United States Court Of Appeals For The Second Circuit | Loree Reinsurance and Arbitration Law Forum

Archive for the ‘United States Court of Appeals for the Second Circuit’ Category

United States Law Week Quotes Philip J. Loree Jr. Comments on Fensterstock

August 4th, 2010 Arbitration Practice and Procedure, Class Action Arbitration, Class Action Waivers, United States Court of Appeals for the Second Circuit, United States Supreme Court No Comments »

Last week I was interviewed by Tom P. Taylor, a reporter for The United States Law Week, about the Fensterstock v. Education Finance Partners, No. 09-1562-cv, slip op. (2d Cir. July 12, 2010), class-action waiver case (blogged here). Yesterday, Tom’s excellent article on Fensterstock was published in 79 U.S.L.W. 1111 (Aug. 3, 2010) (BNA), and he quoted some of my comments in it.

U.S. Law Week is a subscription only publication, but I received permission from the Bureau of National Affairs (”BNA”) to post a copy of the article on my LinkedIn profile. So, if you are a member of Linkedin, you can access a copy of the article here (it does not appear in my “public” LinkedIn profile).

We would like to take this opportunity to thank Tom P. Taylor for conducting a very professional interview and following up with a very professional article. We would also like to thank Bernard J. Pazanowski, who co-authored the article with Tom.

What to Make of the Second Circuit Voiding a Class Action Waiver Under California’s Discover Bank Rule?

July 23rd, 2010 Arbitration Practice and Procedure, California State Courts, Class Action Arbitration, Class Action Waivers, Practice and Procedure, United States Court of Appeals for the Ninth Circuit, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »

After deciding Stolt-Nielsen, S.A. v. AnimalFeeds, Inc. and Rent-A-Center West v. Jackson, the United States Supreme Court left federal arbitration law at a crossroads. In both cases the Court adhered quite faithfully to its prior Federal Arbitration Act jurisprudence, under which it enforces arbitration agreements according to their terms, without regard to other considerations. In Rent-A-Center the Court implicitly reaffirmed that these pro-enforcement rules apply equally to contracts of adhesion.

We will find out whether the Court intends to continue down the same path when it decides AT&T Mobility v. Concepcion next term, a case that raises the question whether California’s Discover Bank unconscionability rule is pre-empted by the Federal Arbitration Act. That rule deems unconscionable under California law class-action or class-arbitration waivers where: (a) “the waiver is found in a consumer contract of adhesion in a setting in which the disputes between the contracting parties predictably involve small amounts of damages”; and (b) “it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money. . . .” Discover Bank v. Superior Court, 36 Cal. 4th 148, 162-63 (2005) (citing Cal. Civ. Code § 1668).

The Discover Bank rule is grounded in a California-law principle – embodied in Cal. Civ. Code § 1668 – that “contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud. . . are against the policy of the law.” See Cal. Civ. Code § 1668. If a company is allegedly engaging in fraudulent acts designed to cheat numerous consumers out of small amounts of money, a class action or class arbitration waiver may, if enforced, effectively act as an exculpatory provision that insulates the company from the consequences of its small scale, but widespread fraud, because the individual, allegedly defrauded consumers have little incentive to pursue separate actions or arbitrations to recoup trivial amounts of damages. See Discover Bank, 36 Cal. 4th at 162-63. Any contract that had that effect – whether it is a class action waiver in an arbitration clause, an exculpatory agreement or a contract that simply forbids class actions – would be unconscionable under the rule.

In Fensterstock v. Education Finance Partners, No. 09-1562-cv, slip op. (2d Cir. July 12, 2010), the United States Court of Appeals for the Second Circuit suggested one path that the United States Supreme Court might take on Discover Bank preemption. In an interesting opinion, Senior Circuit Judge Amalya Lyle Kearse, joined by Circuit Judges José A. Cabranes and Chester J. Straub, held that the Discover Bank rule was not preempted by the Federal Arbitration Act. According to the Second Circuit, California’s Discover Bank rule “’places arbitration agreements on the exact same footing as contracts that bar class action litigation outside the context of arbitration,’” and for that reason the rule is not preempted by the Act. Slip op. at 16-17 (quoting Shroyer v. New Cingular Wireless Serv., Inc., 498 F.3d 976, 990 (9^th Cir. 2007) (emphasis in original)).

On first blush the Second Circuit’s decision seems reasonable. But there are some important issues lurking beneath the surface that the Supreme Court will need to address when it decides AT&T Mobility. Continue Reading »

How Will Stolt-Nielsen, S.A. v. Animalfeeds Int’l Corp. Change Reinsurance Arbitration Practice?

May 25th, 2010 Arbitrability, Arbitration Practice and Procedure, Authority of Arbitrators, Awards, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Grounds for Vacatur, Practice and Procedure, Reinsurance Arbitration, United States Court of Appeals for the Second Circuit, United States Supreme Court 6 Comments »

Part I

A. Introduction

Shortly before the United States Supreme Court decided Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., ___ U.S. ___, slip op. (April 27, 2010), we wrote about the implications the case might have on reinsurance arbitration practice. (See our post here.) But since then, you have not heard much from us, other than our brief report (here) about the Supreme Court vacating and remanding to the United States Court of Appeals for the Second Circuit the American Express Merchants’ Litigation judgment for further consideration in light of Stolt-Nielsen. One — but by no means the only — reason is that after Stolt-Nielsen was decided, we wrote a comprehensive article on it, which will be published in a subscription-only publication in June.

But that article – while comprehensive in scope – is directed at folks interested in the Federal Arbitration Act in general, not necessarily those interested in reinsurance arbitration in particular. And that’s what we want to cover in this multi-part series: Stolt-Nielsen’s implications on reinsurance arbitration practice.

Stolt-Nielsen affects reinsurance arbitration in two very important ways. First, it has set a fairly liberal standard of review that now applies to commercial arbitration awards in cases where a party asserts that the arbitrators exceeded their powers under Federal Arbitration Act Section 10(a)(4) because of the award’s outcome. That, as we shall see, has all sorts of implications for persons involved in reinsurance arbitrations.

Second, it has changed the rules applicable to consolidated-reinsurance-arbitration practice – or at least it requires a wholesale reevaluation of those rules. That, too, has a number of important implications for reinsurance-arbitration practice.

This Part I of the series explains why the standard for challenging an award based on its outcome is important in reinsurance arbitration practice. And, after briefly reviewing pre-Stolt-Nielsen law on outcome-based standards of review, it explains how Stolt-Nielsen has established for the lower courts a fairly searching standard of review. Part II (here) will delve into what the implications of that standard of review will likely be.

Part III (here) will provide the background necessary to understand how Stolt-Nielsen affects the law applicable to consolidated reinsurance arbitration. Part IV (here) will delve into the details of how Stolt-Nielsen changes – or at least requires reconsideration of – the legal status quo in this area. And Part V will discuss the implications of all of this.

We do not set out to discuss the background of Stolt-Nielsen in any detail or to provide a play-by-play of how the Court decided the case. If you are a regular reader you probably already know the background in detail, and our upcoming article does a pretty good job of mapping out the Court’s reasoning. Instead, we focus our attention on the aspects of the decision that are relevant to the two key subjects of discussion.

But before we delve into what Stolt-Nielsen has to say about the standard of review, we pause briefly to address why the standard of review applicable to an outcome-based challenge is so important in reinsurance and other forms of commercial arbitration. Continue Reading »

United States Supreme Court Vacates Judgment in American Express Merchants’ Litigation

May 12th, 2010 Arbitration Practice and Procedure, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »

The Supreme Court has issued a summary order in the American Express Merchants’ Litigation that suggests that it believes that Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. ___ , slip op. (2010) renders class arbitration waivers enforceable despite public policy and other challenges. Readers may recall that on May 29, 2009 American Express filed a petition for a writ of certiorari in the American Express Merchants’ Litigation, in which the United States Court of Appeals for the Second Circuit held that a provision in an arbitration agreement forbidding class action arbitration was invalid and unenforceable under federal public policy grounds in the circumstances presented by the case. See Re American Express Merchants’ Litigation, 554 F.3d 300 (2d Cir. 2009), vacated and remanded sub. nom., American Express Co. v. Italian Colors Restaurant, No. 08-1473 (May 3, 2010).

On May 3, 2010 the United States Supreme Court issued a summary order in American Express Co. v. Italian Colors Restaurant, No. 08-1473 granting certiorari, summarily vacating the judgment of the United States Court of Appeals for the Second Circuit, and remanding it “for further consideration in light of” Stolt-Nielsen. Justice Sonia M. Sotomayor “took no part in the consideration or decision” of the petition. Italian Colors, No. 08-1473 (May 3, 2010) (summary disposition).

It will be interesting to see what the Second Circuit does with the case on remand.

Global Arbitration Review Publishes Article on Hansen v. Everlast and Quotes Philip J. Loree Jr.

November 3rd, 2009 Arbitrability, Authority of Arbitrators, Awards, New York Court of Appeals, Nuts & Bolts: Arbitration, Uncategorized, United States Court of Appeals for the Second Circuit, functus officio No Comments »

Readers may recall our recent post on the New York Court of Appeals’ decision in Re Joan Hansen & Co v. Everlast World’s Boxing Headquarters Corp., ___ N.Y.3d ___, slip op. (Oct. 15, 2009), a case which demonstrates how important the parties’ submission is in determining arbitral authority. The Court held that, after an award, a party cannot reopen an arbitration proceeding to request that the arbitrators decide an issue that had not previously been submitted to the arbitrators. A copy of our post is here.

On November 2, 2009 Kyriaki Karadelis of the U.K.-based trade publication Global Arbitration Review (”GAR”) (website here) wrote what I thought was a concise and insightful article on the case. And we would have said that even if she had not quoted some of our comments in her article! But she did, and we’re flattered by that.

With Global Arbitration Review’s permission, and with the required copyright disclaimer, we have posted the article as a “Slide Share Presentation” in my LinkedIn profile, which you can view by clicking here. Also posted there (again with GAR’s permission and the required disclaimer) is a Global Arbitration Review Article on the United States Court of Appeals for the Second Circuit’s decision in ReliaStar Life Ins. Co. v. EMC National Life Co., ___ F.3d ___, ___ (2009) (Raggi, J.) (blogged here and here), in which the United States Court of Appeals for the Second Circuit held that an arbitration panel was authorized to award under the bad faith exception to the American Rule attorney and arbitrator fees to a ceding company in a case where the parties had agreed that “[e]ach party shall bear the expense of its own arbitrator. . . and related outside attorneys’ fees, and shall jointly and equally bear with the other party the expenses of the third arbitrator.” We reported on GAR’s article concerning ReliaStar case here, which also quotes some of our comments on that case.

We ask our readership to remember that GAR is a subscription-only publication and that it has copyrights in these posted materials. GAR has authorized us to post them online and distribute them for marketing purposes, but that authorization does not extend to others not similarly situated. Please do the right thing and respect GAR’s copyrights – GAR has to make a living just like the rest of us!

Disputing Publishes Part IVB of our Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp. Guest Post

September 21st, 2009 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Class Action Waivers, Consolidation of Arbitration Proceedings, Guest Posts, Practice and Procedure, United States Court of Appeals for the Second Circuit, United States Supreme Court 2 Comments »

On September 1, 2009 Disputing published Part IVA of our four-part guest post on Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198). In Part IVA (here) we considered whether the question in Stolt-Nielsen was one for the court or the arbitrators to decide, and predicted that at least five Justices of the United States Supreme Court will hold that the court must decide it. If we are correct, then the Supreme Court will consider on a de novo basis whether the arbitration panel had the authority to impose class arbitration on the Stolt-Nielsen parties.

Today, Disputing published Part IVB of our guest post (here) in which we consider how the Supreme Court might rule on the merits of the question. We believe that at least five Justices will rule that the arbitrators should not, in the face of the agreements’ silence, have imposed class arbitration where, as here, there is no basis in the Federal Arbitration Act, New York state law or federal maritime law for implying consent to class arbitration.

The Supreme Court’s decision in Stolt-Nielsen may have some important ramifications for both commercial and consumer arbitration. So for advance coverage, tune into Disputing….

Disputing has Published Part IVA of Our Stolt-Nielsen v. AnimalFeeds Guest Post

September 1st, 2009 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Consolidation of Arbitration Proceedings, Guest Posts, United States Court of Appeals for the Second Circuit, United States Supreme Court 4 Comments »

On August 17, 2009 Disputing published Part III of our four-part guest post on Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) (Part III available here). In Part III we examined the background of Stolt-Nielsen and identified four issues that the United States Supreme Court will likely confront when it decides the case.

Today Disputing published Part IVA (here), in which we consider the first issue: Who decides whether class arbitration can be imposed on the parties when their arbitration agreements are silent on that point? Put differently, is the question one of arbitrability for the court or one of procedural arbitrability or contract interpretation for the arbitrators?

Resolution of the question defines the standard of review. Questions of arbitrability are reviewed de novo on the law and for clear error on the facts. But if the question is one of procedural arbitrability or contract interpretation, the standard is the deferential one provided by Federal Arbitration Act Section 10, the one applied by both the District Court and the United States Court of Appeals for the Second Circuit.

The arbitrators in Stolt-Nielsen decided that class arbitration was authorized by the parties’ arbitration agreements even though the agreements said nothing about class arbitration. We believe that at least five Justices will conclude that this question was one of arbitrability for the Court to decide, and will either decide the issue de novo or remand it to the lower courts to decide.

The Supreme Court’s decision in Stolt-Nielsen may have some important ramifications for both commercial and consumer arbitration. So for advance coverage, tune into Disputing….

Disputing has Published Part III of our Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp. Guest Post

August 17th, 2009 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Consolidation of Arbitration Proceedings, Guest Posts, United States Court of Appeals for the Second Circuit, United States Supreme Court 1 Comment »

Last week we announced that Disputing had published Part II of our four-part guest post on Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) (Disputing post here). Today, Disputing published Part III, which discusses the background and procedural history of the Stolt-Nielsen case and identifies the key issues that the United States Supreme Court will likely consider in deciding the case.

The Supreme Court’s decision in Stolt-Nielsen may have some important ramifications for both commercial and consumer arbitration. And soon-to-be Justice Sotomayor may provide the swing vote in the case. So for advance coverage, tune into Disputing….

Global Arbitration Review Quotes Loree Reinsurance and Arbitration Law Forum’s Critical Analysis of ReliaStar Life Ins. Co. v. EMC Nat’l Life Co.

August 10th, 2009 Arbitrability, Authority of Arbitrators, United States Court of Appeals for the Second Circuit 2 Comments »

On April 28, 2009 we published “ReliaStar Life Insurance Co. v. EMC National Life Co.: Critical Analysis of an Important Reinsurance Arbitration Decision,” available here. On July 13, 2009 the London-based Global Arbitration Review published an interesting article about the Second Circuit’s decision in ReliaStar, which quoted from our critical analysis:

Writing shortly after the appeal court’s decision, Philip Loree Jr of New York firm Loree & Loree, said the court had “violated New York contract interpretation rules.” He said that, according to New York law, “to ascertain whether a contract is ambiguous, courts are required to focus on what is said, not what is omitted.” “Given that the pre-eminent purpose of the Federal Arbitration Act is to enforce the parties’ arbitration agreement as written, this case may be one of those rare Second Circuit decisions that warrant rehearing and reversal en banc,” he added.

You can find the article (subscription only) here: ‘Bad Faith’ Costs Decision Upheld, Global Arbitration Review, July 13, 2009, our summary of the decision here, our critical analysis here, and further commentary here. Disputing’s coverage of the case can be found here and here.

Disputing Guest Post: Class And Consolidated Arbitration Under the Federal Arbitration Act: What Issues Will The United States Supreme Court Confront in Stolt-Nielsen, S.A. V. AnimalFeeds Int’l Co.?

August 6th, 2009 Arbitrability, Authority of Arbitrators, Consolidation of Arbitration Proceedings, Guest Posts, United States Court of Appeals for the Second Circuit, United States Supreme Court 4 Comments »

The Loree Reinsurance and Arbitration Law Forum is delighted to guest post once again on Karl Bayer’s and Victoria VanBuren’s wonderful ADR blog, Disputing. Because Victoria and I have both written fairly extensively about Hall Street Assoc. v. Mattel, Inc, 128 S. Ct. 1396 (2008), and about two of the most frequently cited cases construing Hall Street’s dictum on manifest disregard of the law — Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5^th Cir. 2009) and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. granted June 15, 2009 (No. 08-1198) – and because the United States Supreme Court has granted certiorari in Stolt-Nielsen, we thought that our joint-readership might appreciate an analysis of the issues that the Supreme Court will likely address – or at least face — in that case. That’s what we have set out to do in a four-part guest post, Part I of which was published today. (Check it out here.)

As readers may already know, the issue before the United States Supreme Court is whether it is consistent with the Federal Arbitration Act to impose class arbitration on parties whose arbitration agreement is silent on that point. This is the same issue that the Supreme Court set out to decide in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), but ultimately never did because a plurality of the Court ruled that there was a disputed issue of contract interpretation as to whether the agreements in that case were, in fact, silent on class arbitration, which resulted in a remand to the arbitrator. But in Stolt-Nielsen the panel ruled, and the parties agreed, that the contracts are silent on this key point, so the Supreme Court will presumably confront the issue head on.

The Supreme Court’s decision next Term may have some important ramifications for both commercial and consumer arbitration. And soon-to-be Justice Sotomayor may provide the swing vote in the case. So for some advance coverage, tune into Disputing….