900 F.2d 890 (6th Cir. 1990), 89-5871, In re Delta America Re Ins. Co.

Docket Nº:89-5871 to 89-5873.
Citation:900 F.2d 890
Party Name:In re DELTA AMERICA RE INSURANCE CO., in Liquidation, Leroy MORGAN, Commissioner of Insurance, Commonwealth of Kentucky, as Liquidator of Delta America Re Insurance Company, Plaintiff-Appellee, v. NATIONAL DISTILLERS & CHEMICAL CORPORATION, et al., Defendants-Appellants.
Case Date:March 30, 1990
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 890

900 F.2d 890 (6th Cir. 1990)

In re DELTA AMERICA RE INSURANCE CO., in Liquidation,

Leroy MORGAN, Commissioner of Insurance, Commonwealth of

Kentucky, as Liquidator of Delta America Re

Insurance Company, Plaintiff-Appellee,

v.

NATIONAL DISTILLERS & CHEMICAL CORPORATION, et al.,

Defendants-Appellants.

Nos. 89-5871 to 89-5873.

United States Court of Appeals, Sixth Circuit

March 30, 1990

Argued Jan. 23, 1990.

Rehearing Denied April 26, 1990.

David Klingsberg, Alan Goot, Michael Braff, Kaye, Scholer, Fierman, Hays & Handler, New York City, W. Henry Jernigan, Jr., Kevin M. McGuire (argued), James L. Gay, Jackson & Kelly, Lexington, Ky., for plaintiff-appellee.

John P. Brice, II, Fleming, Horstmeyer & Fleming, Lexington, Ky., Larry W. Thomas, Cameron, Hornbostel & Butterman, Washington, D.C., William P. Swain, Boehl, Stopher, Graves & Deindoerfer, Louisville, Ky., James L. Fischer (argued), Perry Kreidman, Wilson, Elser, Moskowitz, Edelman & Dicker, New York City, Stephen M. O'Brien, III (argued), Landrum, Shouse & Patterson, Lexington, Ky., Mark S. Fragner, Kroll & Tract, New York City, for defendants-appellants.

Before WELLFORD and GUY, Circuit Judges, and ENGEL, Senior Circuit Judge.

RALPH B. GUY, Jr., Circuit Judge.

The issue presented by this appeal is the right of an agency or instrumentality of a foreign state to remove a state court contract action to federal court despite a forum selection clause in the contract, which

Page 891

states that jurisdiction to resolve contract disputes will lie in "any court of competent jurisdiction within the United States." The district court concluded that such language results in a waiver of the right of removal and remanded the removed case to the state court where it originated. Upon review, we find that the district court erred, requiring us to reverse the remand order.

I.

The original action underlying this appeal was commenced in the Franklin, Kentucky, Circuit Court by the insurance commissioner of the Commonwealth of Kentucky. The commissioner was acting in his capacity as liquidator of Delta America Re Insurance Company (Delta) after Delta had been declared insolvent. The original defendants were National Distillers and Chemical Corporation (National), the parent corporation of Delta, and DR Insurance Company, a subsidiary of National formed for the purpose of accepting insurance risks ceded from Delta. The liquidator claimed that National had mismanaged Delta and had failed to establish proper loss reserves. National allegedly received improper dividends in excess of twelve million dollars from Delta.

Delta was a wholly owned subsidiary of National Distillers, and was comprised of both Elkhorn Insurance Company and Elkhorn Re Insurance Company. Delta was in the business of providing reinsurance, and accepted risks ceded from primary insurance companies in consideration for the payment of premiums pursuant to reinsurance contracts or treaties. In turn, Delta retroceded approximately forty percent of the risks assumed by it to the reinsurers, who provided reinsurance for Delta. In this capacity, the defendant reinsurers are commonly referred to as "retrocessionaires."

After Delta was declared insolvent, the liquidator began receiving demands from some of the retrocessionaires to rescind their treaties predicated upon allegations that they had been misled at the time those treaties were entered into and that the treaties had been improperly administered by the former managers of Delta. The retrocessionaires indicated they would not remit any balances owed by Delta. Given that the retracessionaires' claims of mismanagement and fraud were directly intertwined with and related to the liquidator's existing action against National, the liquidator amended the complaint against National adding as defendants Delta's reinsurers, including the retrocessionaires.

After being joined as defendants, the retrocessionaires, with the exception of Banco de Seguros del Estado (Seguros), removed this action to federal court on the basis of diversity of citizenship pursuant to 28 U.S.C. Sec. 1441(c). 1 Subsequently, Seguros filed a petition joining in the removal of this action predicated upon its status as a foreign sovereign, as defined by the Foreign Sovereign Immunity Act (FSIA), 28 U.S.C. Sec. 1603. Removal was predicated upon 28 U.S.C. Sec. 1441(d), which states:

Sec. 1441. Actions removable generally

...

(d) Any civil action brought in a State court against a foreign state as defined in section 1603(a) of this title may be removed by the foreign state to the district court of the United States for the district and division embracing the place where such action is pending. Upon removal the action shall be tried...

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