Arbitration Process Issues

ARBITRATION PROCESS ROUNDUP

January 30, 2013 by Carlton Fields

Recent decisions on arbitration process issues:

Motion to Compel Arbitration Appeals

Saleemi v. Doctor’s Associates, Inc., No. 87062-4 (Wash. Jan. 17, 2013) (affirming trial court’s order compelling arbitration in Washington, notwithstanding forum selection clause providing for Connecticut arbitration; appellant failed to seek discretionary appeal, and instant appeal, which came after the arbitration award, required appellant to show prejudice; distinguishing Concepcion in cases not dealing with class arbitration waivers)

13 Parcels v. Laquer, No. 3D12-608 (Fla. Ct. App. Dec. 26, 2012) (reversing denial of motion to compel arbitration; appellants did not waive arbitration, notwithstanding limited motion practice in underlying action and in a prior litigation between the parties)

Marsden v. Blue Cross & Blue Shield of Montana, Inc., No. DA 12-0341 (Mont. Dec. 28, 2012) (affirming granting of motion to compel arbitration; where disputed employment agreement provided for arbitration of “any dispute” arising therefrom, issue for arbitration whether agreement was valid in the first instance)

Agency/Estoppel

James T. Scatuorchio Racing Stable, LLC v. Walmac Stud Management, LLC, Case No. 5:11-cv-00374 (USDC E.D. Ky. Jan. 2, 2013) (denying motion to dismiss where only one out of multiple agreements between parties contained arbitration clause, and only a portion of the claims would thus be submitted to arbitration; certain non-signatories to arbitration agreement who undertook burdens and received benefits under the agreement were bound to arbitrate under estoppel; one-sided arbitration clause not unconscionable where parties at time of contract were represented by counsel)

East Texas Medical Center Regional Healthcare System v. Slack, Case No. 2:12-cv-00307 (USDC E.D. Tex. Jan. 3, 2013) (denying motions to compel arbitration; corporate non-signatory not bound to arbitrate under agency theory merely based on corporate relationship; denying stay of litigation with non-signatory where claims subject to arbitration were not “inherently inseparable” from claims subject to litigation)

This post written by Michael Wolgin.

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NEW YORK SUPREME COURT CREATES A NEW METHOD FOR APPOINTING AN UMPIRE IN AN ARBITRATION

January 29, 2013 by Carlton Fields

In a dispute between two insurance companies and their reinsurer over appointment of an umpire or third party arbitrator in an arbitration proceeding required by their reinsurance treaties, the New York Supreme Court crafted a new approach for appointing the umpire or third arbitrator. The approach blends the “ranking” method and the “strike and draw” method to require each party’s chosen arbitrator to nominate 5 candidates, strike 3 candidates from the other party’s list, and rank the remaining candidates. The candidate with the highest cumulative rating becomes the umpire or third arbitrator, and in the event of a tie between the highest ranking candidates, a coin toss decides the winner. The court also allowed for the appointment of an umpire at the outset of the arbitral proceedings, concluding that the language in one of the treaties requiring the two chosen arbitrators to select an umpire “in the event of the arbitrators failing to agree” does not create a condition precedent to appointment of the umpire. American Home Assurance Co. v. Clearwater Insurance Co., No. 653079/2012 (N.Y. Sup. Ct. Jan. 15, 2013).

This post written by Abigail Kortz.

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STATE LAW REQUIRING “JURISDICTION OF ACTION” IN COURTS FOR INSURANCE DISPUTES RENDERED ARBITRATION CLAUSE VOID

January 28, 2013 by Carlton Fields

The Washington Supreme Court affirmed the denial of a motion to compel arbitration in an insurance dispute, based on a state statute that prohibits insurance contracts from “depriving the courts of [Washington] of the jurisdiction of action against the insurer.” The court analyzed the legislative history of the statute and state court precedent to find that the statute is more than a forum selection provision, but is a requirement for insurance disputes to be litigated in court. The court rejected the argument that a court’s ability to confirm an arbitration award constitutes “jurisdiction of action,” holding that a court’s power to confirm an award reflects only “limited” jurisdiction. The court further held that the state law regulated the “business of insurance” under the McCarran-Ferguson Act, so as to reverse preempt the FAA and preclude any application of Concepcion to this case. This result is similar to that in states which have a statute prohibiting arbitration provisions in certain insurance contracts. Washington Department of Transportation v. James River Insurance Co., Case No. 87644-4 (Wash. Jan. 17, 2013).

This post written by Michael Wolgin.

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COURT REFUSES TO VACATE AWARD WHERE INSURER’S PRE-ARBITRATION APPEALS PROCESS NOT FOLLOWED

January 25, 2013 by Carlton Fields

Plaintiff USA Chiropractic commenced arbitration proceedings against PIP carrier NJ Re-Insurance Co., seeking coverage under an assignment of rights for medical treatment provided to NJ-Re’s insured. The arbitrator entered an award dismissing the claim, holding that USA Chiropractic lacked standing because it had not complied with the insurer’s appeals process before demanding arbitration. USA Chiropractic sought vacatur and also sued arbitration tribunal NAF in state court, arguing that the arbitrator had misapplied the law. The court denied plaintiff’s claims, holding that USA Chiropractic lacked standing for failure to follow NJ-Re’s pre-arbitration appeals process and, further, that NAF was immune from suit. The appellate court affirmed, finding that the trial court did not exceed its authority in denying USA Chiropractic’s request to set aside the award and that it was thus unnecessary to reach plaintiff’s appeal regarding whether NAF was an indispensable party to the litigation. USA Chiropractic v. NJ Re-Insurance Co., No. A-3108-11T1 (N.J. Ct. App. Dec. 14, 2012).

This post written by Ben Seessel.

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FEDERAL COURT FINDS INSURERS’ REMOVAL RIGHTS NOT WAIVED

January 23, 2013 by Carlton Fields

Plaintiff Southwestern Electric Power Company brought suit in Louisiana state court against a number of its insurers, seeking indemnity for damaged heat steam generators. The defendant insurers removed the case to federal court pursuant to the Convention on Recognition and Enforcement of Foreign Arbitral Awards. Plaintiff moved to remand, arguing that the defendants waived their right to removal (1) by written waiver from defense counsel; and (2) by litigating in state court (a motion to stay and compel arbitration was also pending). The court disagreed and denied the remand, noting (1) the purported written waiver was not unequivocal and unambiguous; and (2) the Convention allows removal any time before trial, thus contemplating the possibility of state court litigation before removal. Southwestern Electric Power Co. v. Certain Underwriters at Lloyds, Case No. 12-2065 (USDC W.D. La. Nov. 19, 2012).

This post written by John Pitblado.

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