2005 WL 639412 (S.D.N.Y.)

United States District Court, S.D. New York.

THE SOCIETY OF LLOYD’S, Plaintiff, v. Minna Jane EDELMAN, Kenneth Gross, Todd Gross and Judith P. Kenny, Defendants.

No. 03 Civ.4921(WHP).

March 21, 2005.

Philip J. Walsh, Jordon Burt LLP, Simsbury, CT, for plaintiff.
Charles B. Updike, David B. Gordon, Schoeman Updike & Kaufman, LLP, New York, NY, for defendants.

MEMORANDUM AND ORDER

JUDGE:  PAULEY, J.

[*1]  The Society of Lloyd’s (“Lloyd’s” or “plaintiff”), brings this action to recognize and enforce foreign judgments entered against the defendants in England. Lloyd’s now moves for summary judgment as to defendants Minna Jane Edelman and Kenneth Gross (collectively, “defendants”) pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons set forth below, plaintiff’s motion is granted.

BACKGROUND

Plaintiff regulates an insurance market in England under the Parliamentary authority of a series of so-called Lloyd’s Acts. (Plaintiff’s Statement Pursuant to Local Rule 56.1, dated Apr. 26, 2004 (“Pl. 56.1 Stmt.”) ¶¶ 1-2.) Lloyd’s itself is not an insurer. (Pl. 56.1 Stmt. ¶ 1.) Rather, the insurers in the Lloyd’s market are known as “Names.” (Pl. 56.1 Stmt. ¶ 3.) Pursuant to the Lloyd’s Acts, Names participate in the Lloyd’s market through an underwriting agent. (Pl. 56.1 Stmt. ¶ 9.) Names underwrite insurance policies through syndicates but personally assume the risks and liabilities of such claims. (Pl. 56.1 Stmt. ¶ 4.)

Defendants are Names and residents of New York. (Pl. 56.1 Stmt. ¶ 5; Defendants’ Statement Pursuant to Local Rule 56.1, dated May 20, 2004 (“Defs. 56.1 Stmt.”) ¶ 1.) [FN1] As Names, defendants signed a General Undertaking which governs their membership in the Lloyd’s market and obligates them to comply with the Lloyd’s Acts. (Complaint, dated June 27, 2003 (“Compl.”) Exs. 1, 2; Pl. 56.1 Stmt. ¶¶ 5-8.) The General Undertaking requires Names to litigate all claims in English courts under English law, and states that any final judgment can be enforced in other jurisdictions. (Compl. Exs. 1, 2; Pl. 56.1 Stmt. ¶¶ 7-8.)

FN1. Defendants’ submission pursuant to Local Civil Rule 56.1 does not respond paragraph-by-paragraph to plaintiff’s 56.1 statement, as required by Local Civil Rule 56.1(b). As such, the facts in plaintiff’s Rule 56.1 statement are deemed admitted by defendants. Local Civil Rule 56.1(c); see Gubitosi v. Kapica, 154 F.3d 30, 31 n.1 (2d Cir.1998); Gallimore-Wright v. Long Island R.R. Co., No. 02 Civ. 3968(LAK), 2005 WL 273023, at *2 (S.D.N.Y. Feb. 4, 2005).
Moreover, defendants’ Rule 56.1 counterstatement relies exclusively on the affidavit of defendants’ counsel, David B. Gordon. Mr. Gordon does not attest to personal knowledge of the relevant facts. (Affidavit of David B. Gordon, dated May 20, 2004 (“Gordon Aff.”).) Cf. Fed.R.Civ.P. 56(e) (personal knowledge required). Therefore, this Court will only consider assertions in Mr. Gordon’s affidavit that are based on documents appended as exhibits. See Omnipoint Communications, Inc. v. Common Council of the City of Peekskill, 202 F.Supp.2d 210, 213 (S.D.N.Y.2002). To the extent those portions of the Gordon affidavit support facts in defendants’ Rule 56.1 counterstatement and are not inconsistent with plaintiff’s submission, this Court will consider those additional disputed facts. See Local Civil Rule 56.1(b).

Beginning in the late 1980s, Names in the Lloyd’s market incurred aggregate underwriting losses of over $12 billion, which spawned substantial litigation. (Pl. 56.1 Stmt. ¶ 10; Defs. 56.1 Stmt. ¶¶ 36-37.) In order to address these issues and sustain the viability of the Lloyd’s market, Lloyd’s implemented a Reconstruction and Renewal (“R & R”) Plan that applied to every Name. (Pl. 56.1 Stmt. ¶ 10.) The R & R Plan had two components. First, a newly formed company, Equitas Reinsurance Ltd. (“Equitas”), would reinsure each Name’s underwriting obligations for 1992 and prior underwriting years. (Pl. 56.1 Stmt. ¶ 11.) The cost of reinsurance (the “Equitas Premium”) was individually calculated and charged to each Name. (Pl. 56.1 Stmt. ¶ 11.) Second, Lloyd’s made an offer of settlement to protect each Name from unlimited personal liability and discount his Equitas Premium. (Pl. 56.1 Stmt. ¶ 11.) The Names were not required to accept the settlement offer, but even non-settling Names were required to pay their Equitas Premiums. (Pl. 56.1 Stmt. ¶ 11.) Although most Names accepted the settlement offer, defendants did not. (Pl. 56.1 Stmt. ¶ 13.)

All Names signed a mandatory reinsurance agreement (the “Equitas Contract”). (Defs. 56.1 Stmt. ¶ 41.) The Equitas Contract contains two key clauses. The first, the “pay now, sue later” provision, requires Names to pay their Equitas Premium “free and clear from any setoff, counterclaim or other deduction.” (Defs. 56.1 Stmt. ¶ 7.) The other provision states that the calculation by Lloyd’s of each Name’s Equitas Premium would be “conclusive evidence” of the amount owed, “in the absence of manifest error.” (Defs. 56.1 Stmt. ¶ 7.) Pursuant to the Lloyd’s Acts, a Lloyd’s-appointed underwriting agent signed the Equitas Contract on behalf of the Names. (Defs. 56.1 Stmt. ¶¶ 8, 41; Supplemental Declaration of Nicholas P. Demery, dated June 4, 2004 (“Supp. Demery Decl.”) ¶ 6.)

[*2]  The R & R Plan became effective September 3, 1996, and each Name was required to pay the one-time Equitas Premium by September 30, 1996. (Pl. 56.1 Stmt. ¶ 13.) Defendants failed to make their payments. (Pl. 56.1 Stmt. ¶ 13.) Lloyd’s paid the unpaid Equitas Premiums, and Equitas assigned Lloyd’s the right to recover from defendants. (Pl. 56.1 Stmt. ¶ 14.) Starting in 1996, Lloyd’s commenced separate proceedings in the High Court of Justice, Queen’s Bench Division (the “English Court”) to collect these amounts from Names, including defendants. (Pl. 56.1 Stmt. ¶ 15.) Lloyd’s notified defendants of the actions by serving a writ of summons, and defendants acknowledged service through their solicitors, stating that they intended to contest the claims. (Compl. Exs. 11, 12; Declaration of Nicholas P. Demery, dated Apr. 20, 2004 (“Demery Decl.”) Exs. 1, 2; Pl. 56.1 Stmt. ¶¶ 15-17.)

Lloyd’s moved for an Order 14 final judgment—the equivalent of summary judgment—against each of the defendants. (Pl. 56.1 Stmt. ¶ 18.) The English Court conducted more than 25 days of hearings, at which the Names raised several defenses to payment of the Equitas Premium. (Pl. 56.1 Stmt. ¶ 20.) Specifically, the Names argued that: the Names’ membership in Lloyd’s was induced by fraud and could be rescinded; Lloyd’s could not require the Names to purchase reinsurance from Equitas; and the so-called “pay now, sue later” and “conclusive evidence” provisions of the Equitas contract did not bar the Names from raising these defenses. (Pl. 56.1 Stmt. ¶ 20.) These arguments were rejected by the English Court. (Pl. 56.1 Stmt. ¶ 20; Defs. 56.1 Stmt. ¶¶ 44- 46.) The English Court held that regardless of whether the Names could prove fraud, the “pay now, sue later” clause precluded them from raising those arguments in the action to collect the Equitas Premiums. (Gordon Aff. Ex. 1-B: Soc’y of Lloyd’s v. Wilkinson, slip op. at 35-47 (Q.B. Apr. 23, 1997).) Pursuant to the “conclusive evidence” clause of the Equitas Contract, the English Court fixed damages against the defendants based on the calculations submitted by Lloyd’s. (Gordon Aff. Ex. 1-D: Soc’y of Lloyd’s v. Fraser, slip op. at 5-9 (Q.B. Mar. 4, 1998); Supp. Demery Decl. Ex. 3: Transcript in Soc’y of Lloyd’s v. Fraser (Q.B.), dated Mar. 11, 1998, at 91.) These holdings were affirmed by the English Court of Appeal. Soc’y of Lloyd’s v. Fraser, 1999 Lloyd’s Rep. 156 (C.A. July 31, 1998); Soc’y of Lloyd’s v. Lyon (C.A. July 31, 1997) (attached as an exhibit to plaintiff’s brief).

On March 11, 1998, the English Court issued a judgment in favor of Lloyd’s against Kenneth Gross in the amount of 614,208.60. (Compl. Ex. 22; Pl. 56.1 Stmt. ¶ 19.) On December 4, 1998, the English Court issued a judgment in favor of Lloyd’s against Minna Jane Edelman in the amount of £673,340.83. (Compl. Ex. 21; Pl. 56.1 Stmt. ¶ 19.) (collectively, the “English Judgments”). The U .S. dollar equivalents of these judgments when this civil action was filed were $1,018,912.30 and $1,117,261.29, respectively. All appeals are exhausted, and defendants have not paid the English Judgments. (Pl. 56.1 Stmt. ¶¶ 21, 24.)

[*3]  Plaintiff commenced this action against defendants to recognize and enforce the English Judgments under New York’s Uniform Foreign Money-Judgments Recognition Act, N.Y. C.P.L.R. § 5301 et seq. Plaintiff seeks the full amount of the respective English Judgments, less certain credits to which defendants are entitled. Plaintiff now moves for summary judgment.

DISCUSSION

I. Summary Judgment Standard

Rule 56(c) provides that summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The burden of demonstrating the absence of any genuine dispute as to a material fact rests with the moving party. See, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Grady v. Affiliated Cent., Inc., 130 F.3d 553, 559 (2d Cir.1997). In evaluating the record to determine whether there is a genuine issue as to any material fact, “[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” Liberty Lobby, 477 U.S. at 255.

II. Uniform Foreign Money-Judgments Recognition Act

New York adopted the Uniform Foreign Money-Judgments Recognition Act (the “Recognition Act”) in 1970. The Recognition Act provides, in relevant part, that foreign country judgments that are “final, conclusive and enforceable where rendered” are enforceable in New York. N.Y. C.P.L.R. §§ 5302-03; see CIBC Mellon Trust Co. v. Mora Hotel Corp. N.V., 100 N.Y.2d 215, 221 (2003). However, “a foreign country judgment is not conclusive if [it] was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” N.Y. C.P.L.R. § 5304(a)(1). Additionally, the Act provides that a court has discretion not to recognize a foreign country judgment if, inter alia, “the judgment was obtained by fraud” or “the cause of action on which the judgment is based is repugnant to the public policy of [New York].” N.Y. C.P.L.R. § 5304(b)(3)-(4). Defendants argue that the English Judgments should not be enforced because the English Court proceedings against them failed to comport with due process, and because Lloyd’s acted fraudulently in contravention of New York’s public policy.

A. Due Process

It is incontrovertible that the English judicial system provides impartial tribunals and “procedures compatible with the requirements of due process of law.” See, e.g., Roby v. Corp. of Lloyd’s, 996 F.2d 1353, 1363 (2d Cir.1993) (noting that “United States courts consistently have found [English courts] to be neutral and just forums”); Colonial Bank v. Worms, 550 F.Supp. 55, 58 (S.D.N.Y.1982); see also Soc’y of Lloyd’s v. Ashenden, 233 F.3d 473, 476 (7th Cir.2000) (“Any suggestion that [the English] system of courts ‘does not provide impartial tribunals or procedures compatible with the requirements of due process of law’ borders on the risible.”). New York courts, in particular, have consistently upheld English judgments under the Recognition Act. See, e.g., CIBC, 100 N.Y.2d at 222 (stating that it “is beyond dispute” that the English judicial system affords litigants due process); Soc’y of Lloyd’s v. Grace, 278 A.D.2d 169, 718 N.Y.S.2d 327, 328 (1st Dep’t 2000); Porisini v. Petricca, 90 A.D.2d 949, 456 N.Y.S.2d 888, 890 (4th Dep’t 1982).

[*4]  Moreover, a New York court, analyzing a nearly identical English judgment in favor of Lloyd’s and against other Names, found that due process was satisfied. Grace, 718 N.Y.S.2d at 328. At least fourteen federal and state courts have reviewed judgments for Lloyd’s against other Names and have enforced them under state laws substantially similar to New York’s Recognition Act. See, e.g., Soc’y of Lloyd’s v. Turner, 303 F.3d 325 (5th Cir.2002); Ashenden, 233 F.3d at 476-81; Soc’y of Lloyd’s v. Mullin, 255 F.Supp.2d 468 (E.D.Pa.2003), aff’d, 96 Fed. Appx. 100 (3d Cir.2004); Soc’y of Lloyd’s v. Hudson, 276 F.Supp.2d 1110 (D.Nev.2003); Soc’y of Lloyd’s v. Shields, No. 03-0032 (M.D.Tenn. Oct. 1, 2003), aff’d, 118 Fed. Appx. 12 (6th Cir.2004); Soc’y of Lloyd’s v. Blackwell, No. 02CV448-J (AJB) (S.D.Cal. Feb. 24, 2003); Soc’y of Lloyd’s v. Byrens, No. 02CV449-J (AJB) (S.D.Cal. May 29, 2003); Soc’y of Lloyd’s v. Davies, No. 02-CV-1602-GET (N.D.Ga. Apr. 23, 2003); Soc’y of Lloyd’s v. Borgers, No. CV-02-0423-PHX-FJM (D.Az. Mar. 26, 2003), aff’d, 107 Fed. Appx. 887 (11th Cir.2004); Soc’y of Lloyd’s v. Bennett, No. 02-CV-204TC (D.Utah Nov. 12, 2003)[, aff'd 402 F.3d 932 (10th Cir. 2005)]; Soc’y of Lloyd’s v. Reinhart, No. 02-264-LFG/WWD-ACE (D.N.M. Sept. 30, 2002); Soc’y of Lloyd’s v. Webb, 156 F.Supp.2d 632 (N.D.Tex.2001); Soc’y of Lloyd’s v. Rosenberg, No. 02-1195 (E.D.Pa. Aug. 12, 2002); Soc’y of Lloyd’s v. Collins, No. 00-713-CA-22 (Fla. Cir. Ct. June 4, 2003)[ aff'd, 874 So.2d 672 (4th Dist. 2004)].

Defendants argue that this Court cannot enforce the English Judgments because the English Court failed to afford defendants due process. Rather than focusing on the English judicial system, defendants urge this Court to examine the particular proceedings. (Defendants’ Memorandum in Opposition to Summary Judgment, dated May 20, 2004 (“Defs.Mem.”) at 10-18.) However, the Recognition Act directs this Court to examine the fairness of the English system, rather than evaluate the individual action. CIBC, 100 N.Y.2d at 222 (“[T]he relevant inquiry under C.P.L.R. 5304(a) is the overall fairness of England’s legal ’system.” ’); see Ashenden, 233 F.3d at 477 (construing Illinois’ Recognition Act and holding that assessing due process on a case-by-case basis would “be inconsistent with providing a streamlined, expeditious method for collecting money judgments rendered by courts in other jurisdictions”).

Even considering defendants’ specific challenges to the English proceedings, defendants have not demonstrated that the English courts failed to provide them due process. The undisputed evidence shows that defendants were provided sufficient notice of the claims against them as well as an opportunity to present their arguments in defense. (Compl. Exs. 11, 12; Demery Decl. Exs. 1, 2; Pl. 56.1 Stmt. ¶¶ 15-17, 20.) See Grace, 718 N.Y.S.2d at 328 (enforcing English judgments obtained by Lloyd’s against Names because they “were afforded notice an opportunity to be heard in the underlying English action and, accordingly … the basic requisites of due process were met”). Indeed, the defendants contested the claims against them in the English Court through counsel but were unsuccessful. (Pl. 56.1 Stmt. ¶ 20; Defs. 56.1 Stmt. ¶¶ 44- 46).

[*5]  Accordingly, this Court agrees with the other courts to consider this issue and holds that the English judicial system comports with the principles of due process and that the English Judgments for Lloyd’s are conclusive and final. As such, they are enforceable under New York’s Recognition Act. See N.Y. C.P.L.R. § 5302-03.

B. Discretionary Non-Enforcement of the English Judgments

Defendants also argue that this Court should exercise its discretion under C.P.L.R. § 5304(b) not to enforce the English Judgments. Specifically, defendants argue that Lloyd’s fraudulently induced them to enter the General Undertaking, that their entire relationship with Lloyd’s was steeped in fraud, and that the English Court’s failure to consider defendants’ fraud defenses is repugnant to New York’s public policy. (Defs. Mem. at 15—24.) See N.Y. C.P.L.R. § 5304(b)(3)-(4).

With these arguments, defendants attempt to stretch this Court’s discretion under § 5304(b) beyond its narrow limits. The proper inquiry is not whether the underlying relationship that gives rise to the plaintiff’s claims is tinged with fraud, but whether the foreign judgment itself “was obtained by fraud.” N.Y. C.P.L.R. § 5304(b)(3); see Ackermann v. Levine, 788 F.2d 830, 841 (2d Cir.1986); Koehler v. Bank of Bermuda Ltd., No. M18-302 (CSH), 2004 WL 444101, at *15-16 (S.D.N.Y. Mar. 10, 2004); Fairchild, Arabatzis & Smith, Inc. v. Prometco (Produce & Metals) Co., 470 F.Supp. 610, 615 (S.D.N.Y.1979); see also Mullin, 255 F.Supp.2d at 473 (“Mullin presents no evidence that the English Judgment (as opposed to Mullin’s assent to the General Undertaking) was fraudulently obtained, and thus the Court rejects his contention to the contrary.”). Defendants have presented no evidence that Lloyd’s worked a fraud on the English Court.

Echoing their due process arguments, defendants further contend that the manner in which the English Judgments was rendered flies in the face of New York public policy because the English Courts declined to consider defendants’ fraud defenses. (Defs. Mem. at 21-24.) However, the English Court acknowledged the Names’ defenses but held that the “pay now, sue later” clause required them to be shelved until another proceeding. (Defs. 56.1 Stmt. ¶ 44.) The English Court interpreted the “pay now, sue later” clause to “not exclude or limit [Lloyd’s] liability for fraud or on any other basis. Its effect is and only is to insulate, as a matter of procedure, claims for the premium from counterclaims or set-offs asserted by the reinsured. It neither excludes nor necessarily postpones such cross-claims.” Wilkinson, slip op. at 40. The English Court of Appeal affirmed that ruling, holding that the clause only precluded the Names’ fraud claims from being raised in Lloyd’s’ action to collect the Equitas Premiums. Fraser, 1999 Lloyd’s Rep. 156; Soc’y of Lloyd’s v. Lyon (C.A. July 31, 1997) (attached as an exhibit to plaintiff’s brief). As such, the Names were free to assert these claims in other proceedings.

[*6]  Thus, just as the New York Appellate Division held in a similar case, the English Judgments are enforceable and consistent with public policy because “defendants have effective and viable remedies in the English courts.” Grace, 718 N.Y.S.2d at 328; see also, e.g., Turner, 303 F.3d at 333 (holding that Lloyd’s’ action to collect the Equitas Premiums is not contrary to Texas public policy); Ashenden, 233 F.3d at 478-79 (Illinois public policy); Mullin, 255 F.Supp.2d at 474-78 (Pennsylvania public policy), aff’d, 96 Fed. Appx. at 103. The fact that the English Court issued judgments against defendants despite their fraud defenses does not render Lloyd’s’ fundamental breach of contract cause of action one “repugnant to the public policy” of New York. See Flisfeder v. Jardine, 300 A.D.2d 1132, 751 N.Y.S.2d 890, 891 (4th Dep’t 2002) (“CPLR 5304(b)(4) may not be invoked unless enforcement of such judgment would result in the recognition of a transaction which is inherently vicious, wicked or immoral, and shocking to the prevailing moral sense.” (internal quotations and alterations omitted)). Therefore, this Court lacks discretion under C.P.L.R. § 5304(b) to bar enforcement of the English Judgments.

CONCLUSION

Accordingly, for the foregoing reasons, plaintiff’s motion for summary judgment against defendants Minna Jane Edelman and Kenneth Gross is granted. The parties are directed to submit a proposed money judgment to the Court by April 4, 2005.