Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

FOURTH CIRCUIT STATES POST-STOLT NIELSEN VIEW ON MANIFEST DISREGARD

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The U.S. Court of Appeals for the Fourth Circuit recently stated that manifest disregard remains a viable doctrine in an opinion refusing to vacate a $1.1 million arbitration award against Wachovia for frivolous litigation under state law. Wachovia argued that the panel committed manifest disregard of the law by failing to provide Wachovia adequate notice and hearing under the state statute. The court disagreed, holding the panel was not bound by the statutory procedure in awarding fees, and, in any event, Wachovia was partly responsible for any insufficient process based on its conduct in the arbitration. In so holding, the court provided its interpretation of the Supreme Court’s footnote on manifest disregard in Stolt-Nielsen: “We read this footnote to mean that manifest disregard continues to exist either ‘as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at 9 U.S.C. § 10.’ Therefore, we decline to adopt the position of the Fifth and Eleventh Circuits that manifest disregard no longer exists.” Wachovia Securities, LLC v. Brand, No. 10-2111 (4th Cir. Feb. 16, 2012).

This post written by Michael Wolgin.

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REINSURANCE MARKET UPDATE

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This time of year the major reinsurance brokers publish various market-related reports. Among the interesting recent reports are:

This post written by Rollie Goss.

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ARBITRATION AWARD UPDATE

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Contract Formation

Logan & Kanawha Coal Co., LLC v. Detherage Coal Sales, LLC, No. 2:11-cv-00342 (USDC S.D. W. Va. Jan. 20, 2012) (granting vacatur, alleged arbitration provision not incorporated into parties’ contract)

Exceeded Scope

Zenith Logistics, Inc. v. Teamsters Local Union No. 100, No. 1:11-cv-00301 (USDC S.D. Ohio Feb. 1, 2012) (vacatur denied, arbitrator did not exceed scope in construing contract)

Evident Partiality

NGC Network Asia, LLC v. PAC Pacific Group Int’l, Inc., No. 1:09-cv-08684 (USDC S.D.N.Y. Feb. 3, 2012) (vacatur denied, no evident partiality).

Public Policy

Titan Tire Corp. v. United Steel, No. 3:10-cv-50296 (USDC N.D. Ill. Dec. 22, 2011) (denying vacatur on de novo review of claim that arbitration award under CBA violated public policy)

Manifest Disregard

Fastware, LLC v. Gold Type Business Machines, No. 2:09-cv-01530 (USDC D.N.J. Jan. 5, 2012) (motion to vacate denied, no manifest disregard)

Agility Public Warehousing Co., K.S.C. v. Supreme Foodservice GmbH, No. 11 Civ. 7375 (USDC S.D.N.Y. Dec. 19, 2011) (see also the court’s subsequent memorandum providing support for the December 19 Order) (confirming award, denying vacatur, no manifest disregard)

Hosier v. Citi Group Global Markets, Inc., No. 11-cv-00971 (USDC D. Colo. Dec. 21, 2011) (denying vacatur, arbitrators did not exceed authority, no manifest disregard)

Westminster Securities Corp. v. Petrocom Energy, Ltd., No. 1:10-cv-07893 (2d. Cir. Jan. 19, 2012) (affirming denial of vacatur, arbitrators did not exceed scope, no manifest disregard).

Priority One Services, Inc. v. W&T Travel Services, LLC, No. 10-1873 (USDC D.D.C. Aug. 23, 2011) (vacatur denied, arbitrators did not exceed scope, no manifest disregard), and subsequent order (Jan. 23, 2012) (awarding attorneys fees and costs to prevailing party due to frivolous vacatur argument)

Sawyer v. Horwitz & Assoc., Inc., No. 11-CV-1604 (USDC S.D. Cal. Jan. 31, 2012) (denying vacatur, no manifest disregard, no failure to hear pertinent material evidence)

Procedure

Choice Hotels Int’l, Inc. v. RMC Realty, Ltd., No. 8:11-cv-02093 (USDC D. Md. Jan. 31, 2012) (granting motion for default in action seeking confirmation of award).

Pacific Employers Ins. Co. v. Global Reinsurance Corp. of Am., No. 1:11-cv-06301 (USDC S.D.N.Y. Dec. 12, 2011) (granting motion to confirm award, including declaratory relief)

Johnson v. Nat’l Railroad Passenger Corp. Amtrak, No. No. 11-13739 (11th Cir. Jan. 10, 2012) (affirming dismissal of vacatur action for failure to state a cognizable statutory ground for vacatur)

Big Lagoon Rancheria v. California, No. 4:09-cv-01471 (USDC N.D. Cal. Feb. 1, 2012) (denying vacatur of JAMS mediator recommendations and orders)

This post written by John Pitblado.

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COURT VACATES JURY VERDICT RENDERED IN FAVOR OF INSURER AGAINST REINSURANCE BROKER

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Alabama Municipal Insurance Corporation (“AMIC”) purchased reinsurance though broker Alliant Insurance Services (“Alliant”) that was underwritten by various reinsurers including Lloyd’s of London (“Lloyds”). According to AMIC, its contract with Alliant required Alliant to timely transmit claims to Lloyds and other reinsurers. AMIC alleged that Alliant breached the contract by failing to timely transmit claims to Lloyds for an 18-month period in 2000-2001. AMIC, however, had agreed with Alliant in an unwritten “gentlemen’s agreement” that it would not submit notices of loss for this period; AMIC thus did not submit notices of loss for 2000-2001 to Alliant until 2005, after the parties’ relationship had soured. Lloyds denied AMIC’s claims for the 2000-2001 period, not because they were untimely, but because of unreported growth of total insured values during the period.

A jury concluded that AMIC and Alliant had entered into a contract whereby Alliant agreed to serve as AMIC’s Managing General Agent (“MGA”) and that Alliant had breached its contract. The district court vacated the jury’s verdict on Alliant’s post trial motion on several bases. First, the court found that Alliant never agreed to serve as AMIC’s MGA and, furthermore, that there was no definite contractual term requiring Alliant to timely submit claims to Lloyds. The court also cited AMIC’s failure to perform under the contract by not timely submitting notices of loss to Alliant, and AMIC’s failure to prove damages because Lloyds denied the claims for reasons entirely unrelated to timeliness. It further held that AMIC was estopped from arguing that Alliant untimely submitted claims because Alliant was acting in reliance on representations AMIC made in the “gentlemen’s agreement” regarding not submitting claims for the 2000-2001 time period. Alabama Municipal Ins. Corp. v. Alliant Ins. Servs., Case No. 2:09-928 (USDC M.D. Ala. Jan. 10, 2012).

This post written by Ben Seessel.

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THIRD CIRCUIT HOLDS THAT DISTRICT COURT ERRED IN REFUSING TO APPOINT SUBSTITUTE ARBITRATOR UNDER FAA SECTION 5

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Plaintiff Khan filed a putative class action lawsuit against Dell alleging, among other claims, violations of a state consumer protection statute and common law fraud. The arbitration clause at issue provided that disputes: “SHALL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM (NAF). . . .” At the time Dell filed its motion to compel arbitration, however, NAF had been barred from conducting consumer arbitrations pursuant to the terms of a consent decree with the Minnesota Attorney General that NAF had entered into after being investigated for allegedly engaging in deceptive practices disadvantaging consumers.

The district court held that NAF’s designation was “integral” to the arbitration provision such that it could not be enforced without using NAF and denied Dell’s motion to compel arbitration. The Third Circuit reversed. It determined that the arbitration clause was ambiguous because “EXCLUSIVELY” could refer either to “BINDING ARBITRATION,” to “NAF,” or to both and that the provision thus did not indicate the parties’ “unambiguous intent not to arbitrate their disputes if NAF is unavailable.” The Third Circuit held that the district court, accordingly, should have appointed a substitute arbitrator under FAA Section 5 and remanded the case for further proceedings consistent with its opinion. Khan v. Dell Inc., No. 10-3655 (3rd Cir. Jan. 20, 2012).

This post written by Ben Seessel.

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