Transit Cas. Co. v. Certain Underwriters at Lloyd's of London

• Citation: 119 F.3d 619
• Decision Date: 10 July 1997
• Docket Number: A,No. 553,No. 96-2532,553,96-2532
• Parties: TRANSIT CASUALTY COMPANY, in Receivership, Appellee, v. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, who are members of Syndicates subscribers to contracts of Reinsurance with Transit Casualty Company; C.J. Warrilow, An Underwriter at Lloyd's of London, individually, and on Behalf of Certain Underwriters at Lloyd's of London Who are Members of the Syndicateppellants. The Reinsurance Association of America, Amicus Curiae.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 619

119 F.3d 619

TRANSIT CASUALTY COMPANY, in Receivership, Appellee, v. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, who are members

of Syndicate No. 553, As subscribers to contracts of

Reinsurance with Transit Casualty Company; C.J. Warrilow,

An Underwriter at Lloyd's of London, individually, and on

Behalf of Certain Underwriters at Lloyd's of London Who are

Members of the Syndicate No. 553, Appellants.

The Reinsurance Association of America, Amicus Curiae.

No. 96-2532.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 18, 1996.

Decided July 10, 1997.

Robert A. Knuti (argued), Chicago, IL, for Appellants.

Paula Marie Young (argued), St. Louis, MO, for Appellee.

Before McMILLIAN, Circuit Judge, HENLEY, Senior Circuit Judge, and MORRIS SHEPPARD ARNOLD, Circuit Judge.

McMILLIAN, Circuit Judge.

Plaintiff Transit Casualty Company, in Receivership (the receivership), originally filed, in Missouri state court, a petition and motion for order to show cause based upon the failure to pay reinsurance recoveries and the interference with the liquidation of Transit Casualty Company (Transit) by certain underwriters at Lloyd's of London who are members of Syndicate No. 553 in London (the underwriters). The underwriters subsequently removed the case to federal district court. The underwriters now appeal from a final order entered in the United States District Court ¹ for the Western District of Missouri remanding the cause of action to the state court and denying their motion to stay the execution of the remand order. Transit Cas. Co., in Receivership v. Certain Underwriters at Lloyd's of London, No. 96-4173-CV-C-2 (W.D. Mo. June 10, 1996). For reversal, the underwriters argue the district court erred in holding that (1) Missouri's arbitration laws govern this case and (2) the service of suit clause contained in the parties' reinsurance agreements waived the underwriters' right to remove this cause of action. For the reasons discussed below, we dismiss the appeal pursuant to 28 U.S.C. § 1447(d) for lack of jurisdiction.

I. Background

Transit is an insurance company which was organized and incorporated in 1945 under the laws of Missouri. On December 3, 1985, the Circuit Court of Cole County, Missouri, acting as the receivership court, declared Transit insolvent and ordered liquidation pursuant to Mo.Rev.Stat. § 375.660 (1994). The receivership is proceeding with the liquidation of Transit and has approved certain claims on policies issued by Transit and reinsured by certain Lloyd's of London underwriters who, as members of Syndicate No. 553, subscribed to contracts of reinsurance with Transit.

On February 21, 1996, the receivership filed a petition and motion to show cause in the state court, alleging that the underwriters owe Transit $1,431,856.76 under three separate reinsurance agreements which became effective on December 1, 1978, January 1, 1981, and January 1, 1984. On May 6, 1996, the underwriters removed the case to federal district court pursuant to 9 U.S.C. § 205 (1994), which permits removal, before trial, of an action that relates to an arbitration agreement or award governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention), June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38, reprinted in 9 U.S.C.A. § 201 note (West Supp.1997). The underwriters sought to compel Transit to arbitrate its claims in accordance with an arbitration clause contained in the reinsurance agreements:

Art. XXII--Arbitration Clause

All disputes or differences arising out of this Agreement shall be submitted to the decision of two Arbitrators, one to be chosen by each party, and in the event of the Arbitrators failing to agree, to the decision of the Umpire to be chosen by the Arbitrators.

The goal of the Convention is to facilitate and stabilize international business transactions by promoting the enforcement of arbitral agreements in contracts involving international commerce. Threlkeld & Co. v. Metallgesellschaft Ltd. (London), 923 F.2d 245, 248, 250 (2d Cir.), cert. dismissed, 501 U.S. 1267, 112 S.Ct. 17, 115 L.Ed.2d 1094 (1991). An arbitration agreement or arbitral award falls under the Convention if it "aris[es] out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract, or agreement described in [9 U.S.C. § 2]." 9 U.S.C. § 202.

When Congress amended the Federal Arbitration Act (the FAA) ² in 1970 to implement the Convention, ³ it included the removal provision on which the underwriters based their petition for removal:

Where the subject matter of an action or proceeding pending in a State court relates to an arbitration agreement or award falling under the Convention [on Recognition and Enforcement of Foreign Arbitral Awards], the defendant or the defendants may, at any time before the trial thereof, remove such action or proceeding to the district court of the United States for the district and division embracing the place where the action or proceeding is pending. The procedure for removal of causes otherwise provided by law shall apply, except that the ground for removal provided in this section need not appear on the face of the complaint but may be shown in the petition for removal.

9 U.S.C. § 205. In seeking to compel arbitration of the dispute, the underwriters relied on 9 U.S.C. § 206, which provides that "a court having jurisdiction under this chapter may direct that arbitration be held in accordance with the agreement at any place therein provided for, whether that place is within or without the United States. Such court may also appoint arbitrators in accordance with the provisions of the agreement."

On May 20, 1996, the receivership filed a motion in the district court to remand the case to state court on the grounds that: (1) the service-of-suit clause contained in the parties' reinsurance agreements waives the underwriters' right of removal; (2) removal was defective; (3) the district court lacks subject matter jurisdiction because, under the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 (1994), Missouri's arbitration laws supersede the Convention; (4) the district court lacks subject matter jurisdiction over two show cause orders issued by the state court sui generis; and (5) the district court must abstain under the Burford ⁴ and Colorado River ⁵ abstention doctrines. On June 5, 1996, the district court granted the receivership's motion for remand. Transit Cas. Co., in Receivership v. Certain Underwriters at Lloyd's of London, No. 96-4173-CV-C-2 (W.D. Mo. June 5, 1996). In its June 5, 1996, order, the district court indicated that it would issue a supporting memorandum on or before June 10, 1996. ⁶ Id. On June 6, 1996, the underwriters filed a motion to stay the execution of the remand pending their appeal of the remand order. On June 10, 1996, the district court issued its memorandum opinion and order. Transit Cas. Co., in Receivership v. Certain Underwriters at Lloyd's of London, No. 96-4173-CV-C-2 (W.D. Mo. June 10, 1996) (hereinafter "slip op."). While the receivership presented a multitude of arguments for remanding this cause of action, the district court relied on only two reasons for granting the remand. Because the basis of the remand is dispositive of this court's ability to review the district court's order, we discuss in detail the district court's analysis.

In the district court, the receivership relied in part on Missouri's Uniform Arbitration Act, which provides that written agreements to arbitrate disputes are valid, enforceable, and irrevocable, except in contracts of insurance and contracts of adhesion. Mo.Rev.Stat. § 435.350 (1994). The receivership posited that Missouri's arbitration statute is not preempted by the FAA or the Convention because the McCarran-Ferguson Act preserves state statutes enacted "for the purpose of regulating the business of insurance" and excepts them from the usual rules of preemption. 15 U.S.C. § 1012(b). The McCarran-Ferguson Act provides that "[n]o Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any State for the purpose of regulating the business of insurance ... unless such Act specifically relates to the business of insurance." Id. The receivership maintained that because neither the Convention nor the FAA specifically relates to the business of insurance neither preempts Missouri's arbitration statute.

In determining whether the Missouri arbitration statute is saved from preemption by the McCarran-Ferguson Act, the district court considered: first, whether the federal statutes specifically relate to the business of insurance; second, whether the state law at issue was enacted for the purpose of regulating the business of insurance; and third, whether the application of the federal laws invalidates, impairs, or supersedes the state law. Slip op. at 3, citing United States Dep't of Treasury v. Fabe, 508 U.S. 491, 501, 113 S.Ct. 2202, 2208, 124 L.Ed.2d 449 (1993) (the McCarran-Ferguson Act reverses the normal rules of preemption by imposing a rule that state laws enacted "for the purpose of regulating the business of insurance" do not yield to conflicting federal statutes unless a federal statute specifically requires otherwise); see also Murff v. Professional Med. Ins. Co., 97 F.3d 289, 291 (8th Cir.1996) (applying same three-part test), cert. denied, --- U.S. ----, 117 S.Ct. 2452, 138 L.Ed.2d 210 (1997). Both parties agreed that neither the FAA nor the Convention specifically relates to the business of insurance. Slip op. at 3. The district court then determined that the Missouri arbitration statute was enacted for the purpose of regulating the business of insurance because it is aimed at protecting or regulating the performance of an insurance contract. Id. at 4-5. It further found that the application of the Convention to the parties' reinsurance agreements would impair,...