Jurisdiction Issues

FEDERAL COURT DISMISSES ACTION TO DISQUALIFY COUNSEL IN REINSURANCE ARBITRATION FOR FAILURE TO SATISFY AMOUNT IN CONTROVERSY REQUIREMENT

January 8, 2013 by Carlton Fields

Plaintiff and defendant were parties to a contract under which dispute arose and arbitration was demanded. Plaintiff filed an action in state court seeking to disqualify defendant’s counsel due to an alleged conflict of interest. Defendant removed to federal court. The federal court sua sponte raised the issue of whether the amount in controversy requirement for a diversity action was satisfied. After briefing on the issue, the court held that the requirement was not met, and that the exposure in the underlying arbitration was not the appropriate measure for amount in controversy, but rather only the financial impact of having counsel disqualified and retaining new counsel was implicated. The removing defendant failed to establish the requirement and remanded the case to state court. National Casualty Co. v. Utica Mutual Insurance Co., No. 12-cv-657-bbc (USDC W.D. Wis. Dec. 12, 2012).

This post written by John Pitblado.

See our disclaimer.

REINSURERS’ ACTION SEEKING TO VOID REINSURANCE AGREEMENT TRANSFERRED TO PLACE OF RELATED ARBITRATION

January 7, 2013 by Carlton Fields

Plaintiffs, five Lloyd’s of London underwriters, filed suit in Ohio federal court seeking a declaration that an alleged reinsurance agreement between them and defendant Stonebridge Casualty Insurance Company’s predecessor in interest was invalid because plaintiffs had no knowledge of it. Plaintiffs’ Ohio action was filed after Stonebridge had successfully moved in Florida federal court to compel arbitration of disputes arising under the agreement. Stonebridge moved to have the Ohio action transferred to Florida or dismissed. In response, plaintiffs argued that the Florida court lacked jurisdiction due to the presence of an Ohio forum selection clause in the reinsurance agreement. The court found that this clause did not strip the Florida court of its diversity jurisdiction. The court chastised plaintiffs for attempting to rely on a forum selection clause in a contract that they had not even acknowledge existed. The Ohio court similarly rejected plaintiffs’ argument that venue was improper in Florida, given that many of the relevant negotiations occurred in Florida, and key witnesses and documents were located in Florida. Certain Underwriters at Lloyd’s, London v. Stonebridge Casualty Insurance Co., Case No. 2:12-cv-160 (USDC S.D. Ohio Dec. 12, 2012).

This post written by Ben Seessel.

See our disclaimer.

COURT DISMISSES PORTIONS OF CAPTIVE REINSURANCE CASE

January 4, 2013 by Carlton Fields

We previously posted on a putative class action filed in federal court in California alleging violations of the Real Estate Settlement Procedures Act in the placement of private mortgage insurance and its reinsurance with captive reinsurance companies. After partially lifting a stay put in place pending a deicison by the United States Supreme Court in a pending case, the district court has dismissed, with prejudice, claims against what it terms non-contracting parties, finding that the plaintiff lacked standing to bring such claims and that, in the alternative, the claims were barred by the applicable statute of limitation. The court found that the Complaint at best alleged parallel threads of misconduct rather than an overall “captice reinsurance scheme.” Claims against other defendants were dismissed with leave to amend. McCarn v. HSBC USA, Inc., Case No 12-375 (USDC ED Cal. Nov. 13, 2012).

This post written by Rollie Goss.

See our disclaimer.

COURT DENIES DIRECTORS’ MOTION TO AMEND JUDGMENT FINDING THEM LIABLE FOR DEBT PERTAINING TO SALE OF INSURANCE BUSINESS

December 12, 2012 by Carlton Fields

Continental Casualty Company sold its crop insurance book of business to IGF Insurance Company, which subsequently sold the business to Acceptance Insurance Companies. Continental asserted claims against IGF, its affiliates, and certain of its officers and directors, alleging that $24,000,000 that Acceptance paid IGF to purchase the business had been illegally diverted to IGF affiliates and IGF officers and directors, rendering IGF unable to pay its significant debt to Continental. The court found that IGF had illegally diverted the $24,000,000 and, further, that certain of its officers and directors were jointly and severally liable for the debt owed to Continental. More than two years later, these officers and directors filed a motion to amend the court’s findings of fact and conclusions of law and for entry of judgment in their favor. The court rejected the directors’ request in substance, amending only an inconsequential finding of fact. IGF Insurance Co. v. Continental Casualty Co., Case No. 1:01-cv-799-RLY-MJD (S.D. Ind. Nov. 14, 2012).

This post written by Ben Seessel.

See our disclaimer.

APPEALS COURT AFFIRMS FLORIDA FORUM IN DISPUTE BETWEEN FOREIGN COMPANIES OVER OFFSHORE BOND TRANSACTIONS

December 3, 2012 by Carlton Fields

An appellate court upheld the denial of dismissal of a lawsuit relating to certain offshore bond transactions (made in U.S. Dollars) between a Venezuelan reinsurer and a British Virgin Islands company, finding that Florida was a proper forum for the case. The reinsurer filed suit in Florida, a state in which the defendant had a business address, and the defendant moved to dismiss, contending that Venezuela, rather than Florida, was the proper forum. The lower court denied the motion and the appellate court affirmed, holding that the defendant failed to meet its burden of establishing that all of the following four factors were met to show improper forum: (1) adequate alternative forum; (2) private interests; (3) public interest; and (4) inconvenience/prejudice. While it was undisputed that Venezuela was an adequate alternative forum, the court held that private interests, such as access to evidence and witnesses, adequate enforcement of judgments, and expense, did not balance in the defendant’s favor. ABA Capital Markets Corp. v. Provincial De Reaseguros C.A., Case No. 3D12-130 (Fla. Ct. App. Nov. 7, 2012).

This post written by Michael Wolgin.

See our disclaimer.