Non-Party Notice of Appeal in Reinsurance Dispute Results in an Award of Attorney Fees

When you are not a party to a legal proceeding, but nevertheless file a notice of appeal purportedly on behalf of a party after a settlement, the likelihood of a positive outcome is very low.  Such was the case recently before a New York federal court.  The result:  an award of attorney fees.

In Certain Underwriting Members of Lloyds of London v. Insurance Company of the Americas, Nos. 16-cv-323, 16-cv-374 (VSB), 2019 U.S. Dist. LEXIS 165702 (S.D.N.Y. Sep. 26, 2019), a reinsurance arbitration resulted in an award in favor of the cedent.  The reinsurers sought to vacate the award.  Ultimately, the cedent went into liquidation and, after the award was vacated because of the conduct of one of the arbitrators, the parties settled after the Second Circuit remanded the case back to the district court (see our Blog Post). Yet that was not the end of the story.

The non-party attempted to intervene in the motions to vacate the award and the district court denied the application.  The non-party claimed that it was the parent company of the insolvent cedent and that it was the real party in interest.  Not to be deterred, the non-party also sought to intervene in the liquidation proceeding.  That too was rejected and costs and attorney fees were awarded to the state.   So with that in mind, even though the parties settled after remand, the non-party filed a notice of appeal purportedly on behalf of the insolvent cedent.  The real parties objected strenuously and made filings with the court.  Ultimately, the non-party withdrew its notice of appeal.  The reinsurers, however, sought attorney fees for having to respond to the non-party’s notice of appeal.

In granting the motion, the court found the fee award appropriate because of the false representations, feeble justification for filing the notice of appeal and knowingly misrepresenting that the notice of appeal was filed on behalf of the insolvent cedent.  The court found that the actions taken by the non-party improperly hindered the resolution of the matter and unreasonably and vexatiously multiplied the proceedings.

In calculating the attorney fee award, the court accepted the hourly rate charged by the reinsurer’s counsel, but cut some of the hours expended to what the court thought was more reasonable given the one page notice of appeal and the four page letter to the court.  Counsel for the non-party was ordered to reimburse the reinsurers for the awarded amount of fees incurred in responding to the frivolous notice of appeal.

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