Arbitration Process Issues

THIRD CIRCUIT ISSUES OPINION ON ARBITRABILITY OF DIRECT AND ASSIGNED, OR DERIVATIVE, CLAIMS

May 14, 2014 by Carlton Fields

The Third Circuit recently vacated a lower court’s decision granting a motion to compel arbitration of (1) direct claims by certain cardiac services health providers against CIGNA and (2) claims by those providers on behalf of employee benefit plan participants who were initially denied coverage of the cardiac services by CIGNA but subsequently provided such services by the providers in exchange for assignment of their rights and claims under ERISA against CIGNA to the providers. After observing that the plain language of an arbitration agreement controls and that the presumption of arbitrability applies only where an arbitration provision is ambiguous, the Court of Appeals first held that the alleged facts underlying the direct claims unambiguously did not concern “the performance or interpretation” of the administrative agreement between CIGNA and the providers, as required by the arbitration clause, because the claims involved a CIGNA policy update document distinct from, and sent years after, the administrative agreement. As for the derivative claims, which related to CIGNA’s decision to deny coverage of the cardiac services to the participants, the court concluded that such coverage decision was subject to the terms or conditions of the applicable benefit plan and governed by ERISA, not the administrative agreement. The participants’ rights to pursue their ERISA claims in court could not be diluted through compelled arbitration just because the providers, as assignees, had promised to arbitrate certain of the direct claims they might bring against CIGNA. CardioNet, Inc. v. CIGNA Health Corp., No. 13-2496 (3d Cir. May 6, 2014).

This post written by Kyle Whitehead.

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COURT DEFERS RULING ON APPOINTMENT OF UMPIRE PENDING DISCLOSURES TO DETERMINE NEUTRALITY

May 13, 2014 by Carlton Fields

We previously reported on December 17, 2013, about a dispute in federal court between Nationwide Mutual Insurance Company, National Casualty Company, and Employers Insurance Company of Wausau (collectively, “Nationwide”) and Arrowood Indemnity Company. The dispute concerned the process for appointing a “tie-breaking” umpire in a series of reinsurance coverage arbitrations. Most of the reinsurance agreements contained express provisions regarding the steps to be taken to select the umpire, including the “drawing of lots.” However, certain of the treaties – referred to as the 1967 Treaties – did not provide a clear process for what to do if the two party-appointed arbitrators failed to agree on the selection of the umpire. The court instructed the parties to follow the procedure set forth in the other treaties, and then report back regarding how to handle the appointment under the 1967 Treaties. Once an umpire had been validly appointed pursuant to the terms of the other treaties, the same umpire would be “presumptively appropriate for appointment by the Court” for the remaining disputes under the 1967 Treaties.

After the court issued those instructions, Joseph Goldberg was selected as the umpire pursuant to the terms of the other treaties. Thereafter, Nationwide moved the court to appoint Goldberg as the umpire for the remaining disputes regarding the 1967 Treaties. Arrowood objected, arguing that the decision about Goldberg’s appointment under the 1967 Treaties was premature because the parties had not yet had an opportunity to obtain disclosures from Goldberg in connection with organizational meetings to determine whether he could be neutral. On April 9, 2014, the court agreed with Arrowood and deferred ruling until after the organizational meetings have been held and the parties have had sufficient opportunity to consider the resulting disclosures. Employers Insurance Co. of Wausau v. Arrowood Indemnity Co., Case No. 12-cv-08005-LLS (USDC S.D.N.Y April 9, 2014).

This post written by Catherine Acree.

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COURT CONSTRUES PARTIES’ AGREEMENT TO ALLOW NEW YORK STATE COURTS TO RULE ON STATUTE OF LIMITATIONS DEFENSE

May 8, 2014 by Carlton Fields

The issue confronting the court in In re ROM Reinsurance Management Co. v. Continental Insurance Company was whether the timeliness of a demand for arbitration was a determination for the Court or for the arbitrators. The parties agreed that the “arbitration laws of New York State” shall govern the parties’ arbitration. Under New York’s arbitration laws, in contrast to the Federal Arbitration Act, resolution of a statute of limitations defense can be raised as a threshold issue in the courts. In contrast, under the FAA, the limitations defense is presumptively reserved to the arbitrator, not a court, except where the parties agree to leave timeliness issues to the court. The parties’ intent to have New York state law govern enforcement of the agreement, which includes the statute of limitation defense, must be stated with “critical language concerning enforcement.” Otherwise, all controversies, including issues of timeliness, are subjects for arbitration. The ROM court found that the provision at issue was sufficient. The court further reasoned that its ruling was consistent with the FAA’s goals because it enforced the agreement under the terms agreed upon by the parties, even if the result would be that the arbitration is stayed whereas it would have gone forward under the FAA. In re ROM Reinsurance Management Co. v. Continental Insurance Co., No. 11809 654480/12 (N.Y. App. Div. Mar. 11, 2014).

This post written by Leonor Lagomasino.

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COURT CONSTRUES AMBIGUOUS ARBITRATION CLAUSE BROADLY AND COMPELS ARBITRATION

May 1, 2014 by Carlton Fields

The dispute involved a claim for benefits under a policy insuring a marine construction site damaged in 2008 by Hurricane Ike. The insured contended that the policy did not provide for arbitration, but instead provided only for appraisal to set an amount of loss. The court disagreed, finding that the policy contained a clause entitled “Arbitration” and contained “multiple references to arbitration,” although that clause was ambiguous because the policy was silent as to “what precisely triggers arbitration.” The court then analyzed extrinsic evidence, including the language of a “draft” of the arbitration clause, and compelled arbitration, finding “ample evidence in the record to demonstrate [the parties’] intent to arbitrate any and all disputes under the policy.” Aker Kvaerner/IHI v. National Union Fire Insurance Co. of Louisiana, et al., Case No. 2:10-cv-00278 (USDC W.D. La. Feb. 10, 2014).

This post written by Michael Wolgin.

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CLASS ARBITRATION ROUND-UP

April 28, 2014 by Carlton Fields

There have been a number of recent court opinions enforcing class arbitration waivers, compelling individual arbitration and denying class arbitration, with the lone exception being a California Court of Appeal opinion which, in conflict with an opinion from the Ninth Circuit Court of Appeals, distinguished Concepcion and found a waiver of class arbitration to be unenforceable.

Alakozai v. Chase Investment Services Corp., No. 12-55553 (9th Cir. Feb. 7, 2014) (Affirming denial of motion to compel arbitration of class action claims, finding class arbitration exclusion in FINRA rules was not incorporated explicitly into parties’ agreement, potentially allowing for arbitration of class action claims in another arbitral forum).

Hickey v. Brinker Nat’l Payroll Company, LP, 1:13-cv-00951 (USDC D. Colo. Feb. 18 2014) (granting motion to compel individual arbitration of employees’ claims against employer, rejecting claims that agreement with class arbitration waiver was unenforceable under NLRA or was otherwise unenforceable as unconscionable or against public policy).

Michael Appelbaum v. AutoNation Inc., SACV 13-01927 (USDC C.D. Cal. April 8, 2014) (granting motion to compel individual arbitration of employee’s claims against employer, finding class arbitration waiver not unenforceable under NLRA or otherwise unconsionable, substantively or procedurally)

Johnson v. Consumerinfo.com, Inc., No. 11-56520 (9th Cir. March 20, 2014) (dismissing appeal of trial court’s grant of motion to compel individual arbitration of consumer protection claims, finding FAA bars appeals of court orders staying judicial proceedings and compelling arbitration).

Imburgia v. DirectTV, Inc., No. B239361 (Cal. App. Ct. April 7, 2014) (affirming denial of motion to compel individual arbitration, finding choice of law provision which did not explicitly mention FAA, but did mention state law, allowed for interpretation of enforceability issues under state law, despite that result would otherwise be preempted by FAA. The case distinguishes Concepcion, and is in conflict with Ninth Circuit decision in Murphy v. DirectTV, Inc., No. 11-57163 (9th Cir. July 30, 2013), discussed in prior ReinsuranceFocus.com post.

This post written by John Pitblado.

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