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Arbitration / Court Decisions

Florida Federal Court Dismisses Reinsurer’s Agent From Breach of Contract Lawsuit

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In this case, the ceding company, VIP Universal Medical Insurance Group Ltd. (“VIP”), brought an action in Florida federal court against its reinsurer, BF&M Life Insurance Company Ltd. (“BF&M”), and International Reinsurance Managers LLC (“IRM”), BF&M’s agent, alleging breach of a reinsurance contract, in which BF&M reinsured VIP for medical claims in excess of $200,000. It was alleged that BF&M refused to pay a claim for $139,000 and that IRM had “directed the non-payment” of such claim. IRM moved to dismiss, arguing that it cannot be held liable for breach of contract, where it is not party to a contract.

The Florida federal court agreed with IRM, noting that under Florida law, “an agent for a disclosed insurer is not liable to the insured on the insurance contract.” The court noted that even taking the allegations — that IRM acted as agent and “directed” the non-payment of the claim — as true, they do not state a claim for breach of contract against IRM. The court then held that IRM, as agent to the reinsurer, was not a proper party in VIP’s breach of contract claim because IRM was not a party to the reinsurance contract at issue. Thus, IRM’s motion to dismiss was granted.

VIP Universal Medical Insurance Group Ltd. v. BF&M Life Insurance Company Ltd., et al., No. 17-24633 (USDC S.D. Fla. July 18, 2018).

This post written by Jeanne Kohler.

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California Court Grants § 1782(a) Application Seeking Subscriber Identity for Facebook Page Following Amendment of Application

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Hoteles City Express sought an order granting it permission to issue a subpoena to obtain documents from non-party Facebook, Inc. to show the subscriber identity for a Facebook page allegedly containing defamatory statements regarding Hoteles to be used in a lawsuit in Mexico.

The Northern District of California initially denied Hoteles request absent “additional information regarding the nature of the defamatory statements made and contained on the Facebook account for which Hoteles seeks identifying information.” Furthermore, it concluded that “Hoteles has provided insufficient information for the Court to determine whether it could actually state a claim for defamation under Mexican law.”

Hoteles was directed to, and subsequently did, amend its application. The Court granted the amended application, finding Hoteles had cured its prior defects and finding good cause to grant the requested discovery.

In re Hoteles City Express, Case No. 18-mc-80112 (N.D. Cal. July 13, 2018 & August 8, 2018)

This post written by Nora A. Valenza-Frost.

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Court Finds That Apparently Inconsistent Forum Selection Provisions Do Not Render Arbitration Agreement Unenforceable

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Plaintiff Fintech Fund, FLP filed an action in federal court in the Southern District of Texas asserting claims under the federal Defend Trade Secrets Act and the Computer Fraud and Abuse Act against Ralph Horne, a citizen of the United Kingdom and CEO of a company to which Fintech had licensed certain financial technology. Fintech claimed that Horne used that relationship to access Fintech’s confidential and proprietary information illegally. Horne moved to dismiss the action (1) for lack of personal jurisdiction and (2) for lack of subject matter jurisdiction and improper venue because the matter was subject to an arbitration agreement.

The court rejected Horne’s personal and subject matter jurisdiction arguments, finding that the court had specific jurisdiction over him based on telephone calls he made and emails he sent as part of his allegedly wrongful conduct to a Fintech partner in Texas, and that it had subject matter jurisdiction because Fintech’s claims were for federal statutory violations. Fintech was less successful on the question of venue, however.

Fintech argued that the dispute was not arbitrable because the arbitration agreement was unenforceable and the claims at issue were not covered by it. Fintech said there was no meeting of the minds as to arbitration, as the relevant contract contained an irreconcilable internal inconsistency; the arbitration provision said that all claims against Horne and his company would be resolved by “arbitration under the London Court of International Arbitration (‘LCIA’) Rules,” while a choice of law provision in the same contract said that the courts of England and Wales would have exclusive jurisdiction over such claims. The court found that this apparent inconsistency could be resolved by interpreting them to require that any non-arbitrable claims and disputes regarding arbitrability be brought before courts in England or Wales, while any arbitrable claims must be submitted for arbitration in London. In either case, the agreed upon forum was in the United Kingdom, not the Southern District of Texas. Finding no justification for refusing to enforce the parties agreed upon forum, the court dismissed the action, leaving the question of arbitrability to be decided, if necessary, by a court in England or Wales. Fintech filed its notice of appeal on the same day that the district court entered its order.

Fintech Fund, FLP v. Horne, Civil Action No. H-18-1125 (S.D. Tex. July 6, 2018)

This post written by Jason Brost.

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New York Federal Court Awards Damages for Reinsurance Payments in Lawsuit Against Iran Related to September 11 Attacks

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The Southern District of New York recently granted a motion for damages by insurance plaintiffs in a multidistrict litigation case against Iran stemming from the September 11, 2001 terrorist attacks. The court previously entered a default judgment against Iran and tasked a magistrate judge with calculating damages. The present opinion stemmed from plaintiff’s objections to the magistrate’s recommendations that plaintiffs could not recover reinsurance payments made related to the attacks and that prejudgment interest began to accrue on the individual dates of payment of each claim for which plaintiffs sought damages.

First, the court agreed with plaintiffs and awarded damages for the reinsurance payments at issue. Plaintiffs objected to the magistrate’s recommendation because another case in the MDL had previously awarded damages for reinsurance payments (constituting law of the case) and that, contrary to the magistrate’s logic, their subrogation rights did not depend on contractual privity. The Southern District side-stepped the issue of whether the “law of the case” doctrine applied by concluding equitable subrogation, a doctrine sounding in equity rather than contract, does not require contractual privity under New York law. While not officially deciding the law of the case issue, the court in dicta noted the existence of a D.C. federal case allowing recovery for reinsurance payments on an unrelated terrorist attack and that the magistrate provided no basis for distinguishing the present case from the previously decided MDL case.

Second, the court determined that the date of the September 11 terrorist attacks was the appropriate benchmark for when prejudgment interest should start accruing. New York law provides that damages for losses arising in the state incurred at various times may trigger interest either at the date of each loss individually or upon a “single reasonable intermediate date.” Instead of triggering interest accrual for each loss based on the date each claim was paid, the court affixed all prejudgment interest to begin accruing on September 11, 2001 to promote consistency in the MDL cases and avoid complex calculations. As to losses arising outside of New York, the court likewise exercised its broad discretion to select September 11, 2001—the date of the underlying terrorist attack and the date selected for New York losses—to be the date from which prejudgment interest is to be calculated for non-New York losses.

In re Terrorist Attacks on Sept. 11, 2001, Case No. 03-MDL-1570 (USDC S.D.N.Y. June 25, 2018).

This post written by Thaddeus Ewald .

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Eleventh Circuit Reverses NLRB Order, Enforcing Individualized Arbitration Clause in Employee Agreement

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A pizza delivery driver employed by Domino’s Pizza franchisee Cowabunga Inc. filed a collective action under the Fair Labor Standards Act with the National Labor Relations Board. Cowabunga moved to dismiss, or in the alternative, to stay and compel arbitration based on the employment agreement’s individualized arbitration clause. The day before he dismissed his FLSA lawsuit, the employee filed an unfair labor charge with the NLRB, alleging that Cowabunga violated the National Labor Relations Act by (1) prohibiting Cowabunga employees from filing collective action lawsuits and instead forcing the employees to individually arbitrate such claims, and (2) causing Cowabunga employees to reasonably believe that they were prohibited from filing unfair labor charges with the NLRB. The NLRB granted summary judgment to the employee on both claims.

Cowabunga petitioned the Eleventh Circuit for review of the NLRB panel’s order. With regard to the employee’s first claim, the Eleventh Circuit relied on the U.S. Supreme Court’s recent decision in Epic Systems Corp. v. Lewis which held that individualized arbitration agreements do not violate the NLRA and that those agreements should be enforced as written pursuant to the FAA. With regard to the second claim, the court explained that after the NLRB panel issued its order, it refashioned its test for determining whether an employer’s allegedly facially neutral policy, such as the arbitration provision here, would reasonably lead an employee to believe that he could not file an unfair labor charge with the NLRB. The Court therefore granted Cowabunga’s petition for review and reversed the NLRB panel’s order as to the employee’s first claim and vacated and remanded the order as to the second claim. Cowabunga, Inc. v. Nat’l Labor Relations Bd., Case No. 16-10932 (11th Cir. June 26, 2018).

This post written by Gail Jankowski.

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