The United States Supreme Court denied certiorari in the Louisiana Safety Association case on October 5, 2010, leaving standing the en banc Fifth Circuit opinion described in our November 16, 2009 post. The issue was whether the laws of individual states that restrict or prevent the enforcement of an arbitration agreement in insurance agreements prevent the enforcement of such arbitration agreements that are subject to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”), because the New York Convention is “an Act of Congress” preempted by the McCarran-Ferguson Act. The Fifth Circuit answered the issue in the negative, finding that the New York Convention prevailed over state laws. The Court requested that the Solicitor General submit an amicus brief addressing whether certiorari should be granted. The government submitted an amicus brief which took the position that the opinion below was correct, and that the Supreme Court should deny certiorari. A conflict remains as to this issue with the Second Circuit’s decision in Stephens v. American International Ins. Co., 66 F.3d 41 (2nd Cir. 1995), although the government’s amicus brief took the position that there was an inter-panel conflict on the issue in the Second Circuit, rendering any conflict immature. La. Safety Assn. v. Certain Underwriters, et al., No. 09-945 (US Oct. 4, 2010) (see page 10).
Arbitration Process Issues
NEW YORK APPELLATE COURT AFFIRMS ORDER COMPELLING NON-AAA ARBITRATION AND STAYING AAA ARBITRATION
A New York State appellate court recently affirmed the lower court’s order compelling a non-American Arbitration Association (AAA) arbitration and staying a separate AAA arbitration that was later demanded by the respondent to the original non-AAA arbitration demand. The court based its decision on the fact that the respondent had demanded AAA arbitration nearly four months after service of the petitioner’s demand for the non-AAA arbitration, that the respondent had participated in the petitioner’s non-AAA arbitration by advancing a counterclaim and designating an arbitrator, and that the respondent did not seek a stay of the petitioner’s proceeding. The court agreed with the lower court that the respondent’s tactics were designed to delay the matter and effectively refuse to arbitrate pursuant to the petitioner’s demand. Nachmani v. By Design, LLC, No.04847 (N.Y. Ct. App. Aug. 25, 2010).
This post written by Michael Wolgin.
ARBITRATION COMPELLED FOR COMMUTATION COMPUTATION DISPUTE
Greenlight Reinsurance, Ltd. reinsured Medicus Ins. Co. under a stop-loss reinsurance contract covering a certain portion of Medicus’s medical professional liability insurance risks. Medicus terminated the contract according to its termination provisions. Greenlight asserted, and Medicus disputed, that those provisions require a commutation payment or “break up fee,” which Medicus refused to pay. Greenlight demanded arbitration and Medicus thereafter filed suit. After failing to respond to Greenlight’s motion to compel arbitration, which was granted, Medicus sought reconsideration. The Court upheld its decision compelling arbitration, noting that the dispute inarguably arose under the contract, and that the FAA required a broad rendering of the arbitration provision as covering all such disputes. Medicus Ins. Co. v. Greenlight Reinsurance, Ltd., Case No. 10-00277 (USDC W.D. Tex Je. 24, 2010). Reconsideration has been denied.
This post written by John Pitblado.
COURT DENIES MOTION TO RECONSIDER CONFIRMATION OF ARBITRATION AWARD
Following a denial of its motion to vacate an adverse arbitration award, plaintiffs ABS Financial Services submitted a Motion for Reconsideration requesting that the US District Court for the District of New Jersey reverse its prior ruling and judgment. In its earlier decision, the Court had confirmed the arbitration award even though it contained errors of law because it determined that the the award was supported “by at least some of the evidence in the record and was an arguably reasonable construction of the parties’ contracts.” Noting the extremely difficult standard of review for motions for reconsideration, the Court denied the instant Motion, holding that it had not committed a clear error or manifestly disregarded the law in its prior ruling and judgment. ABS Brokerage Servs., LLC v. Penson Fin. Servs., Inc., Case No. 09-04590 (D. N.J. Aug. 16, 2010).
This post written by John Black.
ELEVENTH CIRCUIT FINDS INSUFFICIENT EVIDENCE TO SUPPORT WAIVER OF ARBITRATION DESPITE ONE-MONTH DELAY PRIOR TO ARBITRATION DEMAND
In a suit between a law firm and Citibank, the Eleventh Circuit reversed the district court’s denial of Citibank’s petition to compel arbitration despite its one-month delay in demanding arbitration. The Eleventh Circuit held that even assuming that Citibank “acted inconsistently with the arbitration right” by filing an answer that was silent on arbitration, the law firm did not provide adequate evidence that its research and filings prior to Citibank’s arbitration demand constituted sufficient prejudice to preclude arbitration. Although the law firm may have suffered some prejudice “when it expended time and resources preparing and filing an offer of judgment, reply, and notice of readiness for trial,” waiver was inappropriate because of the “brevity” of the one-month delay and because the law firm “could not point to any portion of the record that reveals either the amount of money it spent or the number of hours it dedicated to conducting litigation-specific discovery and preparing litigation-specific documents.” Citibank, N.A., v. Stok & Assocs., P.A., No. 09-13556 (11th Cir. July 20, 2010).
This post written by Michael Wolgin.