Jurisdiction Issues

REINSURANCE DISPUTE DISMISSED FOR LACK OF PERSONAL JURISDICTION

December 27, 2010 by Carlton Fields

A federal district court recently granted two individual corporate officer defendants’ motion to dismiss against plaintiff Capitol Insurance. Capitol sued a number of individuals and corporations for alleged losses arising from a reinsurance agreement Capitol entered into with Aldrostar, S.A. The defendants included, among others, Alison Dvorak and Charles Dvorak who allegedly represented themselves as “officers, employees, agents, or servants of the corporate defendants.” The court found that Capitol failed to establish the court’s personal jurisdiction over the Dvoraks. The court held that Alison did not have the requisite minimum contacts with Pennsylvania and that the action against Richard did not arise out of his contracts with the state. Capitol also failed to demonstrate why the corporate shield would not protect the Dvoraks in their individual capacities. Accordingly, Capitol’s assorted claims were dismissed. Capitol Ins. Co. v. Dvorak, Case No. 10-01195 (USDC E.D. Pa. Oct. 29, 2010).

This post written by John Black.

SECOND CIRCUIT AFFIRMS WAIVER OF REMOVAL BASED ON SERVICE OF SUIT PROVISION IN REINSURANCE TREATY

December 14, 2010 by Carlton Fields

In two prior posts (December 8, 2009 and February 11, 2010), we reported on Dinallo v. Dunav Ins. Co., a case between a liquidator of an insurance company and the company’s reinsurer, Dunav Re. The Southern District of New York had remanded the action to New York State Court and denied reconsideration, holding that Dunav Re waived removal based on a service of suit provision in its reinsurance treaty with the insurer. Dunav Re appealed to the Second Circuit Court of Appeals, which, after de novo review, has now affirmed “substantially for the same reasons articulated by the district court.” In other cases, some parties have persuaded courts that the service of suit clause does not waive a right to arbitrate under an arbitration provision, because it merely provides for consent to jurisdiction and venue to enforce such an agreement to arbitrate. The same kind of argument was not persuasive in the context of this case. Dinallo v. Dunav Ins. Co., No. 09-5235 (2d Cir. Dec. 1, 2010).

This post written by Michael Wolgin.

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.