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NINTH CIRCUIT RULES FEDERAL ARBITRATION ACT IS SUBJECT TO EQUITABLE TOLLING, PERMITTING CHALLENGE TO AN ARBITRAL AWARD OUTSIDE THE TIME PERIOD SET FORTH IN THE FAA

December 26, 2016 by Rob DiUbaldo

The Ninth Circuit, as a matter of first impression, ruled that the Federal Arbitration Act (“FAA”) is subject to equitable tolling. Plaintiff Move, Inc. (“Move”) moved to vacate an arbitration panel’s adverse decision, claiming it was prejudiced by the chairperson’s fraudulent misrepresentation that he was a licensed attorney (when he was not), and that such criteria was required for the chairperson’s service on the panel. Move did not discover the chairperson’s misrepresentation until four years after the arbitral award, and thus outside the FAA’s three month timeline for an aggrieved party to petition to vacate an arbitration decision. The court analyzed the FAA’s text, purpose, and structure, concluding that they did not preclude the application of equitable tolling with respect to vacatur of the award or bar Move’s application based on timeliness.

The court then determined that the arbitrator’s misrepresentation constituted sufficient grounds to vacate the panel’s decision. Move had made clear throughout the arbitrator selection process how important it was that the chairperson of the arbitration panel be an experienced, licensed attorney. Even though it was impossible to determine whether the imposter’s presence influenced other panel member’s decisions, or the outcome itself, the prejudice came from his inclusion on the panel as chairperson, when his misrepresentation should have disqualified him from the list of eligible arbitrator candidates.

Move, Inc. v. CitiGroup Global Markets, Inc., No. 14-56650 (9th Cir. Nov. 4, 2016).

This post written by Thaddeus Ewald .

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Filed Under: Arbitration Process Issues, Week's Best Posts

COURT TOSSES TIME-BARRED RICO CLAIMS ALLEGING CAPTIVE REINSURANCE KICKBACK SCHEME

December 22, 2016 by Michael Wolgin

Plaintiffs asserted class claims for RICO violations based on allegations that Bank of America referred borrowers to private mortgage insurance providers in exchange for kickbacks, funneled through a captive reinsurance company. Bank of America argued that plaintiffs’ lack of due diligence precluded them from tolling the four-year statute of limitations under the “injury discovery rule.” The Court found that Bank of America met its initial burden to establish the existence of “storm warnings” of the alleged wrongs, shifting the burden to plaintiffs to show that they exercised reasonable due diligence but were nevertheless unable to discover their injuries. The Court noted that before closing on their loans, plaintiffs received a disclosure explaining that their reinsurance could be placed with a lender-affiliated company, and plaintiffs were given the opportunity to opt out of reinsurance. However, the plaintiffs took no steps to investigate the reinsurance. Since plaintiffs did not exercise reasonable due diligence, the Court held that they had constructive notice of all facts that could have been learned through diligent investigation during the limitations period.

Plaintiffs also attempted to delay the accrual of the limitations period based on the “separate accrual rule.” Plaintiffs argued that each transmission of a periodic account statement was in furtherance of the RICO scheme and constituted a new predicate act of mail and wire fraud, which in turn, resulted in the payment of illegal kickbacks. The Court disagreed, concluding that the present account statements – even if each prompted and caused plaintiffs to make a payment – arose from obligations and facts already known and acknowledged at the time of the parties’ mortgage agreements and thus were not “new and separate.” As such, the Court granted summary judgment in Bank of America’s favor, holding the RICO claims were time-barred.

Weiss v. Bank of America Corp., Case No. 15-62 (USDC W.D. Pa. Nov. 22, 2016).

This post written by Gail Jankowski.

See our disclaimer.

Filed Under: Contract Interpretation, Reinsurance Claims

CONNECTICUT ISSUES BULLETINS REGARDING FINANCIAL REPORTING REQUIREMENTS FOR SURPLUS LINES INSURERS AND ACCREDITED REINSURERS

December 21, 2016 by Michael Wolgin

The Connecticut Insurance Department has issued two bulletins addressing 2016 and 2017 financial reporting requirements for foreign eligible surplus lines insurers and accredited reinsurers. Regarding surplus lines insurers, the department advised that each insurer, before March 1st, must submit a signed report of its financial condition for 2016, and must report their financial condition on a quarterly basis in 2017, including a breakdown of the company’s Connecticut business showing premiums and losses by line. Regarding accredited reinsurers, the department provided that each Connecticut reinsurer: (1) must, before March 1st, submit a signed report of its financial condition for 2016; (2) must file, in addition to the Annual Statement, an actuarial opinion and management discussion and analysis on March 1st and April 1st respectively; (3) need not file quarterly statements unless specifically requested; (4) must file before June 1st, a copy of the company’s independent audit report for 2016; and (5) must file a list of Connecticut insurers ceding business to the accredited reinsurer in 2016. The bulletin also included the March 1st deadline for reinsurance trusts to file documents detailing the balance in the trust and a listing of the trust’s 2016 investments. Finally, managers of non-affiliated reinsurance pools were advised to direct participating companies that are not licensed in Connecticut to file a copy of their Annual Statement with the Connecticut Department. Connecticut Insurance Department Bulletin Numbers FS-4SL-16 & CT Bulletin FS-4AR-16 reinsurer reports 11.28.16 FS-4SL-16 (Nov. 28, 2016).

This post written by Michael Wolgin.

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Filed Under: Reinsurance Regulation

TENTH CIRCUIT AFFIRMS REFUSAL TO COMPEL ARBITRATION WHERE AGREEMENTS CONTAINED CONFLICTING ARBITRATION PROVISIONS

December 20, 2016 by Michael Wolgin

Mr. Ragab sued two financial companies and a corporate officer for misrepresentation and for violating several consumer credit repair statutes. There were six agreements between the parties, including, for example, a consulting agreement, a purchase agreement, and an operating agreement. Each agreement contained arbitration provisions, but they varied in material ways, including: (1) which rules governed, (2) how the arbitrator would be selected, (3) the notice required to arbitrate, and (4) entitlement to attorney’s fees. The district court refused to compel arbitration, concluding that there was no meeting of the minds on essential terms, and therefore no actual agreement to arbitrate. On appeal, a divided panel of the Tenth Circuit affirmed, distinguishing cases where the contracts provided for a solution to resolve conflicting provisions, or where contracts failed to spell out the requirements for arbitration; where, as here, there are multiple, specific, conflicting arbitration provisions with no agreed way to resolve them, “there was no meeting of the minds with respect to arbitration.” The court also rejected the defendants’ argument that the district court should have granted a summary trial to decide whether the parties agreed to arbitrate. The court held that in this case there were no material factual disputes, leaving only an issue of law for the court to resolve. Ragab v. Howard, Case No. 15-1444 (10th Cir. Nov. 21, 2016).

This post written by Michael Wolgin.

See our disclaimer.

Filed Under: Arbitration Process Issues, Week's Best Posts

EIGHTH CIRCUIT UPHOLDS ARBITRAL IMMUNITY IN CHALLENGE TO AAA’S REMOVAL OF ARBITRATOR

December 19, 2016 by Michael Wolgin

Owens, a terminated CEO, engaged in a AAA arbitration with his former company before a three-member panel. In the course of the proceeding, the company sought to remove an arbitrator for making an incomplete disclosure regarding conflicts of interest. The AAA removed the conflicted arbitrator without holding a hearing or consulting the panel, and the remaining two arbitrators ultimately awarded Owens $3 million. The company then successfully moved for dismissal of the award in the district court. Following dismissal, Owens sued the AAA for breach of contract, unjust enrichment, and tortious interference, but his claims were dismissed by the court based on arbitral immunity. On appeal, the Eighth Circuit affirmed, explaining that the reason courts extend immunity to arbitrators is to protect them and the arbitration process from undue influence and attacks from dissatisfied litigants. The Court concluded that “the removal of arbitrators is similarly protected by arbitral immunity because it is just as much a part of the arbitration process as the appointment of arbitrators.” Owens v. American Arbitration Association, Inc., Case No. 16-1055 (8th Cir. Nov. 18, 2016).

This post written by Gail Jankowski.

See our disclaimer.

Filed Under: Arbitration Process Issues, Confirmation / Vacation of Arbitration Awards, Week's Best Posts

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