Reinsurance Focus

Penford Products entered into a contract with C.J. Schneider Engineering (“CJS”) for the construction of an ethanol plant. Penford demanded arbitration under the contract, asserting that the plant was defectively designed and constructed. CJS tendered its defense to Lexington Insurance Company, CJS’s professional liability insurer. After Lexington claimed no coverage and refused to defend, CJS assigned all of its rights against Lexington to Penford. Shortly thereafter, a seven-million dollar arbitration award was issued in Penford’s favor and against CJS. After judgment on the award was entered, Penford initiated garnishment proceedings against Lexington in Iowa state court to collect on the judgment. Lexington moved to compel arbitration, arguing that Penford must abide by the arbitration clause in the Lexington insurance policy issued to CJS. The trial court rejected Penford’s request and the appellate court affirmed holding that, while Penford “stands in the shoes” of CJS for purposes of the garnishment action, Penford was not bound by the arbitration clause in the Lexington/CJS policy. Penford Prods. Co. v. C.J. Schneider Eng’g. Co., No. 1-575/10-1754 (Iowa Ct. App. Dec. 21, 2011).

This post written by Ben Seessel.

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Anna Tractenberg filed a class action suit against Citigroup, Inc. Citigroup moved to compel individual arbitration. The court awaited decision from the U.S. Supreme Court in AT&T Mobility LLC v. Concepcion, 563 U.S. —- (2011), and then, based on its holding, granted Citigroup’s motion to compel individual arbitration. On Tractenberg’s motion for reconsideration, the Court rejected her arguments that the language in her contract with Citigroup differed materially from the language at issue in Concepcion. Anna Tractenberg v. Citigroup, Inc., No. 10-3092 (USDC E.D. Pa. Sept. 1, 2011) (see Dec. 22, 2011 Order denying motion for reconsideration of Orders dated September 1, 2011 and denying request for 1292(b) appeal certification and earlier Order denying motion to opposing arbitration and seeking discovery).

This post written by John Pitblado.

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The Second Circuit Court of Appeals held that a class action waiver clause is not enforceable where plaintiffs can demonstrate that the practical effect of enforcing the clause would be to preclude plaintiffs from vindicating their federal statutory rights. The court further held that the Supreme Court’s decisions in Stolt-Nielsen and Concepcion do not alter this determination. Plaintiffs alleged that provisions in Amex’s contracts requiring businesses to “honor all cards” issued by Amex and its affiliates constitute an illegal tying arrangement in violation of the Sherman Antitrust Act. Plaintiffs submitted an economist’s report that, in the court’s view, demonstrated that it was not financially feasible for plaintiffs to assert their claims individually. Accordingly, the court held that the class action waiver could not be enforced because it effectively prohibited plaintiffs from pursuing protections provided by federal antitrust law. The parties had not agreed to class arbitration. Thus, in accordance with Stolt-Nielsen, the court held that the case could “proceed in a judicial class action or not at all.” The court remanded the matter to the district court with instruction to deny Amex’s motion to compel arbitration. In re Am. Express Merchants’ Litig., No. 06-1871 (2nd Cir. Feb. 1, 2012).

This post written by Ben Seessel.

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