EVERTEST NATIONAL INSURANCE CO. V. SUTTON et al.
(CIVIL ACTION NO.: 08-CV-4643 – April 7, 2009)
THIRD CIRCUIT DISMISSED APPEAL REGARDING THE ENFORCEABILITY OF AN ARBITRATION BOND BASED ON LACK OF JURISDICTION
Appellants appealed a decision from an order by the United States District Court for the District of New Jersey in which it required them to post security with an arbitration panel following an arbitration decision in which the reinsurer was required to pay 70 million dollars following the first phase of the arbitration. The underlying arbitration involved the respondent issuing insurance policies in the sub-prime automobile loan business. To secure its insurance policies, the respondent entered into a reinsurance agreement with the reinsurer, which is a non-party to the action. As part of the reinsurance contract, the appellants guaranteed the reinsurer’s obligation under the reinsurance agreement. The arbitration panel determined, in the first phase, that the respondent was entitled to $76,262,632.00 from the reinsurer. The arbitration panel also requested that the reinsurer moved to post the 70,000,000 as security "to cover part or all of any ultimate award that the panel may decide in Phase II of the arbitration."
When the reinsurer failed to post the security, respondent demanded that the appellants, as guarantors, were obligated to do so. When the appellants failed to do so, respondent commenced an action against appellants for breach of contract in failing to fulfill its obligations as guarantors. Respondent moved for partial summary judgment in this action seeking an Order requiring appellants to satisfy reinsurer’s obligations to post security as well as to dismiss any and all of appellants counterclaims. The District Court of New Jersey granted respondent’s request for summary judgment. It also dismissed all but one of the appellants’ counterclaims against the respondent.
The Third Circuit dismissed appellants’ appeal as an interlocutory appeal based on the fact of the one counterclaim still left to be determined by the District Court. Given that the parties agree that there still lies a legal issue left to be resolved, the Third Court concluded that it does not have jurisdiction to determine the merits of the parties’ arguments.
By Daniel W. Gerber and Jeffrey L. Kingsley