Archive for 2009

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Update: Certiorari Granted in the Stolt-Nielsen Case!

June 15th, 2009 Arbitrability, Authority of Arbitrators, Class Action Arbitration, Consolidation of Arbitration Proceedings, United States Court of Appeals for the Second Circuit, United States Supreme Court 10 Comments »

On May 29, 2009 we discussed Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), which held that “manifest disregard of the law” is not an independent basis for vacating an arbitration award foreclosed by Hall Street, but one encompassed within Section 10(a)(4)’s prohibition against arbitrators “exceed[ing] their powers.  .  .  .”  This morning the United States Supreme Court granted certiorari in Stolt-Nielsen to decide whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act.  The Second Circuit found that the arbitrators did not exceed their powers when they ordered a class action arbitration, even though the contract was concededly silent on whether class arbitrations were permitted.  

We shall post in the not too distant future an analysis of the issue the United States Supreme Court will decide, as its resolution potentially has important implications on the powers of arbitrators to consolidate arbitrations or order class-action arbitration proceedings.  

Stay tuned.  .  .  .

A Case to Watch Carefully: The $4.1 Billion Arbitration Award

June 14th, 2009 Authority of Arbitrators, Awards, California State Courts, Commercial and Industry Arbitration and Mediation Group 1 Comment »

Arbitration fans following the blogosphere — or participating in LinkedIn’s Commercial and Industry Arbitration and Mediation Group (here) — have no doubt heard about the $4.1 billion arbitration award recently confirmed by a California state court.   Check out the coverage in Victoria Pynchon’s Settle It Now Negotiation Blog, here and here, and Victoria VanBuren’s Disputing blog, here.  These posts feature a news article, related links and copies of the judgment and arbitration award.   One of Victoria Pynchon’s posts includes a very amusing video clip from Cabaret, featuring Liza Minelli!

The award arose out of an employment dispute between Paul Chester, the former chief operating officer of  iFreedom Communications, Inc., and iFreedom and its founder, Timothy Ringgenberg.  Mr. Chester claimed, and JAMS arbitrator William F. McDonald, a retired judge, agreed, that iFreedom did not receive commissions, back wages and other benefits due him under his employment agreement, and that he was fired without cause after he confronted his employer about this.  The compensatory component of the award is roughly $1 billion, which Arbitrator McDonald trebled based on iFreedom’s alleged bad faith.  The award is quite lengthy (27 pages), and provides a detailed breakdown of the various claims and corresponding damages.  The award states that the damages are ” appropriate to punish and make an example of defendants.”  (Query whether “making an example of Defendants” is a proper subject of private arbitration. ) Continue Reading »

The Tenth Circuit Tackles a Narrow Arbitration Clause: Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc.

June 8th, 2009 Arbitrability, Authority of Arbitrators, United States Court of Appeals for the Tenth Circuit Comments Off on The Tenth Circuit Tackles a Narrow Arbitration Clause: Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc.

 Introduction

Arbitrability disputes come in various forms.  Some involve broad arbitration clauses, some narrow clauses, and some clauses that are neither broad nor narrow.  Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc., ___ F.3d ___ (10th Cir. 2009) (available here) provides a relatively simple illustration of how courts may decide controversies concerning relatively narrow arbitration clauses and the results that may ensue.  Continue Reading »

LinkedIn’s Commercial and Industry Arbitration and Mediation Group is Now 100 Members Strong!

June 7th, 2009 Commercial and Industry Arbitration and Mediation Group, General Comments Off on LinkedIn’s Commercial and Industry Arbitration and Mediation Group is Now 100 Members Strong!

On May 21, 2009 we announced the formation of a LinkedIn Commercial and Industry Arbitration and Mediation Group (post available here).  At that time the group was 29 members strong, and we are pleased to report that the group has since grown to 100 members.  There have been a number of interesting discussions, and group members have access to several ADR blogs, as well as articles posted by other group members.  It is an excellent networking and educational opportunity for anyone interested in commercial and industry ADR. 

We welcome new members.  Persons who should consider joining this group include arbitrators; mediators; in-house and outside counsel; law professors; dispute-resolution consultants; members of  ADR organizations; business entity representatives and principals whose day-to-day responsibilities include dispute resolution; and law students and other students of commercial and industry ADR. 

If you are already a member of LinkedIn, please click here to apply for membership in the Group.  If you are not a LinkedIn member, click here, and you will be guided through the process of creating a profile (which does not have to be completed in one step).  Once your profile is started, and you have a log-in name and password, you can apply for membership in the Group.  Joining LinkedIn is free, as is joining the group. 

We hope you’ll join us and participate in the discussions!

Reinsurance Nuts & Bolts: Aggregate Extension Clauses in Excess-of-Loss Reinsurance Contracts

June 1st, 2009 Nuts & Bolts, Nuts & Bolts: Reinsurance Comments Off on Reinsurance Nuts & Bolts: Aggregate Extension Clauses in Excess-of-Loss Reinsurance Contracts

Introduction

I remember when I first heard the term “aggregate extension clause.”  I was a couple of years out of law school and just getting my feet wet in reinsurance law and practice.  Naturally, I had no idea of what an aggregate extension clause was or, for that matter, why someone would want to call something an “aggregate extension clause” in the first place, unless the principal objective was to confuse the reader.  I envisioned some densely worded, obtuse, complex and hopelessly confusing provision designed to accomplish some obscure yet important purpose, the relevance of which was surely beyond my ken.  I decided  that I could read up on the clause, or ask a colleague about it, but I feared that the explanation – written or oral – would be at least as difficult to decipher as the clause itself, and probably more so.  So I did my best to avoid even having to think about aggregate extension clauses — let alone deal with them — for as long as possible.

Eventually, of course, I had to face my fears and grapple with the seemingly elusive concept of “aggregate extension.”  I quickly learned that my initial assessment was only partly correct:  aggregate extension clauses are indeed densely worded, but the purpose of the clause is far more straightforward than I once assumed.  Once I learned a little bit about the clause, I realized (or at least thought) that I could impress – or perhaps awe – my less experienced colleagues with it, and might even be able to use it to show my more experienced colleagues that I knew something about reinsurance.   While I can’t say I obtained as much mileage out of my newfound knowledge as I expected,  I am nevertheless glad that I invested a little time into learning about aggregate extension clauses.

In this Reinsurance Nuts & Bolts post we briefly discuss in very simple and basic terms what an aggregate extension clause is, and what it does.  We also provide the reader with an example of some of the operative wording of an aggregate extension clause.  Our discussion is not intended to be comprehensive; if anything, it is oversimplified.  But it should give the reader a basic understanding of the topic.    Continue Reading »

LinkedIn Commercial and Industry Arbitration and Mediation Group Follow-Up Post

May 29th, 2009 Commercial and Industry Arbitration and Mediation Group, General 1 Comment »

On May 21, 2009 we announced the formation of a LinkedIn Commercial and Industry Arbitration and Mediation Group (post available here).  At that time the group was 29 members strong, and we are pleased to report that the group has since grown to 65 members.  There have been a number of interesting discussions, and group members have access to several ADR blogs, as well as articles posted by other group members.  It is an excellent networking and educational opportunity for anyone interested in commercial and industry ADR. 

We welcome new members.  Persons who should consider joining this group include arbitrators; mediators; in-house and outside counsel; law professors; dispute-resolution consultants; members of  ADR organizations; business entity representatives and principals whose day-to-day responsibilities include dispute resolution; and law students and other students of commercial and industry ADR. 

If you are already a member of LinkedIn, please click here to apply for membership in the Group.  If you are not a LinkedIn member, click here, and you will be guided through the process of creating a profile (which does not have to be completed in one step).  Once your profile is started, and you have a log-in name and password, you can apply for membership in the Group.  Joining LinkedIn is free, as is joining the group. 

We hope you’ll join us and participate in the discussions!

Hall Street Meets Pearl Street: Stolt-Nielsen and the Federal Arbitration Act’s New Section 10(a)(4)

May 29th, 2009 Arbitrability, Authority of Arbitrators, Awards, Grounds for Vacatur, Practice and Procedure, United States Court of Appeals for the Second Circuit 11 Comments »

Introduction

Victoria VanBuren’s May 4, 2009 guest post,  Hall Street Meets S. Maestri Place: What Standards of Review will the Fifth Circuit Apply to Arbitration Awards Under FAA Section 10(a)(4) after Citigroup? (available here), looked at the scope of Section 10(a)(4) in the Fifth Circuit after Hall Street Assoc. v. Mattel, Inc., 128 S. Ct. 1396 (2008) and Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009). Today we look at the scope of Section 10(a)(4) in the Second Circuit after Hall Street met Pearl Street in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 548 F.3d 85 (2d Cir. 2009), petition for cert. filed Mar. 26, 2009 (No. 08-1198), in which the Second Circuit said that, notwithstanding its prior case law suggesting otherwise,  “manifest disregard of the law” is not an independent basis for vacating an arbitration award foreclosed by Hall Street, but one encompassed within Section 10(a)(4)’s prohibition against arbitrators “exceed[ing] their powers.  .  .  .”  As we shall see, the Second Circuit justified that holding by taking a more expansive view of Section 10(a)(4) than it previously had, a view that may also permit challenges based on “manifest disregard of the agreement.”  Continue Reading »

Disputing and The Forum Have Formed a Commercial and Industry Arbitration and Mediation Group on LinkedIn!

May 21st, 2009 General 9 Comments »

On May 19, 2009 Victoria VanBuren, blog master of Disputing, I, and others formed a LinkedIn Group called the Commercial and Industry Arbitration and Mediation Group.  The group is a forum for the discussion of issues and the sharing of information concerning commercial and industry arbitration, mediation and other forms of alternative dispute resolution.  Participation in the Group is an excellent networking and educational opportunity.  As of the time this was posted, the group has 29 members with diverse backgrounds, all of whom are interested in commercial and industry ADR. 

Victoria VanBuren — a talented young ADR and intellectual property attorney, Forum guest blogger, and computer science student  — and I are principally responsible for the day-to-day management of the group.  Victoria’s CV is here.  We have also enlisted the support of the following experienced and talented ADR professionals who also act as Group Managers:   

Don Philbin – Don is a Panelist and Shareholder at Conflict Solutions of Texas, and an adjunct professor at Pepperdine University School of Law’s prestigious Straus Institute on Dispute Resolution. Victoria introduced me to Don recently and I have found that he not only is a pleasure to work with, but also has a wonderful sense of humor. We are quite honored to have someone of Don’s caliber participate as a Group Manager.  Learn more about him here. 

Karl Bayer – Karl is a skilled trial lawyer and Dispute Resolution Expert and is the principal of Karl Bayer Dispute Resolution.  Karl has been a great mentor and role model for Victoria and has an excellent practice. You can learn more about Karl and his practice here.  We are all looking forward to Karl’s active participation in the group after he finishes up with a rather grueling, two-month long trial. 

Robert Bear – Robert (CV here) is the owner of RAB Actuarial Solutions, where he offers his services as a consulting actuary, reinsurance consultant and insurance and reinsurance arbitrator. Before forming RAB, Robert was a Senior Vice President and Chief Actuary at PXRE Group Ltd. Robert brings a lot of experience to bear, including experience in the actuarial field, which is relevant to both insurance and reinsurance dispute resolution.  Indeed, panels of actuaries like Robert are sometimes called upon to resolve actuarial disputes pursuant to commutation clauses in reinsurance contracts, and individual actuaries also serve as members of regular reinsurance arbitration panels resolving less arcane reinsurance disputes.  Once you think you really understand the reinsurance business, go talk to an actuary!

Commercial and industry ADR is a broad topic and covers the spectrum from arbitrations and mediations arising out of general, commercial contracts through more specialized forms of dispute resolution used by various industries, including the reinsurance, maritime, telecommunications, securities, financial services, construction industries and others.  We also consider labor and employment arbitration and mediation to be within this spectrum. 

Topics of group discussion may include, but are not limited to, practice and procedure under the Federal Arbitration Act, the New York Convention, the Panama Convention and state arbitration statutes; recent state and federal case law and legislative developments, including the Arbitration Fairness Act of 2009 and other proposed anti-arbitration legislation; news and events pertinent to commercial and industry ADR; international commercial and industry arbitration; the mediation and arbitration process; class arbitration; domestic and international arbitration and mediation organizations and societies and their rules; arbitration and mediation strategies for parties, arbitrators and mediators; industry-specific arbitration practices and procedures; labor arbitration; employment arbitration and mediation; arbitration and mediation technology; proposals for improvement of the process; arbitrator and mediator ethics; confidentiality; and other issues pertinent to commercial and industry ADR. 

Persons who should consider joining this group include arbitrators; mediators; in-house and outside counsel; law professors; dispute-resolution consultants; members of  ADR organizations; business entity representatives and principals whose day-to-day responsibilities include dispute resolution; and law students and other students of commercial and industry ADR.  The purpose of the group is information sharing and professional networking, not job searching or marketing.  Job postings, if any, should be listed in the Jobs Section (as opposed to the Discussion Section). 

If you are already a member of LinkedIn, please click here to apply for membership in the Group.  If you are not a LinkedIn member, click here, and you will be guided through the process of creating a profile (which does not have to be completed in one step).  Once your profile is started, and you have a log-in name and password, you can apply for membership in the Group.  Joining LinkedIn is free, as is joining the group. 

We hope you’ll join us and participate in the discussions! 

[Editor’s note:  For a good book on using LinkedIn as a networking tool, read Jan Vermeiren, How to Really Use LinkedIn (Booksurge 2009).  There are also a number of other books on the subject available at Amazon.com or your local bookstore.]

Reinsurance Nuts & Bolts: Honorable Engagement Clauses

May 18th, 2009 Arbitrability, Authority of Arbitrators, Nuts & Bolts, Nuts & Bolts: Reinsurance, Reinsurance Arbitration 1 Comment »

Introduction

In today’s Nuts & Bolts post we take a brief look at honorable engagement clauses, which are sometimes referred to as “honorable undertaking” clauses.  Honorable engagement clauses are, for practical purposes, a species of choice of law clause.   Generally, they confer upon arbitration panels a degree of freedom to depart from the strict rules of law and evidence, and to interpret the contract as an honorable engagement rather than literally according to its terms.  They are premised on the now arguably outmoded historical concept that a reinsurance contract is more than a contract, but an honorable undertaking, a deal that  is closed when the parties shake hands over a cocktail (or three), and one by which the parties are honor-bound to abide.  They also recognize that reinsurance is an arcane business with its own peculiar set of customs, practices and norms, and that, if the parties so agree, arbitrators should be reasonably free to apply these norms in deciding a case, even if a court faced with the same facts would or could not. 

Honorable engagement clauses are more common in older reinsurance contracts than in those written today.  But many reinsurance disputes arise out of long-tail asbestos or environmental claims arising out of decades-old contracts, a great many of which contain these clauses.  And the clauses can have some significant implications in those disputes. Continue Reading »

Guest Post — Mediating Reinsurance Disputes: A Case Study

May 14th, 2009 Guest Posts, Mediation, Reinsurance Mediation 2 Comments »

Introduction

I am very pleased that Phil Loree Jr. asked me to guest blog for the Loree Reinsurance and Arbitration Law Forum.  I have known Phil for quite some time and have worked with him on various matters over the years.  Phil suggested that I write something about my experiences mediating reinsurance disputes.  This guest post is a revised version of an article I published in the September 2006 edition of JTW News, a popular, U.K.-based reinsurance trade publication.    

As the aggravation, expense and amount of time required to arbitrate or litigate escalate, parties to reinsurance disputes are beginning to opt either by contract or ad hoc agreement to mediate reinsurance disputes. For them, depending upon the case, less is more; that is, compared to arbitration or litigation, mediation is a less aggressive, less costly, less damaging and less divisive alternative to tip the balance of power and opportunity in both parties’ favor.  A careful, experienced and patient mediator views disputes between parties, not as a battle, but as an opportunity to empower them to structure a resolution that best meets their respective short and long term needs. 

Despite this trend, many still claim mediation is unnecessary, expensive and unproductive — complaints based mostly upon its non-binding nature and prior “bad” experiences with ineffective mediators.  From my discussions with many satisfied client and lawyer participants and my own work mediating cases, I have found that parties and their counsel can and do benefit in many ways — even if no settlement immediately results — from mediating their reinsurance disputes before an effective mediator.  Continue Reading »

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