Arbitration: Supreme Court Asks Solicitor General for FAA Advice in Making a Cert Decision (Web)
May 17, 2010
The Court, according to a Scotusblog report this morning, has asked the Solicitor General “to offer the government’s views on whether the Federal Arbitration Act is a federal law that seeks to regulate insurance, and thus overrides any conflicting state law on insurance regulation.”
The case is Louisiana Safety Association of Timbermen--Self Insurers Fund v. Lloyd's, No. 09-945.
It’s an FAA jurisidiction question with international treaty implications--specifically concerning FAA Chapter 2 (9. U.S.C. 201 et seq.) on the Convention on the Recognition and Enforcement Of Foreign Arbitral Awards, better known as the New York Convention.
The Solicitor General’s brief, which Scotusblog reports has no deadline attached to the request, will examine whether the FAA is subject to the McCarran Ferguson Act of 1945.
The case went up to the Fifth U.S. Circuit Court of Appeals, which is based in New Orleans, as an interlocutory appeal. A federal district court had denied a motion to compel arbitration of a contract dispute among three insurers.
The full Fifth Circuit examined whether McCarran–Ferguson authorizes state law to “reverse-preempt” the New York Convention, or its implementing legislation.
In a 15-3 en banc decision in November, the Fifth Circuit concluded that it doesn’t, and vacated the district court’s order denying the motion to compel, and remand for further proceedings.
Louisiana contends that it was regulating the business of insurance, which McCarran-Ferguson permits, in its a law specifying the state’s jurisdiction over insurance contracts. Louisiana state courts had interpreted the law to mean that some arbitration agreements were unenforceable.
The McCarran-Ferguson Act states, “No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance. . . .” 15 U.S.C. § 1012(b). The point of the act is to bar federal insurance regulation without specificity, leaving insurance regulation mostly to the states.
The McCarran-Ferguson Act can be found here.
The Supreme Court’s page on the case here.
The Fifth Circuit opinion in the case is here.
Scotusblog has the cert petition here.
--Russ Bleemer, Editor, Alternatives