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ARBITRATION AWARD OVERTURNED UNDER THE FAA BECAUSE THE PANEL WAS NOT IMPARTIAL

January 18, 2016 by Carlton Fields

The New York Supreme Court vacated the award entered in an arbitration of television rights between Mid-Atlantic Sports Network (“MASN”), the Baltimore Orioles, the Commissioner of Baseball (“MLB”) and the Washington Nationals. The arbitration was held by the Revenue Sharing Definitions Committee of Major League Baseball (“RSDC”). MASN and the Orioles filed a petition to vacate the award, and MLB and the Nationals moved to confirm it.

In vacating the award, the court discussed various grounds for vacatur under the FAA: corruption, fraud, misconduct of the arbitrator, use of undue means to procure the award, evident partiality, and corruption. The court found evident partiality existed here, because the law firm and lawyers opposing MASN and the Orioles served as counsel in other matters for every other entity in the arbitration, including the individual arbitrators. The court speculated that, to the extent that “there is no authority for a finding of ‘evident partiality’ in such a relationship,” it is because “arbitrators in similar situations have disqualified themselves rather than risk a charge of partiality.” While the “appearance of bias” is not a basis for vacatur under the FAA and therefore not applicable, the court noted that such an appearance existed here. The court further found that the panel completely ignored the prejudice established by MASN and the Orioles, which reflected “an utter lack of concern for fairness of the proceeding that is ‘so inconsistent with basic principles of justice’ that the award must be vacated.” TCR Broadcasting Holding, LLP v. WN Partner, LLC, Case No. 652044/2014 (N.Y. Sup. Ct. Nov. 4, 2015).

This post written by Barry Weissman.

See our disclaimer.

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

COURT DENIES MOTION TO DISMISS BY BANK AND ITS AFFILIATED REINSURER IN RICO SUIT

January 14, 2016 by Carlton Fields

This dispute involves class action claims under RICO, claims for unjust enrichment and allegations that Bank of America and its affiliate reinsurer engaged in a conspiracy to defraud home mortgage borrowers into funding sham captive reinsurance arrangements through illegal kickbacks. Specifically, plaintiffs allege that Bank of America referred homeowner borrowers to private mortgage insurance providers in exchange for a kickback of the private mortgage insurance payment to the bank’s affiliated reinsurer, and that in reality, the bank and its reinsurer did not assume any real risk in exchange for the payments, and thus the reinsurance was illusory.  Bank of America moved to dismiss the claims as time-barred, for lack of standing and for failure to state a RICO claim.

A Pennsylvania federal court denied the motion to dismiss on all grounds. However, with respect to the statute of limitations, the court denied the motion to dismiss based on the current record, and gave leave to proceed to limited discovery as to the statute of limitations, injury-discovery and tolling issues.  Weiss, et al. v. Bank of America Corp., et al., No. 15-62 (W.D. Pa. Dec. 22. 2015).

This post written by Jeanne Kohler.
See our disclaimer.

Filed Under: Reinsurance Claims

COURT HOLDS INSURED’S REQUESTS FOR RESERVE DOCUMENTS DISCOVERABLE

January 13, 2016 by Carlton Fields

A North Carolina magistrate judge recently denied an insurer’s motion for a protective order in a suit seeking a declaration that American Home Assurance (American Home) owes PCS Phosphate Co. Inc. (PCS) a duty to defend and a duty to indemnify in two underlying environmental contamination suits. In the coverage suit, the magistrate judge denied American Home’s protective order regarding American Home’s reserves because the request fell “within the scope of permissible discovery based upon claims asserted in this matter.” This fact was true, according to the magistrate judge, because PCS had asserted bad faith and breach of contract claims, while American Home asserted a late notice defense. In such an instance, reserve information is relevant and discoverable. Further, the magistrate held that requests regarding claims handling manuals, record retention, underwriting documents, and promotional materials are all relevant and discoverable.  PCS Phosphate Co., Inc. v. American Home Assurance Co., No. 5:14-CV-99-D (USDC E.D. N.C. Dec. 10, 2015).

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

Filed Under: Discovery

ELEVENTH CIRCUIT CONCLUDES IT LACKS JURISDICTION OVER APPEAL OF ORDER COMPELLING ARBITRATION BUT CONFIRMS ORDER CONFIRMING ARBITRATION AWARD

January 12, 2016 by Carlton Fields

This appeal is from two orders by a district court in Alabama. The first order in June 2012 compelled arbitration of a dispute between the parties, the Union and Wise Alloys.  The second order in December 2014 enforced the resulting arbitration award in the Union’s favor, but denied the Union’s request for attorneys’ fees.  Wise Alloys appealed both the June 2012 and December 2014 orders, and the Union appealed the aspect of the December 2014 which denied its motion for attorneys’ fees.  The procedural history and issues involved in the underlying case can be found here.

The Eleventh Circuit held that it lacked jurisdiction over the appeal of the June 2012 order which compelled arbitration because no notice of appeal was filed within 30 days of that order. The Court noted that the June 2012 order was a final decision and was appealable, and the fact that the order stayed the litigation (and did not dismiss it) did not impact the finality of the order compelling arbitration.  Thus, because Wise Alloys did not file its notice of appeal within 30 days of the order, the Court had no jurisdiction over that aspect of the appeal.

With respect to Wise Alloys’ appeal of the December 2014 order and its challenge to the arbitration award based on its view that the arbitrator exceeded his authority, the Eleventh Circuit noted that its judicial review of arbitration awards is limited and that it specifically reviews a labor arbitration award for “whether [it] is irrational, whether it fails to draw its essence from the collective bargaining agreement or whether it exceeds the scope of the arbitrator’s authority.” Thus, under this standard, the Eleventh Circuit agreed with the district court that the arbitrator’s interpretation of the agreement, even if incorrect, was not an impermissible amendment or change to the agreement.  It also held that the arbitrator was permitted to resort to extrinsic evidence to interpret an ambiguity he concluded was in the agreement.  Accordingly, the Court affirmed the district court’s December 2014 order, confirming the arbitration award.  In addition, it also confirmed the portion of the order denying the Union’s request for attorneys’ fees.  United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers Int’l Union, et al. v. Wise Alloys, LLC, No. 14-15744 (11th Cir. Dec. 8, 2015).

This post written by Jeanne Kohler.
See our disclaimer.

Filed Under: Confirmation / Vacation of Arbitration Awards, Jurisdiction Issues

COURT HOLDS THAT SERVICE-OF-SUIT CLAUSE WAIVES RIGHT TO SEEK REMOVAL

January 11, 2016 by Carlton Fields

The Northern District of Illinois recently granted a motion to remand filed by an insolvent insurer’s assignee because the removal contravened the forum-selection clauses of the reinsurance agreements at issue. Pine Top Receivables of Illinois LLC (PTRIL) sued Transfercom Ltd. (Transfercom) in Illinois state court for breach of contract and certain state law claims. Pine Top Insurance Company’s rights to certain accounts receivable due from reinsurers were assigned to PTRIL when the insurer became insolvent. Transfercom was one of the reinsurers that was indebted to Pine Top Insurance Company.

Transfercom removed the case to the U.S. District Court for the Northern District of Illinois, and PTRIL filed a motion to remand. PTRIL argued, and the court agreed, that the reinsurance agreements contained an agreed-upon clause to accept plaintiff’s choice of forum. The court noted that this clause meant that Transfercom agreed to “submit to the jurisdiction of any Court of competent jurisdiction within the United States.” Further, the court held that “[t]his clause’s ‘plain and ordinary meaning’ constitutes a ‘clear and unequivocal’ waiver of Transfercom’s removal rights.” As a freely negotiated forum selection clause, the court held, the parties must be bound by it.  Pine Top Receivables of Illinois, LLC. v. Transfercom, Ltd., No. 15-CV-8908 (USDC N.D. Ill. Dec. 14, 2015).

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

Filed Under: Contract Interpretation, Jurisdiction Issues, Week's Best Posts

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