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Disney application for arbitration in ‘pink slime’ case rejected

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The Walt Disney Co. lost a ruling Thursday in connection with arbitration of its settlement with an American International Group Inc. unit in the so-called “pink slime” case.

Burbank, California-based Walt Disney paid $177 million, in addition to insurance recoveries, to settle the “pink slime” defamation case against its ABC network by Beef Products Inc. 

Dakota Dunes, South Dakota-based BPI sued American Broadcasting Cos. in 2012 for $5.7 billion, saying ABC and reporter Jim Avila had defamed the company by using the “pink slime” tag and by making more errors and omissions in a series of 2016 reports.

Last year, AIG sued Walt Disney Co. to avoid having to reimburse the parent of ABC News for part of the settlement. 

In the latest development in the case, a Toronto-judge ruled in AIG’s favor that a dispute as to whether the insurer is obligated to contribute $15 million towards the settlement can be resolved through an ad hoc arbitration process under the English Arbitration Act 1996.

Walt Disney had sought for the arbitration to be conducted by offices of London-based JAMS, a private provider of mediation and arbitration services, in Toronto.

JAMS is also arbitrating the issue under a different policy in California, and presumably would have consolidated the proceedings. The U.S. District Court in Los Angeles ruled in Disney’s favor in The Walt Disney Co. v. AIG Specialty Insurance Co. that arbitration by JAMS’ Los Angeles office could proceed.  With the Toronto judge’s ruling, AIG now has two opportunities to prevail in the case.

“There are no terms regarding the appointment of a particular institution (such as JAMS) to administer the arbitration,” said the ruling.

“Disney submits that the court’s intervention is required to break the impasse between the parties and permit the arbitral proceedings to commence. (AIG unit Chartis Excess Ltd.) argues that there is no impasse. Rather, Disney has not complied with the procedure agreed to by the parties.”

“The parties have agreement on the appointment procedure as set out in the policy,” said the ruling. “I find that Disney has not followed this procedure.

“There is no proper request in writing for arbitration to Chartis and Disney has not appointed its arbitrator. I decline to appoint JAMS or otherwise interfere win the appointment procedures as set out in the Act which was agreed to by the parties.”

An AIG spokesperson could not immediately be reached for comment.