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Jurisdiction Issues

COURT REFUSES TO COMPEL ARBITRATION AGAINST NONSIGNATORY ASSOCIATION CAPTIVE INSURER

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The case involved motions to compel arbitration by multiple defendants, all of which were parties to contracts with the plaintiff, an association captive insurer, but only some of which had signed contracts containing arbitration provisions. The court compelled the plaintiff to arbitrate breach of contract and related claims with the arbitration-signatories, finding that the claims fell under the arbitration provisions’ scope, which covered all disputes “arising out of” the underlying contracts. The court rejected, however, a non-arbitration-signatory’s attempt to compel the plaintiff to arbitrate under an estoppel theory, finding that the nonsignatory was “really arguing” that the court should read the arbitration clause into its non-arbitration agreements. Notwithstanding the court’s decision to only partly compel arbitration, it did stay the entire litigation, finding that some of the issues or claims might eliminate certain issues against the non-arbitration-signatory, and that the arbitration would likely proceed expeditiously. J.M. Woodworth Risk Retention Group, Inc. v. Uni-Ter Underwriting Management Corp., Case No. 2:13-cv-00911 (USDC D. Nev. Sept. 11, 2013).

This post written by Michael Wolgin.

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COURT ORDERS UNSEALING OF CONFIDENTIAL REINSURANCE ARBITRATION INFORMATION

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A court recently unsealed certain record documents related to a reinsurance arbitration, at the request of interested nonparties. The documents were originally filed with the court in connection with a petition to confirm the arbitration award and a responsive motion to dismiss. The parties were permitted to file the documents under seal pursuant to an approved confidentiality agreement. In deciding to unseal, the court found that the documents were “judicial documents” relevant to the performance of the judicial function, and thus subject to a “presumption of access.” The weight of the presumption was “high,” in that the documents constituted the heart of the what the court was asked to act upon (notwithstanding that the case settled prior to the court’s consideration of the materials). Neither the existence of a confidentiality agreement, nor the fact that the movant nonparties were engaged in related reinsurance arbitration with one of the parties, could keep the documents protected from public access. Eagle Star Insurance Co. v. Arrowood Indemnity Co., Case No. 1:13-cv-03410 (USDC S.D.N.Y. Sept. 23, 2013).

This post written by Michael Wolgin.

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DUAL REINSURANCE LAWSUITS ALLOWED TO CONTINUE CONCURRENTLY IN DIFFERENT DISTRICTS

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As previously reported, Utica Mutual Insurance Company was successful in seeking transfer of its dispute against two reinsurers from the Southern District of New York to the Northern District of New York. The insurance company has again succeeded, defeating a motion to dismiss, and alternatively a motion to stay the proceeding in the Northern District of New York in favor of a suit initiated by one of the reinsurers against Utica in Wisconsin. Rejecting defendants’ contention that the “first-file rule” requires a stay of the New York lawsuit, the court determined that the New York suit can proceed along side the Wisconsin dispute because: a) the New York suit involves an additional defendant not present in the Wisconsin proceeding, b) the New York suit involves an additional claim under the Federal Arbitration Act, and c) Utica asserts it is not amenable to personal jurisdiction in Wisconsin. Utica Mutual Insurance Co. v. Employers Insurance Co. of Wausau, Case No. 6:12-CV-1293 (N.D.N.Y. Sept. 26, 2013).

This post written by Abigail Kortz.

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SERVICE OF SUIT CLAUSE PRESERVING INSURER’S RIGHT TO “SEEK A TRANSFER” DID NOT PERMIT INSURER’S REMOVAL TO FEDERAL COURT

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An insurer’s bid to remove a lawsuit to federal court was stymied. The case involved a “service of suit” paragraph in an insurance policy permitting the insured to select the venue and forum of a dispute under the policy. The court found that the insurer waived the right to remove an action from state to federal court, notwithstanding a provision purporting to preserve the insurer’s right to “seek a transfer” of the case. The court interpreted consecutively each sentence of the relevant paragraph “like the concentric rings of a target.” Among other things, the court considered whether the phrase “seek a transfer” contemplated seeking removal of the action to federal court. That phrase did not include seeking removal, notwithstanding caselaw that had reached a different result in the context of a different forum selection clause employing the word “transfer” in a grammatically and substantively different way. Hanover Insurance Group, Inc. v. Chartis Specialty Insurance Co., Case No. 4:12-cv-40156 (USDC D. Mass. Aug. 19, 2013).

This post written by Michael Wolgin.

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UK SUPREME COURT ENJOINS FOREIGN COURT ACTION IN FAVOR OF POSSIBLE LONDON ARBITRATION

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Since reinsurance disputes are sometimes multi-jurisdictional we occasionally post on appellate UK and US court opinions dealing with the relationship between proceedings in different countries. The latest example of this involves two parties which entered into a contract concerning a hydroelectric plant in Kazakhstan. The contract is governed by Kazakh law but contains a London arbitration clause. When a dispute arose one party filed suit in Kazakhstan and secured a judgment from the Kazakh Supreme Court invalidating the arbitration provision. The other party filed suit in a UK court seeking a declaration that the arbitration provision was valid and enjoining the action in Kazakhstan. The UK trial court and Court of Appeals ruled that the Kazakh judgment was not binding, upheld the validity of the arbitration provision and enjoined the parties from proceeding with the Kazakh action. The UK Supreme Court agreed, and dismissed the appeal (the UK equivalent of affirming). The UK Supreme Court held that the refusal of the Kazakh court to enforce the arbitration provision compelled it to act to preserve the right to arbitrate. It is perhaps notable that no one had sought to commence an arbitration proceeding. The UK courts were acting to preserve the right of the parties to arbitrate, should they desire to do so. Ust-Kamenogorsk Hydropower Pland JSC v. AES Ust-Kamenogorsk Hydropower Pland LLP, [2013] UKSC 35 (June 12, 2013).

This post written by Rollie Goss.

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