This case presents an interesting arbitration process issue. In 2004, the parties to this action participated in an arbitration, resulting in a $10,000 award to defendant, Smith Barney. Subsequently, plaintiff filed an action to vacate, and defendant moved to confirm the award. In February, 2005 a California district court confirmed the arbitration award. Plaintiff then filed a motion under Rule 60 of the Federal Rules of Civil Procedure to vacate that order, and later filed a Renewed Rule 60 Motion. The renewed motion was filed on the grounds that defendant and its counsel had committed “fraud. . . misrepresentation or other misconduct” by making material misrepresentations to the court. Plaintiff also sought discovery under its motion on the basis of newly discovered case law and evidence. The court granted “limited’ discovery. Plaintiff proceeded to use the limited permission granted by the court to “bombard” Defendant with voluminous discovery. Concluding that the Plaintiff’s discovery requests were “inappropriate in breadth” and “went well beyond the limited subjects referred to in the court’s. . . [o]rder,” the Court denied plaintiff’s motion to compel and granted Smith Barney’s motion for protective order. Sathianathan v. Smith Barney, Case No. C-04-02130 SBA (JCS) (N.D. Cal. Aug. 24, 2007).
Arbitration Process Issues
ILLINOIS FEDERAL COURT RULES PARTY’S CONSENT TO JURISDICTION OF STATE COURT IS NOT A WAIVER OF THE STATUTORY RIGHT TO REMOVE
Plaintiff, Continental Casualty Company’s (“CCC”) and defendant, LaSalle Re Limited (“LaSalle Re”) were parties to several reinsurance agreements, including one Excess of Loss Retrocession Agreement which contained an arbitration clause. In April 2004, the parties executed a Release Agreement, terminating all obligations under the Reinsurance Agreements. Pursuant to the Release Agreement the parties consented to the jurisdiction of Illinois courts in connection with any legal action arising out of the Agreement.
A dispute subsequently arose pertaining to the Retrocession Agreement, and LaSalle Re made a demand for arbitration. In response, CCC filed an action in Illinois state court seeking a declaration of its rights under the Release Agreement. Specifically, CCC argued that the Release Agreement extinguished all obligations under the Retrocession Agreement, including the obligation to arbitrate. Subsequently, LaSalle removed the case to federal court and CCC filed an emergency motion for remand. CCC argued that the forum selection clause in the Release Agreement prevented the case from proceeding in federal district court. The court disagreed and denied CCC’s motion concluding that “[a] general consent to the jurisdiction of a particular court does not. . . adequately demonstrate a waiver of defendant’s statutory right to remove.” Continental Casualty Co. v. LaSalle Ltd., Case No. 07 C 4228 (N.D. Ill. Aug. 16, 2007).
Nine days later, CCC filed a motion in the federal court to stay the arbitration proceedings. (see CCC’s Motion to Stay Arbitration and CCC’s Memorandum of Law in Support of Motion to Stay Arbitration). In connection with its motion, CCC attached copies of the Arbitration Request and the Retrocession Agreement as exhibits to the Amended Complaint (See Ex. 1). To date, the court has not ruled on this motion.
COURT ORDERS ‘UNSEALING’ OF DOCUMENTS DESPITE POSSIBLE CONFIDENTIALITY AGREEMENT IN UNDERLYING ARBITRATION
This action arose out of an arbitration proceeding between petitioner, Nationwide Mutual Insurance Company (“Nationwide”), and Respondent R&Q Reinsurance Company (“R&Q”). The arbitration was resolved in Nationwide’s favor and Nationwide filed a petition to enforce the arbitration award. Shortly afterwards, R&Q filed a motion for leave to file a motion for summary judgment under seal. Nationwide objected to the filing of the motion under seal on the grounds that a confidentiality order was never in effect during the arbitration, and in the alternative, R&Q waived compliance with the order by filing documents in the court given the presumption that all documents filed in court will be open to the public.
The court found the latter argument dispositive, concluding that “the public interest in access to court records outweighs any prejudice to R&Q from unsealing its filing.” This decision illustrates the importance of properly documenting and implementing any desired confidentiality restriction. Nationwide Mutual Ins. Co. v. Randall & Quilter Reinsurance Co., Case No. 2:07-cv-0120 (S.D. Ohio Aug. 10, 2007).
RIGHT TO ARBITRATION SURVIVES TERMINATION OF UNDERLYING AGREEMENT
In 1997, DDT Trucking of North America (“DDT NA”) entered into a distributorship agreement with DDT Holding’s predecessor. That agreement contained an arbitration agreement and stated that if DDT Holdings was sold, it should simultaneously terminate the distributorship agreement and compensate DDT NA. In 1999, the parties terminated the agreement. A dispute arose as to whether this nullified the agreement, such that DDT Holdings did not have to provide any compensation to DDT NA and as to whether this nullified the agreement to arbitrate. Relying on Section 7 of the Arbitration Act of 1996 as well as English precedent, Justice Cooke concluded that the right to compensation and arbitration does not end when the underlying contract is terminated. DDT Trucks of North America Ltd. and DDT Holdings Ltd., [2007] EWHC 1542 [Comm], Eng. Comm., QBD (June 29, 2007).
INSURER NOT PERMITTED TO CHALLENGE ENGLISH ARBITRATION AWARD IN U.S. COURT
A dispute arose between “C” and its insurer “D,” both U.S. corporations. The insurance policy was governed by New York state law, but provided for disputed to be settled in England under the provisions of the English Arbitration Act. The parties agreed to arbitrate in England, and the panel issued a partial award in favor of “C.” “D” threatened to apply to a U.S. court to set aside the award on the basis that it was based on a “manifest disregard of the law.” “C” obtained an interim anti-suit injunction restraining “D” from commencing proceedings in a U.S. court. At the final hearing, Justice Cooke held that because the parties chose England as the seat of arbitration, they must submit any challenge to the eventual award to an English court under English law, regardless of the governing law of the contract. C and D, [2007] EWHC 1541, [Comm], Eng. Comm., QBD (June 28, 2007).