New reinsurance-related and arbitration developments from Carlton Fields
Service of Suit provisions are standard in reinsurance agreements, but broad provisions viewed by many as “standard” may create unintended consequences. This issue is discussed by Rollie Goss in a Treaty Tip titled The Service of Suit Provision.
This post written by Rollie Goss.
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Basulto v. Hialeah Automotive, Case No. SC09-2358 (Fla. March 20, 2014) (reversing intermediate appellate court’s ruling compelling arbitration on monetary relief claims; intermediate court failed to limit its review to whether a valid arbitration agreement existed; no valid agreement due to substantive and procedural unconscionability);
Crawford Professional Drugs, Inc. v. CVS Caremark Corp., Case No. 12-60922 (5th Cir. April 4, 2014) (affirming order compelling arbitration, notwithstanding argument by non-signatories that they were not subject to the arbitration clause; state law may allow an arbitration contract to be enforced by or against nonparties to the contract through state-contract-law theories, including equitable estoppel);
Sanchez v. Carmax Auto Superstores California, LLC, Case No. B244772 (Cal. Ct. App. Feb. 6, 2014) (reversing order denying motion to compel arbitration; arbitration agreement was not illusory, nor unenforceable for procedural unconscionability merely because it was an adhesion contract; arbitration agreement was not substantively unconscionable in that it had bi-lateral application, it did not overly limit discovery, and arbitration rules and procedures were not unfair);
Caplin Enterprises, Inc. v. Arrington, Case No. 2011-CT-01332-SCT (Miss. May 8, 2014) (reversing intermediate appellate court’s ruling that certain arbitration agreements were enforceable; all agreements were contracts of adhesion and so one-sided in their terms as to meet the standard for substantive unconscionability);
Tiri v. Lucky Chances, Inc., Case No. A136675 (Cal. Ct. App. May 15, 2014) (reversing denial of petition to compel arbitration based on trial court’s finding of unconscionability; trial court lacked authority to rule on enforceability of the arbitration agreement where the parties delegated such authority to the arbitrator).
This post written by Michael Wolgin.
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The Tenth Circuit Court of Appeals and a federal district court in Michigan have each issued opinions on motions to compel arbitration. In the Michigan opinion, the court granted a motion for summary judgment, in favor of the defendant, Consolidated Insurance Company, and denied the plaintiff’s motion to compel arbitration. The plaintiff, the representative of the decedent’s estate, sought to recover uninsured motorist benefits under a commercial vehicle policy issued to decedent’s employer. Prior negotiations between the parties resulted in a written agreement to arbitrate the matter. Before arbitration commenced, the defendants canceled the process, arguing that the issue was not arbitral. The defendant’s cancellation was deemed valid based on intervening caselaw holding that coverage did not extend to individuals injured while outside a vehicle. Since the decedent was outside of his truck at the time he was killed, the issue of coverage could not be arbitrated. Johnston v. Indiana Insurance Co., Case No. 13-10797 (USDC E.D. Mich. Feb 11, 2014).
The Tenth Circuit Court of Appeals affirmed a district court’s denial to compel arbitration, finding that since none of the defendant board members signed an agreement with an arbitration clause, they could not be compelled to arbitrate. The court further held that the plaintiff’s alternative legal theories to compel arbitration were forfeited or waived. Genberg v. Porter, No. 13-1140 (10th Cir. May 12, 2014).
This post written by Rollie Goss.
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The Eleventh Circuit recently limited the authority by which an aggrieved party can obtain judicial review of arbitration awards outside of the four grounds enumerated in the Federal Arbitration Act, ruling that an insurance policy alone could not serve as “an independent basis for the enforcement of an arbitration award.” The plaintiff argued that its right to expanded judicial review was based on the policy’s express language that “[a]ny decision rendered in arbitration is binding on you and us unless judicial review is sought…you and we have the right to judicial review of any decision rendered in arbitration.” The Eleventh Circuit disagreed, holding that if parties wish to allow for more avenues to judicial review, they must explicitly designate the “state statutory or common law alternatives to the FAA in their arbitration agreements.” Otherwise, the contract alone will not suffice as the sole basis for judicial review when the FAA itself does not apply. Campbell’s Foliage, Inc. v. Federal Crop Insurance Corp., No. 13-11896 (11th Cir. Apr. 3, 2014).
This post written by Rollie Goss.
See our disclaimer.
The Ninth Circuit Court of Appeals affirmed a district court’s denial of a motion to vacate an arbitration award issued in a dispute between the Johnsons and Wetzel’s Pretzels, concerning the termination of a franchise agreement. The appellants, the Johnsons, challenge the award on grounds that the arbitrator exceeded his powers by enforcing provisions in the franchise agreement that required the Johnsons to assign their lease and property interests to the defendant. The Ninth Circuit denied the appellants’ claims, stating that the Johnsons were unable to show that the award was “irrational or exhibit[ed] a manifest disregard of law,” two of the limited grounds on which a federal court may vacate an arbitral award. Emphasizing the terms of the franchise agreement, the Court stated that the arbitrator acted within the scope of the agreement, which expressly provided for the assignment of the plaintiff’s lease and property interests upon termination of the agreement. Additionally, the Court indicated that the Johnsons were unable to offer convincing evidence that award exhibited a manifest disregard of law. Wetzel’s Pretzels, LLC v. Johnson, No. 12-56716 (10th Cir. Apr. 3, 2014).
This post written by Rollie Goss.