Doughty v. Underwriters at Lloyd's, London

Decision Date02 August 1993
Docket NumberNos. 93-1174,93-1214,s. 93-1174
Citation6 F.3d 856
PartiesKay DOUGHTY, Massachusetts Commissioner of Insurance, etc., Plaintiff, Appellee, v. UNDERWRITERS AT LLOYD'S, LONDON, et al., Defendants, Appellants. In re Derek Richard WALLIS, etc., et al., Petitioners. . Heard
CourtU.S. Court of Appeals — First Circuit

Mark A. Kreger, with whom Andrew Kochanowski, Robert A. Badgley, Lord, Bissell & Brook, Chicago, IL, Kenneth W. Erickson, Matthew M. Burke, and Ropes & Gray, Boston, MA, were on brief, for appellants-petitioners.

Raymond J. Brassard, with whom Scott Harshbarger, Atty. Gen., Thomas A. Barnico, Asst. Atty. Gen., J. David Leslie, Stephen M. Voltz, and Rackemann, Sawyer & Brewster, P.C., Boston, MA, were on brief, for respondent-appellee.

Before SELYA, CYR and BOUDIN, Circuit Judges.

SELYA, Circuit Judge.

In this proceeding, we conclude that the district court's abstention-based remand order is not immediately appealable and that mandamus is not an appropriate alternative. Because this jurisdictional determination involves an issue on which the circuits are somewhat less than uniform, we take some pains to elucidate our rationale. We do not, however, reach the merits and, accordingly, leave a veritable hothouse of efflorescent questions to be plucked at another time and in another forum.


The controversy that is before us finds its genesis in a beguilingly simple question: "Who insures the insurers?" The question arises in connection with American Mutual Liability Insurance Company (AMLICO), a Massachusetts-based firm, which entered into a series of reinsurance contracts over a period of more than three decades. When AMLICO began paying out huge sums to satisfy asbestos-related claims at the tail end of this period, its efforts to secure reimbursement from reinsurers bore no fruit. Unassisted, AMLICO could not stanch the financial hemorrhaging and sought protection under state insolvency laws. The Massachusetts Supreme Judicial Court ordered the firm liquidated, and, in due course, appointed respondent-appellee Kay Doughty, the Commonwealth's Commissioner of Insurance, as permanent receiver.

Doughty filed suit in state court to recover an estimated $15,000,000 in overdue reinsurance indemnities, as well as treble damages under the Massachusetts trade practices statute. See Mass.Gen.Laws ch. 93A, Secs. 10, 11 (1984). She named as defendants a melange of entities alleged to have entered into reinsurance pacts, including the so-called London Market Companies and several underwriting syndicates at Lloyd's, London (collectively, "the Reinsurers"). 1

The Reinsurers did not relish the chance to settle accounts in a court of law. Citing agreements contained in some (but far from all) of the reinsurance contracts, they formally requested that AMLICO submit its claims to arbitration. Doughty declined the invitation. She asserted, among other things, that the call for arbitration came too late; that the Reinsurers had waived the benefit of any agreements to arbitrate; and that, in any event, the dispute as a whole did not qualify as arbitrable. At that point, the Reinsurers invoked 9 U.S.C. Sec. 205 (1988) 2 and removed Doughty's suit to the United States District Court for the District of Massachusetts. Next, they filed motions to compel arbitration and, as an interim prophylactic, to stay proceedings pending the outcome of the arbitral process. Doughty objected to these motions and moved on sundry grounds for an order remanding the case to state court. The Reinsurers opposed this motion.

Concluding that principles of Burford abstention controlled, see Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943); see also Fragoso v. Lopez, 991 F.2d 878, 882-83 (1st Cir.1993) (explicating scope, reach, and current status of Burford abstention), the district court overruled appellants' objection and granted the motion to remand. The court did not speak to the other reasons advanced in support of the motion. Moreover, consistent with its relinquishment of jurisdiction, the court left both the question of arbitrability and the related matter of a stay to the state tribunal.

This proceeding ensued. In it, the Reinsurers wear two hats, appearing as both appellants and petitioners; they appeal from the remand order while simultaneously seeking a writ of mandamus aimed at recalling it. We consolidated these two initiatives for briefing, oral argument, and decision.


We begin our inquiry into the appeal by addressing the question of appellate jurisdiction for, if no jurisdiction attaches, the appeal founders. See In re Recticel Foam Corp., 859 F.2d 1000, 1002 (1st Cir.1988). Here, two hurdles block the jurisdictional path: the statutory bar to appellate review of remand orders, see 28 U.S.C. Sec. 1447(d) (1988), and the bedrock requirement that jurisdiction can never be assumed but must be premised on some affirmative source. See, e.g., Massachusetts v. V & M Management, Inc., 929 F.2d 830, 833 (1st Cir.1991) (per curiam). We trace the dimensions of each hurdle and, in the process, consider appellants' hurdle-clearing capability.

A. The Statutory Bar.

28 U.S.C. Sec. 1447(d) provides that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise." Although this statute prohibits appellate review of remand orders "whether erroneous or not and whether review is sought by appeal or by extraordinary writ," Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 343, 96 S.Ct. 584, 589, 46 L.Ed.2d 542 (1976), the proscription is deeper than it is wide. Because courts must read section 1447(d) in pari materia with its statutory neighbor, 28 U.S.C. Sec. 1447(c), see Thermtron, 423 U.S. at 353, 96 S.Ct. at 593, only remand orders issued under the authority of section 1447(c) are rendered unreviewable by the operation of section 1447(d), see Garcia v. Island Program Designer, Inc., 4 F.3d 57, 58-59 (1st Cir.1993); V & M Management, 929 F.2d at 832-33. And, since section 1447(c), by its terms, is concerned exclusively with remands stemming from "defect[s] in removal procedure" such that "the district court lacks subject matter jurisdiction," it follows that section 1447(d) leaves open the possibility of appellate review in all cases that are remanded for reasons not covered by section 1447(c).

This is such an instance. Despite the fact that Doughty articulated several reasons for remanding the case, many of which implicated section 1447(c), the district court shunted these asseverations to one side and instead remanded exclusively on the basis of Burford abstention. Because abstention, by definition, assumes the existence of subject matter jurisdiction in the abstaining court--after all, one must have (or, at least, presume the presence of) subject matter jurisdiction in order to decline the exercise of it--section 1447(c) does not apply to an abstention-driven remand. See Corcoran v. Ardra Ins. Co., 842 F.2d 31, 34 (2d Cir.1988). Hence, the statutory bar does not preclude us from reviewing the lower court's remand order.

B. Possible Sources of Appellate Jurisdiction.

Our determination that 28 U.S.C. Sec. 1447(d) does not operate to bar appellate review merely removes the first hurdle blocking the jurisdictional path. To pass the next hurdle, the Reinsurers must demonstrate the existence and applicability of some affirmative authority conferring jurisdiction on the courts of appeals to review remand orders of the sort at issue here. The Reinsurers try to clear this hurdle from three different angles. They urge that the remand order is appealable under 28 U.S.C. Sec. 1291 (1988) (conferring jurisdiction on the courts of appeals to review "final decisions of the district courts"), or, alternatively, as a collateral order, see Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1225, 93 L.Ed. 1528 (1949), or, if all else fails, on the basis that the district court's rulings, taken in their totality, constitute a set of orders appealable under the Federal Arbitration Act. We find these exhortations unconvincing.

1. The Final Judgment Rule. In respect to the suggestion that the remand order is appealable as a final judgment, the sockdolager is that the Supreme Court has said exactly the opposite:

[B]ecause an order remanding a removed action does not represent a final judgment reviewable by appeal, the remedy in such a case is by mandamus to compel action, and not by writ of error to review what has been done.

Thermtron, 423 U.S. at 352-53, 96 S.Ct. at 594 (citation and internal quotation marks omitted).

The Reinsurers attempt to deflect the force of this blunt statement by suggesting that it should be regarded as dictum. They posit that, because the Thermtron Court found the remand order so egregious as to justify mandamus, no need to decide the availability of direct appellate review ever arose. In advancing this suggestion, the Reinsurers are whistling past the graveyard.

"Dictum" is a term that judges and lawyers use to describe comments relevant, but not essential, to the disposition of legal questions pending before a court. See Kastigar v. United States, 406 U.S. 441, 454-55, 92 S.Ct. 1653, 1661-62, 32 L.Ed.2d 212 (1972); Dedham Water Co. v. Cumberland Farms Dairy, Inc., 972 F.2d 453, 459 (1st Cir.1992); United States v. Crawley, 837 F.2d 291, 292-93 (7th Cir.1988). Given the familiar principle that "whatever may be done without the employment of [mandamus], may not be done with it," Ex parte Rowland, 104 U.S. 604, 617, 26 L.Ed. 861 (1882)); see also Helstoski v. Meanor, 442 U.S. 500, 505-08, 99 S.Ct. 2445, 2448-49, 61 L.Ed.2d 30 (1979), the Court's statement in Thermtron defies description as mere dictum. To the exact contrary, the mandamus remedy employed in Thermtron necessarily betokened, and, indeed, depended on, the Court's antecedent holding anent the...

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