An Oklahoma District Court was forced to deny the defendant’s motion to compel arbitration, despite the parties’ reinsurance contracts that contained clear and unambiguous arbitration clauses. Pursuant to the McCarran-Fergusson Act, the court was required to apply a state statute prohibiting the enforcement of arbitration clauses in any contract “which reference[s] insurance.” The court also concluded that Oklahoma common law could not save the arbitration agreements. Citing to an Oklahoma Supreme Court case, the court stated that “arbitration provisions falling outside of the UAA [Uniform Arbitration Act] are governed by common law and, generally, ‘agreements to submit future controversies to arbitration are contrary to public policy.’” Cannon v. Lane, 867 P.2d 1235 (Okla. 1994). Although the court acknowledged several subsequent cases stating that the public policy of Oklahoma favors arbitration, the court distinguished those cases because they all fell within the purview of the UAA. Since Cannon has not been overruled, the District Court was bound by it and forced to deny the motion to compel arbitration. The court also rejected defendant’s argument that the Oklahoma statute violates the Contracts Clause of the Federal Constitution. Mid-Continent Casualty Co. v. General Reinsurance Corporation, Case No. 06-CV-0475 (N.D.Okla. Feb. 15, 2007).
Arbitration Process Issues
Tenth Circuit adopts arbitral immunity doctrine
In an appeal from an award in an NASD-sponsored arbitration, the Tenth Circuit has joined virtually all other Circuits in recognizing that arbitrators, arbitral forums and arbitral sponsors are immune from liability for actions taken in connection with administering arbitration. Pfannenstiel v. Merrill Lynch, Pierce, Fenner & Smith, Case No. 04-1274 (10th Cir. Feb. 20, 2007).
Court splits requested class arbitration into separate arbitrations
Cintas Corp. was sued by a group of its service sales representatives for back pay under the Fair Labor Standards Act, which provides for opt-in classes. The District Court entered an Order compelling 56 of the 65 named Plaintiffs to arbitrate, and a request for class-wide arbitration was filed with the American Arbitration Association. The Court held that the arbitrator should determine whether class-wide arbitration was appropriate. After approximately 2,400 Plaintiffs opted into the back pay lawsuit, Cintas filed 70 separate actions against such Plaintiffs, seeking to compel them to arbitrate the dispute in the Districts in which they were employed by Cintas. The Judicial Panel on Multidistrict Litigation created an MDL proceeding, transferring the 70 separate actions to the original forum court, for a determination of: (1) whether the parties named in the 70 separate actions were refusing to arbitrate within the meaning of section 4 of the Federal Arbitration Act; and (2) whether the parties were complying with that obligation by seeking class-wide arbitration. The Court held that the parties were refusing to arbitrate within the meaning of section 4 of the FAA, found that all common proceedings had been completed, and suggested that the cases be remanded to the transferor courts for further, individual, proceedings. In re: Cintas Corp. Overtime Pay Arbitration Lit., Case No. 06-1781 (USDC N.D. Cal. Jan. 12, 2007).
Court remands case to new arbitration panel for further proceedings
After partially vacating an arbitration award as being in manifest disregard of law, a District Court has remanded the case to a new arbitration panel for further proceedings. The Court found it inappropriate to remand the case to the same arbitration panel for further proceedings relating to the issue as to which it had found that the panel had manifestly disregarded Pennsylvania law. Koken v. Cologne Reinsurance (Barbados) Ltd., Case No. 98-0678 (USDC MD Pa Dec. 5, 2006).
Court compels arbitration under international arbitration convention
A US District Court has held that arbitration should be compelled under the Convnetion on the Recognition and Enforcement of Foreign Arbitral Awards of a dispute between a Georga-based insured and a British insurer. The insurance hedged the insured's participation as an investor in a secondary market for life insurance policies. The Court found that although Georgia law invalidated arbitration agreements in insurance policies, and Georgia law applied to the interpretation of the arbitration agreement, the international convention superceded the McCarran-Ferguson Act, requiring arbitration despite Georgia law's hostility to such arbitration agreements. Goshawk Dedicated Limited v. Portsmouth Settlement Co., Case No. 06-274 (USDC ND Ga. Dec. 18, 2006).