Rob DiUbaldo

NINTH CIRCUIT AFFIRMS DENIAL OF MOTION TO COMPEL ARBITRATION FOR LACK OF FEDERAL JURISDICTION

October 27, 2016 by Rob DiUbaldo

The Ninth Circuit affirmed a district court’s dismissal of a plaintiff’s RICO claim, and thus found the district court lacked independent federal jurisdiction to compel arbitration of the dispute under the Federal Arbitration Act (“FAA”). Specifically, the Ninth Circuit agreed with the district court that the plaintiff failed to properly allege any predicate acts for a cognizable RICO claim against the defendant. As that claim was the plaintiff’s only basis for federal jurisdiction, the court found it lacked jurisdiction to compel arbitration under the FAA, which requires a party so moving to demonstrate that the court has an independent basis for federal jurisdiction.

Estate of Clark v. Horwich, No. 12-17064 (9th Cir. Sept. 23, 2016).

This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .

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D.C. COURT DISMISSES DISPUTE OVER REINSURANCE OF FEDERAL CROP INSURANCE PROGRAM

October 26, 2016 by Rob DiUbaldo

On September 20, a federal district court in the District of Columbia dismissed a lawsuit brought by reinsurers of the federal crop insurance program. The plaintiffs-reinsurers alleged that the Federal Crop Insurance Corporation (“FCIC”) improperly modified the actuarial methodology that set the premiums owed for several crops, including corn and soybeans, resulting in plaintiffs purportedly paying more than what was allegedly conveyed to them at the time of contracting. Indeed, the plaintiffs had entered into five-year standard agreements which they claimed included representations that the methodology used to determine the premiums charged would not change, but it later did. The plaintiffs first challenged the methodology with the Deputy Director of Insurance Services, and later to the Civil Board of Contract Appeals (the “Board”), both of which granted summary relief to the FCIC.

Thereafter, the plaintiffs filed suit in federal court alleging counts of breach of contract, promissory estoppel, unjust enrichment, violation of a statute limiting renegotiation of standard contracts to once every five years, violation of a statute in that the FCIC did not consider the reinsurer’s financial condition, reformation and rescission, and for a declaratory judgment. The FCIC filed a motion for judgment on the pleadings under FRCP 12(c), which the court granted. In so doing, the court found that many claims were barred by res judicata as they had been decided by the Board and were not appealed under the Administrative Procedures Act. The court also found that the promissory estoppel and unjust enrichment counts were not actionable because the parties’ agreement was governed by existing contracts. As to the new counts not raised before the Board, the court found that the claims should be dismissed for failure to exhaust administrative remedies. Thus, the court dismissed the suit brought by the reinsurers.

Ace American Ins. Co. v. Federal Crop Ins. Corp., Case No. 1:14-cv-01992-RCL (D.D.C. Sept. 20, 2016).

This post written by Zach Ludens.

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NORTH CAROLINA FEDERAL COURT HOLDS THAT ARBITRATION CLAUSE REQUIRING PANEL TO RENDER A DECISION WITHIN 30 DAYS IS NOT UNCONSCIONABLE

October 25, 2016 by Rob DiUbaldo

In July, a federal court in North Carolina held that an arbitration provision which required the arbitration panel to reach a decision within thirty days of their selection was not unconscionable. Arising out of a dispute regarding a construction contract, the court said that the defendant’s argument failed to consider the thirty day limitation in the full context of the arbitration provision. While acknowledging that “allowing an arbitration panel only 30 days to sort out the liability for the post-construction, partial collapse of two parking garages would be a Herculean feat, if not utterly impossible,” the court noted that “during any significant construction project, billing claims and disputes often arise which require immediate attention and resolution lest the project grind to a halt.” Thus, the court pointed to the panel’s power to extend the date for final disposition under the Commercial Arbitration Rules of the AAA, to find that the thirty day limitation was not unconscionable.

In late September, the same court compelled a second lawsuit between the parties to arbitration, over the objection of a defendant that the thirty day limitation was absolute and jurisdictional, depriving the panel of continued jurisdiction over the first lawsuit. The court held that such a challenge would constitute an argument that the panel “exceeded its powers,” which was not ripe nor before the court at the time.

Tribal Casino Gaming Enter. v. W.G. Yates & Sons Const. Co., Case No. 1:16-cv-00030-MR (W.D.N.C. July 1, 2016) and Case No. 1:16-cv-00132-MR (W.D.N.C. Sept. 26, 2016).

This post written by Zach Ludens.

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THIRD CIRCUIT REJECTS CONTRACTOR’S CHALLENGE TO ARBITRAL JURISDICTION BASED ON FAILURE TO COMPLY WITH AGREEMENT’S PROCEDURAL REQUIREMENTS

October 24, 2016 by Rob DiUbaldo

The Third Circuit affirmed a lower court’s ruling against a contractor challenging an arbitrator’s authority in ordering payment of delinquent contributions to employee benefit funds. Plaintiff (“Nolt”) signed a Project Labor Agreement (“PLA”) for a construction project that required it to hire union employees, but permitted it to hire non-union employees in certain circumstances. The PLA also required Nolt to contribute to employee benefit funds “on behalf of all employees covered by” it. The PLA contained a provision with an exclusive grievance and arbitration procedure for disputes between the parties, which included certain pre-arbitration “meet and confer” requirements and time limits, the failure to comply with which rendered any grievances null and void.

In a dispute over whether Nolt was required to contribute to union employee benefit funds on behalf of its non-union employees, who would not benefit from the funds, an arbitrator interpreted the plain language of the PLA to require contributions for “all employees covered” by the PLA and ordered payment of $492,000 in delinquent contributions. Nolt moved to vacate the arbitration award on the grounds that the arbitrator lacked jurisdiction and that the award violated public policy and other relevant wage laws.

The Third Circuit, noting the limited role of courts in reviewing arbitration awards, affirmed the award based on a finding of arbitral jurisdiction and lack of sufficient conflict with a cognizable public policy. The court found that Nolt’s argument claiming the union failed to comply with the PLA’s procedural requirements was a question of “procedural arbitrability” that was appropriately left to the arbitrator, rather than one of “substantive arbitrability” that would be appropriate for judicial resolution. The court also rejected Nolt’s claim that the award conflicted with public policy by forcing it to essentially pay twice, first to the union employee benefit fund and second via its obligations under applicable wage laws. Nolt failed to identify any “explicit conflict with other ‘laws and legal precedents’,” and, instead, relied on a non-cognizable “general interest in fairness and equal treatment” between union and non-union employers. The court deferred to the arbitrator’s interpretation of the PLA as contract interpretation within his authority and affirmed despite recognizing Nolt’s persuasive arguments that the award forced Nolt to pay an unfair price for its non-union employees.

D.A. Nolt, Inc. v. Local Union No. 30 United Union of Roofers, Waterproofers & Allied Workers, No. 15-3697 (3d Cir. Sept. 23, 2016).

This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .

See our disclaimer.

Reliance Liquidation Court Approves Application for Direct Payments from Reliance’s Reinsurers to Certain Insureds

September 14, 2016 by Rob DiUbaldo

Recently, there have been several developments in the ongoing liquidation of Reliance Insurance Company. The liquidation court recently approved the application for the assumption by one of Reliance’s reinsurers, EFH Vermont Insurance Company, of a direct coverage obligation to Reliance’s insured, LSGT Gas Company LLC, and approved the direct payment to LSGT from EFH. The liquidation court also approved the application for the assumption by another of Reliance’s reinsurers, NAFCO Insurance Company, Ltd., of a direct coverage obligation to Reliance’s insured, Carlson Holdings, Inc., and approved the direct payment to Carlson from NAFCO.