New reinsurance-related and arbitration developments from Carlton Fields
There have been a number of court opinions during the past year or so addressing the circumstances under which agreements to waive class claims in arbitration may be unconscionable. Special Focus Editor John Pitblado takes a closer look at some recent federal Court of Appeals decisions in this area.
This post written by John Pitblado.
The U.S. Supreme Court recently addressed whether Sections 3 and 16 of the Federal Arbitration Act (“FAA”) apply to non-signatories affected by an arbitration agreement. Section 3 of the Federal Arbitration Act (“FAA”) allows parties who have agreed to arbitrate to move for a stay of trial proceedings until they have had a chance to attempt arbitration. Section 16 of the FAA allows an immediate appeal of judgments denying a stay under such circumstances.
In a 6-3 decision, with Justice Scalia writing for the majority, the Court held that a federal court of appeals has jurisdiction over an appeal from a motion to stay proceedings under Section 16(a)(1)(A) of the FAA regardless of whether the petitioner is in fact eligible for a stay. The Court also found that Section 3 of the FAA does not categorically prevent a non-signatory to an arbitration agreement from pursuing a stay in proceedings. Rather, a person may pursue and obtain a stay under Section 3 if the relevant state law would make a contract to arbitrate a particular dispute enforceable by a non-signatory. The Court remanded the case to the Sixth Circuit to determine whether state law allows the non-signatories to enforce their agreement under state contract law and thus are allowed to pursue a stay in proceedings.
The dissent (authored by Justice Souter and joined by Chief Justice Roberts and Justice Stevens) argued that Congressional policy limits the ability of parties to obtain interlocutory appeals and that an appeal from a denial of a motion to stay proceedings should not be available to those parties who have not signed the relevant arbitration agreement. Arthur Andersen v. Carlisle, No. 08-146 (Sup. Ct. May 4, 2009).
This post written by Lynn Hawkins.
A group of reinsurers recently lost both their application for a partial stay of litigation pending arbitration and application to appoint an umpire pursuant to the Federal Arbitration Act. The underlying dispute between the parties concerned a disagreement regarding whether the parties’ commutation agreement covered certain reinsurance contracts purchased from various non-party insurance companies. The plaintiff (CNA) filed an action for a declaratory judgment, alleging that the commutation agreement did not apply to the non-party reinsurance contracts. The reinsurers (collectively, SCOR) argued that the commutation settled and terminated those reinsurance contracts, and that the dispute over one of the reinsurance contracts was already the subject of pending arbitration between the parties. The court declined to order a stay in the case since CNA’s claim – a request for a declaration of rights under the commutation agreement – did not fall within any enforceable agreement to arbitrate. The commutation itself did not include an agreement to arbitrate. The court also declined to appoint an umpire since both the existence of an enforceable arbitration agreement between SCOR and CNA as well as the commutation of one of the reinsurance contracts was disputed. The court observed that appointing an umpire before determining whether the parties are required to arbitrate would be premature. Continental Casualty Co. v. Commercial Risk Re-Ins. Co., Case No. 07-6912 (USDC N.D. Ill. Apr. 16, 2009).
Prior to this ruling, the court had also denied the defendant's Motion to Stay Discovery pending its ruling on the afore-mentioned matters.
This post written by Brian Perryman.
On April 14, 2009, the United States District Court for the District of New Jersey denied Consolidated Services Group’s motion to compel arbitration under the terms of its agreement with plaintiff, Creative Marketing Alliance. The Court determined that although the contract contained an arbitration clause, the agreement was ambiguous as to whether arbitration was the exclusive remedy for all disputes. The Court noted that the agreement acknowledged the possibility of litigation by vesting the District of New Jersey with “sole and exclusive jurisdiction to resolve and interpretation, construction, breach, dispute or other controversy arising” out of the agreement. The arbitration provision failed to state “in clear and unmistakable terms” that the parties elected arbitration for all disputes and waived their right to litigation. Creative Mktg. Alliance, Inc. v. Consolidated Servs. Group, Inc., Case No. 09-518 (D. N.J. April 14, 2009).
This post written by John Black.
On October 6, 2008, we reported on a Texas district court entering orders, over a period of several months, confirming two arbitration awards, granting partial final judgment under Rule 54(b), denying a stay without bond, and denying a Rule 59 motion to set aside the partial final judgment.
Halliburton Energy Services, Inc. (“Halliburton”) has since moved for relief under Rule 60(b), for discovery relating to its Rule 60(b) motion, and for a protective order on discovery into its assets. Halliburton claimed that documents recently discovered in its own files conclusively establish a key issue determined in the arbitration and sought discovery into the opposing party’s knowledge of these documents. The court, after declining to rule on the issue of the motion’s timeliness, denied the motion for relief under Rule 60(b), holding that Rule 60(b) was not available to vacate the award and, on the merits, finding that Halliburton presented no evidence of fraud or misconduct, could not show that these documents would have changed the proceedings, could not show that the judgment was inequitable, had the opportunity to fully and fairly present its case, and could not show due diligence in its search for documents. Finally, the court denied the motion for discovery related to the Rule 60(b) motion and granted the motion for a protective order, finding that discovery into Halliburton’s assets was not supported by the record. Halliburton Energy Servs., Inc. v. NL Indus., Case No. 05-4160 (USDC S.D. Tex. Mar. 31, 2009).
This post written by Dan Crisp.