Arbitration / Court Decisions

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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UK HIGH COURT REFUSES TO STAY PROCEEDINGS DESPITE CONCURRENT ACTION IN TEXAS

July 31, 2013 by Carlton Fields

MacDermid Offshore Solutions LLC (“MacDermid”) sued Niche Products Limited (“Niche”) in Texas for misleading advertising. Soon thereafter, Niche sued MacDermid in the Patents County Court (“PCC”) in England under the British cause of action for malicious falsehood. Both intellectual property proceedings turned on whether a particular type of oil product was different. MacDermid filed an application with the PCC, requesting that the proceedings be heard in Texas. The PCC dismissed the application, and MacDermid appealed.

The High Court of Justice, Chancery Division, dismissed the appeal on the grounds that the judge had applied the correct test in holding that the claim should be heard in the English jurisdiction, despite a concurrent action in Texas. The High Court noted that the test remains whether the foreign jurisdiction is clearly more appropriate. The existence of prior foreign proceedings is not decisive, though it may be a factor to be taken into account, and the weight to be attached to such proceedings is a matter of judgment. MacDermid Offshore Solutions LLC v. Niche Products Ltd, [2013] EWHC 1493 (Ch) (May 6, 2013).

This post written by Brian Perryman.

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COURT HOLDS THAT PRECLUSIVE EFFECT OF PRIOR ARBITRATION SHOULD BE DECIDED BY ARBITRATOR

July 30, 2013 by Carlton Fields

National Casualty, Wausau and Swiss Re reinsured OneBeacon under a multiple line excess cover program. When disputes arose OneBeacon arbitrated with Swiss Re, and lost. OneBeacon then demanded arbitration with National Casualty and Wausau with respect to the same reinsurance program, but that proceeding broke down over disputes concerning the selection of an umpire to complete a three arbitrator panel. National Casualty and Wausau then filed a lawsuit against OneBeacon, seeking a declaration that the prior arbitration award and the doctrine of collateral estoppel barred OneBeacon’s second arbitration, and seeking the court’s assistance in the appointment of the umpire. The court granted OneBeacon’s motion to dismiss the preclusion claim on the basis that the preclusive effect of a prior arbitration in a subsequent arbitration should be decided by the arbitrator and not by the court.

The reinsurers had put forth a senior official of Swiss Re as their umpire candidate, to which OneBeacon objected, on the basis that the candidate was not impartial and was not qualified to serve. The court found OneBeacon’s challenge to the as yet unselected umpire candidate premature under the terms of the Federal Arbitration Act, which provides that challenges to arbitrators should be entertained by courts only after the issuance of an arbitration award. National Cas. Co. v. OneBeacon American Ins. Co., Case No. 12-11874 (USDC D. Mass. July 1, 2013).

This post written by Brian Perryman.

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