TPG Team Prevails at Third Circuit in Insurance Bid Rigging Case
On August 11, 2014, the Third Circuit released its Opinion affirming the District Court for the Eastern District of Pennsylvania’s February 2013 denial of Coventry First, LLC’s motion to dismiss or compel arbitration, in the secondary insurance market class-action case Griswold v. Coventry First, LLC, et al. The plaintiff and the alleged plaintiff class are represented by counsel including TPG. The case will now return to the district court to proceed with discovery and class certification.
In October 2010, TPG filed on behalf of Lincoln Griswold a class action lawsuit against in Pennsylvania state court against Coventry First LLC and other defendants. Griswold v. Coventry First, LLC, et al., U.S. District Court, Eastern District of Pennsylvania, Case No. 2:10-cv-5964. Griswold’s Complaint alleges that a bid-rigging scheme resulted in his receiving substantially less than the fair market value of an insurance policy that he sold to Coventry in March 2008. Coventry First LLC (Fort Washington, PA) is an intermediary in the secondary market for life insurance.
After removal to federal court, the defendants filed a motion to dismiss or compel arbitration in the Eastern District of Pennsylvania. Judge C. Darnell Jones II heard argument in June 2011. On February 27, 2013, Judge Jones denied Coventry’s motion to dismiss, ruling that the plaintiffs have standing, and the plaintiffs were not signatories to the agreement containing the arbitration clause. Judge Jones further ruled that sufficient facts were pled to establish potential racketeering activity, to be explored in discovery.
Coventry appealed the decision to the Third Circuit Court of Appeals. On August 11, 2014, the Third Circuit issued a decision affirming the District Court’s ruling in its entirety. Griswold v. Coventry, 762 F.3d 264 (3d Cir. 2014). Recognizing that it had appellate jurisdiction over the District Court’s denial of the motion to compel arbitration pursuant to 28 U.S.C. § 2392 and the Federal Arbitration Act, the Third Circuit first considered whether it should exercise pendent jurisdiction to adjudicate the standing issue after it was already decided by the District Court. It found that because the issues of standing were discrete from the arbitration question, it would not exercise pendent appellate jurisdiction over the standing issue. Turning to the denial of the motion to compel arbitration, the Third Circuit agreed with the District Court and held that Coventry could not compel arbitration against the Plaintiffs, who never consented to the purchase agreement at issue.