Olivier v. Merritt Dredging Co., Inc., 91-7078

• Decision Date: 06 March 1992
• Docket Number: No. 91-7078,91-7078
• Citation: 954 F.2d 1553
• Parties: Sherman J. OLIVIER, Plaintiff-Appellant, v. MERRITT DREDGING COMPANY, INC., et al., Defendants, South Carolina Property and Casualty Insurance Guaranty Association, Louisiana Insurance Guaranty Association, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1553

954 F.2d 1553

60 USLW 2568

Sherman J. OLIVIER, Plaintiff-Appellant, v. MERRITT DREDGING COMPANY, INC. et al., Defendants South Carolina Property and Casualty Insurance Guaranty Association, Louisiana Insurance Guaranty Association, Defendants-Appellees.

No. 91-7078.

United States Court of Appeals, Eleventh Circuit.

March 6, 1992.

Johnson, Senior Circuit Judge, filed dissenting opinion.

G. Hamp Uzzellee, III, Brian P. McCarthy, Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, Ala., for Sherman J. Olivier.

Patrick H. Sims, Cabniss & Johnston, Mobile, Ala., for La. Ins.

Gregory C. Buffalow, Robert S. Frost, Johnston, Adams, Bailey, Gordon & Harris, Mobile, Ala., for South Carolina Ins.

Appeal from the United States District Court for the Southern District of Alabama.

Before JOHNSON ^*, CLARK ^*, and PECK ^**, Senior Circuit Judges.

JOHN W. PECK, Senior Circuit Judge:

Sherman J. Olivier, a resident of Louisiana and a seaman injured aboard a vessel in Alabama, appeals the dismissal of writs of garnishment issued to the Louisiana Insurance Guaranty Association [LIGA] and the South Carolina Property and Casualty Insurance Guaranty Association [SCIGA]. The district court in Alabama dismissed the writs on the ground that the court lacked personal jurisdiction over the garnishees. The court held that LIGA and SCIGA did not have sufficient minimum contacts with Alabama in order to be subject to personal jurisdiction within the state. Because we find that SCIGA and LIGA had sufficient minimum contacts with Alabama and we believe that judicial economy would best be served by keeping this litigation within that forum, we reverse the district court's order.

I. FACTS

On August 1, 1983 Sherman J. Olivier sustained personal injuries while employed by the Merritt Dredging Company [Merritt] as a sailor aboard a vessel in Alabama on the Alabama River. At the time of his injuries, Olivier was a resident of Louisiana. Merritt was a South Carolina corporation with its principal place of business in South Carolina.

On March 30, 1984 Merritt filed for bankruptcy in South Carolina. In order to protect the bankruptcy estate, the bankruptcy court temporarily stayed the personal injury suit Olivier had brought against Merritt in Alabama. The bankruptcy court lifted its stay on September 26, 1985.

To provide insurance for its various operations including its activity in Alabama, Merritt contracted with the Midland Insurance Company [Midland]. Like Merritt, Midland faced financial difficulties. On April 3, 1986 Midland, a New York corporation, was liquidated pursuant to an order of the Supreme Court of New York. The liquidation proceedings once again stayed Olivier's personal injury suit against Merritt.

The second stay was lifted on May 22, 1987. In December 1988 a jury in Alabama awarded Olivier $507,340.00. On February 14, 1989 Olivier received a judgment against Merritt of $522,190.00, interest from the date of the judgment, and costs.

Due to the insolvency of both Merritt and its insurer, Midland, Olivier requested that the district court in Alabama issue writs of garnishment to LIGA, SCIGA, and the Alabama Insurance Guaranty Association [AIGA]. On July 21, 1989 the district court issued the writs.

AIGA, LIGA, and SCIGA are unincorporated associations created by state statutes. See Ala.Code §§ 27-42-1 et seq. (1975), La.Rev.Stat.Ann. §§ 22:1375 et seq. (West Supp.1991), S.C.Code Ann. §§ 38-31-10 et seq. (Law.Co-op. 1976). ¹ The AIGA writ is not at issue in this appeal. The guaranty associations were established for the purpose of avoiding financial loss or excessive delay in payment to claimants or policyholders due to the insolvency of an insurer. See La.Rev.Stat.Ann. §§ 22:1376, 22:1382, S.C.Code Ann. § 38-31-60; see also Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n, 896 F.2d 674, 676 (2d Cir.1990). Insurance companies that underwrite risks in the state in which the guaranty association exists are required to pay assessments necessary to fund the guaranty association. See La.Rev.Stat.Ann. §§ 22:1380, 22:1382, S.C.Code Ann. §§ 38-31-40, 38-31-60. Prior to its liquidation, Midland was subject to assessments by LIGA and SCIGA. Pursuant to LIGA's and SCIGA's motions, on December 21, 1990 the district court in Alabama dismissed the writs of garnishment it had previously issued on the ground that the court lacked personal jurisdiction over the garnishees. Olivier appeals the district court's order of December 21, 1990.

II. DISCUSSION

A. ALABAMA LONG ARM JURISDICTION

This circuit conducts de novo review of a district court's dismissal of an action for lack of personal jurisdiction. Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir.1990). We begin our inquiry into whether the district court properly refused to assert personal jurisdiction with a two-part analysis. First, we consider whether the district court could obtain personal jurisdiction over the defendants pursuant to the applicable state long-arm statute. Second, we consider whether the exercise of personal jurisdiction would violate the due process clause of the Fourteenth Amendment to the United States Constitution.

In interpreting the reach of the state's long-arm statute, the Supreme Court of Alabama has extended the jurisdiction of Alabama courts to the extent permissible under the due process clause of the Fourteenth Amendment. See Alabama Waterproofing Co., Inc. v. Hanby, 431 So.2d 141, 145 (Ala.1983). Thus, in order to determine whether the district court in Alabama properly refused to exercise personal jurisdiction, we need only consider whether the exercise of jurisdiction would have satisfied the requirements of due process.

B. DUE PROCESS

The determination of whether a district court can exercise personal jurisdiction over a non-resident defendant is itself a two-part inquiry. In the first prong of our due process inquiry, we consider whether the defendants, LIGA and SCIGA, engaged in minimum contacts with the State of Alabama. In the second prong of our inquiry, we consider whether the exercise of personal jurisdiction over the defendants would offend "traditional notions of fair play and substantial justice." Madara, 916 F.2d at 1516 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945)).

1. Minimum Contacts

In analyzing the parties' arguments we are guided by the language of several Supreme Court opinions. As the Supreme Court has stated:

[M]inimum-contacts analysis presupposes that two or more States may be interested in the outcome of a dispute, and the process of resolving potentially conflicting "fundamental substantive social policies" can usually be accommodated through choice-of-law rules rather than through outright preclusion of jurisdiction in one forum. (citations omitted) Burger King Corp. v. Rudzewicz, 471 U.S. 462, 483 n. 26, 105 S.Ct. 2174, 2188 n. 26, 85 L.Ed.2d 528 (1985).

In 1989 Olivier, a resident of Louisiana, received a judgment in Alabama (the place where he sustained his injuries) against Merritt, a South Carolina corporation. Olivier contends that the judgment entitled him to proceed against Merritt's bankrupt insurer, Midland. Olivier maintains that his claim is a "covered claim" within the meaning of the Louisiana and South Carolina statutes governing the respective state insurance guaranty associations; Midland is an insolvent insurer and the claimant or insured was a resident of either Louisiana or South Carolina at the time of the insured event. See La.Rev.Stat.Ann. § 22:1379(3)(a) ², S.C.Code Ann. § 38-31-20(6) ³.

Furthermore, Olivier argues that since his claim is a "covered claim", according to the respective statutes LIGA and SCIGA are deemed insurers to the extent of Midland's obligations. See La.Rev.Stat.Ann. §§ 22:1382 A(1) and (2) ⁴, S.C.Code Ann § § 38 31 60(a) and (b) ⁵.

Olivier contends that Midland is subject to personal jurisdiction in Alabama because it provided insurance coverage for Merritt for accidents that occurred while operating its vessel in Alabama waters. By guaranteeing payment of Midland's policies that provided insurance for claimants who are state residents or insureds who are state residents, Olivier contends LIGA and SCIGA should reasonbly have foreseen that they would be subject to suit in other jurisdictions. Olivier claims that the statutes, which place LIGA and SCIGA in the position of an insolvent insurer, impose affirmative, extraterritorial obligations upon them. Because Midland is subject to personal jurisdiction in Alabama, Olivier argues that both LIGA and SCIGA are subject to personal jurisdiction in Alabama as well. Olivier argues that LIGA's and SCIGA's statutory obligations establish minimum contacts with Alabama sufficient to justify the district court's exercise of personal jurisdiction over them.

As mere creations of their respective state statutes, LIGA and SCIGA claim they have not purposefully directed any activity toward the State of Alabama. Neither LIGA nor SCIGA maintains any offices or agents in Alabama. The associations contend that Midland's contacts with Alabama are not at issue since personal jurisdiction is not being sought after Midland, but after LIGA and SCIGA. LIGA and SCIGA claim that they will be denied due process if they are subject to legal liability in Alabama on account of the unilateral activity of a third party--Midland.

In addition, LIGA and SCIGA argue that although it might have been foreseeable that the associations could become involved in litigation in Alabama, such foreseeability alone is insufficient to confer personal jurisdiction. LIGA and SCIGA maintain that foreseeability is only one factor to be considered in an analysis of a defendant's minimum contacts with a forum.

LIGA and SCIGA note that neither of the state insurance guaranty acts specifically authorizes suit against an insurance guaranty association outside the state which created the association....