Jurisdiction Issues

ENGLISH COURT OF APPEALS AFFIRMS RULING CONFERRING EXCLUSIVE JURISDICTION ON ENGLISH COURTS, SETS ASIDE RULING CONFINING FRAUD TO CLAIMS OF DECEIT

February 17, 2010 by Carlton Fields

This post is our fourth installment covering this convoluted, international lawsuit involving the Seaton Insurance Company (“Seaton”) and Stonewall Insurance Company (“Stonewall”). The dispute centers around the interpretation of a term sheet that details the termination of the parties’ relationship with respect to the run-off of Seaton’s and Stonewall’s insurance business (see our July 23, 2008, December 22, 2008, and January 20, 2009 posts for more information). Interpreting this term sheet, an English court concluded that the parties agreed to submit all disputes to the exclusive jurisdiction of English courts and that the carve-out provision for “fraud” had only the primary meaning of deceit. Seaton and Stonewall appealed. On the jurisdiction issue, the Court of Appeals affirmed the ruling that any claims for fraud must be brought in England and agreed with the lower court judge who called the prospect of a New York court applying the English concept of fraud a “judicial nightmare.” On the “fraud” issue, the Court of Appeals stated that, in the commercial context, the concept of fraud is broader than the concept of deceit which requires a fraudulent misrepresentation, or an equivalent to fraudulent misrepresentation. The Court of Appeals then set aside the judge’s ruling and substituted a declaration that the “fraud” exception is not limited to claims of deceit; the exception extends in some instances to cases of the dishonest abuse of a fiduciary position. Cavell USA, Inc. v. Seaton Ins. Co. [2009] EWCA 1363 (Dec. 16, 2009).

This post written by Dan Crisp.

CAPTIVE REINSURANCE ARRANGEMENT LAWSUIT REINSTATED BY THIRD CIRCUIT

December 28, 2009 by Carlton Fields

In a putative class action by homebuyers seeking to recover treble damages under section 8(d)(2) of the Federal Real Estate Settlement Procedures Act, the Third Circuit held that the statute’s plain language permits private litigants to sue if their real estate settlement transaction involve unlawful settlement service referrals or fee splitting. Plaintiffs alleged that their private mortgage insurance premiums were channeled into an unlawful captive reinsurance arrangement operated by their mortgage lender and its affiliated reinsurer. Plaintiffs further alleged they had a statutory right to a real estate settlement free from unlawful kickbacks and unearned fees, and the lender’s invasion of that right gave them standing to sue. The district court dismissed the case for lack of subject matter jurisdiction (see our December 27, 2008 post), but the Third Circuit reversed, and also rejected the lender’s argument that the lawsuit was barred by the filed rate doctrine. Alston v. Countrywide Financial Corp., No. 08-4334 (3d Cir. Oct. 28, 2009).

This post written by Brian Perryman.

DISTRICT COURT FINDS THAT SERVICE OF SUIT CLAUSE WAIVES RIGHT OF REMOVAL

December 8, 2009 by Carlton Fields

In his capacity as Liquidator of Midland Insurance Company, the Superintendent of Insurance of the State of New York brought suit in New York Supreme Court against Dunav Re, a Serbian reinsurance company, seeking reinsurance monies owed. Dunav Re removed the action to federal court based on diversity jurisdiction, and the Superintendent subsequently moved to remand based on the ground that Dunav Re had consented to the jurisdiction of any competent court pursuant to the service of suit clause in the reinsurance agreements. Dunav Re argued that removal was proper because the service of suit clause’s language was ambiguous and the waiver of the right to removal had to be clear and unequivocal. The court found no ambiguity, citing a New York Court of Appeals decision stating the reinsurance industry has known since a 1949 decision that a service of suit clause waived removal, and granted the motion to remand. Dinallo v. Dunav Ins. Co., Case No. 09-5575 (USDC S.D.N.Y. Nov. 19, 2009).

This post written by Dan Crisp.

DISTRICT COURT REMANDS CLAIM AGAINST LIQUIDATOR TO STATE COURT

December 1, 2009 by Carlton Fields

In a recent action, Granite Re filed suit against Federal Crop Ins. Corp., Risk Management Agency and Ann Frohman, in her capacity as Liquidator for the insolvent insurer, American Growers Ins., alleging that Growers owes unpaid reinsurance premiums to Granite Re. Following removal to Federal Court, the Liquidator moved to dismiss, advising that she claims no interest in the outcome of Granite Re’s litigation against FCIC/RMA and she will therefore forego any right she may have had to remain in the litigation as an interested or intervening party. Though the case was properly removed, the Court explained that a Nebraska statute prevented the federal court from entering a judgment against the Liquidator, and that the McCarran-Ferguson Act prevented the Court from entering an order for distribution of any FCIC/RMA judgment proceeds. Rather than dismissing the claim against the Liquidator, the District Court remanded the claim to Nebraska state court while also granting FCIC/RMA’s request to transfer the claims against those parties to the District Court for the District of Columbia. Granite Reinsurance Co., LTD v. Ann M. Frohman, Case No. 08-410 (D. Neb. Oct. 26, 2009).

This post written by John Black.

COURT DECLINES TO RECONSIDER ORDER DISMISSING SUIT TO ENFORCE ARBITRATION AWARD FOR LACK OF JURISDICTION

November 18, 2009 by Carlton Fields

A court has denied reconsideration of its earlier order holding that an award postponing the determination of a remedy is not final and binding and, thus, is not subject to review. We reported on the earlier order in an August 20, 2009 post. The American Postal Workers’ Union brought a suit alleging that the United States Postal Service breached a collective bargaining agreement by failing to comply with an arbitration award finding liability. On July 14, 2009, the court dismissed the case for lack of jurisdiction. The Union moved for reconsideration, principally arguing that that it should be permitted to move forward to enforce the award because it had been granted final injunctive relief. The court found that the Union was simply regurgitating its earlier, unsuccessful argument. Therefore, the motion for reconsideration was denied. American Postal Workers’ Union v. United States Postal Service, Case No. 08-2200 (USDC D.D.C. Sept. 2, 2009).

This post written by Brian Perryman.