Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

FEDERAL COURT DISMISSES ACTION TO DISQUALIFY COUNSEL IN REINSURANCE ARBITRATION FOR FAILURE TO SATISFY AMOUNT IN CONTROVERSY REQUIREMENT

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Plaintiff and defendant were parties to a contract under which dispute arose and arbitration was demanded. Plaintiff filed an action in state court seeking to disqualify defendant’s counsel due to an alleged conflict of interest. Defendant removed to federal court. The federal court sua sponte raised the issue of whether the amount in controversy requirement for a diversity action was satisfied. After briefing on the issue, the court held that the requirement was not met, and that the exposure in the underlying arbitration was not the appropriate measure for amount in controversy, but rather only the financial impact of having counsel disqualified and retaining new counsel was implicated. The removing defendant failed to establish the requirement and remanded the case to state court. National Casualty Co. v. Utica Mutual Insurance Co., No. 12-cv-657-bbc (USDC W.D. Wis. Dec. 12, 2012).

This post written by John Pitblado.

See our disclaimer.

REINSURERS’ ACTION SEEKING TO VOID REINSURANCE AGREEMENT TRANSFERRED TO PLACE OF RELATED ARBITRATION

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Plaintiffs, five Lloyd’s of London underwriters, filed suit in Ohio federal court seeking a declaration that an alleged reinsurance agreement between them and defendant Stonebridge Casualty Insurance Company’s predecessor in interest was invalid because plaintiffs had no knowledge of it. Plaintiffs’ Ohio action was filed after Stonebridge had successfully moved in Florida federal court to compel arbitration of disputes arising under the agreement. Stonebridge moved to have the Ohio action transferred to Florida or dismissed. In response, plaintiffs argued that the Florida court lacked jurisdiction due to the presence of an Ohio forum selection clause in the reinsurance agreement. The court found that this clause did not strip the Florida court of its diversity jurisdiction. The court chastised plaintiffs for attempting to rely on a forum selection clause in a contract that they had not even acknowledge existed. The Ohio court similarly rejected plaintiffs’ argument that venue was improper in Florida, given that many of the relevant negotiations occurred in Florida, and key witnesses and documents were located in Florida. Certain Underwriters at Lloyd’s, London v. Stonebridge Casualty Insurance Co., Case No. 2:12-cv-160 (USDC S.D. Ohio Dec. 12, 2012).

This post written by Ben Seessel.

See our disclaimer.

COURT DISMISSES PORTIONS OF CAPTIVE REINSURANCE CASE

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We previously posted on a putative class action filed in federal court in California alleging violations of the Real Estate Settlement Procedures Act in the placement of private mortgage insurance and its reinsurance with captive reinsurance companies. After partially lifting a stay put in place pending a deicison by the United States Supreme Court in a pending case, the district court has dismissed, with prejudice, claims against what it terms non-contracting parties, finding that the plaintiff lacked standing to bring such claims and that, in the alternative, the claims were barred by the applicable statute of limitation. The court found that the Complaint at best alleged parallel threads of misconduct rather than an overall “captice reinsurance scheme.” Claims against other defendants were dismissed with leave to amend. McCarn v. HSBC USA, Inc., Case No 12-375 (USDC ED Cal. Nov. 13, 2012).

This post written by Rollie Goss.

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ARBITRATION ROUND-UP

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Evident Partiality, Fraud, Corruption, Undue Means

Dubois v. Macy’s Retail Holdings, Inc., Case No. 11-4904 (USDC E.D.N.Y. Sept. 13, 2012) (accepting magistrate’s report and recommendation denying motion to vacate, no corruption, fraud, undue means, or evident partiality; granting motion to confirm)

Burbach Aquatics, Inc. v. Huntley Illinois Park District, Case No. 12-6613 (USDC N.D. Ill Nov. 21, 2012) (denying motion to vacate, no evident partiality, no manifest disregard of the law)

Gambino v. Alfonso Electrical Services, Case No. 10-10860 (USDC D. Mass. Nov. 20, 2012) (granting motion to vacate, evident partiality where arbitrator owed fiduciary duty as trustee to prevailing party)

Failure or Refusal to Hear Material Evidence

Allstate Ins. Co. v. GEICO, No. D36443 (N.Y. App. Div. Oct. 9, 2012) (reversing trial court decision granting motion to vacate for failure or refusal to hear evidence, reinstating and confirming award)

Exeeding Scope of Submission

Integrated Construction Enterprises, Inc. v. Bradley Sciocchetti, Inc., No. A-2511-10T4 (N.J. App. Div. Nov. 20, 2012) (affirming denial of vacatur, arbitrator did not exceed powers by awarding prevailing party costs associated with arbitration, no evident mathematical error in damages award)

Arbitration Procedure

OneBeacon America Insurance Co. v. Swiss Reinsurance America Corp., Case No. 12-5043 (USDC S.D.N.Y. Oct. 19, 2012) (granting petition for appointment of neutral third arbitrator for tri-partite panel)

Hofer Builders, Inc. v. Captstone Building Corp., Case No. 12-1367 (USDC E.D. La. Nov. 20, 2012) (denying interlocutory motion to vacate arbitrator decision denying summary judgment, as decision did not constitute a “final award”)

Oakley Fertilizer, Inc. v. Hagrpota for Trading & Distribution, Ltd., Case No. 11-7799 (USDC S.D.N.Y. Nov. 16, 2012) (granting motion to confirm award under Convention on Recognition and Enforcement of Foreign Arbitral Awards and the FAA, where losing party in arbitration was refusing to pay award)

Choice Hotels International, Inc. v. Jai Shree Navdurga, LLC, Case No. 11-2893 (USDC D. Md. Nov. 29, 2012) (confirming award by default judgment, denying motion for costs not pled in initial complaint)

This post written by John Pitblado.

See our disclaimer.

FEDERAL COURT HOLDS THAT JOINT VENTURE AGREEMENT TO PURCHASE, RENOVATE, AND SELL REAL PROPERTY IS SUBJECT TO THE FAA

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Bilbo, a Mississippi resident, and McNally, a Floridian, entered into a joint venture agreement to purchase, renovate, and resell residential property located in Jackson, Mississippi. The agreement contained an arbitration clause. After a dispute arose, Bilbo moved to compel arbitration in federal district court. McNally moved to dismiss on the grounds that the FAA did not apply because the parties’ agreement did not concern “matters of interstate commerce.” The court held that the FAA applied, given that Congress’ power to regulate commerce is broadly construed and that McNally, a Florida resident, agreed to purchase and renovate property in Mississippi, a different state. Bilbo v. McNally, Case No. 12-cv-00502 (USDC S.D. Miss. Nov. 15, 2012).

This post written by Ben Seessel.

See our disclaimer.