This case presents an interesting arbitration process issue. In 2004, the parties to this action participated in an arbitration, resulting in a $10,000 award to defendant, Smith Barney. Subsequently, plaintiff filed an action to vacate, and defendant moved to confirm the award. In February, 2005 a California district court confirmed the arbitration award. Plaintiff then filed a motion under Rule 60 of the Federal Rules of Civil Procedure to vacate that order, and later filed a Renewed Rule 60 Motion. The renewed motion was filed on the grounds that defendant and its counsel had committed “fraud. . . misrepresentation or other misconduct” by making material misrepresentations to the court. Plaintiff also sought discovery under its motion on the basis of newly discovered case law and evidence. The court granted “limited’ discovery. Plaintiff proceeded to use the limited permission granted by the court to “bombard” Defendant with voluminous discovery. Concluding that the Plaintiff’s discovery requests were “inappropriate in breadth” and “went well beyond the limited subjects referred to in the court’s. . . [o]rder,” the Court denied plaintiff’s motion to compel and granted Smith Barney’s motion for protective order. Sathianathan v. Smith Barney, Case No. C-04-02130 SBA (JCS) (N.D. Cal. Aug. 24, 2007).
Arbitration / Court Decisions
ARBITRATION AWARD CONFIRMATION DECISIONS
Four recent opinions dealt with arbitration award confirmation on a variety of bases.
- In Cuie v. Nordstrom, Inc., No. 07-1114 (3d Cir. Aug. 14, 2007) the court affirmed the denial of a motion to vacate an arbitration award. The Court characterized the arguments of the movant as being nothing more than that the arbitrator had made the wrong decision.
- In Coastal Caisson Corp. v. E. E. Cruz/NAB/Frontier-Kemper, Case No. 05-7462 (USDC S.D. N.Y. Aug. 10, 2007), the court had vacated an initial arbitration decision as being in manifest disregard of law. The court confimed a second award entered after the matter was remanded to the panel. This decision also addresses the availability of pre-judgment interest.
- In Hutchinson v. Farm Family Casualty Ins. Co., Case No. 99-2584 (USDC D. Conn. Aug. 20, 2007), the court denied a motion to vacate an award based upon the contention that the panel's decision with respect to choice of law exceeded its authority.
- In New Regency Productions, Inc. v. Nippon Herald Films, Inc., No. 05-55224 (9th Cir. Sept. 4, 2007), the court affimed the vacation of an award on the basis of evident partiality on the part of the arbitrator. The arbitrator took a new employment position and failed to investigate a potential conflict. The court held that he was under a duty to investigate potential conflicts and make an appropriate disclosure, and that the fact that the arbitrator did not have actual knowledge of a conflict did not excuse this breach of duty.
ILLINOIS FEDERAL COURT RULES PARTY’S CONSENT TO JURISDICTION OF STATE COURT IS NOT A WAIVER OF THE STATUTORY RIGHT TO REMOVE
Plaintiff, Continental Casualty Company’s (“CCC”) and defendant, LaSalle Re Limited (“LaSalle Re”) were parties to several reinsurance agreements, including one Excess of Loss Retrocession Agreement which contained an arbitration clause. In April 2004, the parties executed a Release Agreement, terminating all obligations under the Reinsurance Agreements. Pursuant to the Release Agreement the parties consented to the jurisdiction of Illinois courts in connection with any legal action arising out of the Agreement.
A dispute subsequently arose pertaining to the Retrocession Agreement, and LaSalle Re made a demand for arbitration. In response, CCC filed an action in Illinois state court seeking a declaration of its rights under the Release Agreement. Specifically, CCC argued that the Release Agreement extinguished all obligations under the Retrocession Agreement, including the obligation to arbitrate. Subsequently, LaSalle removed the case to federal court and CCC filed an emergency motion for remand. CCC argued that the forum selection clause in the Release Agreement prevented the case from proceeding in federal district court. The court disagreed and denied CCC’s motion concluding that “[a] general consent to the jurisdiction of a particular court does not. . . adequately demonstrate a waiver of defendant’s statutory right to remove.” Continental Casualty Co. v. LaSalle Ltd., Case No. 07 C 4228 (N.D. Ill. Aug. 16, 2007).
Nine days later, CCC filed a motion in the federal court to stay the arbitration proceedings. (see CCC’s Motion to Stay Arbitration and CCC’s Memorandum of Law in Support of Motion to Stay Arbitration). In connection with its motion, CCC attached copies of the Arbitration Request and the Retrocession Agreement as exhibits to the Amended Complaint (See Ex. 1). To date, the court has not ruled on this motion.
CALIFORNIA SUPREME COURT DENIES DISCOVERY OF NONPARTY LIABILITY INSURER’S REINSURANCE AGREEMENTS
The issue presented in this case was whether a statutory provision authorizing limited discovery of a defendant’s insurance coverage information authorized pretrial discovery of a nonparty liability insurer’s reinsurance agreements for purposes of facilitating settlement of an underlying tort action. In a 4-3 decision, the court concluded that while such discovery may be appropriate in limited circumstances, such as where the reinsurance agreement was functioning the same way as a liability policy or where the reinsurance agreement was itself the subject matter of the litigation at hand, the present case did not present such narrow circumstances. The dissenting opinion stated that the relevant statute “unambiguously provides for discovery of reinsurance policies, by including ‘any agreement under which any insurance carrier may be liable to . . . indemnify or reimburse for payments made to satisfy the judgment.’” Catholic Mutual Relief Society v. Superior Court of Los Angeles, S134545 (Cal. Sup. Ct. Aug. 27, 2007).
DEVELOPMENTS IN TWO PRIOR REPORTED UK MATTERS REGARDING BROKERS AND NORTH KOREA
In posts to this blog on September 22, 2006 and February 21, 2007, we reported on developments in a case in UK courts alleging fraud by a broker in the placement of reinsurance and a fraudulent, undisclosed binder addendum that substantially increased the brokers' compensation. The UK Court of Appeals has affirmed decisions of the lower court in this matter. R + V Versicherung AG v. Risk Insurance and Reinsurance Solutions SA, [2007] EWCA Civ. 807 (July 30, 2007).
In a December 5, 2006 post, we described a dispute over allegedly fraudulent reinsurance claims from North Korean insurers. The insurers filed suit in the UK to enforce the judgment of a North Korean court, and a judge has stricken a defense alleged by the reinsurers that they had reached a settlement of the claims. The court found that there was no reasonable prospect that the defense could be established given the absence of a written confirmation of the alleged settlement. Other defenses remain at issue. Korea National Insurance Corp. v. Allianz Global Corporate & Specialty AG, [2007] EWHC 1744 (Comm. July 24, 2007).