Archive for September 2010

Losing Party Misfires in Attempt to Show Arbitrator’s Bias

September 17, 2010

After receiving a favorable arbitration ruling, Midwest Generation EME moved to confirm its award against Continuum Chemical Corporation, which countered with a petition to vacate the award based on the “evident partiality” of one of the arbitrators.  Continuum alleged that the arbitrator, Stanley Sklar, intentionally concealed “a system of referrals and ongoing economic and professional business relationships” between himself, his former construction law practice group at Bell, Boyd & Lloyd, and the opposing counsel’s construction law practice group at Schiff Hardin LLP.

Continuum requested that it be allowed to take limited discovery of Mr. Sklar based on his affiliation with the lawyers at Schiff Hardin, contending that he violated the AAA Code of Ethics.  According to the code, Mr. Sklar has a continuing duty to disclose any circumstance or relationship likely to give rise to “justifiable doubt” as to the arbitrator’s impartiality and which might “reasonably affect impartiality or lack of independence.”  Courts have been reluctant, however, to allow post-arbitration discovery as it is often a tactic employed by losing parties who want another bite at the apple.  Thus, most jurisdictions allow vacation of arbitration awards only when there is clear evidence of arbitral impropriety or bias.

In order to support its claim of impropriety, Continuum points to the common professional involvements between Mr. Sklar and the Schiff Hardin attorneys, such as concurrent membership in the same professional associations, simultaneous participation in professional seminars, boards and committees, and collaborative authorship of books on construction law.

In denying Continuum’s Motion for Leave to Take Limited Discovery, United States Magistrate Judge Jeffrey Cole held that there was no evidence that would warrant a departure from the deeply held sentiment that post-arbitration discovery should be allowed only in exceptional circumstances.  The court found that Mr. Sklar’s participation in the above-mentioned activities did not trigger his obligation to disclose his “relationship” with the Schiff Hardin attorneys.  Given the intimacy of the group of specialists and professionals from which arbitrators are chosen and how common it is for construction lawyers to appear as arbitrators, the court refused to find that the claimed evidence was more than mere speculation, concluding that the allegations failed to support a finding that there was a reasonable probability that pecuniary interests and business referrals existed between Mr. Sklar and the Schiff Hardin attorneys.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only.  The purpose of the Blog is not to provide specific legal advice on any particular matter.  By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm.  This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.  Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Seventh Circuit Fills Gap in Case Law Regarding Settlement Apportionment in Insurance Coverage Claims

September 16, 2010

On July 1, 2010, in the case of Santa’s Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339 (7th Cir. 2010), the U.S. Court of Appeals for the Seventh Circuit rendered a decision establishing Illinois precedent on allocation of insurers’ liability based on covered and uncovered claims in cases in which it is possible that none of the settlement was attributable to the dismissal of claims for damage covered by the insurer’s policy.  The court held that “the proper inquiry is whether the claims were not even potentially covered by the insurance policy.”  The Seventh Circuit predicted that Illinois courts would determine whether a “primary focus” of the settled claims was a potentially covered loss, the burden of which is on the insured.  On the other hand, the court found that if the insurer can establish that the claims were not even potentially covered, then the insurer would not be required to reimburse the insured for the settlement.

In Santa’s Best, the insured was sued for allegedly copying another company’s Christmas light packaging and using false and deceptive advertising language.  Following this lawsuit, the insureds requested that their insurer, St. Paul Fire, provide a defense.  St. Paul Fire argued that there was no coverage and subsequently filed a counterclaim for declaratory judgment.  The U.S. district court held that the insurer had a duty to defend, causing St. Paul Fire to tender substantial funds to the insured for its litigation expenses.  The court agreed, however, with St. Paul Fire in that it was not obliged to cover the insured’s contract indemnitee’s defense costs or to reimburse the insured for settlement funds that resolved the underlying action.  The court also denied the insured’s request for prejudgment interest.  Each party appealed.

On appeal, the Seventh Circuit reversed the district court in part, finding that based on the substance of the allegations of the underlying complaint against the insured, the suit included at least one covered claim.  It agreed with the district court that the insurer had a duty to defend but failed to meet its burden to prove that certain exclusions applied.  The court also agreed that the district court properly refused to require St. Paul Fire to reimburse the insured for its third party indemnitee’s expenses, but remanded for further proceedings to determine whether the primary focus of the underlying action was a covered loss, and to resolve whether St. Paul Fire owed prejudgment interest on litigation expenses and reimbursement for the settlement expenses.  To access the Seventh Circuit’s opinion, please visit:

http://www.ca7.uscourts.gov/tmp/1C0SC2UV.pdf

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only.  The purpose of the Blog is not to provide specific legal advice on any particular matter.  By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm.  This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.  Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.

Pulte Homes and Pulte Mortgage Face Consumer Fraud Charges from the Arizona Attorney General

September 7, 2010

Pulte Home Corp., the nation’s largest homebuilder, is facing consumer fraud charges brought by Arizona Attorney General, Terry Goddard.  Goddard claims, amongst other things, that Pulte defrauds consumers by informing them that they have “pre-qualified” for financing at a certain rate but later offers them a much higher rate.  One customer was promised a 7% interest rate during the pre-qualification process but was later offered a 13.875% interest rate.  Subsequently the customer was forced to forfeit her earnest deposit because she “could not afford the loan which was offered.”

Customers are promised a full refund of all but $500 of their earnest money if they supply Pulte Home with a loan disapproval notice before the loan application deadline expires.  However, in numerous instances, Pulte Mortgage did not give loan disapproval notices to customers before the deadline had passed and denied a refund to those customers.

Goddard also claims that Pulte targets Spanish-speaking customers through websites and advertisements but does not provide translators, does not provide contracts in Spanish, and does not provide the same disclosures, including the “risks” of its loans, that are available to English speakers.

Pulte sales representatives sell potential customers on the promise of “purchase price reductions, money towards upgrades or closing costs and interest rate buy down.”  These promises paired with comparable loan terms led many consumers to choose Pulte Mortgage over other lenders, only to discover later that the loan products were substantially different from and more expensive than those initially offered by Pulte Homes sales representatives during the oral “pre-qualification” process.

Goddard is seeking restitution, an injunction and civil penalties for consumer fraud against Pulte Home & Pulte Mortgage.

This Blog is made available by Laurie & Brennan, LLP for general educational purposes only.  The purpose of the Blog is not to provide specific legal advice on any particular matter.  By using this Blog site you understand that there is no attorney client relationship between you and this firm and the authors or members of the firm.  This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.  Under rules applicable to the professional conduct of attorneys in various jurisdictions, the material on this Blog may be considered advertising material.


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