On October 18, 2011, the Miami-Dade Daily Business Review reports on the case of DeLeon v. Great American Assurance Co., where the Third District Court of Appeals held that a truck driver is entitled to attorney's fees after an attorney for his insurance carrier improperly questioned him during an examination under oath, thereby making judicial intervention necessary to resolve the claim.
The facts are as follows--the truck driver's tractor-trailer was stolen while parked at an interstate trucking company. When the police found the truck, it was damaged and nine tires were missing. The trucker filed a claim with his insurer. The insurer required the trucker to submit to an examination under oath ("EUO"), as part of its investigation. Like many insurance policies, the trucker's required him to provide the statement before initiating a lawsuit. However during the EUO, the bulk of the questioning pertained to the trucker's unrelated criminal conviction and who he was living with at the time. The trucker refused to answer these questions. In response, the insurance company attorney threatened the trucker that he was jeopardizing his insurance coverage and invited him to withdraw his claim in lieu of responding. The trucker walked out of the EUO before its conclusion and subsequently filed suit.
The appellate court found that it was necessary for the trucker to resort to litigation in order to resolve his claim. The appellate court reasoned that the insurance company "decided to use the usual policy provision requiring a sworn statement as a license to make unwarranted and intrusive inquiries into the personal life of any insured who has the termerity to make a claim against it." The appellate court's concurring opinion broadened the exhortation to all counsel practicing within the state and warned that it will not tolerate improper conduct by attorneys in the handling of disputes, whether inside or outside of the courtroom. This is yet another decision cautioning insurers and their attorneys on how insureds should be treated.
If you are interested in receiving a full copy of the DBR article or of the opinion, please feel free to contact me at miamipandi@comcast.net or motero@houckanderson.com.
Crewmember Claims Not Falling Within Arbitration Clause
In DOE v. PRINCESS CRUISE LINES, LTD., 23 Fla. L. Weekly Fed. C439a (11th Cir. September 23, 2011), the Eleventh Circuit held that the trial court did not err in holding that a crewmember's claims for false imprisonment, intentional infliction of emotional distress, spoliation of evidence, invasion of privacy, and fraudulent misrepresentation do not fall within scope of arbitration provision, where those claims contain allegations that do not arise from, do not relate to, and are not connected with parties' crew agreement or services performed by plaintiff as bar server. The Eleventh Circuit reasoned that such claims are not the immediate, foreseeable result of performance of parties' contractual duties or plaintiff's services as cruise line employee and are not within scope of arbitration clause, where claims involve factual allegations about how cruise line and its officials treated plaintiff after learning that she had been raped, including allegations that she was kept on the ship against her will, that she was prevented from getting medical attention off the ship, that her rape kit was destroyed in incinerator, and that her confidentiality as rape victim was intentionally violated.
However, the Eleventh Circuit also found that the district court erred by denying the cruise line's motion to compel arbitration on remaining five claims which fall under either Jones Act or general maritime law applicable to seamen, or Seaman's Wage Act, because those claims arise directly from plaintiff's undisputed status as a “seaman” employed by cruise line and the rights that she derives from that employment status, and as a result fall within scope of arbitration provision.
If you are interested in receiving a complete copy of this decision, please feel free to contact me at Houck Anderson at mailto:mmotero@houckanderson.comor miamipandi@comcast.net.
The Key to Arbitration Clause Provisions is Careful Handling
Businesses often insert an arbitration clause in a contract based on the expectations that arbitration is cheaper and faster than a lawsuit. Unfortunately, a poorly drafted arbitration clause can lead to a messy legal dispute that is neither cheaper nor faster. Transaction-oriented lawyers have their strengths, and litigation is generally not one of them. As a result, they may not anticipate all of the ramifications of the provisions they insert in an arbitration clause. Sometimes an attorney borrows from a well-crafted contract that is ill-suited to the needs of the current client. In a sincere but misguided effort to cover all bases, an attorney may insert language that is overly expansive, overly restrictive or just plain impractical. This is particularly true in maritime matters.
In my years as a claims executive ultimately paying for arbitration proceedings, a lawyer appearing before arbitrators and advising clients on contracts that other lawyers have drafted, I have learned to analyze arbitration clauses in the same way that a coach may watch videotapes of games. Because there are various nuances to drafting arbitration clauses, it is good to highlight the most important questions when reviewing a proposed contract.
Set Goals
- What do you want to accomplish? One reason for arbitration is to achieve a private resolution out of the eye of the public and competitors. The other main reasons are to avoid costly trials and drawn-out disputes.
- What will be arbitrated and what will not? When asked, courts generally rule broadly regarding what is covered by arbitration. All issues in a construction contract should be--but tort claims, probably not.
- Are provisions for arbitration consistent and harmonious with other provisions of the contract? If not, resolving conflicts and confusion within the document may protract and complicate the proceedings.
- Is the arbitration nonbinding? If the answer is yes, then clearly, somebody was not thinking when writing the contract. If an arbitration ruling cannot be enforced, the two sides will still end up in court after going through a time-consuming and potentially expensive set of hearings or reluctantly unsatisfactorily reach a result that is less then satisfactory.
Choose Players
- How many arbitrators? Base the number on the size of the contract. If it is a simple dispute, one arbitrator will do. If the agreement has complex issues and involves considerable money, you may want a panel of three. Remember that costs rise with the number of arbitrators.
- Who chooses the arbitrators? Independent groups such as the American Arbitration Association, the Judicial Arbitration & Mediation Services and the Society of Maritime Arbitrators offer qualified individuals.
- Who pays the arbitrators? The cost could be split between the two sides or paid by the loser in the dispute.
- What are the roles of the arbitrators? A contract may say that each side picks one arbitrator and those two pick the third who manages the arbitration. If the clause fails to state that the first two arbitrators should act in a neutral fashion, they may be advocates and engage in a tug-of-war over the third to gain a 2-to-1 victory. This is less than ideal.
- Can there be independent communication with the arbitrators? Yes, when the advocate arbitrators are not neutral. The two sides argue the case before the arbitration panel and separately talk to their arbitrator--not a good situation.
Keep Score
- Will attorneys fees be awarded for the prevailing party? Not unless there is a provision for it in the contract.
- What type of award may be made? Both sides should know ahead of time what they might gain or lose and why. There are multiple types of awards: standard (amount and breakdown), reasoned (arbitrator gives reasons) and findings of fact and conclusions of law (arbitrator makes findings). The more complicated and detailed the award, the more expensive. The type of award should be specified in the contract.
- Does the winner take all? Use the legal standard of preponderance of the evidence in weighing how much to award to each side.
- What rules apply? In the contract, pick rules of arbitration, either AAA, SMA or some other rules designated specifically for arbitration.
In summary, while company owners and managers expect attorneys to know how to draft every page of a contract--reality can fall short of expectations. A business should choose an attorney that is experienced in arbitration and contract drafting in the particular area of law to undertake this very important task. Undertaking this step by step analysis before signing on the dotted line is the difference between signing a contract and crossing fingers that all will ultimately come out ok and signing a contract, knowing that the language chosen is well suited for the business and risks that comes with that business.
If you are interested in contact me, please feel free to do so at miamipandi@comcast.net or motero@houckanderson.com.
Glut of Ships Bad News for Supertanker Owners
Bloomberg News reports that owners of supertankers, losing money for a sixth consecutive quarter, will probably idle the most ships in more than two decades, as they contend with a glut that drove charter rates to the lowest in at least fourteen years. The combination of too many ships and slowing demand growth for oil means that about six percent of the fleet will be anchored in a year, according to Bloomberg's survey of eight brokers and analysts. However that may not be enough to end the slump. This is because it is reported that freight agreements, traded by brokers and used to bet on transportation costs, anticipate rates no higher than $13,819 a day through 2013.
While owners can cut operating costs to as little as $2,000 a day from $12,000 by anchoring ships, it also means no income. This was a statement made by Andreas Sohmen-Pao, CEO of the oil and gas shipping unit of BW Group, which is idling three ships of its own. The global fleet of VLCCs expanded about 9 percent to 570 ships in the past two years, the most since 1983, Clarkson data shows. Owners ordered the greatest number of new ships since the 1970s between 2006 and 2008, when charter rates surged to as much as $289,000. Demand for oil tankers will match fleet capacity by the Northern Hemisphere's next winter, lifting charter rates, stated Peter Evensen, the CEO of Teekay in an interview in London on October 6th.
If you are interested in contacting me,you may reach me at miamipandi@comcast.net or at Houck Anderson at motero@houckanderson.com.