Arbitration / Court Decisions

PARTIES AGREE TO DISMISSAL OF ACTION AFTER LIBERTY MUTUAL PETITIONS COURT TO APPOINT ARBITRATOR

August 28, 2012 by Carlton Fields

A lawsuit involving a reinsurance dispute has been voluntarily dismissed so that it may proceed in arbitration. On July 14, 2011, Liberty Mutual petitioned a court to appoint an umpire and compel arbitration pursuant to its reinsurance agreement with Continental Insurance under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Federal Arbitration Act. The dispute between the two parties arose after Liberty Mutual sought reimbursement from its reinsurer, Continental for amounts paid to a policyholder. Although the parties agreed that their contracts required them to arbitrate, and each had successfully chosen one arbitrator, they were unable to choose an umpire. Because their contracts did not specify a selection process for the umpire and the parties were unable to come to an agreement themselves, Liberty Mutual sought judicial intervention, asking for an order appointing one of five disinterested industry umpires or, alternatively, a retired Massachusetts judge. Although both parties submitted memoranda on the issue and the court held a hearing on the motion, the parties thereafter stipulated to a dismissal of the action and, pursuant to this, the court dismissed the action with prejudice. Liberty Mutual Insurance Co. v. Continental Insurance Co., Case No. 11-cv-11245-MBB (USDC D.Mass. May 7, 2012).

This post written by Brian Perryman.

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ENGLISH LAW APPLIES TO ARBITRATION AGREEMENT IN POLICIES OSTENSIBLY GOVERNED BY BRAZILIAN LAW WHERE LONDON IS ARBITRAL FORUM

August 23, 2012 by Carlton Fields

Insurance policies insuring various risks regarding the construction of a hydroelectric plant in Brazil provided that, if the parties could not resolve disputes through mediation, arbitration was to take place in London. Brazilian law, however, governed the policies and, furthermore, the policies gave Brazilian courts exclusive jurisdiction over policy disputes. The policies, and arbitration clauses within them, however, were silent regarding what law governed interpretation of the policies’ arbitration agreements.

The insurers (Sulamérica and others) gave notice of arbitration regarding a dispute, to which the insureds responded by obtaining an order from a Brazilian court enjoining arbitration. The insurers applied to the U.K. Commercial Court for an injunction to restrain the Brazilian court proceedings. In opposition, the insureds argued that, under Brazilian law, arbitration could not be commenced without their consent. The Commercial Court sided with the insurers, determining that the arbitration agreement was governed by English law. The appeals court dismissed the appeal and agreed with the Commercial Court that, given the choice of London as arbitral forum, the arbitration agreement had its “closest and most real connection” with English law. Sulamérica CIA Nacional de Seguros S.A. v. Enesa Engenharia S.A., Case No. A3/2012/0249, [2012] EWCA Civ. 638 (Q.B. May 16, 2012).

This post written by Ben Seessel.

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SECOND CIRCUIT REVERSES DENIAL OF SETTLEMENT CLASS CERTIFICATION IN AIG/GEN RE FINITE REINSURANCE SECURITIES LITIGATION

August 22, 2012 by Carlton Fields

In a case we have reported on previously, AIG purported to settle class action securities law claims arising from alleged finite reinsurance transactions between it and Gen Re. The district court, however, denied the parties’ joint motion for approval of the settlement, finding that it could not certify a settlement class because the “fraud-on-the-market” theory used to prove reliance was not viable under the facts of the case, resulting in a failure to satisfy the predominance requirement of Federal Rule of Civil Procedure 23(b)(3). The Second Circuit reversed, however, finding that the failure of the fraud-on-the-market theory was relevant only to a manageability analysis, and not to a predominance analysis. Since a court need not engage in a manageability analysis to certify a settlement class under the Supreme Court’s Amchem case, a settlement class could be certified. In re American International Group Securities Litigation, No. 10-4401-cv (2d Cir. Aug. 13, 2012)

This post written by John Pitblado.

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CALIFORNIA APPELLATE COURT REFUSES TO ENFORCE “UNCONSCIONABLE” ARBITRATION CLAUSE WHICH WAS NEVER AGREED TO

August 20, 2012 by Carlton Fields

Perry Sparks sued his former employer for wrongful termination in California state court. The defendant employer moved to compel arbitration, relying on an arbitration clause in its 2006 employee handbook. The trial court held, and the appellate court affirmed, that the motion to compel should be denied for several reasons: (1) the arbitration clause was included within a lengthy employee handbook and there was no specific acknowledgement or agreement by plaintiff to be bound by the clause; (2) the handbook did not constitute a contract, and any “agreement” found therein was rendered illusory by the defendant’s unilateral authority to alter the terms; (3) the specific rules referred to in the arbitration clause were not provided to plaintiff; and (4) the arbitration clause was unconscionable. The court side-stepped the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion by basing its holding alternatively on the non-existence of an agreement, which it held remains a gatekeeper inquiry properly addressed by the Court. Sparks v. Vista Del Mar Child and Family Services, B234988 (Cal. App. Ct. July 30, 2012).

This post written by John Pitblado.

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AWARD UPHELD AGAINST FOOTBALL PLAYER’S WORKERS’ COMPENSATION CLAIM FOR FAILURE TO SUPPORT APPLICATION OF STATE LAW

August 16, 2012 by Carlton Fields

A former professional football player, whose National Football League employment contract waived application of California workers’ compensation law, sought to vacate an arbitration award that denied the player’s pursuit of California workers’ compensation benefits for injuries that allegedly occurred over the course of the player’s football career. The court rejected the player’s arguments that the award constituted a violation of California and federal labor policy, and that the award reflected a manifest disregard of California law. The player’s injuries, the court explained, could not be sufficiently tied to events occurring in California. Without a “clear” indication that a California court would apply that state’s law, the award could not be deemed to violate California and federal labor policy, which in turn precluded the player’s contention that the award violated the Constitution’s Full Faith and Credit Clause. Matthews v. National Football League Management Council, Case No. 11-5186 (9th Cir. Aug. 6, 2012).

This post written by Michael Wolgin.

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