Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Contract Formation

ARBITRATION ROUND-UP

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Scope of Arbitration

Citigroup, Inc. v. Abu Dhabi Investment Authority, Case No. 1:13-cv-06073 (USDC S.D.N.Y. Nov. 25, 2013) (dismissing action to enjoin arbitration; granting motion to compel arbitration; defense of res judicata based on prior confirmation of arbitration award is an issue for arbitration panel)

Unconscionability

Lombardi v. Kahaly, Case No. 11-56752 (9th Cir. Dec. 2, 2013) (reversing denial of motion to compel arbitration of claims for injunctive relief under California Unfair Competition Law and Consumer Legal Remedies Act; following precedent holding that FAA preempts California unconscionability law and that “effective vindication” exception does not apply to state statutes; arbitration agreement not unconscionable for nonmutuality)

Lombardi v. Twyman, Case No. 10-56602 (9th Cir. Dec, 2, 2013) (reversing order that denied motion to compel arbitration based on unconscionability of class waiver arbitration provision; following Concepcion and American Express; arbitration agreement not substantively unconscionable for nonmutuality, nor procedurally unconscionable for alleged penalty for rejecting arbitration agreement)

Due Process

Staples v. Morgan Stanley Smith Barney, Case No. 6:13-cv-00013 (USDC D. Mont. Oct. 28, 2013) (confirming FINRA award; finding proper service of process by FINRA; no corruption, fraud, undue means, or arbitrator bias, misconduct, or exceeding of powers)

Labor Disputes

Northern New England Telephone Operations LLC v. Local 2327, International Brotherhood of Electrical Workers, AFL-CIO, Case Nos. 13-1167, 13-1186 (1st Cir. Nov. 12, 2013) (affirming confirmation of award and denial of Rule 11 costs and fees; panel did not exceed authority in LMRA arbitration by wrongfully adding/subtracting terms in interpreting the relevant collective bargaining agreement)

Reyco Granning LLC v. International Brotherhood of Teamsters, Local Union No. 245, Case No. 13-1002 (8th Cir. Nov. 15, 2013) (reversing district court’s order granting summary judgment in favor of union and confirming award on collective bargaining agreement; directing court to grant employer’s motion for summary judgment and vacate arbitration award; arbitrator exceeded authority by looking to contract negotiations to discern intent with respect to unambiguous contract language)

Concurrent Proceedings

Alstom Chile S.A. v. Mapfre Compania de Seguros Generales Chile S.A., Case No. 1:13-cv-02416 (USDC S.D.N.Y. Oct. 31, 2013) (compelling arbitration and permanently enjoining defendant from prosecuting related tort proceedings in Chile; holding that broad arbitration clause for all disputes “arising out of or relating to” agreement covered both breach of contract and tort claims; finding that failure to comply with requirement to negotiate dispute did not bar enforcement of arbitration provision)

This post written by Michael Wolgin.

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SUMMARY JUDGMENT DENIED ON ISSUE OF WHETHER COMPANY WAS PARTY TO REINSURANCE AGREEMENT

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In a long running dispute concerning reinsurance, which we posted on in March 2011, a court was asked to find that Guarantee Trust was a party to a reinsurance agreement that it never signed. Acknowledging that it was a well established principle of Illinois contract law that “a party may, by his acts and conduct, assent to contravct terms and become bound by them even though he has not signed the contract, if it is clear that his conduct relates to the specific contract in question,” the cour found that there were disputed issues of material fact as to whether American Medical had demonstrated the types of acts and conduct which would bind Guarantee Trust to a reinsurance agreement it had not signed. The court therefore denied American Medical’s motion for summary judgment. Guarantee Trust Life Ins. Co. v. American Medical and Life Ins. Co., Case No. 10-2125 (USDC N.D. Ill. Mar, 27, 2013).

This post written by Rollie Goss.

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CAPTIVE REINSURANCE LAWSUIT DISMISSED

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A lender defendant successfully moved for the dismissal of a putative class action centered on residential mortgages acquired through National City Mortgage (“National City”). Plaintiffs allege that National City and its reinsurer National City Mortgage Insurance Company conspired with private mortgage insurers to create a “captive reinsurance scheme.” This scheme, with primary insurers paying NCMIC a portion of insurance premiums for the assumption of risk, circumvented the kickback prohibitions of the Real Estate Settlement Procedures Act. These insurance premium payments were allegedly made by the primary insurers for the referral of business. Plaintiffs alleged they were entitled to equitable tolling. The Court rejected this argument holding that the amended complaint contained only general allegations of an agreement between the defendants and contained no tolling date. Plaintiffs also failed to show “an affirmative act of concealment by each defendant.” The Court declined to exercise jurisdiction over a state-law claim for unjust enrichment. White v. PNC Financial Services Group, Inc., Case No. 2:11-cv-07928-LS (USDC E.D. Pa. June, 4, 2013).

This post written by Brian Perryman.

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