In this Special Focus article, John Pitblado addresses the impact of pre-pleading security statutes on foreign insurers and reinsurers in litigation.
This post written by John Pitblado.
WITH OR WITHOUT PREJUDICE, THAT IS THE QUESTION
A California federal court addressed arguments pertaining to whether a dismissal of a third party complaint as part of a settlement agreement between a plaintiff insurer and defendant-third-party-plaintiff reinsurer should be with or without prejudice. The third party plaintiff argued that the nature of the agreements between it and the third party defendant, another pool reinsurer (and no settlement had been reached as between these two parties), as to future indemnification obligations left open questions that could be precluded by dismissal with prejudice. The court ordered the dismissal without prejudice, invoking its broad discretion under Rule 41, and citing a failure by the third party defendant to identify a concrete harm it would suffer from a dismissal without prejudice. Eagle Star Ins. Co., Ltd. v. Highland Ins. Co., No. 02-cv-2165 (USDC S.D. Cal. July 22, 2010).
This post written by John Pitblado.
SECOND CIRCUIT: CLASS ARBITRATION WAIVER UNCONSCIONABLE UNDER CALIFORNIA LAW
Defendant-Appellant Affiliated Computer Services appealed an order of the US District Court for the Southern District of New York denying Affiliated’s motion to compel arbitration. The district court held that the arbitration clause of a promissory note was unconscionable under California law because of its class action and class arbitration waiver provision. On appeal, Affiliated argued that the clause was not unconscionable, and in the alternative, that California law on this issue was preempted by the FAA. The Second Circuit affirmed the district court’s order, finding that the class arbitration waiver was unconscionable and unenforceable under California law according to principles applicable to contracts generally, and that California law is therefore not preempted by the FAA. Fensterstock v. Education Fin. Partners, Case No. 09-1562 (2d Cir. July 12, 2010)
This post written by John Black.
LAWSUIT ALLEGING UNDERREPORTING OF WORKERS COMPENSATION PREMIUMS WILL PROCEED, IN PART
Motions to dismiss a lawsuit brought by plaintiff American Insurance Group, Inc., and its affiliates and subsidiaries, has been dismissed in part, and granted in part. Some of what the court has described as a “long and tortured procedural history” of the case is reported in our posts of March 27, 2008 and April 6, 2009. Plaintiffs’ claims against defendants stemmed from five underlying allegations. First, plaintiffs alleged that the defendant insurance companies improperly underreported to the National Council on Compensation Insurance, administrator for the National Worker’s Compensation Reinsurance Pool, the amount of their voluntary market workers compensation premiums, which resulted in a decrease in their residual market obligations. Second, plaintiffs alleged that the Pool board members blocked participation in an AIG settlement fund established to compensate third parties allegedly injured by AIG. Third, plaintiffs contended that Pool board members suppressed investigations into premium underreporting. Fourth, plaintiffs alleged that certain of the defendants conspired to direct NCCI to issue false quarterly Pool statements. Finally, plaintiffs allege that the Pool board directed NCCI to ignore amended premium filings with the intent of further disabling the effectiveness of the AIG settlement fund. Several of the defendants also filed counterclaims, which AIG unsuccessfully moved to dismiss. American International Group, Inc. v. Ace INA Holdings, Inc., Case No. 07 CV 2898 (USDC N.D. Ill. June 30, 2010).
This post written by Brian Perryman.
EIGHTH CIRCUIT HOLDS THAT HALL STREET ELIMINATED MANIFEST DISREGARD OF LAW DOCTRINE; AFFIRMS ARBITRATION AWARD
Following an arbitration award and district court confirmation granting Medicine Shoppe International lost future profits and future license fees, defendants/appellants Turner Investments and Donnie Turner (President of Turner Investment) appealed to the Eighth Circuit arguing that the district court erred in confirming the award because the arbitrator showed a manifest disregard for the law. Specifically, Turner Investments assert that Medicine Shoppe failed to demonstrate future profits with reasonable certainty as required by Missouri law, that Medicine Shoppe failed to mitigate damages, and that the award of future fees to a franchisor hampered the growth of important franchise markets contrary to public policy. The Eighth Circuit affirmed the award, citing Hall Street Assoc. LLC v. Mattel, Inc., 552 U.S. 576 (2008) for the proposition that only the enumerated reasons listed in the FAA justify vacatur of an arbitration award. Having found that none of the enumerated reasons existed, the Court affirmed the judgment of the district court. The Eighth Circuit therefore joins the list of Circuit Courts of Appeal which have held that the doctrine of manifest disregard of law did not survive Hall Street. Medicine Shoppe Int’l, Inc. v. Turner Investments, Inc., Case No. 09-2179 (8th Cir. July 21, 2010).
This post written by John Black.