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You are here: Home / Archives for Arbitration / Court Decisions

Arbitration / Court Decisions

CLAUSE WHERE PARTY DEMANDING ARBITRATION IS NOT A PARTY TO ALLEGEDLY TERMINATED REINSURANCE AGREEMENT

May 27, 2014 by Carlton Fields

A federal district court has taken under advisement plaintiff’s motion for injunction and defendant’s cross-motion to compel arbitration after conducting a hearing on the matter. The issue to be decided is whether CX can compel Trenwick to participate in an arbitration based upon a reinsurance agreement as to which CX was not a party and which, according to Trenwick, was terminated. At the core of this dispute is a reinsurance agreement under which Trenwick reinsured Commercial Casualty Insurance Company. CX argued the reinsurance agreement included a “cut-through” provision which gave CX the right to collect directly against Trenwick even though CX was not a party to the reinsurance agreement. Trenwick denied liability under this cut-through provision and further denied that the cut-through provision gave its beneficiaries, including CX, any rights under the agreement’s arbitration clause. Additionally, Trenwick argued that the reinsurance agreement was terminated further to a commutation agreement between Trenwick and CCIC’s Liquidator and, as a result, terminated any rights CX may have had under the cut-through provision and any requirement to arbitrate CX’s claims. CX responded that it was not a party to the commutation agreement, which could therefore not extinguish CX’s right to arbitrate. CX also argued that Trenwick’s termination defense must be arbitrated. Trenwick America Reinsurance Corp. v. CX Reinurance Company Limited, Case No. 3:13-cv-01264 (JBA) (USDC D. Conn. Apr. 28, 2014).

This post written by Leonor Lagomasino.

See our disclaimer.

Filed Under: Arbitration Process Issues, Interim or Preliminary Relief, Week's Best Posts

CLAIMS AGAINST LOAN SERVICER AND FORCE-PLACED INSURER ALLEGING COMMISSION AND REINSURANCE KICKBACK SCHEME SURVIVE DISMISSAL

May 22, 2014 by Carlton Fields

A putative class action involving force-placed home insurance and an alleged scheme for mortgage lenders to obtain kickbacks in the form of commissions, reinsurance premium, and other fees, has survived a motion to dismiss. The complaint alleged that the mortgage lender, loan servicer, and insurer participated in a scheme of entering into exclusive agreements to force place insurance at grossly excessive rates in return for the kickbacks. The loan servicer and insurer moved to dismiss two Florida law claims: unjust enrichment and tortious interference with a business relationship. Regarding the claim for unjust enrichment, the court held that the complaint sufficiently alleged that the named plaintiffs conferred a “direct benefit” on the servicer and insurer (force-placed premiums), that the servicer and insurer retained the benefit, and that the benefit would be inequitable for them to retain. With respect to tortious interference, the court held that the complaint sufficiently alleged that the servicer and insurer intentionally interfered with the lender’s and plaintiffs’ business relationship in bad faith, which resulted in damages to the plaintiffs. The court held that the complaint adequately alleged the causes of action. Hamilton v. SunTrust Mortgage, Inc., Case No. 13-60749-CIV (USDC S.D. Fla. March 28, 2014).

This post written by Michael Wolgin.

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Filed Under: Contract Interpretation

DENIAL OF ARBITRATION REVERSED WHERE TRIAL COURT FAILED TO HOLD TRIAL TO RESOLVE DISPUTED QUESTIONS OF FACT

May 20, 2014 by Carlton Fields

The Tenth Circuit has pointedly reversed a trial court’s decision to deny arbitration, based on the fact that the lower court failed to hold a trial (as required by the FAA) when disputed questions of fact surrounding the parties’ oral agreement remained. The case was brought as a class action against a propane gas company for overcharging customers. Despite multiple rounds of lengthy discovery, factual questions remained regarding the content of conversations between the parties, and when the “last act” of contract formation occurred for purposes of determining choice of state contract law. The Tenth Circuit concluded: “Summary-judgment-like motions practice may be a permissible and expedient way to resolve arbitrability questions when it’s clear no material disputes of fact exist and only legal questions remain. But when factual disputes may determine whether the parties agreed to arbitrate, the way to resolve them isn’t by round after round of discovery and motions practice. It is by proceeding summarily to trial. That is the procedure the [FAA] requires and the parties should have undertaken a long time ago – and it is the procedure they must follow now.” Howard v. Ferrellgas Partners, L.P., Case No. 13-3061 (10th Cir. April 8, 2014).

This post written by Michael Wolgin.

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Filed Under: Arbitration Process Issues, Week's Best Posts

COURT VACATES ARBITRATION AWARD WHERE ARBITRATION HELD UNDER INCORRECT ARBITRATION RULES

May 15, 2014 by Carlton Fields

A federal judge in Houston recently vacated an arbitration award where the reinsurance agreement specified that the arbitration of any disputes would proceed “under the auspices of the ICC,” but the arbitration actually proceeded under the American Arbitration Association’s Commercial Arbitration Rules. The Court found that the parties to the reinsurance agreements selected the International Chamber of Commerce, and application of its rules, as a mandatory and essential condition of their agreement to arbitrate. Because this did not occur, the selected arbitrator lacked jurisdiction to hear the claims presented. The court noted that generally, after the conclusion of an arbitration, a court cannot second guess the arbitrator’s jurisdiction and decision so long as the arbitrator (1) is arguably construing or applying the contract, and (2) is acting within the scope of his authority. The court found, however, that the case presented a rare example of the second exception, in which an arbitrator assumed authority over a dispute that the parties’ agreements mandated be referred to a different forum, namely the ICC. This error fundamentally prejudiced the proceedings. PoolRe Insurance Corp. v. Organizational Strategies, Inc., Case No. H-13-1857 (USDC S.D. Tex. Mar. 31, 2014).

This post written by Catherine Acree.

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Filed Under: Confirmation / Vacation of Arbitration Awards

THIRD CIRCUIT ISSUES OPINION ON ARBITRABILITY OF DIRECT AND ASSIGNED, OR DERIVATIVE, CLAIMS

May 14, 2014 by Carlton Fields

The Third Circuit recently vacated a lower court’s decision granting a motion to compel arbitration of (1) direct claims by certain cardiac services health providers against CIGNA and (2) claims by those providers on behalf of employee benefit plan participants who were initially denied coverage of the cardiac services by CIGNA but subsequently provided such services by the providers in exchange for assignment of their rights and claims under ERISA against CIGNA to the providers. After observing that the plain language of an arbitration agreement controls and that the presumption of arbitrability applies only where an arbitration provision is ambiguous, the Court of Appeals first held that the alleged facts underlying the direct claims unambiguously did not concern “the performance or interpretation” of the administrative agreement between CIGNA and the providers, as required by the arbitration clause, because the claims involved a CIGNA policy update document distinct from, and sent years after, the administrative agreement. As for the derivative claims, which related to CIGNA’s decision to deny coverage of the cardiac services to the participants, the court concluded that such coverage decision was subject to the terms or conditions of the applicable benefit plan and governed by ERISA, not the administrative agreement. The participants’ rights to pursue their ERISA claims in court could not be diluted through compelled arbitration just because the providers, as assignees, had promised to arbitrate certain of the direct claims they might bring against CIGNA. CardioNet, Inc. v. CIGNA Health Corp., No. 13-2496 (3d Cir. May 6, 2014).

This post written by Kyle Whitehead.

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Filed Under: Arbitration Process Issues, Confirmation / Vacation of Arbitration Awards, Contract Interpretation

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