Arbitration Process Issues

SECOND CIRCUIT GRANTS MOTION TO STAY PENDING APPEAL OF DECISION VACATING ORDER THAT AN ARBITRATION MUST COMMENCE ANEW

April 15, 2010 by Carlton Fields

On August 3, 2009, we reported on a district court vacating its prior order that the arbitration must commence anew and reappointing an arbitrator to the panel after the arbitrator’s health improved. Insurance Company of North America and INA Reinsurance (collectively, “INA”) appealed and also moved for a stay pending appeal arguing that, if the circuit court does not grant a stay, an unauthorized panel would soon hear a key substantive motion, which would potentially compromise INA’s future rights and squander resources in duplicative proceedings. Public Service Mutual Insurance Company moved to dismiss the appeal for lack of jurisdiction. The Second Circuit summarily granted the motion for a stay pending appeal and denied the motion to dismiss. Insurance Co. of N. Am. v. Public Serv. Mut. Ins. Co., No. 09-3640 (2d Cir. Jan. 21, 2010).

This post written by Dan Crisp.

REINSURED ESTOPPED TO AVOID ARBITRATION CLAUSE

April 14, 2010 by Carlton Fields

Pronational Insurance Company brought suit against AXA Liabilities Managers, Inc. (AXA’s claims-handling subsidiary), alleging several common law claims in connection with AXA Re’s denial of coverage for a claim made by Pronational under a reinsurance contract. AXA LM moved to compel arbitration under the reinsurance contract, to which Pronational and AXA Re only were signatories. Pronational objected on the basis that AXA LM was not a signatory. The Court granted the motion to compel arbitration, finding that Pronational was equitably estopped to attempt to avoid the arbitration clause in the contract under which the subject claims were made. The reasoning for this decision is contained in a Magistrate Judge’s Report and Recommendation, which the district judge adopted in a very short Order. Pronational Ins. Co. v. AXA Liabilities Managers, Inc., Case No. 08-2022 (USDC N.D. Ala. January 28, 2010).

This post written by John Pitblado.

FIRST CIRCUIT TO DISTRICT COURT: CLARIFY YOUR POSITION ON HOW THE ARBITRATION SHOULD PROCEED

April 13, 2010 by Carlton Fields

In this dispute, the First Circuit previously reversed the confirmation of an arbitration award concluding that the award was in manifest disregard of law and remanded the case for the entry of an order vacating the award. Without addressing whether the arbitration panel should be reconstituted or not, the district court entered an order vacating the award and remanding the matter to FINRA. The Defendants argued against the remand to FINRA because the First Circuit did not specify such a remand. Treating the Defendants’ motion as a Rule 60(b) motion, the Plaintiffs argued that the motion did not demonstrate entitlement to relief pursuant to Rule 60(b)’s requirements. The district court denied the Defendants’ motion in a brief electronic order “[e]ssentially for the reasons stated in [the Plaintiffs’] Opposition.” The Defendants appealed both the district court’s remand order and electronic order denying the Rule 60(b) motion.

Before addressing the Appellants’ arguments, the First Circuit addressed the Appellees’ request to recall the earlier mandate in light of Hall Street Assocs. v. Mattel, 552 U.S. 576 (2008). Denying this request, the First Circuit noted that it had not yet determined whether Hall Street could be reconciled with the circuit’s manifest disregard case law and found that the court was not faced with such circumstances to warrant a recall of the mandate. In response to the Appellants’ argument that the remand order contravened the mandate, the First Circuit disagreed, stating that the district court was not limited to perform only those actions specifically listed in the mandate and finding that the mandate did not explicitly or implicitly prohibit the district court from remanding the matter to FINRA. The First Circuit then noted that the Appellants’ Rule 60(b) argument was mostly a reformulation of their argument against the remand order and affirmed the district court’s remand order. However, the First Circuit did address an issue with the brief electronic order by remanding the matter to the district court so that the court, after considering the parties’ arguments, could specify whether: (1) the original panel should be reconstituted; (2) a new panel should be constituted; or (3) FINRA should rule on this issue in the first instance, in accordance with FINRA’s practices and procedures. Kashner Davidson Sec. Corp. v. Mscisz, No. 09-1356 (1st Cir. Apr. 1, 2010).
This post written by Dan Crisp.

DISTRICT COURT DENIES MOTION FOR RECONSIDERATION BROUGHT BY ASSIGNEE OF REINSURANCE CLAIMS

April 1, 2010 by Carlton Fields

This is our third installment covering the action brought by B.D. Cooke & Partners Ltd. (“Cooke”) to recover money from certain underwriters at Lloyd’s, London as the assignee of rights under certain reinsurance contracts. In an April 24, 2009 post, we detailed the federal district court concluding, among other things, that the liquidator’s right not to be compelled to arbitrate was not assigned to Cooke and compelling arbitration between Cooke and the defendants. In a January 27, 2010 post, we covered the federal district court denying the defendants’ motion to stay arbitration pending the result of Cooke’s motion for reconsideration. The federal district court has now denied Cooke’s motion for reconsideration, finding that Cooke essentially asserted the same arguments regarding the enforceability of the arbitration clause and the defendants’ waiver of the right to remove the action and rejecting Cooke’s argument concerning the scope of the arbitration clause because the dispute concerned matters of performance under the contracts. B.D. Cooke & Partners Ltd. v. Certain Underwriters at Lloyd’s, London, Case No. 08-3435 (USDC S.D.N.Y. Mar. 9, 2010).

This post written by Dan Crisp.

FIRST CIRCUIT CLARIFIES STANDARD OF REVIEW, CONCLUDES THAT AGREEMENT MANDATES ARBITRATION

March 29, 2010 by Carlton Fields

In this dispute between two parties to a joint venture agreement, one party filed a lawsuit and the other submitted an arbitraiton demand. Motions were filed to stay the lawsuit pending arbitration and to stay the arbitration. The motions were assigned to a magistrate judge. The magistrate judge concluded that arbitration was optional under the agreement and granted the plaintiff’s motion to stay the arbitration. The defendant contested this decision, but the district court stated that this decision was not “clearly erroneous or contrary to law.” In a case of first impression to the federal courts of appeal, the First Circuit held that the correct standard of review for a district judge’s review of a magistrate judge’s ruling on a motion to stay pending arbitration was whether the ruling was contrary to law. The First Circuit further stated that, for questions of law, no practical difference exists between review under the “contrary to law” and de novo standards. Next, in interpreting the arbitration provision at issue, the First Circuit concluded that a statement that the parties had the right to seek legal and equitable relief merely granted the authority to award such relief to the arbitrator, and did not make a provision that the parties “shall” arbitrate disputes permissive. The First Circuit thus reversed the decision and remanded to the district court for the entry of an order staying the litigation. PowerShare, Inc. v. Syntel, Inc., No. 09-1625 (1st Cir. Mar. 1, 2010).

This post written by Dan Crisp.