Reinsurance Focus

Bear Stearns filed suit in New York state court against two former employees to recover funds it alleges was due and owing on promissory notes executed by the former employees. The defendants removed the action to the Southern District of New York and subsequently moved to compel arbitration pursuant to their employee agreements. Noting the presumption in favor of arbitration, the district court explained that even though the forum clause included in the promissory notes was not exclusive and made no mention of arbitration, such disputes fell within the scope of the employment agreements’ arbitration clause. The court stayed all proceedings pending the conclusion of arbitration. Bear Stearns & Co. v. Gordon, 08 Civ. 8596 (S.D. N.Y. Jul. 1, 2009); Bear Stearns & Co v. Cohen, 08 Civ. 8597 (S.D. N.Y. Jul. 1, 2009).

This post written by John Black.

A court granted a petition for pre-arbitration issuance of judicial subpoenas to enable the petitioners to learn the names of potential parties against whom they may have a claim in their contemplated arbitration. Although the contemplated arbitration was to be governed by the Financial Industry Regulatory Authority’s Code of Arbitration Procedure, those rules were silent as to pre-arbitration discovery. However, a New York civil procedure statute specifically permitted pre-action discovery “to aid in arbitration.” That statute had been invoked where application was made to discover the identity of potential parties against whom an action may exist, so the petition was held proper. Petition of VTrader Pro LLC, Index No. 102334/09 (N.Y. Sup. Ct. Apr. 21, 2009).

This post written by Brian Perryman.

Following an unfavorable decision by an arbitrator, the Pacific Northwest Regional Council of Carpenters (“PNRCC”) filed suit in the Western District of Washington to vacate the arbitrator’s award to the Laborers’ International Union of North America (“LIUNA”). LIUNA filed a motion to transfer PNRCC’s action to D.C. federal court, arguing that PNRCC was bound to consent to D.C. jurisdiction by the collective bargaining agreement. Finding that the action could clearly have been brought in D.C., the district court focused on the “convenience of the parties” and “interests of justice” requirements for a §1404(a) transfer. The court noted that both LIUNA and PRNCC’s parent union were headquartered in Washington, D.C. and that all relevant records were in D.C. where all of the operative facts of the case occurred. For these reasons, the court held that D.C. was the more convenient forum.

The court also held that the interests of justice supported the transfer. LIUNA had filed a suit seeking enforcement of the arbitration award in D.C. and the court noted that it would be inefficient and duplicative to examine the same issues in separate cases. Ultimately, the court granted the motion to transfer, explaining that whether the agreement properly bound PNRCC was irrelevant in the §1404(a) analysis. LIUNA had met their burden by showing that D.C. was the most appropriate forum to decide all issues based on the traditional §1404(a) considerations. Pacific Northwest Reg'l Council of Carpenters v. Laborers Int'l Union of N. Am., Case No. C09-420 (W.D. Wash. June 5, 2009).

This post written by John Black.

In an unpublished opinion, the Third Circuit Court of Appeals declined to exercise jurisdiction over an appeal of an order allowing discovery in connection with a motion to vacate an arbitration award. The Federal Arbitration Act provides for appeals from orders “modifying, correcting, or vacating an [arbitration] award.” The trial court’s decision to permit discovery into whether the award should be vacated might be a prelude to a final order vacating or modifying the award, but it is not a final order for purposes of the Act. Guyden v. Prudential Life Ins. Co. of Am., No. 08-3108 (3d Cir. June 5, 2009).

This post written by Brian Perryman.

Constructamax, Inc. (“CMAX”), joined by Arch Insurance Company and Arch Reinsurance Company, filed a motion in federal district court to enforce a purported settlement agreement reached with Whitlock Mills LP (“Whitlock”) prior to the commencement of an Alternative Dispute Resolution (“ADR”) proceeding . Whitlock acknowledged the settlement discussion, but denied the existence of an enforceable settlement agreement. The district court ultimately denied CMAX’s motion, ruling that pursuant to the plain language of The New Jersey Alternative Procedure for Dispute Resolution Act, the ADR umpire had full jurisdiction to decide the enforceability of the purported settlement agreement. Deluxe Building Sys., Inc. v. Constructamax, Inc., Case No. 06-2996 (USDC D.N.J. June 2, 2009).

This post written by Dan Crisp.

On December 1, 2008, we reported on a Sixth Circuit remand with instructions to dismiss for lack of jurisdiction on ripeness grounds, which the district court subsequently dismissed the action. Though in the underlying arbitration, the arbitration panel issued a “Partial Final Class Determination Award” denying the defendants’ motion for class certification. Then, after granting plaintiff’s motion to reopen the case, the plaintiff filed a motion to confirm the award, and defendants filed a motion to dismiss for lack of subject matter jurisdiction. Applying the Sixth Circuit’s analysis from the earlier action, the district court granted the motion to dismiss as the matter was not ripe for judicial review, determining that the plaintiff could not establish a suffering of harm or hardship and quoting the circuit court stating that courts “should remain reluctant to invite a judicial proceeding every time the arbitrator sneezes.” Dealer Computer Servs., Inc. v. Dub Herring Ford Lincoln Mercury, Inc., Case No. 017-10263 (USDC D.N.J. May 29, 2009).

This post written by Dan Crisp.

On June 9, 2009, the U.S. Court of Appeals for the Fifth Circuit affirmed an arbitration award against Saipem America, which arose out of an international commercial insurance dispute. The Fifth Circuit reviewed the arbitration award handed down by a tribunal in The Hague, Netherlands for $1 million in damages and $400,000 in attorneys' fees. In addressing the parties' dispute over whether the U.S. Supreme Court's decision in Hall Street Associates prevented review of the award on nonstatutory grounds, the Fifth Circuit concluded that it may vacate the award only if a statutory ground supported the vacatur. With respect to the negligence claim, the Court ruled that the tribunal was within its authority to rule on the issue of negligence because the parties had submitted the issue in the “Terms of Reference” to the arbitration tribunal. Further, the Court ruled that the award of attorneys' fees was statutorily proper under Texas Code Section 172.145. Finally, the Court found no basis to overturn the tribunal's ruling as to indemnity. Saipem Am. v. Wellington Underwriters Agencies Ltd., No. 08-20247 (5th Cir. Jun. 9, 2009).

This post written by John Black.

There have been a number of decisions recently on the issue of arbitability:

• Denial of motion to compel affirmed:  Arbitration provision void due to agreement’s non-compliance with California workers compensation insurance laws. Ceradyne, Inc. v. Argonaut Ins. Co., G039873 (Cal. Ct. App. June 2, 2009)
• Motion to compel individual arbitration denied:  Class arbitration waiver void as unconscionable under Washington state law. Coneff v. AT&T Corp., No. C06-944 (W.D. Wa. May 22, 2009)
• Denial of motion to compel affirmed:  Arbitration provision void under California arbitration statute for possibility of conflicting rulings. Schwartz v. Vista Pointe Salton Sea, LLC, D052988 (Cal. Ct. App. June 2, 2009)
• Motion to compel granted, no procedural or substantive unconscionability:  Nayal v. Hip Network Services IPA, Inc., 08-10170 (S.D.N.Y. May 28, 2009)
• Motion to vacate order compelling arbitration granted for defendant’s waiver:   Apple & Eve, LLC v. Yantai North Andre Juice Co., Ltd., 07-745 (E.D.N.Y. April 27, 2009)

This post written by John Pitblado.

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.

The U.S. Supreme Court recently addressed whether Sections 3 and 16 of the Federal Arbitration Act (“FAA”) apply to non-signatories affected by an arbitration agreement. Section 3 of the Federal Arbitration Act (“FAA”) allows parties who have agreed to arbitrate to move for a stay of trial proceedings until they have had a chance to attempt arbitration. Section 16 of the FAA allows an immediate appeal of judgments denying a stay under such circumstances.

In a 6-3 decision, with Justice Scalia writing for the majority, the Court held that a federal court of appeals has jurisdiction over an appeal from a motion to stay proceedings under Section 16(a)(1)(A) of the FAA regardless of whether the petitioner is in fact eligible for a stay. The Court also found that Section 3 of the FAA does not categorically prevent a non-signatory to an arbitration agreement from pursuing a stay in proceedings. Rather, a person may pursue and obtain a stay under Section 3 if the relevant state law would make a contract to arbitrate a particular dispute enforceable by a non-signatory. The Court remanded the case to the Sixth Circuit to determine whether state law allows the non-signatories to enforce their agreement under state contract law and thus are allowed to pursue a stay in proceedings.

The dissent (authored by Justice Souter and joined by Chief Justice Roberts and Justice Stevens) argued that Congressional policy limits the ability of parties to obtain interlocutory appeals and that an appeal from a denial of a motion to stay proceedings should not be available to those parties who have not signed the relevant arbitration agreement. Arthur Andersen v. Carlisle, No. 08-146 (Sup. Ct. May 4, 2009).

This post written by Lynn Hawkins.