Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

DISTRICT JUDGE ORDERS LG ELECTRONICS TO ARBITRATE IN TV PATENT SUIT

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The Southern District of New York ordered LG Electronics Inc. to arbitrate with technology patent licensing company Wi-LAN Inc. a dispute over whether certain LG television models infringe patents LG does not own.  The current dispute can be traced back to a 2012 Florida suit in which Wi-LAN alleged that two of its patents for video display technology were used in LG’s flat panel televisions without their consent. LG filed a motion to dismiss arguing that the televisions were subject to a previously entered into patent licensing agreement (the “PLA”), signed by both parties. In response, Wi-LAN filed a motion to compel arbitration based on language in the PLA that mandated arbitration in the case of disagreement between the parties.  LG subsequently brought suit in New York federal court seeking an injunction against arbitration in the Florida proceeding. LG argued that the matter should not be sent to arbitration because Wi-LAN waived its right to arbitrate under the PLA by suing LG for patent infringement initially.

The court determined that Wi-LAN had not waived this right because, even though Wi-LAN did not move to compel arbitration until approximately four months after it filed its Florida suit, LG could not show that it had suffered any prejudice as a result of this delay. Prejudice, the court noted, is the “key to waiver analysis.”  Further, the court held that the PLA contains “clear and unmistakable evidence that they intended the arbitrator to resolve both issues of contract interpretation and issues of arbitrability.” Consequently, it ordered that the arbitrator, and not the court, would determine whether the arbitration clause is inapplicable because Wi-LAN “chose” litigation.  LG Electronics, Inc. v. Wi-LAN USA, Inc., No. 13-CV-2237-RA, 2014 WL 3610796 (S.D.N.Y. July 21, 2014).

This post written by Whitney Fore.

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UNDER FAA, CHICAGO COURT REFUSES TO DETERMINE WHETHER CLAIMS SHOULD BE PART OF PENDING NEW YORK ARBITRATION

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A dispute involving competing actions between two competing aeroponic farming companies, FarmedHere, LLC and Just Greens, LLC (doing business as Aero Farm Systems), was simultaneously at issue in a New York arbitration, a New York state court, and a Chicago federal court. Aero Farm had originally demanded arbitration in New York based on an arbitration clause in a distribution agreement between Aero Farm and a company affiliated with FarmedHere. In response, FarmedHere filed a petition to stay the arbitration in the New York court, contending that it was not a party to the distribution agreement, and a separate case in Chicago alleging unfair trade practices and seeking a declaration regarding certain patented aeroponic farming technology. Aero Farm then moved to dismiss the Chicago action, contending that (1) FarmedHere assumed obligations under the distribution agreement, (2) FarmedHere’s claims were therefore subject to the arbitration clause, and (3) the proper jurisdiction under the FAA to determine arbitrability was New York (where the arbitration was pending), and not Chicago. After a review of the evidence, the court agreed with Aero Farm and dismissed the Chicago proceedings without prejudice. FarmedHere can attempt to refile its claims in Chicago if the New York court determines that FarmedHere’s claims are not arbitrable. FarmedHere, LLC v. Jut Greens, LLC, Case No. 14 C 370 (USDC N.D. Ill. June 16, 2014).

This post written by Michael Wolgin.

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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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FEDERAL COURT REMANDS ACTION TO CONFIRM ARBITRATION AWARD: NO SUBJECT MATTER JURISDICTION

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A federal court in California recently rejected efforts to remove a state court arbitration confirmation proceeding to federal court. The underlying royalties dispute had been addressed in an arbitration, and ultimately the dispute arrived in California state court in a proceeding to confirm the arbitration award. The defendant opposed the petition for confirmation and filed a separate petition to vacate or modify the award. That pleading included a count for “Declaratory Judgment for No Liability under Federal Patent Laws.” Based on the assertion of federal relief in its own petition, the defendant filed a notice of removal. The federal court rejected the defendant’s assertion of jurisdiction and remanded the case back to state court. The court concluded that there was no subject matter jurisdiction — despite the patent-related request for relief — due to the limited nature of the proceedings before the state court. The court determined that the declaratory judgment count did not belong in the state court action in the first place, and it ruled that issues of patent law need not be decided to resolve the limited issues presented in the case. In sum, the court refused to allow the defendant “to create jurisdiction where none can possibly exist in order to bring a properly-situated case before a new forum.”

Amkor Tech., Inc. v. Tessera, Inc., 5:14-CV-03604 EJD, 2014 WL 4467715 (USDC N.D. Cal. Sept. 9, 2014).

This post written by Catherine Acree.

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