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Arbitration Process Issues

DENIAL OF ARBITRATION OF STOP-LOSS INSURANCE DISPUTE AFFIRMED UNDER STATE INSURANCE LAW

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The president of a corporate administrator of a trust appealed the denial of his motion to compel arbitration against a company that sued him individually in a case seeking benefits and other relief for disputed medical stop-loss coverage. The appellate court initially held that, although the president was a non-signatory to the underlying agreements, the president could enforce the arbitration provisions based on agency and the plaintiff’s allegations, which treated the president and his corporation as one and the same. The court concluded, however, that arbitration could not be compelled under state insurance law, which prohibits arbitration involving certain insurance agreements. The court found that under the McCarran-Ferguson Act, the state insurance law was not preempted by the FAA or the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The court held that the state law regulated insurance, and the agreement at issue provided “indemnity” and was therefore properly subject to the state insurance law as a contract of “insurance.” Scott v. Louisville Bedding Co., No. 2012-CA-000252-MR (Ky. Ct. App. July 12, 2013).

This post written by Michael Wolgin.

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CLASS ACTION WAIVER ARBITRATION PROVISIONS ENFORCEABLE IN THE SECOND CIRCUIT POST-AMEX V. ITALIAN COLORS

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In back-to-back opinions addressing wage disputes brought under the Fair Labor Standards Act, the Second Circuit reversed the district court’s orders denying defendants’ motions to compel arbitration. In so doing, the Second Circuit explicitly followed the Supreme Court’s holding in American Express Co. v. Italian Colors Restaurant that plaintiffs cannot use the “effective vindication doctrine” to invalidate class action waiver provisions by showing that their claim is not economically worth pursuing individually. The Second Circuit also made clear that Amex I and its progeny that preceded the Supreme Court decision are no longer good law. The Amex I cases invalidated a class action waiver provision based on plaintiffs’ showing that “they would incur prohibitive costs if compelled to arbitrate under the class action waiver.” Sutherland v. Ernst & Young LLP, No. 12-304 (2d Cir. Aug. 9, 2013); Raniere v. Citigroup Inc., No. 11-5213 (2d Cir. Aug. 12, 2013).

This post written by Abigail Kortz.

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Round-Up Of Federal Decisions Involving Questions of Arbitrability

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Mortensen v. Bresnan Communications, LLC, No. 11-35823 (9th Cir. July 15, 2013) (vacating district court order declining to enforce arbitration agreement between broadband internet provider and consumer, finding 2011 U.S. Supreme Court decision AT&T Mobility v. Concepcion controlling; finding error in district court’s failure to apply New York law despite forum selection clause).

Biernacki v. Service Corp. Int’l, No. 11-17495 (9th Cir. June 10, 2013) (reversing district court order which held that plaintiffs – current and former employees of defendant who initially brought a putative class action in court for which certification was denied – had waived right to seek to compel arbitration, due to participation in litigation for three years. Ninth Circuit court held that merely participating in litigation, and incurring legal expense, insufficient to demonstrate waiver of right to arbitrate).

Safelite Group, Inc. v. Zurich Amer. Ins. Co., Case No. 2:12-cv-536 (USDC S.D. Ohio July 30, 2013) (compelling arbitration where “broad” clause governing “any and all” disputes, includes quasi-contractual claims; reserving questions of arbitrability for arbitrator pursuant to AAA rules incorporated into arbitration provision; staying remaining claims involving non-party until completion of arbitration).

Oracle America, Inc. v. Myriad Group, A.G., No. 11-17186 (9th Cir. July 26, 2013) (reversing denial of motion to compel arbitration, finding question of whether court or arbitrator should decide issues of arbitrability governed by contact language which unmistakably indicated parties’ intent to reserve question for arbitrator).

This post written by John Pitblado.

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ARBITRATION COMPELLED IN TRENWICK REINSURANCE DISPUTE

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A federal district court granted a motion by reinsurer Unionamerica Insurance Company to dismiss a lawsuit seeking enjoin the allegedly “illegal arbitration” of a reinsurance dispute between Unionamerica and Trenwick American Reinsurance Corp.; the court instead granted Unionamerica’s motion to compel the arbitration. Unionamerica had demanded that Trenwick participate in arbitration concerning Unionamerica’s claim that Trenwick failed to make payments due under a reinsurance assumption agreement. In response, Trenwick filed a lawsuit seeking to enjoin such an arbitration.

The court rejected Trenwick’s suit and compelled arbitration. Although the court found it had jurisdiction to decide threshold questions of arbitrability, it also determined that Unionamerica – a nonsignatory to the reinsurance agreement – could invoke the arbitration provision because of “cut-through” language allowing Unionamerica to rely on all terms of the agreement. The court further determined that the parties’ claims and defenses fell within the arbitration provisions’ scope, which encompassed “any” dispute arising out of or in connection with the agreement. Finally, the court held that Trenwick’s statute of limitations defense was not justiciable in court, but would need to be decided by the arbitrator. Trenwick American Reinsurance Corp. v. Unionamerica Insurance Co., Case No. 3:13cv94 (USDC D. Conn. July 12, 2013).

This post written by Brian Perryman.

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ROUNDUP OF MOTIONS TO COMPEL INVOLVING NON-SIGNATORIES TO ARBITRATION AGREEMENTS

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Four recent decisions considered whether to compel arbitration in the context of non-signatories and multiple agreements and claims. The decisions highlight different doctrines relevant to this analysis, including equitable estoppel, third-party beneficiary, and agency principals.

Murphy v. DirecTV, Inc., No. 11-57163 (9th Cir. July 30, 2013) (reversing lower court’s order compelling arbitration; non-signatory was not entitled to benefit of arbitration clause under equitable estoppel, third-party beneficiary doctrine, or agency principals);

84 Lumber Co. v. F.H. Paschen, S.N. Nielsen & Associates, LLC, Case No. 2:12cv01748 (USDC E.D. La. July 24, 2013) (granting motions to compel arbitration; contract and tort claims against signatory were subject to arbitration clause, notwithstanding claimant’s fraudulent inducement claim with respect to agreement as a whole; claims against non-signatory would be arbitrated under equitable estoppel);

Uptown Drug Co., Inc. v. CVS Caremark Corp., Case No. 3:12cv06559 (USDC N.D.Cal. July 22, 2013) (granting in part and denying in part motion to compel arbitration; non-signatories could compel arbitration under equitable estoppel of misappropriation of trade secrets claims, which were intertwined with relevant agreement; non-signatories could not compel arbitration of alleged violations of unfair prong of unfair competition law, which were not intertwined with agreement);

National Union Fire Ins. Co. v. Chopper Express, Inc., Case No. 1:13-cv-03129 (USDC S.D.N.Y. June 19, 2013) (granting motion to compel arbitration against signatory; providing petitioner time to submit evidence to show that non-signatory co-respondents were also bound by underlying contract based on corporate relation).

This post written by Michael Wolgin.

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