Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

THIRD CIRCUIT ACCORDS “EXTREME DEFERENCE” TO ARBITRATOR’S AWARD

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The Third Circuit Court of Appeals affirmed a district court’s ruling confirming an arbitration award in a labor dispute under a collective bargaining agreement. The Court reiterated the principles of “extreme deference” accorded to arbitrator decisions under the Federal Arbitration Act, and cited the arbitrator’s review of testimony, exhibits, briefs, oral argument and thoughtful seven-page memorandum of decision. The Court concluded by citing the district court’s statement that the case “is really nothing more than Tube City’s quibbling over the arbitrator’s interpretation of the CBA [collective bargaining agreement].” Tube City IMS, LLC v. United Steel, Paper and Forestry, Rubber, Mfg., Energy, Allied Industrial Service Workers Int’l Union, Local 5852-19, No. 10-1403 (3d Cir. Jan. 6, 2011).

This post written by John Pitblado.

MANIFEST DISREGARD OF LAW DOCTRINE NOT VIABLE IN THE EIGHTH CIRCUIT

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A U.S. district court in the Eighth Circuit has followed circuit precedent and rejected the “manifest disregard of the law” attack on an arbitration award. The court confirmed an award and denied a motion to vacate, holding that “it is well-established in the Eighth Circuit that the ‘manifest disregard of the law’ doctrine is no longer good law, and this Court is bound to follow the established law of the Eighth Circuit.” Jay Packaging Group, Inc. v. Mark Andy, Inc., Case No. 4:10MC00763 (USDC E.D. Mo. Jan. 21, 2011).

This post written by Michael Wolgin.

$185 MILLION AWARD CONFIRMED FOR LOSSES CAUSED BY ARGENTINA’S EMERGENCY LAWS ENACTED IN RESPONSE TO 2002 ECONOMIC CRISIS

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On June 24, 2010, we reported on a dispute between BG Group, a British company that invested in Argentinean gas distribution, and Argentina over losses incurred by BG Group after Argentina enacted emergency laws in response to an economic crisis in 2002. A U.S. district court has now confirmed an arbitration award in excess of $185 million over Argentina’s contention that the award violated public policy and was thus improper under the New York Convention. The court’s decision was based upon the following determinations: (1) that the panel correctly found that the governing investment treaty’s condition precedent for suit in Argentinean court to precede arbitration was invalid in light of Argentina’s emergency laws, which made it effectively impossible to comply with that condition; (2) that the arbitration was not an impermissible “derivative claim” brought by a non-party to the investment treaty because the duty that BG Group claimed Argentina violated was a duty contemplated by the treaty to extend to an investor; (3) that in calculating damages, the panel’s consideration of a transaction that occurred four years prior to the economic crisis was not improper because the panel considered it only to assist it in determining BG Group’s fair market value prior to its loss in 2002; and (4) that the award did not run afoul of the “just compensation” prong of the U.S. Takings Clause because the panel had held that no property had been expropriated by Argentina, and in any event, the panel was not an arm of the government, and a “judicial taking” is not an action under the law that is “well defined and dominant” so as to constitute a violation of public policy. Republic of Argentina v. BG Group PLC, Case No. 08-485 (USDC D.D.C. Jan. 21, 2011). This post written by Michael Wolgin.

SPECIAL FOCUS: SEVENTH CIRCUIT COURT BRINGS DOWN CURTAIN ON PRE-AWARD CHALLENGE TO ARBITRATOR PARTIALITY

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What happens when an arbitrator is asked to further arbitrate an alleged fraud committed in a prior arbitration in which the same arbitrator presided? In this Special Focus, John Pitblado examines a recent Seventh Circuit decision holding that knowledge acquired in a prior reinsurance arbitration about an alleged failure to disclose material documents did not render the arbitrator impartial, since an arbitration need not follow the pattern of jury trials.

This post written by John Pitblado.

CONNECTICUT AG SETTLES ANTITRUST CASE AGAINST GUY CARPENTER & EXCESS RE

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Connecticut Attorney General George Jepsen announced an antitrust settlement with Guy Carpenter & Co and Excess Re on January 31, 2011, concluding litigation pending for over three years. The settlement, amounting to $4.25 million, resolved allegations that the reinsurers were engaged in a series of antitrust conspiracies to fix prices, create closed reinsurance markets, and allocate reinsurance markets. The litigation against Guy Carpenter and Excess Re was the first such suit brought by a state or federal antitrust enforcement agency. The Hartford Financial Services Group settled similar claims with the Connecticut AG for $1.3 million in 2009.

This settlement is notable because, in addition the significant monetary payment, Guy Carpenter agreed as part of the settlement to reform a number of its nationwide business practices. The reforms, designed to prevent any suspicion of future antitrust violations, include disclosure of ownership interest in reinsurance companies, compensation arrangements, descriptions of facilities, disclosure of factors leading to its brokers making placement recommendations, implementation of minimum competitive bid requirements and a nationwide sampling program. State of Connecticut v. Guy Carpenter & Company and Excess Reinsurance Company, Case No. 07-4033778 (Conn. Super. Ct. Jan. 31, 2011).

This post written by John Black.