Jurisdiction Issues

COURT DENIES RECONSIDERATION OF ORDER STAYING ACTION TO COMPEL ARBITRATION

January 5, 2015 by Carlton Fields

A federal district court refused to reconsider its order staying Allstate’s action to compel arbitration against its insured, A.O. Smith. The case involved a Settlement/Coverage-in Place Agreement between A.O. Smith and Allstate regarding coverage for asbestos liability. Continental Casualty Company, another insurer for A.O. Smith, filed an action in Wisconsin state court against both A.O. Smith and Allstate arguing that the Agreement impermissibly limited its subrogation and contribution rights against Allstate. When Allstate and A.O. Smith asserted their defenses in the Wisconsin action, a dispute emerged between them as to the nature of the Agreement. Allstate attempted to compel arbitration against A.O. Smith in federal court and to stay the Wisconsin litigation pending the outcome of the arbitration. The federal court, however, refused to compel arbitration and instead stayed its own proceedings, in deference to the Wisconsin court’s determination of a pending motion for summary judgment that could impact arbitrability. In denying reconsideration of that ruling, the court explained that its stay was warranted because the Wisconsin litigation was further along, the Wisconsin court was “currently in a more informed position from which to address the issue of arbitrability, and a stay [was therefore] warranted on that basis.” Allstate Insurance Co. v. A.O. Smith Corp., Case No. 1:15-cv-06574 (USDC N.D. Ill. Dec. 11, 2015).

This post written by Barry Weissman.

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SECOND CIRCUIT REFUSES TO HEAR APPEAL BY UNDERWRITER AGAINST REINSURER

October 20, 2014 by Carlton Fields

The Second Circuit refused to hear an appeal in an action brought by Acumen Re Management Corporation, an underwriter, against a reinsurer, General Security National Insurance Company. The crux of the action was Acumen’s allegation that General Security breached the agreement between them by failing to pay Acumen certain commissions which General Security allegedly owed under the parties’ agreement. In the suit, Acumen alleged five distinct theories as to how General Security breached the agreement. The lower court entered partial summary judgment in favor of General Security on four of those theories and further held that, under all five theories, no more than nominal damages were available to Acumen. The lower court certified the partial final summary judgment as to the four counts under Federal Rule of Civil Procedure 54(b) which authorizes, under certain circumstances, entry of a partial final judgment as to one or more, but fewer than all, claims of the parties such that the partial final judgment becomes reviewable on appeal. The Second Circuit determined that the five theories Acumen alleged were not separate and distinct claims; instead, Acumen alleged five various ways in which General Security breached the agreement and the claims were interrelated and dependent upon each other. The Second Circuit concluded that it did not have jurisdiction to review the lower court’s entry of partial summary judgment. Acumen Re Management Corp. v. General Security National Insurance Co., No. 12‐5081‐cv (2d Cir. Oct. 3, 2014).

This post written by Leonor Lagomasino.

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UNDER FAA, CHICAGO COURT REFUSES TO DETERMINE WHETHER CLAIMS SHOULD BE PART OF PENDING NEW YORK ARBITRATION

October 15, 2014 by Carlton Fields

A dispute involving competing actions between two competing aeroponic farming companies, FarmedHere, LLC and Just Greens, LLC (doing business as Aero Farm Systems), was simultaneously at issue in a New York arbitration, a New York state court, and a Chicago federal court. Aero Farm had originally demanded arbitration in New York based on an arbitration clause in a distribution agreement between Aero Farm and a company affiliated with FarmedHere. In response, FarmedHere filed a petition to stay the arbitration in the New York court, contending that it was not a party to the distribution agreement, and a separate case in Chicago alleging unfair trade practices and seeking a declaration regarding certain patented aeroponic farming technology. Aero Farm then moved to dismiss the Chicago action, contending that (1) FarmedHere assumed obligations under the distribution agreement, (2) FarmedHere’s claims were therefore subject to the arbitration clause, and (3) the proper jurisdiction under the FAA to determine arbitrability was New York (where the arbitration was pending), and not Chicago. After a review of the evidence, the court agreed with Aero Farm and dismissed the Chicago proceedings without prejudice. FarmedHere can attempt to refile its claims in Chicago if the New York court determines that FarmedHere’s claims are not arbitrable. FarmedHere, LLC v. Jut Greens, LLC, Case No. 14 C 370 (USDC N.D. Ill. June 16, 2014).

This post written by Michael Wolgin.

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FEDERAL COURT REMANDS ACTION TO CONFIRM ARBITRATION AWARD: NO SUBJECT MATTER JURISDICTION

October 9, 2014 by Carlton Fields

A federal court in California recently rejected efforts to remove a state court arbitration confirmation proceeding to federal court. The underlying royalties dispute had been addressed in an arbitration, and ultimately the dispute arrived in California state court in a proceeding to confirm the arbitration award. The defendant opposed the petition for confirmation and filed a separate petition to vacate or modify the award. That pleading included a count for “Declaratory Judgment for No Liability under Federal Patent Laws.” Based on the assertion of federal relief in its own petition, the defendant filed a notice of removal. The federal court rejected the defendant’s assertion of jurisdiction and remanded the case back to state court. The court concluded that there was no subject matter jurisdiction — despite the patent-related request for relief — due to the limited nature of the proceedings before the state court. The court determined that the declaratory judgment count did not belong in the state court action in the first place, and it ruled that issues of patent law need not be decided to resolve the limited issues presented in the case. In sum, the court refused to allow the defendant “to create jurisdiction where none can possibly exist in order to bring a properly-situated case before a new forum.”

Amkor Tech., Inc. v. Tessera, Inc., 5:14-CV-03604 EJD, 2014 WL 4467715 (USDC N.D. Cal. Sept. 9, 2014).

This post written by Catherine Acree.

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TENTH CIRCUIT REVERSES TRIAL COURT DENIAL OF MOTION TO COMPEL ARBITRATION OF WAGE DISPUTE

September 24, 2014 by Carlton Fields

The Tenth Circuit Court of Appeals reversed a trial court order denying an employer’s motion to compel arbitration of a wage dispute under the arbitration clause contained in the plaintiffs’ Confidentiality/Non-Compete Agreement. The plaintiff employees brought suit against their employer, an oil-rig servicer, under the Fair Labor Standards Act and Oklahoma Protection of Labor Act. The employer moved to compel arbitration under a provision in the parties’ non-compete agreements. The plaintiffs argued – successfully to the trial court – that the wage disputes did not come within the purview of the arbitration provision, which, although in an agreement that related mostly to non-compete and confidentiality issues, nevertheless contained a broad clause mandating arbitration of “any dispute.” The Tenth Circuit noted that, while the scope of the parties’ contract was narrow, the scope of the arbitration provision was broad, and that, under the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, and the broad federal policy favoring arbitration embodied in the FAA, it was constrained to enforce the agreement. It remanded with instructions to compel arbitration. Sanchez v. Nitro-Lift Technologies, LLC, Nos. 12-7046 and 12-7057 (10th Cir. Aug. 8, 2014).

This post written by John Pitblado.

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