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Arbitration / Court Decisions

SHORT TERM ASSISTANCE FOR HAITI

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Haiti is one of sixteen members of the Carribean Catastrophe Risk Insurance Facility (CCRIC), which is a regional parametric trigger cat risk insurance pool that is intended to provide member governments with short term cash payments to bridge the gap between hurricanes or earthquakes and the receipt of contributions from other governments, organizations and individuals. The facility makes payments to member governments after a 14 day waiting period after a qualifying event. The CCRIF is scheduled to make a payment to the Government of Haiti of $8 million on January 26, which is more than 20 times the premium of $385,000 paid by Haiti for this coverage. The World Bank sponsored a donor conference when the CCRIF was founded in 2007, seeking international support for this facility, but pledges of support at that time from countries around the world, the World Bank and other organizations totaled only $47 million. This level of support may have been due in part to the fact that this was the first regional cat risk insurance pool of its kind, and there was uncertainty as to how effective it would be in accomplishing its goal. The CCRIF claims that it provides coverage to its members at approximately 40% less than commercially available coverage, when such coverage is available. While the amount of the CCRIF’s payment to Haiti is not impressive in light of the magnitude of this disaster, perhaps this event will prompt a re-evaluation of the level of international support for the CCRIF as a means of providing short term liquidity for immediate relief efforts for such disasters.

News reports have indicated that a large portion of the losses in Haiti are not insured, making the impact of this disaster for one of the historically poorest nations in the Western Hemisphere even more catastrophic. For sobering details about the impact of this disaster, including post-earthquake population movements in Haiti, details on the humanitarian response, and details about relief contributions from many sources around the world, go to the Relief Web, which is administered by the United Nations’ Office for the Coordination of Humanitarian Affairs.

This post written by Rollie Goss.

DISTRICT COURT SEES BLEMISHES IN BEAUTY PRODUCTS DISTRIBUTORS’ CLAIMS

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In one outgrowth of a thicket of litigation between Amway Global and a number of its former beauty product “independent business owners” (“IBOs”), a Michigan federal court confirmed an arbitration award in favor of Amway. Dispute arose when the IBOs allegedly breached agreements with Amway when they went to work for a competitor. The IBOs alleged that the contracts were unenforceable, as were the arbitration provisions. In Michigan litigation, the court compelled the parties to arbitrate, which they did over 16 days in Detroit in 2009. The arbitrator ruled in favor of Amway. Meanwhile, the IBOs had brought putative class action claims in Utah federal court, which claims were consolidated with two similar cases brought by Amway and its competitor, MonaVie products, and were pending (and remain pending) when the arbitration took place. When Amway filed an action in Michigan to confirm the arbitration award, the IBOs filed an identical action in Utah, seeking to vacate the award, and seeking to consolidate that action with the other consolidated Utah cases. The Michigan court refused the IBOs’ motion to stay or transfer to Utah, citing the “first to file” rule, as Amway had filed its action to confirm the award three days earlier than the IBOs filed their similar Utah action, and the IBOs failed to demonstrate a reason to depart from the rule. Amway Global v. Woodward, No. 09-12946 (E.D. Mich., Nov. 20, 2009).

This post written by John Pitblado.

A SHORT SUMMARY OF RECENT ARBITRATION DECISIONS

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This post briefly summarizes circuit and district courts’ recent decisions concerning arbitration awards, none of which vacate an award.

Awards Upheld:
National Postal Mail Handlers Union v. American Postal Workers Union, No. 08-5487 (D.C. Cir. Dec. 18, 2009) (agreeing with the district court that the arbitrator probably erred, but noting the deferential standard of review given to labor arbitration decisions, affirmed the decision of the district court, which upheld the award).

Mishra v. Doctors Hosp. of Augusta, LLC, No. 09-12548 (11th Cir. Dec. 3, 2009) (concluding that the district court did not err in compelling arbitration or in affirming the arbitration award).

Peng v. Gabay, Case No. 05-3939 (USDC D. N.J. Dec. 29, 2009) (denying plaintiffs’ motion for reconsideration as the plaintiffs’ arguments did not address any new evidence or controlling decisions and confirming the FINRA panel’s award, which, among other things, dismissed the plaintiffs’ claims for failure to comply with the panel’s discovery orders).

Cardell Fin. Corp. v. Suchodolski Assocs., Inc., Case No. 09-6148 (USDC S.D.N.Y. Dec. 16, 2009) (granting petition to confirm the award and denying cross-petition to vacate the award, finding that the panel neither exceeded authority nor exhibited a manifest disregard of the law and that the respondents were not denied a meaningful opportunity to present their case).

Matthew v. Papua New Guinea, Case No. 09-3851 (USDC S.D.N.Y. Dec. 9, 2009) (denying the petition to vacate the award; the petitioner failed to show the award was made in manifest disregard of the law or the arbitrator exceeded his authority, committed misconduct, or rendered an ambiguous or indefinite award).

Dailey v. Legg Mason Wood Walker, Inc., Case No. 08-1577 (USDC W.D. Pa. Dec. 8, 2009) (granting a motion for summary judgment to confirm a FINRA panel’s award; the plaintiff failed to establish that the award was completely irrational or that the arbitrator demonstrated evident partiality or acted in manifest disregard of the law).

MPJ, My Pers. Jet, A.V.V. v. Aero Sky, L.L.C., Case No. 09-693 (USDC W.D. Tex. Nov. 30, 2009) (accepting the conclusion from the Magistrate Judge’s Report and Recommendation that the plaintiffs’ motion to confirm the award should be granted; no procurement of award by evident partiality, arbitrator exceeding authority or misconduct, or corruption, fraud or undue means).

Francis v. Landstar Sys. Holdings, Inc., Case No. 09-238 (USDC M.D. Fla. Nov. 25, 2009) (denying the motion to vacate award in employment dispute; the arbitrator did not exceed her powers, and no basis existed to conclude that the award was made in manifest disregard for the law).

Damages:
Mason Tenders Dist. Council v. Circle Interior Demolition, Inc., Case No. 07-11227 (USDC S.D.N.Y. Dec. 22, 2009) (adopting the Magistrate Judge’s Report and Recommendation in its entirety, finding that the amount of damages is clear from the face of the award and that the plaintiff is entitled to interest).

Motion to Alter or Amend Judgment:
Waddell v. Holiday Isle, LLC, Case No. 09-0040 (USDC S.D. Ala. Dec. 10, 2009) (denying motion to alter or amend judgment that challenged, among other things, the court’s denials of the motion to vacate and supplemental motion to vacate).

Finality of Award:
Mitsubishi Heavy Indus., Ltd., v. Stone & Webster, Inc., Case No. 08-00509 (USDC S.D.N.Y. Sept. 29, 2009) (dismissing both the petition to vacate and the cross-petition to confirm, ruling that the award is not final and ready for review and refusing to address the parties’ arguments concerning whether part of the award should be vacated or confirmed).

This post written by Dan Crisp.

SECOND CIRCUIT AFFIRMS DISMISSAL OF SHAREHOLDER DERIVATIVE CLASS ACTION AGAINST REINSURER

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The Second Circuit Court of Appeals recently affirmed a district court decision (reported on this blog March 10, 2009), which dismissed a putative shareholder derivative class action against PXRE Group, Ltd., a publicly traded Bermuda reinsurer, and certain of its directors and officers. The plaintiff shareholders alleged that PXRE intentionally or recklessly understated loss projections in the immediate aftermath of Hurricanes Katrina, Rita and Wilma in 2005, in order to preserve its credit rating. Specifically, the plaintiffs claimed that PXRE failed to take river flooding into account in its loss modeling, and that its loss modeling software was inadequate for much-larger-than-typical hurricane loss modeling, and was based only on typical hurricane loss modeling. The plaintiffs alleged specific misleading statements in press releases that it argued were intended to deceive in advance of public offerings. In an effort to establish scienter, the plaintiffs’ Complaint included allegations purportedly obtained from “confidential informants” from PXRE, including actuaries, a Vice President in charge of loss modeling, and the Chief Actuary of a “peer company.” Citing heightened pleading requirements for securities/fraud type claims, the district court dismissed the case, as plaintiffs had failed to sufficiently allege the bases for its allegations. The Second Circuit court affirmed by short summary order, citing the district court’s “thorough, well-reasoned opinion.” In re PXRE Group, Ltd., No. 09-1370 (2d Cir. Dec. 21, 2009).

This post written by John Pitblado.

THIRD CIRCUIT RULES ARBITRATORS NOT CORRUPT

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Following the New Jersey District Court’s confirmation of an arbitrator’s award in favor of the defendant/appellees, the appellants filed an appeal to the Third Circuit challenging the final judgment. The challenge was based on appellant’s assertion that the arbitrator demonstrated bias by failing to ensure that certain documentary evidence was disclosed in a timely manner.

The Third Circuit affirmed, holding that the arbitrators’ conduct revealed no partiality or corruption and that the arbitrators were not guilty of misconduct in refusing to postpone the hearing or in refusing to hear pertinent evidence. Further, the Court ruled that the arbitrators did not impose an improper burden on appellants such that vacatur or modification of the award was required. Andorra Services v. Venfleet, Ltd., Case No. 08-4902 (3d Cir. Dec. 10, 2009).

This post written by John Black.