Confirmation / Vacation of Arbitration Awards

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 SANCTIONS PARTY FOR IMPROPER REMOVAL OF ACTION SEEKING CONFIRMATION OF ARBITRATION AWARD

April 16, 2014 by Carlton Fields

The facts in Jackson v. Sleek Audio, LLC, et. al., Case No. 13-80725-CIV-Marra (S.D. Fla. March 17, 2014) stemmed from an arbitrators award against Curtis Jackson (“Jackson”) in his action against former business associates, Sleek Audio and others (“Sleek”). The arbitrator’s award included an award of attorney’s fees for which, Jackson contended, he lacked authority to award under the Federal Arbitration Act, 9 U.S.C. §1, et. seq. (“FAA”) and under Florida law.

Following the award by the arbitrator, Jackson brought an action in the Southern District of Florida seeking to vacate the arbitration award and also removed Sleek’s petition in the State Court seeking confirmation of the award. Jackson argued the arbitrator relied on the FAA’s preemption of Florida law in finding authority to award attorney’s fees and, thus, the issue of the FAA’s preemption formed the basis of the federal question jurisdiction. Sleek then moved to dismiss the action to vacate the award and to remand its own action seeking confirmation of the award. The parties agreed there was no diversity of citizenship and the federal court did not have jurisdiction under the FAA.

In its analysis of federal question jurisdiction, the Court first restated the principle that only complete preemption can convert state law claims into federal statutory claim in order to serve as a basis for federal question jurisdiction. In this case, the FAA did not completely preempt state law and thus could not form an independent basis for jurisdiction. The Jackson Court concluded that Jackson therefore did not have “an objectively reasonable basis for removal” and ordered Jackson to pay Sleek’s costs, including attorney’s fee, incurred in connection the removal proceedings.

This post written by Leonor Lagomasino.

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COURT AWARDS DAMAGES AND PREJUDGMENT INTEREST IN LONG-RUNNING RETROCESSION DISPUTE

April 7, 2014 by Carlton Fields

Republic Insurance was a fronting company for a syndicate of reinsurers which obtained retrocessional coverage from Group Des Assurance Nationales under LMX quota share contracts over a number of years. As we reported in an August 20, 2013 post, the Court granted summary judgment in Republic’s favor. Thereafter, the parties disputed the damages, offset, and method of prejudgment interest calculation. The Court has now ruled on those issues, awarding Republic the full amount of damages claimed, declining to award Group Des Assurance Nationales an offset against premiums paid, and awarding prejudgment interest dating back to the contract years at issue, which roughly doubled the award. Republic Insurance Co. v. Banco De Seguros Del Estado, No. 10-C-5039 (USDC N.D. Ill. March 20, 2014).

This post written by John Pitblado.

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ARBITRATION ROUND-UP

April 3, 2014 by Carlton Fields

Arbitration Procedure

Trustees of the New York City District Council of Carpenters Pension Fund, Welfare Fund, Annuity Fund v. Alliance Workroom Corp., No. 13-Civ-5096 (USDC S.D.N.Y. Dec. 11, 2013) (arbitration award confirmed, treating unopposed petition to confirm as summary judgment motion based on unopposed record, granting attorneys fees incurred in unopposed action to confirm arbitration award).

Thai-Lao Lignite (Thailand) Co., Ltd. v. Government of the Lao People’s Democratic Republic, No. 10-CV-5256 (USDC S.D.N.Y. Feb. 6, 2014) (vacating award based on ruling in parallel action in Malaysian Court of Appeal, based on New York Convention for the Enforcement of Foreign Arbitral Awards).

McAlpine v. Priddle, No. S-14891 (Alaska Feb. 21, 2014) (affirming confirmation of award in criminal defense attorney fee agreement, agreement not procured by fraud, not barred by public policy)

Lakeshore Engineering Services, Inc. v. Target Construction, Inc., No. 13-14498 (USDC E.D. Mich. Feb. 27, 2014) (no waiver, contract and arbitration agreement binding and enforceable)

Exceeding Powers

Renard v. Ameriprise Fin. Svcs., Inc., No. 13-CV-555 (USDC E.D. Wis. Mar. 6, 2014) (arbitrators did not exceed powers, award not procured by fraud, no failure to hear pertinent evidence)

Manifest Disregard

Schafer v. Multiband Corp., No. 13-1316 (6th Cir. Jan. 6, 2014) (reversing district court’s order granting vacatur of award, where award was contrary to precedent, but nevertheless “reasoned” and therefore not in manifest disregard of the law).

Abu Dhabi Investment Authority v. Citigroup, Inc., No. 13-1068-cv (2d Cir. Feb. 19, 2014) (no manifest disregard in application of New York law in choice-of-law dispute)

Evident Partiality

Ometto v. ASA Bioenergy Holding A.G., Nos. 12-4022, 13-225 (2d Cir. Jan 7, 2014) (affirming denial of petition to vacate award, no evident partiality based on claim of arbitrator’s failure to disclose information; no manifest disregard of law)

Scope of Arbitration Agreement

Aetrex Worldwide, Inc. v. Sourcing For You Limited, No. 13-3933 (3d Cir. Jan. 23, 2014) (denying motion to compel arbitration where arbitration agreement contained exception for injunction actions, which applied even after injunction request denied and withdrawn)

Neuronetics, Inc. v. Fuzzi, No. 13-1506 (3d Cir. Jan. 24, 2014) (affirming grant of motion to confirm, issue regarding non-payment of contract for sale of healthcare products within scope of arbitration agreement).

Unconscionability

Kirby v. Lion Enterprises, Inc., No. 12-C-47 (W. Va. Mar. 7, 2014) (reversing decision affirming confirmation of award and remanding with instructions to develop record on issue of unconscionability)

This post written by John Pitblado.

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SUPREME COURT HOLDS THAT ARBITRATORS, NOT COURTS, ARE TO INTERPRET A TREATY’S ARBITRATION PREREQUISITE

March 17, 2014 by Carlton Fields

The United States Supreme Court has held that arbitrators, not courts, bear the primary responsibility for interpreting and applying a local litigation requirement of an investment treaty between the United Kingdom and Argentina that operated as a condition precedent to arbitration. BG Group plc, a British firm that had invested in an Argentine entity, sought arbitration for a dispute arising out of that treaty. Argentina claimed that the arbitrators lacked jurisdiction over the dispute because BG Group had not complied with the treaty’s requirement that the dispute first be submitted to an Argentinean court for consideration. The arbitrators concluded that they had jurisdiction finding, in part, that Argentina’s conduct in enacting new laws that hindered recourse to its judiciary had excused BG Group’s failure to comply with the treaty’s local litigation requirement. The arbitrators then found in favor of BG Group and awarded it $185 million in damages.

After decisions by the federal district and appellate courts, both of which were reported here previously, the Supreme Court held that the treaty’s local litigation requirement was a procedural condition precedent to arbitration and that, absent a contrary intent reflected in the treaty itself, the interpretation and application of that procedural provision should be decided by the arbitrators and that decision should be reviewed with considerable deference. The fact that the document at issue was a treaty rather than an ordinary contract did not change the Court’s analysis, a position on which the dissent strongly disagreed. The Court concluded that the arbitrators’ jurisdictional determination was lawful and the judgment of the Court of Appeals to the contrary was therefore reversed. BG Group PLC v. Republic of Argentina, No. 12-138 (U.S. March 5, 2014).

This post written by Renee Schimkat.

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