The Third Circuit disagreed, however, finding that the trial judge had not decided that the contract was invalid, but instead simply allowed limited discovery on the issue of arbitrability. Citing its earlier decision in Guidotti v. Legal Helpers Debt Resolution, LLC, the Third Circuit found that where “the parties’ agreement to arbitrate the dispute is not clear on the face of the complaint (or incorporated documents),” a motion to dismiss in favor of arbitration should be decided using a summary judgment standard. Because the service agreement – the only operative contract containing an arbitration clause – was not referenced in or attached the complaint, the existence of such a duty was not clear on the face of that complaint, and the plaintiff was entitled to limited discovery on the validity of and applicability of that agreement.

Horton v. FedChoice Federal Credit Union, No. 16-3960 (3d Cir. Apr. 25, 2017)

This post written by Jason Brost.
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