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New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

FEDERAL COURT REFUSES TO ENFORCE ARBITRATOR’S SUBPOENA DUCES TECUM TO NON-PARTY

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A United States district court in Louisiana recently dismissed a suit brought under the Federal Arbitration Act to enforce a subpoena duces tecum issued in an arbitration proceeding. The district court granted the defendant’s motion to dismiss on two grounds. First, the court held that the amount in controversy requirement for diversity jurisdiction was lacking because the plaintiffs were asserting no claim against the defendant in the federal court action; the plaintiffs sought only the production of discovery documents. Second, the court ruled that Section 7 of the FAA provides for the enforcement of a subpoena duces tecum against a non-party only if the non-party is compelled to testify as a witness before the arbitrator. Because the defendant was not summoned to testify in the arbitration proceeding, the subpoena duces tecum was unenforceable. Chicago Bridge & Iron Co. N.V., et al. v. TRC Acquisition, LLC, No. 14-1191, 2014 WL 3796395 (E.D. La. July 29, 2014).

This post written by Catherine Acree.

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SPECIAL FOCUS: IS IT STILL PRIVILEGED?

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We previously reported on the decision in Progressive Casualty Ins. Co. v. FDIC, where the federal district court rejected claims of privilege, work product, and the common interest doctrine to certain information disclosed by an insurer to its reinsurers and broker. In a Special Focus article titled “IS IT STILL PRIVILEGED? AN INSURER’S DISCLOSURE OF INFORMATION TO ITS REINSURERS AND BROKERS WAIVES PRIVILEGE … SOMETIMES,” Renee Schimkat discusses Progressive Casualty (including another more recent order in that case) and other decisions where courts have considered whether the disclosure of information between these three parties waives applicable privileges.

This post written by Renee Schimkat.
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SECOND CIRCUIT REFUSES TO HEAR APPEAL BY UNDERWRITER AGAINST REINSURER

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The Second Circuit refused to hear an appeal in an action brought by Acumen Re Management Corporation, an underwriter, against a reinsurer, General Security National Insurance Company. The crux of the action was Acumen’s allegation that General Security breached the agreement between them by failing to pay Acumen certain commissions which General Security allegedly owed under the parties’ agreement. In the suit, Acumen alleged five distinct theories as to how General Security breached the agreement. The lower court entered partial summary judgment in favor of General Security on four of those theories and further held that, under all five theories, no more than nominal damages were available to Acumen. The lower court certified the partial final summary judgment as to the four counts under Federal Rule of Civil Procedure 54(b) which authorizes, under certain circumstances, entry of a partial final judgment as to one or more, but fewer than all, claims of the parties such that the partial final judgment becomes reviewable on appeal. The Second Circuit determined that the five theories Acumen alleged were not separate and distinct claims; instead, Acumen alleged five various ways in which General Security breached the agreement and the claims were interrelated and dependent upon each other. The Second Circuit concluded that it did not have jurisdiction to review the lower court’s entry of partial summary judgment. Acumen Re Management Corp. v. General Security National Insurance Co., No. 12‐5081‐cv (2d Cir. Oct. 3, 2014).

This post written by Leonor Lagomasino.

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DISTRICT COURT APPLIES NEW YORK CONVENTION, DENIES MOTION TO DISMISS PETITION TO COMPEL ARBITRATION

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In late July, a New York federal court denied Harris Corporation’s (“Harris”) motion to dismiss for lack of subject-matter jurisdiction. The motion sought to dismiss HBC Solutions Inc.’s (“HBC”) Amended Petition to Compel Arbitration.  The dispute centered on a memorialized Asset Sale Agreement (“Sale Agreement”) in which HBC agreed to purchase Harris’s Broadcast Communications Division. The Sale Agreement stated that the final purchase price would be determined after closing with resolution of any pricing dispute handled through an independent accountancy to determine the “adjustment amount.” Harris did not contact the accountancy firm for resolution.

Without a federal question and without diversity of citizenship between the parties, the court looked to whether it had jurisdiction under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“The New York Convention”) and its codification in the Federal Arbitration Act. Harris argued first that the New York Convention should not apply, as the parties were both domestic. Second, Harris argued that the additional provision in the Sale Agreement was not arbitration but an “expert determination.”  Considering Harris’s first argument, the Court noted that the New York Convention would typically not apply if both parties were citizens of the United States. However, the sale included a transfer of property in fourteen different countries, making the transaction “significantly international.” Further, the Court reasoned that the language in the Sale Agreement was evidence of a desire to adjudicate any pricing dispute through a third party, here an accountancy. As the New York Convention applies, the motion to dismiss for lack of subject-matter jurisdiction was denied.

The Court concluded that the contract’s clearly stated intention to refer disputes to an accountant for resolution qualified as an agreement to arbitrate, and directed the respondent to serve an opposition to the Amended Petition.  Given that some reinsurance agreements provide for somewhat similar alternative dispute resolution avenues, this opinion may be of interest to reinsurance practitioners.  HBC Solutions, Inc., v. Harris Corp., No. 13-CV-6327 (JMF) (S.D.N.Y. July 18th, 2014).

This post written by Matthew Burrows.

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SPECIAL FOCUS: DISMISSAL OF MARIAH RE CAT BOND LAWSUIT

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We posted previously on the Mariah Re cat bond lawsuit.  The court recently dismissed the Amended Complaint in that action with prejudice.  Rollie Goss discusses this opinion in a Special Focus article titled Cat Bond Litigation: Unambiguous Bond Documents Cause Court To Dismiss With Prejudice Complaint Seeking to Claw Back Payments Made From a Cat Bond Reinsurance Trust.

This post written by Rollie Goss.

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