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Arbitration / Court Decisions

SUIT AGAINST LLOYD’S DISMISSED FOR LACK OF JURISDICTION BECAUSE ONE OF THE NAMES SHARED CITIZENSHIP WITH PLAINTIFFS

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A federal district court granted the motion of certain underwriters at Lloyd’s of London to dismiss the suit for lack of subject matter jurisdiction, holding that when determining the diversity of citizenship of the parties in a case involving Lloyd’s, all the “names” must be taken into consideration. When federal jurisdiction is founded on 28 U.S.C. § 1332, the parties must be diverse in their citizenship, so that each defendant is a citizen of a state different from each plaintiff. In this case, the plaintiffs, citizens of Louisiana, claimed that an insurance policy with Lloyd’s covered property damaged in Hurricane Katrina. Lloyd’s presented the court with an unsworn declaration that one of the names on the policy also was a citizen of Louisiana. Rejecting plaintiffs’ technical arguments about the unsworn nature of the declaration, the court dismissed the case because the diversity requirement was not met. St. Charles Property Association v. Certain Underwriters at Lloyd’s London, Case No. 09-2504 (USDC E.D. La. Oct. 2, 2009).

This post written by Brian Perryman.

SPECIAL FOCUS: THIRD CIRCUIT TELENOR DECISION REGARDING THE PRECLUSIVE EFFECT OF A COLLUSIVE FOREIGN COURT JUDGMENT AND THE NECESSITY FOR A TRIAL TO DETERMINE THE ARBITRABILITY OF A DISPUTE

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On October 26, 2009 we posted a brief item on Telenor Mobile Communications AS v. Altimo Holdings & Investments Limited, 07-4974 (2d Cir. Oct. 8, 2009), in which the Third Circuit held that: (1) the district court did not err in not holding a trial to determine whether a dispute before it was arbitrable based upon a dispute as to whether the person who signed the contract containing an arbitration provision had apparent authority to sign the document on behalf of a corporate party, when the factual record clearly demonstrated that the signer had apparent authority to do so; and (2) the district court did not act in manifest disregard of law by confirming an arbitration award that failed to give preclusive effect to a collusive judgment of a Ukrainian court adjudicating an issue before the arbitration panel. Blogmaster Rollie Goss submits a more detailed SPECIAL FOCUS post on this interesting case.

This post written by Rollie Goss.

SECOND CIRCUIT AFFIRMS CONTEMPT ORDER IN KYISTAR DISPUTE

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In a companion opinion to the Second Circuit affirming the district court’s grant of a motion to confirm the final arbitral award in a dispute involving Kyivstar G.S.M. (“Kyivstar”) (see our October 26, 2009 post), a Ukrainian mobile telecommunications company, the Second Circuit has affirmed the decision of the district court finding Storm LLC (“Storm”) and its corporate parents (collectively, the “Respondents”) in civil contempt for the failure to comply with the final arbitration award and denying the Respondents’ motion for an order to amend the contempt order to delay sanctions and eliminate the requirement that Storm deposit its shares of Kyivstar with the court to secure compliance with the award.

In this appeal, Storm’s corporate parents disputed the determination that they were alter egos of Storm, which made them jointly liable for contempt, and the conclusion that the award required Storm’s affiliates to divest their interest from a Turkish telecommunications company rather than Astelit, LLC, a Ukrainian telecommunications company, and asked the circuit court to remand the divestiture question to the arbitration panel for clarification. The Second Circuit affirmed the decisions of the district court, stating that the findings of fact supported the conclusion that the corporate parents were alter egos of Storm and concluding that no support existed for a remand of the divestiture question because the award was unambiguous and the district court’s legal analysis was correct. Telenor Mobile Communications AS v. Storm LLC, No. 07-6929 (2d Cir. October 8, 2009).

This post written by Dan Crisp.

COURT DENIES MOTION TO ORDER DEPOSITION IN CHICAGO FOR USE IN A PRIVATE, FOREIGN ARBITRATION

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In connection with a train derailment in Graniteville, South Carolina, Norfolk Southern Corp., Norfolk Southern Railway Co., and General Security Insurance Co. (collectively, “movants”) sought an order to require the deposition in Chicago of the former counsel to ACE Bermuda Ltd. for use in a private arbitration in England. The movants claimed that 28 U.S.C. Section 1782 allowed the Illinois district court to order such a deposition, however, Section 1782 does not explicitly address private arbitrations. In denying the motion, the court interpreted the reference to “arbitral tribunals” in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), to include state-sponsored arbitrations but exclude purely private arbitrations and the court agreed with pre-Intel circuit court decisions that Section 1782’s legislative history did not support the inclusion of private arbitral tribunals within the scope of the statute. In re Norfolk S. Corp., Case No. 09-3092 (USDC N.D. Ill. June 15, 2009).

This post written by Dan Crisp.

FEDERAL COURT REFUSES TO ENJOIN LATER STATE COURT CLAIMS RELATING TO PREVIOUSLY LITIGATED REINSURANCE TREATIES

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A federal court in Texas denied Aon Re’s motion for preliminary injunction against the defendant TIG Insurance Company. Aon Re moved to enjoin TIG from bringing claims arising out of two reinsurance treaties entered into in the late 1990’s that had been the subject of prior litigation, also in federal court in Texas, and which was resolved on summary judgment in Aon Re’s favor on statute of limitation grounds in 2005. However, TIG subsequently brought claims against Aon Re, based at least in part on issues pertaining to the two treaties, in federal court in Texas, which it withdrew, and then re-filed in state court in California.

Aon Re sought an injunction from the Texas federal court to enjoin TIG from prosecuting any further claims arising from the treaties, as it contended those issues had all been resolved. TIG cited the Anti-Injunction Act, which generally disfavors a federal court’s injunction preventing a state court from exercising its jurisdiction. Aon Re cited the “relitigation” exception to the Anti-Injunction Act, but the Court held that Aon Re failed to demonstrate, under the more strict standards required to obtain injunctive relief, that the prior judgment rendered based on statute of limitations grounds was a judgment “on the merits,” entitling it to the preclusive effect. The court essentially left it to the state court in California to decide for itself whether Aon Re was entitled to preclusion, based on the prior judgment in its favor. Aon RE, Inc. v. TIG Ins. Co., No. 3:09-cv-0300-B (USDC N.D. Tex. Sept. 28, 2009).

This post written by John Pitblado.