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Arbitration / Court Decisions

COURT DECLINES TO STAY LITIGATION OF CLAIMS UNDER GUARANTEE DESPITE COMMON ISSUES WITH PENDING REINSURANCE ARBITRATION

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This case concerns overlapping reinsurance agreements, retrocession agreements related to the rinsured risks, and guarantees of the retrocession agreements. The reinsurance and retrocession agreements all contain arbitration provisions, but the guarantees do not. Disputes arose, an arbitration commenced concerning the retrocession agreements and a lawsuit was filed on the related guarantees. On a motion to dismiss, the court held that the claimant did not have to “exhaust” efforts to collect under the reinsurance or retrocession agreements before bringing suit under the guarantees. The court denied a request to stay the claims based on the guarantees pending the arbitration of disputes under the retrocession agreements, because the party seeking the stay had failed to establish that there were issues common to the arbitration and the court action which would be finally determined by the arbitration. While liabiity under the reinsurane and retrocession agreements might be considered an issue common to the arbitration and court action, the court found this factor overcome by evidence that the defendants had delayed and abused the arbitration process. Finally, the court rejected arguments that the guarantee claims failed to state a claim. Greenlight Reinsurance, Ltd. v. Appalachian Underwriters, Inc., Case No. 12-8544 (USDC S.D. N.Y.July 25, 2013).

This post written by Rollie Goss.

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COURT REJECTS NUMEROUS DEFENSES TO ARBITRATION BY NON-SIGNATORY AND APPOINTS UMPIRE FOR ARBITRATION TO PROCEED

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In a decision granting a workers’ compensation insurer’s petition to appoint an umpire and proceed with arbitration, a court recently analyzed and rejected a number of defenses to arbitration made by the two affiliated company respondents. The court considered whether one of the companies, a non-signatory to the underlying agreement, could be compelled to arbitrate. Applying principles of actual and apparent agency, the court found that the signatory had authority to obtain insurance for the non-signatory affiliate and was therefore subject to the agreement, based on the contract language, and other close connections between the affiliated companies. Next, the court rejected the respondents’ claim that the court lacked jurisdiction based on a forum selection clause in the agreement. The court also refused to stay the action pending a subsequently filed overlapping action in California and refused to find that the agreement was unenforceable because it had not first been submitted to the California Department of Insurance. The court found that the California DOI defense constituted a challenge to the entire insurance agreement, rather than specifically the arbitration provision, and thus the court could direct that arbitrability be resolved by the arbitration panel under the FAA. On this last point, the court found that the California requirements did not “reverse-preempt” FAA arbitration under the McCarran-Ferguson Act, because the court found no conflict between the California requirements and the agreement to arbitrate. National Union Fire Ins. Co. of Pittsburgh, PA v. Personnel Plus, Inc., Case No. 1:12-cv-04647 (USDC S.D.N.Y. July 23, 2013).

This post written by Michael Wolgin.

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DENIAL OF ARBITRATION OF STOP-LOSS INSURANCE DISPUTE AFFIRMED UNDER STATE INSURANCE LAW

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The president of a corporate administrator of a trust appealed the denial of his motion to compel arbitration against a company that sued him individually in a case seeking benefits and other relief for disputed medical stop-loss coverage. The appellate court initially held that, although the president was a non-signatory to the underlying agreements, the president could enforce the arbitration provisions based on agency and the plaintiff’s allegations, which treated the president and his corporation as one and the same. The court concluded, however, that arbitration could not be compelled under state insurance law, which prohibits arbitration involving certain insurance agreements. The court found that under the McCarran-Ferguson Act, the state insurance law was not preempted by the FAA or the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The court held that the state law regulated insurance, and the agreement at issue provided “indemnity” and was therefore properly subject to the state insurance law as a contract of “insurance.” Scott v. Louisville Bedding Co., No. 2012-CA-000252-MR (Ky. Ct. App. July 12, 2013).

This post written by Michael Wolgin.

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CLASS ACTION WAIVER ARBITRATION PROVISIONS ENFORCEABLE IN THE SECOND CIRCUIT POST-AMEX V. ITALIAN COLORS

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In back-to-back opinions addressing wage disputes brought under the Fair Labor Standards Act, the Second Circuit reversed the district court’s orders denying defendants’ motions to compel arbitration. In so doing, the Second Circuit explicitly followed the Supreme Court’s holding in American Express Co. v. Italian Colors Restaurant that plaintiffs cannot use the “effective vindication doctrine” to invalidate class action waiver provisions by showing that their claim is not economically worth pursuing individually. The Second Circuit also made clear that Amex I and its progeny that preceded the Supreme Court decision are no longer good law. The Amex I cases invalidated a class action waiver provision based on plaintiffs’ showing that “they would incur prohibitive costs if compelled to arbitrate under the class action waiver.” Sutherland v. Ernst & Young LLP, No. 12-304 (2d Cir. Aug. 9, 2013); Raniere v. Citigroup Inc., No. 11-5213 (2d Cir. Aug. 12, 2013).

This post written by Abigail Kortz.

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Round-Up Of Federal Decisions Involving Questions of Arbitrability

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Mortensen v. Bresnan Communications, LLC, No. 11-35823 (9th Cir. July 15, 2013) (vacating district court order declining to enforce arbitration agreement between broadband internet provider and consumer, finding 2011 U.S. Supreme Court decision AT&T Mobility v. Concepcion controlling; finding error in district court’s failure to apply New York law despite forum selection clause).

Biernacki v. Service Corp. Int’l, No. 11-17495 (9th Cir. June 10, 2013) (reversing district court order which held that plaintiffs – current and former employees of defendant who initially brought a putative class action in court for which certification was denied – had waived right to seek to compel arbitration, due to participation in litigation for three years. Ninth Circuit court held that merely participating in litigation, and incurring legal expense, insufficient to demonstrate waiver of right to arbitrate).

Safelite Group, Inc. v. Zurich Amer. Ins. Co., Case No. 2:12-cv-536 (USDC S.D. Ohio July 30, 2013) (compelling arbitration where “broad” clause governing “any and all” disputes, includes quasi-contractual claims; reserving questions of arbitrability for arbitrator pursuant to AAA rules incorporated into arbitration provision; staying remaining claims involving non-party until completion of arbitration).

Oracle America, Inc. v. Myriad Group, A.G., No. 11-17186 (9th Cir. July 26, 2013) (reversing denial of motion to compel arbitration, finding question of whether court or arbitrator should decide issues of arbitrability governed by contact language which unmistakably indicated parties’ intent to reserve question for arbitrator).

This post written by John Pitblado.

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