Jurisdiction Issues

TEXAS SUPREME COURT HOLDS THAT ORDER VACATING ARBITRAL AWARD DUE TO UNRESOLVED QUESTIONS OF FACT IS NOT APPEALABLE

June 12, 2012 by Carlton Fields

As a condition of his employment at Bison, Aldridge signed an arbitration agreement in which he agreed to resolve by arbitration any claims for work-related injuries. After Aldridge sustained an injury at work, Bison paid him approximately $80,000 in medical and wage replacement benefits in exchange for a release in which Aldridge gave up the right to take legal action. Aldridge later demanded arbitration. The arbitrator dismissed Aldridge’s claim with prejudice based on the terms of the release. Aldridge filed a petition to vacate; Bison moved to confirm.

The trial court vacated in part, holding that there were unresolved questions of fact regarding whether the release and waiver was enforceable. In particular, the court held that there were fact issues regarding whether Texas’s fair notice requirement had been met and, if not, whether both parties had actual knowledge of the terms of the waiver. Further, the court held that there was a question regarding whether the “ambiguous terms of the waiver” precluded arbitration. Bison appealed. The court of appeals held that the trial court’s order was interlocutory and thus not appealable. The Supreme Court affirmed, holding that the order was interlocutory and non- appealable because it left “significant factual and legal issues open for further determination.” The dissenting justices opined that mandamus review was warranted under Texas procedure because the FAA would permit an appeal from the trial court’s order, which the dissent argued calls for an “arbitration Mulligan.” Bison Bldg. Materials, Ltd. v. Aldridge, No. 06-1084 (Tex. Jan. 16, 2008).

This post written by Ben Seessel.

See our disclaimer.

CAPTIVE REINSURANCE LITIGATION STAYED PENDING SUPREME COURT DECISION

June 7, 2012 by Carlton Fields

A putative class action against HSBC and its affiliates asserting violations of the Real Estate Settlement Procedures Act of 1974 was stayed in part pending the outcome of First American Financial Corp. v. Edwards, a case expected to be resolved this term by the U.S. Supreme Court. The named plaintiff seeks to represent, among others, consumers whose residential mortgage loans were included within HSBC’s captive mortgage reinsurance arrangements. Among other things, plaintiff seeks classwide resolution of whether the captive reinsurance arrangements constituted unlawful kickbacks from the private mortgage insurer defendants. The district court issued a partial stay of the action pending the decision in First American, where the Supreme Court is expected to rule whether a private purchaser of real estate settlement services has standing under Article III of the Constitution to assert a RESPA claim absent a showing that the alleged violation affected the price, quality, or other characteristics of the settlement services provided. McCarn v. HSBC USA, Inc., Case No. 12-375 (USDC E.D. Cal. Apr. 12, 2012).

This post written by John Black.

See our disclaimer.

NINTH CIRCUIT: NO IMMEDIATE APPEAL OF INTERIM STAY AND ORDER COMPELLING SUBMISSION OF DISPUTE TO REFEREE

May 24, 2012 by Carlton Fields

The Ninth Circuit recently issued an opinion on an issue of first impression — whether an order compelling enforcement of a contractual agreement to submit a dispute to a referee, and staying proceedings in the interim, is immediately appealable. The dispute at issue arose between Bagdasarian Productions and Twentieth Century Fox over the film “Alvin and the Chipmunks, The Squeakquel.” The Ninth Circuit dismissed the appeal on the basis that it lacked jurisdiction at this stage of the proceedings. Specifically, the court held that the stay was not a “final decision” or “judgment” because it did not put the plaintiffs “out of court.” No decision by the referee could possibly moot the action or be res judicata (as with a parallel proceeding). Indeed, after the referee’s decision, the losing party would have the option of moving for a new trial or any other post-judgment motions. Similarly, the court found that the order staying the proceedings was not immediately appealable under the collateral order doctrine because plaintiffs could ultimately seek relief on appeal to this court after the action before the referee and district court concludes. The Court noted that its ruling was consistent with treatment of orders denying or compelling arbitration under the Federal Arbitration Act. Bagdasarian Productions, LLC v. Twentieth Century Fox Film Corp., No. 10-56430 (9th Cir. Mar. 26, 2012).

This post written by John Black.

See our disclaimer.

FEDERAL COURT JURISDICTION FOUND FOR STATE LAW CLAIMS BASED ON DISPUTED WITHDRAWALS UNDER FEDERAL REINSURANCE PROGRAM

May 9, 2012 by Carlton Fields

School districts brought a case in state court against their insurers, alleging that the insurers’ withdrawal of funds from the federal Early Retiree Reinsurance Program (ERRP) on the school district’s behalf was improper under the ERRP’s scheme. Despite the plaintiffs’ assertion of only state common law claims for conversion, civil theft, unjust enrichment, and breach of fiduciary duty, the defendants removed the case to federal court as implicating a federal question. On plaintiffs’ motion to remand back to state court, the court analyzed plaintiffs’ allegations and determined that, notwithstanding that the legal claims were alleged under state law, meeting the elements of those claims required the court to interpret the ERRP and related federal regulations to determine whether the defendants’ withdrawals were proper. The court then determined that, because the case would entail a “substantial and disputed federal issue,” and because federal jurisdiction over the case would not create “a potentially enormous shift of traditionally state cases into federal court,” federal jurisdiction was proper. In reaching this conclusion, the court found that the lack of a right to a private right of action under the ERRP was a relevant factor, but did not require remand. Hartland Lakeside Joint No. 3 School District v. WEA Insurance Corp., Case No. 2:12-cv-00154 (USDC E.D. Wisc. Apr. 24, 2012).

This post written by Michael Wolgin.

See our disclaimer.

COURT OVERTURNS DENIAL OF REQUEST FOR REINSURANCE-RELATED RECORDS FOR JURISDICTIONAL REASONS

May 7, 2012 by Carlton Fields

The Commonwealth Court of Pennsylvania issued an opinion vacating Pennsylvania’s Office of Open Records’ denial of a request for documents under the state’s Right-to-Know Law. Plaintiff sought records related to Reinsurance Offset Guidelines from the Pennsylvania Department of Insurance and Reliance Insurance Company, which has been in liquidation since 2001. The OOR denied the request on the basis that the documents were “internal, pre-decisional deliberations.” The court vacated the denial because the OOR did not have jurisdiction to hear this matter as Reliance’s Statutory Liquidator. The court further explained that the Pennsylvania Insurance Department, when aiding the Statutory Liquidator, and Reliance are acting pursuant to a judicial order and under the supervision of the Commonwealth Court. Because the court had appointed the state Insurance Commissioner as Statutory Liquidator, it retained general supervision over the Statutory Liquidator and the insolvent estate. Thus, all complaints regarding how the insolvency is being administered must be directed to the court, and any records can only be obtained through court order. Greenberger v. Pennsylvania Ins. Dept., No. 931 C.D. 2011 (Pa. Commw. Ct. Mar. 7, 2012).

This post written by John Black.

See our disclaimer.