Jurisdiction Issues

ENGLISH APPELLATE COURT AFFIRMS ENGLISH JURISDICTION AND APPLICATION OF ENGLISH LAW TO REINSURANCE AGREEMENT FORMED IN SWITZERLAND

November 9, 2010 by Carlton Fields

In a case pending in English court brought by a property insurer against Swiss-based Glacier Reinsurance AG, another reinsurer, and an English reinsurance brokerage, Glacier moved to dismiss, contending that the proper venue for the claims against it was a court in Switzerland, its domicile. The English court denied Glacier’s motion and the English Appellate Court affirmed. The court applied Article 6 of the Lugano Convention and applicable interpretive case law, which provide that a defendant may be sued in the state of domicile of one of its co-defendants when necessary to avoid the risk of irreconcilable judgments. The court explained that this risk exists when the same situation in law and in fact applies to the claims of multiple defendants. The court held that English Law governed the claims against Glacier because Glacier made a “demonstrable choice” of English law when, among other things, it participated in the London market. The court noted that the reinsurance agreement, which was presented to Glacier and accepted by Glacier in Switzerland, should not be construed as a separate placement in the Swiss market. The court also stressed the “commercial need” for a dispute involving multiple parties to be determined by one tribunal. Gard Marine & Energy Ltd. v. Lloyd Tunnicliffe, [2009] EWHC 2388 (Ct. App. Oct. 6, 2010).

This post written by Michael Wolgin.

UK COURT INSISTS ON JURISDICTION OF CANADIAN MUNICIPAL REINSURANCE CONTRACT

October 21, 2010 by Carlton Fields

Recently, Ontario Municipal Insurance Exchange applied for an order from the UK Royal Court of Justice dismissing an action against it, arguing that England was not the proper forum for the action brought against it by Stonebridge Underwriting Limited (a Lloyd’s underwriter). The claim arose out of an alleged failure by Stonebridge to pay under a 2001-2002 reinsurance contract. The Judge denied Ontario’s request, finding that the concurrent proceedings initiated by Ontario against JTL Canada (on issues directly related to this case) in Canadian Court did not provide a decisive reason for the UK Court to decline jurisdiction. The Court was mindful of the fact that many of the witnesses and much of the evidence were present in Canada, but that these issues were outweighed by the factors in favor of English jurisdiction. The Court noted that a great deal of London reinsurance relates to risk around the globe, and that often, the UK is still the most appropriate jurisdiction. Stonebridge Underwriting Ltd. v. Ontario Mun. Ins. Exchange, [2010] EWHC 2279 (Queen’s Bench Oct. 9, 2010).

This post written by John Black.

SUPREME COURT’S “LOOK THROUGH” ANALYSIS FOR FEDERAL QUESTION JURISDICTION IN ARBITRATION PETITIONS DOES NOT OVERRULE PRIOR PRECEDENT IN DIVERSITY JURISDICTION PETITIONS

September 23, 2010 by Carlton Fields

Federal courts have diversity jurisdiction over a petition to compel arbitration of claims that are part of a pending state court action that includes one or more nondiverse parties not named in the petition, the Eighth Circuit has held. The matter arose on separate actions to compel arbitration of state law tort claims pursuant to arbitration agreements governed by the Federal Arbitration Act. The plaintiffs filed lawsuits in state court asserting tort claims against nursing home operators and the administrators of two nursing homes. The operators, but not the administrators, filed federal actions to compel arbitration, basing federal jurisdiction on diversity of citizenship between the operators, alleged to be Alabama citizens, and the state court plaintiffs, alleged to be Arkansas citizens.

The plaintiffs did not contest the citizenship allegations, and the district court granted petitions to compel arbitration. Thereafter, in Vaden v. Discover Bank, the Supreme Court held that a federal court entertaining a petition to compel arbitration based upon federal question jurisdiction should determine its jurisdiction by “looking through” a petition to the parties’ underlying substantive controversy. Relying on Vaden, the district court vacated the arbitration orders, concluding that while Vaden addressed only federal question jurisdiction, its “look through” analysis implicitly overruled prior federal cases compelling arbitration based upon diversity of citizenship. The Eighth Circuit reversed and reinstated the orders. There was no credible evidence in Vaden itself to suggest that “the otherwise on-point decisions” in Moses H. Cone Memorial Hospital v. Mercury Construction Corp. and other precedents had been overruled. Northport Health Services of Arkansas, LLC v. Rutherford, No. 09-2433 (8th Cir. May 14, 2010).

This post written by Brian Perryman.

FEDERAL COURT DECLINES TO ABSTAIN FROM DECIDING REINSURANCE DISPUTE NOTWITHSTANDING FIRST-FILED STATE CASE

September 20, 2010 by Carlton Fields

A federal district judge has agreed with a magistrate judge’s recommendation to deny a motion to abstain where an earlier-filed reinsurance coverage lawsuit was pending in Connecticut state court. In May 2009, the defendant filed suit in state court, contending there was no coverage under two reinsurance agreements for losses the plaintiffs incurred regarding asbestos-related claims. Five months later, the plaintiffs filed suit in federal court, seeking monetary relief for the defendant’s alleged breaches of contract, and for a declaration of the parties’ rights and obligations. The federal suit concerned the same two reinsurance contracts at issue in the state suit, but also involved claims under eleven additional contracts between the parties.

The defendant asked the federal court to defer to the first-filed state suit, which itself had been stayed on the state court’s finding that the federal suit would be the better vehicle to resolve the disputes. The magistrate judge recommended against abstention. The parties submitted briefing on the defendant’s objections to the recommendation, including objections, opposition to the objections and a reply in support of the objections. In adopting the magistrate judge’s recommendations, the district judge noted that, while the same parties and two of the same contracts were involved in the state suit, the claims were more comprehensive in the federal court because of the additional contracts at issue, and because the damages claims were absent from the state suit. Seaton Insurance Co. v. Clearwater Insurance Co., No. 09-516 S (USDC D. Conn. Sept. 2, 2010).

This post written by Brian Perryman.

FOLKSAMERICA GIVEN 60 DAYS TO PERFECT SERVICE AGAINST CONSTRUCTORA DEL LITORAL

August 24, 2010 by Carlton Fields

The US District Court for the Southern District of Florida recently issued an opinion on defendant Constructora del Litoral’s Motion to Dismiss for Insufficiency of Service of Process by plaintiff Folksamerica Reinsurance. The action arises out of defendants’ alleged failure to indemnify Folksamerica for sums paid in connection with reinsuring surety bonds issued for a construction project in Ecuador. Plaintiff served process pursuant to the Inter-American Convention on Letters Rogatory and Additional Protocol. Constructora alleged in its Motion to Dismiss that service was improper under both Ecuadorian law and under the Convention. The Court concluded that, although defendants had met the burden in establishing that service of process was insufficient, Folksamerica should be given 60 days to perfect service and file proof with the Court. Further background is available in the motion to dismiss, and the opposition to the motion to dismiss. Folksamerica Reinsurance Co. v. Constructora del Litoral, S.A., Case No. 10-20560 (S.D. Fla. June 18, 2010).

This post written by John Black.