Patton Boggs Reinsurance Newsletter- March 2013: New York Federal Court Denies Preliminary Injunction on Alleged Use of Confidential Information

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Utica Mut. Ins. Co. v. INA Reinsurance Co., No. 6:12-CV-00194 (DNH/TWD) (N.D.N.Y. Dec. 14, 2012).

In a case arising out of alleged breaches of confidentiality agreements and orders, a New York federal court has accepted the recommendations of a magistrate judge and has denied a cedent's motion for a preliminary injunction to prevent the further disclosure of confidential information in a pending arbitration. The cedent and the reinsurer entered into a confidentiality agreement for an audit. Subsequent to the audit an arbitration was commenced and the parties entered into further confidentiality agreements as part of the arbitration process. A dispute arose about the completeness of the earlier audit responses and the cedent produced additional documents, including e-mails relevant to the underlying claims. Counsel for the reinsurer printed out the e-mails and reviewed them.

Another reinsurer also reinsured the cedent for the same underlying risks. A dispute arose between the cedent and the other reinsurer and a lawsuit alleging breach of the reinsurance certificates was commenced. The same law firm that represented the reinsurer in this case also represented the other reinsurer. The same lawyer was involved in both cases for both reinsurers. Shortly after receiving the complaint in the other reinsurer's action, the lawyer discussed certain e-mails obtained in the audit and arbitration on behalf of the reinsurer with those working on the other reinsurer's case.

The cedent claimed that disclosure of those e-mails to the other attorneys in the same firm violated the various confidentiality agreements in the arbitration and audit. In denying the preliminary injunction, the court focused on the requirements for a preliminary injunction and found that there was no irreparable harm. Although it was not required, the court did provide its views on the merits of the claim and found that the cedent had shown a likelihood of success on the merits that the disclosures breached the confidentiality agreements.