Jurisdiction Issues

DISTRICT COURT CERTIFIES STANDING ISSUE FOR INTERLOCUTORY APPEAL IN CAPTIVE REINSURER KICKBACK CASE

August 20, 2008 by Carlton Fields

On July 21, 2008, we reported on the decision of a court denying a motion to dismiss, which contended that the filed rate doctrine barred claims relating to alleged kickbacks on mortgage insurance placed with a captive reinsurer. One of the issues addressed was whether the plaintiffs, who are borrowers, have standing to assert claims that their lender and a mortgage reinsurance company violated the Real Estate Settlement Procedures Act by collecting illegal referral payments in the form of excessive reinsurance premiums. The district court has denied a motion for reconsideration, but has certified the issue of whether the plaintiffs have standing to sue for interlocutory appeal pursuant to 28 U.S.C. §1292(b). Under §1292, the Third Circuit has discretion to accept or decline to accept the interlocutory appeal. Alexander v. Washington Mutual, Inc., Case No. 07-4426 (USDC E.D. Pa. Aug. 4, 2008).

This post written by Rollie Goss.

COMMUTATION AGREEMENT’S JURISDICTION CLAUSE IS EXCLUSIVE AND MANDATORY, UK COMMERCIAL COURT HOLDS

August 7, 2008 by Carlton Fields

Allstate applied for a stay of proceedings in a UK Commercial Court action brought by Equitas pending the outcome of arbitration in Texas between Allstate and a non-party, Highlands. The English action concerned the scope of a commutation agreement between, among others, Allstate and Equitas. The agreement was governed by English law and contained an exclusive English jurisdiction clause. The claims in the action – the applicability of the commutation agreement to certain Lloyd’s syndicates’ claimed interests in common account excess of loss reinsurance contracts and whether Highland could recover pursuant to the contracts – were also the subject of the Texas arbitration. This was insufficient to warrant a stay of proceedings, however, principally because of the jurisdiction selection clause. The effect of the clause made English jurisdiction exclusive and mandatory, depriving the court of its common law discretion to stay proceedings in favor of another jurisdiction on classic forum non conveniens grounds. Equitas Limited v. Allstate Insurance Company [2008] EWHC 1671 (Comm. July 17, 2008).

This post written by Brian Perryman.

ENGLISH COURT DENIES INSURANCE COMPANIES’ REQUEST TO STAY PENDING A PRIOR-FILED CASE IN US DISTRICT COURT

July 23, 2008 by Carlton Fields

Seaton Insurance Company and Stonewell Insurance Company are involved in litigation with Cavell USA, owned by British citizen Kenneth Randall, over Cavell’s handling of the run-off of their insurance obligations under an administration agreement. The parties entered into a written settlement of their disputes, and the settlement agreement contained a provision that the settlement “shall be governed by and construed in accordance with English law and the parties submit to the exclusive jurisdiction of the English courts.”

After entering into the settlement with Cavell, Seaton and Stonewell initiated arbitration with their reinsurers in the US, National Indemnity Company, and served subpoenas on Cavell. Seaton and Stonewell also sued Cavell in the US, alleging that Cavell fraudulently concealed its intention to delegate claims handling to the reinsurer. Allegations of such wrongdoing had been dismissed from the US arbitration. Cavell filed a motion to dismiss, and contended that any suit should be brought in the UK under the terms of the settlement.

Cavell then separately sued Seaton and Stonewell in the UK, seeking a declaration that all of their disputes had been compromised, and seeking damages resulting from Seaton and Stonewell involving it in the US arbitration and the US lawsuit. Seaton and Stonewell gave notice that they would challenge the jurisdiction of the UK court, and sought a stay of the UK lawsuit pending a decision on the motion to dismiss the US lawsuit they had filed.

The Queen’s Bench Division of the Commercial Court refused the insurance companies’ application for a stay for proceedings, finding that the resolution of the motion to dismiss in the US court would not assist it in resolving the jurisdictional challenge in the UK lawsuit. The court also stated that “it is difficult to see how the defendants can challenge the jurisdiction of this court at that stage.” This case is an interesting example of the interplay between proceedings in different countries. Cavell USA Inc. v. Seaton Ins. Co. [2008] EWHC 876 (April 11, 2008).

This post written by Rollie Goss (with thanks to Jason Morris).

JUDICIAL PANEL ON MULTIDISTRICT LITIGATION TRANSFERS CASE FILED BY TENNESSEE INSURANCE COMMISSIONER INVOLVING RECIPROCAL OF AMERICA TO PENDING MDL ACTION

July 15, 2008 by Carlton Fields

The Tennessee Insurance Commissioner, as liquidator for three risk retention groups, sued General Reinsurance Corp, Milliman, Price Waterhouse Coopers, Wachovia Bank and others in Tennessee state court, alleging a broad based conspiracy and fraud in a reinsurance program involving Reciprocal of America. After the case was removed to federal district court, the Judicial Panel on Multidistrict Litigation granted a motion to transfer the case to the Reciprocal of America Sales Practices Litigation MDL proceeding pending in the Western District of Tennessee. The Panel found that the actions involve questions of fact arising out of relationships and transactions substantially similar to those involved in the MDL action, and that transfer and consolidation therefore was appropriate under 28 U.S.C. section 1407. In re: Reciprocal of America Sales Practices Litigation, MDL No. 1551 (JPML June 5, 2008).

This post written by Rollie Goss.

NEW JERSEY SUPREME COURT AFFIRMS VAILIDITY OF CONTRACTUAL BAR TO JUDICIAL REVIEW OF ARBITRATION AWARDS, WITH ONE EXCEPTION

June 24, 2008 by Carlton Fields

In an opinion that runs just over one page long, the New Jersey Supreme Court has affirmed the decision of the Appellate Division that upheld a provision of an arbitration agreement entered into by two “sophisticated business parties” which foreclosed appellate court review of the decision of an arbitrator, but finding the provision invalid to the extent that it foreclosed the right to initial judicial review, which would have deprived a court of the ability to vacate the award if it violated public policy. The contractual provision stated that the arbitrator’s decision would be “final, binding and conclusive” and “not subject to an appeal to any authority in any forum.” “Additionally, the parties forswore any legal action other than one to confirm or enforce (but not to vacate) the arbitration award.” After an award was entered, a trial court judge confirmed the award, and an appeal was filed. A motion to dismiss the appeal was filed, on the basis that the parties had expressly waived any right to appeal. The Appellate Division panel denied the motion to dismiss, and entered an opinion examining the award and upholding its validity, finding the absence of any grounds under the New Jersey Arbitration Act for vacating an award on the basis of public policy. In a single sentence, the Court mentioned that the “rare circumstances” that might justify an appellate court in vacating an arbitration award on public policy grounds might include bias or misconduct of the trial judge or unconscionability in the formation of the contract, and that none of these bases were present. The Court affirmed “substantially for the reasons expressed in” Appellate Division’s opinion. Van Duren v. Rzasa-Ormes, No. A-52-07 (N.J. June 19, 2008).

This post written by Rollie Goss.