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You are here: Home / Archives for Week's Best Posts

Week's Best Posts

VERMONT SUPREME COURT SENDS BANK BACK INTO CLASS ARBITRATION

November 13, 2012 by Carlton Fields

The Vermont Supreme Court reversed a trial court order that had the effect of precluding class arbitration where the parties’ agreement was silent on the issue. The trial court based its ruling on the then-recent U.S. Supreme Court decision in Stolt-Nielsen SA v. AnimalFeeds Int’l Corp. However, on appeal, the Vermont Supreme Court reversed, holding that the trial court’s involvement was premature, as it was not based on a timely vacatur or confirmation action, as required to invoke a court’s jurisdiction under the Vermont Arbitration Act. The defendant bank failed to timely challenge the arbitrator’s pre-Stolt-Nielsen decision allowing class arbitration, and failed to re-raise the issue of arbitrability with the arbitrator in light of Stolt-Nielsen. Bandler and Bandler & Co. v. Charter One Bank, No. 2011-249 (VT Oct. 5, 2012).

This post written by John Pitblado.

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Filed Under: Arbitration Process Issues, Week's Best Posts

COURT ENFORCES FORUM SELECTION CLAUSE IN REINSURANCE AGREEMENTS AND TRANSFERS ARBITRATION DISPUTE UNDER 28 U.S.C. § 1404

November 12, 2012 by Carlton Fields

In an arbitration dispute brought in the Western District of Wisconsin over the inability of the parties to choose an arbitrator for reinsurance disputes, the court found that venue was improper and transferred the case to the Southern District of New York under 28 U.S.C. § 1404. Petitioners sought an order compelling the respondent to comply with the method for choosing arbitrators provided for in the arbitration agreement and respondent counterclaimed asking the court to choose an arbitrator since the parties could not agree on one. Respondent also argued that venue was not proper as to petitioners claims because the arbitration agreements included an agreement to hold arbitrations in New York, but argued at the same time that it should be allowed to assert its counterclaim in Wisconsin because it related to appointing an umpire under 9 U.S.C. § 5, which does not include a venue limitation, rather than enforcing an arbitration agreement under 9 U.S.C. §4, which includes a venue limitation. The court determined that the transfer of all claims was appropriate because the Seventh Circuit held in Haber v. Biomet that § 4 requires district courts to enforce forum selection clauses in arbitration agreements and that the counterclaim could not be tried separately from petitioners’ claims because the claims were too intertwined. Employers Ins. Co. of Wausau v. Arrowood Indemnity Co., Case No. 12-283 (USDC W.D. Wis. Oct. 26, 2012).

This post written by Abigail Kortz.

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Filed Under: Arbitration Process Issues, Week's Best Posts

COURT REVERSED FOR STRAYING FROM ARBITRATION AGREEMENT DESPITE “LAPSE” IN ARBITRATOR SELECTION PROCESS

November 6, 2012 by Carlton Fields

In a three-way dispute between Exxon, BP, and a provider of drilling services over the alleged breach of an assignment agreement, a federal appeals court reversed based on the lower court’s improper resolution of a “lapse” in the parties’ ineffective two-party arbitrator selection procedures. The agreement provided that the dispute would be arbitrated before three arbitrators appointed in accordance with the rules of the Arbitration and Conciliation Act of 1990. ACA’s procedures, however, address a two-party dispute, in which each party selects an arbitrator, with the third selected by the arbitrators themselves.

When the three-way dispute arose in this case, and the parties could not agree on how the two-party arbitration selection process could be implemented, suit was filed in federal court under the New York Convention and the FAA. The court found that the arbitration agreement procedure reached a “mechanical breakdown” or “lapse,” and that it would order the appointment of five arbitrators. While the appellate court agreed with the district court’s determination that it was entitled to intervene under the FAA, it reversed the process that the district court instituted, holding that the FAA limited the court to enforce the underlying arbitration agreement, which in this case provided for only three arbitrators. On remand, the appellate court recommended a procedure for the district court to “consider” to achieve the equitable appointment of three arbitrators in a three-party dispute context. BP Exploration Libya Ltd. v. Exxonmobil Libya Ltd., No. 11-20547 (5th Cir. July 30, 2012).

This post written by Michael Wolgin.

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Filed Under: Arbitration Process Issues, Week's Best Posts

NAIC PUBLISHES EXPOSURE DRAFT OF CAPTIVES WHITE PAPER

November 5, 2012 by Carlton Fields

We previously reported on the NAIC’s inquiry into the potentially abusive use of captives to avoid certain accounting rules. As part of that inquiry, the NAIC’s Financial Condition (E) Committee’s Captives and Special Purpose Vehicle Use Subgroup has called for comments on its white paper titled Captives and Special Purpose Vehicles. Comments are due by the close of business on November 16, 2012. The white paper describes some disagreement among different states on issues relating to captives. The end of the comment period is shortly before the NAIC’s scheduled fall meeting.

This post written by Rollie Goss.

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Filed Under: Accounting for Reinsurance, Reinsurance Regulation, Reserves, Week's Best Posts

PHILIPPINE INSURER IS NOT ENTITLED TO STAY OF LONDON REINSURERS’ DECLARATORY COVERAGE ACTION REGARDING VESSEL SINKING

October 30, 2012 by Carlton Fields

A consortium of London reinsurers are seeking a declaration from an English court regarding their duty to indemnify Philippine insurer Oriental Insurance Company for losses resulting from the sinking of a cargo passenger ship during Typhoon Frank in 2008. The sinking, which caused widespread outrage in the Philippines due to the vessel’s failure to heed storm warnings resulted in over 500 deaths and significant property loss. The reinsurance contract contained a “Typhoon Warranty,” which voided the policy if an otherwise covered vessel left port during a typhoon or storm warning. Oriental’s underlying policy with the ship owner contained a virtually identical clause. Oriental, facing massive claims and litigation in the Philippines, sought a stay of the proceedings initiated by the British reinsurers, arguing that their action was premature given the reinsurance contract’s “follow the fortunes” clause and significant unresolved claims pending in the Philippine courts. The lower court dismissed Oriental’s application for a stay, holding that such relief should only be granted in “rare and compelling circumstances,” which were not present. The appellate court dismissed the appeal with “little enthusiasm,” finding the lower court’s decision correct but noting its apparent “unfairness.” In particular, as one justice noted, the reinsurers’ action might force Oriental to assert in the London courts that the “Typhoon Warranty” did not apply, a position diametrically opposed to the one it would wish to take in defending ongoing and imminent coverage suits in the Philippines. Amlin Corp. Member Ltd. v. Oriental Assurance Corp., [2012] EWCA Civ. 1341 (Royal Courts of Justice, Queen Bench Division, Commercial Court Oct. 17, 2012).

This post written by Ben Seessel.
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Filed Under: Follow the Fortunes Doctrine, Interim or Preliminary Relief, Reinsurance Claims, UK Court Opinions, Week's Best Posts

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