Reinsurance Focus

The plaintiff’s employer adopted a dispute resolution program containing language stating that by continuing or accepting employment each employee agreed to submit all covered claims to the dispute resolution program and to accept the resulting arbitration award. The employer later amended the dispute resolution program, clarifying, among other things, that the employer was equally bound to submit all claims to arbitration. When a dispute arose between the parties, the plaintiff filed suit in federal district court, arguing that the amended dispute resolution program was not supported by any consideration and, consequently, was not a valid contract. The court disagreed and found that by continuing his employment the plaintiff’s conduct manifested intent to be bound by, and constituted acceptance of and consideration for, the amended dispute resolution program. The court alternatively found that mutual promises to submit claims to binding arbitration constituted adequate consideration. Rangel v. Hallmark Cards, Inc., Case No. 10-04003 (USDC D. Kan. Mar. 4, 2010).

This post written by Dan Crisp.

After the federal district court granted a motion for reconsideration by Arrowood Indemnity Co. (“Arrowood”) and remanded three questions to the arbitration panel, Trustmark Insurance Co. (“Trustmark”) moved to stay the remand and for discovery into the Umpire’s relationship with Arrowood and its counsel. Trustmark argued that, since the outset of the present arbitration in 2003, Arrowood had selected the Umpire as its party-appointed arbitrator in at least six unrelated arbitrations and the Umpire is therefore biased. The court noted that the Umpire’s relationship with Arrowood and its counsel was disclosed and grew out of the Umpire’s professional service as an arbitrator, and ruled that, under the Federal Arbitration Act, this sort of relationship does not constitute evident partiality. In addition to denying the motion to stay the remand and for discovery, the court also denied Trustmark’s motion to vacate an order admitting Arrowood’s counsel pro hac vice and an emergency motion to stay the remand. Arrowood Indem. Co. v. Trustmark Ins. Co., Case No. 03-1000 (USDC D. Conn. Feb. 2, 2010).

This post written by Dan Crisp.

A federal district granted a motion to compel arbitration between parties to a reinsurance treaty, which motion was subsequently withdrawn by the moving party, Century Indemnity. In its January 8, 2010 motion, Century contended that AXA Belgium was “patently refusing to move forward with the selection of an umpire, with no legitimate basis to do so,” thereby precluding Century “from proceeding with the contractually-agreed method of dispute resolution.” Century asked the court to order arbitration with a panel of the parties’ respective candidates and an umpire selected by the court from a slate of candidates proposed by Century’s candidate. The motion to compel arbitration was granted in a one-page order dated February 2, 2010. On March 11, 2010, however, Century filed a notice of withdrawal of the motion. Century Indemnity Co. v. Royal Belge Incendie Reassurance S.A., No. 10-MC-2 (USDC E.D. Pa. Feb. 2, 2010).

This post written by Brian Perryman.

On August 3, 2009, we reported on a district court vacating its prior order that the arbitration must commence anew and reappointing an arbitrator to the panel after the arbitrator’s health improved. Insurance Company of North America and INA Reinsurance (collectively, “INA”) appealed and also moved for a stay pending appeal arguing that, if the circuit court does not grant a stay, an unauthorized panel would soon hear a key substantive motion, which would potentially compromise INA’s future rights and squander resources in duplicative proceedings. Public Service Mutual Insurance Company moved to dismiss the appeal for lack of jurisdiction. The Second Circuit summarily granted the motion for a stay pending appeal and denied the motion to dismiss. Insurance Co. of N. Am. v. Public Serv. Mut. Ins. Co., No. 09-3640 (2d Cir. Jan. 21, 2010).

This post written by Dan Crisp.

Pronational Insurance Company brought suit against AXA Liabilities Managers, Inc. (AXA’s claims-handling subsidiary), alleging several common law claims in connection with AXA Re’s denial of coverage for a claim made by Pronational under a reinsurance contract. AXA LM moved to compel arbitration under the reinsurance contract, to which Pronational and AXA Re only were signatories. Pronational objected on the basis that AXA LM was not a signatory. The Court granted the motion to compel arbitration, finding that Pronational was equitably estopped to attempt to avoid the arbitration clause in the contract under which the subject claims were made. The reasoning for this decision is contained in a Magistrate Judge’s Report and Recommendation, which the district judge adopted in a very short Order. Pronational Ins. Co. v. AXA Liabilities Managers, Inc., Case No. 08-2022 (USDC N.D. Ala. January 28, 2010).

This post written by John Pitblado.

In this dispute, the First Circuit previously reversed the confirmation of an arbitration award concluding that the award was in manifest disregard of law and remanded the case for the entry of an order vacating the award. Without addressing whether the arbitration panel should be reconstituted or not, the district court entered an order vacating the award and remanding the matter to FINRA. The Defendants argued against the remand to FINRA because the First Circuit did not specify such a remand. Treating the Defendants’ motion as a Rule 60(b) motion, the Plaintiffs argued that the motion did not demonstrate entitlement to relief pursuant to Rule 60(b)’s requirements. The district court denied the Defendants’ motion in a brief electronic order “[e]ssentially for the reasons stated in [the Plaintiffs’] Opposition.” The Defendants appealed both the district court’s remand order and electronic order denying the Rule 60(b) motion.

Before addressing the Appellants’ arguments, the First Circuit addressed the Appellees’ request to recall the earlier mandate in light of Hall Street Assocs. v. Mattel, 552 U.S. 576 (2008). Denying this request, the First Circuit noted that it had not yet determined whether Hall Street could be reconciled with the circuit’s manifest disregard case law and found that the court was not faced with such circumstances to warrant a recall of the mandate. In response to the Appellants’ argument that the remand order contravened the mandate, the First Circuit disagreed, stating that the district court was not limited to perform only those actions specifically listed in the mandate and finding that the mandate did not explicitly or implicitly prohibit the district court from remanding the matter to FINRA. The First Circuit then noted that the Appellants’ Rule 60(b) argument was mostly a reformulation of their argument against the remand order and affirmed the district court’s remand order. However, the First Circuit did address an issue with the brief electronic order by remanding the matter to the district court so that the court, after considering the parties’ arguments, could specify whether: (1) the original panel should be reconstituted; (2) a new panel should be constituted; or (3) FINRA should rule on this issue in the first instance, in accordance with FINRA’s practices and procedures. Kashner Davidson Sec. Corp. v. Mscisz, No. 09-1356 (1st Cir. Apr. 1, 2010).
This post written by Dan Crisp.

This is our third installment covering the action brought by B.D. Cooke & Partners Ltd. (“Cooke”) to recover money from certain underwriters at Lloyd’s, London as the assignee of rights under certain reinsurance contracts. In an April 24, 2009 post, we detailed the federal district court concluding, among other things, that the liquidator’s right not to be compelled to arbitrate was not assigned to Cooke and compelling arbitration between Cooke and the defendants. In a January 27, 2010 post, we covered the federal district court denying the defendants’ motion to stay arbitration pending the result of Cooke’s motion for reconsideration. The federal district court has now denied Cooke’s motion for reconsideration, finding that Cooke essentially asserted the same arguments regarding the enforceability of the arbitration clause and the defendants’ waiver of the right to remove the action and rejecting Cooke’s argument concerning the scope of the arbitration clause because the dispute concerned matters of performance under the contracts. B.D. Cooke & Partners Ltd. v. Certain Underwriters at Lloyd’s, London, Case No. 08-3435 (USDC S.D.N.Y. Mar. 9, 2010).

This post written by Dan Crisp.

In this dispute between two parties to a joint venture agreement, one party filed a lawsuit and the other submitted an arbitraiton demand. Motions were filed to stay the lawsuit pending arbitration and to stay the arbitration. The motions were assigned to a magistrate judge. The magistrate judge concluded that arbitration was optional under the agreement and granted the plaintiff’s motion to stay the arbitration. The defendant contested this decision, but the district court stated that this decision was not “clearly erroneous or contrary to law.” In a case of first impression to the federal courts of appeal, the First Circuit held that the correct standard of review for a district judge’s review of a magistrate judge’s ruling on a motion to stay pending arbitration was whether the ruling was contrary to law. The First Circuit further stated that, for questions of law, no practical difference exists between review under the “contrary to law” and de novo standards. Next, in interpreting the arbitration provision at issue, the First Circuit concluded that a statement that the parties had the right to seek legal and equitable relief merely granted the authority to award such relief to the arbitrator, and did not make a provision that the parties “shall” arbitrate disputes permissive. The First Circuit thus reversed the decision and remanded to the district court for the entry of an order staying the litigation. PowerShare, Inc. v. Syntel, Inc., No. 09-1625 (1st Cir. Mar. 1, 2010).

This post written by Dan Crisp.

An arbitration provision in an employment contract provided that each party to the arbitration could take one fact deposition, depose experts, request documents, and take additional depositions if authorized by the arbitrator for good cause. A California trial court held the limit on depositions to be unconscionable, refused to sever the discovery limit provision and denied a motion to compel arbitration. The California Court of Appeals reversed, finding that such limits on discovery were permissible in arbitration, in that it provided the arbitrator with discretion to permit further depositions without setting an extraordinarily high standard for obtaining further depositions. The Court also held that a contractual provision that the arbitrator, rather than a court, should interpret and implement the arbitration provision was permissible, especially in light of court decisions at both the state and federal levels holding that arbitrators have the authority to resolve disputes over the meaning of specific terms of an arbitration agreement. Dotson v. Amgen, Inc., Civil No. B212965 (Cal Ct. App. Feb. 3, 2010).

This post written by Rollie Goss.

The United States Court of Appeals for the Second Circuit has affirmed a district court’s grant of defendants’ motion to dismiss a complaint for employment discrimination and motion to compel arbitration. The district court rejected the plaintiff’s assertion that an arbitration agreement between herself and co-defendant Atlantic Video was procedurally and substantially unconscionable. The district court further held the plaintiff could be compelled to arbitrate with co-defendant ESPN, although it was not a signatory to the arbitration agreement.

The Second Circuit affirmed. The arbitration agreement was not procedurally unconscionable under New York law simply because it was offered on a “take it or leave it” basis and, in any event, the plaintiff admitted she did not even read the agreement before signing it. The agreement also was not substantively unconscionable because, as plaintiff urged, “in its totality” it contained “numerous unconscionable and oppressive terms.” The defendants agreed to waive several of the challenged terms relating to the statutes of limitations and fee-shifting provisions, and further represented that a provision forbidding any appeal of the arbitrator’s decision would not prevent the plaintiff from later moving to vacate an arbitration award. New York law allowed for the enforcement of the arbitration agreement as modified by the defendants’ waivers, although the court cautioned that had “the defendants attempted to enforce the arbitration agreement as originally written it is not clear that we would hold in their favor.” Finally, the court found plaintiff was equitably estopped from avoiding arbitration with ESPN, which was not mentioned in the agreement but which the plaintiff understood to be her co-employer. Ragone v. Atlantic Video, No. 08-4666 (2d Cir. Feb. 17, 2010).

This post written by Brian Perryman.