Reinsurance Focus

The Texas Court of Appeals affirmed a trial court order denying New Hampshire Insurance Company’s motion to compel arbitration of Magellan Reinsurance Company’s nine common law and statutory claims. New Hampshire and Magellan entered into a reinsurance agreement whereby Magellan agreed to accept 100% of New Hampshire’s obligations under automobile dealer insurance policies. Pursuant to the agreement, Magellan established a trust account from which New Hampshire was authorized to withdraw funds to pay claims. A dispute arose after New Hampshire had emptied the trust account and demanded that Magellan make an additional $1.4 million deposit to replenish it. Magellan in turn questioned New Hampshire’s claims handling and accounting practices. New Hampshire responded by filing a petition in Turks and Caicos Island (TCI) courts seeking to wind up Magellan’s business, citing to the purportedly unpaid $1.4 million obligation and a TCI ordinance relating to a company’s inability to pay debt.

Several years of litigation in TCI, Texas, and New York courts ensued during which time, among other developments, New Hampshire successfully defeated Magellan’s attempt to stay the TCI litigation for arbitration. The TCI litigation, however, was ultimately concluded in Magellan’s favor in 2009 with a finding that New Hampshire was not a “creditor” of Magellan and thus could not wind up Magellan’s business. New Hampshire then sought to compel arbitration of Magellan’s action pending in Texas state court. The trial court denied the motion to compel. The Texas Court of Appeals affirmed holding that, because New Hampshire had convinced the TCI court to deny Magellan’s request to stay litigation for arbitration, New Hampshire was judicially estopped from seeking to arbitrate Magellan’s claims. New Hampshire Insurance Co. v. Magellan Reinsurance Co., No. 02-12-00196-CV (Tex. Ct. App. Feb. 14, 2013).

This post written by Ben Seessel.

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In a putative class anti-trust action brought by retail grocers against wholesale grocers, a divided panel of the Eighth Circuit recently reversed the lower court’s decision to compel arbitration under an equitable estoppel theory. The retailers had purposefully brought suit against wholesalers with whom they did not have supply and arbitration agreements. The lower court found that equitable estoppel could be applied to compel arbitration because the retailers’ claims against non-signatory wholesalers were so intertwined with the agreement containing the arbitration clause that it would be unfair to allow the retailers to rely on the agreement in formulating its claims but to disavow availability of the arbitration clause of that same agreement. The lower court reasoned that without the arbitration “agreements no wholesaler-supplier relationship would exist to be exploited by the alleged anti-trust conspiracy.” On appeal, the Eighth Circuit reversed this ruling, holding that the retailers’ claims were based on statutory rights that exist independent of the supply and arbitration agreements, and that since none of the contracts specified price terms, the retailers’ claims did not involve alleged violation of any contractual terms. The lower court’s analysis, the Eighth Circuit concluded, “focuse[d] too much on the relationship between the signatories, rather than on the relationship between the signatory’s claims against the non-signatory and the contract containing the arbitration clause.” In re Wholesale Grocery Products Antitrust Litigation, No. 11-3768 (8th Cir. Feb. 13, 2013).

This post written by Michael Wolgin.

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