Arbitration Process Issues

COURT AFFIRMS REINSURANCE ARBITRATION AWARD BUT DIRECTS FURTHER BRIEFING ON THE ISSUE OF SEALING DOCUMENTS

March 16, 2015 by Carlton Fields

A federal district court in New York confirmed an arbitration panel’s final award, but directed the parties to brief the issue of whether the continued sealing of supporting documents, filed in connection with the petition to confirm that award, was appropriate. Clearwater Insurance and the respondent insurance companies were parties to multiple reinsurance contracts and arbitrated their dispute concerning amounts billed under those contracts. Clearwater’s petition to confirm the arbitration award was unopposed and the court found no basis for vacating, modifying, or correcting it. The court did, however, question whether the continued sealing of documents, requested by both parties, was warranted. The documents were filed under seal because their public filing would allegedly violate a confidentiality agreement between the parties. This, the court found, did not justify the sealing nor overcome the strong presumption of public access to judicial documents. The parties were directed to submit additional briefing to the court on this issue. Clearwater Insurance Co. v. Granite State Insurance Co., No. 1:15-cv-00165 (USDC S.D.N.Y. Feb. 5, 2015).

This post written by Renee Schimkat.

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COURT REJECTS GENERAL UNCONSCIONABILITY ARGUMENT AND COMPELS ARBITRATION

March 13, 2015 by Carlton Fields

Late last year, a district court judge in Connecticut granted Defendant General Electric’s (“GE”) motion to compel arbitration based on Plaintiff’s signature to GE’s Acknowledgement Conditions of Employment Form. Ms. Pingel, plaintiff, was hired by GE in 2006. Four years later she brought a discrimination action against GE, which was later resolved. As part of that resolution, Ms. Pingel received a new position within GE. That employment was contingent on Ms. Pingel signing an employment contract containing agreed upon procedures for alternative dispute resolution. GE did not provide a hard copy of these procedures to Ms. Pingel, but did provide the location of these forms online. Both parties signed the agreement. Two and a half years later, Ms. Pingel was fired. She subsequently sued for discrimination, and GE moved to compel arbitration.

Ms. Pingel opposed the motion to compel arbitration alleging (1) the agreement to arbitrate was unconscionable and (2) the parties did not have a meeting of the minds when the contract was signed. The court did not find these arguments dispositive. First, to find an agreement to arbitrate unconscionable, the provision need be oppressive or particularly one sided. The court found that as “the delegation provision equally binds both parties [this] weighs heavily against such a conclusion.” The court further noted that general challenges to a contract, here unconscionability of the arbitration agreement, does not necessarily preclude the enforcement of said agreement. That issue is for the arbitrator to decide. Ms. Pingel did not allege any specific unconscionable provisions within the arbitration agreement; therefore the general allegations are better decided by an arbitrator. Finally, as Ms. Pingel signed the acknowledgment form, the court found this compelling evidence to show a meeting of the minds. The court noted that ignorance from failing to read a contract is not a winning argument.

The District court therefore granted GE’s motion to compel arbitration on all of Ms. Pingel’s claims. Pingle v. General Electric Company, Case No. 3:14– 00632 (CSH) (USDC D. Conn. Dec. 19, 2014).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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ARBITRATION DENIED DESPITE RELATED AGREEMENT WITH ARBITRATION PROVISION

March 11, 2015 by Carlton Fields

A Florida court of appeals affirmed a trial court decision to deny arbitration finding a later signed contract supplanted an earlier contract with an arbitration provision. The Appellant, HHH Motors, LLP, signed a retail purchase agreement with Appellees, Jenny and Kristopher Holt, to purchase a Dodge Ram truck. The contract contained an arbitration provision. To finance the truck purchase, both parties then executed a retail installment sales contract (“RISC”) which failed to include a similar provision. The contract did include a merger clause however, which signified that the RISC was to be a complete and final agreement between HHH Motors and the Holts.

The Holt’s then filed a class action lawsuit alleging HHH Motors violated Florida’s Deceptive and Unfair Trade Practices Act relating to certain customer charges. The trial court denied HHH Motors motion to compel arbitration based on the retail purchase agreement, and they subsequently appealed.

HHH Motors argued that their right to arbitration vested when the original agreement was signed. They further argued that as the contracts were signed “contemporaneously,” both contracts should be interpreted together. While the appeals court did acknowledge two documents signed contemporaneously on the same transaction may be interpreted together, this argument was not dispositive. The RISC was “was sufficiently unequivocal to render the [retail purchase agreement] arbitration clause nugatory.” The court further noted that if HHH Motors wanted to include an arbitration clause in the RISC, they easily could have done so. HHH Motors v. Holt, No. 1D13-4397, (Fla. 1st DCA, Dec. 3, 2014).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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SEVENTH CIRCUIT DENIES REHEARING IN FAILED ATTEMPT TO COMPEL ARBITRATION AND TO REQUIRE PRE-PLEADING SECURITY FROM URUGUAY STATE-OWNED REINSURER

March 9, 2015 by Carlton Fields

On November 18, 2014, we reported on the Seventh Circuit’s decision in Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, in which Pine Top claimed that Banco de Seguros owed it $2,352,464.08 under certain reinsurance contracts. The Seventh Circuit affirmed the trial court’s ruling denying Pine Top’s motion to compel arbitration, agreeing that Pine Top’s assigned rights under the reinsurance contracts were limited to the collections of certain debts and did not include the right to arbitrate. The Seventh Circuit also had affirmed the trial court’s denial of a motion to strike Banco Seguros’s pleading for failure to post security, holding that such pre-judgment security is a form of attachment that violates the Foreign Sovereign Immunities Act. On December 22, 2014, the Seventh Circuit denied Pine Top’s petition for rehearing and rehearing en banc, as no judge requested a vote on the petition, and the judges on the prior panel voted to deny rehearing. Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, No. 13–1364 (7th Cir. Dec. 22, 2014).

This post written by Michael Wolgin.

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REINSURANCE-RELATED DISPUTE STAYED PENDING ARBITRATION DESPITE LATER EXECUTED SETTLEMENT AGREEMENT

February 25, 2015 by Carlton Fields

Steadfast Insurance Company entered into a settlement agreement with its insured, Barton Malow Enterprises after agreeing to pay $15 million on Barton’s claim. The settlement included a complete release of all claims by Steadfast against Barton and its affiliates and subsidiaries. Thereafter, Steadfast discovered that it had purchased reinsurance covering a portion of the settlement proceeds under a reinsurance agreement with United Integrity. United denied the claim, arguing that Steadfast released United because United was in fact a wholly-owned subsidiary of Barton’s. Steadfast then served an arbitration demand on United pursuant to the arbitration clause in their reinsurance agreement. Barton and United responded by filing suit against Steadfast, which moved to stay the action pending arbitration. Barton and United opposed the motion for stay, arguing that the later-executed settlement agreement overrode the arbitration provision. The court disagreed and stayed the case pending arbitration. The arbitration provision was not superseded by the settlement agreement because the settlement agreement did not specifically preclude arbitration. Moreover, United’s claims fell within the scope of the arbitration provision; the claims implicated both sides’ rights and obligations under the reinsurance agreement. Finally, although Barton was not a party to the reinsurance agreement, the court found that judicial economy warranted staying Barton’s claims against Steadfast pending conclusion of the arbitration. Barton Malow Enterprises, Inc. v. Steadfast Insurance Co., No. 14-cv-7347 (USDC S.D.N.Y. Dec. 31, 2014).

This post written by Leonor Lagomasino.

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