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Arbitration / Court Decisions

CITING CONCEPCION, FIFTH CIRCUIT AFFIRMS NO CLASS ARBITRATION RULING

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Jeffrey Reed brought a putative class action case against his alma mater, “on-line” school, Florida Metropolitan University, Inc. (“FMU”), in Texas state court, alleging that FMU solicited students in violation of certain provisions of the Texas Education Code. FMU removed to federal court, and moved to compel arbitration under the parties’ agreement. The court granted the motion to compel, and also refused to address the issue of whether class arbitration was allowable, which Reed had raised, finding it should be decided by the arbitrator. At arbitration, Reed moved for a “Clause Construction Award” allowing the arbitration to proceed on a class basis. Over FMU’s objection, the arbitrator ruled in Reed’s favor. Reed moved to confirm and FMU moved to vacate the ruling. The district court vacated the award, finding it exceeded the scope of the arbitrator’s power under the Federal Arbitration Act. Reed appealed. The Fifth Circuit Court of Appeals affirmed, based on the U.S. Supreme Court’s holdings in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct 1758 (2010) and AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), emphasizing that the arbitrator forced the parties into class arbitration without a contractual basis for doing so. Reed v. Florida Metropolitan Univ., Inc., No. 11-50509 (5th Cir. May 18, 2012).

This post written by John Pitblado.

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CAPTIVE REINSURANCE LITIGATION STAYED PENDING SUPREME COURT DECISION

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A putative class action against HSBC and its affiliates asserting violations of the Real Estate Settlement Procedures Act of 1974 was stayed in part pending the outcome of First American Financial Corp. v. Edwards, a case expected to be resolved this term by the U.S. Supreme Court. The named plaintiff seeks to represent, among others, consumers whose residential mortgage loans were included within HSBC’s captive mortgage reinsurance arrangements. Among other things, plaintiff seeks classwide resolution of whether the captive reinsurance arrangements constituted unlawful kickbacks from the private mortgage insurer defendants. The district court issued a partial stay of the action pending the decision in First American, where the Supreme Court is expected to rule whether a private purchaser of real estate settlement services has standing under Article III of the Constitution to assert a RESPA claim absent a showing that the alleged violation affected the price, quality, or other characteristics of the settlement services provided. McCarn v. HSBC USA, Inc., Case No. 12-375 (USDC E.D. Cal. Apr. 12, 2012).

This post written by John Black.

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SETTLEMENT REACHED IN DISPUTE OVER REINSURANCE ALLEGEDLY OWED TO LIQUIDATING INSURER

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The New Hampshire Insurance Commissioner, as liquidator for The Home Insurance Company, recently settled a breach of contract suit to collect reinsurance payment from reinsurer, Repwest Insurance Company. The commissioner had alleged that Repwest waived any defenses to payment by failing to timely object to the commissioner’s notice of claim made in liquidation under a reinsured Home insurance policy. In its answer, Repwest had denied that it had received proper notice, and had asserted, among other defenses, that Repwest was entitled to setoff certain claims it had against another reinsurer against its obligations to Home. Sevigny v. Repwest Insurance Co., Case No. 1:11-cv-00405 (USDC D.N.H. Apr. 23, 2012).

This post written by Michael Wolgin.

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MOTION TO SET ASIDE DISCOVERY ORDER ON LOSS RESERVES DENIED

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In the latest development in the ongoing litigation between Granite State Insurance Company and Clearwater Insurance Company, Granite unsuccessfully moved to set aside a magistrate judge’s discovery order. As we reported in July 2011, Granite was ordered to produce certain asbestos loss reserve documents in response to Clearwater’s request for production of documents. The motion objecting to that order was denied, the district judge concluding that, first, the magistrate judge’s order was not contrary to law as the crucial issue was not merely, as Granite suggested, whether a ceding insurer has any practices in place regarding providing notice and, second, the order was not “clearly erroneous” because the notice procedures were relevant to the ultimate issue in dispute. The district judge explained that Granite’s arguments were largely tied to the merits of its defenses rather than to the permissibility of the discovery sought. Granite State Insurance Co. v. Clearwater Insurance Co., Case No. 09-10607 (USDC S.D.N.Y. Apr. 20, 2012).

This post written by John Black.

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APPELLATE COURT AFFIRMS DENIAL OF MOTION TO COMPEL ARBITRATION

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A California appellate court upheld denial of a motion to compel arbitration of an underlying labor employment dispute. Martha Hoover brought a wrongful termination class action against American Home Life Insurance Company, arising from its termination of her agent contract, which American Home characterized as creating an independent contractor relationship with Hoover. Her claims were brought under state labor laws, relying on her assertion that she and other similarly situated agents should be treated as statutory employees, and that American Home violated the class members’ statutory employment rights. American Home moved to compel arbitration of the dispute pursuant to the Collective Bargaining Agreement that incorporated Hoover’s agency contract, and which contained an arbitration clause. Nevertheless, the trial court denied the motion to compel, finding that, (1) the agreement did not apply to Hoover’s claims, to the extent she was a statutory employee, and so was not in dispute; and (2) even if it did, American Home waived its right to arbitration by waiting a year to invoke its right to arbitrate. Hoover v. American Income Life Ins. Co., No. E052864 (Cal. App. May 16, 2012).

This post written by John Pitblado.

See our disclaimer.