General Star Nat. v. Administratia Asigurarilor De

Decision Date07 May 2002
Docket NumberNo. 01-3002.,01-3002.
Citation289 F.3d 434
PartiesGENERAL STAR NATIONAL INSURANCE COMPANY, f/k/a Monarch Insurance Company of Ohio, Plaintiff-Appellee, v. ADMINISTRATIA ASIGURARILOR de STAT; Carom, S.A.; Asigurarea Romaneasca, S.A., Defendants, ASTRA, S.A., Defendant-Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

Kevin P. Foley (briefed), Reminger & Reminger, Columbus, OH, Daniel Joseph Neppl (argued and briefed), Michael, Best & Friedrich, Chicago, IL, for Plaintiff-Appellee.

David A. Kopech (argued and briefed), Ellis, Venable & Busam, Columbus, OH, for Defendant-Appellant.

Before NORRIS, SILER, and GILMAN, Circuit Judges.

OPINION

GILMAN, Circuit Judge.

General Star National Insurance Company (General Star), an Ohio corporation, brought suit in federal district court against Astra, S.A. (Astra), a Romanian state-owned insurance company, asserting claims for breach of contract and unjust enrichment. Astra failed to respond to the complaint. General Star then moved for a default judgment, which the district court granted. Nearly one year later, Astra filed a motion to vacate the default judgment, which the district court denied. For the reasons set forth below, we AFFIRM the judgment of the district court.

I. BACKGROUND

Between 1974 and 1981, General Star entered into five reinsurance contracts with Administratia Asigurarilor de Stat (ADAS), which was then a state-owned insurance company responsible for providing all insurance services in Romania. The contracts provided that General Star would remit a portion of its premiums from certain insurance policies to ADAS. In return, ADAS agreed to assume a proportionate share of any losses that General Star incurred on these policies.

General Star and ADAS maintained their business relationship until 1991, when ADAS was dissolved by a Romanian governmental decree. The decree was issued shortly after democratic reformers overthrew the communist regime that had governed Romania for nearly 50 years. Three companies were created by the new Romanian government to take over ADAS's insurance operations. One of these companies, Astra, was ordered to assume ADAS's international and reinsurance interests. The two other companies, Carom, S.A. (Carom), and Asigurarea Romaneasca (Asirom), assumed responsibility for ADAS's remaining insurance endeavors.

General Star alleges that it began having difficulty collecting the monies due under the reinsurance contracts at approximately the same time that ADAS was dissolved. On October 14, 1998, General Star filed suit against ADAS, Astra, Carom, and Asirom in the United States District Court for the Southern District of Ohio, asserting claims for breach of contract and unjust enrichment. The complaint sought recovery of $922,107 in past due payments and $1,618,994 in additional expenses.

General Star sought to notify the defendants of this suit in two ways. First, two days after filing the complaint, General Star faxed a copy to Astra. Then, on November 23, 1998, General Star had a copy of the summons and complaint delivered to Mendes and Mount, a New York law firm designated in the reinsurance contracts as ADAS's agent for receiving service.

The defendants, however, failed to file any response to General Star's complaint in the weeks following Mendes and Mount's receipt of the documents. Approximately two months after the complaint was filed, General Star moved the district court for a default judgment, pointing out that the defendants had failed to file a response within 20 days of receiving service of process as required by Rule 12(a)(1)(A) of the Federal Rules of Civil Procedure. The district court agreed, and therefore entered a default judgment against the defendants on March 17, 1999.

Almost one year later, on March 16, 2000, the defendants filed a motion to vacate the default judgment pursuant to Rule 60(b) of the Federal Rules of Civil Procedure. They claimed that the default judgment was void because of an alleged lack of subject matter jurisdiction and improper service of process. The district court agreed that the judgment was void as to Carom and Asirom, neither of which is ADAS's successor-in-interest for the purposes of the reinsurance contracts at issue. But the court determined that the judgment was valid as to Astra, which it concluded is the successor to ADAS with regard to the reinsurance contracts. This timely appeal followed.

II. ANALYSIS

Astra maintains that the district court erred in denying its motion to vacate the default judgment. This motion was brought pursuant to Rule 60(b)(4) of the Federal Rules of Civil Procedure, which provides that a court may grant relief from a judgment that is void. We review de novo a district court's denial of a Rule 60(b)(4) motion. Jalapeno Prop. Mgmt., LLC v. Dukas, 265 F.3d 506, 515 (6th Cir.2001).

A. Subject matter jurisdiction

Our analysis begins with Astra's contention that the district court lacked subject matter jurisdiction over the present case, thereby rendering the default judgment void. Antoine v. Atlas Turner, Inc., 66 F.3d 105, 108 (6th Cir.1995) ("A judgment is void under 60(b)(4) if the court that rendered it lacked jurisdiction of the subject matter ....") (internal quotation marks omitted). The district court based its exercise of subject matter jurisdiction on 28 U.S.C. § 1330(a), which governs the jurisdiction of the federal district courts in actions against a foreign state. Section 1330(a) provides as follows:

The district courts shall have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement.

Astra concedes that, as an agency of the Romanian government, it is a "foreign state" for the purposes of § 1330(a), and that this section therefore governs whether the district court had subject matter jurisdiction over the present case. But Astra argues that the district court misapplied § 1330(a). Specifically, Astra maintains that the district court erroneously concluded that Astra was not entitled to immunity pursuant to 28 U.S.C. § 1605(a)(1) and (2).

Section 1605(a)(1) provides that a foreign state is not entitled to sovereign immunity if it either expressly or implicitly waives that immunity. The district court held that ADAS implicitly waived its sovereign immunity when it agreed in the reinsurance contracts "to submit to the jurisdiction of any court of competent jurisdiction of the United States." Because the court determined that Astra is a successor-in-interest to ADAS, it concluded that Astra is bound by ADAS's implicit waiver of sovereign immunity.

Section 1605(a)(2) provides that a foreign state lacks sovereign immunity in any suit that "is based upon a commercial activity carried on in the United States by the foreign state...." The district court reasoned that each reinsurance contract between General Star and ADAS is a commercial transaction within the United States, such that ADAS would have no immunity in the present case. Again, having decided that Astra is a successor-in-interest to ADAS, the court determined that § 1605(a)(2) provides an alternative basis for concluding that Astra lacks sovereign immunity.

Astra also contends that the district court lacked subject matter jurisdiction because each of the reinsurance contracts contains a clause requiring the parties to submit any disputes arising under the contract to mandatory arbitration. It therefore maintains that the issue of whether it is a successor-in-interest to ADAS may be resolved only through the arbitration process.

But "[a]n agreement to arbitrate may be waived by the actions of a party which are completely inconsistent with any reliance thereon." Germany v. River Terminal Ry. Co., 477 F.2d 546, 547 (6th Cir.1973) (per curiam). Although a waiver of the right to arbitration is "not to be lightly inferred," MicroStrategy, Inc. v. Lauricia, 268 F.3d 244, 249 (4th Cir.2001) (internal quotation marks omitted), a party may waive the right by delaying its assertion to such an extent that the opposing party incurs actual prejudice. Doctor's Assocs., Inc. v. Distajo, 107 F.3d 126, 131 (2d Cir.1997) (recognizing that a party waives the right to arbitrate where it delays the invocation of that right to the extent that the opposing party incurs "unnecessary delay or expense") (internal quotation marks omitted).

In the present case, Astra did not assert its purported right to arbitrate until it filed its motion to vacate the default judgment on March 16, 2000. General Star gave Astra actual notice of the lawsuit on October 16, 1998. Thus, for 17 months, Astra remained idle while General Star incurred the costs associated with this action. Astra, moreover, sought arbitration only after the district court had entered a default judgment against it. Under these circumstances, we believe that Astra has waived its right to arbitrate. Menorah Ins. Co. v. INX Reinsurance Corp., 72 F.3d 218, 222 (1st Cir.1995) (concluding that the defendant waived its right to arbitrate where it "chose not to invoke arbitration from July 1992 until October 1993 and [the plaintiff] bore the costs of proceeding to try to obtain the sums it thought owed"); Stone v. E.F. Hutton & Co., 898 F.2d 1542, 1543 (11th Cir.1990) (per curiam) (holding that the defendant waived its right to arbitrate where it delayed its assertion of that right for 20 months).

Astra further maintains that even if the district court had the authority to resolve whether Astra was a successor-in-interest to ADAS, the court erred in resolving the merits of the issue. It points out that ADAS was created by the former communist regime in Romania, while Astra...

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