Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

CIVIL SUBPOENAS ISSUED BY ARBITRATOR AGAINST OUT-OF-STATE NONPARTIES HELD UNENFORCEABLE

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The Colorado Supreme Court vacated a district court’s order enforcing subpoenas issued by an arbitrator against out-of-state nonparties. The court held that a district court has the same authority to enforce subpoenas in civil actions regardless of whether arbitration is involved or not, and that Colorado courts have no authority to enforce civil subpoenas against out-of-state nonparties. The court rejected the argument that Colorado’s long-arm statute gives a Colorado court the authority to enforce such subpoenas. It further stated that, under the Uniform Interstate Depositions and Discovery Act (“UIDDA”), which Colorado and other states had recently adopted, a subpoena issued for discovery in the “trial state” must be submitted to the clerk of court in the “discovery state” at which time the clerk in the discovery state re-issues the subpoena. Colorado Mills, LLC v. SunOpta Grains & Foods, Inc., No. 11SA82 (Colo. Feb. 6, 2012).

This post written by Ben Seessel.

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COURT REJECTS REPETITIVE CHALLENGE TO CLASS ARBITRATION UNDER STOLT-NIELSEN

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After losing on essentially the same issue in an appeal to the Fourth Circuit Court of Appeals, the defendants in an ongoing class arbitration Amerix Corporation and Genus Credit Management initiated an action on the eve of termination of the class arbitration attacking the propriety of class arbitration, alleging that the arbitrator was exceeding the scope of his authority as defined in Stolt-Nielsen and Concepcion. They also filed a motion under Fed. R. Civ. P. 60(b) seeking review of the court’s decision declining to vacate the arbitrator’s initial Clause Construction Award. The class claimants moved to dismiss this new action, filed an opposition to the Rule 60(b) motion, and moved for attorneys fees.

The District Court concluded that res judicata could apply to bar reconsideration of the clause construction, which the court declined to vacate. Further, the court explained that Stolt-Nielsen did not present a sufficient change to revisit prior issues, and thus, the law of the case doctrine precluded relitigating the construction of the arbitration clause. Finally, the court held that Stolt-Nielsen itself provided another ground for dismissing the new action. Specifically, the court ruled that the arbitrator’s decision was based on applicable law and contract principles, so his determination to allow class arbitration did not run afoul of Stolt-Nielsen. Unlike Stolt-Nielsen, the agreement was not silent as to the parties intent, which the arbitrator was able to determine in the instant case. Thus, the new action was dismissed. Additionally, the court denied further review under Rule 60(b) and denied the motion for attorneys fees. Amerix Corp. v. Jones, Case No. 11-02844 (USDC D. Md. Jan. 17, 2012).

This post written by John Black.

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COURT OF APPEALS VACATES $185 MILLION ARBITRATION AWARD WHERE CLAIMANT FAILED TO ABIDE BY TREATY’S PREREQUISITE OF BRINGING A LAWSUIT IN THE ARGENTINEAN COURTS

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The United States Court of Appeals for the D.C. Circuit has vacated an arbitration award in excess of $185 million issued against the Republic of Argentina and in favor of a British company, BG Group, PLC, that had invested in gas distribution in Argentina. It reversed a district court order that, as we reported earlier, had confirmed the award. The court cited BG Group’s failure to abide by a provision in the governing Bilateral Investment Treaty between Argentina and the U.K. requiring disputes to be submitted to an Argentinean court and litigated for eighteen months without resolution before an arbitration could be commenced. The appellate court further rejected the arbitration panel’s decision that it would be “senseless” to comply with this provision, which the panel based on an opinion, rendered by a former Argentinean Attorney General and Minister of Justice, that it could take six years to resolve BG Group’s claims in the Argentinean courts. The court of appeals further held that the district court erred in determining that the arbitrators properly decided the threshold question of arbitrability because there was no clear and unmistakable evidence that the arbitrators should decide the issue where the precondition of bringing the dispute to court had not been met. Republic of Argentina v. BG Group, PLC, No. 11-7021 (D.C. Cir. Jan. 17, 2012).

This post written by Ben Seessel.

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COURT AWARDS PREJUDGMENT INTEREST TO REINSURER ON PAST DUE BILLINGS

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Munich Reinsurance America, Inc. and Tower Insurance Co. of New York were parties to certain reinsurance and retrocessional agreements. A billing dispute arose and Munich Re brought suit. Tower had resisted payment of the billings due because it had not received sufficient information demonstrating its liability for the billed amounts. During the course of discovery the parties reconciled the billings, and determined and agreed that Tower owed Munich $3,287,597. They disputed how much interest Tower should be charged for its withholding, and moved for summary judgment on the issue, with Tower contending interest should be limited to $5,404.27, and Munich Re contending it was owed $673,806.00, based on differing views of the rate and accrual date. Citing its equitable powers, and with guidance from state civil procedure rules applicable to interest on contract debts, the Court split the baby, finding Tower owed Munich Re $168,093.61 in pre-judgment interest. Munich Reinsurance America, Inc. v. Tower Ins. Co. of New York, No. 09-2598 (USDC D.N.J. Mar. 26, 2012).

This post written by John Pitblado.

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MOTION TO COMPEL ARBITRATION ROUNDUP

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Class-Waiver Arbitration Clauses:

Vernon v. Qwest Communications International, Inc., Case No. 1:09-cv-01840 (USDC D.D.C. Mar. 8, 2012) (compelling arbitration; class-waiver arbitration provision in electronic agreement that was not “user friendly” was enforceable under Concepcion, as it was not unconscionable under state law)

Smith v. Americredit Financial Services, Inc., Case No. 3:09-cv-01076 (USDC S.D. Cal. March 12, 2012) (denying motion to compel arbitration; class waiver arbitration provision in retail installment contract was procedurally and substantively unconscionable under state law and was thus unenforceable, notwithstanding Concepcion)

Division of Labor Between Courts and Arbitrators:

Grigsby & Associates, Inc. v. M Securities Investment, Case No. 09-11817 (11th Cir. Dec. 20, 2011) (vacating order denying motion to enjoin arbitration; district court incorrectly held that arbitrators should decide whether defendants waived right to arbitrate by pursuing several lawsuits)

Schatz v. Cellco Partnership, Case No. 1:10-cv-05414 (USDC S.D.N.Y. Feb. 3, 2012) (compelling arbitration; validity of arbitration clause limiting relief available to plaintiff was question for arbitration, where it was ambiguous whether a “clear conflict” existed between the arbitration clause and purported rights to relief under state law)

Unite Here Local 25 v. Madison Ownership, LLC, Case No. 1:11-cv-0062 (USDC D.D.C. March 23, 2012) (denying dismissal of injunction action to compel labor arbitration, but ordering discovery as to coverage of arbitration agreement; purported failure of legal basis for injunctive relief was not a jurisdictional issue for the court, but was a question of available remedy for arbitrators to decide)

Waller v. Foulke Management Corp., Case No. 1:10-cv-06342 (USDC D.N.J. Mar. 19, 2012) (denying reconsideration of order compelling arbitration; whether multiple arbitration agreements were consistent and thus valid was question for court)

Seventeenth Street Associates, LLC v. Cole, Case No. 3:11-cv-00478 (USDC S.D. W. Va. Feb. 29, 2012) (compelling arbitration; court determines res judicata precluded relitigation of prior order compelling arbitration)

Right to Enforce Arbitration Agreement:

Allianz Global Risk U.S. Insurance Co. v. General Electric Co., Case No. 10-55451 (9th Cir. Mar. 5, 2012) (affirming order compelling arbitration; Allianz had subrogation rights under state law and thus GE was estopped from refusing to arbitrate with Allianz under the arbitration agreement between GE and Allianz’s insured)

Butto v. Collecto Inc., Case No. 2:10-cv-02906 (USDC E.D.N.Y. Feb. 23, 2012) (denying reconsideration of order denying motion to compel arbitration; non-signatory was not “sufficiently close” to contracting party to enforce arbitration agreement)

Thomas v. Westlake, Case No. D058531 (Cal. Ct. App. Mar. 23, 2012) (reversing denial of petition to compel arbitration; alleged agency relationship amongst defendants permitted non-signatory defendants to enforce arbitration agreement)

This post written by Michael Wolgin.

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