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Arbitration / Court Decisions

VARYING RULINGS WITH RESPECT TO ARBITRATION AWARDS

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Courts Confirm Awards Finding Sufficient Support In Record: New Jersey Reg'l Council of Carpenters v. Patock Constr. Co., Case No. 08-4952 (USDC D.N.J. Mar. 11, 2009) (sufficient basis to find that respondent improperly subcontracted with a non-signatory subcontractor and lost work opportunity damages were proper); Tlumacki v. CAN Ins. Cos., No. A-4024-05T5 (N.J. Super. Ct. App. Div. Mar. 31, 2009) (sufficient evidentiary basis for the award existed and no showing of impartiality).

Confirming Awards Based On Arbitrator’s Interpretation Of Agreement: Blair Commc'ns, Inc. v. Int'l Bhd. of Elec. Workers, Local Union No. 5, Case No. 07-162 (W.D. Pa. Mar. 26, 2009) (“work preservation” agreement in collective bargaining agreement did not violate public policy); Global Reinsurance Corp. of Am. v. Argonaut Ins. Co., Case No. 07-7514 (USDC S.D.N.Y. Mar. 23, 2009) (arbitrator employed a plausible construction of reinsurance treaties’ definition of “loss occurrence,” and properly applied “follow the fortunes” doctrine).

Requests To Vacate: McQueen-Starling v. UnitedHealth Group, Inc., Case No. 08-4885 (USDC S.D.N.Y. Mar. 20, 2009) (remanding to arbitrator for clarification of unaddressed “retaliation claim” in discrimination case); Int'l Longshoremen’s Ass'n (Local 1575) v. Horizon Lines, Inc., Case. No. 08-1530 (USDC D.P.R. Mar. 16, 2008) (award “does not suffer from inanition or manifest errors of law”); Jones v. PPG Indus. Inc., Case No. 07-1537 (USDC W.D. Pa. Mar. 13, 2009) (no manifest disregard of law); Williams v. Mexican Rest. Inc., Case No. 05-841 (USDC E.D.Tex. Mar. 18, 2009) (confirming award since errors of fact did not justify vacating awards; see March 25, 2009 post); Kesterson v. NCO Portfolio Mgmt. Inc., Case No. 08-182 (USDC N.D. Ind. Mar. 27, 2009) (adopting Report and Recommendation that petition to vacate award be granted following entry of default judgment for defendant’s failure to appear).

Miscellaneous: A. Bauer Mech. Inc. v. Joint Arbitration Bd. of the Plumbing Contractors’ Ass'n, No. 06-3936 (7th Cir. Mar. 25, 2009) (affirming default judgment for failure to respond to counterclaim to enforce arbitration board’s ruling; Caraballo v. City of Chicago, Case No. 07-2807 (USDC N.D. Ill. Mar. 18, 2009) (requiring plaintiffs to arbitrate consolidated FLSA claims); Laundry, Dry Cleaning Workers & Allied Indus. Health Fund v. Jung Sun Laundry Group Corp Case, No. 08-2771 (USDC E.D.N.Y. Mar. 16, 2007) (adopting Report and Recommendation that award be confirmed; respondent failed to appear at arbitration and confirmation proceedings and no manifest disregard of law).

This post written by Brian Perryman.

COURT BINDS INSURER TO ARBITRATION AWARD EVEN THOUGH NOT A PARTY TO THE ARBITRATION AND IT HAD NO DUTY TO DEFEND

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On February 20, 2009, the California Court of Appeals handed down an opinion considering whether an arbitration award and resulting judgment could be considered a “loss” under the terms of an insurance policy. This action arose out of an insurance agreement issued by Executive Risk Indemnity, Inc. (“ERII”) to STARS Holding Company (“STARS”). A former client (“Jones”) of STARS initiated an arbitration proceeding against the firm for faulty investment advice. Though it was aware of the proceedings, ERII chose not to participate in the arbitration. An award was levied against STARS, and the California Court of Appeals determined that ERII was bound by that decision. This appeal arose out of the ensuing coverage action between Jones (to whom STARS assigned its rights under the underlying insurance policy) and ERII.

The court determined that because ERII was bound by the results of the arbitration proceeding between its insured, STARS, and the injured party, Jones, it could not now contest the validity of STARS’s liability to Jones or the amount of damages established by the judgment. The court concluded that “when an insurer (1) is duly notified of the underlying claim against the insured; and (2) is given a full opportunity to protect its interests, the resulting judgment – if obtained without fraud or collusion – is binding against the insurer in any later coverage litigation on the claim involving its insured.” This rule applied despite the fact that ERII had no contractual duty to defend under the indemnity-only policy at issue. Thus, the court reversed and remanded for further proceedings to determine if ERII was required to indemnify STARS. Executive Risk Indem., Inc. v. Jones, Case No. 05-444352 (Cal. Ct. App. Feb. 20, 2009).

This post written by John Black.

COURT ORDERS PLAINTIFF TO PRODUCE CLAIMS FILES AND REINSURANCE POLICIES

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Plaintiff Clarendon National Insurance Company (“Clarendon”) sued Atlantic Risk Management, Inc. (“Atlantic”), its third party claims administrator (“TPA”), based in part on its contention that it consistently relied on Atlantic’s coverage recommendations to its detriment. The trial court denied Atlantic’s motions to compel production of Clarendon’s claim files and copies of its reinsurance policies. The Appellate Division reversed, ordering Clarendon to produce all of its claims files for which Atlantic served as TPA, as well as copies of its reinsurance policies. The Court held that the claims files were relevant to plaintiff’s claims handling practices at issue, and that the reinsurance policies are required to be disclosed under New York’s procedural rule requiring production of all insurance policies which potentially cover the subject liability. Clarendon Nat’l Ins. Co. v. Atlantic Risk Mgmt. Inc., Nos. 5303N, 5303NA, 5303NB and 5303NC (N.Y. App. Div. Feb. 19, 2009).

This post written by John Pitblado.

APPELLATE COURT AFFIRMS DISMISSAL OF CEDENT’S LEGAL MALPRACTICE AND BREACH OF FIDUCIARY DUTY CLAIMS

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A California appellate court recently affirmed the dismissal of a cedent’s legal malpractice and breach of fiduciary duty claims pursuant to California's one-year statute of limitations. This dispute involved the legal representation of the cedent insurer with regard to the coverage of a claim tendered to the insurer by one of its insureds. In affirming the dismissal, the court found that the insurer sustained “actual injury” more than one year prior to bringing suit. The statute of limitations was not tolled because representation of the cedent ended more than one year prior to bringing the suit, and the claim for breach of fiduciary duty is also governed by the one-year statute of limitations. Norcal Mut. Ins. Co. v. Sedgwick, Detert, Moran & Arnold, Case No. B203357 (Cal. Ct. App. Mar. 19, 2009).

This post written by Daniel Crisp.

SECOND CIRCUIT’S FINDING THAT PLAINTIFF WAIVED THE RIGHT TO ARBITRATE IS BINDING ON THE DISTRICT COURT

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After Interdigital, Inc. (“Interdigital”) brought two suits against Nokia Corporation (“Nokia”) for patent infringement before the International Trade Commission and in the District of Delaware, Nokia petitioned the Southern District of New York for injunctive and declaratory relief and to compel arbitration pursuant to an arbitration clause contained in two contracts that allegedly licensed the patents to Nokia. The New York district court granted Nokia’s requested injunctive relief prohibiting Interdigital from proceeding against Nokia prior to the completion of arbitration proceedings and issued an order compelling arbitration, but the Second Circuit reversed the injunction and order compelling arbitration, concluding that Nokia waived its right to arbitrate its license claim through prior litigation and remanded the case to the district court. Upon remand, the district court stated that the Second Circuit’s finding that Nokia had waived its right to arbitrate is binding on the court and dismissed with prejudice the counts for injunctive relief and an order to compel arbitration. In regards to the requested declaratory relief that Nokia and its affiliates are licensed to the asserted patents, the court concluded that Nokia’s claim was a compulsory counterclaim and, thus, dismissed the third claim deferring to the earlier-filed action in the District of Delaware for the resolution of the claims. Nokia Corp. v. Interdigital, Inc., Case No. 08-1507 (USDC S.D.N.Y. Mar. 5, 2009).

This post written by Dan Crisp.