US Court of Appeals decides Artex vs. Shivkov dispute must be settled by individual arbitration
The US Court of Appeals for the Ninth Circuit has decided in favour of Artex Risk Solutions and TSA Holdings, formerly Tribeca Strategic Advisors in an appeal of the case Shivkov vs Artex Risk Solutions.
The panel affirmed the District of Arizona’s order compelling individual arbitration and dismissed a putative class action alleging violations of the Racketeer Influenced and Corrupt organizations Act and Arizona law. It concluded the matter must be settled by individual arbitration.
Some 81 individuals and related business entities had entered into agreements with Artex Risk Solutions and TSA Holdings, formerly Tribeca Strategic Advisors, that saw Artex and Tribeca form and manage captive insurance companies on their behalf. The plaintiffs paid insurance premiums into the captives and claimed the payments as tax deductible business expenses without recognising them as taxable income. The IRS then audited the plaintiffs and issued delinquency notices, and sought to impose penalties.
After settling with the IRS, plaintiffs brought a putative class action suit against Artex and Tribeca, alleging the captives were illegal and abusive tax shelters, and that Artex and Tribeca had failed to inform or advise them.
However, the agreements between the defendants and the plaintiffs contained an arbitration clause and the court therefore affirmed the earlier order compelling arbitration. The agreements were silent on the issue of class arbitration, and therefore did not permit class arbitration, the court concluded. The panel dismissed the argument that the agreements between the parties were unenforceable.
The plaintiffs argued that Artex and Tribeca had breached a fiduciary duty to fully explain the arbitration clause, but the court found no state law authority requiring the defendants to do so.
“Although plaintiffs assert that Artex and Tribeca breached a fiduciary duty to point out and fully explain an arbitration clause, they identify no state law authority recognising such a duty,” the court said.
