The United States Court of Appeals for the Fifth Circuit recently dismissed an appeal of an Order which addressed venue and transfer issues in a matter filed seeking to vacate an arbitration award under the Federal Arbitration Act (“FAA”). The Court held that since the FAA can not itself be a basis for federal question jurisdiction, and there were insufficient jurisdictional allegations to establish diversity jurisdiction, the federal courts lacked jurisdiction of the matter, and remanded the case with instructions that it be dismissed for lack of subject matter jurisdiction. Other courts have also held that the FAA does not itself confer subject matter jurisdiction upon a federal court. Oteeva, LP v. X-Concepts LLC, No. 06-11181 (5th Cir. Nov. 2, 2007).
Jurisdiction Issues
UK Court of Appeal Grants Injunction to Restrain Proceedings in a United States District Court
On July 20, 2007, this blog reported on a dispute relating to the mass defection of fourteen facultative reinsurance brokers from the U.K. based Marsh Services Limited to Integro, a competitor. A suite was filed in US District Court in New York, which the Court declined to dismiss on jurisdiction grounds. In a parallel suit in the UK, a judge declined to enjoin the prosecution of the US action, but the UK Court of Appeals has allowed an emergency appeal, entering an injunction to restrain the US proceedings. This opinion contains an interesting discussion of the relationships between the UK and US courts, as influenced by an EU regulation relating to employment contracts. Samengo-Turner v. J & H Marsh & McLennan (Services) Limited, [2007] EWCA Civ 723 (July 12, 2007).
District Court Denies U.K. Defendant’s Motion to Dismiss For Lack of Personal Jurisdiction
Defendants, employees of the U.K. based Marsh Services Limited, provided services to plaintiff Guy Carpenter & Company (“Guy Carpenter”) in the field of facultative reinsurance. In April 2007, the Defendants resigned from Marsh Services to join Integro, a competitor of plaintiffs. By doing so, Plaintiffs allege that defendants breached a non-solicitation provision of their contract. This contract contained two forum selection clauses.
One of the defendants, Ron Whyte, moved to dismiss on the basis that the court lacked personal jurisdiction over him and on based upon the doctrine of forum non conveniens. Whyte argued that the existence of a second forum selection clause in “Schedule II.D” of the contract created an ambiguity which rendered the forum selection clause in the body of the Agreement unenforceable. The court disagreed, denying the motion to dismiss, and holding that the forum selection clause in Schedule II.D did not apply to the issue, and was, in any event, non-exclusive. Guy Carpenter & Co. v. Julian Samengo-Turner, Ron Whyte, and Marcus Hopkins, Case No. 07 Civ. 3580 (USDC S.D. N.Y. June 29,2007).
Court Resolves Service Issue and Stays US Action Pending Prior-Filed Canadian Action
Canada Life Assurance and Converium Ruckversicherung were parties to a reinsurance agreement that experienced losses as a result of the September 11 attack on the World Trade Centers. A dispute led to an arbitration in Canada and a lawsuit in Canada to vacate the award. Due to a concern as to whether the Canadian Court had jurisdiction, Canada Life filed an action in United States District Court in New Jersey, purporting to make service on Converium’s US counsel in the arbitration. The district court found the service insufficient and quashed it, but declined to dismiss, ordering Canada Life to effectuate service in compliance with the Federal Rules of Civil Procedure rather than the Federal Arbitration Act, which the Court held did not apply to service of a motion to vacate upon a non-US corporation. Applying principles of international comity, the Court stayed the action pending the resolution of the prior-filed Canadian lawsuit. Canada Life Assur. Co. v. Converium Ruckversicherung AG, Case No. 06-3800 (USDC D.N.J. June 13, 2007).
Court affirms dismissal of most claims against Republic of Indonesia and state-owned insurer under Foreign Sovereign Immunities Act
Anglo-Iberia Underwriting Management Company and Industrial Re International sued an employee of the Indonesian state-owned social security insurer, Jamsostek, who while on leave in Colorado studying for an M.B.A. perpetrated an international reinsurance fraud scam that cost the Plaintiffs an estimated $55 million. Plaintiffs also sued Jamsostek and the Republic of Indonesia, alleging that they had breached contractual obligations to Plaintiffs and negligently failed to supervise their employee. The district court had dismissed all claims against Indonesia and Jamsostek based upon the sovereign immunity conferred by the Foreign Sovereign Immunities Act. The Second Circuit addressed the issue of whether the immunity exception for commercial activities applied. The Court of Appeal found that the contract claims were properly dismissed, but that the district court had failed adequately to consider the negligent supervision claim, and remanded for further consideration with respect to that claim. In remanding, the appellate panel set out the standards for the application of the commercial activity exception. Anglo-Iberia Underwriting Management Co. v.Lodderhose, Case No. 03-9260 (2d Cir. May 25, 2007).