Week's Best Posts

NINTH CIRCUIT FINDS THAT THE DISTRICT COURT LACKED JURISDICTION TO CONFIRM ARBITRATION AWARD AGAINST THE UNITED STATES

May 19, 2009 by Carlton Fields

In a proceeding in which the United States declined to participate, an arbitration panel awarded over $93 million to Park Place Associates, Ltd. (“Park Place”) on a breach of contract claim against the United States, which subsequently filed a motion to vacate in district court, which denied the motion to vacate and granted Park Place’s motion to confirm the award. On appeal, the Ninth Circuit first affirmed the denial of the motion to vacate, finding jurisdiction sufficient, since the United States had commenced civil proceedings in the district court by filing a complaint and a motion to vacate, and rejecting United States’ manifest disregard of the law arguments. Next, the court vacated the grant of the motion to confirm, concluding that, in this case where the action is to confirm a contract-based claim against the United States, the Tucker Act, which conditions its waiver on jurisdiction to the Court of Federal Claims, is the only means by which the United States can be said to have waived sovereign immunity, and, thus, the district court lacked jurisdiction to confirm the award. The court then remanded the case to the district court with instructions to dismiss the confirmation action as barred by sovereign immunity. United States v. Park Place Assocs., Ltd., No. 05-56235, No. 05-56312 (9th Cir. Apr. 22, 2009).

This post written by Dan Crisp.

COMMUTATION’S TANGLED WEB UNWOVEN BY APPELLATE COURT

May 18, 2009 by Carlton Fields

An appellate court in Illinois recently concluded that a decades-old commutation agreement between Old Republic Insurance Company and Central National Insurance Company (predecessor in interest to the defendant), was, in fact, not ambiguous, rendering superfluous the trial at which various extrinsic evidence was introduced in support of the parties’ competing interpretations, after the trial court denied summary judgment based on triable ambiguity.

The parties entered into the agreement in 1990, in an effort to mitigate the effects of Central National’s financial difficulties, which had caused it to be placed in rehabilitation by the State of Nebraska. The parties had come to reinsure one another under various reinsurance agreements. However, Central National argued that the commutation agreement was ambiguous, and was not intended to extinguish certain of Old Republic’s obligations to Central National. The appellate court disagreed, finding the language mutually releasing “all liabilities and obligations of the parties to each other under the reinsurance agreements” to mean just that – that all liabilities and obligations flowing both ways were equally extinguished. Old Republic Ins. Co. v. Ace Property & Casualty Ins. Co., 1-07-2668 (Ill. App. Ct. March 24, 2009).

This post written by John Pitblado.

REINSURER’S CLAIMS SURVIVE (IN PART) EARLY DISPOSITIVE MOTION

May 11, 2009 by Carlton Fields

A court granted in part and denied in part a motion for judgment on the pleadings in a case involving claims by a reinsurer of automobile insurance policies (Lincoln General) against its cedent (U.S. Auto) and the cedent’s affiliates for allegedly intentionally miscalculating amounts owed under certain agreements between Lincoln General and U.S. Auto. Lincoln General argued that it had been underpaid, and was owed millions of dollars from U.S. Auto, and that the affiliates were also liable for U.S. Auto’s actions under various theories of direct and vicarious liability. The court denied that part of the defendants’ motion arguing that Lincoln General failed to set forth facts forming the basis of a viable veil-piercing claim; Lincoln General’s complaint adequately pled an alter ego theory. The court also allowed a tortious interference with contract claim to proceed against some of the defendants. However, the court granted that part of the motion arguing that non-signatories to the guaranty agreements between Lincoln General and U.S. Auto could not be held liable as guarantors, and that Lincoln General’s unjust enrichment claim failed as to those defendants who had written agreements with Lincoln General. Lincoln Gen. Ins. Co. v. U.S. Auto Ins. Servs., Inc., Case No. 07-1985 (USDC N.D. Tex. Apr. 29, 2009).

This post written by Brian Perryman.

RECENT DECISIONS FEATURE JURISDICTIONAL ISSUES OVER NON-SIGNATORIES TO ARBITRATION AGREEMENTS

May 5, 2009 by Carlton Fields

UBS AG named Ramy and Michel Lakah (the “Lakahs”) as respondents in an arbitration proceeding, despite Michel never signing the arbitration agreement and Ramy only signing on behalf of Lakah Funding Ltd. and the guarantors, not in his personal capacity. The Lakahs petitioned the state court to stay the arbitration, and UBS removed the petition to federal court seeking to pierce the corporate veil. While the action was pending, the arbitration panel chairman informed all parties that the panel would address the question of jurisdiction over the Lakahs, and the Lakahs subsequently moved for a preliminary injunction. The court granted the petitioners’ motion for injunctive relief, stating that, unless the agreement clearly provides otherwise, courts decide the question of whether the parties agreed to arbitrate, and, without addressing the merits, the court found that petitioners would be irreparably harmed if the panel addressed the issue due to the cost of and time spent litigating before a body lacking the authority to decide this issue. Lakah v. UBS AG, Case No. 07-2799 (USDC S.D.N.Y. Mar. 6, 2009).

Symetra National Life Insurance Co. and Symetra Life Insurance Co., (collectively “Symetra”), obligors on structured settlement payments and nonparties to the transfer agreement that contained the arbitration clause, appealed from a trial court’s confirmation of an arbitration award that directed Symetra to pay Rapid Settlements, Ltd., instead of the original payee. In reversing the trial court’s judgment and vacating the arbitration award, the court held that the arbitration award violated public policy as set forth in the Texas Structured Settlement Protection Act (“TSSPA”) because no court had preapproved the transfer agreement. The court also held that Symetra had standing to contest the arbitration award because, first, the TSSPA gave Symetra an interest sufficient to contest any attempt to force the company to make payments, in the absence of court approval, to anyone other than the payee and, second, Symetra could be subject to double liability if payments were ever made to the wrong party. Symetra Nat’l Life Ins. Co. & Symetra Life Ins. Co. v. Rapid Settlements, Ltd., Case No. 14-07-00880 (Tex. App. Apr. 21, 2009).

This post written by Dan Crisp.

MIDWEST EMPLOYERS CAS. CO. VS. LEGION INS. CO. – THE SAGA CONTINUES TOWARDS TRIAL

May 4, 2009 by Carlton Fields

As reported in our previous posts on November 19, 2007 and July 8, 2008, Midwest Employers Casualty Company (“Midwest”) sued Legion Insurance Company (“Legion”), in connection with 43 separate reinsurance certificates issued by Midwest to Legion between 1994 and 2001. The crux of Midwest’s position is that the certificates each establish that the coverage was provided on a “loss occurring basis” rather than a “risk attaching basis,” and also that the agreements contain no agreement to arbitrate. Midwest moved for summary judgment on those bases. However, the federal court agreed with Legion that the nature of the agreements could not be ascertained from the face of the documents submitted, and that the parties’ various oral agreements and understanding as to how the agreements operated potentially conflicted with the certificates, leaving fact questions to be reserved for trial. The court denied the motion and instructed the parties to prepare for trial. Midwest Employers Cas. Co. v. Legion Ins. Co., Case No. 07-870 (USDC W.D. Mo. Mar. 24, 2009).

This post written by John Pitblado.