Alexander & Alexander Services, Inc. v. Lloyd's Syndicate 317

• Decision Date: 18 April 1990
• Docket Number: No. 1093,D,1093
• Parties: ALEXANDER & ALEXANDER SERVICES, INC., Alexander & Alexander, Inc., and Alexander & Alexander of New York, Inc., Third-Party Plaintiffs-Appellees, v. LLOYD'S SYNDICATE 317, Third-Party Defendant-Appellant. ocket 89-9231. . Certified to New York Court of Appeals
• Court: U.S. Court of Appeals — Second Circuit

Page 44

925 F.2d 44

1991 A.M.C. 1495

ALEXANDER & ALEXANDER SERVICES, INC., Alexander & Alexander, Inc., and Alexander & Alexander of New York, Inc., Third-Party Plaintiffs-Appellees, v. LLOYD'S SYNDICATE 317, Third-Party Defendant-Appellant.

No. 1093, Docket 89-9231.

United States Court of Appeals, Second Circuit.

Certified to New York Court of Appeals April 18, 1990.

Submitted After Answer to Certified Question Dec. 21, 1990.

Argued April 6, 1990.

Decided Jan. 22, 1991.

John M. Woods, New York City (Thacher Proffitt & Wood, Joseph G. Grasso, of counsel), for third-party defendant-appellant Lloyd's Syndicate 317.

Jonathan C. Thau, New York City (Wilson, Elser, Moskowitz, Edelman & Dicker, Thomas W. Hyland, Thomas A. Leghorn, Michael Schwartzberg, of counsel), for third-party plaintiffs-appellees Alexander & Alexander Services, Inc., Alexander & Alexander, Inc., and Alexander & Alexander of New York, Inc.

Before KAUFMAN, FEINBERG and WALKER, Circuit Judges.

PER CURIAM:

Third-party defendant Lloyd's Syndicate 317 (Syndicate 317) appeals from an amended Memorandum and Order dated October 11, 1989 of the United States District Court for the Southern District of New York, Whitman Knapp, J., denying Syndicate 317's motion to dismiss the third-party complaint against it for lack of personal jurisdiction, and holding that Syndicate 317 was "doing business" in New York within the meaning of New York Civil Practice Law and Rules (CPLR) Sec. 301. Landoil Resources Corp. v. Alexander & Alexander Services, Inc., 720 F.Supp. 26 (S.D.N.Y.1989). The district court certified the issue of jurisdiction for immediate appeal to this court pursuant to 28 U.S.C. Sec. 1292(b), and a panel of this court granted leave to appeal. After hearing argument, in April 1990 we certified the jurisdictional question to the New York Court of Appeals pursuant to New York Rules of Court Sec. 500.17. Alexander & Alexander Services, Inc. v. Lloyd's Syndicate 317, 902 F.2d 165 (2d Cir.1990). That court accepted the certified question and allowed the parties to brief and argue the issue presented. Landoil Resources v. Alexander, 76 N.Y.2d 760, 559 N.Y.S.2d 237, 558 N.E.2d 39 (1990). In November 1990, the New York Court of Appeals answered the certified question in the negative, finding that Syndicate 317 was not "doing business" in New York for purposes of personal jurisdiction under CPLR Sec. 301. Landoil Resources v. Alexander, 77 N.Y.2d 28, 563 N.Y.S.2d 739, 565 N.E.2d 488 (1990). The parties thereafter submitted letter briefs to us, which addressed the New York Court of Appeals' answer to the certified question. For the reasons that follow, we now reverse the October 1989 order of the district court.

An overview of the manner in which Lloyd's underwriting syndicates operate is necessary to an understanding of this case, and is set forth in some detail in our prior order, which is reported in full at 902 F.2d 165; familiarity with that order is assumed. Our prior order also described in some detail the factual background of this case, id. at 167-68, which is only briefly summarized here.

Alexander & Alexander, Inc., a Maryland corporation; Alexander & Alexander of New York Inc., a New York corporation, and Alexander & Alexander Services, Inc., a Maryland corporation (collectively, Alexander), third-party plaintiffs-appellees, obtained political risk insurance policies from various Lloyd's underwriters, including appellant Syndicate 317, as insurance broker for Landoil Resources Corporation (Landoil), a Philippines corporation. Disputes arose regarding alleged losses under the policies, and Landoil reached a settlement with certain Lloyd's underwriters following arbitration proceedings in London to which Alexander was not a party. Landoil thereafter brought the underlying action against Alexander in the United States District Court for the Southern District of New York. In the third-party complaint at issue here, Alexander sought indemnification and contribution from, among others, Syndicate 317. (Although Alexander named a number of underwriting syndicates in its third-party complaint, due to a dispute over the scope of Alexander's service of process the only underwriter purporting to appear and moving to dismiss the complaint was Syndicate 317.)

As the district court observed, "in the traditional sense of the phrase [Lloyd's underwriters] do not themselves 'do business' anywhere except in London." 720 F.Supp. at 27. The district court nevertheless found Syndicate 317 subject to personal jurisdiction in New York on the basis of the American Trust Fund (the Fund), which is on deposit at Citibank in New York and administered by a department of the Corporation of Lloyd's, the Finance & Market Services Group (FMSG). Id. at 28. As of December 31, 1988, the balance of the Fund on deposit at Citibank was $9.4 billion. Were it not for the existence of a trust fund for the security of New York insureds at a New York bank, New York insurance brokers would not be permitted to place insurance with Lloyd's syndicates, 11 N.Y.C.R.R. Sec. 27.5(a)(1)(ii), nor would New York insurance companies be permitted to count as an asset or to credit against loss reserves any obligation reinsured by Lloyd's syndicates, 11 N.Y.C.R.R. Sec. 125.4(c). Lloyd's underwriters do not directly deposit monies into the Fund or withdraw monies from it; however, a portion of their premium income derived from underwriting United States risks, including New York risks, is deposited into the Fund.

In accordance with these facts, we certified the following question to the New York Court of Appeals:

Whether in this case the existence of a trust fund totalling $9.4 billion on deposit at a New York bank and managed by an administrative department of a foreign corporation serving insurance underwriting members suffices to constitute "doing business" by a syndicate of such insurance underwriting members for...