842 F.2d 31 (2nd Cir. 1988), 256, Corcoran v. Ardra Ins. Co., Ltd.

Docket Nº:256, Docket 87-7478.
Citation:842 F.2d 31
Party Name:James P. CORCORAN, Superintendent of Insurance of the State of New York, and his successors in office as Superintendents of Insurance of the State of New York, as Liquidator of Nassau Insurance Company, in Liquidation, Plaintiff- Appellee, v. ARDRA INSURANCE COMPANY, LTD., Richard S. Diloreto, and Jeanne S. Diloreto, Defendants-Appellants.
Case Date:March 17, 1988
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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842 F.2d 31 (2nd Cir. 1988)

James P. CORCORAN, Superintendent of Insurance of the State

of New York, and his successors in office as Superintendents

of Insurance of the State of New York, as Liquidator of

Nassau Insurance Company, in Liquidation, Plaintiff- Appellee,


ARDRA INSURANCE COMPANY, LTD., Richard S. Diloreto, and

Jeanne S. Diloreto, Defendants-Appellants.

No. 256, Docket 87-7478.

United States Court of Appeals, Second Circuit

March 17, 1988

Argued Nov. 16, 1987.

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John S. Kinzey, New York City (Cecelia Kempler, Ronald J. Gizzi, LeBoeuf, Lamb, Leiby & MacRae, Joseph Termini, Termini & Epstein, New York City, on the brief), for plaintiff-appellee.

James D. Veach, New York City (Eugene A. Leiman, Mound, Cotton & Wollan, New York City, on the brief), for defendants-appellants.

Before KEARSE and ALTIMARI, Circuit Judges, and LASKER, District Judge. [*]

KEARSE, Circuit Judge:

Defendants Ardra Insurance Company, Ltd. ("Ardra"), et al., appeal from an order of the United States District Court for the Southern District of New York, Peter K. Leisure, Judge, remanding this action, brought in state court by James P. Corcoran as the Superintendent of Insurance of the State of New York ("Superintendent") to recover proceeds allegedly due under three reinsurance agreements, to state court on grounds of abstention. Ardra contends that abstention was inappropriate because, pursuant to arbitration clauses in the reinsurance agreements, the district court was required to order arbitration of the dispute under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Foreign Arbitral Awards Convention" or "Convention"), Dec. 29, 1970, 21 U.S.T. 2517, T.I.A.S. No. 6997, 330 U.N.T.A. 38. The Superintendent contends (1) that the appeal should be dismissed pursuant to 28 U.S.C. Sec. 1447(c) and (d) (1982) for lack of appellate jurisdiction, (2) that the district court properly abstained, and (3) that even if abstention was improper, the case was correctly remanded to state court because the McCarran-Ferguson Act, 15 U.S.C. Sec. 1011 et seq. (1982), supersedes the Convention. For the reasons below, we dismiss the appeal for lack of a final order, and, treating the appeal as a petition for mandamus, we deny the petition.


Ardra is a Bermuda insurer that entered into three reinsurance agreements with a New York insurance company, Nassau Insurance Company ("Nassau"). Nassau has been in liquidation since June 1984, and the Superintendent, as its liquidator, was authorized by an Order of Liquidation, issued pursuant to Article 74 of the New York Insurance Code, N.Y. Ins. Law Sec. 7401 et seq. (McKinney 1985), to pay claims arising under policies issued by Nassau and to collect reinsurance on such claims. The Superintendent sought reinsurance payments from Ardra, which repudiated its obligation to make such payments on the ground that the Superintendent had refused to allow Ardra's representatives to participate in court proceedings involving third-party claims against Nassau's insureds. The Superintendent commenced the present action against Ardra and two of its officers in New York State Supreme Court to recover the reinsurance payments.

Defendants responded by demanding arbitration pursuant to arbitration clauses in the reinsurance agreements and eventually removed the case to the district court pursuant to 9 U.S.C. Sec. 205 (1982), which allows removal of any state court action relating "to an arbitration agreement or award falling under the Convention." Defendants moved in the district court for an order compelling arbitration, dismissing the complaint

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against Ardra, and dismissing or staying all proceedings as to the individual defendants. Corcoran moved to remand the case to state court, contending (1) that the McCarran-Ferguson Act gave the state courts exclusive jurisdiction over all matters relating to the liquidation of Nassau, (2) that the Convention was inapplicable to a suit brought by a state official whose recovery powers by law exceeded Nassau's rights under the reinsurance agreements, and (3) that the district court should abstain in order to allow the state court to decide state-law issues of first impression raised by the Superintendent.

In an opinion reported at 657 F.Supp. 1223 (1987), Judge Leisure granted the remand motion. Noting that the Convention applies only to "commercial relationships and disputes arising out of those relationships," id. at 1228, the court concluded that the question of whether the Superintendent merely stood in Nassau's shoes or had greater rights than Nassau was a novel question of state law that was of considerable importance to the state's system of regulating insurance liquidations. The court chose to abstain from deciding this issue, which would affect the applicability of the Convention, and it remanded the action to state court. The court noted that it had not decided any of the issues central to the dispute between the parties, such as the merits of the Superintendent's claims for reinsurance proceeds, the interplay between the Convention and New York's regulatory system or the McCarran-Ferguson Act, or the applicability of the Convention to the present controversy. Rather, the remand left the resolution of all such questions to the state court.

Defendants have appealed, contending that the district court improperly abstained from deciding important questions of federal law. The Superintendent, in addition to defending the merits of the district court's remand decision on essentially the same grounds advanced in support of his remand motion, has moved to dismiss the appeal on the ground that a remand order is not appealable.


The principal questions before us are whether the district court's remand order is reviewable; if it is reviewable, whether the proper mechanism for review is appeal or mandamus; and, upon review under the appropriate standard, whether the remand order was proper. We conclude that the district court's order remanding the case is reviewable, but not by appeal. We treat the appeal as a petition for mandamus, and we deny the petition.

  1. The Reviewability of the Remand Decision

    Section 1447(d) of 28 U.S.C. provides, with one exception not pertinent here, that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise...." 28 U.S.C. Sec. 1447(d). The Supreme Court has interpreted this provision as prohibiting appellate review only with respect to remand orders issued under Sec. 1447(c), which requires the district court to remand a case if it appears, prior to final judgment, that the action "was removed improvidently and without jurisdiction." 28 U.S.C. Sec. 1447(c); see Carnegie-Mellon University v. Cohill, --- U.S. ----, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988) ("Cohill "); Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976) ("Thermtron "). If the action is one that was properly removed to the district court, and the district judge bases his remand on some ground other than the ground that the removal was improvident or without jurisdiction, the remand order is reviewable by the court of appeals. Thermtron, 423 U.S. at 351, 96 S.Ct. at 593; see generally Cohill, 108 S.Ct. at 616-22.

    Removal in the present case was predicated on the Foreign Arbitral Awards Convention. The Convention deals with arbitration agreements arising out of, inter alia, commercial relationships between citizens of the United States and citizens of foreign states. 9 U.S.C. Sec. 202 (1982). The procedures enacted by Congress for federal judicial treatment of agreements falling under

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    the Convention are set forth in 9 U.S.C. Secs. 201-208 (1982). Section 203 treats an action to enforce an agreement falling under the Convention as one arising under the laws and treaties of the United States and gives the district courts original jurisdiction over such an action. Section 205 provides that where the subject matter of an action pending in a state court relates to an arbitration agreement falling under the Convention, the defendant may, at any time before trial, remove the action to the district court; the ground for removal need not appear on the face of the state court complaint but may be shown in the petition for removal.

    In the present case, Ardra moved in state court to compel arbitration on the ground that the reinsurance agreements between itself, a Bermudan citizen, and Nassau, a citizen of the United States, provided for arbitration. Prior to trial, Ardra removed the case to the district court. In remanding, the district court did not suggest...

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