Employers Ins. of Wausau v. Certain Underwriters, 92-C-0076-C.

• Decision Date: 23 March 1992
• Docket Number: No. 92-C-0076-C.,92-C-0076-C.
• Citation: 787 F. Supp. 165
• Parties: In the Matter of the Arbitration Between EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Petitioner, v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON and Certain London Market Insurance Companies, Respondents.
• Court: U.S. District Court — Western District of Wisconsin

787 F. Supp. 165

In the Matter of the Arbitration Between EMPLOYERS INSURANCE OF WAUSAU, a Mutual Company, Petitioner, v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON and Certain London Market Insurance Companies, Respondents.

No. 92-C-0076-C.

United States District Court, W.D. Wisconsin.

March 23, 1992.

Douglas J. Klingberg, Ruder, Ware & Michler, Wausau, Wis., for Employers Ins. of Wausau.

William D. Mollway, Madison, Wis., for Certain Underwriters at Lloyd's, London and Certain London Market Ins. Companies.

OPINION AND ORDER

CRABB, Chief Judge.

This petition to compel arbitration is before the court on respondents' second notice of removal. Petitioner opposes the removal, contending that respondents should not be permitted to remove on a ground that could have been presented in the first removal petition they filed pursuant to 28 U.S.C. § 1441(b) and because all of the respondents have not joined in the removal petition. Respondents assert that 9 U.S.C. § 205 entitles them to remove the action at "any time" and does not require all respondents to join in the petition for removal.

I conclude that 9 U.S.C. § 205's provision that "the procedure for removal of causes otherwise provided by law shall apply" mandates that general removal law will govern those issues not covered specifically by § 205, which means that all respondents were required to join in the removal petition. I am persuaded also that respondents should not be permitted a second attempt to remove this case based on a ground that could have been presented in the first notice of removal. For these two reasons, the case will be remanded to state court.

For the sole purpose of deciding this motion, I find from the complaint and from the procedural history that the following material facts are undisputed.

UNDISPUTED FACTS

Employers Insurance of Wausau is a Wisconsin corporation with its principal place of business in Wausau, Wisconsin. Respondent Underwriters at Lloyd's are individuals engaged in the business of underwriting insurance and reinsurance risks at Lloyd's of London, England. Respondents "Certain London Market Insurance Companies" are corporations doing business in London, England. At all times relevant to this complaint, respondents did business with petitioner and entered into contracts with it.

Petitioner and respondents are parties to certain contracts of reinsurance, referred to as "blanket excess retrocessional reinsurance treaties." Pursuant to the reinsurance treaties, respondents agreed to be bound by petitioner's loss settlements. In 1984, petitioner began making and paying asbestos loss settlements, and submitted proofs of loss to respondents for payment of respondents' share of the settlements under the reinsurance treaties. Respondents began to deny payment for such loss settlements on August 22, 1988.

Petitioner commenced this action in the Circuit Court of Marathon County, Wisconsin, on August 19, 1991, naming as respondents "certain Underwriters at Lloyd's London," "certain London companies," London, El Banco, St. Helens Insurance Company, Ltd., and La Preservatrice Fondore Assurances. Service of a petition to compel arbitration on all respondents was accomplished on that date. The petition cited the contractual "service of suit" clause that stated:

It is agreed that in the event of the failure of Reinsurers hereon to pay any amount claimed to be due hereunder, Reinsurers hereon, at the request of the reinsured, will submit to the jurisdiction of any Court of competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such Court.

The petition advised respondents that any attempt to remove the cause from the jurisdiction of the Marathon County Circuit Court would be regarded as a further breach of contract by respondents.

Respondents removed the action to this court on September 9, 1991. The notice of removal did not include as respondents El Banco, St. Helens Insurance Company, Ltd., or La Preservatrice. Respondents did not explain their absence. On November 29, 1991, respondents moved to amend the notice of removal to cite 9 U.S.C. § 205 as a ground for removal.

On January 6, 1992, the case was remanded to the Circuit Court for Marathon County, Wisconsin on the ground that the original notice was procedurally defective in failing to name all of the respondents. I concluded that an untimely amendment of the defective notice could not be permitted.

On January 30, 1992, respondents filed a second notice of removal pursuant to 9 U.S.C. § 205. Again, the notice did not include as respondents El Banco, St. Helens Insurance Company, Ltd., or La Preservatrice, and it did not include an explanation for their absence.

OPINION

General removal law is clear. Proceeding under the premise that "federal court jurisdiction under the removal statutes constitutes an infringement upon state sovereignty," statutory removal provisions are subject to strict construction. See, e.g., Fellhauer v. City of Geneva, 673 F.Supp. 1445, 1447 (N.D.Ill.1987) (citing Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941)). The removing party bears the burden of establishing the propriety of the removal. If the propriety of the removal is doubtful, federal courts should reject the case Id. Generally, all defendants must join in a removal petition in order to effect removal. Northern Illinois Gas Co. v. Airco Indus. Gases, 676 F.2d 270, 272 (7th Cir.1982). If they do not, defendants bear the burden of explaining affirmatively why any co-defendants are not included in the removal petition. Crete Oil Co. v. Dunham, No. 91 C 3253, 1991 WL 152898 (N.D.Ill. July 31, 1991).

Failure to Name All Respondents

The first issue is whether the § 205 removal petition is defective because all respondents failed to join in it. 9 U.S.C. § 205 is part of the enabling legislation passed by Congress to enforce the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It provides in part:

Where the subject matter of an action or proceeding pending in a State court relates to an arbitration agreement or award falling under the Convention, the defendant or the defendants may, at any time before the trial thereof, remove such action or proceeding to the district court.... The procedure for removal of causes otherwise provided by law shall apply, except that the ground for removal provided in this section need not appear on the face of the complaint but may be shown in the petition for removal.

Respondents attempt to distinguish § 205 from general removal law by arguing that the joinder rule applies only to the strict removal provisions of 28 U.S.C. § 1441(a)(c). They contend that a more liberal construction is favored where removal statutes are designed specifically to bring cases into federal court, as shown, for example, in § 1441(d), relating to removal under the Foreign Sovereign Immunity Act.

Section 1441(d) provides that "Any civil action brought in a state court against a foreign state ... may be removed by the foreign state...." (emphasis added). Consistently with the statute's plain language, the Fifth Circuit Court of Appeals has held that when a foreign state petitions for removal, the action is transferred to federal court, even if other defendants do not wish to remove the action. Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1375 (5th Cir.1980). The Fifth Circuit has analogized the Foreign Sovereign Immunity Act to the Convention Act, finding that 9 U.S.C. § 205 and 28 U.S.C. § 1441(d) are similar in two respects: (1) they both permit removals based on the foreign domicile of the defendant and (2) § 1441(d) allows removal "at any time for cause shown," while § 205 allows removal "at any time before trial." McDermott Int'l v. Lloyds Underwriters, 944 F.2d 1199 (5th Cir.1991). The court concluded that Congress's intent in enacting the Foreign Sovereign Immunity Act was to establish a uniform body of law by channelling cases against foreign sovereigns away from the state courts and into federal courts; similarities between the two statutes indicated that Congress sought a unitary jurisprudence for Convention Act cases as well. Id. at 1212.

Respondents seek to extend the analogy between these two statutes, arguing that because the Foreign Sovereign Immunity Act does not require removal by all defendants, the Convention Act should be read in the same way. Although, as the Fifth Circuit pointed out, the two statutes have similarities, they are different in one important respect: the language in § 1441(d) provides for removal by "the foreign state;" § 205 tracks the language of § 1441(a) in this respect, and provides that "the defendant or the defendants" may remove. Moreover, although both statutes provide a federal forum, the policy favoring a federal forum appears to be stronger with respect to the Foreign Sovereign Immunity Act: "In view of the potential sensitivity of actions against foreign states and the importance of developing a uniform body of law in this area, it is important to give foreign states clear authority to remove to a Federal forum actions brought against them in State court." H.R.Rep. No. 94-1487, 94th Cong., 2d Sess. 32 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6631-6632. By contrast, in McDermott the court commented: "the language and history of the Convention Act indicate nothing other than Congress' intent to grant federal courts concurrent jurisdiction over the Convention cases and defendants a right to remove state-filed cases to federal court." McDermott, 944 F.2d at 1208 n. 12. Although the Fifth Circuit emphasized the importance of a federal forum to provide a unified interpretation of the Convention Act, it did so in the context of a forum selection clause in the parties' insurance policy....