Week's Best Posts

COURT UPHOLDS ANNULMENT OF FOREIGN ARBITRATION AWARD BASED ON FOREIGN COURT’S FINDING THAT TRIBUNAL VIOLATED RULE ON FEES

July 6, 2016 by Carlton Fields

A U.S. District Court refused to confirm the award that had been entered by an arbitration tribunal in favor of Getma International against the Republic of Guinea. The award had been annulled by the Common Court of Justice and Arbitration (CCJA) when Guinea complained that the tribunal violated the CCJA Arbitration rules in repeatedly seeking increased arbitrators’ fees from the parties. The CCJA granted the annulment, despite the fact that it had previously advised the tribunal on one occasion to consult with the parties regarding increased fees, because only the CCJA had the ultimate authority to order increased fees, not the parties or the tribunal themselves. Undeterred, Getma attempted to confirm the award in the U.S. District Court, contending that the annulment ran contrary to public policy, citing the New York Convention. The court, however, rejected Getma’s argument, finding that the CCJA was within its authority to annul the award and that the annulment was within the CCJA’s discretion. Getma Int’l v. Republic of Guinea, No. 1:14-cv-01616 (USDC D.D.C. June 9, 2016).

This post written by Joshua S. Wirth.

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EIGHTH CIRCUIT RULES THAT NLRB ERRED BY INVALIDATING EMPLOYMENT AGREEMENTS REQUIRING INDIVIDUAL ARBITRATION

July 5, 2016 by Carlton Fields

We previously reported on a federal circuit split that has developed over the enforceability of arbitration provisions waiving class actions in employment agreements. Compare December 19, 2013 (D. R. Horton) and November 9, 2015 (Murphy Oil) with June 6, 2016 (Lewis). The Eighth Circuit recently fortified its position on the side of holding that such class waivers are enforceable. Specifically, the Eighth Circuit analyzed whether the NLRB erred by finding that a mandatory individual arbitration clause in an employment agreement violated sections 7 and 8(a)(1) of the National Labor Relations Act by (1) requiring the employee to arbitrate “[a]ll claims, disputes, or controversies” related to employment; (2) waiving the employee’s right to maintain a class action; and (3) allegedly leading employees to believe that they could not file a grievance with the National Labor Relations Board.

Following a prior ruling of the Eighth Circuit as well as rulings by the Fifth Circuit in D.R. Horton and Murphy Oil, the court held that the employer “did not violate section 8(a)(1) by requiring its employees to enter into an arbitration agreement that included a waiver of class or collective actions in all forums to resolve employment-related disputes.” The Court did find, however, that NLRB properly ruled that the language of the arbitration clause, which included a broad requirement that “[a]ll claims, disputes, or controversies arising out of, or in relation to” employment with the company “shall be decided by arbitration,” was overly broad and should have contained language informing the employee that they retained the rights to file charges with the NLRB. Cellular Sales of Missouri, LLC v. National Labor Relations Board, No. 15-1620 (8th Cir. June 2, 2016).

This post written by Barry Weissman.
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SOUTH CAROLINA DISTRICT COURT FINDS THERE IS NO SEPARATE CAUSE OF ACTION FOR APPORTIONMENT UNDER SOUTH CAROLINA’S CONTRIBUTION AMONG TORTFEASORS ACT

June 28, 2016 by Carlton Fields

Plaintiff Companion Property and Casualty Insurance Company (“Companion”) participated in a fronted insurance program with Redwood and Freestone. Reinsurance collateral trusts were established for Companion’s benefit and maintained by defendant U.S. Bank as trustee. Companion authorized Redwood and Freestone to administer the trusts’ assets by giving direction to U.S. Bank. One such direction was to authorize certain third-parties who could act for Redwood and Freestone with regard to each trust account. Through the direction of Redwood, Freestone and their authorized third-parties, U.S. Bank made certain investments which were ultimately to the detriment of the trusts. U.S. Bank then made claims against the third-parties for apportionment, contribution and indemnification for its liability to Companion. The third-party defendants moved to dismiss all of U.S. Bank’s claims.

U.S. Bank asserted that third-party defendants are responsible for damages alleged by Plaintiff Companion pursuant to South Carolina Code § 15-38-15 which addresses apportionment of percentages of liability among tortfeasors responsible for less than fifty percent of total fault.

Analyzing South Carolina’s Contribution Among Tortfeasors Act (“SCCATA”), the Court noted that “apportionment” as it appeared in the statute occurred only after the jury “(a) has awarded damages to a plaintiff, (b) has determined any comparative negligence by the plaintiff, and then (c) only after motion by the defendant.” Unlike SCCATA’s statutory language for other causes of action – for example contribution – which described the relief as an action or right to contribution, such verbiage was not present in the provision of SCCATA concerning apportionment. The Court also noted SCCATA referred to “the total percentages of fault attributed to the plaintiff and the defendants must be one hundred percent” – but there was no mention of any fault allocation to third-party defendants. U.S. Bank’s claim for contribution was therefore dismissed.

Companion Property and Casualty Insurance Company v. U.S. Bank National Association, 3:15-cv-01300 (USDC D.S.C. May 27, 2016)

This post written by Nora A. Valenza-Frost.

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THE FIFTH CIRCUIT UPHOLDS ARBITRATION AWARD, FINDING THAT ARBITRATOR DID NOT MANIFESTLY DISREGARD THE LAW AND THAT THE AWARD DID NOT VIOLATE PUBLIC POLICY

June 27, 2016 by Carlton Fields

On May 23, 2016, the Fifth Circuit upheld an arbitrator’s approximate $1.45 million award in favor of McKool Smith P.C., a law firm who represented Curtis International Ltd., a Canadian electronics wholesaler, in patent infringement cases.

The background of the case is as follows. McKool Smith represented Curtis in two patent litigations which were filed in 2013, and settled in January 2014. Curtis and McKool Smith then had disputes over unpaid invoices. McKool Smith commenced arbitration, seeking approximately $1.3 million in unpaid legal invoices, plus expert witness fees, along with pre and post-award interest. The arbitrator awarded the firm the full $1.45 million requested. McKool Smith then moved in Texas federal court to confirm the award, but Curtis filed a cross-motion to vacate it, arguing that the award was contrary to public policy, that the arbitrator had exceeded his powers and that the arbitrator had manifestly disregarded Texas state law by allowing the firm to collect fees that involved the use of unauthorized experts and that had been block-billed. The Texas federal court confirmed the award. In particular, the district court found that Curtis’ arguments that the award violated public policy and was in manifest disregard of the law rested on non-statutory grounds for vacatur that the Fifth Circuit had previously foreclosed. Curtis appealed to the Fifth Circuit, asserting that the arbitrator exceeded his powers within the meaning of the Federal Arbitration Act (the “FAA”) because the arbitration agreement between the parties incorporated Texas law, and the arbitrator manifestly disregarded that law in issuing the award and that the award violated public policy.

In an unpublished decision, the Fifth Circuit noted that it had previously held that the statutory grounds set forth in the Federal Arbitration Act (the “FAA”) are the exclusive means for vacatur under the FAA. However, the Court declined to decide whether manifest disregard of law and public policy fall within those FAA’s statutory grounds, saying it “need not decide this issue today.” The Court noted that Curtis had not shown any ground to vacate the award, holding that “Curtis fails to overcome our deferential standard of review and to demonstrate that the arbitrator manifestly disregarded the law or issued the arbitration award in violation of public policy.” Thus, the Fifth Circuit upheld the award. On June 6, 2016, Curtis filed a petition for rehearing, which was denied by the Fifth Circuit on June 21, 2016.

McKool Smith, P.C. v. Curtis International Ltd., No. 15-11140 (5th Cir. May 23, 2016).

This post written by Jeanne Kohler.

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NEW HAMPSHIRE BILL AMENDS CREDIT FOR REINSURANCE LAWS

June 21, 2016 by Carlton Fields

New Hampshire recently amended its credit for reinsurance laws for domestic ceding insurers, revising RSA § 405:47 as follows:

“No credit under this section shall be allowed, as an admitted asset or deduction from liability, to any ceding insurer for reinsurance, unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance shall be payable by the assuming insurer on the basis of the claims allowed against the ceding insurer in the insolvency proceedings, under contract or contracts reinsured, without diminution because of the insolvency of the ceding insurer…”

Specific exceptions to the above include so-called cut-through arrangements (where the reinsurer/assuming insurer assumes a domestic cedent’s policy obligations to direct insured(s)) or where the reinsurance agreement expressly provides for another payee of such reinsurance in the event of the insolvency of the cedent. The revised statute further provides that a reinsurance contract may require that the “domiciliary liquidator or receiver” of any insolvent cedent provide written notice to the reinsurer within a specific or reasonable period of time of any claim implicating the reinsurance that is filed in court or with the liquidator/receiver. If, during the pendency of the claim, a reinsurer seeks to investigate the claim and interpose certain defenses on the cedent’s behalf, the reinsurer can intervene in the proceeding in which the claim is pending and assert certain defenses unless barred by the applicable reinsurance agreement. The expenses incurred by the reinsurer in these situations are payable up to the amount of the expenses or amount of the “benefit produced”, whichever is less, as expenses of the receivership. The revised statute has an effective date of July 26, 2016. N.H. HB 1403, Ch. 144, May 27, 2016.

This post written by Rob DiUbaldo.
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