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DISTRICT COURT QUASHES ARBITRATOR’S NON-PARTY SUBPOENA

September 21, 2010 by Carlton Fields

The U.S. District Court for the North District of Illinois has granted a motion to quash an arbitration subpoena directed to a non-party for her deposition. The court noted a Circuit split as to whether an arbitrator is authorized to subpoena pre-hearing discovery from non-parties. The court sided with the Second and Third Circuits, holding that the plain language of Section 7 of the FAA does not authorize arbitrators to issue subpoenas for depositions of non-parties outside the physical presence of the arbitrator. The court noted that opinions from the Fourth and the Eighth Circuits had permitted such discovery under certain circumstances. Accordingly, the subpoena was quashed. Ware v. Peacock, Inc., Case No. 10-2587 (N.D. Ill. May 7, 2010).

This post written by John Black.

Filed Under: Discovery, Week's Best Posts

FEDERAL COURT DECLINES TO ABSTAIN FROM DECIDING REINSURANCE DISPUTE NOTWITHSTANDING FIRST-FILED STATE CASE

September 20, 2010 by Carlton Fields

A federal district judge has agreed with a magistrate judge’s recommendation to deny a motion to abstain where an earlier-filed reinsurance coverage lawsuit was pending in Connecticut state court. In May 2009, the defendant filed suit in state court, contending there was no coverage under two reinsurance agreements for losses the plaintiffs incurred regarding asbestos-related claims. Five months later, the plaintiffs filed suit in federal court, seeking monetary relief for the defendant’s alleged breaches of contract, and for a declaration of the parties’ rights and obligations. The federal suit concerned the same two reinsurance contracts at issue in the state suit, but also involved claims under eleven additional contracts between the parties.

The defendant asked the federal court to defer to the first-filed state suit, which itself had been stayed on the state court’s finding that the federal suit would be the better vehicle to resolve the disputes. The magistrate judge recommended against abstention. The parties submitted briefing on the defendant’s objections to the recommendation, including objections, opposition to the objections and a reply in support of the objections. In adopting the magistrate judge’s recommendations, the district judge noted that, while the same parties and two of the same contracts were involved in the state suit, the claims were more comprehensive in the federal court because of the additional contracts at issue, and because the damages claims were absent from the state suit. Seaton Insurance Co. v. Clearwater Insurance Co., No. 09-516 S (USDC D. Conn. Sept. 2, 2010).

This post written by Brian Perryman.

Filed Under: Contract Interpretation, Jurisdiction Issues, Reinsurance Claims, Week's Best Posts

ARBITRATION ROUND UP

September 16, 2010 by Carlton Fields

Manifest Disregard:

Paul Green School of Rock Music Franchising, LLC v. Smith, Case No. 09-2718 (3d Cir. Aug. 2, 2010) (affirming district court’s confirmation of arbitration award; holding no manifest disregard; declining to address whether the Third Circuit considers “manifest disregard” to be a valid ground for vacatur of an arbitration award under the FAA)

The Burton Corp. v. Shanghai Viquest Precision Industries, Co., Case No. 10 Civ. 3163 (USDC S.D.N.Y. August 3, 2010) (denying petition to vacate award; granting petition to confirm award; noting that in the Second Circuit, “manifest disregard” remains a valid ground for vacating arbitration awards; finding no manifest disregard; arbitrator did not exceed authority)

Kunz v. JHP Enterprises, LLC, Case No. 1:09CV115 (USDC D. Utah August 9, 2010) (granting motion to confirm FINRA award; no manifest disregard)

Ozormoor v. T-Mobile USA, Inc., Case No. 08-11717 (USDC E.D. Mich. August 19, 2010) (denying motion to vacate award; arbitrator did not exceed authority; no manifest disregard; upholding one-year limitation provision in arbitration agreement)

Westerlund v. Landmark Aviation, Case No. CV09-0686 (USDC C.D. Cal. August 9, 2010) (denying motions to vacate and motion to modify award; granting motion to confirm award; no manifest disregard; award not “completely irrational”; arbitrator did not exceed powers)

Choice of Law:

Idea Nuova, Inc. v. GM Licensing Group, Inc., Case No. 09-3652 (2d Cir. Aug. 9, 2010) (affirming district court’s (1) dismissal of complaint to vacate or modify arbitration award and (2) confirmation of award; concluding that by agreeing to submit disputes “to AAA arbitration for resolution,” the parties incorporated the AAA Commercial Arbitration Rules into their agreement)

Johnson v. Rosenfeld, Case No. 08-56911 (9th Cir. Aug. 13, 2010) (affirming district court’s confirmation of award and application of choice of law provision; holding that arbitrator did not violate California disclosure rules nor exceed his powers under California arbitration procedure)

Overlapping Remedies:

Kaliroy Produce Co. v. Pacific Tomato Growers, Inc., Case No. CIV 10-160 (USDC D. Az. Aug. 4, 2010) (denying motion to vacate award; granting petition to confirm award; holding that New York Convention’s remedies are not exclusive of remedies under the FAA; among other rulings: no manifest disregard, no violation of public policy, award did not “fail to draw its essence” from arbitration agreement; no evident partiality; Notice of Appeal to Ninth Circuit)

F. Hoffmann-La Roche Ltd. v. Qiagen Gaithersburg, Inc., Case No. 09 Civ 7326, 7396 (USDC S.D.N.Y. Aug. 11, 2010) (denying motion to vacate international arbitration award; granting motion to confirm award; finding that matter was “international” under the New York Convention but that FAA also applied; no manifest disregard; arbitrator did not exceed authority)

This post written by Michael Wolgin.

Filed Under: Arbitration / Court Decisions, Confirmation / Vacation of Arbitration Awards

REINSURER ORDERED TO PAY $1.4 MILLION IN PRE-JUDGMENT INTEREST

September 15, 2010 by Carlton Fields

Massachusetts Mutual Life Insurance Company was awarded in excess of $1.4 million in pre-judgment interest, on a $32 million breach of contract award against its reinsurer, Employers Reinsurance Corporation. A Missouri federal court applying Connecticut law analyzed the issue under equitable principles, and found that the Connecticut statute authorizing pre-judgment interest sets a maximum of ten percent interest, but that the Court may, in its discretion, award a lesser amount. The Court found that the appropriate interest rate to be applied in the case was the one-year constant maturity Treasury rate adopted into the federal statute governing pre-judgment interest (and attested to in an affidavit indicating the current Treasury rate). The Court dated the accrual of interest back to April, 2006, when Employers Re stopped making reimbursement payments to Mass Mutual, which payments the Court previously held were required under the parties’ reinsurance treaty. Employers Reinsurance Corp. v. Massachusetts Mutual Life Ins. Co., No. 06-0188 (USDC W.D. Mo. August 19, 2010)

This post written by John Pitblado.

Filed Under: Arbitration / Court Decisions, Reinsurance Claims

S&P ARTICLES ON REINSURANCE MARKET CHANGES

September 14, 2010 by Carlton Fields

Standard & Poors, in addition to providing ratings of reinsurance companies, also provides free articles on various aspects of the reinsurance market. These articles often include significant financial analysis and illustrative charts. To access these articles, go to S&P’s Home Page and search for “reinsurance.” You will be asked to register as a user for free access to the site’s content, and we are unable to provide direct access to the articles. There are two recent articles that may be of interest to our readers:

  • Fall in Traditional Reinsurance Pricing Outpaces Decline in ILS Pricing – In an article that is somewhat inconsistent with the ILS reports of some involved in the insurance-linked securities markets, S&P opines that the decline in the price of traditional reinsurance for cat risks is likely to dampen the issuance of ILS as an alternative to traditional reinsurance over the next 12-24 months.
  • The Sluggish Economic Recovery and Emerging Regulatory Changes Are Reshaping the Life Reinsurance Landscape – This article discusses the options of life reinsurers for capital raising and deployment in light of Solvency II, the decline in life reinsurance cessions and limited capital resources.

This post written by Rollie Goss.

Filed Under: Industry Background, Reinsurance-Related Organization Links, Week's Best Posts

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