Week's Best Posts

PRESIDENT APPOINTS INSURANCE EXPERT MEMBER OF FSOC

July 2, 2011 by Carlton Fields

President Obama has nominated Roy Woodall to fill the position designated for an insurance expert on the Financial Stability Oversight Council (“FSOC”). An attorney, Mr. Woodall served as Kentucky Insurance Commissioner, was President of the National Association of Life Companies for 13 years prior to its merger with the American Council of Life Insurers (“ACLI”), and continued with the ACLI as managing director for issues and vice-president and chief counsel for state relations. He later served as a senior insurance policy analyst in the Treasury Department and as an insurance consultant for the Congressional Research Service. If confirmed by the Senate, Mr. Woodall would be the long-awaited insurance “expert” in the FSOC’s work, including its deliberations concerning the criteria for designating companies as systematically important financial institutions. There is no indication yet as to when the Senate Banking Committee might hold a confirmation hearing for Mr. Woodall. With the Congress embroiled in the issue of the national debt, and the Senate scheduled to be in recess until July 10, and from August 8 to September 5, it may be a while before Mr. Woodall actually joins in the work of the FSOC (assuming he is confirmed by the Senate).

This post written by Rollie Goss.

PLAINTIFF SUES ARBITRATOR, AAA FOR DUE PROCESS VIOLATIONS

June 28, 2011 by Carlton Fields

The present action before the US District Court in Nevada arose from a dispute between Dr. Ronald Slaughter and Laboratory Medicine Consultants regarding a stockholder agreement. A state district judge ordered the parties to arbitrate claims. A state court compelled the parties to arbitrate their disputes. Slaughter subsequently submitted an arbitration demand against LMC in September, 2007, after which he then tried to disqualify arbitrator Howard Roitman (which was denied). While arbitration was proceeding, Slaughter filed a suit in the Nevada federal court seeking to litigate issues encompassed by the arbitration. Slaughter then sought a stay of the arbitrtation pending litigation, but the Court denied the stay and dismissed the federal case in its entirety. Undeterred, Slaughter then filed another suit in federal court, this time against the AAA, Arbitrator Roitman, and two employees of the AAA alleging that his due process rights were violated during the underlying arbitration proceedings. Meanwhile, the arbitration continued, with rulings adverse to Slaughter. Defendants moved to dismiss the action, stating that they had immunity pursuant to N.R.S. § 38.229 for their conduct in administering arbitration proceedings and that the federal case was an impermissible collateral attack on the underlying arbitration. The Court agreed and dismissed the motion, specifically finding that Nevada’s Uniform Arbitration Act (cited above) protected the defendants against the suit. Further, the Court found that Slaughter’s action was an attack on the arbitration award and that his only relief would be to pursue vacatur of the award under the Federal and Nevada Arbitration Acts. Accordingly, the federal action was dismissed in its entirety. Slaughter v. American Arb. Assoc., Case No. 10-01437 (USDC D. Nev. June 2, 2011).

This post written by John Black.

ARBITRATION WITH SOME PLAINTIFFS BUT NOT OTHERS DENIED DUE TO RISK OF CONFLICTING RULINGS

June 27, 2011 by Carlton Fields

In an action brought by twenty-three investors against a brokerage related to investment fraud by the broker, a California appellate court rejected the brokerage’s attempt to arbitrate with the twelve investors with whom the brokerage had signed client agreements and stay the court action as to the remaining investors. While the client agreements at issue contained express agreements to arbitrate “any and all controversies or claims,” California law provides that a court should not order arbitration where: (1) a party to the arbitration agreement is contemporaneously a party to a pending court action arising out of the same transaction; and (2) where “there is a possibility of conflicting rulings on a common issue of law or fact.” The court was not persuaded by the brokerage’s argument that no risk of conflicting rulings existed, where the twelve investors, who had signed client agreements, had a “different legal standing” than the eleven investors who were non-clients. The court explained that the brokerage failed to show how the client/non-client distinction was relevant and that, on the contrary, “a legal duty may exist outside of a written agreement.” Cianci v. Centaurus Financial, Inc., Case No. B222474 (Cal. Ct. App. May 5, 2011).

This post written by Michael Wolgin.

COURT CHARACTERIZES CROSS-PETITION TO CONFIRM AWARD AS SUPERFLUOUS AND IMPROPER, BUT DECLINES TO STRIKE IT

June 21, 2011 by Carlton Fields

Century Insurance arbitrated a dispute with London Market Reinsurers under the parties’ treaty reinsuring Century’s exposure to asbestos claims. Century petitioned the federal district court to have the arbitration award confirmed. The reinsurers cross-petitioned, citing the same basis for confirmation as did Century, but using its filing to tell its side of the story. Century moved to strike the cross-petition, charging that it was redundant, misleading, violative of the parties’ confidentiality agreement, and an improper attempt to advance the reinsurers’ “public relations agenda.” The court agreed that the filing was improper, and that the parties should “conduct their own public relations campaign outside the Court,” but refused to strike the cross-petition, reasoning that orders striking papers should be sparingly granted because the public should have access to court filings. Century Insurance Co. v. Certain Underwriters at Lloyd’s London, Case No. 11 Civ. 1503 (USDC S.D.N.Y. May 23, 2011).

This post written by Ben Seessel.

SUPREME COURT DENIES REVIEW OF CASE CHALLENGING PARTY-SELECTED ARBITRATOR

June 20, 2011 by Carlton Fields

The Supreme Court denied certiorari in Trustmark Insurance Co. v. John Hancock Life Insurance Co., a case involving a challenge to a party-selected arbitrator in a tripartite arbitration (where each party selects an arbitrator, and the two arbitrators select an umpire). We reported earlier on both the federal district court’s decision enjoining the arbitration on the basis that John Hancock’s selected arbitrator was not “disinterested” because of his participation in a prior arbitration proceeding between the same parties (Feb. 8, 2011), and the court of appeals’ reversal of the district court’s decision (May 10, 2010). The court of appeals held the district court erred in holding that John Hancock’s arbitrator was not “disinterested” because he had knowledge of the parties’ prior arbitration, and further erred in determining that the arbitration panel lacked the power to construe a confidentiality agreement that the parties had reached during the first arbitration proceeding. Trustmark Insurance Co. v. John Hancock Life Insurance Co., No. 09-3682 (7th Cir. Jan. 6, 2011), cert. denied 79 U.S.L.W. 3594 (U.S. May 16, 2011) (No. 10-1213).

This post written by Ben Seessel.