In a non-reinsurance arbitration under the auspices of the American Arbitration Association, a three member panel signed an award, which the AAA found was not final due to continuing discussions among the members of the panel. Three days later, the panel issued a final award, which the AAA sent to the parties. A dispute arose as to which award should be confirmed. The District Court respected the authority of the AAA to determine the finality of awards, and confirmed the latter award. The US Court of Appeals for the Second Circuit affirmed. The Courts also rejected a contention that the latter award was in manifest disregard of law. Appel Corp. v. Katz, Case No. 02-8879 (2nd Cir. Feb. 2, 2007).
Arbitration / Court Decisions
Court defers to AAA's decision as to finality of arbitration award
In a non-reinsurance arbitration under the auspices of the American Arbitration Association, a three member panel signed an award, which the AAA found was not final due to continuing discussions among the members of the panel. Three days later, the panel issued a final award, which the AAA sent to the parties. A dispute arose as to which award should be confirmed. The District Court respected the authority of the AAA to determine the finality of awards, and confirmed the latter award. The US Court of Appeals for the Second Circuit affirmed. The Courts also rejected a contention that the latter award was in manifest disregard of law. Appel Corp. v. Katz, Case No. 02-8879 (2nd Cir. Feb. 2, 2007).
Rulings with respect to indictment relating to allegedly fraudulent reinsurance transaction
A US District Court has denied motions to dismiss an indictment of six former officers of General Reinsurance Corp. and American International Group, which alleged that the two companies engaged in a fraudulent reinsurance transaction, which had the effect of boosting AIG's loss reserve for the fourth quarter of 2000 by $250 million, and by $250 in the first quarter of 2001. The transaction was allegedly entered into shortly after AIG reported that its year 2000 third quarter loss reserves declined $59 million from the previous quarter, after which AIG's stock price decreased. United States v. Ferguson, Case No. 3:06CR137 (D. Conn. Jan. 24, 2007). The decision disposed of ten different motions, which attacked the indictment and sought discovery.
UK Court grants partial summary judgment on reinsurance claims
In English and American Insurance Company Ltd. v. Axa Re SA, [2006] EWHC 3323 (Comm. Ct. Dec. 20, 2006), the UK Commercial Court of the Queen's Bench Division granted summary judgment to English and American Insurance Company (“EAIC”) on ten reinsurance contracts, pursuant to which a predecessor of Axa Re reinsured EAIC for its participation in insurance of Dow Chemical Company. The losses related to claims relating to Dow's manufacture and sale of breat implant devices and silicone materials. Provisional liquidators had been apponted for EAIC in 1993, and EAIC has been the subject of a scheme of arrangement since 1995. After pursuing its solvent insurers, Dow pursued EAIC, which in turn made claims on its reinsurance. EAIC entered into what the Court described as an interim settlement with Dow, in which in effect recognized that it had a liability to Dow of at least $3,772,760. The scheme of arrangement was paying EAIC's creidtors a dividend rate of 25%. The Court granted EAIC partial summary judgment against Axa Re in the amount of $673,808, an amount which the Court found Axa Re had “no realistic prospect of successfully defending.” Apparently, the litigation will continue with respect to other amounts claimed by EAIC.
Court splits requested class arbitration into separate arbitrations
Cintas Corp. was sued by a group of its service sales representatives for back pay under the Fair Labor Standards Act, which provides for opt-in classes. The District Court entered an Order compelling 56 of the 65 named Plaintiffs to arbitrate, and a request for class-wide arbitration was filed with the American Arbitration Association. The Court held that the arbitrator should determine whether class-wide arbitration was appropriate. After approximately 2,400 Plaintiffs opted into the back pay lawsuit, Cintas filed 70 separate actions against such Plaintiffs, seeking to compel them to arbitrate the dispute in the Districts in which they were employed by Cintas. The Judicial Panel on Multidistrict Litigation created an MDL proceeding, transferring the 70 separate actions to the original forum court, for a determination of: (1) whether the parties named in the 70 separate actions were refusing to arbitrate within the meaning of section 4 of the Federal Arbitration Act; and (2) whether the parties were complying with that obligation by seeking class-wide arbitration. The Court held that the parties were refusing to arbitrate within the meaning of section 4 of the FAA, found that all common proceedings had been completed, and suggested that the cases be remanded to the transferor courts for further, individual, proceedings. In re: Cintas Corp. Overtime Pay Arbitration Lit., Case No. 06-1781 (USDC N.D. Cal. Jan. 12, 2007).