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Arbitration / Court Decisions

COURT DENIES INSURER’S REQUEST FOR ARBITRATION ATTORNEY’S FEES

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Amerisure successfully arbitrated a dispute with Global Re. Under the parties’ reinsurance agreement, arbitration was to be governed by Illinois law, though Amerisure is a Michigan-based company and Global Re is based in New York. Amerisure’s award was confirmed by an Illinois circuit court but the portion of it awarding attorney’s fees was vacated. Subsequently, Amerisure filed a one-count complaint in the circuit court seeking attorney’s fees pursuant to Illinois statute. The court dismissed Amerisure’s complaint, determining that New York law applied to the lawsuit and that New York law did not permit an award of attorney’s fees in this instance. While the parties agreed that Illinois law should apply to arbitration matters, there was no such provision governing litigation. Absent a governing choice of law provision, New York law applied because New York had the most significant contacts with the parties’ dispute. Amerisure Mutual Insurance Co. v. Global Reinsurance Corp. of America, Case No. 10 L 012665 (Ill. Cir. Ct. Nov. 7, 2012).

This post written by Ben Seessel.

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NINTH CIRCUIT HOLDS THAT MALICIOUS PROSECUTION AND ABUSE OF PROCESS CLAIMS ARE ARBITRABLE

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The Ninth Circuit affirmed the district court’s grant of the motion to compel arbitration of defendant’s malicious prosecution and abuse of process claims against plaintiff that arose from a previous arbitration. In so affirming, the court determined that the arbitration clause, which stated that it applied to “all controversies” between the parties “which may arise from any account for any cause whatsoever” was broad enough to encompass the tort claims. The court distinguished this language from language that limits application of the arbitration clause only to claims “arising out of” the agreement. This is a fairly traditional articulation of the difference between narrow and broad arbitration provisions. Morgan Keegan & Co. v. Grant, No. 11-56399 (9th Cir. Oct. 25, 2012).

This post written by Abigail Kortz.

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APPEALS COURT AFFIRMS FLORIDA FORUM IN DISPUTE BETWEEN FOREIGN COMPANIES OVER OFFSHORE BOND TRANSACTIONS

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An appellate court upheld the denial of dismissal of a lawsuit relating to certain offshore bond transactions (made in U.S. Dollars) between a Venezuelan reinsurer and a British Virgin Islands company, finding that Florida was a proper forum for the case. The reinsurer filed suit in Florida, a state in which the defendant had a business address, and the defendant moved to dismiss, contending that Venezuela, rather than Florida, was the proper forum. The lower court denied the motion and the appellate court affirmed, holding that the defendant failed to meet its burden of establishing that all of the following four factors were met to show improper forum: (1) adequate alternative forum; (2) private interests; (3) public interest; and (4) inconvenience/prejudice. While it was undisputed that Venezuela was an adequate alternative forum, the court held that private interests, such as access to evidence and witnesses, adequate enforcement of judgments, and expense, did not balance in the defendant’s favor. ABA Capital Markets Corp. v. Provincial De Reaseguros C.A., Case No. 3D12-130 (Fla. Ct. App. Nov. 7, 2012).

This post written by Michael Wolgin.

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U.S. SUPREME COURT SLAPS OKLAHOMA SUPREME COURT ON THE WRIST FOR DISREGARDING PRECEDENT ON THE FAA AND GRANTS CERT. IN YET ANOTHER ARBITRATION CASE

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In a recent per curiam opinion, the U.S. Supreme Court reminded state courts that the Federal Arbitration Act is “the supreme Law of the Land” and they must abide by the Supreme Court’s opinions interpreting that law. The Oklahoma Supreme Court ignored Supreme Court precedent, which holds that a court has authority to decide the validity of an arbitration clause, but that the validity of the contract is left to the arbitrator to decide once the arbitration clause is deemed valid. Improperly assuming the role of arbitrator, the Oklahoma Supreme Court declared a noncompetition agreement that included a valid arbitration clause to be “void and unenforceable against Oklahoma’s public policy,” elevating Oklahoma law over the FAA. Nitro-Lift Technologies, L.L.C. v. Howard, No. 11-1377, 586 U.S. __ (U.S. Nov. 26, 2012).

Accepting an opportunity to provide further guidance with respect to class arbitrations, the Supreme Court has also granted certiorari in an arbitration case decided by the Second Circuit to decide “[w]hether the Federal Arbitration Act permits courts, invoking the ‘federal substantive law of arbitrability,’ to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal law claim.” As profiled in a prior post, the Second Circuit held that arbitration agreements that do not provide for class arbitration are unenforceable if the claimant can demonstrate that “the cost of . . . individually arbitrating their dispute . . . would be prohibitive.” It will be intertesting to see whether the Court decides this case on a narrow statement of the issue or uses it to provide broader principled guidance for post-Concepcion cases. In re American Express Merchants’ Litigation, No. 12-133 (U.S. Nov. 9, 2012).

This post written by Abigail Kortz.

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SECOND CIRCUIT AFFIRMS DISMISSAL OF LAWSUIT BASED ON ARBITRATION PROVISIONS BUT REFUSES TO ORDER SANCTIONS

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Ipcon Collections sued Costco over a dispute regarding a series of agreements in which Costco agreed to sell karaoke systems on a consignment basis on behalf of Ipcon’s predecessor in interest. Costco initiated arbitration and moved to dismiss the lawsuit based on arbitration clauses in the agreements, and for sanctions. The lower court granted Costco’s motion to dismiss in favor of the pending arbitration proceedings and denied its motion for sanctions. The Second Circuit affirmed. The Court of Appeals held that Ipcon’s argument that Costco “never intended to honor” the contracts sounded in fraud in the inducement, and it was up to the arbitrators to decided the merits of such claim. The court also rejected Ipcon’s alternative argument that there had been no “meeting of the minds,” holding that the executed contracts constituted objective evidence of a meeting of the minds. Though finding that Ipcon’s argument was “weak,” the court affirmed the decision not to award Costco sanctions “given the confusing nature of the division of responsibility between courts and arbitrators as to contract formation.” Ipcon Collections, LLC v. Costco Wholesale Corp., No. 11-3944 (2d Cir. Oct. 9, 2012).

This post written by Ben Seessel.

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