Arbitration / Court Decisions

England Court of Appeals Denies Request to Reopen Case Upon Allegation of Fraud, Asserting Lack of Jurisdiction

July 6, 2007 by Carlton Fields

This case involves claims by Lloyds names against Lloyds, alleging that they had been misled by misrepresentations by Lloyds of its syndicate auditing and operational controls into becoming members of Lloyds syndicates. The names later suffered serious financial losses with respect to asbestos claims. The names lost the case, but then discovered additional evidence which they contended demonstrated that the judge had been misled by Lloyds. The issue before the court was whether the England and Wales Court of Appeals had jurisdiction to reopen a case upon an allegation that the Court had been misled by a party’s evidence and by fraud. The applicants, who were names at the Society of Lloyds, asserted that under the jurisprudence of Taylor v. Lawrence, 2003 QB 528, the Court had authority to reopen the case.

The Court disagreed, noting that, unlike the present case, Taylor v. Lawrence concerned misconduct by a court in that the judge was said to have been biased. Taylor v. Lawrence did not contain authority for extending the recognition of jurisdiction to reopen an appeal on the grounds of bias to a case where the allegation was not that the court had misbehaved, but that the court had been misled by one of the parties. The court cited authority directly denying the existence of jurisdiction in the latter case, providing that the proper remedy was to bring a collateral action to set aside the judgment allegedly obtained by fraud. Jaffray v. The Society of Lloyds, [2007] EWCA Civ 586 (June 20, 2007).

Courts Rule on Confirmation of Arbitration Awards

July 3, 2007 by Carlton Fields

Seven recent decisions addressed whether arbitration awards should be confirmed or vacated:

In Choice Hotels International, Inc. v. Shiv Hospitality, LLC, No. 05-2201 and 06-1043 (USCA 4th Cir. June 20, 2007), the Court affirmed a District Court's confirmation of an arbitration award, because a motion to vacate the award was untimely under the Federal Arbitration Act, which provides that an award may be confirmed within one year of its entry, but that a motion to vacate an award must be filed within three months of the entry of an award judgment. The Court confirmed the District Court's application of this rule to confirm the award when the motion to vacate was not filed within the required three month period.
In Downer v. Siegel, No. 06-30159 (USCA 5th Cir. June 13, 2007), the Court vacated a District Court Order vacating an arbitration award on the basis that the dispute was not subject to arbitration under the arbitration provision of an asset management agreement. The claimants attempted to avoid arbitration by naming the broker individually, instead of the brokerage firm with which they had contracted. The Court of Appeal held that the dispute was arbitrable because it necessarily related to the asset management agreement. The case was remanded for confirmation of the award.
In Sheet Metal Workers' International Assoc. Local 15 v. Law Fabrication, LLC, No. 06-16185 and 07-10356 (USCA 11th Cir. June 26, 2007), the Court affirmed the confirmation of a labor arbitration award, rejecting contentions that the dispute was not arbitrable and that the arbitration submission was untimely, finding the timeliness claim to be for the arbitrators to decide.
In Grabowski v. Vital Signs, Case No. 99-5683 (USDC D. N.J. June 8, 2007), the Court confirmed an arbitration award, rejecting claims that an arbitrator exibited evident partiality because: (1) one party's original expert (who was replaced by another expert) joined a firm with which the arbitrator was associated; and (2) the arbitrator was retained as an expert by a party allegedly adverse to defendant's counsel in another pending litigation.
In Hall Steel Co. v. Metalloyd Ltd., Case No. 05-70743 (USDC E.D. Mich. June 7, 2007), the Court denied a motion to confirm two arbitration awards entered by a London arbitrator on the basis that they were interim, not final, awards, and hence not eligible for confirmation under the Federal Arbitration Act.
In Glass Service Co. v. Illinois Farmers Ins. Co., No. C1-02-005860 (Minn. Ct. App. June 26, 2007), the Court affirmed the confirmation of arbitration awards despite claims that the arbitrators exceeded their authority: (1) by awarding aggregate damages in multiple individual consolidated claims; (2) by failing to hold a party to its burden of proof as an assignee and under the arbitration rules; and (3) in awarding damages in contravention of the policy language and governing statute, and that the lower court had erred in modifying the awards to add pre-award interest.
In In re Arbitration of Cincinnati Ins. Co. v. Tyco Fire Products, No. 82C806001071 (Minn. Ct. App. May 1, 2007), the Court affirmed the vacation of an arbitration award on the basis that it was procured by undue means, where the record supported a determination that the respondent was excluded from the arbitration proceeding by undue means, in violation of the due process provisions of the Minnesota Arbitration Act.

Seventh Circuit Finds Illinois’ ‘Insurance Producers Limitations Act’ Does Not Apply to Reinsurance Intermediaries

July 2, 2007 by Carlton Fields

This case arose out of reinsurance agreements between BCS and a third party, Insurance Specialists. The agreements were negotiated by BCS’ former reinsurance intermediary, Guy Carpenter & Company Inc. (“Guy Carpenter”). BCS alleged that Guy Carpenter failed to obtain adequate reinsurance for BCS and that Guy Carpenter’s actions resulted in an arbitration award against BCS in favor of its London reinsurers, exceeding $4.8 million dollars.

The district court granted summary judgment for Guy Carpenter, finding that five of the six claims asserted by BCS fell within the purview of the Illinois Insurance Producers Limitations Act (IPLA) and were barred by IPLA’s two-year statute of limitations. The district court also granted summary judgment for Guy Carpenter on the sixth claim, for implied indemnity, because BCS was unable to show it was derivatively liable in the arbitration for Guy Carpenter’s actions.

In a de novo review, the Seventh Circuit reversed the district court’s finding that five of BCS’ claims were governed by IPLA. Relying on briefing from the Illinois Attorney General, the Court concluded that “IPLA does not apply to reinsurance intermediaries and therefore does not govern the disputed agreements between BCS and Guy Carpenter.” The Seventh Circuit affirmed the district court’s finding that BCS failed to state a claim for implied indemnity because BCS failed to demonstrate that its liability resulted solely from the actions of Guy Carpenter. BCS Ins. Co. v. Guy Carpenter & Co. Inc., No. 06-1050 (7th Cir. June 18, 2007).

Party To Arbitration Waived Right to Contest Consolidation

June 28, 2007 by Carlton Fields

Plaintiff, Kentucky oil-and-gas developer Martin Ray Twist, sought an order compelling the defendant Investors to arbitrate separately their state law claims of securities violations, fraud, and other wrongs. Plaintiff’s motion was filed in federal court only weeks after a party-appointed arbitrator issued an order denying this identical request. The United States District Court for the Southern District of Indiana denied Plaintiff’s motion reasoning that “…Twist freely elected to let the arbitrator tackle the question.” The Court concluded that “[h]aving allowed the arbitrator to decide the issue, Twist cannot ask the court to overturn the ruling.” Martin Ray Twist v. Arbusto, Case No. 05-0187 (USDC S.D. Ind. June 8, 2007).

Reinsurance Company’s Claims Not Barred by FAA’s 90-Day Deadline

June 27, 2007 by Carlton Fields

Pursuant to the terms of a settlement agreement arising out of a personal injury claim, Plaintiff, R&Q Reinsurance Company (“R&Q”), was obligated to make periodic payments to defendant Gwendolyn Sands Brown (“Brown”). Despite the fact that the settlement agreement prohibited Brown from transferring her rights to a third party, Brown entered into an agreement to transfer her interest in the payments to co-defendant, Rapid Settlements (“Rapid”). When Brown sought to cancel the Transfer Agreement, Rapid filed a demand for arbitration and ultimately succeeded. Upon receiving notice of the arbitration award, R&Q filed this action seeking declaratory and injunctive relief. Rapid sought to dismiss the complaint based upon R&Q’s alleged failure to comply with the timing provisions of the Federal Arbitration Act.

The U.S. District Court for the Southern District of Florida disagreed with Rapid and denied its motion to dismiss. The court explained that the FAA did not apply because R&Q was not a party to the arbitration proceedings and did not directly attack the quality of the arbitration proceedings. The court concluded that the declaratory judgment action was properly before the court. R&Q Reinsurance Co. v. Rapid Settlements, Ltd. and Gwendolyn Sands Brown, Case No. 06-14329 (USDC S.D. Fla., May 14, 2007).