Society of Lloyd's v. Turner
| Decision Date | 25 July 2002 |
| Docket Number | No. 01-10463.,No. 01-10773.,01-10463.,01-10773. |
| Citation | 303 F.3d 325 |
| Parties | The SOCIETY OF LLOYD'S, Plaintiff-Appellee, v. Percy R. TURNER, Defendant-Appellant. The Society of Lloyd's, Plaintiff-Appellee, v. James Duncan Webb, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Charles Thomas Kruse, Jacalyn A. Hollabaugh, Abigail K. Sullivan, J. Clifford Gunter, III, Warren Wayne Harris, Bracewell & Patterson, Houston, TX, for Plaintiff-Appellee.
Jacks C. Nickens, Paul D. Flack, Nickens, Keeton, Lawless, Farrell & Flack, Houston, TX, Bradley Wayne Hoover, Hoover & Harger, Sugar Land, TX, for Defendant-Appellant.
Appeals from the United States District Court for the Northern District of Texas.
Before DUHÉ, BARKSDALE and DENNIS, Circuit Judges.
In these consolidated appeals, Percy Turner and Duncan Webb appeal from the district courts' summary judgments in favor of the Society of Lloyd's (Lloyd's) recognizing the foreign judgments that it had obtained against them in an English court to collect underwriting obligations owed by them as American members of Lloyd's insurance syndicates. We affirm.
Through a succession of Parliamentary Acts (the Lloyd's Acts 1871-1982), the United Kingdom Parliament has authorized Lloyd's to regulate an English insurance market located in London, England. Some of the background as to the nature and structure of Lloyd's of London was set forth in Haynsworth v. The Corporation, 121 F.3d 956, 958-59 (5th Cir.1997), by this court:
... Lloyd's is a 300-year-old market in which individual and corporate underwriters known as "Names" underwrite insurance. The Corporation of Lloyd's, which is also known as the Society of Lloyd's, provides the building and personnel necessary to the market's administrative operations. The Corporation is run by the Council of Lloyd's, which promulgates "Byelaws," regulates the market, and generally controls Lloyd's administrative functions.
Lloyd's does not underwrite insurance; the Names do so by forming groups known as syndicates. Within each syndicate, participating Names underwrite for their own accounts and at their own risk. That is, as a matter of English law, Names' liability is several rather than joint, and individual Names are not responsible for the unfulfilled obligations of others. Each syndicate is managed and operated by a Managing Agent, who owes the Names a contractual duty to conduct the syndicate's affairs with reasonable care. Syndicates have no legal existence or identity apart from the Names they comprise.
Names must become members of Lloyd's in order to participate in the market. Prospective members are solicited and assisted in the process of joining by Member's Agents, whose duties to the Names are fiduciary in nature. Names must pass a means test to ensure their ability to meet their underwriting obligations, post security (typically, a letter of credit), and personally appear in London before a representative of the Council of Lloyd's to acknowledge their awareness of the various risks and requirements of membership, and in particular the fact that underwriting in the Lloyd's market subjects them to unlimited personal liability.
Participation in the market also requires the execution of a number of contracts and agreements, the most important of which is the General Undertaking, the standardized contract between Lloyd's and the individual Names. Names additionally must enter into a Member's Agent's agreement, the contract that defines the relationship between the Name and his chosen Member's Agent, and one or more Managing Agent's agreements, which define the relationships between the Name and the Managing Agents of the syndicates he wishes to join. Under the present version of Lloyd's Byelaws, each of these agreements must contain clauses designating England as the forum in which disputes are to be resolved and choosing English law as the law governing such disputes.
In the late 1980s and early 1990s, Lloyd's underwriters incurred billions of dollars of losses, due in large part to toxic tort cases. Because of the enormity of the outstanding liabilities and because of the Names' inability to satisfy their underwriting obligations, the very existence of Lloyd's was threatened. To ensure both the survival of the market and the payment of policyholders' claims, as well as to protect the Names, Lloyd's devised the Reconstruction and Renewal (R&R) plan, which provided reinsurance for all the Names' pre-1993 liabilities from an independent company, Equitas Reinsurance Ltd. ("Equitas"). Equitas was funded, in part, by the reinsurance premiums paid by the Names.
Because one of the main goals of the R&R Plan was to allow the Lloyd's market to continue to function without being stalled by litigation, the Equitas policy included two key provisions, both at issue here. First, the contract contained a "pay now, sue later" provision, which precluded the Names from claiming any set-offs to the Equitas premium, except by way of a separate litigation after the payment of the premium was made.1 Second, the Equitas contract contained a "conclusive evidence" clause, which provided that Lloyd's calculation of the premium owed constituted "conclusive evidence as between the Name and [Equitas] in the absence of manifest error."2
According to Lloyd's, 95% of the Names accepted the offer and paid the reinsurance premium. The remaining 5%, including Turner and Webb, refused to accept the offer and refused to pay. As Lloyd's was contractually authorized to do,3 Lloyd's appointed a substitute agent for the non-accepting Names. The substitute agent signed and accepted the Equitas reinsurance contract on behalf of the resistant Names.
Lloyd's paid the Equitas premiums for those Names, and Equitas assigned its right to collect the premiums to Lloyd's. In late 1996, Lloyd's brought collection proceedings in England against the recalcitrant Names, including Turner and Webb. Turner appeared through counsel and participated in the English action. But Webb, despite notice and being made a party, elected not to answer or defend in the English litigation.
The lengthy litigation that followed in England took place in a series of test cases. First, the English courts tried the Leighs case4 to determine whether Lloyd's was entitled to appoint substitute agents to bind the non-settling Names to the R&R Plan, to enforce the Equitas contact, and to collect the premiums. The court found for Lloyd's, but allowed the plaintiffs to pursue their claims of fraudulent inducement against Lloyd's in a separate action. The English Court of Appeal upheld the trial court's decision, and leave to appeal was denied by the Judicial Committee of the House of Lords, the English equivalent of the United States Supreme Court.
The Names' claims for fraud were brought all together in the Jaffray action.5 Despite notice of this action from Lloyd's, neither Webb nor Turner joined in the Jaffray litigation. Although the English courts found in favor of Lloyd's, the English Court of Appeal has granted permission to appeal, thus providing yet another avenue of review for this claim.
Following these decisions, Lloyd's sought summary judgment against the Names for the Equitas premium amount in the Fraser litigation.6 In this litigation, the Names challenged Lloyd's calculation of the reinsurance premium under the "conclusive evidence" clause. In response, the Queen's Bench Division held several hearings, required Lloyd's to produce numerous documents regarding its calculation of the premium, and allowed the Names to present arguments regarding manifest error in Lloyd's calculation of the premium. After lengthy review, the trial court ruled against the Names on this claim, and the English Court of Appeal denied leave to appeal.
The English court then entered summary judgment against Turner in England on March 11, 1998, holding him liable to Lloyd's for approximately 71,000. As Webb had chosen not to participate in any of the foregoing litigation, a default judgment against him had been entered on June 27, 1997, in an amount of approximately 66,000. In May 2000, Lloyd's sought recognition of the English monetary judgments against Turner and Webb in separate divisions of the Northern District of Texas. In both cases, the Names sought summary judgment, asking for non-recognition of the English judgments, and, in both cases, Lloyd's filed cross motions for summary judgment, seeking recognition of the judgments. Both district courts granted summary judgment in favor of Lloyd's, holding that the English judgments were enforceable under the Texas Foreign Country Money-Judgment Recognition Act. Webb and Turner have both separately appealed and, because of the similarity of the cases, we consolidated them for review.
We review grants of summary judgment de novo, employing the same standard as the district court.7 Rule 56(c) of the Federal Rules of Civil Procedure allows the court to enter summary judgment in favor of the moving party only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."8
The Uniform Foreign Country Money-Judgment Recognition Act has been adopted by Texas and governs whether a judgment entered by a foreign nation will be recognized in this country.10 Under this Act, once a copy of a foreign judgment is filed with the clerk of the court in the county of residence of the party against whom recognition is sought, the party against whom recognition is sought may contest the judgment's recognition by filing a motion for non-recognition, which Turner and Webb have done.11 A court may refuse to enforce a foreign judgment if certain provisions of §...
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