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Arbitration / Court Decisions

NEW YORK COURT ORDERS THAT UMPIRE BE APPOINTED TO COMPLETE REINSURANCE ARBITRATION PANEL

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Petitioner American Home Assurance Company sought appointment of an umpire, or a third arbitrator under certain treaties, to preside over arbitrations of disputes arising under three reinsurance treaties with respondent Clearwater Insurance Company. The treaties provided that each side would select an arbitrator and the two would select an umpire or third arbitrator; the parties had each selected an arbitrator but the two arbitrators had not chosen an umpire or third arbitrator. The court granted petitioner’s request pursuant to New York CPLR 7504, which provides that a court shall appoint an arbitrator if the method the parties’ agreed upon “fails or for any reason is not followed.” In so holding, the court rejected respondent’s argument that CPLR 7504 did not apply because it was not mentioned in the reinsurance treaties, holding that the law was in existence at the time of the formation of the contracts and thus incorporated in them. The court also dispensed with respondent’s argument that the arbitrations should proceed before an umpire is selected, i.e., that an umpire need not be selected unless the two arbitrators failed to agree, reasoning that having an umpire present during the arbitrations to hear the proof is the more practical approach. The court ordered a specific selection process for the umpire (or third arbitrator) – a hybrid of the ARIAS-US ranking method and the “strike and draw” method. In re American Home Assurance Co., Case No. 653079/2012 (N.Y. Sup. Ct. Jan. 15, 2013)

This post written by Ben Seessel.

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CALIFORNIA ARBITRATION ROUND UP

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Class Waiver Cases Addressing Concepcion

Gutierrez v. Wells Fargo Bank, NA, Case No. 10-16959 (9th Cir. Dec. 26, 2012) (refusing to vacate district court’s judgment, rejecting argument that interim ruling of Concepcion created new right to arbitrate in this particular class action banking dispute; defendant waived right to arbitrate by litigating to judgment while Concepcion was pending, notwithstanding permissive arbitration clause)

Natalini v. Import Motors, Inc., Case No. A133236 (Cal. Ct. App. Jan. 7, 2013) (affirming denial of petition to compel individual arbitration in putative class action lawsuit; class waiver arbitration clause in motor vehicle sales contract procedurally and substantively unconscionable, notwithstanding Concepcion)

Outland v. Macy’s Department Stores, Inc., Case No. A133589 (Cal. Ct. App. Jan. 16, 2013) (affirming dismissal of putative class action lawsuit in employment dispute, citing Concepcion; underlying employment agreement contained a class waiver arbitration clause which should be upheld under FAA, notwithstanding California Gentry, Franco, and Truly Nolen decisional law holding such class waivers unenforceable)

Claim Preclusion

Casady v. The Waffle, LLC, Case No. B235553 (Cal. Ct. App. Jan. 3, 2013) (affirming denial of requests to restore and recommence civil action after arbitration was dismissed for failure of the plaintiff failed to pay share of arbitrator’s fee; dismissal of arbitration was a sanction and constituted an award on the merits)

This post written by Michael Wolgin.

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UNAVAILABILITY OF A DESIGNATED ARBITRATION FORUM DOES NOT PROVIDE AN IMPOSSIBILITY DEFENSE

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On appeal, a circuit court’s denial of a motion to compel arbitration was reversed for several reasons. First, the circuit court erred by allowing submission of parol evidence after determining that language in the arbitration agreement requiring the parties to select their arbitrators from a “nationally recognized arbitration association” was unambiguous. Second, the circuit court erred by finding the arbitration agreement to be invalid based on the argument that the contractually designated nationally recognized arbitration association would not take on the pre-dispute arbitration agreement case and the arbitration agreement was therefore impossible to perform. The appellate court found the impossibility argument to be without merit since the FAA authorizes a court to appoint arbitrators when the parties fail to name them, making arbitration possible even in the event that a designated forum will not take the case. Spring Lake NC, LLC v. Figueroa, No. 2D12-1202 (Fla. Dist. Ct. App. Dec. 14, 2012).

This post written by Abigail Kortz.

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PARTICIPATION IN NEW YORK ARBITRATION NOT AN IMPLICIT WAIVER OF SOVEREIGN IMMUNITY UNDER THE FSIA

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A pro se attorney sued his former clients, Argentina’s economic ministry and a reinsurance company owned by the Argentine government, for malicious prosecution based on the Argentine government’s criminal prosecution of the attorney for allegedly exorbitant fees. In the malicious prosecution action, the Southern District of New York decided it could not exercise subject matter jurisdiction over the defendants because none of the exceptions to sovereign immunity provided by the Foreign Sovereign Immunities Act applied. Although the court acknowledged that defendants’ retention of the attorney in connection with commercial matters qualified as commercial activity, it determined that the commercial activity exception did not apply because the activity in question was the government initiated criminal prosecution. The court also concluded that defendants’ prior consent to arbitrate the issue of alleged overbilling by the plaintiff was not an “unmistakable or unambiguous waiver” of immunity from the separate tort action of malicious prosecution. Moreira v. Ministerio de Economia y Produccion de la Republica Argentina, Case No. 10 Civ. 266 (LTS)(KNF) (S.D.N.Y. Dec. 7, 2012).

This post written by Abigail Kortz.

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COURT REFUSES TO ENJOIN ATTORNEYS WHO ALLEGEDLY BREACHED CONFIDENTIALITY AGREEMENT IN REINSURANCE ARBITRATION

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On May 1, 2012, we reported on the Second Circuit’s affirmance of a denial of Utica Mutual Insurance Company’s motion to disqualify R & Q Reinsurance Company’s attorneys in a dispute arising out of the alleged breach of three confidentiality agreements, including one entered as an order in the parties’ pending reinsurance arbitration. Utica alleged that R&Q breached the confidentiality agreement put in place in the reinsurance arbitration by improperly disclosing confidential information in a separate lawsuit against a third party. On December 14, 2012, the court adopted a magistrate’s recommendation (entered on November 6, 2012), to deny Utica’s motion for preliminary injunction enjoining R&Q from disclosing the alleged confidential information. The court found that Utica failed to demonstrate with any specificity that the alleged breach of confidentiality would cause it irreparable harm, although the court did note that Utica showed a likelihood of success on the merits of its claim that the confidentiality agreements had been breached. Utica Mutual Insurance Co. v. INA Reinsurance Co., Case No. 6:12-cv-00194 (USDC N.D.N.Y. Dec. 14, 2012).

This post written by Michael Wolgin.

See our disclaimer.