2005
WL 1714997
For
opinion see 74 USLW 3013
Briefs
and Other Related Documents
Supreme
Court of the United States.
Wallace
R. BENNETT, Petitioner,
v.
THE
SOCIETY OF LLOYD'S, Respondent.
No.
04-1731.
July
20, 2005.
On
Petition for a Writ of Certiorari to the United States Court of Appeals for the
Tenth Circuit
Brief
in Opposition
Michael
N. Zundel, Counsel of Record, James A. Boevers, Prince, Yeates And Geldzahler,
Attorneys for Respondent, 175 East 400 South, Suite 900, Salt Lake City, UT
84111, (801) 524-1000.
QUESTIONS
PRESENTED
Did
the Tenth Circuit correctly determine that there is complete diversity of
citizenship between the plaintiff in the district court (respondent here), The
Society of Lloyd's ("Lloyd's"), an English corporation, and the
defendants in the district court [including petitioner here, Mr. Bennett
("Bennett")], who are all individual residents of the State of Utah?
Did
the Tenth Circuit correctly determine that an assignment of claims against Bennett
from one English corporation, Equitas Reinsurance Limited
("Equitas"), to another English corporation, Lloyd's, was not a
collusive assignment under 28 U.S.C. § 1359, for purposes of creating
diversity of citizenship subject matter jurisdiction in the district court?
Did
the Tenth Circuit, in this diversity action, correctly interpret Utah law in
determining that Lloyd's English Judgment against Bennett is enforceable under
principles of comity?
PARTIES
BELOW AND CORPORATE DISCLOSURE STATEMENT
In
addition to Lloyd's and Bennett, the parties in the Tenth Circuit included the
following defendants-appellants: Richard A. Reinhart, Grant R. Caldwell, David
L. Gillette, James R. Kruse, Edward W. Muir, Kent B. Petersen, Calvin P.
Gaddis, [FN1] Stephen M. Harmsen and Kelly C. Harmsen. Lloyd's has no parent
corporation and there is no publicly held company owning 10% or more of its
stock.
FN1. During the pendency of
the appeals in the Tenth Circuit, Lloyd's reached a settlement with Mr. Gaddis
resulting in the dismissal of his appeal.
TABLE
OF CONTENTS
Questions
Presented ... i
Parties
Below and Corporate Disclosure Statement ... ii
Table
of Contents ... iii
Table
of Cited Authorities ... v
Table
of Appendices ... xi
Statement
of the Case ... 1
Reasons
for Denying the Petition ... 8
I.
The Tenth Circuit Correctly Determined that there was Complete Diversity of
Citizenship Between Lloyd's, an English Corporation, and the Defendants in the
District Court, Who are All Individual Residents of the State of Utah ... 8
A.
Background ... 8
B.
As an English Corporation, Lloyd's is a Citizen of England ... 9
II.
The Tenth Circuit Correctly Determined that an Assignment of Claims from One
English Corporation, Equitas, to Another English Corporation, Lloyd's, was not
a Collusive Assignment for Purposes of Creating Diversity of Citizenship ... 13
A.
The Assignment at Issue is Equitas' Assignment to Lloyd's of Equitas' Claim
Against Bennett Based on Bennett's Failure to Pay the Equitas Premium ... 13
B.
Because Equitas is Also an English Corporation, Its Assignment to Lloyd's Was
Not Collusive ... 15
III.
The Other Issues the Petition Raises are Issues of Utah Law Only ... 16
IV.
The Tenth Circuit Correctly Interpreted Utah Law in Determining that Lloyd's
English Judgment Against Bennett is Enforceable Under Principles of Comity ...
18
Conclusion
... 23
TABLE
OF CITED AUTHORITIES
FEDERAL
CASES
Amoco
Rocmount Co. v. Anschutz Corp., 7 F.3d 909 (10th Cir. 1993), cert. den., 510
U.S. 1112 (1994) ... 13
Bank
of the United States v. Deveaux, 5 Cranch (9 U.S.) 61, 3 L. Ed. 38 (1809) ...
11
Hilton
v. Guyot, 159 U.S. 113 (1895) ... 19, 20
Indiana
Gas Co. v. Home Ins. Co., 141 F.3d 314 (7th Cir. 1998) ... 12
Marshall
v. Baltimore & Ohio Railroad Co., 16 How. (57 U.S.) 314, 14 L. Ed. 953
(1853) ... 11
National
S.S. Co. v. Tugman, 106 U.S. 118 (1882) ... 10
Richards
v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998), cert. den., 525 U.S. 943
(1998) ... 22
Riley
v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir. 1992), cert.
den., 506 U.S. 1021 (1992) ... 22
Society
of Lloyd's v. Ashenden, 233 F.3d 473 (7th Cir. 2000) ... 18, 19, 21
Society
of Lloyd's v. Bila, Civil No. A-03-CA-9 (W.D. Tex. May 21, 2003) ... 13
Society
of Lloyd's v. Blackwell, 127 Fed. Appx. 961 (9th Cir. April 13, 2005) ... 18
Society
of Lloyd's v. Borgers, 127 Fed. Appx. 959 (9th Cir. April 13, 2005) ... 18
Society
of Lloyd's v. Byrens, Civil No. 02CV449 (S.D. Cal. May 29, 2003) ... 19
Society
of Lloyd's v. Davies, 107 Fed. Appx. 887 (11th Cir. May 21, 2004) ... 18
Society
of Lloyd's v. Edelman, 03 Civ. 4921 (WHP) (S.D.N.Y. March 21, 2005) ... 19
Society
of Lloyds v. Evnen, No. 8:02CV 118 (D. Neb. April 28, 2003) ... 19
Society
of Lloyd's v. Fuerst, Case No. 04-2964 (8th Cir. July 11, 2005) ... 19
Society
of Lloyd's v. Hudson, 276 E Supp. 2d 1110 (D. Nev. 2003) ... 19
Society
of Lloyd's v. Mullin, 96 Fed. Appx. 100 (3rd Cir. May 5, 2004) ... 18
Society
of Lloyd's v. Reinhart, 402 F.3d 982 (10th Cir. 2005) ... passim
Society
of Lloyd's v. Rosenberg, No. 02-1195 (E.D. Pa. August 13, 2002) ... 19
Society
of Lloyd's v. Shields, 118 Fed. Appx. 12 (November 17, 2004) ... 18
Society
of Lloyd's v. Siemon-Netto, Civil Action No. 03-1524 (JR) (D.D.C. 2004) ... 19
Society
of Lloyd's v. Sommer, Civil Action No. 02-RB-1959 (OES) (D. Colo. September 9,
2004) ... 13
Society
of Lloyd's v. Turner, 303 F.3d 325 (5th Cir. 2002) ... 8, 18, 19
Steele
v. Hartford Fire Ins. Co., 788 F.2d 441 (7th Cir. 1986) ... 15
Torres
v. Southern Peru Copper Corp., 113 F.3d 540 (5th Cir. 1997) ... 10, 11
Western
Farm Credit Bank v. Hamukua Sugar Co., Inc., 841 F. Supp. 976 (D. Hawaii 1994),
aff'd, 87 F.3d 1326 (9th Cir. 1996) ... 15
STATE
CASES
Mori
v. Mori, 931 P.2d 854 (Utah 1997) ... 19
Rocky
Mtn. Claim Staking v. Frandsen, 884 P.2d 1299 (Utah App. 1994), cert. den., 899
P.2d 1231 (Utah 1995) ... 20
Society
of Lloyd's v. Collins, Case No. 00-713-CA-22 (19th Cir. Ct., Indian River
County, Florida, June 4, 2003) aff'd, Case No. 4D03-2674 (Fla. 4th Dist. Ct.
App. May 19, 2004) ... 19
ENGLISH
CASES
Society
of Lloyd's v. Fraser & Others (C.A. July 31, 1998) ... 7, 8
Society
of Lloyd's v. Jaffray, 2000 WL 1629463 (High Court of Justice November 2,
2000), aff'd, 2002 WL 1654876 (C.A. July 26, 2002) ... 7, 22
Society
of Lloyd's v. Leighs and Others (High Court of Justice February 20, 1997) ... 7
Society
of Lloyd's v. Lyon v. Leighs v. Wilkinson, (C.A. July 31, 1997) ... 7
Society
of Lloyd's v. Wilkinson & Others (High Court of Justice April 23, 1997) ...
7
FEDERAL
STATUTES
28
U.S.C. § 1332 ... 9, 11
28
U.S.C. § 1359 ... i, 13, 15
STATE
STATUTES
Utah
Code Ann. § 61-1-22(9) ... 22
ENGLISH
STATUTES
Lloyd's
Act 1871 ... 1, 9
Lloyd's
Act 1982 ... 1, 5, 9
Lloyd's
Acts 1871-1982 ... 2, 3, 7, 12
Insurance
Companies Act 1982 ... 2
Financial
Services and Markets Act 2000 ... 2
FEDERAL
RULES
Sup.
Ct. R. 10 ... 16, 17
10th
Cir. R. 30.1 ... 1, 2
10th
Cir. R. 30.2 ... 1
D.U.
Civ. R. 56-1(c) ... 2
OTHER
AUTHORITIES
O'Connor's
Federal Rules, Civil Trials 2003 ... 12
1
Restatement (Third) of Foreign Relations § 482 (1987) ... 21
Uniform
Foreign Money - Judgment Recognition Act, Uniform Laws Annotated, Vol. 13, Part
II (West 2002) ... 18, 19
Wright,
Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d Vol. 13B, §
3623 (West 1984) ... 10, 11
TABLE
OF APPENDICES
Appendix
A - Order Of The United States District Court For The District Of Utah, Central
Division Filed June 10, 2004 ... 1a
Appendix
B - Order Of The United States District Court For The Western District Of
Texas, Austin Division Filed May 21, 2003 ... 6a
Appendix
C - Order Granting Motion For Reconsideration Of The United States District
Court For The District Of Colorado Filed September 9, 2004 ... 9a
STATEMENT
OF THE CASE
Lloyd's
is an English corporation, created by the U.K. Parliament through the Lloyd's
Act 1871:
The
Right Honorable George Joachim Goschen..., and all persons admitted as members of
Lloyd's before or after the passing of this Act, are hereby united into a
Society and Corporation for the purposes of this Act, and for those purposes
are hereby incorporated by the name of Lloyd's, and by that name shall be one
body corporate, with perpetual succession and a common seal, and with power to
purchase, take, hold, and dispose, of lands and other property (which
incorporated body is hereafter in this Act referred to as the Society.)
[Lloyd's
Act 1871, § 3, entitled "Incorporation of Lloyd's" (emphasis
added)] (Relevant excerpts of the Lloyd's Act 1871 are attached as Exhibit D to
Doc. 247). See also, the Lloyd's Act 1982, Paragraph (1), attached as Exhibit 1
to Doc. 244; See also, Doc. 97]. [FN2] Through Parliamentary Acts, the Lloyd's
Acts 1871-1982, the United Kingdom Parliament authorized Lloyd's to regulate
the English insurance market. Lloyd's is not an insurer and does not insure
risks. Instead Lloyd' s promulgates and enforces regulations under the Lloyd's
Acts, and exercises disciplinary authority over those who conduct insurance
business in the Lloyd's market. As an insurance regulator, one of Lloyd's
primary objectives is to make sure that valid claims of policy holders are
paid. [Declaration of Nicholas P. Demery dated June 7, 2002 ("Demery
Dec."), Aple. Supp. App. 168-176, ¦¦ 2, 3]
FN2. In addition to
appealing from the Judgment against him based on the District Court's November
12, 2002 summary judgment Order ["Summary Judgment Order," Appendix
("App.") B to Bennett's Petition for a Writ of Certiorari
("Petition") here], Bennett also appealed from a post-judgment
Order, which, among other
things, rejected his arguments that the District Court lacked diversity of
citizenship subject matter jurisdiction (App. A hereto). In that second appeal,
the record consisted of the district court record, because Bennett was pro se
and not required to file an appendix containing the excerpts of the record he
relied on. See 10th Cir. R. 30.1. Citations herein to the district court record
before the Tenth Circuit in that appeal are by "Doc." No. However in
the main appeals related to the merits of the November 12, 2002 Summary
Judgment Order, in which Bennett also participated and which were consolidated
with Bennett's second appeal, the record before the Tenth Circuit primarily
consisted of appendices filed by the defendants other than Bennett, and by
Lloyd's. See 10th Cir. R. 30.1 and 30.2. These appendices are cited herein as
the "Caldwell Def. App," the "Harmsen App" and "Aple.
Supp. App." Also, in the district court, Bennett never disputed the facts
set forth below (Aple. Supp. App 30-40 and 776-781), and therefore they are
deemed admitted by him. See D. U. Civ. R. 56-1(c).
Individual
and corporate members of Lloyd's known as "Names" underwrite
insurance. The U.K. Insurance Companies Act 1982 permits Names to conduct
insurance business only as long as they become and remain subject to Lloyd's
regulatory jurisdiction (Demery Dec., ¦ 4). [FN3]
FN3. This was the
applicable statute at all relevant times. The presently applicable statute is
the Financial Services and Markets Act 2000.
As
a condition of becoming members of Lloyd's, and/or continuing to underwrite
insurance, Names, including Bennett, entered into agreements governing their
membership in Lloyd' s and underwriting in the Lloyd's market. Among these
agreements is the General Undertaking. In the General Undertaking, Bennett
agreed, in part, (1) that he would comply with the provisions of the Lloyd's
Acts 1871-1982 and any byelaws or regulations Lloyd' s promulgated thereunder,
(2) that any dispute arising out of or relating to his membership of and
underwriting insurance business at Lloyd's would be resolved in English Courts
pursuant to English law, and (3) that an English Judgment would be conclusive,
binding and enforceable in any other jurisdiction. [FN4] (Demery Dec., ¦¦ 5, 6;
Caldwell Def. App. 26-37, clauses 1 through 2.3)
FN4. Under the Lloyd's
Acts, Names could only participate in the Lloyd's market through an
underwriting agent, which would contractually assume management
responsibilities over Names' underwriting activities.
Names
underwrite insurance by forming groups known as "syndicates." Names'
liability is several rather than joint. Bennett incurred liabilities with
respect to insurance commitments that he undertook by assuming a portion of a syndicate's
risk in the Lloyd's market. [FN5] In order to close the syndicate at the end of
each underwriting year of account, reinsurance is purchased to cover any
outstanding liabilities as well as liabilities that have been incurred but not
reported. (Demery Dec., ¦ 7)
FN5. Bennett and his
co-defendants (the "Utah Names") are all highly educated, financially
sophisticated professionals and business people. (Caldwell Def. App. 94, ¦¦ 3,
4; 98, ¦¦ 3, 4; 104, ¦¦ 3, 4; 109, ¦¦ 3, 4; 114, ¦¦ 3, 4; 118, ¦¦ 3, 4; Harmsen
App. 51, 52, ¦¦ 2, 3) As Bennett indicates in his Petition here, he is a
retired law professor.
Underwriting
in the Lloyd's market was historically a profitable venture. However, in the
late 1980s and early 1990s, Names in the Lloyd's market incurred substantial
underwriting losses (over $12 billion). As a result of these losses, Names
underwriting in those years were unable to purchase affordable reinsurance for
their outstanding liabilities, thus making those liabilities open-ended. Many
Names defaulted on their underwriting obligations as they came due, putting
policyholders at risk of non-payment. Simultaneously, a significant amount of
litigation began to embroil the Lloyd' s market. (Demery Dec. ¦ 8)
To
address these issues, which threatened the viability of the Lloyd's market,
Lloyd's devised the reconstruction and renewal ("R&R") plan. The
R&R plan provided reinsurance otherwise unavailable to each Name with
respect to his or her pre-1993 underwriting obligations, through a newly formed
company, Equitas. [FN6] The R&R plan also provided an offer of settlement
(the "Settlement Offer") to each Name with pre-1993 underwriting
liabilities, to end litigation and assist the Names in meeting their
underwriting obligations. (Demery Dec. ¦ 9)
FN6. Equitas is part of the
Equitas Group of business entities that was created as part of the R&R
plan. (Ex. B to Doc. 247, pp. 81-82; Ex. 8 to Doc. 244, pp. 81-82) All of the
companies in the Equitas Group - including Equitas - are private limited companies
incorporated in England and resident in the United Kingdom for tax purposes.
(Ex. B to Doc. 247, p. 83; Ex. 8 to Doc. 244, p. 83)
The
cost of reinsuring each Name's pre-1993 liabilities (the "Equitas
Premium") was individually calculated and charged to the particular Name.
[FN7] Names who wished to resign their membership in Lloyd's would be able to
do so upon payment of their Equitas Premium and other outstanding obligations.
Names who did not accept the Settlement Offer did not receive certain credits
that the settling Names received to offset their Equitas Premiums, but could
continue to litigate with Lloyd's and others who did business in the Lloyd's
market. If the Settlement Offer was not accepted, a Name was still required to
pay the full amount of his or her underwriting obligations, including the
Equitas Premium. (Demery Dec. ¦ 9)
FN7. While the Bennett
disputes the accuracy of these calculations, that issue goes to the merits of
Lloyd's English Judgments, which, as shown below, could not be relitigated in
the district court here.
In
implementing the R&R plan, and pursuant to the Substitute Agent's Byelaw of
1983 passed pursuant to s.6 and Schedule 2, paragraph (18)(b) of the Lloyd's
Act 1982 (Aple. Supp. App. 984) Lloyd's appointed a substitute agent and
required each Name to become a party to the Equitas reinsurance contract
through that substitute agent. This substitute agent signed the contract on
behalf of the Name. (Demery Dec. ¦ 10)
The
Equitas reinsurance contract contained a "pay now, sue later" clause
that precluded Names from asserting claims they might have had against Lloyd's
or others as a set-off or counterclaim to payment of their Equitas Premium. The
Equitas reinsurance contract also contained a "conclusive evidence"
clause which provided that, "in the absence of manifest error,"
Lloyd's determination of a Name's Equitas Premium was conclusive (Demery Dec. ¦
10). [FN8]
FN8. English Courts have
held that the R&R plan was within Lloyd's regulatory authority, including
the mandatory requirement that Names purchase reinsurance from Equitas. (Demery
Dec. ¦ 10) Also, the "pay now, sue later" and "conclusive evidence"
provisions, and Lloyd's right to appoint a substitute agent, were not new.
Similar provisions were included in agency agreements the Names (including
Bennett) signed with their underwriting agents at Lloyd's. [Aple. Supp. App.
19-29, ¦¦ 9(a) and (b) and 13(b); Harmsens App. 16, ¦ 9(a) and (b); 18-19,
13(b); 29, ¦ 9(a) and (b); 31-32, ¦ 13(b); see also, Caldwell Def. App. 632, ¦
10; 658, ¦ 7.1(d)]
The
R&R plan became effective on September 3, 1996. Less than five percent of
all Names did not accept the Settlement Offer (which had a deadline for
acceptance of August 28, 1996, subsequently extended to September 11, 1996). A
still smaller number refused to pay the Equitas Premium, which became due and
payable on September 30, 1996. Even though Bennett did not accept the
Settlement Offer, he was still required to pay his full underwriting
obligation, including the Equitas Premium. He failed to make payment, and
Equitas subsequently assigned the right to recover payment of the Equitas
Premium to Lloyd's. (Demery Dec. ¦¦ 11, 12)
Beginning
in late 1996, Lloyd's brought separate actions in England against Bennett and
other Names who had not paid the Equitas Premium (the "English
Actions"). In the English Actions, Lloyd's sought payment of each of the
Names' respective Equitas Premiums plus unpaid interest and costs. The English
Actions were commenced by filing a Writ of Summons (equivalent to a complaint
in U.S. litigation) in the English Court (High Court of Justice, Queen's Bench
Division) against Bennett and other Utah Names. (Demery Dec. ¦ 13)
Lloyd's
served Bennett, through his agent for service of process, with a Writ of
Summons. He filed an Acknowledgment of Service through his English solicitors
of record, the firm of Epstein Grower and Michael Freeman, thereby appearing in
the English Court and notifying Lloyd's of his intent to contest the claim and
to be represented by those English solicitors. (Demery Dec. ¦ 14)
In
32 days of hearings before English trial and appellate courts, the Names raised
several defenses to entry of judgments by the English Court. (Demery Dec. ¦ 17)
The defenses included the following, all of which were rejected: (1) that
Lloyd's lacked the regulatory authority under the Lloyd's Acts 1871- 1982 to
mandate that all Names purchase reinsurance coverage from Equitas; (2) that
Names were entitled to rescind their membership in Lloyd's as a result of
alleged fraud in the inducement of their membership of, or underwriting at,
Lloyd's; (3) that Names were entitled to litigate their claims of fraud in the
inducement as a defense or set-off to their obligation to pay the Equitas
Premium; and (4) that the Names were not bound by the "pay now, sue
later" and the "conclusive evidence" clauses in the Equitas
reinsurance contract. [FN9]
FN9. See Society of Lloyd's
v. Leighs and Others (High Court of Justice February 20, 1997) (Demery Dec.,
Ex. J, Aple. Supp. App. 622-680); Society of Lloyd's v. Wilkinson & Others
(High Court of Justice April 23, 1997) (Demery Dec., Ex. J, Aple. Supp. App. 682-704);
Society of Lloyd's v. Lyon; v. Leighs; v. Wilkinson, (C.A. July 31, 1997)
(Demery Dec., Ex. J, Aple, Supp. App. 608-619) (affirming rulings of lower
court); Society of Lloyd's v. Fraser & Others (C.A. July 31, 1998), denying
leave to appeal from High Court of Justice decisions dated December 3, 1997 and
January 22 and March 4, 1998 (Demery Dec., Ex. K, Caldwell Def. App. 38-68).
The Names were allowed to litigate their fraud claims separately in Society of
Lloyd's v. Jaffray, 2000 WL 1629463 (High Court of Justice November 2, 2000),
aff'd, 2002 WL 1654876 (C.A. July 26, 2002) (Aple. Supp. App. 782-936). The
Names lost the Jaffray case, in which Bennett and the other Utah Names decided
not to participate. Also, notwithstanding the "conclusive evidence
clause," Lloyd's was required to produce documentation showing how the
Equitas Premiums were calculated (Fraser, supra, Caldwell Def. App. 64- 65).
The
English Court entered judgments in favor of Lloyd's against Bennett and the
other Names on March 11, 1998. (Demery Dec., Ex. A-I, Aple. Supp. App. 224,
273,320, 368, 415, 461, 509, 557, 605) A three judge panel of the United
Kingdom Court of Appeal heard argument on the application for leave to appeal
by Names from June 15-19, 1998. Leave to appeal was denied on July 31, 1998.
See, Society of Lloyd's v. Fraser & Others, supra (Demery Dec., Ex. K,
Caldwell Def. App. 38-68). [FN10] Thus, all appeals from the entry of the
English Judgments were exhausted. [FN11]
FN10. As to certain of
their arguments, the Names filed leave to appeal (the equivalent of a U.S.
petition for writ of certiorari) with the Judicial Committee of the House of
Lords (the equivalent of the U.S. Supreme Court), which was denied. See Society
of Lloyd's v. Turner, 303 F.3d 325, 328 (5th Cir. 2002).
FN11. The foregoing
undisputed facts are also set forth in the Tenth Circuit decision below that is
the subject of Bennett's Petition here. See Society of Lloyd's v. Reinhart, 402
F.3d 982 (10th Cir. 2005), App. A to Bennett Petition, pp. 5a-14a.
Bennett
and the other Utah Names had not satisfied their judgment debts, and on March
8, 2002, Lloyd's filed its Complaint in Utah federal district court to enforce
its English Judgments against Bennett and the other Utah Names. (Aple. Supp.
App. 1-18)
REASONS
FOR DENYING THE PETITION
A.
Background
As
the Tenth Circuit recognized below, the U.K. Parliament gave powers to Lloyd' s
to regulate the English insurance market. See, Society of Lloyd's v. Reinhart,
supra, App. A to Bennett Petition here, p. 5a. Early in its existence, Lloyd's
may have been considered a kind of unincorporated association. However, this
status changed over one hundred years ago, when Parliament explicitly
incorporated Lloyd's (Ex. D to Doc. 247, Lloyd's Act 1871, § 3,
entitled "Incorporation of Lloyd's"). As the Tenth Circuit also
recognized below, since 1871 Lloyd's has been a corporation organized and
existing by Acts of Parliament. See also, Doc. 97, Lloyd's Act 1982, ¦ 1;
Reinhart, supra, App. A to Bennett Petition here, p. 38a.
Also,
as established above, Lloyd's is not an insurer and does not insure risks. The
only insurers in the Lloyd's market are underwriting members of Lloyd's who are
known as Names. Names underwrite insurance by forming groups known as
"syndicates," and each Name incurs personal liability with respect to
insurance commitments that he or she undertakes by assuming a portion of a
syndicate's risk in the Lloyd's market. (Demery Dec., Doc. 30, ¦¦ 2, 4, 7;
Reinhart, supra, App. A to Bennett Petition here, p. 5a; Summary Judgment
Order, App. B to Bennett Petition here, pp. 46a, 47a) Thus, Lloyd's is a legal
entity separate and distinct from the entities operating in the market it
regulates, and from the members of the syndicates who underwrite insurance in
that market.
B.
As an English Corporation, Lloyd's is a Citizen of England.
Bennett's
assertion that all the members of Lloyd's have the same citizenship as Lloyd's
is wrong because Lloyd's is an English corporation. A U.S. corporation is a
citizen of the state where it has been incorporated and of the state where it
has its principal place of business. 28 U.S.C. § 1332(c)(1). As to
foreign corporations, "[I]t has long been the rule that a corporation
incorporated in a foreign nation is a citizen of that nation for purposes of
diversity jurisdiction." Torres v. Southern Peru Copper Corp., 113 F.3d
540, 543 n.12 (5th Cir. 1997); see also, National S.S. & Co. v. Tugman, 106
U.S. 118 (1882). [FN12]
FN12. Thus, the cases
Bennett cites at p. ii of his Petition here, which deal with the citizenship of
U.S. national banking associations, are irrelevant.
Bennett's
argument that Lloyd's takes the citizenship of its members is incorrect on a
number of fronts. Because Lloyd' s is a corporation, it has a citizenship
independent of the citizenship of its members. The quotation from Wright,
Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d
("Wright & Miller"), Vol. 13B, § 3623, p. 592 (West
1984) at p. 16 of Bennett's Petition here, to the effect that the stockholders
of a foreign country corporation are presumed to be citizens of that country,
is taken out of context. The full quotation reads:
Thus,
a presumption exists that all the stockholders of a corporation chartered by a
foreign country are citizens of that country, and the corporation may sue or be
sued in the federal courts as an alien.
(Emphasis
added to indicate the portion omitted by Bennett.)
Moreover,
as the surrounding pages in Wright & Miller explain, the presumption that
stockholders have the same citizenship as their corporation arose from the
outmoded concern that a corporation, an artificial being, could not be a
citizen within the meaning of the Constitution, and therefore could not sue in
federal court. Wright & Miller, § 3623, pp. 587-597. At one point
the Supreme Court held that because a corporation was not a citizen, it could
only act as an association of its stockholders, and therefore the citizenship
of its stockholders controlled for purposes of federal diversity jurisdiction.
Id. at pp. 589-90, citing Bank of the United States v. Deveaux, 5 Cranch (9
U.S.) 61, 3 L. Ed.38 (1809). Later, the Supreme Court changed this reasoning -
in part because plaintiffs were often unable to bring suit in federal court
against corporations with shareholders from various states - and established
the presumption that all of the stockholders of a corporation were citizens of
the state of incorporation. Id., at pp. 590-91, citing Marshall v. Baltimore
& Ohio Railroad Co., 16 How. (57 U.S.) 314, 14 L. Ed. 953 (1853).
As
Wright & Miller makes clear, this presumption has been modified by 28
U.S.C. § 1332(c)(1), which states that for purposes of diversity of
citizenship, a U.S. corporation is a citizen of 1) the state in which it has
been incorporated and 2) the state where it has its principal place of
business. Id. at p. 592. Section 1332(c)(1) does not state that a stockholder
of a corporation has the same citizenship as that corporation; and it does not
state that U.S. stockholders of a foreign corporation have the same citizenship
as that corporation. The settled law is that "diversity jurisdiction is
present in suits between citizens of a State and citizens or subjects of a
foreign state." Torres, supra, 113 F.3d at 543. [FN13] As Wright &
Miller goes on to explain, "... [T]he presumption that all the
stockholders of a corporation are citizens of the state of incorporation was of
doubtful accuracy in 1854 and ... is totally unwarranted today." Wright
& Miller § 3623 at p. 602 (emphasis added).
FN13. 28 U.S.C. §
1332 (a)(2) provides that diversity of citizenship exists between "(2)
citizens of a State and citizens or subjects of a foreign state".
Nicholas
Demery's statement in his declaration that Lloyd's is "a Society and
Corporation incorporated under the Lloyd's Acts 1871-1982 comprising all
persons admitted as members of Lloyd's," (as quoted in Bennett's Petition
here at p. 23) does not contradict Lloyd's position in the least. The fact that
Lloyd's is comprised of its members is irrelevant for purposes of U.S.
diversity jurisdiction. As Demery's statement correctly points out, Lloyd's is
a corporation. Therefore, it takes the citizenship of the nation of its
incorporation: England, not that of its members.
Also,
Bennett is deliberately confusing Lloyd's with the underwriting syndicates.
Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314 (7th Cir. 1998), discussed by
Bennett at pp. 21-22 of his Petition here, involves syndicates and their
insureds, not Lloyd's. [FN14] As the district court recognized in the Summary
Judgment Order (App. B to Bennett's Petition here), the syndicates are not
Lloyd's. This case does not involve any syndicates. It is a dispute between a
corporation (Lloyd's) and an individual (Bennett) by which Lloyd's seeks to
enforce an English judgment against the individual. The syndicates are
irrelevant to this case, and any analysis of their citizenship is inapposite.
FN14. On page 17 of his
Petition here, Bennett also cites O'Connor's Federal Rules, Civil Trials 2003,
for the proposition that "[f]or Lloyd's of London, diversity is determined
by the residence of each name." Lloyd's counsel is not familiar with O'Connor's
Federal Rules, and - despite inquiries at local law libraries - has been unable
to locate a copy of this source. However, O'Connor was referring to the
syndicates, not Lloyd's itself. Bennett acknowledged as much in the district
court on p. 15 of Doc. 244, in which he added a bracketed reference to the
syndicates in the above quote: "for Lloyd's of London [syndicates],
diversity is determined by the residence of each name." (Emphasis added)
As
an English corporation, Lloyd' s is a citizen of England. Because each of the
Utah Names is a citizen of the State of Utah, diversity jurisdiction is proper.
See, Society of Lloyd's v. Bila, Civil No. A-03-CA-9 (W.D.Tex. May 21, 2003)
(App. B hereto), and Society of Lloyd's v. Sommer, Civil Action No. 02-RB-1959
(OES) (D. Colo. September 9, 2004) (App. C hereto), in which the courts held
that there was diversity jurisdiction in cases - just like this one - where
Lloyd's filed suit to enforce an English judgment against an American Name.
A.
The Assignment at Issue is Equitas' Assignment to Lloyd's of Equitas' Claim
Against Bennett Based on Bennett's Failure to Pay the Equitas Premium.
Bennett's
argument that the assignment from Equitas to Lloyd's voids diversity
jurisdiction is based on a misunderstanding of the facts and the law. 28 U.S.C.
§ 1359 states that "a district court shall not have jurisdiction
of a civil action in which any party, by assignment or otherwise, has been
improperly or collusively made or joined to invoke the jurisdiction of such
court." The purpose of this statute is to prevent parties from
manufacturing diversity jurisdiction through the assignment of a claim from a
non-diverse party to a diverse party. See Amoco Rocmount Co. v. Anschutz Corp.,
7 F.3d 909, 916 (10th Cir. 1993), cert. den., 510 U.S. 1112 (1994). Here, the
undisputed facts in the record demonstrate that the assignment in question,
from one English corporation, Equitas, to another English corporation, Lloyd's,
was not collusive.
Equitas
was created as part of Lloyd's R&R plan, and it provided otherwise
unavailable reinsurance to each Name. The cost of this reinsurance was called
the Equitas Premium. The R&R plan also provided a settlement offer to each
Name, which would have provided financial assistance to the Name in paying the
Equitas premium, in return for a release of litigation claims. Those Names that
did not settle were still required to pay the full amount of their underwriting
obligations, including the Equitas Premium. After the R&R plan had become
effective, in September 1996 Equitas assigned to Lloyd's the Equitas right to
recover payment of the Equitas Premium from the non-settling Names. See,
Reinhart, supra, App. A to Bennett Petition here, p. 11 a. Lloyd's then sued
many of the non-settling names, obtained English Judgments, and, with respect
to many of those judgments against American Names, sought enforcement in
America. (Summary Judgment Order, App. B to Bennett's Petition here)
Thus,
the underlying claim is Equitas' claim for the Equitas Premium; it is not a claim
that was ever held by Bennett's underwriting agents, [FN15] or the syndicates
in which he is a member. Accordingly, Bennett's apparent attempts in his
Petition here, to argue that the syndicates are the real parties in interest,
are incorrect and have no evidentiary basis in the record. [FN16]
FN15. Bennett's initial
underwriting agent was William Edwards Courts & Partners, Ltd., which
Bennett refers to several times in his Petition here.
FN16. Moreover, the
syndicates are not legal entities and are managed by the participating Names'
agent.
B.
Because Equitas is Also an English Corporation, Its Assignment to Lloyd's Was
Not Collusive.
The
assignment from Equitas to Lloyd's cannot be collusive because Equitas, like
Lloyd's, is an English corporation and diverse from the Utah Names. The law
only prohibits improper or collusive assignments that create diversity
jurisdiction. Western Farm Credit Bank v. Hamukua Sugar Co., Inc., 841 F. Supp.
976, 981 (D. Hawaii 1994), aff'd, 87 F.3d 1326 (9th Cir. 1996). As Judge Posner
has observed with respect to 28 U.S.C. § 1359, "the statute can
have no application where the assignor could have sued in federal court as well
as the assignee." Steele v. Hartford Fire Ins. Co., 788 F.2d 441,445 (7th
Cir. 1986). Thus, if the assignor is already diverse from the party in
question, then the assignment cannot create diversity jurisdiction; diversity
jurisdiction already existed.
As
the Tenth Circuit held below, the record demonstrates that Equitas is a citizen
of England. Equitas is part of the Equitas Group, and "[a]ll the companies
in the Equitas group are all private limited companies incorporated in England
and resident in the United Kingdom for Tax purposes." [Ex. B to Doc. 247,
pp. 81-83 (emphasis added); Reinhart, supra, App. A to Bennett's Petition here,
p. 38a] There is no evidence in the record to suggest that Equitas is a citizen
of any other nation or state, much less the State of Utah.
Equitas
is diverse from Bennett and the other Utah Names and therefore, as a matter of
law, the assignment of its claim to Lloyd's is not collusive. Lloyd's has
established that there was no collusive assignment and diversity jurisdiction
is proper. [FN17]
FN17. Contrary to the
implication in Bennett's Petition here at p. i, n.1, there is no conflict
between the circuits regarding the diversity issues Bennett attempts to raise.
Bennett
ignores the standards governing this Court's grant of certiorari, as set forth
in Sup. Ct. R. 10:
Rule
10. Considerations Governing Review on Certiorari
Review
on a writ of certiorari is not a matter of right, but of judicial discretion. A
petition for a writ of certiorari will be granted only for compelling reasons.
The following, although neither controlling nor fully measuring the Court's
discretion, indicate the character of the reasons the Court considers:
(a)
a United States court of appeals has entered a decision in conflict with the
decision of another United States court of appeals on the same important
matter; has decided an important federal question in a way that conflicts with
a decision by a state court of last resort; or has so far departed from the
accepted and usual course of judicial proceedings, or sanctioned such a
departure by a lower court, as to call for an exercise of this Court's
supervisory power;
(b)
a state court of last resort has decided an important federal question in a way
that conflicts with relevant decisions of this Court. (c) a state court or a
United States court of appeals has decided an important question of federal law
that has not been, but should be settled by this Court, or has decided an
important federal question in a way that conflicts with relevant decisions of
this Court.
A
petition for a writ of certiorari is rarely granted when the asserted error
consists of erroneous factual findings or the misapplication of a properly
stated rule of law.
(Emphasis
added.) Thus, this Court grants certiorari primarily to consider
"important federal questions."
As
to the issues other than diversity of citizenship, Bennett does not suggest why
this Court should have any interest in reviewing a decision by the Tenth
Circuit interpreting purely Utah law, particularly where, as discussed below,
the Tenth Circuit's decision was based upon, and is consistent with, decisions
of the Utah Supreme Court and Utah Court of Appeals (as well as all of the
other various federal circuits that have considered the comity issues). [FN18]
FN18. Also, Bennett does
not identify any criteria under Sup. Ct. R. 10 that would justify granting
certiorari as to the diversity of citizenship federal law issues discussed
above.
In
Reinhart, supra, App. A to Bennett's Petition here, the Tenth Circuit
considered consolidated appeals by Bennett and the other Utah Names, as well as
a consolidated appeal by Mr. Reinhart, a New Mexico Name. As to Mr. Reinhart,
the Court held that Lloyd's English Judgment against him was enforceable under
New Mexico's version of the Uniform Foreign Money - Judgment Recognition Act
("Uniform Act"), also adopted in many other states. (App. A to
Bennett Petition, pp. 2a-4a, 16a-29a)
However,
Utah has not adopted the Uniform Act. Therefore, the Tenth Circuit analyzed the
enforceability of Lloyd's English Judgments against Bennett and the other Utah
Names under Utah common law principles of comity. See Reinhart, supra, App. A
to Bennett Petition, pp. 29a-33a. However, before addressing the Utah law of
comity, the Court noted that Lloyd's English Judgments against American Names
have been uniformly enforced in numerous federal courts [FN19] (applying state
law) and state courts across the country, typically on motions for summary
judgment by Lloyd's under either the Uniform Act or common law principles of
comity. See cases cited in App. A to Bennett Petition, p. 15a, n.3. [FN20]
FN19. There is no split in
the circuits. See Society of Lloyd's v. Ashenden, 233 F.3d 473 (7th Cir. 2000);
Society of Lloyd's v. Turner, supra; Society of Lloyd's v. Mullin, 96 Fed.
Appx. 100 (3rd Cir. May 5, 2004); Society of Lloyd's v. Davies, 107 Fed. Appx.
887 (11th Cir. May 21, 2004); Society of Lloyd's v. Blackwell, 127 Fed. Appx.
961 (9th Cir.
April 13, 2005); Society of
Lloyd's v. Shields, 118 Fed. Appx. 12 (November 17, 2004) (applying common
law); Society of Lloyd's v. Borgers, 127 Fed. Appx. 959 (9th Cir. April 13,
2005) (applying common law), all of which have enforced Lloyd's English
Judgments at issue, against American Names.
FN20. See also, Society of
Lloyd's v. Collins, Case No. 00-713-CA-22 (19th Cir. Ct., Indian River County,
Florida, June 4, 2003), aff'd, Case No. 4D03-2674 (Fla. 4th Dist. Ct. App. May
19, 2004); Society of Lloyd's v. Rosenberg, No. 02-1195 (E.D. Pa. August 13,
2002); Society of Lloyd's v. Byrens, Civil No. 02CV449 (S.D. Cal. May 29,
2003); Society of Lloyds v. Evnen, No. 8:02CV 118 (D. Neb. April 28, 2003)
(applying common law); Society of Lloyd's v. Edelman, 03 Civ. 4921 (WHP)
(S.D.N.Y. March 21, 2005), available at 2005 WL 639412; Society of Lloyd's v.
Hudson, 276 F. Supp. 2d 1110 (D. Nev. 2003) (applying common law); Society of
Lloyd's v. Fuerst, Case No. 04-2964 (8th Cir. July 11, 2005), available at 2005
WL 1606011; Society of Lloyd's v. Siemon-Netto, Civil Action No. 03-1524 (JR)
(D.D.C. 2004).
With
respect to the Utah common law of comity, the Tenth Circuit correctly held that
in Mori v. Mori, 931 P.2d 854, 856 (Utah 1997), the Utah Supreme Court ruled
that foreign country judgments are enforceable in Utah under common law
principles of comity set forth in Hilton v. Guyot, 159 U.S. 113 (1895). See,
Reinhart, supra, App. A to Bennett Petition, p. 30a. [FN21] Reinhart also held
that under Hilton, foreign nation judgments are enforceable in the U.S. if the
following requirements are met:
FN21. Even though the
Uniform Act does not apply directly in Utah, the Uniform Act is based on common
law principles of comity under Hilton and its progeny. See Uniform Act, §
4, Comment, Vol. 13, Part II, Uniform Laws Annotated 43, 59 (West 2002);
Ashenden, 233 F.3d at 476-477 (citing Hilton). Thus, decisions like Ashenden
and Turner, enforcing Lloyd's English Judgments under the Uniform Act, are
persuasive authority here.
(1)
there has been opportunity for a full and fair trial abroad before a court of
competent jurisdiction,
(2)
conducting the trial upon regular proceedings, after due citation or voluntary
appearance of defendant,
(3)
under a system of jurisprudence likely to secure an impartial administration of
justice between the citizens of its own country and those of other countries,
(4)
there is nothing to show either prejudice in the court, or in the system of
laws under which it was sitting, or fraud in procuring the judgment, or
(5)
no other special reason exists indicating why the comity of this nation should
not allow it full effect.
Reinhart,
App. A to Bennett Petition, pp. 30a-31 a, quoting Hilton at 159 U.S. 202
(emphasis added by Reinhart).
Reinhart
then held that under Utah law, "... the validity of a foreign judgment
'should be tested by the law of the jurisdiction where the judgment was
rendered.' " [App. A to Bennett Petition, p. 31a, citing Rocky Mtn. Claim
Staking v. Frandsen, 884 P.2d 1299, 1300-1301 (Utah App. 1994), cert. den., 899
P.2d 1231 (Utah 1995)]. Thus, the Tenth Circuit ruled that under Utah law foreign
country judgments are entitled to comity based on an analysis of the foreign
judicial system, not the particulars of the individual judgment, and there is
no question about the fairness of the English judicial system:
...
We
have no choice under Hilton and Rocky Mountain but to examine the entirety of
the foreign judicial system, and not the particularity of individual judgments.
...
Like
all the other circuits that have examined the question, we have already
determined that the English judicial system is procedurally above reproach.
...
(App.
A to Bennett Petition, pp. 31 a-32a, citing 1 Restatement (Third) of Foreign
Relations § 482 cmt. b (1987) and Ashenden, supra, 233 F.3d at 478,
emphasis added).
Notwithstanding
the foregoing, Reinhart noted that the district court did analyze the English
court cases (cited in the Statement of the Case, above) with respect to the
challenges of Names like Bennett to their liability to Lloyd's (App. A to
Bennett Petition, pp. 32a-33a). Reinhart concluded that in those cases Bennett
and the other Utah Names "... were given a full and fair opportunity to
litigate their claims before the English courts." (Id. at p. 33a). [FN22]
FN22. In this regard,
Reinhart further noted that there were " ... thirty-two days of hearings
before English trial and appellate courts ..." Id. at p. 4a. Also, after a
19 week trial in England in Jaffray, supra, the Names (not including Bennett
and the other Utah Names, who elected not to participate) lost their fraud
claims against Lloyd's (App. A to Bennett Petition, p. 13a). That decision was
affirmed on appeal, Id.
Reinhart
then went on to reject Bennett's claims under the anti-waiver provisions of the
Utah Uniform Securities Act, Utah Code Ann. § 61-1- 22(9), based on
its decision in Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953
(10th Cir. 1992), cert. den., 506 U.S. 1021 (1992), and the Ninth Circuit
decision in Richards v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998), cert.
den., 525 U.S. 943 (1998), in which Bennett was a party (App. A to Bennett
Petition, pp. 8a-10a, 38a-40a). [FN23]
FN23. The dicta Bennett
cites on this point from factually unrelated Supreme Court decisions, at pp.
11-12 of his Petition, does not apply here.
What
Bennett sought in the Tenth Circuit, and what Bennett's Petition here seeks, is
the right to litigate Lloyd's underlying claims against him in Utah, applying
Utah law. However, as he agreed in his General Undertaking with Lloyd's, those
claims have already been litigated before English courts, applying English law.
As shown above, under Utah law, and according to every federal circuit court
decision that has considered the issues, Lloyd's English Judgments against U.S.
Names are fully enforceable in U.S. Courts, without relitigating the merits of
those Judgments. [FN24]
FN24. The so-called
accounting issues Bennett seeks to raise in his Petition either were litigated
and lost in the English courts (Bennett Petition, p. 27; Reinhart, App. A to
Bennett Petition, pp. 12a-13a), or are based not on claims Bennett has against
Lloyd's, but on claims he has against managing agents of syndicates regulated
by Lloyd's (Bennett Petition, pp. 3, 27). Again, Bennett confuses Lloyd's with
the syndicates.
CONCLUSION
Based
upon the foregoing, Bennett' s Petition for a Writ of Certiorari should be
denied.