Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

Fourth Circuit Affirms Summary Judgment for Employer on Hostile Work Environment Claim, Vacates for Employer on Retaliation Claim

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In this employment case, Stacy Saunders appealed from the district court’s award of summary judgment in favor of her former employer, Metropolitan Property Management Inc. Saunders’ action against Metropolitan alleged a hostile work environment and retaliation under Title VII of the Civil Rights Act of 1964.

In affirming the district court’s award of summary judgment in favor of Metropolitan on the hostile work environment claim, the Fourth Circuit, focusing on whether an employee’s conduct is imputable to Metropolitan, found that there were no disputed issues of material fact concerning the investigation Metropolitan conducted, as the investigation into the employee’s conduct was reasonably thorough and completed in a timely fashion.

However, after reviewing the record, the Fourth Circuit concluded that there were genuine disputes of material fact with respect to the retaliation claim, mainly whether Saunders would have been fired but for her complaint of sexual harassment. The Fourth Circuit found that there was compelling evidence to support Saunders’ argument that the real reason she was fired was because she engaged in the protected activity of filing a complaint of sexual harassment.

The Fourth Circuit therefore vacated in part the district court’s award of summary judgment and remanded the retaliation claim for further proceedings.

Saunders v. Metropolitan Property Management, Inc., No. 18-2008 (4th Cir. Mar. 18, 2020).

Court Confirms Award in Favor of Reinsurer, Including Over $400,000 in Attorneys’ Fees

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Petitioner, Catalina Holdings (Bermuda) Ltd. was involved in a reinsurance dispute with Legion Indemnity Co., an insolvent insurer, and its liquidator, Robert Muriel, acting director of insurance of the state of Illinois. Following an arbitration hearing, the panel issued an initial award that Muriel/Legion must pay Catalina $76,000 in unpaid premiums. After further briefing, the panel issued a final award granting Catalina an additional $437,501.04 in “costs,” which consisted of attorneys’ fees and expenses. Catalina moved to confirm the award in the Northern District of Illinois. Muriel moved to vacate or modify as it related to the award of attorneys’ fees.

The court denied Muriel’s motion, finding that the panel did not exceed its authority by awarding attorneys’ fees on a noncontractual basis, or any other bases. The arbitration clause at issue allowed the arbitrators to award “interest and costs” but was silent as to what “costs” may include. Noting that arbitrators are “pretty much at large in the formulation of remedies” when the arbitration clause is silent in that regard, the court disagreed with Muriel/Legion that the word “costs” left “no possible interpretive route to the award of attorneys’ fees.” The court also distinguished Seventh Circuit cases setting aside awards for lacking a contractual basis, finding that the arbitrators in those cases ignored contract language that was “clear, unambiguous, and not silent.” Under the circumstances here, the court found no basis to vacate. Further, since the panel had specifically invited briefing on the issue of attorneys’ fees before issuing the final award, the court found no basis to modify the final award under section11(b) of the Federal Arbitration Act. Catalina’s motion to confirm was therefore granted, and Muriel’s motion was denied in its entirety.

Catalina Holdings (Bermuda) Ltd. v. Muriel, No. 1:18-cv-05642 (N.D. Ill. Apr. 6, 2020).

Alabama Supreme Court Reverses Order Compelling Arbitration Based on Failure to Authenticate Arbitration Agreement

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A construction company, Parkerson Construction LLC, sued homeowner Jeanne Lacy Oaks claiming that Oaks owed it more than $50,000 for construction work on her home. Oaks filed a counterclaim alleging that Parkerson misrepresented itself and performed deficient work. Parkerson moved to compel arbitration on Oaks’ counterclaim based on an arbitration provision in a September unauthenticated work authorization agreement that was attached to the motion. The trial court granted Parkerson’s motion and compelled arbitration.

On appeal, the Alabama Supreme Court reversed the trial court’s order, concluding that Parkerson failed to meet its evidentiary burden, akin to the evidentiary burden on a motion for summary judgment, to demonstrate that an arbitration agreement existed between it and Oaks. The Alabama high court rejected Parkerson’s reliance on federal case law that, Parkerson argued, permitted trial courts to consider, “for summary-judgment purposes, evidence that is not submitted in admissible form.” The Alabama court noted that the federal case law, which was not binding on it, also held that a challenge to the admissibility of evidence created a burden “on the proponent to show that the material is admissible as presented or to explain the admissible form that is anticipated” at trial. In this case, the court held, Oaks attacked the authenticity of the September 2015 agreement, but Parkerson did not demonstrate that the agreement was or could be admissible. Parkerson had “more than four months between Oaks’s initial assertion that the September 2015 agreement was not authenticated and the hearing on its motion to compel arbitration, during which it could have placed into evidence an authenticated copy of the September 2015 agreement. Parkerson failed to do so. Therefore, the September 2015 agreement was never properly before the trial court, leaving the court without any basis for granting Parkerson’s motion to compel arbitration.”

Oaks v. Parkerson Construction, LLC, No. 1171193 (Ala. Feb. 28, 2020).

Court Confirms Arbitration Award Against Parties Who Failed to Attend Arbitration

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The Northern District of Texas has confirmed an arbitration award for Wells Fargo against Energy Product Co. and Energy Transport and Logistic LLC. Neither Energy Product nor Energy Transport participated in the arbitration or filed a response to the motion to confirm. Unanswered motions to confirm an arbitration award are treated as unopposed motions for summary judgment and do not result in a default judgment. Therefore, the movant must demonstrate that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.

Wells Fargo demonstrated that there was no factual dispute here and that it was entitled to judgment. Wells Fargo was required to show that, as required by the Federal Arbitration Act, the proceedings were not “fundamentally unfair.” A “fundamentally fair hearing requires only notice, opportunity to be heard and to present relevant and material evidence before the decision-makers, and that the decision-makers are not infected with bias.” After reviewing the record, the court determined that standard was met in this case, despite that neither Energy Product nor Energy Transport attended the arbitration hearing. The court found that they had both received fair notice of the hearing but simply chose not to attend. While all parties to an arbitration proceeding are entitled to notice and an opportunity to be heard, “due process is not violated if the hearing proceeds in the absence of one of the parties when that party’s absence is the result of his decision not to attend.”

Wells Fargo Bank, N.A. v. Energy Prod. Co., No. 3:19-cv-02014 (N.D. Tex. Mar. 26, 2020).

District Court Compels Arbitration for Claims Against Supervisor Despite Plaintiff’s Claims Regarding Never Seeing or Signing Agreement Containing Arbitration Clause

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The U.S. District Court for the District of Nebraska recently granted a defendant’s motion to compel arbitration despite a plaintiff’s claims that she had never seen or signed the employment agreement containing the arbitration clause and that the agreement did not cover certain claims and could not be invoked by a defendant who was not a party to the agreement.

Barbara Nelson worked as an assistant manager in a restaurant owned by American Blue Ribbon Holdings LLC. Julie Kunkle was Nelson’s supervisor. Nelson filed a number of claims related to her employment against American Blue Ribbon Holdings and Kunkle, including a defamation claim related to purported statements Kunkle made to restaurant employees and others.

American Blue Ribbon Holdings obtained a stay with respect to Nelson’s claims related to potential bankruptcy proceedings. Kunkle moved to compel arbitration, claiming that Nelson’s claims were within the scope of an arbitration clause Nelson signed when she was hired by American Blue Ribbon Holdings.

The district court granted Kunkle’s request despite Nelson’s claims that (1) she had never signed the employment agreement in question and (2) even if she had, the arbitration clause did not cover her claims against Kunkle, who was not a signatory to the agreement with American Blue Ribbon Holdings.

First, the court rejected Nelson’s “self-serving” affidavit that she had never seen nor signed the arbitration clause. The evidence established that someone had to access the agreement containing the clause via an emailed link sent to Nelson’s email account, enter Nelson’s email address as a username, use Nelson’s zip code as the password, and subsequently enter Nelson’s “address, telephone number, date of birth, Social Security number, gender, marital status, and direct deposit banking information.” The evidence further established that American Blue Ribbon Holdings did not otherwise collect this information and that Nelson signed the agreement again when she started.

Second, the court concluded that Nelson’s claim against Kunkle was within the scope of the arbitration agreement and that Kunkle could invoke that agreement even though she was not a signatory to it. The agreement was broad and covered, among other things, “disputes regarding the employment relationship” brought under certain employment statutes “and all other state statutory and common law claims.” The fact that (1) Kunkle was an agent of American Blue Ribbon Holdings; (2) allowing Nelson to sue Kunkle for employment-related claims covered by the agreement would limit the agreement’s effectiveness; and (3) many of Nelson’s claims against Kunkle were synonymous or intertwined with her claims against American Blue Ribbon Holdings was sufficient for the clause to cover Nelson’s defamation claim, as well as claims that Kunkle violated Nelson’s rights under the Family and Medical Leave Act.

The court therefore stayed Nelson’s action pending arbitration proceedings.

Nelson v. Kunkle, No. 8:19-cv-00329 (D. Neb. Mar. 20, 2020).