Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Arbitration / Court Decisions

Arbitration / Court Decisions

CALIFORNIA APPELLATE COURT AFFIRMS DENIAL OF ADR WHERE THERE WAS A POSSIBILITY OF CONFLICTING RULINGS WITH CONCURRENT LITIGATION

by

In a suit by residents of a mobile home park, of whom only some had signed leases that permitted arbitration or other ADR, against the owners of the facility, a California Appellate Court recently affirmed the lower court’s denial of the owners’ motion to compel arbitration. Under California law, the trial court has discretion to deny arbitration where there is a possibility of conflicting rulings on a common issue of law or fact. The lower court found, and the appellate court agreed, that all the plaintiffs had alleged that the mobile home park was inadequately maintained, and to permit arbitration for only some of the residents, while the others continued to litigate in court, would create the possibility of conflicting rulings on issues of law or fact. The appellate court further held that while an evidentiary showing is required under California law to show the existence of an agreement to arbitrate, no such showing is required for the court to find the “possibility” of conflicting rulings. Abaya v. Spanish Ranch I, L.P., No. A125298 (Cal. Ct. App. Nov. 11, 2010).

This post written by Michael Wolgin.

SIGNIFICANT ARBITRATION AWARD DECISIONS

by

A number of significant arbitration award decisions have been handed down in the last few weeks:

Employment

  • The District Court confirmed an arbitration award as to Main Line that was originally obtained against Main Line by a sister local union. The Court found Main Line in violation of the union’s collective bargaining agreement and that the grievance procedure was properly followed. Sheet Metal Workers’ Int’l. Assoc. Local Union 27 v. Main Line Mechanical, Inc., Case No. 10-01873 (USDC D. N.J. Oct. 25, 2010).
  • On cross motions for summary judgment, the District Court granted in part and denied in part HPD’s motion, finding that the arbitrator correctly found that HPD had cause to terminate plaintiff Shaw. The arbitration award was confirmed, except for as to attorneys’ fees and costs. Shaw Constructors v. HPD, LLC, Case No. 10-01874 (USDC E.D. La. Oct. 26, 2010).
  • The District Court for Puerto Rico granted Puerto Rico Telephone Co.’s motion for summary judgment finding that plaintiff had failed to establish that the arbitral decision on behalf of a terminated union member should be set aside. The arbitrator’s decision was confirmed. Union Independiente de EmpleadosTelefonicos de Puerto Rico v. Puerto Rico Telephone Co., Case No. 10-1667 (USDC D. P.R. Nov. 15, 2010).
  • A physician and his wife initiated an employment action against Washington Hospital Center, which resulted in arbitration. Dr. Tio moved for a vacatur of the award, which was denied by the District Court. Tio v. Washington Hospital Center, Case No. 08-00626 (USDC D.D.C. Nov. 30, 2010).

Jurisdictional Decisions/International Agreements:

  • The Sixth Circuit affirmed the District Court’s determination that it lacked jurisdiction to confirm an arbitration panel’s interim award denying class arbitration for lack of ripeness. The Court of Appeals ruled that Dealer Computer failed to demonstrate cognizable hardship. Dealer Computer Servs., Inc. v. Dub Herring Ford, Case No. 09-1848 (6th Cir. Oct. 14, 2010).
  • The Eastern District of Pennsylvania vacated its own prior confirmation of an arbitration award in favor of Aurum Asset Managers, finding that it lacked subject matter jurisdiction to confirm the award because Banco is entitled to sovereign immunity. Aurum Asset Managers, LLC v. Banco de Estado do Rio Grande do Sul, Case No. 08-00102 (USDC E.D. Pa. Oct. 13, 2010).
  • The Southern District of New York granted Japanese entity NTT DoCoMo’s motion to confirm an arbitration award, finding the US public policy did not preclude an arbitration panel from ordering specific performance of a stock purchase agreement. NTT DoCoMo v. Ultra D.O.O., Case No. 10-03823 (USDC S.D. N.Y. Oct. 12, 2010).
  • The Southern District of New York recently granted Swedish firm NYKCool’s motion to confirm an arbitration award and for post-award interest on a dispute related to Contracts of Affreightment. NYKCool A.B. v. Pacific Fruit Co., Case No. 10-03867 (S.D. N.Y. Nov. 24, 2010).

Manifest Disregard for the Law:

  • The Second Circuit recently issued a Summary Order affirming the District Court’s confirmation of an arbitration award in favor of the County of Nassau. The Court applied New York law and determined that the award was not in manifest disregard of law because it was not irrational, and that no arbitrator partiality was demonstrated. County of Nassau v. Chase, Case No. 09-3642 (2d Cir. Oct. 4, 2010).
  • The District Court for Arizona confirmed an arbitration award against AZ Holding, finding that the arbitrator’s failure to award attorneys’ fees and costs did not amount to manifest disregard of the law. AZ Holding, LLC v. Frederick, Case No. 08-00276 (USDC D. Ariz. Nov. 29, 2010).
  • The Southern District of New York denied Goldman Sachs’ motion to vacate an arbitration award and instead confirmed the award, ruling that the arbitrator did not manifestly disregard the law, even though he did not explicate the reasons for his ruling. Goldman Sachs Execution & Clearing L.P. v. The Committee of Unsecured Creditors’ Committee of Bayou Group, LLC, Case No. 10-05622 (USDC S.D. N.Y. Nov. 30, 2010).

This post written by John Black.

SECOND CIRCUIT AFFIRMS WAIVER OF REMOVAL BASED ON SERVICE OF SUIT PROVISION IN REINSURANCE TREATY

by

In two prior posts (December 8, 2009 and February 11, 2010), we reported on Dinallo v. Dunav Ins. Co., a case between a liquidator of an insurance company and the company’s reinsurer, Dunav Re. The Southern District of New York had remanded the action to New York State Court and denied reconsideration, holding that Dunav Re waived removal based on a service of suit provision in its reinsurance treaty with the insurer. Dunav Re appealed to the Second Circuit Court of Appeals, which, after de novo review, has now affirmed “substantially for the same reasons articulated by the district court.” In other cases, some parties have persuaded courts that the service of suit clause does not waive a right to arbitrate under an arbitration provision, because it merely provides for consent to jurisdiction and venue to enforce such an agreement to arbitrate. The same kind of argument was not persuasive in the context of this case. Dinallo v. Dunav Ins. Co., No. 09-5235 (2d Cir. Dec. 1, 2010).

This post written by Michael Wolgin.

SPECIAL FOCUS: STORM WARNINGS FOR THE REINSURANCE INDUSTRY

by

The concept of “storm warnings” triggering a duty to inquire and the starting of the running of statute of limitation periods has been prevalent in securities and other financial fraud litigation. Carlton Fields associate Paul Williams explores the application of this doctrine to reinsurance disputes in a Special Focus article.

This post written by Rollie Goss.

INSUREDS ORDERED TO ARBITRATE NOTWITHSTANDING ALLEGEDLY CONFLICTING CONTRACTUAL PROVISIONS

by

AIG insureds were directed to arbitrate their breach of contract, tortious breach of the covenant of good faith and fair dealing, unfair competition, and other causes of action based on AIG’s alleged misconduct in denying their claims for benefits. AIG moved to compel arbitration, citing a provision in the insurance contracts requiring any controversy to be settled by binding arbitration. Plaintiffs opposed, pointing to what they argued was a conflicting provision, which stated that “in the event of [the insurer’s] failure to pay any amount claimed to be due hereunder, we, at your request, will submit to the jurisdiction of a court of competent jurisdiction within the United States.” Relying on the presumption favoring arbitration, the court held that the contractual provisions were harmonious–all disputes were required to be resolved through arbitration but the insureds could bring suit in a court of their choice to enforce compliance with an arbitration award. The court also held that AIG could compel arbitration under an equitable estoppel theory, notwithstanding that it was not a signatory to the arbitration agreement. NS Holdings LLC v. Am. Int’l Group, Inc., Case No. 10-1132 (U.S.D.C. C.D. Cal. Nov. 15, 2010).

This post written by Ben Seessel.