Arbitration / Court Decisions

AFTER AMEX, MASSACHUSETTS SUPREME COURT RECONSIDERS PRIOR DECISION FINDING CLASS WAIVER UNENFORCEABLE ON COST-PROHIBITIVE GROUNDS

August 13, 2013 by Carlton Fields

On July 2, 2013, we reported on Feeney v. Dell Inc., which was issued eight days before the U.S. Supreme Court’s decision in American Express Co. v. Italian Colors Restaurant, and appeared to reach a result at odds with that decision. Specifically, while Amex held that individual arbitration could be compelled under the FAA based on a class waiver contract provision, notwithstanding that the cost of arbitration exceeded the potential recovery, Feeney had held that U.S. Supreme Court precedent precluded a class waiver under those circumstances. On August 1, 2013, the Feeney court granted a petition for rehearing, changing the result in its prior opinion, and reversing the lower court’s denial of a motion to confirm the underlying arbitration award, holding that “following Amex, our analysis in Feeney II no longer comports with the Supreme Court’s interpretation of the FAA.” Feeney v. Dell Inc., Case No. SJC-11133 (Mass. August 1, 2013).

This post written by Michael Wolgin.

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DISTRICT COURT TRANSFERS BREACH OF CONTRACT ACTION INVOLVING REINSURANCE AGREEMENT

August 12, 2013 by Carlton Fields

In a dispute between an insurance company and a reinsurance company over sums paid pursuant to a reinsurance agreement, the Southern District of New York granted defendant’s motion to transfer to the Northern District of New York (“NDNY”) where a similar dispute involving the same parties, but a different reinsurance agreement, is pending. The court determined that transfer was appropriate because the only witnesses reside in the NDNY, the relevant documents exist in defendant’s headquarters located in the NDNY, and plaintiff’s choice of forum is entitled to little deference since plaintiff is located in New Jersey, not in the forum. The fact that the sister case pending in the NDNY involves common witnesses and documents, and therefore might generate duplicative discovery, also weighed in favor of transfer. Munich Reinsurance America, Inc. v. Utica Mutual Insurance Company, Case No. 13-cv-238 (USCD S.D.N.Y. June 18, 2013).

This post written by Abigail Kortz.

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UK SUPREME COURT ENJOINS FOREIGN COURT ACTION IN FAVOR OF POSSIBLE LONDON ARBITRATION

August 7, 2013 by Carlton Fields

Since reinsurance disputes are sometimes multi-jurisdictional we occasionally post on appellate UK and US court opinions dealing with the relationship between proceedings in different countries. The latest example of this involves two parties which entered into a contract concerning a hydroelectric plant in Kazakhstan. The contract is governed by Kazakh law but contains a London arbitration clause. When a dispute arose one party filed suit in Kazakhstan and secured a judgment from the Kazakh Supreme Court invalidating the arbitration provision. The other party filed suit in a UK court seeking a declaration that the arbitration provision was valid and enjoining the action in Kazakhstan. The UK trial court and Court of Appeals ruled that the Kazakh judgment was not binding, upheld the validity of the arbitration provision and enjoined the parties from proceeding with the Kazakh action. The UK Supreme Court agreed, and dismissed the appeal (the UK equivalent of affirming). The UK Supreme Court held that the refusal of the Kazakh court to enforce the arbitration provision compelled it to act to preserve the right to arbitrate. It is perhaps notable that no one had sought to commence an arbitration proceeding. The UK courts were acting to preserve the right of the parties to arbitrate, should they desire to do so. Ust-Kamenogorsk Hydropower Pland JSC v. AES Ust-Kamenogorsk Hydropower Pland LLP, [2013] UKSC 35 (June 12, 2013).

This post written by Rollie Goss.

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WEST VIRGINIA SUPREME COURT REVERSES “UNCONSCIONABILITY” HOLDINGS, COMPELS ARBITRATION

August 6, 2013 by Carlton Fields

In a consolidated appeal of two cases involving Credit Acceptance Corporation (“CAC”), the West Virginia Supreme Court reversed two trial court decisions denying motions to compel arbitration, and ordered both cases to proceed to arbitration. The trial court had found that the arbitral forums named in the agreements were unavailable, and that the agreements were unconscionable inasmuch as they contained a waiver of the right to a jury trial. It denied CAC’s motions to compel arbitration on those bases in both cases. The West Virginia Supreme Court reversed, finding that (1) while one of the arbitral forums mentioned in the agreement – the National Arbitration Forum – was no longer available for consumer arbitrations, the other entity mentioned – the American Arbitration Association – remained available; and (2) the fact that an arbitration agreement requires an explicit waiver of the right to a jury trial does not render it unconscionable or unenforceable. The Court remanded with directions to the trial court to compel arbitration. Credit Acceptance Corp. v. Front, No. 12-0545 (W.V. June 19, 2013).

This post written by John Pitblado.

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UBS AG STATUTE OF LIMITATIONS ARGUMENT FAILS IN MOTION TO DISMISS

August 1, 2013 by Carlton Fields

For nearly five-and-a-half years, various banking and insurance corporations (“movants”) have engaged in extensive discovery to attempt to prove that Michel and Ramy Lakah, acting as an alter ego for bond guarantor Lakah Funding Limited, are bound by arbitration agreements that they had not signed in a personal capacity. When the Lakahs sought to stay the arbitration, the movants filed a motion to dismiss that claim as being untimely filed. The movants allege that the petition was filed more than twenty days after notice was given, failing to comply with section 7503(c) of the N.Y. Code.

The court held that the movants had waived their right to argue that the stay petition was time-barred. The court explained that “[f]or almost five-and-a-half years . . .the movants did not inform this court or their opponents of their belief that the extensive rounds of discovery and related litigation . . . were completely unnecessary because the Lakahs were time-barred from seeking to stay arbitration on any ground.” In their answer, the movants failed to assert their statute of limitations claim as an affirmative defense, therefore waiving that right. Additionally, the court did not allow movants to amend their answer to include this affirmative defense principally because of their own “inordinate delay.” Lakah v. UBS AG, Case No. 07-cv-02799 (USDC S.D.N.Y. May 22, 2013).

This post written by Brian Perryman.

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