Jurisdiction Issues

FIFTH CIRCUIT HOLDS ORDER REMANDING CASE BACK TO ARBITRATORS FOR CLARIFICATION IS NON-FINAL AND NON-APPEALABLE

August 18, 2014 by Carlton Fields

The appeal arose from a lawsuit to clarify an arbitration award concerning an alleged breach of a corporate merger agreement containing a binding arbitration clause. The federal district court found the arbitration panel had exceeded its authority under that arbitration clause by failing to provide sufficient findings of fact and conclusions of law regarding a damages claim. The district court therefore remanded the case back to the panel for consideration of that issue and clarification of the award. On appeal, the Fifth Circuit held that because the district court neither confirmed nor vacated the award, the order was not final, a point on which the dissent strongly disagreed, and it therefore did not have appellate jurisdiction over the order. The court further reasoned that it was necessary to decline jurisdiction to avoid generating piecemeal appeals and in light of the court’s deferential standard of review of arbitration awards. Murchison Capital Partners, L.P., et al. v. Nuance Communications, Inc., No. 13-10852 (5th Cir. July 25, 2014).

This post written by Renee Schimkat.

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FEDERAL DISTRICT COURT UPHOLDS FOREIGN REINSURER’S RIGHT TO REMOVE ACTION TO FEDERAL COURT

July 28, 2014 by Carlton Fields

The Court for the Middle District of Louisiana upheld a magistrate’s ruling denying a motion to remand filed by the Louisiana Commerce and Trade Association of Self Insurer’s Fund (“LCTA”), holding that the defendant foreign reinsurers (“Reinsurers”) properly removed the state court action under the Convention of the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) which Congress implemented under the Convention Act, 9 U.S.C. §§201-208. In so holding, the Court first found it had subject matter jurisdiction under the Convention Act and rejected LTCA’s argument that, because the issue of arbitrability was not raised below, the state court action did not “relate to” an arbitration as required by the New York Convention. Noting the extraordinary breadth of the New York Convention, the Court found that because LTCA’s claim against the Reinsurers arose under the Reinsurance Contract which included an arbitration clause, the state court action thus related to the arbitration clause. The Court also noted that a party is not required to first move to compel arbitration before it is permitted to remove the action and, in any case, the Reinsurers in this case had advised the state court that they intended to remove the action.

The Court then turned to LTCA’s contractual argument that the Reinsurers waived their right to remove under the Service-of-Suit Clause in the Reinsurance Contract. In this case, the Service-of-Suit clause provided that the Reinsurers agreed to submit to the jurisdiction of a court of competent jurisdiction within the United States in the event they failed to pay any amount claimed under the Reinsurance Contract. The Service-of-Suit Clause, however, further provided that nothing contained in that provision constituted a waiver of the Reinsurer’s right to remove the action to a United States District Court. The Court found that this provision was not an explicit, clear, and unequivocal waiver of the right to remove, as required under applicable law, and further found it expressly and sufficiently reserved the Reinsurer’s right to removal. Louisiana Commerce and Trade Association Self-Insurers Fund v. Certain Underwriters at Lloyd’s London Subscribing to Contract Number A1430B600/A2430B600, No 13-700-JJB-RLB (M.D. La. July 15, 2014), affirming and adopting Magistrate Judge’s Report and Recommendations dated May 6, 2014.

This post written by Leonor Lagomasino.

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SIGNATORIES AND NON-SIGNATORIES DENIED MOTIONS TO COMPEL ARBITRATION

June 26, 2014 by Carlton Fields

The Tenth Circuit Court of Appeals and a federal district court in Michigan have each issued opinions on motions to compel arbitration. In the Michigan opinion, the court granted a motion for summary judgment, in favor of the defendant, Consolidated Insurance Company, and denied the plaintiff’s motion to compel arbitration. The plaintiff, the representative of the decedent’s estate, sought to recover uninsured motorist benefits under a commercial vehicle policy issued to decedent’s employer. Prior negotiations between the parties resulted in a written agreement to arbitrate the matter. Before arbitration commenced, the defendants canceled the process, arguing that the issue was not arbitral. The defendant’s cancellation was deemed valid based on intervening caselaw holding that coverage did not extend to individuals injured while outside a vehicle. Since the decedent was outside of his truck at the time he was killed, the issue of coverage could not be arbitrated. Johnston v. Indiana Insurance Co., Case No. 13-10797 (USDC E.D. Mich. Feb 11, 2014).

The Tenth Circuit Court of Appeals affirmed a district court’s denial to compel arbitration, finding that since none of the defendant board members signed an agreement with an arbitration clause, they could not be compelled to arbitrate. The court further held that the plaintiff’s alternative legal theories to compel arbitration were forfeited or waived. Genberg v. Porter, No. 13-1140 (10th Cir. May 12, 2014).

This post written by Rollie Goss.

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APPELLATE COURTS ADDRESS JURISDICTION TO HEAR DISPUTES CONCERNING ARBITRATION

June 18, 2014 by Carlton Fields

Establishing that a federal court has jurisdiction to hear an arbitration dispute is not always easy. The Fourth Circuit recently affirmed the dismissal of an action seeking to vacate an arbitration award based upon lack of subject matter jurisdiction. Plaintiff attempted to show that the nexus between her claims and “commerce” fell within the realm of the FAA, and therefore there was a federal question under §1331. However, she failed to raise that argument below, so it was not properly before the court of appeal, and the Court found it to be unavailing in any event. Ball v. Stylecraft Homes, LLC, No. 13-1946 (4th Cir. Mar. 26, 2014)

The Eleventh Circuit affirmed the denial of a motion to remand for lack of jurisdiction. The issue was whether diversity jurisdiction was defeated because the action was a direct action against an insurer, defeating diversity jurisdiction under 28 U.S.C. §1332(c). The Court held that it was not a direct action, and affirmed the district court’s order compelling arbitration. Kong v. Allied Professional Insurance Company, No. 13-12305 (11th Cir. May 9, 2014)

This post written by Rollie Goss.

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CLASS ARBITRATION ROUND-UP

April 28, 2014 by Carlton Fields

There have been a number of recent court opinions enforcing class arbitration waivers, compelling individual arbitration and denying class arbitration, with the lone exception being a California Court of Appeal opinion which, in conflict with an opinion from the Ninth Circuit Court of Appeals, distinguished Concepcion and found a waiver of class arbitration to be unenforceable.

Alakozai v. Chase Investment Services Corp., No. 12-55553 (9th Cir. Feb. 7, 2014) (Affirming denial of motion to compel arbitration of class action claims, finding class arbitration exclusion in FINRA rules was not incorporated explicitly into parties’ agreement, potentially allowing for arbitration of class action claims in another arbitral forum).

Hickey v. Brinker Nat’l Payroll Company, LP, 1:13-cv-00951 (USDC D. Colo. Feb. 18 2014) (granting motion to compel individual arbitration of employees’ claims against employer, rejecting claims that agreement with class arbitration waiver was unenforceable under NLRA or was otherwise unenforceable as unconscionable or against public policy).

Michael Appelbaum v. AutoNation Inc., SACV 13-01927 (USDC C.D. Cal. April 8, 2014) (granting motion to compel individual arbitration of employee’s claims against employer, finding class arbitration waiver not unenforceable under NLRA or otherwise unconsionable, substantively or procedurally)

Johnson v. Consumerinfo.com, Inc., No. 11-56520 (9th Cir. March 20, 2014) (dismissing appeal of trial court’s grant of motion to compel individual arbitration of consumer protection claims, finding FAA bars appeals of court orders staying judicial proceedings and compelling arbitration).

Imburgia v. DirectTV, Inc., No. B239361 (Cal. App. Ct. April 7, 2014) (affirming denial of motion to compel individual arbitration, finding choice of law provision which did not explicitly mention FAA, but did mention state law, allowed for interpretation of enforceability issues under state law, despite that result would otherwise be preempted by FAA. The case distinguishes Concepcion, and is in conflict with Ninth Circuit decision in Murphy v. DirectTV, Inc., No. 11-57163 (9th Cir. July 30, 2013), discussed in prior ReinsuranceFocus.com post.

This post written by John Pitblado.

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