Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

PRIOR TO AMERICAN EXPRESS, MASSACHUSETTS SUPREME COURT FINDS CLASS WAIVER UNENFORCEABLE UNDER THE FAA ON COST-PROHIBITIVE GROUNDS

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Eight days before the U.S. Supreme Court issued its American Express decision, the Massachusetts Supreme Court appeared to reach a contrary conclusion when it found that U.S. Supreme Court precedent interpreting the FAA precluded a class waiver when a party would be precluded from pursuing individual statutory relief due to the complexity and cost of the case. The Massachusetts court made this determination in an opinion that reversed its own previous holding made prior to Concepcion in the same putative class action, regarding a class waiver provision in a consumer contract that the court had invalidated because it was “contrary to the fundamental public policy of the Commonwealth favoring consumer class actions” under state statute. It seems likely that the defendant will either seek further review of renew its motion to compel arbitration in light of the American Express decision. Feeney v. Dell Inc., Case No. SJC-11133 (Mass. June 12, 2013).

This post written by Michael Wolgin.

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U.S. SUPREME COURT UPHOLDS CLASS WAIVER PROVISIONS UNDER THE FAA, NOTWITHSTANDING COST-PROHIBITIVENESS OF INDIVIDUAL RELIEF

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On June 20th, the U.S. Supreme Court reversed a decision from the Second Circuit that refused to enforce a class waiver arbitration provision in a putative antitrust class action. The Supreme Court 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. The Supreme Court based its decision on its prior ruling in Concepcion, and the fact that nothing in the antitrust laws or the class action procedural rules guarantee an affordable path to litigating claims. Additionally, the Court held that the class waiver did not run afoul of prior case law stating that a class waiver might be prohibited if it precluded “effective vindication” of statutory rights. The Court explained that that exception is intended to prevent only a “prospective waiver” of a right to pursue statutory remedies, which does not exist simply because it is not cost-effective to prove one’s case. American Express Co. v. Italian Colors Restaurant, Case No. 12-133 (S. Ct. June 20, 2013).

This post written by Michael Wolgin.

See our disclaimer.

ARBITRATION ROUND UP

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Manifest Disregard

HET-JV v. Weston Solutions, Inc., No. 13-100 (USDC E.D. Pa. June 4, 2013) (vacatur denied for ICDR interim award on liability, no manifest disregard, arbitrators did not imperfectly execute powers. Confirmation also denied as premature prior to damages phase of arbitration)

Smith v. Servicemaster Holding Corp., No. 2:11-cv-02943 (USDC W.D. Tenn. May 21, 2013) (vacatur denied where arbitrator ruled that arbitration could proceed on class-wide basis, ruling did not exceed powers, and was not in manifest disregard of the law).

A&G Coal Corp. v. Integrity Coal Sales, Inc., No. 12 Civ. 5293 (USDC S.D.N.Y. May 21, 2013) (vacatur denied, no manifest disregard, arbitrator did not exceed scope of authority).

C-Sculptures, LLC v. Brown, No. 2011-195907 (S.C. May 8, 2013) (affirmation of award reversed by South Carolina Supreme Court, finding award reflected manifest disregard of the law, as arbitrator had been apprised of applicable law and improperly failed to grant respondent’s motion to dimiss)

Exceeding or Imperfectly Executing Powers

Langlais v. Pennmont Benefit Services, Inc., No. 12-3234 (3d Cir. June 7, 2013) (affirming confirmation of arbitration award, arbitrator did not exceed powers, claims were within the scope of arbitration).

Award Exceeds Scope of Submission

Chevron Corp. v. Republic of Ecuador, No. 12-1247 (USDC D.C. June 6, 2013) (confirming award under New York Convention, finding the award was within the scope of the submission).

Marker Volkl (Int’l) GMBH v. Epic Sports Int’l, Inc., No. 12 Civ. 8729 (USDC S.D.N.Y. May 1, 2013) (denying vacatur of foreign award under New York Convention for failure to establish any of the enumerated bases for vacatur, award was within scope of submission).

Award Result of Fraud, Deceit

Meeks v. Host International, Inc., No. 11-17928 (9th Cir. May 22, 2013) (vacatur denied to pro se plaintiff from arbitration award against her in employment termination case, as no fraud, deceit or bad faith demonstrated in arbitration award).

This post written by John Pitblado.

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COURT DEALS ANOTHER BLOW TO ASSIGNEE OF LIQUIDATED CAPTIVE IN CONTINUING REINSURANCE DISPUTE

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A federal court dismissed claims brought by the putative assignee of rights from a previously liquidated captive insurer, against the defendant reinsurer, for alleged payment dispute under reinsurance treaties issued by the defendant to the captive between 1977 and 1986. The plaintiff petitioned to compel arbitration in 2012, and this blog has reported on the court’s denial of plaintiff’s request that the defendant post pre-judgment security, and the plaintiff’s appeal of that decision, as well as the court’s subsequent decision dismissing the case for lack of standing, as the court found the assignee plaintiff had not been assigned the right to arbitrate.

The plaintiff thereafter filed an amended complaint, ostensibly to cure the jurisdictional defect regarding assignment of the right to arbitrate. However, the court again sided with the defendant reinsurer, finding that the amendment did not cure the defect, that the plaintiff has no right to compel arbitration, and that the plaintiff’s claims should be dismissed for failure to state a claim. Pine Top Receivables of Illinois, LLC v. Banco De Seguros Del Estado, No 12 C 6357 (USDC N.D. Ill. June 11, 2013).

This post written by John Pitblado.

See our disclaimer.

REINSURED PERMITTED TO ADD FRAUD CLAIMS IN COMMISSION OVERCHARGE ACTION AGAINST REINSURANCE BROKERS

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We previously reported on interlocutory decisions rendered in a lawsuit brought by Instituto Nacional de Seguros against Florida insurance broker Hemispheric Reinsurance Group, L.L.C. and London-based Howden Insurance Brokers Limited. INS alleges that HRG and Howden overcharged it on commissions in connection with its purchase of $300 million in faculty reinsurance coverage. The Florida circuit court recently allowed INS to amend its complaint to add fraud claims premised on the allegation that HRG and Howden engaged in “grossing up,” i.e., added their commissions to premium charges without informing INS. The court permitted INS’s amended complaint and ordered the pleadings closed. Instituto Nacional de Seguros v. Hemispheric Reinsurance Group, L.L.C., Case No. 10-33653 (Fla. Cir. Ct. June 12, 2013).

This post written by Ben Seessel.

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