New reinsurance-related and arbitration developments from Carlton Fields
There have been a number of court opinions during the past year or so addressing the circumstances under which agreements to waive class claims in arbitration may be unconscionable. Special Focus Editor John Pitblado takes a closer look at some recent federal Court of Appeals decisions in this area.
This post written by John Pitblado.
A federal district court recently refused to seal various documents finding that the defendant failed to overcome the strong presumption in favor of access to judicial documents. The court rejected the defendant's argument that the weight of the presumption was low in light of the underlying arbitration proceedings, finding that “[t]he fact that arbitral proceedings in this case may have been confidential under arbitral rules or the arbitration clause at issue does not necessitate that they be kept confidential in these proceedings.” Ultimately, the court dismissed the matter finding that it did not have personal jurisdiction over the defendant, nor did it have quasi in rem jurisdiction over the property at issue. Sony Ericsson Mobile Comm. AB v. Delta Electronics Pub. Co. Ltd., Case No. 09-995 (USDC S.D.N.Y. Apr. 8, 2009).
This post written by John Black.
A software company’s (Xtria) appeal of the trial court’s refusal to vacate a commercial arbitration award was rejected, along with Xtria’s assertion that the arbitrator made a gross mistake or manifestly disregarded the law because the claims of Xtria’s sales agent (International) were barred due to a previous settlement entered into between Xtria and International’s subsidiary (Tracking Systems). The settlement defined Tracking Systems to includes its “past, present and future affiliate.” In a subsequent arbitration between Xtria and International concerning Xtria’s alleged breach of another contract, the arbitrator refused to apply the settlement to International because, although it was Tracking System’s parent company, it was not an “affiliate” under California law, because International controlled Tracking Systems, not the other way around. The arbitrator awarded International $1.35 million for breach of contract. The trial court confirmed the award.
On appeal, the award was again confirmed. The appellate court noted the United States Supreme Court’s decision in Hall Street Associates, LLC v. Mattel, Inc., and Fifth Circuit precedent holding that the “manifest disregard” vacatur ground is no longer a federal common law standard, and contrary state law is preempted by the Federal Arbitration Act. However, the appellate court stated that “without making a determination that the so-called common-law grounds for vacatur no longer exist,” it would address Xtria’s manifest disregard argument “in the attitude of cautiously donning both a belt and suspenders.” However, Xtria’s argument was unavailing since the arbtirator did not manifestly disregard the law in: (1) interpreting the settlement agreement; (2) determining the parties’ intent to exclude International from the settlement; or (3) deciding that International was not a Tracking Systems “affiliate.” There was also no “gross mistake” in the arbitrator’s decision. Xtria v. Int'l Ins. Alliance Inc., Case No. 06-08-00073 (Tex. App. May 15, 2009).
This post written by Brian Perryman.
As previously reported (3/17/08 post), this case involves the interpretation of the terms of a reinsurance contract and the duties of the parties under that contract. In the most recent development, the Eighth Circuit affirmed the Bankruptcy Appellate Panel’s judgment affirming in part, and reversing in part, a prior decision of the bankruptcy court regarding the reinsurance contract at issue. The Eighth Circuit determined that appellant/debtor Acceptance Insurance Company (“AIC”) was a part to the reinsurance contract, however, the language in the reinsurance provision of the contract was ambiguous and susceptible to two alternate interpretations. Accordingly, extrinsic evidence was both appropriate and necessary to interpret the language of the provision and to ascertain the intent of the parties. Citing evidence before the bankruptcy trial court, the Court affirmed the bankruptcy panel's decision that the parties intended the reinsurance provision to provide reinsurance coverage. The Eighth Circuit also found that appellee Granite Re was entitled to the full $15 million premium payment, and AIC was not discharged of its duty to pay the premium by the frustration of fundamental purpose defense. In Re Acceptance Ins. Co. Inc., No. 08-1933 (8th Cir. May 18, 2009).
This post written by John Black.
As previously reported (3/17/08 post), this case involves the interpretation of the terms of a reinsurance contract and the duties of the parties under that contract. In the most recent development, the Eighth Circuit affirmed the Bankruptcy Appellate Panel’s judgment affirming in part, and reversing in part, a prior decision of the bankruptcy court regarding the reinsurance contract at issue. The Eighth Circuit determined that appellant/debtor Acceptance Insurance Company (“AIC”) was a part to the reinsurance contract, however, the language in the reinsurance provision of the contract was ambiguous and susceptible to two alternate interpretations. Accordingly, extrinsic evidence was both appropriate and necessary to interpret the language of the provision and to ascertain the intent of the parties. Citing evidence before the bankruptcy trial court, the Court affirmed the bankruptcy panel's decision that the parties intended the reinsurance provision to provide reinsurance coverage. The Eighth Circuit also found that appellee Granite Re was entitled to the full $15 million premium payment, and AIC was not discharged of its duty to pay the premium by the frustration of fundamental purpose defense. In Re Acceptance Ins. Co. Inc., No. 08-1933 (8th Cir. May 18, 2009).
This post written by John Black.