Week's Best Posts

COURT DENIES MOTIONS TO COMPEL PRODUCTION OF DOCUMENTS UNRELATED TO REINSURANCE POLICIES AT ISSUE IN ACTION

February 24, 2015 by Carlton Fields

The dispute continues between Utica Mutual and Clearwater Insurance in the Northern District of New York where the court recently denied, in large part, the parties’ respective motions to compel discovery of insurance and reinsurance documents unrelated to the specific facultative reinsurance policies at issue in the action. In this case, on which we have previously reported, the issue is whether reinsurance is due under contracts between Utica Mutual and Clearwater for a reinsurance claim relating to a settlement with one of Utica Mutual’s insureds. Utica Mutual sought to compel Clearwater to produce unrelated reinsurance contracts, claim notices, claim files, claim billing information, and other documents concerning contractual relationships with non-parties, arguing these documents were relevant to Clearwater’s defenses and counterclaim that it was misled into paying amounts toward that settlement. Clearwater, in turn, sought to compel Utica Mutual to produce information about primary commercial insurance policies issued by Utica Mutual to a number of its commercial insureds, claiming the information was needed, in part, to determine damages relating to the underlying settlement.

The court denied the parties’ motions, finding the documents sought were not relevant and noting that any issues as to the underlying settlement were already litigated and resolved. Discovery of entirely different contracts and documents that are “not germane or are only faintly relevant” would create confusion and diversion. The court did grant that part of Utica Mutual’s motion seeking to compel Clearwater to respond to an interrogatory requesting the factual and legal bases for Clearwater’s assertions that the amounts it paid to Utica Mutual were not due and payable. That single interrogatory, the court found, sought relevant information. Utica Mutual Insurance Co. v. Clearwater Insurance Co., No. 6:13-cv-01178 (USDC N.D.N.Y. Jan. 20, 2015).

This post written by Renee Schimkat.

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SPECIAL FOCUS: ALTERNATIVE CAPITAL AND REINSURERS

February 23, 2015 by Carlton Fields

One hot topic in the reinsurance industry over the last year or two has been the influx and role of alternative capital. In a Special Focus article titled Alternative Capital Proving That For Reinsurers, Size Does Not Matter, Bob Shapiro and Scott Shine explore some of the issues in this area.

This post written by Rollie Goss.

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CALIFORNIA COURT OF APPEAL SIDES WITH FEDERAL ARBITRATION ACT OVER STATE LAW UNCONSCIONABILITY RULE

February 17, 2015 by Carlton Fields

The California Court of Appeals recently held that the Federal Arbitration Act (“FAA”) preempts California’s Broughton-Cruz rule, which states that arbitration agreements for injunctive relief under California’s unfair competition and false advertising laws are against public policy and invalid.

In McGill v. Citibank, plaintiff sued Citibank for state law claims of unfair competition and false advertising, alleging that Citibank had violated her rights as a consumer in offering a credit insurance plan she purchased to protect her credit card account. Citibank moved to compel plaintiff to arbitrate her claims pursuant to the arbitration provision in her account contract. The trial court granted the motion with regard to plaintiff’s claims for monetary damages and restitution but refused to order arbitration of the claim for injunctive relief. Citibank appealed the decision as to the damages and restitution claims.

California’s appellate court held that the California Broughton-Cruz rule did not survive the Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion, __ U.S. __, 131 S. Ct. 1740 (2011). In Concepcion, the Court held that the FAA preempts state laws, such as laws that prohibit class arbitration waivers in certain contexts or otherwise impede the FAA’s objective of enforcing arbitration agreements according to their terms. The California court reversed and remanded the case for the trial court to order all of plaintiff’s claims to arbitration. McGill v. Citibank, N.A., No. G049838 (Cal. Ct. App. Dec. 18, 2014).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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THIRD CIRCUIT REVERSES EQUITABLE ESTOPPEL RULING COMPELLING ARBITRATION AGAINST NON-SIGNATORY INSURER

February 16, 2015 by Carlton Fields

The trial court had granted the motion to compel arbitration of Flintkote Company against one of its asbestos liability insurers, Aviva PLC, despite the fact that Aviva was a non-signatory to the subject Alternative Dispute Resolution Agreement (“ADR Agreement”). Flintkote had entered into the ADR Agreement with its other asbestos liability insurers, but not with Aviva, which would not accept the ADR Agreement’s arbitration provision. The trial court compelled arbitration based on equitable estoppel, reasoning that Aviva had agreed to participate in mediation with Flintkote and the other insurers (which had been initiated further to the ADR Agreement). On appeal, the Third Circuit reversed. The court held that there was “simply no evidence that Aviva embraced the [ADR] Agreement when it opted to participate in mediation alongside the other London insurers.” The court also ruled that certain correspondence sent by the joint mediation counsel that referenced the ADR Agreement or suggested joint action with Aviva did not constitute sufficient reliance on the ADR Agreement to compel Aviva to arbitrate. The court further held that Flintkote could not have reasonably relied on an “unspoken” agreement with Aviva to arbitrate, given that Aviva had previously “negotiated for and specifically reserved the right to resolve all disputed issues through litigation.” Flintkote Co. v. Aviva PLC, No. 13-4055 (3d Cir. Oct. 9, 2014).

This post written by Michael Wolgin.

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NINTH CIRCUIT COURT OF APPEALS GRANTS WRIT OF MANDAMUS TO VACATE ORDER GRANTING DISQUALIFICATION OF ARBITRATOR

February 10, 2015 by Carlton Fields

In In Re Sussex, No. 14-70158 (9th Cir. Jan. 27, 2015), the Ninth Circuit determined that the district court erred in holding that its decision to intervene mid-arbitration was justified under Aerojet-General Corp. v. Am Arbitration Ass’n, 478 F.2d 248 (9th Cir. 1973). Specifically, the panel held that the district court erred in predicting that an award issued by the arbitrator would likely be vacated because of his evident partiality under the Federal Arbitration Act, 9 U.S.C. § 10(a)(2). The panel determined that undisclosed facts regarding the arbitrator’s efforts to start a company to attract investors for litigation financing did not give rise to a reasonable impression that the arbitrator would be impartial toward either party. The panel, quoting Commonwealth Coatings v. Continental Cas. Co., 393 U.S. 145, 150 (1968) emphasized that an arbitrator must disclose facts showing that they might be reasonably biased against one litigant and favorable to another. In this case, the panel found that the arbitrator’s financial effort regarding his efforts to start a litigation finance company in relation to the parties and issues in the case were contingent, attenuated, and speculative. Furthermore, the panel held that even if the arbitrator’s activities created a reasonable impression of partiality, the district court’s equitable concern that costs and delays would result if the arbitration award were vacated was inadequate to justify a mid-arbitration intervention, regardless of the size and early stage of arbitration.

This post written by Kelly A. Cruz-Brown.

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