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“PMG and Zurich have an insurance agreement pursuant to which Zurich is required to maintain a collateral trust to pay any amount due under any agreement PMG may have with Zurich or any of Zurich’s affiliates.” Professional Mgt. Serv’s Grp., Inc. v. Zurich Am. Ins. Co., No. 8:14-cv-2180-T-36EAJ, 2015 WL 1310989, *1 (M.D. Fla. March 24, 2015). Their insurance agreement contained a forced arbitration clause, which provided in pertinent part as follows:
Any dispute arising out of the interpretation, performance or alleged breach of this Agreement, shall be settled by binding arbitration administered by the American Arbitration Association (AAA) under its Arbitration Rules.
Professional Mgt. Serv’s Grp., Inc. v. Zurich Am. Ins. Co., No. 8:14-cv-2180-T-36EAJ, 2015 WL 1310989, *1 (M.D. Fla. March 24, 2015).
There came a time when PMG demanded that Zurich pay money out of the collateral trust which Zurich agreed to maintain under the insurance agreement, and Zurich refused. Disputing Zurich’s denial, PMG sued Zurich, and Zurich filed a motion to stay PMG’s lawsuit and compel PMG to arbitrate its claims.
PMG did not dispute that its claims “fall within the scope of the Program Agreement’s arbitration clause ….” (That apparently removes any precedential value of this decision on the issue of applying forced arbitration clauses in insurance agreements, but there is more to this decision than that one issue.) Neither did PMG dispute that any “legal constraints external to the agreement would otherwise foreclose arbitration of those claims.” Professional Mgt. Serv’s Grp., Inc. v. Zurich Am. Ins. Co., No. 8:14-cv-2180-T-36EAJ, 2015 WL 1310989, *1 (M.D. Fla. March 24, 2015).
On this record, the Court granted the insurance company’s requests to stay the lawsuit and to compel PMG to arbitrate its claims pursuant to the forced arbitration clause in Zurich’s insurance agreement. In part, the Court based its ruling on what the Court said was “clear and unmistakable evidence” that the parties intended to arbitrate and that the parties intended for the arbitrator alone to determine the validity of the forced arbitration clause.Professional Mgt. Serv’s Grp., Inc. v. Zurich Am. Ins. Co., No. 8:14-cv-2180-T-36EAJ, 2015 WL 1310989, *3 (M.D. Fla. March 24, 2015). [Emphasis added to “clear and unmistakable evidence”.]
Forced arbitration clauses may be viewed with favor by five of the current Justices on the U.S. Supreme Court. But that is not the same thing as a holding that parties can deprive Federal Courts of jurisdiction just because one party or both parties insert a clause in their contract saying so, which was the effect of the holding in this case.
The first 3 people to send me an EMail that they would like a complimentary copy of my forthcoming book, “Lender Force-Placed Insurance Practices,” can have one if they are willing to follow these easy steps.
First, be a person whose mailing address and other contact information I can confirm, and send me an EMail with the words that I will be looking for in the subject line, requesting a complimentary copy of my book, “Lender Force-Placed Insurance Practices.” (All this will be explained further on April 5 and 6, 2015.)
Second, tell me that you agree to write a book review of my book that meets the publisher’s criteria. The publisher will be either a respected legal periodical or a respected law blog with nationwide distribution. Tell me that if you receive your complimentary book that you agree to write a book review of my book and that within 2 weeks after you receive the book, you will EMail attach your review of “Lender Force-Placed Insurance Practices” to the publisher I have selected. (No promises that the publisher will publish your book review of “Lender Force-Placed Insurance Practices,” but all we can do is our best whatever we do.)
Third, follow the instructions that will be posted on Insurance Claims and Issues Blog and on Insurance Claims and Bad Faith Law Blog on the Monday and Tuesday after Easter, April 5 and April 6, 2015, respectively. That’s it! Easy as 1-2-3.
“Lender Force-Placed Insurance Practices” is still in the process of publication, so right now the books are at the Book’s Publisher. I will be able to distribute the complimentary copies after publication, of course. Copies of my book should be available to me to distribute by April 5, so when the instructions are posted on April 5 and April 6, is about the time that I expect printed copies of my book to be on hand.
At the risk of repetition, it is as simple as that! Watch here for any further updates and watch for the easy-to-follow steps that will be posted on April 5 and April 6, 2015 in order to receive your complimentary copy of “Lender Force-Placed Insurance Practices”!
In May, 2013, a nonprofit corporation called “American Coalition Against Nuclear Iran” a/k/a “United Against Nuclear Iran” (“UANI”) wrote a public letter to Mr. Victor Restis alleging that Mr. Restis and his shipping company illegally participated in exporting “Iranian oil in violation of international sanctions.” Next, the Coalition united to write and disseminate press releases, and “postings on social media” including its Facebook page “and on UANI’s website,” all repeating the alleged libel that Mr. Restis and his shipping company participated in these illegal actions. Victor Restis v. American Coalition Against Nuclear Iran, Inc., No. 13 Civ 5032 (ER), Doc. 316, Opinion and Order filed March 23, 2015, at pp. 2-3 (S.D.N.Y.). Later in 2013, Mr. Restis and his company filed suit. Download Victor Restis v. American Coalition Against Nuclear Iran, Doc. 316, Filed 03.23.15 (S.D.N.Y. No. 13 Civ. 5032 (ER)).
In 2014, an unknown, unnamed agency of the Federal Government requested and received permission to intervene in the civil defamation case. The Federal Government demanded that the lawsuit had to be dismissed because of “the state secrets privilege.” (The agency is unknown because the Federal Judge did not name it on the ground of national security.)
The Federal Judge explained the states secret privilege after he had two ex parte meetings with unknown, unidentified Federal agents. As the Federal Judge explained the states secret privilege, it “is a common law evidentiary rule that allows the government to withhold information from discovery when disclosure would be inimical to national security.” Victor Restis v. American Coalition Against Nuclear Iran, Inc., No. 13 Civ 5032 (ER), Doc. 316, Opinion and Order filed March 23, 2015, at p. 4 (S.D.N.Y.). (The Federal Judge’s admission to the two ex parte meetings with the unidentified Federal agents is on page 7 of his Opinion and Order.)
The Federal Judge’s Opinion and Order in this civil case went beyond “a common law evidentiary rule that allows the government to withhold information from discovery,” however. In it, the Federal Judge ordered that the private plaintiffs’ defamation claim be dismissed because the state secrets privilege required dismissal here. The Federal Judge explained his ruling of dismissal on the basis that Federal Courts have ordered that claims must be dismissed where evidence as to claims or defenses necessarily carried an inherent and unacceptable risk of exposing state secrets. That this was the first dismissal of a civil case involving purely private litigants in which the Federal Government had demanded dismissal, did not change the view of this case in the Federal Judge’s eyes. “[T]he Court is convinced,” he wrote, “that further litigation of this action would impose an unjustifiable risk of disclosing state secrets.” This was so even if the case were tried in his chambers. Victor Restis v. American Coalition Against Nuclear Iran, Inc., No. 13 Civ 5032 (ER), Doc. 316, Opinion and Order filed March 23, 2015, at pp. 12-13 (S.D.N.Y.).
In sum, even if the plaintiffs could prove actionable defamation in this case without using the “state secrets” but only putting on non-privileged evidence available in the public domain, still this case presented an “unacceptable risk,” an “unjustifiable risk,” of exposing state secrets. Accordingly, the Federal Government’s demand had to be followed and this civil defamation case was dismissed.
Since the plaintiffs no longer have a pending prosecution of their defamation claim in suit at the present time, what if the plaintiffs pursue their claim against the defendants without a lawsuit. (The defendants in the civil defamation suit included not just the nonprofit corporation but also individuals associated both with that company and with the alleged defamation.) If the plaintiffs pursue their claim without their defamation lawsuit, the question becomes whether the defendants’ insurance companies, if any, can now deny coverage on the ground that to allow the claim to proceed against their policyholders would necessarily pose an “unacceptable risk” and an “unjustifiable risk” of exposing state secrets?
Another question arises, too, of course: Can defendants, whether operating through nonprofit corporations or otherwise, raise the shield of “state secrets” every time they allegedly libel or slander someone?
AIG has reportedly settled a shareholder class action lawsuit filed in Federal Court. Even though the Federal Government closed its alleged investigations into the subject, without filing any criminal or civil regulatory enforcement action, the AIG shareholders’ lawsuit involved allegations that AIG “had led investors to buy stock and debt they otherwise would not have bought, resulting in billions of dollars in losses.” The alleged failures of AIG were alleged failures “to disclose the risks [AIG] took on through its portfolio of credit default swaps and a securities lending program.” Reuters copyrighted report, “A.I.G. to Pay Nearly $1Billion to Settle Class-Action Suit Brought by Shareholders,” p. 16, Col. 1 (New York Times Nat’l ed., Sunday, March 22, 2015).
AIG’s monetary payment of indemnity in the settlement is a reported $970.5 Million. Id.
AIG will pay the plaintiffs’ attorneys $120.46 Million. See id.
Whether these numbers are “hard” or “soft,” including whether the settlement payments for indemnity in particular represent actual amounts to be paid to the plaintiffs in this settlement, are questions worth exploring further.
Mandatory arbitration provisions in contracts generally are a huge issue. USAA reportedly “uses mandatory arbitration clauses in many of its financial services contracts with service members.” Jessica Silver-Greenberg and Michael Corkery, “Failed by Law and Courts, Troops Come Home to Repossessions” p. A1, col. 1 (New York Times Nat’l ed., St. Patrick’s Day, 2015). If USAA and perhaps other insurance companies are using mandatory arbitration clauses in financial services contracts, their inclusion in the type of financial services contracts known as insurance contracts seems likely.
If mandatory arbitration provisions in insurance contracts become an accepted part of transacting the business of insurance, it must be remembered that class action waivers are ordinarily a part of mandatory arbitration provisionsin contracts in general.
St. Patrick’s Day, 2014 was the day a Federal Judge signed an order submitted by the parties to preliminarily approve their class action settlement of the plaintiffs’ claims arising from the defendants’ lender force-placed insurance practices. Fladell v. Wells Fargo Bank, N.A., Case No. 13-cv-60721, Dkt. No. 168 (S.D. Fla. Order filed March 17, 2014). Even before the Federal Judge signed the Order submitted by the parties in the Miami case, Federal Courts in other jurisdictions stayed or dismissed other pending lawsuits arising from the defendant bank’s alleged lender force-placed insurance practices. See “They Were Against It Before They Were For It: Fladell” in Three Parts, on Insurance Claims and Issues Blog, December 29, 2014; Insurance Claims and Bad Faith Law Blog, December 30, 2014; and on Insurance Claims and Issues Blog, December 31, 2014.
The class certified for settlement purposes in Fladell included many more people than the Florida, Arkansas, and Oklahoma plaintiffs before the Court in South Florida. It swept across the entire United States to includeanyone who had a claim against the bank and its co-defendants anywhere, in basic and simple terms. Fladell v. Wells Fargo Bank, N.A., Case No. 13-cv-60721, Dkt. No. 168, ¶ 4 (S.D. Fla. Order filed March 17, 2014). The claims alleged by the actual plaintiffs in the Fladell case included alleged claims for unjust enrichment, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing.
The Order preliminarily approving the Fladell settlement has been replaced with an order submitted by the parties for final approval, and by a judgment. However, even now, Fladell is not final. It is on appeal as of this writing.
Far from being dispositive in precluding other claims in other jurisdictions, Fladell may not be dispositive even in its own District. It has been held in the Southern District of Florida – as it has been held elsewhere – that the requirement of “predominance” of common issues in a purported nationwide class action is simply not satisfied in the face of a predominant need for an individualized inquiry “based upon the class member’s location.” Florida’s law on unjust enrichment in particular is different from many other States. Florida is not alone. Courts in many jurisdictions “have found variation in unjust enrichment laws to preclude a finding of predominance for multistate classes asserting unjust enrichment claims.” Karhu v. Vital Pharmaceuticals, Inc., No. 13-60768-CIV, 2014 WL 815253, *8-*9 (S.D. Fla. March 3, 2014)(holding that putative class action plaintiff did not meet burden of establishing that common issues predominate “with regard to the unjust enrichment claims of the Proposed Classes”; same holding with regard to Unfair Trade Practices claim), dismissed without prejudice by Order filed on March 27, 2014, notice of appeal filed on April 15, 2014 regarding denial of class certification and dismissal. (As of this writing, the appeal in Karhu is still pending.)
It is unclear why the Fladell plaintiffs’ unjust enrichment claims should be given any greater weight simply because the parties in Fladell stipulated that everyone else’s claims of any kind anywhere in the nation would be included in their settlement once a Court approved it. Certainly no reason appears why the Fladell plaintiffs’ claims for unjust enrichment should preclude the unjust enrichment claims of anyone else, nor why any of the claims alleged by the Fladell plaintiffs should preclude the claims of other people which Courts have held not to constitute a certifiable class action, such as deceptive and unfair trade practices laws, breach of the implied covenant of good faith and fair dealing, or alleged breach of fiduciary duties. Each and every one of these claims necessitates individualized determinations of facts which do not allow even common questions to predominate and so preclude not the claims, but preclude a certifiable class.
Although the Fladell class action settlement has been arguably reduced to a judgment, in the first place that judgment is not final; as noted earlier, it is on appeal.
Second, even if the Fladell class action settlement eventually involves a final judgment, class settlement certification can be collaterally attacked including on the ground of inadequate representation on common issues. See Hecht v. United Collection Bureau, Inc., 691 F.3d 218, 221-24 (2d Cir. 2012), and cases cited in it. See generally the outstanding article by Georgene Vairo, “Is the Class Action Really Dead? Is That Good or Bad for Class Members?” 64 Emory L.J. 477 (2014).
The issue seems to boil down to whether a Court lacks subject-matter jurisdiction. That the issue involved is at bottom a potential lack of jurisdiction isshown, for example, by the history of the Karhu case cited above. In that Southern District of Florida case, once the District Judge denied certification of the alleged nationwide class, the Judge was impelled to dismiss the entire case without prejudice because the Court lacked jurisdiction as a result of denying the nationwide class certification.
Attorneys in Fladell were thus justifiably concerned with the issue of jurisdiction because they provided a proposed order which the District Judge signed in Fladell that recited it would preclude all other claims filed anywhere in the United States because it barred all claims that were or supposedly could have been filed in Fladell. See Fladell v. Wells Fargo Bank, N.A., Case No. 13-cv-60721, Dkt. No. 168, ¶¶ 13 & 15 (S.D. Fla. Order filed March 17, 2014). The fact that these provisions were written into the preliminary class settlement certification order proposed in Fladell, which were carried forward when the class settlement was finally approved, reflect an understandable concern that the Fladell class action settlement may not apply anywhere outside of South Florida and, depending on the forthcoming resolution by the Eleventh Circuit Court of Appeals, may not apply anywhere including in South Florida.
The author’s forthcoming book on “Lender Force-Placed Insurance Practices” is scheduled for publication this Spring by the American Bar Association.
Applying settled law in a diversity case in which a legal issue had not yet been decided by the State Supreme Court, “the Court of Appeals has held that an insurance adjuster owes no legal duty to the insured,” and there is no basis on which to hold that the Indiana Supreme Court would disagree, says a Seventh Circuit panel. The Federal Appellate panel therefore followed the holdings of the Indiana Court of Appeals. Lodholtz v. York Risk Serv’s Grp., Inc., ___ F.3d ___, 2015 WL 542815 *1 (7th Cir. February 11, 2015).
Thus, unless and until determined to the contrary by a court of competent jurisdiction, as a matter of law in Indiana as in many jurisdictions an insurance adjuster owes no legal duty to the insured.
The rules which allow for secrecy in insurance and other cases are not inflexible. Although the presumption is that openness is the default rule, the presumption is rebuttable. The rules and the opportunities for rebuttal are explored in these articles posted on Legal Solutions Blog and linked here for your ease of reference:
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The State of New Jersey is the plaintiff in a lawsuit against Exxon which has been going on for 11 years. The suit is about environmental contamination caused by Exxon at more than one site in New Jersey. Exxon's liability has already been determined at trial. All that remains is to determine damages in the next trial phase. New Jersey has for years been seeking damages of $8.9 Billion or $8,900,000,000.00.
However Governor Christie reportedly derailed that process. His administration recently announced to the Trial Judge that the State of New Jersey and Exxon have reached a settlement for less than 3% of what New Jersey sought under its previous Governors who filed and maintained this successful lawsuit against Exxon: They settled for a reported $250,000,000.00.
The announced settlement amount of $250,000,000.00 looks suspiciously like the amount of a self-insured retention or deductible on one of Exxon's presumably many liability insurance policies. What role if any Exxon's insurance companies are playing and have played in this settlement is not yet reported.
With respect to "public comment" on this settlement, how does that work exactly? Can people who are not residents of New Jersey make comments, for example? And what exactly is involved with "court approval" of this settlement, from why is it required to how is the process performed? In short, "What's up, New Jersey?"
Please Read The Disclaimer. Copyright 2015 by Dennis J. Wall. All rights reserved.