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Arbitration / Court Decisions

COURT ORDERS PRE-PLEADING SECURITY POSTED

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In a dispute regarding two quota share reinsurance agreements, Plaintiffs Arrowood Surplus Lines Insurance Company and Arrowood Indemnity Company sought an order requiring Gettysburg National Indemnity to post pre-pleading security pursuant to Connecticut statute. Under Connecticut law, before an “unauthorized insurer” can file a pleading in a case against it, it must either post a pre-pleading security, procure proper authorization to do business in Connecticut or seek an order from the court dispensing with pre-pleading security. The District Court for the District of Connecticut determined that Gettysburg National was required to post pre-pleading security in an amount determined by the contract under the reinsurance agreement between Arrowood and Gettysburg National. Thus, Gettysburg National was ordered to post pre-pleading security in the amount of $660,389. Arrowood Surplus Lines Ins. Co. v. Gettysburg Nat. Ins. Co., Case No. 09-000972 (D. Conn. Apr. 6, 2010).

This post written by John Black.

SECOND CIRCUIT GRANTS MOTION TO STAY PENDING APPEAL OF DECISION VACATING ORDER THAT AN ARBITRATION MUST COMMENCE ANEW

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On August 3, 2009, we reported on a district court vacating its prior order that the arbitration must commence anew and reappointing an arbitrator to the panel after the arbitrator’s health improved. Insurance Company of North America and INA Reinsurance (collectively, “INA”) appealed and also moved for a stay pending appeal arguing that, if the circuit court does not grant a stay, an unauthorized panel would soon hear a key substantive motion, which would potentially compromise INA’s future rights and squander resources in duplicative proceedings. Public Service Mutual Insurance Company moved to dismiss the appeal for lack of jurisdiction. The Second Circuit summarily granted the motion for a stay pending appeal and denied the motion to dismiss. Insurance Co. of N. Am. v. Public Serv. Mut. Ins. Co., No. 09-3640 (2d Cir. Jan. 21, 2010).

This post written by Dan Crisp.

REINSURED ESTOPPED TO AVOID ARBITRATION CLAUSE

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Pronational Insurance Company brought suit against AXA Liabilities Managers, Inc. (AXA’s claims-handling subsidiary), alleging several common law claims in connection with AXA Re’s denial of coverage for a claim made by Pronational under a reinsurance contract. AXA LM moved to compel arbitration under the reinsurance contract, to which Pronational and AXA Re only were signatories. Pronational objected on the basis that AXA LM was not a signatory. The Court granted the motion to compel arbitration, finding that Pronational was equitably estopped to attempt to avoid the arbitration clause in the contract under which the subject claims were made. The reasoning for this decision is contained in a Magistrate Judge’s Report and Recommendation, which the district judge adopted in a very short Order. Pronational Ins. Co. v. AXA Liabilities Managers, Inc., Case No. 08-2022 (USDC N.D. Ala. January 28, 2010).

This post written by John Pitblado.

FIRST CIRCUIT TO DISTRICT COURT: CLARIFY YOUR POSITION ON HOW THE ARBITRATION SHOULD PROCEED

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In this dispute, the First Circuit previously reversed the confirmation of an arbitration award concluding that the award was in manifest disregard of law and remanded the case for the entry of an order vacating the award. Without addressing whether the arbitration panel should be reconstituted or not, the district court entered an order vacating the award and remanding the matter to FINRA. The Defendants argued against the remand to FINRA because the First Circuit did not specify such a remand. Treating the Defendants’ motion as a Rule 60(b) motion, the Plaintiffs argued that the motion did not demonstrate entitlement to relief pursuant to Rule 60(b)’s requirements. The district court denied the Defendants’ motion in a brief electronic order “[e]ssentially for the reasons stated in [the Plaintiffs’] Opposition.” The Defendants appealed both the district court’s remand order and electronic order denying the Rule 60(b) motion.

Before addressing the Appellants’ arguments, the First Circuit addressed the Appellees’ request to recall the earlier mandate in light of Hall Street Assocs. v. Mattel, 552 U.S. 576 (2008). Denying this request, the First Circuit noted that it had not yet determined whether Hall Street could be reconciled with the circuit’s manifest disregard case law and found that the court was not faced with such circumstances to warrant a recall of the mandate. In response to the Appellants’ argument that the remand order contravened the mandate, the First Circuit disagreed, stating that the district court was not limited to perform only those actions specifically listed in the mandate and finding that the mandate did not explicitly or implicitly prohibit the district court from remanding the matter to FINRA. The First Circuit then noted that the Appellants’ Rule 60(b) argument was mostly a reformulation of their argument against the remand order and affirmed the district court’s remand order. However, the First Circuit did address an issue with the brief electronic order by remanding the matter to the district court so that the court, after considering the parties’ arguments, could specify whether: (1) the original panel should be reconstituted; (2) a new panel should be constituted; or (3) FINRA should rule on this issue in the first instance, in accordance with FINRA’s practices and procedures. Kashner Davidson Sec. Corp. v. Mscisz, No. 09-1356 (1st Cir. Apr. 1, 2010).
This post written by Dan Crisp.

A HORSE RACE TO JUDGMENT

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Continental Casualty Corporation sued its reinsurer, AXA Global Risks (UK) Ltd., in Missouri federal court seeking, among other things, a temporary restraining order and preliminary injunction to prevent AXA from proceeding with a similar action AXA filed against Continental in a British court. The parties dispute AXA’s obligation to reinsure a portion of a $23,072,979 judgment against Continental in a coverage action between Continental and its insured, a construction company, under a certain reinsurance slip between Continental and AXA. In response, AXA moved to dismiss or stay the Missouri action in favor of the British lawsuit, which was filed approximately six weeks earlier than Continental’s suit. The Court rejected both parties’ arguments, refusing to enjoin prosecution of the British action, and refusing to stay or dismiss the case on its own docket. The court stated, citing Third Circuit precedent, that “when related cases are before two different sovereigns, the appropriate procedure is to permit both jurisdictions to proceed, with any decision of one becoming res judicata on the other.” Continental Cas. Corp. v. AXA Global Risks (UK) Ltd., Case No 09-00335 (USDC W.D. Mo. April 2, 2010).

This post written by John Pitblado.