Reinsurance Focus

The facts in Jackson v. Sleek Audio, LLC, et. al., Case No. 13-80725-CIV-Marra (S.D. Fla. March 17, 2014) stemmed from an arbitrators award against Curtis Jackson (“Jackson”) in his action against former business associates, Sleek Audio and others (“Sleek”). The arbitrator’s award included an award of attorney’s fees for which, Jackson contended, he lacked authority to award under the Federal Arbitration Act, 9 U.S.C. §1, et. seq. (“FAA”) and under Florida law.

Following the award by the arbitrator, Jackson brought an action in the Southern District of Florida seeking to vacate the arbitration award and also removed Sleek’s petition in the State Court seeking confirmation of the award. Jackson argued the arbitrator relied on the FAA’s preemption of Florida law in finding authority to award attorney’s fees and, thus, the issue of the FAA’s preemption formed the basis of the federal question jurisdiction. Sleek then moved to dismiss the action to vacate the award and to remand its own action seeking confirmation of the award. The parties agreed there was no diversity of citizenship and the federal court did not have jurisdiction under the FAA.

In its analysis of federal question jurisdiction, the Court first restated the principle that only complete preemption can convert state law claims into federal statutory claim in order to serve as a basis for federal question jurisdiction. In this case, the FAA did not completely preempt state law and thus could not form an independent basis for jurisdiction. The Jackson Court concluded that Jackson therefore did not have “an objectively reasonable basis for removal” and ordered Jackson to pay Sleek’s costs, including attorney’s fee, incurred in connection the removal proceedings.

This post written by Leonor Lagomasino.

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Republic Insurance was a fronting company for a syndicate of reinsurers which obtained retrocessional coverage from Group Des Assurance Nationales under LMX quota share contracts over a number of years. As we reported in an August 20, 2013 post, the Court granted summary judgment in Republic’s favor. Thereafter, the parties disputed the damages, offset, and method of prejudgment interest calculation. The Court has now ruled on those issues, awarding Republic the full amount of damages claimed, declining to award Group Des Assurance Nationales an offset against premiums paid, and awarding prejudgment interest dating back to the contract years at issue, which roughly doubled the award. Republic Insurance Co. v. Banco De Seguros Del Estado, No. 10-C-5039 (USDC N.D. Ill. March 20, 2014).

This post written by John Pitblado.

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Arbitration Procedure

Trustees of the New York City District Council of Carpenters Pension Fund, Welfare Fund, Annuity Fund v. Alliance Workroom Corp., No. 13-Civ-5096 (USDC S.D.N.Y. Dec. 11, 2013) (arbitration award confirmed, treating unopposed petition to confirm as summary judgment motion based on unopposed record, granting attorneys fees incurred in unopposed action to confirm arbitration award).

Thai-Lao Lignite (Thailand) Co., Ltd. v. Government of the Lao People’s Democratic Republic, No. 10-CV-5256 (USDC S.D.N.Y. Feb. 6, 2014) (vacating award based on ruling in parallel action in Malaysian Court of Appeal, based on New York Convention for the Enforcement of Foreign Arbitral Awards).

McAlpine v. Priddle, No. S-14891 (Alaska Feb. 21, 2014) (affirming confirmation of award in criminal defense attorney fee agreement, agreement not procured by fraud, not barred by public policy)

Lakeshore Engineering Services, Inc. v. Target Construction, Inc., No. 13-14498 (USDC E.D. Mich. Feb. 27, 2014) (no waiver, contract and arbitration agreement binding and enforceable)

Exceeding Powers

Renard v. Ameriprise Fin. Svcs., Inc., No. 13-CV-555 (USDC E.D. Wis. Mar. 6, 2014) (arbitrators did not exceed powers, award not procured by fraud, no failure to hear pertinent evidence)

Manifest Disregard

Schafer v. Multiband Corp., No. 13-1316 (6th Cir. Jan. 6, 2014) (reversing district court’s order granting vacatur of award, where award was contrary to precedent, but nevertheless “reasoned” and therefore not in manifest disregard of the law).

Abu Dhabi Investment Authority v. Citigroup, Inc., No. 13-1068-cv (2d Cir. Feb. 19, 2014) (no manifest disregard in application of New York law in choice-of-law dispute)

Evident Partiality

Ometto v. ASA Bioenergy Holding A.G., Nos. 12-4022, 13-225 (2d Cir. Jan 7, 2014) (affirming denial of petition to vacate award, no evident partiality based on claim of arbitrator’s failure to disclose information; no manifest disregard of law)

Scope of Arbitration Agreement

Aetrex Worldwide, Inc. v. Sourcing For You Limited, No. 13-3933 (3d Cir. Jan. 23, 2014) (denying motion to compel arbitration where arbitration agreement contained exception for injunction actions, which applied even after injunction request denied and withdrawn)

Neuronetics, Inc. v. Fuzzi, No. 13-1506 (3d Cir. Jan. 24, 2014) (affirming grant of motion to confirm, issue regarding non-payment of contract for sale of healthcare products within scope of arbitration agreement).

Unconscionability

Kirby v. Lion Enterprises, Inc., No. 12-C-47 (W. Va. Mar. 7, 2014) (reversing decision affirming confirmation of award and remanding with instructions to develop record on issue of unconscionability)

This post written by John Pitblado.

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The United States Supreme Court has held that arbitrators, not courts, bear the primary responsibility for interpreting and applying a local litigation requirement of an investment treaty between the United Kingdom and Argentina that operated as a condition precedent to arbitration. BG Group plc, a British firm that had invested in an Argentine entity, sought arbitration for a dispute arising out of that treaty. Argentina claimed that the arbitrators lacked jurisdiction over the dispute because BG Group had not complied with the treaty’s requirement that the dispute first be submitted to an Argentinean court for consideration. The arbitrators concluded that they had jurisdiction finding, in part, that Argentina’s conduct in enacting new laws that hindered recourse to its judiciary had excused BG Group’s failure to comply with the treaty’s local litigation requirement. The arbitrators then found in favor of BG Group and awarded it $185 million in damages.

After decisions by the federal district and appellate courts, both of which were reported here previously, the Supreme Court held that the treaty’s local litigation requirement was a procedural condition precedent to arbitration and that, absent a contrary intent reflected in the treaty itself, the interpretation and application of that procedural provision should be decided by the arbitrators and that decision should be reviewed with considerable deference. The fact that the document at issue was a treaty rather than an ordinary contract did not change the Court’s analysis, a position on which the dissent strongly disagreed. The Court concluded that the arbitrators’ jurisdictional determination was lawful and the judgment of the Court of Appeals to the contrary was therefore reversed. BG Group PLC v. Republic of Argentina, No. 12-138 (U.S. March 5, 2014).

This post written by Renee Schimkat.

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A federal U.S. district court recently confirmed a foreign arbitration award obtained by a Belizean telecommunications company against the Government of Belize in arbitral proceedings held before a tribunal appointed by the London Court of International Arbitration (“LCIA”). Factually, the case involved agreements between the company and Belize, wherein the company paid money in exchange for certain tax benefits and investment return guarantees associated with its telecommunications improvement plan. When Belize later refused to comply with the agreements, the company (i) requested arbitration before the LCIA, pursuant to the agreements, (ii) won declaratory and monetary relief upon Belize’s default, and (iii) assigned the monetary portion of the award to Belize Social Development, a British Virgin Island organization. Legally, the court first held that the arbitration award was governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”) (of which the Federal Arbitration Act is a codification) because England (where the arbitration took place) and the United States are both parties to the Convention. The court emphasized that, under the Convention, it should confirm the foreign award absent a finding that an enumerated exception to enforcement specified in the Convention applies. The court methodically deconstructed and denied Belize’s procedural arguments, including lack of subject-matter jurisdiction, lack of standing, forum non conveniens, international comity, and failure to join a required party under F.R.C.P. 19, and then turned to the exceptions to the Convention proffered by Belize, again ruling in favor of the company. The Convention arguments revolved around the following: (i) failure to produce copies of the arbitral award and accommodation agreements (Art. IV(1)); (ii) invalidity of accommodation agreements (Art. V(1)(a)); (iii) inappropriateness of arbitration (Arts. V(1)(c) and V(2)(a)); (iv) suspension of the award by a “competent authority” (Art. V(1)(e)); and (v) public policy (Art. V(2)(b)). None of these arguments was found to be meritorious, and the court confirmed the arbitral award. Belize Social Development Ltd. v. Government of Belize, Case No. 09-2170 (RJL) (D.D.C. Dec. 11, 2013).

This post written by Kyle Whitehead.

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Scope of Arbitration

Citigroup, Inc. v. Abu Dhabi Investment Authority, Case No. 1:13-cv-06073 (USDC S.D.N.Y. Nov. 25, 2013) (dismissing action to enjoin arbitration; granting motion to compel arbitration; defense of res judicata based on prior confirmation of arbitration award is an issue for arbitration panel)

Unconscionability

Lombardi v. Kahaly, Case No. 11-56752 (9th Cir. Dec. 2, 2013) (reversing denial of motion to compel arbitration of claims for injunctive relief under California Unfair Competition Law and Consumer Legal Remedies Act; following precedent holding that FAA preempts California unconscionability law and that “effective vindication” exception does not apply to state statutes; arbitration agreement not unconscionable for nonmutuality)

Lombardi v. Twyman, Case No. 10-56602 (9th Cir. Dec, 2, 2013) (reversing order that denied motion to compel arbitration based on unconscionability of class waiver arbitration provision; following Concepcion and American Express; arbitration agreement not substantively unconscionable for nonmutuality, nor procedurally unconscionable for alleged penalty for rejecting arbitration agreement)

Due Process

Staples v. Morgan Stanley Smith Barney, Case No. 6:13-cv-00013 (USDC D. Mont. Oct. 28, 2013) (confirming FINRA award; finding proper service of process by FINRA; no corruption, fraud, undue means, or arbitrator bias, misconduct, or exceeding of powers)

Labor Disputes

Northern New England Telephone Operations LLC v. Local 2327, International Brotherhood of Electrical Workers, AFL-CIO, Case Nos. 13-1167, 13-1186 (1st Cir. Nov. 12, 2013) (affirming confirmation of award and denial of Rule 11 costs and fees; panel did not exceed authority in LMRA arbitration by wrongfully adding/subtracting terms in interpreting the relevant collective bargaining agreement)

Reyco Granning LLC v. International Brotherhood of Teamsters, Local Union No. 245, Case No. 13-1002 (8th Cir. Nov. 15, 2013) (reversing district court’s order granting summary judgment in favor of union and confirming award on collective bargaining agreement; directing court to grant employer’s motion for summary judgment and vacate arbitration award; arbitrator exceeded authority by looking to contract negotiations to discern intent with respect to unambiguous contract language)

Concurrent Proceedings

Alstom Chile S.A. v. Mapfre Compania de Seguros Generales Chile S.A., Case No. 1:13-cv-02416 (USDC S.D.N.Y. Oct. 31, 2013) (compelling arbitration and permanently enjoining defendant from prosecuting related tort proceedings in Chile; holding that broad arbitration clause for all disputes “arising out of or relating to” agreement covered both breach of contract and tort claims; finding that failure to comply with requirement to negotiate dispute did not bar enforcement of arbitration provision)

This post written by Michael Wolgin.

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Comity

Corporacion Mexicana de Mantenimieneto Integral v. Pemex-Exporacion y Produccion, Case No. 1:10-cv-00206 (USDC S.D.N.Y. Aug. 27, 2013) (confirming $400 million Mexican arbitration award; refusing to enforce Mexican judgment nullifying award; Mexican judgment “violated basic notions of justice in that it applied a law that was not in existence at the time the parties contract was formed and left [the party in arbitration] without an apparent ability to litigate its claims”)

Manifest Disregard/Exceeding Authority

Dewan v. Walia, Case No. 12-2175 (4th Cir. Oct. 28, 2013) (vacating judgment that confirmed award in favor of former employee and remanding to district court with instructions to vacate the award; award was “manifest disregard of the law; “neither linguistic gymnastics, nor a selective reading of Maryland contract law, could support [the arbitrator’s] conclusion that the Release was enforceable but that [employee’s] claims were arbitrable anyway”)

Wells Fargo Advisors, LLC v. Watts, Case No. 12-1464 (4th Cir. Oct. 1, 2013) (affirming order confirming award for unpaid balance on employee loan; reversing ruling vacating arbitration panel’s grant of attorney’s fees; no fraud or manifest disregard of the law; “a court must defer to arbitrators’ factual findings on attorneys’ fees even if the arbitrators do not explain a basis for the precise amount”)

Walter v. Mark Travel Corp., Case No. 6:09-cv-01019 (USDC D. Kan. Sept. 18, 2013) (confirming $1.1 million award; denying motion to vacate award; court properly compelled arbitration against assignee of signatory; request for court to revisit order compelling arbitration was untimely; arbitrators did not exceed powers, nor was there a manifest disregard of the law)

Neshgold LP v. New York Hotel & Motel Trades Council, Case No. 1:13-cv-02399 (USDC S.D.N.Y. Sept. 19, 2013) (denying motion to vacate; granting motion to confirm award; award finding liability against employer in labor dispute did not exceed arbitrator’s authority, nor violate public policy; award determining relief due to labor union did not reflect manifest disregard of the law)

Phoenix Bulk Carriers, Ltd. v. American Metals Trading, LLP, Case No. 1:10-cv-02963 (USDC S.D.N.Y. Oct. 31, 2013) (granting motion to confirm award in favor of carrier against iron supplier; denying motion to vacate award; panel did not act in manifest disregard of the law nor exceed its authority because award was based on panel’s interpretation of shipping contract and findings of fact)

Evident Partiality/Fraud

DuBois v. Macy’s Retail Holdings, Inc., Case No. 12-3980-cv (2d Cir. Oct. 4, 2013) (affirming judgment denying pro se motion to vacate award rejecting claim for employee discrimination; confirming the award and granting dismissal of complaint; appellant failed to present any evidence to support the claim that the award was obtained through corruption, fraud, or undue means, that arbitrator exhibited evident partiality, or that arbitrator exceeded his powers)

Stone v. Bear, Stearns & Co., Case No. 12-2827 (3d Cir. Oct. 29, 2013) (affirming order denying petition to vacate FINRA award that rejected claim for millions of dollars in losses under investment; granting cross-petition to confirm the award; no evidence of exceeding powers or evident partiality against appellant based on arbitrator’s undisclosed family relation to well-connected finance professor)

Venue

First State Insurance Co. v. National Casualty Co., Case No. 1:13-cv-00704 (USDC S.D.N.Y. Sept. 27, 2013) (transferring venue of petition to confirm the arbitration panel’s final order regarding interpretation of reinsurance contract; forum selection clause in arbitration agreement unambiguously selected venue; clause was “unambiguous and specifically excludes alternative venue for the petition to confirm the final order”)

This post written by Michael Wolgin.

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In Lagstein v. Certain Underwriters at Lloyd’s of London, No. 03-01075 (9th Cir. June 10, 2010), a $900,000 insurance bad faith case, the Ninth Circuit reversed the vacatur of an arbitration award of over $6 million, including hefty punitive damages, holding that the award was not excessive and that the vacator was not supported by the Federal Arbitration Act. Recently revisiting the issue of the proper interest to be awarded, the Ninth Circuit held that an explicit award of interest on the award’s contract damages “d[id] not foreclose … awarding interest on the remaining portions of the arbitration award.” Applying state law for post-award, pre-judgment interest and federal law for post-judgment interest, the court then ordered Lloyd’s (1) to pay interest on all of the damage awards from award date until judgment satisfaction and (2) to pay interest on post-award, pre-judgment interest from the date of the court’s opinion until satisfaction. Lagstein v. Certain Underwriters at Lloyd’s of London, No. 2:03–01075 (9th Cir. Aug. 5, 2013).

This post written by Kyle Whitehead.

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Arbitrator Exceeding Powers

Prime United Inc., v. Sears Holdings Management Corp., Case No. 12 C 5364 (N.D. Ill. July 16, 2013) (vacatur denied where arbitrator did not exceed powers in offsetting claimant’s damages by respondent’s counterclaim award)

Golden Temple of Oregon, LLC. v. Puri, Case No. 3:11-cv-01358 (D. Ore. Aug. 7, 2013) (vacatur granted, arbitrator exceeded powers or imperfectly executed them by failing to consider impact of license agreement in trademark dispute)

Manifest Disregard of Law

Physicians Insurance Capital, LLC v. Praesidium Alliance Group, LLC, Case No. 4:12-CV-1789 (N.D. Ohio July 18, 2013) (granting motion to confirm, denying vacatur, finding no manifest disregard of the law).

Arbitration Procedure

Bridgeport Ventures LLC v. PanAm Management Group, Inc., No. 11-13971 (11th Cir. July 30, 2013) (affirming decision confirming award, finding district court had diversity jurisdiction, and respondent’s petition to vacate untimely)

Pochat v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., Case No. 12-22397 (S.D. Fla. Aug. 23, 2013) (granting motion to confirm, but modifying award to allow offset for counterclaim amount)

Evident Partiality

Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, Kochav S.A.R.L., No. 12-3247 (2d Cir. Aug. 30, 2013) (affirming decision to confirm award where no evident partiality, no refusal to consider material or pertinent evidence).

This post written by John Pitblado.

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An executive terminated by Doral Financial Corporation initiated an arbitration proceeding against Doral seeking severance compensation under contract. Doral counterclaimed, asserting that the former executive had breached a contractual non-competition clause by accepting employment at a competing bank. The arbitration panel decided both issues in the executive’s favor. Doral unsuccessfully petitioned the district court for vacatur. Doral appealed the denial of the petition to the Court of Appeals for the First Circuit. In support, Doral argued that he was denied a fair hearing in contravention of the FAA because the arbitrators had refused to issue pre-hearing and hearing subpoenas to the executive’s new employer and that the arbitrators lacked the authority to grant pre-award interest. The Fifth Circuit rejected both contentions and affirmed the denial of the petition to vacate. The appellate court held that Doral had a sufficient opportunity to present evidence at the hearing, argue for the issuance of subpoenas, and, furthermore, that the panel had the authority to award pre-hearing interest. Doral Fin. Corp. v. Garcia-Velez, No. 12-1519 (5th Cir. July 31, 2013).

This post written by Ben Seessel.

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