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New reinsurance-related and arbitration developments from Carlton Fields

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Arbitration Process Issues

COURT AFFIRMS RULING THAT THE ISSUE OF ARBITRABILITY IS RESERVED FOR THE ARBITRATION PANEL

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On November 30, 2009, we reported on a state appellate court ruling that the arbitration panel had the power to rule on its own jurisdiction, pursuant to the American Arbitration Association rules incorporated into the parties’ agreement. The New York Court of Appeals has since ruled that this order should be affirmed with costs, stating that the parties agreed to arbitrate questions of arbitrability, including whether the agreement itself is invalid according to Hall St. Assocs., L.L.C. v. Mattel, Inc., or whether the offending provision could be severed from the remainder of the agreement. Life Receivables Trust v. Goshawk Syndicate 102 at Lloyd’s, No. 138 SSM 12 (N.Y. May 4, 2010).

This post written by Dan Crisp.

REVERSING TRIAL COURT, TENTH CIRCUIT FINDS NO WAIVER OF RIGHT TO ARBITRATE

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Phillip Hill sued his former employer in federal court, alleging retaliatory discharge. His former employer, Ricoh Americas Corp., answered the complaint, and the parties engaged in a Rule 26 pre-trial conference to set discovery and trial deadlines. Shortly thereafter, and approximately four months after suit had been filed, Ricoh moved to compel arbitration based on a provision in Hill’s original employment contract with Ricoh’s predecessor-in-interest. The district court denied the motion to compel on waiver grounds and Ricoh appealed. The Tenth Circuit found no waiver, quickly disposing of Hill’s argument that Ricoh failed to raise “arbitration and award” as an affirmative defense with its answer, as Hill asserted was required under Rule 8, noting that the provision only applies to completed arbitrations. The Tenth Circuit then analyzed several factors to determine whether Ricoh had waived its right to arbitrate, and found that on balance of the factors, it had not. Key to this analysis was that Ricoh had engaged in “minimal litigation activity,” and that there was “no evidence in the record that Ricoh intentionally and knowingly relinquished its right to demand arbitration.” It remanded with instructions to compel arbitration. Hill v. Ricoh Americas Corp., No. 09-3182 (10th Cir. April 19, 2010).

This post written by John Pitblado.

ON REMAND FROM SECOND CIRCUIT, FEDERAL COURT DECLINES TO COMPEL ARBITRATION

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As reported in our December 3, 2009 post, the Second Circuit recently reversed and remanded a $40 million jury verdict against New Hampshire Insurance Company on claims made by AXA Versicherung AG. The remand instructed the trial court to determine whether the claims should have been arbitrated. In a thorough opinion, the lower court ruled on remand that (1) the claims were not arbitrable; and (2) even if the claims were arbitrable, New Hampshire waived its right to arbitrate them. The basis for the court’s first conclusion was that each of AXA’s claims generally sounded in fraud, rather than a dispute over interpretation of the parties’ reinsurance agreement. Because the agreement only required arbitration over disputes pertaining to the interpretation of the agreement, the fraud claims were non-arbitrable. The court also held that, even assuming any of the claims were arbitrable, New Hampshire waived its right to arbitration by (1) failing to seek arbitration of similar claims in separate litigation involving a different plaintiff; and (2) delaying any attempt to compel arbitration in the AXA litigation of non-fraud claims until after discovery and summary judgment briefing. AXA Versicherung AG v. New Hampshire Ins. Co., 05-10180 (USDC S.D.N.Y. April 29, 2010).

This post written by John Pitblado.

Court Orders Stay in B.D. Cooke v. Lloyds

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In the latest development in the dispute between B.D. Cooke & Partners and Lloyd’s of London, the Southern District of New York stayed litigation pending arbitration of the dispute. B.D. Cooke was directed to inform the Court within 30 days and every three months thereafter as to the status of the arbitration proceedings. If no timely response is received, the Court may dismiss the action pursuant to Fed. R. Civ. P. 41(b). B.D. Cooke & Partners Ltd. v. Certain Underwriters at Lloyd’s London, Case No. 08-3435 (S.D.N.Y. Apr. 13, 2010).

This post written by John Black.

Special Focus: Pre-Award Challenges to Party-Selected Arbitrators

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The issue of arbitrator bias has been of particular interest. Two decisions were issued by judges of the same court recently, both involving Trustmark, that shed light on this issue in the context of the actual or potential breach of confidentiality provisions due to a single arbitrator participating in multiple arbitrations. Our Special Focus article explores these decisions.

This post written by John Pitblado.