Arbitration / Court Decisions

COURT COMPELS PRODUCTION OF LIABILITY INSURER’S COMMUNICATIONS WITH ITS REINSURER

January 16, 2014 by Carlton Fields

In a dispute over coverage under a liability policy for directors and officers of a failed bank, the court compelled certain documents from the insurer covered by a discovery request seeking “documents relating to any communications with any reinsurer about the claim at issue.” While some of the documents were deemed privileged based on submitted declarations, the court found that the basis for withholding other documents was not sufficiently supported or described in the insurer’s privilege log. The court also compelled certain documents shared between the insurer and the reinsurer, notwithstanding the insurer’s assertion of the common interest doctrine. The court explained that although the insurer and reinsurer shared commercial or financial interests, the insurer failed to demonstrate that it shared the requisite “identical legal interest” with the reinsurer. Bancinsurer, Inc. v. McCaffree, Case No. 2:12-cv-02110 (USDC D. Kan. Oct. 24, 2013).

This post written by Michael Wolgin.

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SEVENTH CIRCUIT FINDS REINSURANCE “REVENUE SHARING AGREEMENT” AMBIGUOUS

January 13, 2014 by Carlton Fields

Aon Benfield was the reinsurance broker of record for Homeowners Choice, Inc. The parties executed a “revenue sharing agreement” whereby a portion of the commission Aon made in placing Homeowners’s reinsurance policies would be rebated to Homeowners. During the 2010 contract year, Homeowners notified Aon that it was replacing it as broker of record. Homeowners requested $659,943 from Aon as payment due under the parties’ revenue sharing agreement. Aon refused, claiming that the revenue sharing payment clause was superseded by the clause allowing Aon to keep commissions made after termination of the contract. The district court found the clauses Aon relied on to be ambiguous, and because Aon drafted the agreement, it awarded damages to Homeowners under the doctrine of contra proferentem. Aon appealed, but the Seventh Circuit Court of Appeals agreed with the district court and affirmed. Homeowners Choice, Inc. v. Aon Benfield, Inc., No. 13-1846 (7th Cir. Dec. 29, 2013).

This post written by John Pitblado.

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COURT APPROVES ARBITRATOR’S ALLOWANCE OF CLASS ARBITRATION BY ESTOPPEL

January 9, 2014 by Carlton Fields

In Hill v. Wackenhut Services International, an employment-related dispute involving alleged unpaid compensation for employees’ work on American military bases overseas, the U.S. District Court for the District of Columbia upheld an arbitral award authorizing class arbitration, basing its decision on the extremely limited availability of judicial review of arbitral awards and two Supreme Court cases. Stolt-Nielsen S.A. v. Animal Feeds International Corp. (2010) held that a court may not uphold an arbitrator’s decision to permit class arbitration if it reflects the arbitrator’s personal policy preferences rather than an interpretation of the parties’ agreement. Consistent with Stolt-Nielsen, Oxford Health Plans, LLC v. Sutter (2013) teaches that a court must uphold an arbitrator’s decision to permit class arbitration so long as that decision was “arguably construing” the parties’ agreement, even if the interpretation is mistaken. The Hill court found that the arbitrator had authorized class arbitration based upon the doctrines of collateral and judicial estoppel, which stemmed from the Hill defendants’ acceptance of a class arbitration award in an earlier related class proceeding. Because the Hill employment agreement’s choice-of-law clause incorporated federal and Florida law, both of which recognize the principles of estoppel on which the arbitrator relied, the arbitrator’s decision to invoke those doctrines “drew its essence from the contract,” consistent with the mandate of Oxford Health. Hill v. Wackenhut Services International, Case No. 11-2158 (JEB) (D.D.C. Sept. 18, 2013).

This post written by Kyle Whitehead.

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ARBITRATION ROUND-UP

January 8, 2014 by Carlton Fields

Scope of Arbitration

Citigroup, Inc. v. Abu Dhabi Investment Authority, Case No. 1:13-cv-06073 (USDC S.D.N.Y. Nov. 25, 2013) (dismissing action to enjoin arbitration; granting motion to compel arbitration; defense of res judicata based on prior confirmation of arbitration award is an issue for arbitration panel)

Unconscionability

Lombardi v. Kahaly, Case No. 11-56752 (9th Cir. Dec. 2, 2013) (reversing denial of motion to compel arbitration of claims for injunctive relief under California Unfair Competition Law and Consumer Legal Remedies Act; following precedent holding that FAA preempts California unconscionability law and that “effective vindication” exception does not apply to state statutes; arbitration agreement not unconscionable for nonmutuality)

Lombardi v. Twyman, Case No. 10-56602 (9th Cir. Dec, 2, 2013) (reversing order that denied motion to compel arbitration based on unconscionability of class waiver arbitration provision; following Concepcion and American Express; arbitration agreement not substantively unconscionable for nonmutuality, nor procedurally unconscionable for alleged penalty for rejecting arbitration agreement)

Due Process

Staples v. Morgan Stanley Smith Barney, Case No. 6:13-cv-00013 (USDC D. Mont. Oct. 28, 2013) (confirming FINRA award; finding proper service of process by FINRA; no corruption, fraud, undue means, or arbitrator bias, misconduct, or exceeding of powers)

Labor Disputes

Northern New England Telephone Operations LLC v. Local 2327, International Brotherhood of Electrical Workers, AFL-CIO, Case Nos. 13-1167, 13-1186 (1st Cir. Nov. 12, 2013) (affirming confirmation of award and denial of Rule 11 costs and fees; panel did not exceed authority in LMRA arbitration by wrongfully adding/subtracting terms in interpreting the relevant collective bargaining agreement)

Reyco Granning LLC v. International Brotherhood of Teamsters, Local Union No. 245, Case No. 13-1002 (8th Cir. Nov. 15, 2013) (reversing district court’s order granting summary judgment in favor of union and confirming award on collective bargaining agreement; directing court to grant employer’s motion for summary judgment and vacate arbitration award; arbitrator exceeded authority by looking to contract negotiations to discern intent with respect to unambiguous contract language)

Concurrent Proceedings

Alstom Chile S.A. v. Mapfre Compania de Seguros Generales Chile S.A., Case No. 1:13-cv-02416 (USDC S.D.N.Y. Oct. 31, 2013) (compelling arbitration and permanently enjoining defendant from prosecuting related tort proceedings in Chile; holding that broad arbitration clause for all disputes “arising out of or relating to” agreement covered both breach of contract and tort claims; finding that failure to comply with requirement to negotiate dispute did not bar enforcement of arbitration provision)

This post written by Michael Wolgin.

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SECOND CIRCUIT VACATES DENIAL OF CITIBANK’S MOTION TO COMPEL ARBITRATION

January 7, 2014 by Carlton Fields

On appeal from the S.D.N.Y., Citibank challenged the district court’s denial of Citibank’s motion to compel arbitration and decision that the agreement to arbitrate was not binding on the parties. The S.D.N.Y. concluded that Signature Cards signed by appellees when opening their accounts with Citibank did not incorporate by reference the Client Manual, which contains the arbitration agreement. The Second Circuit vacated the district court judgment and remanded for further proceedings because several issues of fact existed as to the making of the arbitration agreement, therefore requiring a trial. The issues of fact identified are (1) whether Citibank provided the Client Manual to appellees; (2) whether the Client Manual appears to be a contract on its face; and (3) whether appellees are estopped from arguing they did not agree to arbitrate because they “knowingly exploited” the benefits of the agreement. Hirsch v. Citibank, N.A., No. 12-1172-cv (2d Cir. Oct. 22, 2013).

This post written by Abigail Kortz.

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