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THE SIXTH CIRCUIT HOLDS THAT CLASS ACTION ARBITRATION WAIVERS ARE PROHIBITED UNDER THE NATIONAL LABOR RELATIONS ACT

June 20, 2017 by John Pitblado

The Sixth Circuit enforced a National Labor Relations Board’s (“NLRB”) order finding that Alternative Entertainment Inc., a Michigan-based satellite television retailer, violated the National Labor Relations Act (“NLRA”) by requiring employees to sign arbitration agreements that precluded them from pursuing class or collective arbitration claims. The Sixth Circuit noted that the NLRA guarantees the right to concerted legal action and does not permit employers to force individual arbitration of employees’ employment or workplace-related claims, stating “[m]andatory arbitration provisions that permit only individual arbitration of employment-related claims are illegal pursuant to the NLRA and unenforceable pursuant to the [Federal Arbitration Act’s] saving clause.”

The NLRB was seeking enforcement of its order finding that Alternative Entertainment violated the NLRA when it forbade an employee from talking with his co-workers about a proposed compensation change and by firing the employee for complaining to management about it, as well as when it barred employees from pursuing class action litigation or collective arbitration of work-related claims. The NLRB sought to enforce the award, and Alternative Entertainment sought relief from the order.

In holding that the NRLA prevents employers from pursuing class action litigation or collective arbitration of workplace-related claims, the Sixth Circuit joined previous rulings by the Seventh and Ninth Circuits. To the contrary, the Fifth and Eighth Circuit have held the opposite and have found class arbitration waiver provisions to be enforceable despite the NLRB’s claim that this kind of arbitration provision violates Section 7 of the NLRA. The Supreme Court has accepted this issue for review and presumably will resolve this Circuit conflict. National Labor Relations Board v. Alternative Entertainment, Inc., No. 16-1385 (6th Cir. May 26, 2017).

This post written by Jeanne Kohler.
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COURT REJECTS MOTION TO SEAL SUMMARY JUDGMENT EXHIBITS WHEN MOVING PARTY FAILS TO PROVIDE SUFFICIENT FACTUAL JUSTIFICATION FOR SUCH SEALING

June 13, 2017 by Rob DiUbaldo

Utica Mutual Insurance Company’s request that numerous exhibits filed in support of summary judgment be sealed has been rejected by a federal district court, which found that Utica’s general statements about the documents were insufficient to allow the court to “make the ‘specific, on-the-record findings’ required to seal judicial documents.”

Utica and Munich Reinsurance America, Inc. are on opposing sides of two related lawsuits regarding Utica’s attempt to seek reimbursement for asbestos claims under two reinsurance contracts. Both parties moved for summary judgment, and Utica moved to have numerous exhibits in support of these motions filed under seal on the basis that they contained privileged communications with in-house and/or outside attorneys, referred to such privileged information, or contained attorney’s handwritten notes protected by the work product doctrine.

The court began by describing the standards for such a sealing motion, noting the “strong presumption of access” that attaches to documents filed in connection with a summary judgment motion and that overcoming this presumption requires a party to provide facts sufficient to allow the court to make “specific, on-the-record findings . . . demonstrating the closure is essential to preserve higher values and narrowly tailored to serve that interest.” Utica’s explanations, the court found, were not specific enough to meet this standard. In its descriptions of attorney-client communications, the court found that Utica did not explain who all of the recipients were or show that the communications were intended to be or were kept confidential. Regarding attorney notes, the court found that Utica did not indicate whether they were fact or opinion work product. Similarly, the court found that Utica did not specify whether other documents it wished to file under seal were protected by attorney-client privilege or the work product doctrine and otherwise failed to provide information sufficiently specific for the court to determine which documents contained protected information or to narrowly tailor a sealing order to protect that information. However, the court allowed Utica to file as exhibits certain briefs from prior litigation in the same redacted form that they were previously filed.

Utica Mutual Insurance Company v. Munich Reinsurance America, Inc., No. 6:12-CV-00196 (BKS/ATB) (N.D.N.Y. April 26, 2016)

This post written by Jason Brost.

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IAIS PROPOSES REVISIONS TO INSURANCE CORE PRINCIPLE 13 ON REINSURANCE

June 12, 2017 by Rob DiUbaldo

The International Association of Insurance Supervisors (“IAIS”) recently released proposed revisions to the existing version of its Insurance Core Principle 13 regarding “Reinsurance and Other Forms of Risk Transfer.” The proposal involves a fairly significant re-working of the structure of certain ICP 13 sections, as well as important substantive updates. At the outset, the proposal would revise the description of what ICP covers, from supervisors “set[ting] standards” for the use of reinsurance and other forms of risk transfer in order to ensure that insurers adequately control and transparently report their risk transfer programs, to supervisors “requir[ing] the insurer to manage effectively” its use of reinsurance and other forms of risk transfer. Other noteworthy changes include (but are not limited to):

inserting a list of factors to inform a supervisor’s assessment of a ceding insurer’s reinsurance program;
recommending the group-wide supervisor of an insurance group require the reinsurance strategy of the insurance group to address a designated set of issues;
specifying supervisors require ceding insurers to establish effective internal controls over the implementation of their reinsurance program;
including credit risk posed by a reinsurer (and ways for ceding insurer to mitigate reinsurer credit risk), as well as operational risk related to contract documentation, as characteristics of the reinsurance program that should be included in a ceding insurer’s capital assessment;
requiring ceding insurers to demonstrate the economic impact of risk transfers originating from reinsurance contracts (as opposed to requiring transparency to allow the supervisor to understand the economic impact);
eliminating statement that binding documentation requirements are questions of jurisdictional contract law;
requiring ceding insurers to consider the impact of their reinsurance programs in liquidity management (as opposed to the supervisor assessing whether cedants control their liquidity position to take account of risk transfers); and
inserting a section regarding considerations for supervisors of insurers ceding risks to SPEs.

The IAIS held a public background call on June 5, 2017 to introduce the public consultation package and to receive initial feedback. Interested parties may submit feedback on the proposed revisions to the IAIS online through July 31, 2017.

This post written by Thaddeus Ewald .
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COURT VACATES ARBITRATION AWARD FOR ARBITRATOR’S EVIDENT PARTIALITY

June 6, 2017 by Michael Wolgin

A New York Court vacated an arbitration award, finding that a party appointed arbitrator’s undisclosed relationships with the appointing party amounted to a relatively infrequent instance in which such nondisclosure demonstrated evident partiality by clear and convincing evidence. In doing so, the court confirmed that “evident partiality” standard applies in tripartite arbitration involving party appointed arbitrators.

The arbitration at issue arose from a dispute where the reinsurers denied coverage for two workers’ compensation claims by the reinsured. Pursuant to the reinsurance treaties’ arbitration clause, each side appointed an arbitrator and the party appointed arbitrators then selected an umpire. The arbitration resulted in an award for the reinsured and the reinsurers brought this action against the reinsured to vacate the award. The plaintiffs argued that the arbitrator appointed by the defendant (“arbitrator”) failed to disclose his significant business relationships with numerous executives of the defendant, which demonstrated such “evident partiality” as to warrant vacatur of the arbitration award. The court granted plaintiff’s motion to vacate the arbitration award.

In finding “evident partiality,” the court considered the arbitrator’s nondisclosure of his relationships with the defendant’s numerous principals. Those principals were involved in the arbitrator’s own business in their capacity as the Chief Financial Officer, Managing General Agent, National Claims Manager, and counsel. The court found particularly relevant the arbitrator’s nondisclosure of his relationship with a director of the defendant whom the arbitrator hired as the Chief Financial Officer of the arbitrator’s own company just months before the arbitration hearing. The court held that a reasonable person would conclude that an arbitrator who failed to disclose such material relationships was partial to one side. Also, in response to defendant’s argument that evident partiality standard applies “with reduced force, or not at all” in tripartite industry arbitration involving party appointed arbitrators, the court cited a Second Circuit case where the court applied the evident partiality standard to an arbitration panel with the same arrangement. Certain Underwriting Members at Lloyd’s of London v. Ins. Co. of the Americas, Case No. 16-00374 (USDC S.D.N.Y. Mar. 31, 2017)

This post written by Rollie Goss.

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FIFTH CIRCUIT VACATES TEXAS FEDERAL COURT’S ORDER WHICH WITHDREW ITS PRIOR ORDER COMPELLING ARBITRATION

June 5, 2017 by Michael Wolgin

Plaintiff Gaspar Salas, a former employee of defendant GE Oil & Gas, brought suit in 2014 in Texas federal court against GE for discrimination and retaliation. The court granted GE’s motion to compel arbitration, and the case was dismissed in December 2014. The parties did not move forward with arbitration, and in February 2016, plaintiff filed a motion to compel arbitration in the same court. After a teleconference on the motion, the court issued an order, reopening the suit and withdrawing its prior order compelling arbitration. GE moved for reconsideration, which was denied and GE then appealed.

On appeal, GE argued that the district court lacked subject matter jurisdiction to reopen the case, since it had previously dismissed the suit. Thus, according to GE, the court could exercise jurisdiction only to the extent of enforcing an arbitration award. That the district court fully dismissed the case, explained the Fifth Circuit, is not necessarily fatal to the court’s exercise of jurisdiction. Under the Federal Arbitration Act, however, district courts may not intervene in the arbitral process “beyond the determination as to whether an agreement to arbitrate exists and enforcement of that agreement.” Here, the Fifth Circuit noted that the district court did not determine whether the parties’ agreement to arbitrate was valid nor did it enforce that arbitration agreement. Instead, the district court had found “that the parties had ‘failed’ to arbitrate and withdrew its prior order compelling arbitration.” Thus, the Fifth Circuit remanded the case for further proceedings, but limited the district court’s jurisdiction to determining only whether an agreement to arbitrate still exists and enforcement of that agreement. Gaspar Salas v. GE Oil & Gas, No. 16-20379 (5th Cir. May 12, 2017).

This post written by Jeanne Kohler.

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