Magazine article Dispute Resolution Journal

Class-Action Arbitration

Magazine article Dispute Resolution Journal

Class-Action Arbitration

Article excerpt

REINSURANCE

The 4th Circuit upheld the district court's classcertification order for claims brought by ERISA plans against their Belgian reinsurance contractor.

North American Indemnity (NAI), a Belgian company, entered into reinsurance contracts with 408 ERISA plans throughout the United States, all of which provided for arbitration of any dispute between the parties in connection with the contract. The plans (as intervenors in a suit originally brought by NAI against the third-party administrator for negligent intervention) claimed that NAI defaulted on the payment of claims under the reinsurance contracts.

The district court entered a "take nothing" judgment against NAI and then held a hearing to discuss the possibility of certifying a class for purposes of an arbitration against NAI. Although counsel for Pedcor Management's ERISA plan advised against certifying a class for arbitration, the court went ahead and did so, certifying a class consisting of all ERISA plans that bought reinsurance from NAI whose claims had not been paid. Pedcor appealed.

The 4th Circuit affirmed. The court noted the U.S. Supreme Court's holding in Green Tree Financial Corp. v. Bazzle, that when an arbitration clause does not expressly forbid a class action, and the arbitration clause language is broad enough to embraces the class certification issue, that issue is one for the arbitrator to decide. Moreover, the high court held that in Bazzle, the issue of class certification fell within the arbitrator's powers because that issue did not relate to the validity of the arbitration agreement, but to the nature of the proceeding entailed. …

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