Society of Lloyd's v. Siemon-Netto

• Decision Date: 08 August 2006
• Docket Number: No. 04-7214.,04-7214.
• Citation: 457 F.3d 94
• Parties: SOCIETY OF LLOYD'S, Appellee v. Gillian Mary SIEMON-NETTO and Uwe Siemon-Netto, Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

457 F.3d 94

SOCIETY OF LLOYD'S, Appellee v. Gillian Mary SIEMON-NETTO and Uwe Siemon-Netto, Appellants.

No. 04-7214.

United States Court of Appeals, District of Columbia Circuit.

Argued October 28, 2005.

Decided August 8, 2006.

Appeal from the United States District Court for the District of Columbia (No. 03cv01524).

Russel H. Beatie argued the cause and filed the briefs for appellants.

Stephen J. Jorden argued the cause and filed the brief for appellee.

Before: SENTELLE and GARLAND, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge.

Defendants Gillian and Uwe Siemon-Netto are two among the hundreds of "Names" whom the Society of Lloyd's has sued for nonpayment of reinsurance premiums. The English High Court of Justice, Queen's Bench Division, entered money judgments in favor of Lloyd's against the Siemon-Nettos. Lloyd's then sued to enforce those judgments in the United States District Court for the District of Columbia. The district court granted summary judgment in favor of Lloyd's, and we now affirm.

I

Eight circuit courts have set forth the background information that is relevant to this appeal.¹ Seeing no need to reinvent the wheel, we take our description of the context of this litigation from the Fifth Circuit's clear explications in Society of Lloyd's v. Turner, 303 F.3d 325 (5th Cir. 2002), and Haynsworth v. The Corporation, 121 F.3d 956 (5th Cir.1997). See also Society of Lloyd's v. Reinhart, 402 F.3d 982, 988 (10th Cir.2005) ("Numerous courts have summarized the basic facts applicable to the underlying litigation, and these facts are not in dispute.").

A

The Parliament of the United Kingdom authorized the Society of Lloyd's to regulate a London insurance market through a series of Parliamentary Acts, known as the "Lloyd's Acts," passed between 1871 and 1982. In Haynsworth, the Fifth Circuit explained the structure of the Lloyd's market as follows:

Lloyd's is a 300-year-old market in which individual and corporate underwriters known as "Names" underwrite insurance. The Corporation of Lloyd's, which is also known as the Society of Lloyd's, provides the building and personnel necessary to the market's administrative operations. The Corporation is run by the Council of Lloyd's, which promulgates "Byelaws," regulates the market, and generally controls Lloyd's administrative functions.

Lloyd's does not underwrite insurance; the Names do so by forming groups known as syndicates. Within each syndicate, participating Names underwrite for their own accounts and at their own risk.... Each syndicate is managed and operated by a Managing Agent, who owes the Names a contractual duty to conduct the syndicate's affairs with reasonable care....

Names must become members of Lloyd's in order to participate in the market. Prospective members are solicited and assisted in the process of joining by Member's Agents, whose duties to the Names are fiduciary in nature. Names must pass a means test to ensure their ability to meet their underwriting obligations, post security (typically, a letter of credit), and personally appear in London before a representative of the Council of Lloyd's to acknowledge their awareness of the various risks and requirements of membership, and in particular the fact that underwriting in the Lloyd's market subjects them to unlimited personal liability.

Participation in the market also requires the execution of a number of contracts and agreements, the most important of which is the General Undertaking, the standardized contract between Lloyd's and the individual Names. Names additionally must enter into a Member's Agent's agreement, the contract that defines the relationship between the Name and his chosen Member's Agent, and one or more Managing Agent's agreements, which define the relationships between the Name and the Managing Agents of the syndicates he wishes to join. Under the present version of Lloyd's Byelaws, each of these agreements must contain clauses designating England as the forum in which disputes are to be resolved and choosing English law as the law governing such disputes.

Haynsworth, 121 F.3d at 958-59.

The Turner court described the insurance crisis that led to lawsuits like the one now before us:

In the late 1980s and early 1990s, Lloyd's underwriters incurred billions of dollars of losses, due in large part to toxic tort cases. Because of the enormity of the outstanding liabilities and because of the Names' inability to satisfy their underwriting obligations, the very existence of Lloyd's was threatened. To ensure both the survival of the market and the payment of policyholders' claims, as well as to protect the Names, Lloyd's devised the Reconstruction and Renewal (R & R) plan, which provided reinsurance for all the Names' pre-1993 liabilities from an independent company, Equitas Reinsurance Ltd. ("Equitas"). Equitas was funded, in part, by the reinsurance premiums paid by the Names.

....

According to Lloyd's, 95% of the Names accepted the offer and paid the reinsurance premium.² The remaining 5% ... refused to accept the offer and refused to pay. As Lloyd's was contractually authorized to do, Lloyd's appointed a substitute agent for the non-accepting Names. The substitute agent signed and accepted the Equitas reinsurance contract on behalf of the resistant Names.

Turner, 303 F.3d at 327-28.

The Turner court further explained the genesis of the referenced "contractual[ ] authoriz[ation]" that permitted Lloyd's to appoint a substitute agent for the recalcitrant Names:

All Names signed a General Undertaking in which they agreed to "comply with the provisions of Lloyd's Acts 1871-1982, any subordinate legislation made thereunder, [and any] requirement made or imposed by the Council [of Lloyd's]." Pursuant to Lloyd's Acts 1982, Schedule 2, § (18)(b), Lloyd's obtained the power to appoint substitute agents when the Council deemed it necessary. Through a series of bylaws and resolutions under this Act, the Council was authorized to appoint a substitute agent on behalf of Names specifically "to execute the Reinsurance Contract for itself and on behalf of the Members in such form as the council may direct ...." Lloyd's Byelaw No. 20 of 1983; Byelaw No. 82 of 1995; AUA9 Resolution of 1996.

Turner, 303 F.3d at 328 n. 3.

Finally, the Fifth Circuit described the English litigation against the recalcitrant Names, upon which the English judgments in this case are ultimately founded:

Lloyd's paid the Equitas premiums for those Names, and Equitas assigned its right to collect the premiums to Lloyd's. In late 1996, Lloyd's brought collection proceedings in England against the recalcitrant Names ....

The lengthy litigation that followed in England took place in a series of test cases. First, the English courts tried the Leighs case, [Society of Lloyd's v. Leighs, [1997] C.L.C. 759 (Q.B.)], to determine whether Lloyd's was entitled to appoint substitute agents to bind the non-settling Names to the R & R Plan, to enforce the Equitas contact, and to collect the premiums. The court found for Lloyd's, but allowed the plaintiffs to pursue their claims of fraudulent inducement against Lloyd's in a separate action. The English Court of Appeal upheld the trial court's decision, [see Society of Lloyd's v. Leighs, [1997] EWCA (Civ) 2283], and leave to appeal was denied by the Judicial Committee of the House of Lords, the English equivalent of the United States Supreme Court.

The Names' claims for fraud were brought all together in the Jaffray action, [Society of Lloyd's v. Jaffray, [2000] EWHC (Comm) 51], ... [in which] the English courts found in favor of Lloyd's ....

... Lloyd's sought summary judgment against the Names for the Equitas premium amount in the Fraser litigation. In this litigation, the Names challenged Lloyd's calculation of the reinsurance premium .... After lengthy review, the trial court ruled against the Names on this claim, and the English Court of Appeal denied leave to appeal. [See Society of Lloyd's v. Fraser, [1998] EWCA (Civ) 1378.]

Turner, 303 F.3d at 328-29.

B

This brings us to the present litigation. Gillian and Uwe Siemon-Netto were among the Names who neither accepted their settlement offers nor paid the reinsurance premium for their outstanding underwriting liabilities. Nor did they take the opportunity afforded by the English courts to pursue separate fraud claims against Lloyd's. See Society of Lloyd's v. Siemon-Netto, No. 03-1524, Mem. Op. at 3 (D.D.C. Aug. 20, 2004).

On March 24, 1997, Lloyd's sued the Siemon-Nettos in England for breach of their contractual obligations to pay the reinsurance premiums. The Siemon-Nettos' counsel entered an appearance on their behalf. The English courts granted summary judgment against the Siemon-Nettos in the Fraser case, see Society of Lloyd's v. Fraser, [1998] EWCA (Civ) 1378, and on December 21, 1998, entered individual money judgments against Gillian Siemon-Netto for £280,055.72 and against Uwe Siemon-Netto for £87,109.97, see Society of Lloyd's v. Gillian Mary Siemon-Netto, Judgment (J.A. 116); Society of Lloyd's v. Uwe Siemon-Netto, Judgment (J.A. 119).

On July 15, 2003, Lloyd's filed suit against the Siemon-Nettos in the United States District Court for the District of Columbia, seeking recognition and enforcement of the English judgments under the District's Uniform Foreign Money Judgments Recognition Act of 1995 ("Recognition Act"), D.C.Code § 15-381 et seq. Venue was based on the Siemon-Nettos' status as District residents and jurisdiction on diversity of citizenship. See Compl. ¶¶ 6, 7. The Siemon-Nettos answered Lloyd's complaint and asserted a number of affirmative defenses and counterclaims. Lloyd's filed motions to strike the affirmative defenses under Federal Rule of Civil Procedure 12(f) and to dismiss the counterclaims pursuant to Rule 12(b).

The district court granted Lloyd's motions to strike...