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Idaho Federal Court Grants Motion to Compel Discovery of Reinsurance Information for Employee Benefit ERISA Plan

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In THC–Orange County LLC v. Regence BlueShield of Idaho Inc., the U.S. District Court for the District of Idaho addressed a motion by plaintiff THC–Orange County LLC, doing business as Kindred Hospital Ontario, to conduct limited discovery from the defendants, including whether defendant WinCo Holdings Employee Benefit Plan “has reinsurance and, if so, who the reinsurer is and whether the reinsurer has any input into benefit decisions.”

The underlying lawsuit involves claims by plaintiff Kindred Hospital under ERISA for the payment of benefits for the care of a patient. The plaintiff’s complaint named several defendants, including the plan, Regence BlueShield of Idaho as contract administrator, and Cambia Health Solution, the parent company of Regence. The plaintiff moved to conduct limited discovery addressing the following topics: Regence’s relationship with the plan and its authority under the plan; whether the plan has reinsurance and, if so, the identity of the reinsurer and whether it has any input into benefit decisions; the identity and qualifications of medical reviewers; and appeal panel minutes.

Rejecting the defendants’ opposition, the court granted the plaintiff’s motion and compelled discovery regarding each topic. The court found that a “structural conflict may exist” regarding the relevant underlying plan documents and other documents and ordered limited discovery. The court also ordered limited discovery regarding the existence of reinsurance for the plan and the identity and authority of any such reinsurer. The court based this ruling on its observation of a “potential structural conflict of interest,” which the court noted “is sufficient to warrant limited discovery about a potential financial conflict of interest.” Finally, the court found that the plaintiff was entitled to discovery on the identities and qualifications of medical reviewers, the “Blue Card” program, and the appeal panel’s minutes and notes from meetings occurring during the relevant time period. The court also granted the plaintiff’s motion to take judicial notice of certain plan documents relied upon in filing its motion.

THC-Orange County, LLC v. Regence BlueShield of Idaho, Inc., No. 1:24-cv-00154 (D. Idaho June 2, 2025).

Second Circuit Affirms Confirmation of Arbitration Award Involving Dispute About Foreign Restaurant Franchises

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The Second Circuit Court of Appeals has rejected a challenge to a confirmation of an arbitration award upholding the nonrenewal of a master franchise agreement for Subway restaurants.

Beginning in the 1990s, Subway International B.V. entered into a series of master franchise agreements with Subway Russia that allowed Subway Russia to operate Subway sandwich franchises in Russia. In 2020, Subway decided not to renew the master franchise agreement, claiming that it had the right to do so because of certain “defaults” by Subway Russia. Subway Russia disagreed and the parties arbitrated the matter.

An arbitrator ruled in favor of Subway. The parties cross-moved to confirm and vacate that award. The district court remanded the case for the arbitrator to decide one additional issue. After the arbitrator had ruled on that issue, the parties again cross-moved to confirm and vacate the award and the district court confirmed the award.

Subway Russia appealed and the Second Circuit affirmed. The court rejected Subway Russia’s arguments that: (1) Subway’s second petition to confirm was untimely; (2) the district court erred in changing its initial decision; and (3) the district court’s decisions were contradictory. The court explained that the district court appropriately remanded the case and thus exercised jurisdiction over the second petition for confirmation. The court held that the district court had authority to correct its first decision, which remanded the matter for a further ruling, and that its second decision did not conflict with its first decision.

Subway International B.V. v. Subway Russia Franchising Co., No. 24-1702 (2d Cir. May 12, 2025).

Ohio Federal Court Grants Motion to Confirm Arbitrator’s Award of Attorneys’ Fees and Costs to Prevailing Party

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In Preferred Wireless LLC v. T-Mobile USA Inc., the U.S. District Court for the Southern District of Ohio addressed a motion by defendant T-Mobile to confirm an arbitrator’s award of attorneys’ fees and costs, and also addressed a motion by plaintiff Preferred Wireless to vacate that award.

The underlying arbitration arose out of the merger between T-Mobile and Sprint in April 2020. Preferred Wireless was a Sprint retailer operating more than 80 stores at the time of the merger. After the merger, T-Mobile absorbed Sprint’s operations, and Preferred Wireless and T-Mobile entered into a retailer services agreement (RSA). After T-Mobile closed several stores, Preferred Wireless filed a lawsuit alleging that T-Mobile misrepresented the number of stores it intended to close, which “induc[ed] Preferred Wireless to sign the RSA.” Preferred Wireless filed its complaint in the Delaware County Court of Common Pleas alleging fraud, fraudulent inducement, breach of contract, and violations of the Washington Consumer Protection Act and the Washington Franchise Investment Protection Act. T-Mobile removed the case to the U.S. District Court for the Southern District of Ohio, and the parties then agreed to arbitration.

The arbitrator dismissed the Washington Franchise Investment Protection Act claim and then held a five-day hearing, after which all remaining claims of Preferred Wireless were dismissed. T-Mobile then filed a fee petition requesting more than $3.3 million in attorneys’ fees and costs under the RSA, which provided that the “prevailing party” is entitled to recover reasonable attorneys’ fees and costs. Preferred Wireless opposed the fee application, arguing that “because the Interim Arbitration Award did not include an award of damages, Defendants were not considered the prevailing party under the RSA.” The arbitrator rejected the argument, reduced the amount of the fee request, and awarded T-Mobile approximately $2.9 million. The court granted T-Mobile’s motion to confirm the award, finding that the arbitrator did not exceed his authority in awarding fees to T-Mobile as the prevailing party and rejecting the argument that a prevailing party must be awarded monetary relief to be entitled to a prevailing party fee award. The court also found that the arbitrator did not “act in manifest disregard of the law” by awarding fees without contemporaneous billing records to support the application, finding that the fee request was reasonable. The court confirmed the award of $2.9 million in attorneys’ fees, costs, and expert fees, and denied the motion by Preferred Wireless to vacate the award.

Preferred Wireless LLC v. T-Mobile USA Inc., No. 2:22-cv-00978 (S.D. Ohio, May 6, 2025).

Court Denies Vacatur of Zero-Damage Arbitration Award, Finding No Manifest Disregard of the Law

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The case involved a dispute between a medical device manufacturer and a purchaser. The petitioner, Northgate Technologies Inc., alleged that United States Endoscopy Group Inc. breached a requirements contract by purchasing medical devices and supplies from a different manufacturer. U.S. Endoscopy had been purchasing the devices and supplies from Northgate for years, but, in 2021, U.S. Endoscopy began purchasing devices and supplies from a new competing company that had been acquired by its corporate parent. Northgate alleged that this change resulted in nearly $4 million in damages from lost sales.

In February 2024, Northgate filed a demand for arbitration against U.S. Endoscopy, contending that U.S. Endoscopy breached the parties’ agreement. The parties attended an American Arbitration Association commercial arbitration in which the arbitrator found that U.S. Endoscopy’s parent company breached the parties’ agreement. The arbitrator determined, however, that there were no damages for lost profits because, among other reasons, the number of devices that U.S. Endoscopy or its affiliates purchased from Northgate remained consistent throughout the term of their agreement.

In October 2024, Northgate filed a petition in federal court to vacate the arbitration award, contending that the arbitrator exceeded his powers and displayed a manifest disregard of the law (a doctrine recognized in certain circuits, including the Sixth Circuit). The court denied the petition under the Federal Arbitration Act and the Illinois Uniform Arbitration Act. The court explained that, to show manifest disregard, a party must show more than a mere error in interpretation or application of the law. A party must provide evidence that the arbitrators were aware of the relevant law but chose to ignore it.

Here, the court held that section 2-708(2) of the Uniform Commercial Code provided the applicable measure of lost profit damages and that recovery of lost profits in Illinois is allowable if the loss is proved with a reasonable degree of certainty and such profits were within the reasonable contemplation of the parties at the time the contract was entered. The arbitrator considered applicable case law and analyzed whether the breach was reasonably foreseeable at the time of contracting, and rendered his decision based on finding a lack of evidence that met that legal standard. The court therefore found that the arbitrator came to a “legally plausible” conclusion and did not manifestly disregard the law.

The court rejected Northgate’s arguments, which conflated proof of the breach of contract with proof of damages, and which incorrectly contended that the arbitrator erred by considering evidence of historic sales and past profits. The court concluded: “[Northgate] fails to show that the arbitrator manifestly disregarded the law. Instead, [Northgate’s] arguments amount to a general dissatisfaction with the arbitrator’s decision.” Accordingly, the court denied Northgate’s motion to vacate the arbitrator’s award and granted U.S. Endoscopy’s motion to confirm the award.

Northgate Technologies Inc. v. United States Endoscopy Group, Inc., No. 1:24-cv-01885 (N.D. Ohio Apr. 29, 2025).

Second Circuit Affirms Dismissal of Challenge to FINRA Award

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The Second Circuit Court of Appeals has affirmed the dismissal of a challenge to a FINRA arbitration award after concluding that federal courts lacked jurisdiction over the matter.

Versel Green filed an action seeking to vacate a FINRA arbitration award in favor of Bank of America Merrill Lynch and other entities. The district court dismissed his action for lack of jurisdiction. Green appealed. He conceded that no diversity existed but claimed the federal courts had federal question jurisdiction over his claim. The Second Circuit disagreed. It noted that even though Green invoked the Federal Arbitration Act, he still had to present an “independent jurisdictional basis” for his claim that appeared “on the face of the application itself.” The Second Circuit concluded that Green had not done that, explaining that “quarrels about legal settlements — even settlements of federal claims — typically involve only state law, like disagreements about other contracts.”

Green v. Bank of America Merrill Lynch, No. 24-2550 (2d Cir. May 13, 2025).