Arbitration Process Issues

DISTRICT COURT DENIES LLOYDS’ RULE 59 MOTION IN DISPUTE WITH EMPLOYERS INSURANCE; SECOND APPEAL FOLLOWS

December 29, 2009 by Carlton Fields

In our 11/9/09 post, we reported on the dispute between Employers Ins. and Lloyds of London. In the most recent development, the Lloyds-parties filed a Rule 59 Motion for Reconsideration and Clarification of the District Court’s September 28th opinion and order requesting that the court declare that Wisconsin law applies to the parties’ contracts or in the alternative that irrespective of which law is applied the arbitrators are required to be impartial and disinterested. The District Court denied Lloyds’ Motion for Reconsideration finding that Lloyds had failed to demonstrate that the order and opinion was in error and that the motion at hand failed to specify relief contemplated by Rules 59 or 60. The Lloyds-parties subsequently filed a revised notice of appeal to the Seventh Circuit to include this Order, as well as ones covered by a prior Notice of Appeal. Employers Ins. Co. of Wausau v. Certain Underwriters at Lloyds of London, Case No. 09-210 (W.D. Wisc. Oct. 23; Oct. 29, 2009).

This post written by John Black.

NINTH CIRCUIT FINDS REVISED CLASS ACTION BAN IN ARBITRATION AGREEMENT UNCONSCIONABLE

December 21, 2009 by Carlton Fields

The Ninth Circuit Court of Appeals held that a “new twist” on the previously addressed issue of when an arbitration provision barring aggregation of individual claims is unconscionable did not command a new result. Plaintiffs brought a class action suit in California federal court against AT&T Mobility, LLC, alleging that they were unfairly charged sales tax on the retail price of a new phone that had been offered as “free” with the sign-up of new service. AT&T demanded that the claims be submitted to individual arbitration, as per the arbitration provision of the provider agreement. The plaintiffs pointed to a previous Ninth Circuit decision, Shoyer v. Cingular Wireless Services, Inc., (9th Cir. 2007), which held that a similar arbitration provision was unconscionable in part because it tended to prevent plaintiffs from suing on individual claims due to the disproportionate legal expense of doing so vis-à-vis the small amount of damages at issue. The class action procedure, the Court held in Shoyer, is designed to avoid this problem. However, AT&T’s arbitration clause contained a provision requiring the company to pay $7,500 to any claimant who won an arbitration award in excess of AT&T’s last offer, in order to provide financial incentive for claimants to bring individual claims and to address the inequity identified by the Court in Shoyer. Nevertheless, the Ninth Circuit was not convinced that this new language cured the defect of tending to prevent individual claims from being vindicated, due to the small amount of damages. The Court additionally held that the FAA does not trump California contract law on unconscionability. Laster v. AT&T Mobility, LLC, No. 08-56394 (9th Cir. Oct. 27, 2009).

This post written by John Pitblado.

DISTRICT COURT DENIES SUMMARY JUDGMENT IN OLSON, FINDS REINSURER HAD RIGHT TO SEEK REVIEW

December 17, 2009 by Carlton Fields

In the latest development in the Olsen v. United States case, the US District Court for the Eastern District of Washington issued an Order denying Plaintiffs’ Motion for Partial Summary Judgment. Following a complicated procedural history involving a number of arbitration decisions which were ultimately vacated, Plaintiffs initiated the instant action challenging under the APA the National Appeals Division’s resolution of Plaintiffs’ claims for payment of their crop insurance. Plaintiffs asserted two primary arguments: (1) Reinsurer FCIC had no legal right to revise claim determinations made under a private contract of insurance that FCIC was not a party to; and (2) NAD lacked jurisdiction over the issue of whether Plaintiffs had been overpaid by AGIC. The District Court denied Plaintiffs’ Motion, finding that the insurance contract granted FCIC authority to revise the claim and that administrative review of Plaintiffs’ claims by the NAD was appropriate. Olson v. United States, Case No. 08-5012 (USDC E.D. Wash. Sept. 30, 2009).

This post written by John Black.

SPECIAL FOCUS: NEW YORK CONVENTION TRUMPS STATE LAW

December 7, 2009 by Carlton Fields

We previously reported on the en banc decision of the United States Court of Appeals for the Fifth Circuit holding that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention), prevailed over a state law that prohibited arbitration provisions in insurance policies. The Second and Fifth Circuits are now in conflict on this important arbitration issue. We offer a Special Focus view of this decision.

This post written by Rollie Goss.

SECOND CIRCUIT REMANDS AXA v. AIG FOLLOWING $40 MILLION DOLLAR JUDGMENT

December 3, 2009 by Carlton Fields

Following the entry of a $40 million judgment against them at a jury trial on claims of fraudulent inducement with respect to two reinsurance facilities, the AIG defendants appealed to the Second Circuit, arguing in part that that the claims brought by AXA should have been arbitrated because they sound in contract. AXA, while not disputing that contract claims would be subject to arbitration, asserted that their claims sound in fraud and were properly litigated in the District Court. The Second Circuit concluded that the record was not clear as to whether the District Court properly considered whether AXA’s fraudulent inducement claims sounded in contract or fraud or whether AIG had waived its right to arbitration. The Court opined that in this case, it was of paramount importance to weigh the first and third waiver factors (time elapsed and prejudice) to determine whether AIG had indeed waived arbitration. The case was remanded to the District Court. AXA Versicherung AG v. New Hampshire Ins. Co., Case No. 08-2521 (2d Cir. Nov. 6, 2009).

This post written by John Black.