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

October 14, 2014 by Carlton Fields

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.

See our disclaimer.

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

SPECIAL FOCUS: DISMISSAL OF MARIAH RE CAT BOND LAWSUIT

October 13, 2014 by Carlton Fields

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.

See our disclaimer.

Filed Under: Alternative Risk Transfers, Contract Interpretation, Reinsurance Claims, Special Focus, Week's Best Posts

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

October 9, 2014 by Carlton Fields

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.

See our disclaimer.

Filed Under: Arbitration Process Issues, Jurisdiction Issues

COURT DETERMINES REINSURER OBLIGATION TO PAY FOR COMBINED LOSS AND EXPENSE CAPPED AT THE DOLLAR AMOUNT STATED IN THE REINSURANCE ACCEPTED SECTION OF CERTIFICATE OF REINSURANCE

October 8, 2014 by Carlton Fields

The United States District Court for the Southern District of New York granted partial summary judgment to plaintiff reinsurer seeking a declaration that the dollar amount stated in the “Reinsurance Acceptance” section of each of nine certificates of reinsurance caps the maximum amount that the reinsurer can be obligated to pay for combined loss and expenses.

The reinsurance certificates at issue in this case contained a “Subject to Clause” stating that the reinsurance was in consideration of the payment of premium and subject to the terms, conditions and amount or limits of liability set forth in the certificate and a “Reinsurance Accepted” section that stated a dollar amount of liability. The court relied upon the plain language of the certificates of reinsurance and the Second Circuit’s binding precedent in Bellefonte Reinsurance Co. v. Aetna Cas. And Sur. Co., 903 F.2d 910, 913 (2d Cir. 1990) and Unigrad Security Ins. Co. v. North River Ins. Co., 4 F.3d 1049, 1070-71 (2d Cir. 1993).

The court noted that the relevant language in the certificates of insurance at issue in this case were nearly identical to the language relied upon by the Second Circuit in Bellefonte and that the Bellefonte and Unigard courts made clear that all other contractual language must be construed in light of the certificate limit because to do otherwise would negate the reinsurance certificate language that the reinsurance is subject to the terms, conditions, and amount of liability set forth in the certificate. The court further noted that if the parties intended to exclude expenses from the total liability cap, the parties could have made that clear in the certificate language.

The court also rejected the defendant’s arguments that the “follow the fortunes” doctrine or the “in addition thereto” language in the reinsurance certificates obligated plaintiff reinsurer to pay for expenses above the certificate limit. The court again relied on Bellefonte, which held that neither the “follow the fortunes” doctrine nor the “in addition thereto” language in the reinsurance certificates exempted defense costs from the clauses limiting the reinsurers’ overall liability under the certificates, as all costs were subject to the express caps on liability set forth in the certificates. Global Reinsurance Corporation of American v. Century Indemnity Company, 1:13-cv-06577-LGS (USDC S.D.N.Y. August 15, 2014).

This post written by Kelly A. Cruz-Brown.

See our disclaimer.

Filed Under: Contract Interpretation, Reinsurance Claims

RHODE ISLAND DIVISION OF INSURANCE AMENDS CREDIT FOR REINSURANCE REGULATION

October 7, 2014 by Carlton Fields

Effective September 2, 2014, Insurance Regulation 59 entitled “Credit for Reinsurance” is amended to update the regulation to the current version of the National Association of Insurance Commissioners (NAIC) Model Regulation and to make changes necessitated by amendment of Rhode Island’s Credit for Reinsurance Act, R.I. Gen Laws § 27-1.1-1 et seq.

The amendments to Insurance Regulation 59 also include the adoption of Forms CR-1, entitled “Certificate of Certified Reinsurer,” CR-F parts 1 and 2 entitled “Assumed Reinsurance as of December 31, Current Year” and “Ceded Reinsurance as of December 31, Current Year,” and CR-S entitled “Reinsurance Assumed Life Insurance, Annuities, Deposit Funds and Other Liabilities Without Life or Disability Contingencies, and Related Benefits Listed by Reinsured Company as of December 31, Current Year.”

This post written by Kelly A. Cruz-Brown.

See our disclaimer.

Filed Under: Reinsurance Regulation, Week's Best Posts

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