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Archive for May, 2010

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

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

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.

Richard Faulkner and Philip J. Loree Jr. Quoted in Business Insurance on Rent-A-Center West v. Jackson

May 8th, 2010 Uncategorized Comments Off on Richard Faulkner and Philip J. Loree Jr. Quoted in Business Insurance on Rent-A-Center West v. Jackson

Our friend Richard Faulkner, a partner in the Richardson, Texas law firm of Blume Faulkner, P.L.L.C., I, and others were quoted in a Business Insurance article on the Rent-A-Center West v. Jackson case pending in the United States Supreme Court.  The article is available here. 

Richard’s quote was “The 9th Circuit’s decision flies in the face of virtually every well-reasoned decision on arbitrability and jurisdiction[.]”  I could not agree with him more. 

For those of you that do not know Richard, he has decades of experience in the arbitration, mediation and ADR fields and is a contributing author to Elkouri & Elkouri, How Arbitration Works (6th Ed.).   His practice includes acting as a neutral arbitrator or mediator, serving on construction dispute boards, and representing clients in domestic and international arbitration-law-related matters.   Recently he represented Dub Herring Ford Lincoln-Mercury, Inc. before the United States Supreme Court as an amicus curiae in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., which was decided on April 27, 2010. 

My more modest sound bite was: “There’s a lot of attention being paid to this case because it’s very frequent that you have challenges to arbitration agreements on unconscionability grounds made by employees and consumers.” 

The Supreme Court is expected to issue its decision in this controversial case by the end of this term in late June.  We believe there is a good chance that at least five members of the Court will vote for a reversal, but that outcome is by no means a foregone conclusion.  Whatever the result, you will certainly hear about it here at the Forum.