Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

SECOND CIRCUIT AFFIRMS DISTRICT COURT DECISION TO COMPEL ARBITRATION IN PATENT INFRINGEMENT BATTLE BETWEEN LG AND WI-LAN

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A Second Circuit 3-judge panel affirmed a district court decision denying a request for declaratory and injunctive relief while subsequently compelling arbitration in a licensing infringement suit. On appeal, LG Electronics, Inc. and its US affiliate (together “LG”) alleged that Wi-LAN, Inc. and its US affiliate (together “Wi-LAN”) waived their right to arbitrate and further alleged that Wi-LAN should not be allowed to arbitrate the parties’ patent licensing agreement (“PLA”) while also litigating the infringement suit.

The panel considered three factors to determine whether Wi-LAN waived its right to arbitrate the PLA agreement, specifically: “(1) the time elapsed from when litigation was commenced until the request for arbitration; (2) the amount of litigation to date, including motion practice and discovery; and (3) proof of prejudice.” Considering these factors, the panel determined that LG did not suffer from either substantive prejudice or prejudice based on cost or delay. The panel noted that LG had not yet produced discovery and the litigation’s limited motion practice mostly occurred after Wi-LAN’s arbitration demand. Additionally, Wi-LAN’s two week demand for arbitration was not sufficient to cause delay.

Finally, the court considered LG’s claim splitting argument noting that the “doctrine does not bar arbitration of claims or defenses that the parties have agreed to arbitrate, while litigating overlapping claims or defenses that the parties have not agreed to arbitrate.” Citing Supreme Court precedent, the court found that because the parties had agreed to arbitrate the PLA, arbitration is appropriate to determine whether the agreement is effective. LG Electronics, Inc. v. Wi-LAN USA, No. 14-3035 (2nd Cir. Sept. 10, 2015).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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LOUISIANA LEGISLATION REPEALS AUTHORITY TO ENTER NIMA

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The Louisiana House of Representatives’ Bill 259, effective July 1, 2015 as Act 386, repeals the authority of the state’s insurance commissioner to enter the Non-Admitted Insurance Multi-State Agreement (“NIMA”) or other cooperative compacts or agreements with other states for the purpose of allocating surplus lines premium on multi-state policies and tax revenues. Act 386 provides that the entire surplus lines premium of a surplus lines policy of which Louisiana is the home state of the policyholder would be subject to the surplus lines tax, which the Act sets at 4.85%.

H.B. 259, 2015 Reg. Sess. (La. 2015).

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

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OREGON FEDERAL COURT FINDS ARBITRATION AGREEMENT IN CGL POLICY INVALID

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Plaintiff, Technical Security Integration, Inc., a Washington company, sold certain security and surveillance equipment and services. It hired Corey Tharp as a sales associate in Oregon, to tap his connections to that state’s gaming casinos, and later terminated him. After the casinos Tharp sold contracts to refused to renew their contracts with Plaintiff, and instead signed on with the company that later employed Tharp, Plaintiff brought suit against Tharp and his employer, alleging interference with contract and related claims. Tharp and his employer asserted counterclaims, and Plaintiff sought coverage from its CGL carrier, the defendant, Philadelphia Indemnity. Philadelphia declined coverage, citing the policy’s employment-related practices exclusion, and Plaintiff thereafter brought a coverage action in federal court. Philadelphia moved to compel arbitration, citing the policy’s arbitration endorsement. Plaintiff objected. The matter was heard by a Magistrate, who held that Washington law applied, and that, pursuant to Revised Code of Washington § 48.18.200(1)(b), which prohibits insurance contracts from “depriving the courts of this state of the jurisdiction of action against the insurer,” the arbitration agreement was invalid. The Magistrate therefore denied the motion to compel arbitration. Philadelphia sought de novo review by the District Judge, who approved and adopted the Magistrate’s recommended ruling. Technical Security Integration, Inc. v. Philadelphia Indemnity Ins. Co., No. 3:14-cv-01895-SB (USDC D. Ore. May 27, 2015) (Magistrate’s report and recommendation); Technical Security Integration, Inc. v. Philadelphia Indemnity Ins. Co., No. 3:14-cv-01895-SB (USDC D. Ore. July 30, 2015) (approving and adopting Magistrate’s report).

This post written by John Pitblado.

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OIL SUPPLIER APPEALS CONOCO’S RIGHT TO BUY STAKE IN REFINERY UNIT

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In a long-standing dispute between Venezuelan state-owned Oil Company Petroleos de Venezuela SA (“Petroleos”) and ConocoPhillips, a New York district court judge upheld ConocoPhillips’ acquisition of a 50% stake in a Texas refinery. The two parties were former joint partners in an oil refining operation but disagreements between them led to the triggering of a contract provision that automatically dissolved the joint venture. Following the dissolution, the parties proceeded to arbitration.

The arbitration action concerned a range of disputes, one of which involved the parties’ Transfer Agreement, pursuant to which mandatory transfers of joint venture interests acted as a remedy for ConocoPhillips in the event of Petroleos’s breach. This was referred to as the “Call Option,” which Petroleos contended at arbitration acted as a penalty because it resulted in a purchase price of zero dollars for its share of the joint venture. The arbitration panel concluded that the Call Option was valid and enforceable under New York law and did not constitute an impermissible contractual penalty. Petroleos petitioned to vacate the portion of the award regarding the Call Option, but the district court denied the petition, and granted ConocoPhillips petition to confirm.

PDV Sweeny, Inc. v. ConocoPhillips Co., No. 14-cv-5183 (U.S.D.C. S.D.N.Y. Sept. 1, 2015).

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

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EIGHTH CIRCUIT HOLDS NJ LAW TOLLS ARBITRATION AGAINST BROKER

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The Eighth Circuit Court of Appeals recently held that New Jersey state law fraud claims against Morgan Keegan, the brokerage firm now part of Raymond James & Associates, were tolled by the plaintiffs’ efforts to collect an arbitration award. The Eighth Circuit reasoned that, while the district court correctly held that certain federal and Arkansas state law claims were time-barred, the New Jersey claims were timely and erroneously dismissed.

Zaracor v. Morgan Keegan & Co., Inc., No. 13-3315 (8th Cir. Sept. 1, 2015).

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

See our disclaimer.