Week's Best Posts

U.S. COVERED AGREEMENT POLICY STATEMENT AFFIRMS U.S. STATE-BASED REGULATION OF INSURANCE

October 30, 2017 by Michael Wolgin

We have posted several times on the negotiation and finalization of the Covered Agreement (“the Agreement”) negotiated by the Obama Administration and approved by the Trump Administration with the European Union. The agreed text of the Agreement was released in January of this year, and the House Financial Services Committee held a hearing on the Agreement the following month. The Trump Administration’s decision to sign the Agreement was announced in July, and included a statement that the U.S. would issue a “U.S. policy statement on implementation.” That statement intrigued many, prompting speculation as to the positions that would be taken in that policy statement. We posted an analysis of the complicated timeline for the implementation of the Agreement later that month.

In conjunction with the signing of the Agreement on September 22, the U.S. released the anticipated policy statement. The policy statement is not remarkable, and is based upon a theme that the Agreement affirms, preserves, and builds upon the U.S. state-based structure for the regulation of the business of insurance. The policy statement summarizes various provisions of the Agreement, stating in part that the Agreement:

with respect to the collateral requirement, “does not prevent a state insurance regulator from imposing non-collateral requirements that do not have substantially the same regulatory impact as collateral requirements as conditions for ceding companies to enter into reinsurance agreements with EU reinsurers or to allow credit for such reinsurance, if the state insurance regulator applies the same requirements in the case of reinsurance agreements with U.S. reinsurers domiciled in that state;”
does not prevent parties to reinsurance agreements to contractually require collateral for reinsurance;
excludes the US parent of US-domiciled reinsurers from the need to comply with the requirements of Solvency II just because it has an affiliate doing business in the EU; and
preserves the authority of the states (in conjunction with the NAIC) to set capital requirements for US insurance groups.

The principal text of the Conclusion section of the policy statement provides:

The Agreement supports the principles specified in the Presidential Executive Order on Core Principles for Regulating the United States Financial System (Feb. 3, 2017) by enabling U.S. companies to be competitive with foreign firmshttps://www.reinsurancefocus.com/wp-admin/edit.php in domestic and foreign markets; advancing U.S. interests in international financial regulatory negotiations and meetings; and making regulation efficient, effective, and appropriately tailored. The United States looks forward to promoting the interests of U.S. stakeholders, U.S. insurance regulators, and the U.S. economy as the Agreement is implemented. The United States also shares with the EU the goal of protecting insurance and reinsurance consumers while respecting one another’s system for supervision and regulation.

This post written by Rollie Goss.
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CONGRESS DISAPPROVES THE CFPB’S ANTI-CLASS ACTION ARBITRATION WAIVER RULE

October 29, 2017 by Carlton Fields

Congress has adopted a joint resolution of disapproval of the CFPB’s arbitration rule under the Congressional Review Act, 5 U.S.C. Section 801 et seq. President Trump’s approval of the joint resolution will prevent the implementation of the rule. With the disapproval of the rule, the CFPB’s rule “may not be reissued in substantially the same form, and a new rule that is substantially the same as such a rule may not be issued, unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.” 5 U.S.C. Section 801(b)(2). While it seems highly unlikely that the present Congress would approve the same or similar rule, it is not known whether the CFPB will attempt to find another way to implement a prohibition of class action arbitration waivers.

This post written by Rollie Goss.
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FIFTH CIRCUIT FINDS ORDER NOT “FINAL” FOR PURPOSES OF APPELLATE JURISDICTION

October 24, 2017 by John Pitblado

The U.S. Court of Appeals for the Fifth Circuit held that an order compelling arbitration and staying a related action was not an appealable “final decision with respect to arbitration” under the Federal Arbitration Act (“FAA”).

Anthony Charles filed an action asserting substantive claims regarding construction of a home in Mississippi (“Charles I”). While it was pending, the defendants filed a separate action against Charles (“Charles II”), seeking to compel him to arbitrate the claims in Charles I. The court in Charles II granted the motion to compel, and ordered that the unresolved claims in Charles I be stayed pending arbitration. Charles appealed.

The Fifth Circuit held that it did not have jurisdiction over the appeal. The court noted that the FAA only allows courts to consider an appeal from a “final decision with respect to arbitration,” meaning one that “ends the litigation on the merits.” In ruling, the court found that furthering the strong interest in favor of arbitration required considering Charles II together with Charles I. Because the claims in Charles I were merely stayed by virtue of Charles II – not dismissed – the court held that the decision in Charles II could not be considered a “final appealable order” under the FAA.

Green Tree Servicing, LLC, et al. v. Anthony Charles, No. 17-60165 (5th Cir. Sept. 29, 2017)

This post written by Alex Silverman.

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NINTH CIRCUIT AFFIRMS APPLICATION OF ARBITRATION CLAUSE FOUND IN AMAZON’S CONDITIONS OF USE

October 23, 2017 by John Pitblado

Applying Washington law, the Ninth Circuit Court of Appeals affirmed a California federal court’s ruling that Amazon’s Conditions of Use (COU) created a valid contract between Amazon and its customers, and there was no procedural unconscionability in the presentation of the arbitration clause. Further, the Court found that, “[w]hile the COU are adhesive in nature, adhesion is insufficient to support a finding of procedural unconscionability.”

Plaintiff made three arguments for substantive unconscionability which the Court found lacked merit: (1) “the unilateral modification clause does not render the arbitration provision substantively unconscionable because Amazon is limited by the implied covenant of good faith and fair dealing;” (2) “the arbitration clause’s exemption of intellectual property claims for injunctive relief does not make the provision overly harsh or one-sided;” and (3) “the attorneys’ fees provision does not create substantive unconscionability because it mirrors Washington’s statutory right to attorneys’ fees for frivolous claims” and “also complies with California law, which permits Amazon to seek fees as a sanction for frivolous claims.”

Class action waivers continue to be a hotly contested issue. We previously reported that the California Fifth District Court of Appeal held that, while California Private Attorneys General Act (PAGA) claims for civil penalties cannot be arbitrated or waived, the underlying worker claims for the wages themselves are subject both to arbitration and a class action waiver, which substantially undercuts an employer’s group exposure in wage and hour actions.

Wiseley, et al. v. Amazon.com, Inc., No. 15-56799 (9th Cir. Sept. 19, 2017)

This post written by Nora A. Valenza-Frost.

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SECOND CIRCUIT ENFORCES ARBITRATION AGREEMENT IN FAVOR OR NON-PARTY WHOSE AGENT ENTERED INTO THAT AGREEMENT

October 17, 2017 by Rob DiUbaldo

The Second Circuit has affirmed an order compelling a plaintiff-employee to arbitrate his employment related claims against Carnival Cruise Lines, despite the fact that the one page employment agreement that he signed did not contain an arbitration clause and did not mention Carnival.

The plaintiff sued Carnival in connection with injuries allegedly suffered while working on one of their ships, and Carnival moved to compel arbitration. The plaintiff argued that he should not be required to arbitrate his claims because his employment contract did not contain an arbitration clause or expressly incorporate any other document, and Carnival was not a party to or even mentioned in that agreement. The Court disagreed.

First, the Court noted that incorporation by reference was a matter of law and thus for the court to decide. Second, it found that the language – stating that the “herein terms and conditions in accordance with POEA Governing Board Resolution No. 09 and Memorandum Circular No. 10 … shall be strictly and faithfully observed,” was sufficient to incorporate those documents, which contained an arbitration clause. Third, the Court found that it did not matter that the plaintiff was unaware of the arbitration clause, as he was bound by the terms of his contract and the incorporated documents, regardless of whether he had actually read them. Finally, the court held that the company with which the plaintiff had entered into a contract was acting as an agent for Carnival, and that Carnival had the power to enforce an arbitration agreement made by its agent.

Pagaduan v. Carnival Corporation et al., No. 16-465 (2d Cir. Sept. 18, 2017)

This post written by Jason Brost.

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