On July 20, 2007, this blog reported on a dispute relating to the mass defection of fourteen facultative reinsurance brokers from the U.K. based Marsh Services Limited to Integro, a competitor. A suite was filed in US District Court in New York, which the Court declined to dismiss on jurisdiction grounds. In a parallel suit in the UK, a judge declined to enjoin the prosecution of the US action, but the UK Court of Appeals has allowed an emergency appeal, entering an injunction to restrain the US proceedings. This opinion contains an interesting discussion of the relationships between the UK and US courts, as influenced by an EU regulation relating to employment contracts. Samengo-Turner v. J & H Marsh & McLennan (Services) Limited, [2007] EWCA Civ 723 (July 12, 2007).
Arbitration / Court Decisions
UK Court Assesses Costs in Action Deemed Largely Fruitless
The UK Commercial Court, Queen’s Bench Division, has assessed costs in favor of Equitas against broker Horace Holman in an action in which Equitas sought an accounting and other remedies from Horace Holman. The Court found that the action was “largely fruitless,” in part due to the status of Horace Holman’s records, but that Equitas was nevertheless entitled to have its costs paid by Horace Holman. This opinion demonstrates the different approach that UK and US courts take with respect to the assessing of the costs of litigation. Equitas Ltd. v. Horace Holman & Co., [2007] EWHC 903 (Comm) (April 27, 2007).
Bermuda Forum Section Provision Does Not Apply to Insurance Policies that were Part of an Overall Rent-a-Captive Insurance Program
The liquidator of Legion Insurance Company and Villanova Insurance Company sued three companies to recover premiums owed for insurance provided in a rent-a-captive workers compensation insurance program. A defendant sought to move to dismiss based upon a Bermuda forum selection clause contained in a shareholder agreement it had entered into with an affiliate of the controlling shareholder of the insurance companies. The shareholder agreement was part of the overall rent-a-captive insurance program, and the insurance policies at issue were also part of that program. The district court held that the forum selection provision did not apply to the dispute over policy premiums for two reasons: (1) the forum provision was not part of the insurance policies, and hence the insurance companies were not bound by it; and (2) the forum clause, by its terms, applied only to disputes concerning the shareholder agreement, and hence did not cover disputes concerning the insurance policies. Rohrbaugh v. U.S. Management, Inc., Case No. 05-3486 (USDC E.D.N.Y. July 2, 2007).
Arbitration Awards, Part II
Three recent court opinions addressed the confirmation of arbitration awards on fairly traditional grounds:
- In a case involving reinsurance, the court found that an arbitration panel did not exceed its authority in entering the award it entered. The dispute was whether a West Virginia Court had already determined the scope of contractual obligations later ruled upon by the arbitration panel. HCC Aviation Insur. Group, Inc. v. Employers Reinsurance Corp., Case No. 05-11118 (USCA 5th Cir. June 28, 2007).
- In Pirooz v. MEMC Electronic Materials, Inc., Case No. 06-2002 (USCA 8th Cir. July 2, 2007), the Court of Appeals, in a per curiam opinion, affirmed a “well-reasoned” district court opinion that confirmed an arbitration award over objections that the arbitrator had exceeded his authority, entered an award that failed to draw its essence from the agreement and evidenced manifest disregard for the law.
- A US District Court, in The Upper Deck Company v. American International Specialty Lines Ins. Co., Case No. 05-1945 (USDC SD Cal. June 28, 2007), confirmed an arbitration award, rejecting contentions that the award “implausibly interpreted” a contract and evidenced manifest disregard for the law.
These three cases all involved arguments that essentially disputed the merits of the arbitration awards and the judgments made by the arbitrators, arguments which are rarely successful.
Arbitration Awards – Part I
There have been a large number of Court of Appeal and District Court opinions recently relating to arbitrations awards. This week, we present a two-part post to present these opinions. Today's post concerns evident partiality and venue, while tomorrow's will address the scope of arbitrators' authority and manifest disregard of law.
- In a potentially important opinion, the Second Circuit has issued a fairly detailed analysis of a situation in which an arbitrator came to be aware of a business relationship between his company and the parent company of one of the parties to the arbitration. Rather than investigate, he walled himself off with a “Chinese Wall” in an attempt to remain ignorant, and did not disclose his lack of investigation of the potential conflict. The District Court held that this constituted evident partiality, and vacated the arbitration award. The Court of Appeals affirmed. This case contains a good discussion of the legal principles relating to evident partiality. Applied Industrial Materians Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., Case No. 06-3297 (USCA 2d Cir. July 9, 2007).
- In Toroyan v. Barrett, Case No. 06-4422 (USDC SD N.Y. July 10, 2007), the court confirmed an arbitration award over objections of evident partiality and manifest disregard of law. The evident partiality claim was based on the fact that parties to the arbitration had contributed to maintaining an endowed chair in a different school of the University where the arbitrator was a professor. The court rejected the evident partiality claim for three reasons: (1) there was no indication that the arbitrator knew of the relationship; (2) the relationship was immaterial; and (3) the objector should have known about the issue and raised it prior to losing the arbitration.
- In The Ridge at Red Hawk, LLC v. Schneider, Case No. 06-4162 (USCA 10th Cir. July 9, 2007), the 10th Circuit affirmed a venue decision by an arbitration panel. This case is intersting in part because it involves parallel proceedings in a Texas state court and a Utah federal court, with Rooker-Feldman Doctrine implications. The courts concluded that a somewhat unique arbitration provision in the contract underlying the dispute allowed an appeal of the venue issue only if the determination was strictly legal in nature, and the arbitration award indicated that the venue determination was a combination of a legal and factual determination. Therefore, the courts dismissed the federal court challenge to the arbitration award.
- In ReliaStar Life Ins. Co. v. Certain Underwriters at Lloyd's London, Case No. 06-3845 (USDC D Minn. Feb. 1, 2007), the court confirmed an arbitration award by agreement of the parties. The Stipulation filed with the court includes a copy of the award.