Contract Interpretation

FOURTH AND FINAL SETTLEMENT IN THE AIG SECURITIES LITIGATION IS APPROVED

January 23, 2014 by Carlton Fields

On September 11, 2013, the Southern District of New York approved the final settlement in the protracted class litigation regarding allegedly artificially inflated prices for AIG securities. This final settlement resolves all claims against defendant Gen Re with a settlement fund of $72 million for a class of persons and entities who purchased AIG securities from October 28, 1999 through April 1, 2005. Lead counsel was awarded $6.5 million in attorneys’ fees (9.09% of the settlement fund) and $525k in expenses. Any funds not claimed by class members will be distributed to a 501(c)(3) not-for-profit rather than returned to the defendant. The three previous settlements resolved claims against PwC, AIG, and Starr International Company. In re American International Group, Inc. Securities Litigation, 04 Civ. 8141 (DAB) (S.D.N.Y. Sept. 11, 2013).

This post written by Abigail Kortz.

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SEVENTH CIRCUIT FINDS REINSURANCE “REVENUE SHARING AGREEMENT” AMBIGUOUS

January 13, 2014 by Carlton Fields

Aon Benfield was the reinsurance broker of record for Homeowners Choice, Inc. The parties executed a “revenue sharing agreement” whereby a portion of the commission Aon made in placing Homeowners’s reinsurance policies would be rebated to Homeowners. During the 2010 contract year, Homeowners notified Aon that it was replacing it as broker of record. Homeowners requested $659,943 from Aon as payment due under the parties’ revenue sharing agreement. Aon refused, claiming that the revenue sharing payment clause was superseded by the clause allowing Aon to keep commissions made after termination of the contract. The district court found the clauses Aon relied on to be ambiguous, and because Aon drafted the agreement, it awarded damages to Homeowners under the doctrine of contra proferentem. Aon appealed, but the Seventh Circuit Court of Appeals agreed with the district court and affirmed. Homeowners Choice, Inc. v. Aon Benfield, Inc., No. 13-1846 (7th Cir. Dec. 29, 2013).

This post written by John Pitblado.

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NONAPPEALABILIY CLAUSES IN ARBITRATION AGREEMENT HELD NOT ENFORCEABLE IN THE NINTH CIRCUIT

December 25, 2013 by Carlton Fields

Faced with a question of first impression, the Ninth Circuit recently held that a clause in an arbitration agreement that eliminates any and all federal court review of arbitration awards, including review under § 10 of the Federal Arbitration Act, is unenforeceable. The Court reasoned that allowing parties to “contractually eliminate all judicial review of arbitration awards . . . run[s] counter to the text of the FAA,” and “would also frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.” In re Wal-Mart Wage and Hour Employment Practices Litigation, No. 11-17718 (9th Cir. Dec. 17, 2013).

This post written by Abigail Kortz.

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COURT ALLOWS INTERVENTION OF “TOLLING SUB-CLASS” IN RESPA CLASS ACTIONS REGARDING PMI REINSURANCE

December 18, 2013 by Carlton Fields

We have previously reported on a case styled Munoz v. PHH Corp., No. 1:08-CV-0759 (E.D. Cal.), and other similar suits alleging putative class actions under the Real Estate Settlement Procedures Act (“RESPA”), arising from purported “sham” reinsurance transfers covering private mortgage insurance. In Munoz, where a class of consumers was certified, an intervening plaintiff sought intervention in order to certify a sub-class of consumers whose claims would be time-barred under the statute of limitations, but who sought to create a “tolling sub-class” of similarly situated claimants. The court granted the motion for intervention, and the defendants sought reconsideration. Finding the prior order not “clearly erroneous or contrary to law,” the court denied the motion for reconsideration. Munoz v. PHH Corp., No. 1:08-CV-0759 (USDC E.D. Cal. Oct. 29, 2013)

This post written by John Pitblado.

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BRITISH COURT REFUSES TO ENJOIN U.S. REINSURANCE LAWSUIT, OR STAY BRITISH SUIT, BETWEEN SAME PARTIES REGARDING SAME ISSUES.

December 16, 2013 by Carlton Fields

The claimant, the Insurance Company of the State of Pennsylvania, sued Equitas under certain reinsurance contracts that provided cover of $15 million, excess of $5 million in underlying insurance for ICP-issued policies covering the Dole Food Co. Dole faced more than $30 million in liabilities arising from alleged personal injuries caused by its use of certain pesticides in its fruit farming operations. Equitas claimed that ICP failed to timely notify Equitas of the claims, barring coverage under the reinsurance contracts. ICP brought suit first in New York, and Equitas filed its own later action in London, arguing that venue in the U.S. was improper, and seeking to enjoin the U.S. action. The English court declined to enjoin the U.S. action. However, it also denied ICP’s motion to stay the English proceeding, leaving the litigation proceeding on parallel tracks in New York and London. Insurance Co. of Pa. v. Equitas, [2013] EWHC 3713 (U.K. High Court of Justice, Comm. Div. Nov. 29, 2013)

This post written by John Pitblado.

See our disclaimer.