Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

ARBITRABILITY: A “GATEWAY ISSUE” FOR THE COURTS OR A QUESTION OF PROCEDURE FOR THE AAA?

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In an action by a pharmacy franchisor to stay franchisees’ collective arbitration claims filed with the American Arbitration Association and to compel individual arbitrations, the Eastern District of Missouri granted the franchisees’ motion to dismiss based on lack of subject matter jurisdiction, relying heavily on both contract interpretation and the Federal Arbitration Act, which states that agreements to arbitrate “shall be valid, irrevocable, and enforceable save upon such grounds as exist at law or in equity for the revocation of any contract.” Although the arbitration clauses provided that “arbitration shall be conducted on an individual, not a class-wide, basis,” they also expressly incorporated the AAA’s rules, and AAA Rule 7(a) grants arbitrators, not courts, the authority to determine their own jurisdiction.

Without reaching the question of whether collective arbitrability is a gateway issue for the court or a question of procedure to be determined by an arbitrator, the court held that the parties had “clearly and unmistakably agreed to submit all questions of arbitrability to an arbitrator” pursuant to AAA Rule 7(a). In so holding, the court directed its attention to a handful of exceptions to the applicability of the AAA’s rules found in the franchise agreements, emphasizing that no such exception regarding the resolution of arbitrability had been included. Therefore, the court found the AAA’s arbitrability provision controlling. Medicine Shoppe Int’l, Inc. v. Edlucy, Inc., Case No. 12-161 (USDC E.D. Mo. May 14, 2012).

This post written by Rollie Goss.

See our disclaimer.

ARBITRATION ROUNDUP

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Accrual of Actions to Dispute Award:

International Relief and Development, Inc. v. Ladu, Case No. 12-1302 (4th Cir. June 14, 2012) (affirming order confirming award; motion to vacate filed beyond FAA’s three-month filing deadline; upholding finding that appellant had actual notice of award where no evidence suggested “definitively or firmly” that findings were mistaken);

International Brotherhood of Electrocal Workers, Local 50, AFL-CIO v. Metro Electric Engineering Technologies, Inc., Case No. 11-14333 (USDC E.D. Mich. July 25, 2012) (granting summary judgment confirming award due to expiration of statutes of limitations regarding award issued in connection with a collective bargaining agreement under the Labor Management Relations Act; letters from panel advising of defendant’s liability accrued defendant’s rights to dispute confirmation of award).

Jurisdiction:

Paralikas v. Ford Motor Credit Co., LLC, Case No. 10-3308 (USDC E.D.N.Y. June 14, 2012) (dismissing action to vacate award; FAA does not provide an independent basis for federal subject matter jurisdiction).

Class-Wide Arbitration:

Rame, LLC v. Popovich, Case No. 12-1684 (USDC S.D.N.Y. June 9, 2012) (denying petition to vacate award permitting class-wide arbitration; “manifest disregard” still viable in Second Circuit, but not present in this case; arbitrator did not exceed authority where dispute resolution agreement provided that “all claims” could be decided by arbitration).

Scope of Arbitration:

Schneider v. Thailand, Case No. 11-1458 (2d Cir. Aug. 8, 2012) (affirming order confirming award under New York Convention, notwithstanding lower court’s failure to determine “clear and unmistakable” evidence that scope of arbitration agreement would be decided by arbitrators before performing deferential review of award; because UNCITRAL Rules were incorporated in arbitration agreement, appellate court could infer intent for arbitrators to decide scope of agreement; noting “manifest disregard” inapplicable to foreign awards);

Langlais v. Pennmont Benefit Services, Inc., Case No. 11-5275 (USDC E.D. Pa. July 11, 2012) (granting motion to confirm $3.8 million award as to signatories of arbitration agreement, but only in their capacities reflected in agreement; denying motion as to non-signatories because motion to confirm “is not the proper time or procedural vehicle to make such determinations”).

Manifest Disregard/Evident Partiality:

Fund Raising, Inc. v. Alaskans For Clean Water, Inc., Case No. 09-4106 (USDC June 26, 2012) (denying fundraiser’s motion to vacate $8 million award in favor of former client environmental advocates; “manifest disregard” standard applied where arbitrator’s application of law challenged; no manifest disregard nor “complete irrationality” in, among other findings, arbitrator’s interpretation of confidentiality clause, finding of fiduciary duty, finding judicial estoppel, and awarding punitive damages for actions related to perjury);

Digitelcom, LTD v. Tele2 Sverige AB, Case No. 12-3082 (USDC S.D.N.Y. July 25, 2012) (granting motion to confirm award issued by International Centre for Dispute Resolution and granting attorney’s fees award for disingenuous motion; among other things, arbitrator did not commit “manifest disregard” nor exhibit “evident partiality”);

Trademark Remodeling, Inc. v. Rhines, Case No. 11-1733 (USDC D. Md. Aug. 6, 2012) (granting motion to enforce award; finding no evident partiality or corruption, fraud, or undue means despite defendants’ disclosure of confidential information, providing gift card to adverse witness, and manner in which hearing was conducted; no exceeding powers or “manifest disregard” for arbitrator’s use of evidence and findings beyond contract);

P.H. Glatfelter Co. v. United Steel, Paper and Forestry, Rubber Manufacturing, Energy, Allied Industrial and Service Workers International Union, Case No. 11-741 (USDC S.D. Ohio Aug. 21, 2012) (granting summary judgment vacating award issued in connection with a collective bargaining agreement under the Labor Management Relations Act; evident partiality existed where arbitrator failed to disclose that he had 6 first cousins employed at paper mill at issue in arbitration).

This post written by Michael Wolgin.

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NEW YORK ADOPTS EMERGENCY AMENDMENT TO EXCESS LINES REGULATION

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The New York State Department of Financial Services has, on an emergency basis published in the State Register on August 1, 2012, adopted amendments to Insurance Regulation 41, concerning excess (or surplus) lines insurance. The purpose of the amendment is to implement the changes to the New York insurance code which were adopted in 2011 to conform the law to the Nonadmitted and Reinsurance Reform Act portion of the Dodd-Frank Act, which addressed certain issues regarding the writing of excess and surplus lines insurance.

This post written by Rollie Goss.

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COURT DETERMINES REINSURANCE AGREEMENT AND GENERAL AGENCY AGREEMENT OBLIGATIONS STRICTLY GOVERNED BY CONTRACT

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Lincoln General Insurance Company and U.S. Auto Insurance Services, Inc., as managing general agent for State and County Mutual Fire Insurance Company, entered into general agency agreements and reinsurance agreements. Disputes arose as to the amount due to Lincoln under the agreements, and litigation ensued. Lincoln brought a variety of claims, including breach of contract, misappropriation and conversion, breach of trust and/or fiduciary duties, aiding and abetting breach of trust and/or fiduciary duties and tortious interference with contract. The court found that there was no fiduciary duty involved in these relationships, and essentially found that the relationship was governed by the terms of the written agreements, without any implied torts. It dismissed all of the claims except for the breach of contract and tortious interference with contract claims. Lincoln General Insurance Company v. U.S. Auto Insurance Services, Inc., Case No. 10-2307 (USDC N.D. Tex. Aug. 30, 2012).

This post written by Rollie Goss.

See our disclaimer.

ROUNDUP OF FEDERAL DECISIONS ON MOTIONS TO COMPEL ARBITRATION

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Following is a summary of court decisions, some compelled, others denying, arbitration:

Authenment, III v. Ingram Barge Co., Case No. 10-2107 (USDC E.D. La. July 13, 2012) (granting West of England Shipowner’s Mutual’s motion to stay pending arbitration in a case initially brought against West of England’s insured, notwithstanding that plaintiff was non-signatory to arbitration agreement; holding that Convention on the Recognition and Enforcement of Foreign Arbitral Awards supersedes Louisiana’s statute prohibiting arbitration agreements in insurance contracts).

ISC Holding AG v. Nobel Biocare Finance AG, No. 11-239 (2d Cir. July 25, 2012) (affirming order dismissing with prejudice petition to compel arbitration and vacating petitioner’s notice of voluntary dismissal; holding that Rule Federal Rule 41(a)(1)(A)(i) does not apply in the context of petitions to compel arbitration).

Wooten v. Fisher Invest., Inc., No. 11-2476 (8th Cir. July 26, 2012) (affirming that district court properly dismissed without prejudice plaintiff’s state and federal statutory claims because they were subject to an ongoing arbitration that was required to be completed before remedies could be pursued in federal court).

Gove v. Career Sys. Dev’l Corp., No. 11-2468 (1st Cir. July 17, 2012) (affirming that employment discrimination claims brought by applicant against potential employer were not subject to compulsory arbitration because arbitration agreement was ambiguous as to whether claims brought by applicants that were not hired were subject to arbitration provision).

Union Elec. Co. v. Aegis Energy Syndicate 1225, Case No. 4:12CV87 (USDC E.D. Mo. Aug. 23, 2012) (denying insurer’s motion to compel arbitration; holding that Missouri choice of law and forum selection clause in policy endorsement prevails over alternative resolution provision in policy).

This post written by Ben Seessel.

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