Reinsurance Focus

Mortensen v. Bresnan Communications, LLC, No. 11-35823 (9th Cir. July 15, 2013) (vacating district court order declining to enforce arbitration agreement between broadband internet provider and consumer, finding 2011 U.S. Supreme Court decision AT&T Mobility v. Concepcion controlling; finding error in district court’s failure to apply New York law despite forum selection clause).

Biernacki v. Service Corp. Int’l, No. 11-17495 (9th Cir. June 10, 2013) (reversing district court order which held that plaintiffs – current and former employees of defendant who initially brought a putative class action in court for which certification was denied – had waived right to seek to compel arbitration, due to participation in litigation for three years. Ninth Circuit court held that merely participating in litigation, and incurring legal expense, insufficient to demonstrate waiver of right to arbitrate).

Safelite Group, Inc. v. Zurich Amer. Ins. Co., Case No. 2:12-cv-536 (USDC S.D. Ohio July 30, 2013) (compelling arbitration where “broad” clause governing “any and all” disputes, includes quasi-contractual claims; reserving questions of arbitrability for arbitrator pursuant to AAA rules incorporated into arbitration provision; staying remaining claims involving non-party until completion of arbitration).

Oracle America, Inc. v. Myriad Group, A.G., No. 11-17186 (9th Cir. July 26, 2013) (reversing denial of motion to compel arbitration, finding question of whether court or arbitrator should decide issues of arbitrability governed by contact language which unmistakably indicated parties’ intent to reserve question for arbitrator).

This post written by John Pitblado.

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A federal district court granted a motion by reinsurer Unionamerica Insurance Company to dismiss a lawsuit seeking enjoin the allegedly “illegal arbitration” of a reinsurance dispute between Unionamerica and Trenwick American Reinsurance Corp.; the court instead granted Unionamerica’s motion to compel the arbitration. Unionamerica had demanded that Trenwick participate in arbitration concerning Unionamerica’s claim that Trenwick failed to make payments due under a reinsurance assumption agreement. In response, Trenwick filed a lawsuit seeking to enjoin such an arbitration.

The court rejected Trenwick’s suit and compelled arbitration. Although the court found it had jurisdiction to decide threshold questions of arbitrability, it also determined that Unionamerica – a nonsignatory to the reinsurance agreement – could invoke the arbitration provision because of “cut-through” language allowing Unionamerica to rely on all terms of the agreement. The court further determined that the parties’ claims and defenses fell within the arbitration provisions’ scope, which encompassed “any” dispute arising out of or in connection with the agreement. Finally, the court held that Trenwick’s statute of limitations defense was not justiciable in court, but would need to be decided by the arbitrator. Trenwick American Reinsurance Corp. v. Unionamerica Insurance Co., Case No. 3:13cv94 (USDC D. Conn. July 12, 2013).

This post written by Brian Perryman.

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Four recent decisions considered whether to compel arbitration in the context of non-signatories and multiple agreements and claims. The decisions highlight different doctrines relevant to this analysis, including equitable estoppel, third-party beneficiary, and agency principals.

Murphy v. DirecTV, Inc., No. 11-57163 (9th Cir. July 30, 2013) (reversing lower court’s order compelling arbitration; non-signatory was not entitled to benefit of arbitration clause under equitable estoppel, third-party beneficiary doctrine, or agency principals);

84 Lumber Co. v. F.H. Paschen, S.N. Nielsen & Associates, LLC, Case No. 2:12cv01748 (USDC E.D. La. July 24, 2013) (granting motions to compel arbitration; contract and tort claims against signatory were subject to arbitration clause, notwithstanding claimant’s fraudulent inducement claim with respect to agreement as a whole; claims against non-signatory would be arbitrated under equitable estoppel);

Uptown Drug Co., Inc. v. CVS Caremark Corp., Case No. 3:12cv06559 (USDC N.D.Cal. July 22, 2013) (granting in part and denying in part motion to compel arbitration; non-signatories could compel arbitration under equitable estoppel of misappropriation of trade secrets claims, which were intertwined with relevant agreement; non-signatories could not compel arbitration of alleged violations of unfair prong of unfair competition law, which were not intertwined with agreement);

National Union Fire Ins. Co. v. Chopper Express, Inc., Case No. 1:13-cv-03129 (USDC S.D.N.Y. June 19, 2013) (granting motion to compel arbitration against signatory; providing petitioner time to submit evidence to show that non-signatory co-respondents were also bound by underlying contract based on corporate relation).

This post written by Michael Wolgin.

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On July 2, 2013, we reported on Feeney v. Dell Inc., which was issued eight days before the U.S. Supreme Court’s decision in American Express Co. v. Italian Colors Restaurant, and appeared to reach a result at odds with that decision. Specifically, while Amex held that individual arbitration could be compelled under the FAA based on a class waiver contract provision, notwithstanding that the cost of arbitration exceeded the potential recovery, Feeney had held that U.S. Supreme Court precedent precluded a class waiver under those circumstances. On August 1, 2013, the Feeney court granted a petition for rehearing, changing the result in its prior opinion, and reversing the lower court’s denial of a motion to confirm the underlying arbitration award, holding that “following Amex, our analysis in Feeney II no longer comports with the Supreme Court’s interpretation of the FAA.” Feeney v. Dell Inc., Case No. SJC-11133 (Mass. August 1, 2013).

This post written by Michael Wolgin.

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In a consolidated appeal of two cases involving Credit Acceptance Corporation (“CAC”), the West Virginia Supreme Court reversed two trial court decisions denying motions to compel arbitration, and ordered both cases to proceed to arbitration. The trial court had found that the arbitral forums named in the agreements were unavailable, and that the agreements were unconscionable inasmuch as they contained a waiver of the right to a jury trial. It denied CAC’s motions to compel arbitration on those bases in both cases. The West Virginia Supreme Court reversed, finding that (1) while one of the arbitral forums mentioned in the agreement – the National Arbitration Forum – was no longer available for consumer arbitrations, the other entity mentioned – the American Arbitration Association – remained available; and (2) the fact that an arbitration agreement requires an explicit waiver of the right to a jury trial does not render it unconscionable or unenforceable. The Court remanded with directions to the trial court to compel arbitration. Credit Acceptance Corp. v. Front, No. 12-0545 (W.V. June 19, 2013).

This post written by John Pitblado.

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For nearly five-and-a-half years, various banking and insurance corporations (“movants”) have engaged in extensive discovery to attempt to prove that Michel and Ramy Lakah, acting as an alter ego for bond guarantor Lakah Funding Limited, are bound by arbitration agreements that they had not signed in a personal capacity. When the Lakahs sought to stay the arbitration, the movants filed a motion to dismiss that claim as being untimely filed. The movants allege that the petition was filed more than twenty days after notice was given, failing to comply with section 7503(c) of the N.Y. Code.

The court held that the movants had waived their right to argue that the stay petition was time-barred. The court explained that “[f]or almost five-and-a-half years . . .the movants did not inform this court or their opponents of their belief that the extensive rounds of discovery and related litigation . . . were completely unnecessary because the Lakahs were time-barred from seeking to stay arbitration on any ground.” In their answer, the movants failed to assert their statute of limitations claim as an affirmative defense, therefore waiving that right. Additionally, the court did not allow movants to amend their answer to include this affirmative defense principally because of their own “inordinate delay.” Lakah v. UBS AG, Case No. 07-cv-02799 (USDC S.D.N.Y. May 22, 2013).

This post written by Brian Perryman.

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National Casualty, Wausau and Swiss Re reinsured OneBeacon under a multiple line excess cover program. When disputes arose OneBeacon arbitrated with Swiss Re, and lost. OneBeacon then demanded arbitration with National Casualty and Wausau with respect to the same reinsurance program, but that proceeding broke down over disputes concerning the selection of an umpire to complete a three arbitrator panel. National Casualty and Wausau then filed a lawsuit against OneBeacon, seeking a declaration that the prior arbitration award and the doctrine of collateral estoppel barred OneBeacon’s second arbitration, and seeking the court’s assistance in the appointment of the umpire. The court granted OneBeacon’s motion to dismiss the preclusion claim on the basis that the preclusive effect of a prior arbitration in a subsequent arbitration should be decided by the arbitrator and not by the court.

The reinsurers had put forth a senior official of Swiss Re as their umpire candidate, to which OneBeacon objected, on the basis that the candidate was not impartial and was not qualified to serve. The court found OneBeacon’s challenge to the as yet unselected umpire candidate premature under the terms of the Federal Arbitration Act, which provides that challenges to arbitrators should be entertained by courts only after the issuance of an arbitration award. National Cas. Co. v. OneBeacon American Ins. Co., Case No. 12-11874 (USDC D. Mass. July 1, 2013).

This post written by Brian Perryman.

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There are three recent opinions on motions to compel arbitration which illustrate the impact of the Internet in this area of the law.

Guidotti v. Legal Helpers Debt Resolution, L.L.C., No. 12-1170 (3d Cir. May 28, 2013) (reversing lower court’s partial refusal to compel arbitration in putative class action; lower court must permit discovery and make findings whether absence of electronic header associated with third-party document hosting website supported plaintiff’s claim that plaintiff never reviewed arbitration provision nor agreed to arbitrate).

Chatman v. Pizza Hut, Inc., Case No. 1:12-cv-10209 (USDC N.D. Ill. May 23, 2013) (granting motion to compel individual arbitration in case brought as putative employment class action; finding that arbitration provision in online agreement was supported by three forms of consideration: (1) Pizza Hut’s promise to consider the plaintiff for employment; (2) Pizza Hut’s obligation to submit to binding arbitration; and (3) Pizza Hut’s continued employment of the plaintiff).

Dixon v. NBCUniversal Media, LLC, Case No. 2:12-cv-07646 (USDC S.D.N.Y. May 28, 2013) (granting motion to compel individual arbitration in case brought as putative employment class action, notwithstanding employee’s failure to review arbitration agreement in ADR manual; employee completed online PowerPoint training, which disclosed that binding nature of the ADR program, that it applied to employee’s claims, that no collective procedure would be permitted, and that continued employment constituted an agreement).

This post written by Michael Wolgin.

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In a longstanding dispute arising out of an oil development venture, an intermediary seeking additional profits appealed to the Fifth Circuit after the lower court dismissed the intermediary’s RICO claims that had been previously resolved in arbitration. The arbitration award had rejected the intermediary’s claims based on alleged bribes that associated oil companies allegedly paid to foreign officials. Finding that res judicata barred the intermediary’s claims, the Fifth Circuit rejected the intermediary’s argument that the arbitrator had failed to exercise jurisdiction when he stated in the course of dismissing the claims that he lacked authority to determine criminality under RICO. The Fifth Circuit held that the arbitrator’s statement was not indicative of a refusal to consider the intermediary’s claims, that the arbitrator did in fact exercise jurisdiction, and that as a result, the lower court correctly found that res judicata barred the intermediary’s lawsuit. Grynberg v. BP, P.L.C., Case No. 12-20291 (5th Cir. June 7, 2013).

This post written by Michael Wolgin.

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Eight days before the U.S. Supreme Court issued its American Express decision, the Massachusetts Supreme Court appeared to reach a contrary conclusion when it found that U.S. Supreme Court precedent interpreting the FAA precluded a class waiver when a party would be precluded from pursuing individual statutory relief due to the complexity and cost of the case. The Massachusetts court made this determination in an opinion that reversed its own previous holding made prior to Concepcion in the same putative class action, regarding a class waiver provision in a consumer contract that the court had invalidated because it was “contrary to the fundamental public policy of the Commonwealth favoring consumer class actions” under state statute. It seems likely that the defendant will either seek further review of renew its motion to compel arbitration in light of the American Express decision. Feeney v. Dell Inc., Case No. SJC-11133 (Mass. June 12, 2013).

This post written by Michael Wolgin.

See our disclaimer.