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Arbitration / Court Decisions

New York Federal Court Denies Reinsurer’s Motions for New Trial and Judgment as a Matter of Law, Modifies Accrual Date for Prejudgment Interest

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In a matter previously covered in this blog, the Northern District of New York was asked to determine whether Clearwater Insurance Co. (the reinsurer) was entitled to a new trial, a judgment as a matter of law, or an amendment to the judgment rendered in favor of Utica Mutual Insurance Co. (the cedent).

At trial, the jury agreed with Utica’s interpretation of the parties’ reinsurance contract and found that an underlying settlement between Utica and insured Gould’s Pumps was negotiated in good faith. As a result, the jury awarded Utica $10 million in damages under the reinsurance treaty, and a judgment was entered consistent with this verdict.

Among several post-trial motions filed by the parties, Clearwater moved for a new trial or judgment as a matter of law, arguing that the verdict was not supported by sufficient evidence, that there were errors in the jury instructions and verdict form, and that a recent Second Circuit decision nullified the jury’s verdict as a matter of law. Clearwater also moved to amend the judgment, arguing that Utica was not entitled to prejudgment interest or, in the alternative, that prejudgment interest should accrue from a later date. The court denied Clearwater’s motion for a new trial, finding the jury’s verdict to be adequately supported and upholding the jury instructions used at trial. The court also denied Clearwater’s motion for a judgment as a matter of law, finding that the cited Second Circuit decision did not nullify the jury’s verdict.

However, the court granted Clearwater’s motion to amend the judgment in part, finding that the court’s calculation of prejudgment interest from the date Utica submitted its first unpaid reinsurance billing would result in a windfall for Utica. The court determined that the reasonable accrual date for prejudgment interest was the midpoint of the unpaid reinsured billings and modified its judgment accordingly.

Utica Mutual Insurance Co. v. Clearwater Insurance Co., No. 6:13-cv-01178 (N.D.N.Y. Mar. 18, 2022).

State Court Disregards State Law Authorizing Award of Attorneys’ Fees in Arbitration Dispute Governed by FAA

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The Nevada Supreme Court affirmed the denial of attorneys’ fees pursuant to section 38.243, N.R.S. and in association with the confirmation of an arbitration award. The Nevada statute provides “on application of a prevailing party to a contested judicial proceeding under [Nevada laws seeking confirmation, vacatur, or modification of an arbitration award], the court may add reasonable attorney’s fees and other reasonable expenses of litigation incurred.”

The Nevada Supreme Court first affirmed the lower court’s confirmation of the arbitration award, finding that the arbitrator had not exceeded its authority in rendering the award. The court then recognized that a court may not award attorneys’ fees “absent authority under a statute, rule, or contract.” Despite Nevada law authorizing such an award, the Nevada Supreme Court noted that the parties both agreed that the FAA governed judicial review of this particular arbitration award, and because neither the FAA nor the arbitration agreement itself authorized an award of post-arbitration attorneys’ fees or costs, the lower state court was correct in denying fees, contrary Nevada law notwithstanding.

In re Petition of CLA Properties LLC, No. 80427 (Nev. Mar. 17, 2022).

New York Federal Court Confirms Arbitration Award Under Cyprus-Libya Bilateral Investment Treaty

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On March 23, 2022, a New York federal court confirmed an award in an arbitration before a tribunal of the International Chamber of Commerce (ICC) between Olin Holdings Ltd. and the state of Libya under a bilateral investment treaty. In the underlying ICC arbitration, Olin claimed that the Libyan government obstructed the operation of, and ultimately expropriated, Olin’s dairy factory in Libya’s capital city Tripoli in violation of the bilateral investment treaty between Libya and Cyprus, where Olin was formed. Olin sought $147,882,000 as compensation for the damages it allegedly incurred as a result.

In June 2016, the ICC tribunal issued a jurisdictional award, concluding that the bilateral investment treaty included an agreement to arbitrate the dispute and that Olin’s prior lawsuits against Libya in Libyan court did not preclude Olin from invoking the arbitration clause. The tribunal held an evidentiary hearing on the merits and issued a final award awarding Olin €18,225,000 in damages; $773,000 for the costs of arbitration; and €1,069,687.70 for general legal costs and expenses, plus simple interest at a rate of 5% per annum from the date of the final award.

Olin petitioned to confirm the final award in New York state court, and Libya removed the petition to federal court. Noting that courts are required to review arbitrators’ decisions “with considerable deference” if the record supplies “clear and unmistakable evidence” that the parties agreed to submit a given issue to arbitration, the court concluded that the terms of reference agreement entered into by the parties at the outset of the ICC arbitration constituted such clear and unmistakable evidence of the parties’ intent to arbitrate with respect to both arbitrability and the substantive issues in the dispute, indicating that deferential review was warranted.

The court noted that under this deferential standard, if the arbitrators “explain their conclusions in terms that offer even a barely colorable justification for the outcome reached, confirmation of the award cannot be prevented by litigants who merely argue, however persuasively, for a different result.” The court further noted that under the New York Convention, the court was required to confirm the final award unless it finds one of the seven grounds for refusal or deferral of recognition or enforcement of the award specified in the Convention. In finding that the ICC tribunal presented more than a “barely colorable justification” for the final award, the court noted that the final award was 143 pages long, and thoughtfully and thoroughly considered and rejected each of Libya’s defenses to Olin’s claims. The court further considered each of the seven enumerated grounds for refusing to confirm an award under the Convention and found that none of those grounds had been met. As a result, the court granted Olin’s motion to confirm the final award. The court separately denied Libya’s motion to dismiss the petition on forum non conveniens grounds, finding that Libya failed to meet its burden to establish any of the factors that would support dismissal of the action in favor of a foreign jurisdiction.

Olin Holdings Ltd. v. State of Libya, No. 1:21-cv-04150 (S.D.N.Y. Mar. 23, 2022).

Tenth Circuit Concludes Enforceability of Arbitration Clause Was Issue for Arbitrator

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The Tenth Circuit Court of Appeals recently concluded that whether an arbitration agreement could be enforced against a non-signatory who was allegedly a third-party beneficiary of the arbitration agreement was for the arbitrator, not the court, to determine where the arbitration provisions contained delegation language that the alleged beneficiary did not specifically challenge.

Ladonna Kay Rainwater was a patient at Casa Arena Blanca Nursing Center. Rainwater’s daughter Melanie Burris signed an admission agreement and a dispute resolution agreement that contained an arbitration clause as part of Rainwater’s admission to Casa Arena. The agreement provided that it was “between Kay Rainwater (‘Resident’) and/or Melanie Burris (‘Representative’), and Casa Arena Blanca (‘Facility’)” and further provided that Rainwater was a “third-party beneficiary of the agreement.” The agreement also included a “delegation clause” and incorporated JAMS rules, including JAMS rules regarding delegation.

After Rainwater passed away, her estate filed a wrongful death lawsuit alleging that Casa Arena failed to care for Rainwater properly. Casa Arena moved to compel arbitration. The district court denied Casa Arena’s motion and Casa Arena appealed.

The Tenth Circuit reversed and remanded. The court explained that there was no dispute that a contract had been formed, that the contract contained an arbitration clause, or that the arbitration clause included a delegation clause. The dispute was whether the arbitration clause should be enforced against Rainwater’s estate as a third-party beneficiary of the agreement.

That issue, the Tenth Circuit explained, was for the arbitrator in light of the delegation clause and the fact that Rainwater’s estate had not specifically challenged the delegation clause (and instead had generally asserted its arguments regarding enforceability as to the estate).

Casa Arena Blanca LLC v. Rainwater, No. 21-2037 (10th Cir. Mar. 22, 2022).

Texas Supreme Court Finds Erotic Dancer and Club Had “Meeting of the Minds” to Enforce Arbitration Agreement

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Stephanie Sotero Hernandez was killed in a car accident after leaving work at Baby Dolls Topless Saloons Inc. Hernandez’s estate filed a wrongful death suit against the club alleging it continued serving alcohol to Hernandez’s co-worker, the driver of the car, after knowing she was intoxicated. The club moved to compel arbitration based on the arbitration clause in its contract with Hernandez. A Texas court of appeals affirmed a trial court order denying the club’s motion, finding the terminology in the contract was “uncertain” and lacked “definiteness,” thus invalidating any agreement to arbitrate. The Texas Supreme Court reversed.

Hernandez’s estate argued the motion should be denied because there was never a “meeting of the minds” between Hernandez and the club. The court disagreed, finding that to conclude otherwise, as did the court of appeals, ignores that Hernandez and the club operated under the contract on a weekly basis for nearly two years before her untimely death. The court therefore rejected the notion that the parties never entered a valid contract. Hernandez’s estate also argued that the arbitration clause itself was limited in scope and inapplicable, but the court again disagreed, emphasizing the bolded and capitalized clause in the contract explicitly delegating gateway arbitrability issues of this sort to the arbitrator. The court thus reversed and remanded with instruction to grant the club’s motion to compel arbitration.

Baby Dolls Topless Saloons, Inc. v. Sotero, No. 20-0782 (Tex. Mar. 18, 2022).