Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

ROUNDUP OF MOTIONS TO COMPEL INVOLVING NON-SIGNATORIES TO ARBITRATION AGREEMENTS

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Four recent decisions considered whether to compel arbitration in the context of non-signatories and multiple agreements and claims. The decisions highlight different doctrines relevant to this analysis, including equitable estoppel, third-party beneficiary, and agency principals.

Murphy v. DirecTV, Inc., No. 11-57163 (9th Cir. July 30, 2013) (reversing lower court’s order compelling arbitration; non-signatory was not entitled to benefit of arbitration clause under equitable estoppel, third-party beneficiary doctrine, or agency principals);

84 Lumber Co. v. F.H. Paschen, S.N. Nielsen & Associates, LLC, Case No. 2:12cv01748 (USDC E.D. La. July 24, 2013) (granting motions to compel arbitration; contract and tort claims against signatory were subject to arbitration clause, notwithstanding claimant’s fraudulent inducement claim with respect to agreement as a whole; claims against non-signatory would be arbitrated under equitable estoppel);

Uptown Drug Co., Inc. v. CVS Caremark Corp., Case No. 3:12cv06559 (USDC N.D.Cal. July 22, 2013) (granting in part and denying in part motion to compel arbitration; non-signatories could compel arbitration under equitable estoppel of misappropriation of trade secrets claims, which were intertwined with relevant agreement; non-signatories could not compel arbitration of alleged violations of unfair prong of unfair competition law, which were not intertwined with agreement);

National Union Fire Ins. Co. v. Chopper Express, Inc., Case No. 1:13-cv-03129 (USDC S.D.N.Y. June 19, 2013) (granting motion to compel arbitration against signatory; providing petitioner time to submit evidence to show that non-signatory co-respondents were also bound by underlying contract based on corporate relation).

This post written by Michael Wolgin.

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AFTER AMEX, MASSACHUSETTS SUPREME COURT RECONSIDERS PRIOR DECISION FINDING CLASS WAIVER UNENFORCEABLE ON COST-PROHIBITIVE GROUNDS

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On July 2, 2013, we reported on Feeney v. Dell Inc., which was issued eight days before the U.S. Supreme Court’s decision in American Express Co. v. Italian Colors Restaurant, and appeared to reach a result at odds with that decision. Specifically, while Amex held that individual arbitration could be compelled under the FAA based on a class waiver contract provision, notwithstanding that the cost of arbitration exceeded the potential recovery, Feeney had held that U.S. Supreme Court precedent precluded a class waiver under those circumstances. On August 1, 2013, the Feeney court granted a petition for rehearing, changing the result in its prior opinion, and reversing the lower court’s denial of a motion to confirm the underlying arbitration award, holding that “following Amex, our analysis in Feeney II no longer comports with the Supreme Court’s interpretation of the FAA.” Feeney v. Dell Inc., Case No. SJC-11133 (Mass. August 1, 2013).

This post written by Michael Wolgin.

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DISTRICT COURT TRANSFERS BREACH OF CONTRACT ACTION INVOLVING REINSURANCE AGREEMENT

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In a dispute between an insurance company and a reinsurance company over sums paid pursuant to a reinsurance agreement, the Southern District of New York granted defendant’s motion to transfer to the Northern District of New York (“NDNY”) where a similar dispute involving the same parties, but a different reinsurance agreement, is pending. The court determined that transfer was appropriate because the only witnesses reside in the NDNY, the relevant documents exist in defendant’s headquarters located in the NDNY, and plaintiff’s choice of forum is entitled to little deference since plaintiff is located in New Jersey, not in the forum. The fact that the sister case pending in the NDNY involves common witnesses and documents, and therefore might generate duplicative discovery, also weighed in favor of transfer. Munich Reinsurance America, Inc. v. Utica Mutual Insurance Company, Case No. 13-cv-238 (USCD S.D.N.Y. June 18, 2013).

This post written by Abigail Kortz.

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NEW YORK DFS AMENDS RESERVE REQUIREMENTS ON CERTAIN UNIVERSAL LIFE POLICIES

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New York’s Department of Financial Services issued an amendment to Insurance Regulation 147 (11 NYCRR 98) which changes reserve requirements on universal life with secondary guarantee policies. The amendment is designed to conform Regulation 147 with NAIC’s revisions to actuarial guidelines calling for reserves for all universal life with secondary guarantee business written between July 1, 2005 and December 31, 2012 to be calculated under a “principles-based” approach. For business issued after January 1, 2013, reserves are to be calculated using a formulaic-based approach. Insurers must also file quarterly financial statements based on minimum reserve standards in effect on the date of filing. New York Department of Financial Services Fourth Amendment to 11 NYCRR 98 (May 17, 2013).

This post written by John Pitblado.

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UK SUPREME COURT ENJOINS FOREIGN COURT ACTION IN FAVOR OF POSSIBLE LONDON ARBITRATION

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Since reinsurance disputes are sometimes multi-jurisdictional we occasionally post on appellate UK and US court opinions dealing with the relationship between proceedings in different countries. The latest example of this involves two parties which entered into a contract concerning a hydroelectric plant in Kazakhstan. The contract is governed by Kazakh law but contains a London arbitration clause. When a dispute arose one party filed suit in Kazakhstan and secured a judgment from the Kazakh Supreme Court invalidating the arbitration provision. The other party filed suit in a UK court seeking a declaration that the arbitration provision was valid and enjoining the action in Kazakhstan. The UK trial court and Court of Appeals ruled that the Kazakh judgment was not binding, upheld the validity of the arbitration provision and enjoined the parties from proceeding with the Kazakh action. The UK Supreme Court agreed, and dismissed the appeal (the UK equivalent of affirming). The UK Supreme Court held that the refusal of the Kazakh court to enforce the arbitration provision compelled it to act to preserve the right to arbitrate. It is perhaps notable that no one had sought to commence an arbitration proceeding. The UK courts were acting to preserve the right of the parties to arbitrate, should they desire to do so. Ust-Kamenogorsk Hydropower Pland JSC v. AES Ust-Kamenogorsk Hydropower Pland LLP, [2013] UKSC 35 (June 12, 2013).

This post written by Rollie Goss.

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