Society of Lloyd's v. Reinhart
| Decision Date | 23 March 2005 |
| Docket Number | No. 02-2301.,No. 03-4094.,No. 03-4082.,No. 03-4065.,No. 03-4183.,02-2301.,03-4065.,03-4082.,03-4094.,03-4183. |
| Citation | 402 F.3d 982 |
| Parties | SOCIETY OF LLOYD'S, Plaintiff-Appellee, v. Richard A. REINHART, Defendant-Appellant. Society of Lloyd's, Plaintiff-Appellee, v. Grant R. Caldwell, David L. Gillette, James R. Kruse, Edward W. Muir, and Kent B. Petersen, Defendants-Appellants. Society of Lloyd's, Plaintiff-Appellee, v. Stephen M. Harmsen; Kelly C. Harmsen, Defendants-Appellants. Society of Lloyd's, Plaintiff-Appellee, v. Wallace R. Bennett, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
George R. McFall (Patrick J. Rogers, Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, NM, and Theodore W. Grippo, Jr., Lindenbaum Coffman Kurlander Brisky and Grippo, Ltd., Chicago, IL, with him on the briefs), Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, NM, for Defendant-Appellant in Case Number 02-2301.
Barry D. Williams (Rikki L. Quintana with him on the brief) Krehbiel, Bannerman & Williams, P.A., Albuquerque, NM, for Plaintiff-Appellee in Case Number 02-2301.
Matthew L. Lalli (Alan L. Sullivan and Troy L. Booher, Snell & Wilmer, L.L.P., Salt Lake City, UT, and Theodore W. Grippo, Jr., Lindenbaum Coffman Kurlander Brisky and Grippo, Ltd., Chicago, IL with him on the briefs) Snell & Wilmer, L.L.P., Salt Lake City, UT, for Defendants-Appellants in Case Number 03-4065.
Steven A. Wuthrich, Montpelier, ID, for Defendants-Appellants in 03-4082.
Wallace R. Bennett, Defendant-Appellant, filed briefs pro se in Case Numbers 03-4094 and 03-4183.
Michael N. Zundel (James A. Boevers and Thomas R. Barton with him on the briefs) Prince, Yeates & Geldzahler, Salt Lake City, UT, for Plaintiff-Appellee in 03-4065, 03-4082, 03-4094 and 03-4183.
Before SEYMOUR, HENRY, and LUCERO, Circuit Judges.
This consolidated appeal involves the Plaintiff-Appellee Lloyd's of London's request for the court's recognition and enforcement of money judgments issued by the High Court of Justice, Queen's Bench Division, London, England, in its favor against each of the defendants. Lloyd's obtained money judgments in England against each of the six New Mexicans (the "New Mexico Names") and the nine Utahns (the "Utah Names") (collectively, the "Names") in connection with underwriting obligations. Lloyd's then brought actions in the United States District Court for the Districts of New Mexico and Utah seeking recognition of these judgments as final and enforceable, entitled to full faith and credit in New Mexico and Utah, respectively. Each federal district court granted summary judgment in favor of Lloyd's. Of the Utah Names, one defendant reached a settlement with Lloyd's, leaving eight in this litigation. Five of the six New Mexico Names reached settlements with Lloyd's. We have consolidated these cases for disposition on appeal.
On appeal, the New Mexico Name raises several arguments. First, he argues that the English judgment deprived him of due process under New Mexico's Uniform Foreign Money-Judgment Recognition Act. Second, the New Mexico Name maintains that the English judgment stemmed from an action that is repugnant to New Mexico's public policy as the judgment: (a) violates New Mexico's securities laws; (b) is based on unconscionable contracts; (c) stems from adhesion contracts; (d) comprises unlawful cognovit notes, (e) is based on illusory contacts; and (f) violates the New Mexico Unfair Practices Act.
The Utah Names offer similar arguments. They contend that the district court cannot enforce the English judgments under Utah law, because the English system of jurisprudence is incompatible with American standards of due process, and that they did not receive an opportunity for a full and fair trial. The defendants also maintain that the English judgments conflict with Utah public policy. One Utah Name questions whether diversity jurisdiction exists, and also challenges the enforcement of the English judgments as violative of Utah securities laws. Two Utah Names also contend that the district court's approval of the English post-judgment interest of eight percent per annum was incorrect.
We hold that the Utah and New Mexico Names received due process under the English system of jurisprudence and that, in the thirty-two days of hearing before English trial and appellate courts, they received an opportunity for a full and fair trial. As to the New Mexico Name, specifically, the English legal proceedings provided ample due process pursuant to New Mexico's Uniform Foreign Money-Judgment Recognition Act. We also hold that the Lloyd's judgments are not repugnant to New Mexico's public policy.
As to the Utah Names, we hold that the English proceedings satisfied Utah's due process requirements and the English judgments do not conflict with Utah's public policy. We also affirm the district court's denial of a motion for discovery and a motion to certify questions of law to the Utah Supreme Court. We hold that the parties in this case are diverse, and that enforcement of the English judgments does not violate Utah's securities laws. Finally, we reverse the district court's determination that Lloyd's English judgments should accrue interest at the English post-judgment interest rate.
Numerous courts have summarized the basic facts applicable to the underlying litigation, and these facts are not in dispute. See Soc'y of Lloyd's v. Ashenden, 233 F.3d 473 (7th Cir.2000); Haynsworth v. The Corp., 121 F.3d 956 (5th Cir.1997); Allen v. Lloyd's of London, 94 F.3d 923 (4th Cir.1996); Soc'y of Lloyd's v. Webb, 156 F.Supp.2d 632 (N.D.Tex.2001). We shall summarize the pertinent facts here, borrowing heavily from the detailed and well-reasoned Webb decision.
Lloyd's is not an insurer, but rather is the regulator of an insurance market located in London. Through Parliamentary Acts, specifically the Lloyd's Acts of 1871-1982, Parliament created Lloyd's and authorized it to regulate the English insurance market. Individual and corporate members of Lloyd's known as "Names" underwrite insurance. The New Mexico defendants and Utah defendants became Names in the Lloyd's market between the late 1970's and late 1980's.
The Names underwrite insurance by forming groups known as syndicates. Names are passive investors in the sophisticated scheme, but along with potential profits they may incur substantial personal and direct liability with respect to a portion of a syndicate's risk in the Lloyd's market. The liability of each Name is several rather than joint. As a condition of becoming members of Lloyd's, Names enter into agreements governing their membership in Lloyd's and their underwriting in the Lloyd's market. At issue here is the General Undertaking Agreement, which obligated the New Mexico and Utah Names, and all other Names, to comply with the Parliamentary Acts under which Lloyd's was created and to submit any dispute arising out of their memberships or underwriting at Lloyd's to the English courts for resolution pursuant to English law. Each Name "irrevocably agree[d] that the courts of England [had] exclusive jurisdiction to settle any dispute" arising out of the underwriting of insurance business, and agreed that such "[p]roceedings brought in the English courts [were] conclusive and binding upon any party and may be enforced in the courts of any other jurisdiction." Case No. 02-2301, Aplts' App. vol. I, at 43 (General Undertaking Agreement).
By the early 1980's, which is about the time that Lloyd's solicited the Utah and New Mexico Names,
Lloyds knew that it had problems with rising asbestos and toxic tort claims. The syndicates' reserves were inadequate to handle these rising claims and a committee known as the Asbestos Working Party was formed to gather information about the breadth of the problem. The problem was described as "the largest phenomenon that has ever hit the casualty insurance industry" and "the most significant legal and loss cost issue in the history of the industry." Information about these claims was not published in the marketplace, was omitted from the audit instructions, and was not published in Lloyds financial statements for the year. Although a letter was prepared that provided the necessary disclosures to the Names, it was merely placed in a file and never distributed to the intended Names. Simultaneously, Lloyds was campaigning in Parliament for passage of the Lloyds Act of 1982 which granted Lloyds and its governing body extraordinary bylaw-making powers and immunity. In exchange, Lloyds committed to providing better quality information to prospective Names. This promise was not fulfilled and Lloyds admitted to Parliament that it had not kept its promise. "The Council of Lloyds very much regrets that the undertaking to implement the recommendations... within 2 years of the Royal Assent has not been kept."
Webb, 156 F.Supp.2d at 635 (emphasis supplied) (internal citations omitted).
According to former Name and lead plaintiff in the fraud action against Lloyd's, Sir Peter Jaffray, "[t]he only way they could keep going was to suppress the asbestos information, cook the books to ensure they were still showing profits and go after new investors." Case No. 02-2301, Aplts' App. vol. I, at 84 (). Further,
[d]uring the five years that Lloyds failed to improve information disseminated to prospective Names, approximately 10,000 new Names had joined Lloyds, most of whom were U.S. investors.
Webb, 156 F.Supp.2d at 635. The New Mexico and Utah Names contend that the Lloyd's representative emphasized Lloyd's long history of profitability, its exclusive and selective members, its program of annual audits, and that the risk of "unlimited liability" had been of little...
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