Jurisdiction Issues

Eighth Circuit Affirms Ruling That NLRB Retains Jurisdiction to Review Arbitration Decision on NRLA Charge, Not Court

July 29, 2020 by Nora Valenza-Frost

An arbitrator resolved a dispute between the parties in favor of the union, deciding that Exide Technologies had violated the collective bargaining agreement and the National Labor Relations Act (NLRA) by unilaterally changing its procedures for implementing the Family and Medical Leave Act without bargaining with the union. Exide sought to vacate the award and the union sought to confirm it. The U.S. District Court for the Western District of Arkansas confirmed the arbitrator’s finding of a collective bargaining agreement violation but concluded that it lacked jurisdiction to review the NLRA finding.

Procedurally, the union had filed a grievance, and then filed two unfair labor practice charges with the National Labor Relations Board (NLRB). The NLRB deferred pursuant to its policy that “the NLRB will conditionally dismiss a case when a set of facts may present not only an alleged violation of the NLRA but also an alleged breach of the collective-bargaining agreement subject to arbitration. However, the NLRB retains limited jurisdiction to decide, among other things, whether an arbitrator has reached a result repugnant to the NLRA.” The parties proceeded to arbitration.

The district court confirmed the arbitrator’s collective bargaining agreement ruling, because it drew its essence from the parties’ agreement. However, the district court decided it lacked jurisdiction to review the arbitrator’s NLRA ruling and that Exide should have moved the NLRB to reopen the deferred unfair labor practice charges so that the NLRB can review the arbitrator’s findings. The Eighth Circuit ruled that when a court possesses jurisdiction to decide a collective bargaining agreement issue under section 301 of the Labor Management Relations Act, it is not preempted from exercising its jurisdiction by the fact that the employer’s conduct may also violate the NLRA. However, section 301 does not provide the court with original jurisdiction to decide whether Exide violated the NLRA, and the NLRA had retained jurisdiction to determine whether the arbitrator’s actions were appropriate.

Exide Technologies v. International Brotherhood of Electrical Workers, Local No. 700, No. 19-2317 (8th Cir. July 10, 2020).

Fifth Circuit Rejects Challenges to $147M International Arbitration Award

May 29, 2020 by Brendan Gooley

The Fifth Circuit has rejected challenges under Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards to a Swedish arbitration award.

In 1994, Carpatsky Petroleum Corp., at the time a Texas company, entered into a joint activity agreement with Ukraine’s state oil and gas enterprise (OJSC Ukrnafta) to develop an oil and gas field in Ukraine.

Two years later, Carpatsky merged into a newly incorporated Delaware company also called Carpatsky. Carpatsky did not formally notify Ukrnafta of this corporate change, and an amendment to the joint activity agreement executed shortly thereafter stated that Carpatsky was registered in Texas and was affixed with a seal that included Carpatsky’s Texas incorporation number.

The oil and gas venture went south and led to litigation and arbitration. A Swedish arbitration tribunal ultimately awarded Carpatsky approximately $147 million. A federal district court subsequently confirmed that award. Ukrnafta appealed that ruling to the Fifth Circuit.

Ukrnafta first challenged the district court’s removal jurisdiction. The Fifth Circuit rejected that claim, noting that “[r]emoval is allowed whenever a defendant asserts a ‘nonfrivolous connection’ to an international arbitration agreement.” The court concluded that that “low bar” was “easily clear[ed]” by Carpatsky under the facts of this case.

The Fifth Circuit accordingly turned to Ukrnafta’s merits claims.

At the outset, the court noted that it only had “secondary jurisdiction” over the case because the arbitration award was rendered in Sweden under Swedish law. The court’s review was therefore limited to determining whether the award should be vacated under the grounds listed in Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Ukrnafta’s principal contention was that the relevant agreements between the parties were not valid because of Carpatsky’s allegedly undisclosed change in domicile from Texas to Delaware and the use of a seal with Carpatsky’s Texas incorporation information on an amendment after Carpatsky had reincorporated in Delaware through a merger. The Fifth Circuit rejected that claim. It explained that Carpatsky’s signatory (whose name was Mr. Texas) had the capacity to bind Carpatsky, and Mr. Texas’ use of the Texas seal to do so didn’t change that. Ukrnafta had also waived its claim that Carpatsky’s reincorporation somehow rendered the arbitration agreement void by submitting to the arbitration in Stockholm after it knew about the reincorporation. That agreement was effectively a new agreement to arbitrate the disputes between the parties.

The Fifth Circuit then rejected Ukrnafta’s remaining claims under Article V:

The arbitration awarded Ukrnafta ample due process (the tribunal “held multiple hearings,” the “parties submitted witness statements, expert reports, and multiple rounds of briefing,” and the “merits hearing lasted four days with fifteen witnesses,” similar to a “full-blown federal trial”) and Ukrnafta had therefore not been “unable to present [its] case.”
The arbitration award did not exceed the “terms of the submission to arbitration” and was not “beyond the scope of the submission to arbitration” merely because the panel refused to apply a limitation of liability because it concluded “that Ukrainian law renders a limitation of liability unenforceable in cases of international breach” and regardless of whether that decision was “[r]ight or wrong,” it was not a ground for nonrecognition.
For the reasons already discussed regarding Ukrnafta’s agreement to arbitrate in Sweden, “Ukrnafta waived [any] challenge to the Stockholm tribunal’s jurisdiction.”
The arbitration award was not “contrary to the public policy” on the ground that it disrespected the holding of Ukrainian courts in related litigation that “the 1998 amendment” to the joint activity agreement “was invalid because of Carpatsky’s changed domicile”: although American courts are concerned with comity, there is a “strong policy favoring international arbitration” and “[e]nforcing this award would [therefore] further American policy, not contravene it.”

The Fifth Circuit also rejected Ukrnafta’s argument that the arbitration panel had “‘manifestly disregarded’ the Ukrainian statute of limitations” (that was not a ground for refusing to enforce the award under Article V) and Ukrnafta’s attempt to pursue state law claims (those claims were barred by the doctrine of claim preclusion based on the arbitration proceedings).

The Fifth Circuit, therefore, affirmed the district court’s confirmation.

OJSC Ukrnafta v. Carpatsky Petroleum Corp., No. 19-20011 (5th Cir. Apr. 6, 2020).

District Court Orders Insurer in Receivership to Arbitrate With Reinsurers, Rejecting Argument That Jurisdiction Rests With Receivership Court and That McCarran-Ferguson Act Preempts FAA

May 11, 2020 by Benjamin Stearns

The District Court of Puerto Rico upheld a prior judgment ordering Integrand Assurance Co. to arbitrate its claims against its various reinsurers, rather than remand the case to the court overseeing Integrand’s receivership, the Superior Court of the Commonwealth of Puerto Rico.

Integrand commenced proceedings against the reinsurers in order to recover assets that the reinsurers purportedly owed Integrand. In support of its argument that the proceedings should be remanded, Integrand argued that, under the Puerto Rico insurance code, the Superior Court of Puerto Rico had “exclusive jurisdiction to attend” to any action by or against Integrand and its estate subsequent to the commencement of receivership proceedings. Integrand further argued that the McCarran-Ferguson Act preempted the application of the Federal Arbitration Act to the parties’ dispute.

The court disagreed with Integrand, finding that, under the U.S. Supreme Court’s test in Humana v. Forsyth, the FAA was not preempted because the application of the FAA to the parties’ dispute would not “invalidate, impair, or supersede the state statute regulating insurance.” The court found that the provisions relied upon by Integrand related clearly and exclusively to the commencement of receivership proceedings. The instant dispute, however, was over entitlement to certain assets, not the commencement of receivership proceedings. The exclusive jurisdiction provisions, therefore, did not apply.

The court also distinguished this case from prior cases holding that, in the context of a liquidation proceeding, the FAA was preempted. Significantly, in those prior cases, the action was brought by other entities against the assets of a delinquent insurance company, unlike in this case, in which the action was brought by and for the delinquent insurance company in an attempt to recover assets supposedly owed to it. Finding that the FAA applied, the court upheld the order that the parties proceed with the arbitration of their dispute.

Integrand Assurance Co. v. Everest Reinsurance Co., No. 3:19-cv-01111 (D.P.R. May 1, 2020).

Fourth Circuit Determines Arbitral Panel in UK Is Foreign Tribunal for Purposes of Section 1782

April 13, 2020 by Nora Valenza-Frost

Where the parties to a private arbitration in the United Kingdom disagreed as to whether the arbitration panel is a “foreign or international tribunal” for purposes of obtaining testimony from residents in South Carolina pursuant to 28 U.S.C. § 1782, the Fourth Circuit determined that the panel was a “foreign tribunal” for purposes of the statute.

The district court denied the appellant’s application for the issuance of subpoenas to three South Carolina residents, relying on case law that held that private arbitral bodies were not “tribunals” as used in section 1782(a). The circuit court disagreed, reasoning that “even if we were to apply the more restrictive definition of ‘foreign or international tribunal’… – that the term refers only to ‘entities acting with the authority of the State’ – we would conclude that the UK arbitral panel charged with resolving the dispute between” the parties meets that definition.

The matter was remanded to the district court to conduct further proceedings on the appellant’s section 1782 application.

Servotronics, Inc. v. Boeing Co., No. 18-2454 (4th Cir. Mar. 30, 2020).

Nebraska Appellate Court Affirms Dismissal for Lack of Personal Jurisdiction in Suit Involving Breach of Reinsurance Participation Agreement

February 11, 2020 by Brendan Gooley

The Court of Appeals of Nebraska has affirmed the dismissal of a claim under a reinsurance participation agreement based on lack of personal jurisdiction.

Applied Underwriters Captive Risk Assurance Co., an Iowa corporation with its principal place of business in Nebraska, entered into a reinsurance participation agreement with Doyle Signs Inc., an Illinois corporation based in Illinois. The agreement contained a choice-of-law clause and a forum selection clause providing that the agreement would be governed by Nebraska law and that disputes regarding the agreement would be heard by the “courts of Nebraska.” Applied Underwriters later sued in Nebraska state court alleging that Doyle owed it nearly $380,000 under the agreement.

Doyle moved to dismiss for lack of personal jurisdiction claiming it did not have sufficient contacts with Nebraska to be hauled into court there and, in the alternative, that Nebraska was not a reasonably convenient forum. The trial court granted Doyle’s motion and Applied Underwriters appealed.

The Court of Appeals affirmed. It found the case largely on point with its prior decision in Applied Underwriters Captive Risk Assurance Co. v. E.M. Pizza, Inc., 26 Neb. App. 906, 923 N.W.2d 789 (2019). In that case, the court concluded that the defendant had sufficient minimum contacts with Nebraska for specific jurisdiction but that Nebraska was nevertheless not a reasonably convenient forum.

Attempting to distinguish E.M. Pizza, Applied Underwriters argued that Doyle did business in Nebraska and was subject to general personal jurisdiction there. The court rejected that argument. It concluded that Doyle did not have systematic and continuous general business contacts with Nebraska based on the fact that it had bid for and had been awarded eight contracts by corporate offices outside Nebraska to make signs for Nebraska stores when the signs were manufactured outside Nebraska, transported to Nebraska by third parties, and there was no evidence that, among other things, Doyle had any employees in Nebraska, made sales there, or solicited business there.

In the alternative, the court noted that even if Doyle had sufficient minimum contacts with the state, it was not fair or reasonable for Nebraska courts to exercise jurisdiction over Doyle.

The court also rejected Applied Underwriters’ argument that the forum selection clause conferred jurisdiction on Nebraska’s courts, noting that it had rejected a similar argument in E.M. Pizza.

Finally, the court rejected Applied Underwriters’ contention that Doyle did not challenge service upon it, explaining that courts are still entitled to determine whether Nebraska courts are a convenient forum notwithstanding the apparent lack of challenge to service of process.

Applied Underwriters Captive Risk Assurance Co. v. Doyle Signs, Inc., No. A-19-464, 2019 WL 7425406 (Neb. Ct. App. Dec. 20, 2019) (copy of opinion available from Nebraska court website with a subscription).