Blue Cross Blue Shield of Massachusetts, Inc. v. BCS Insurance
2011 U.S. App. LEXIS 25304
7th Cir.2011Background
- BCS Insurance Co. is a captive insurer owned by Blue Cross Blue Shield plans; plans are residual claimants.
- Consolidated arbitration was sought by twelve plans who purchased E&O insurance from BCS and demanded defense/indemnity.
- Arbitrators appointed by plans and BCS could not agree on a third; plans sought judicial appointment under §5 of the FAA.
- BCS cross-petitioned to de-consolidate arbitration, arguing Stolt-Nielsen governs consolidation and requires court ruling before arbitration.
- District Judge Lefkow denied the cross-petition; BCS appealed (No. 11-2343) and then sought a second appeal (No. 11-2757) after district ruling.
- The court dismissed the interlocutory appeal for lack of jurisdiction and affirmed the district court’s final judgment on appeal No. 11-2757.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the interlocutory appeal is jurisdictionally proper | BCS contends §16(a)(1)(B) allows appeal from denial to order arbitration proceed. | Plans argue mid-arbitration review is improper; appeal improper because arbitration was ongoing. | Interlocutory appeal dismissed for lack of jurisdiction. |
| Whether the district court properly appointed a third arbitrator during appeal | BCS sought to de-consolidate; district court may appoint third arbitrator pending appeal. | Arbitrators may resolve consolidation questions; court review not required pre-arbitration. | District court was entitled to appoint a third arbitrator; no mid-arbitration review required. |
| Whether consolidation requires express assent under Stolt-Nielsen before arbitration | Stolt-Nielsen supersedes Wausau and requires court resolution before consolidation. | Arbitrators may resolve consolidation; Stolt-Nielsen does not preclude arbitrators from deciding. | Arbitrators may decide consolidation; no top-down court ruling required before arbitration. |
Key Cases Cited
- Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010) (class arbitration requires contractual authorization)
- Employers Insurance Co. of Wausau v. Century Indemnity Co., 443 F.3d 573 (7th Cir. 2006) (arbitrators may resolve consolidation questions; review after award)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (interlocutory review boundaries; gateway questions)
- Omni Tech Corp. v. MPC Solutions Sales, LLC, 432 F.3d 797 (7th Cir. 2005) (labeling as arbitration does not alter nature of arbitration)
- Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (U.S. 2003) (arbitrators may decide class arbitration; split on who decides)
- Apostol v. Gallion, 870 F.2d 1335 (7th Cir. 1989) (certification and consolidation principles in arbitration)
- Trustmark Insurance Co. v. John Hancock Life Insurance Co., 631 F.3d 869 (7th Cir. 2011) (avoid mid-arbitration judicial review; timing matters)
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (U.S. 2009) (FAA interpretation and review standards)
- AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (U.S. 1986) (pre-arbitration questions and arbitration existence)
- Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (U.S. 1974) (notice and representation in class proceedings)