SYNDICATE 420, ETC. v. Glacier Gen. Assur. Co., Civ. A. No. 83-5787

• Decision Date: 10 April 1986
• Docket Number: Civ. A. No. 83-5787,85-504 and 85-643.
• Citation: 633 F. Supp. 428
• Parties: SYNDICATE 420 AT LLOYD'S LONDON v. GLACIER GENERAL ASSURANCE COMPANY, et al.
• Court: U.S. District Court — Eastern District of Louisiana

633 F. Supp. 428

SYNDICATE 420 AT LLOYD'S LONDON v. GLACIER GENERAL ASSURANCE COMPANY, et al.

Civ. A. Nos. 83-5787, 85-504 and 85-643.

United States District Court, E.D. Louisiana.

April 10, 1986.

Dexter L. Delaney, P.C., Mulroney, Delaney, & Scott, Missoula, Mont., Burke & Meyer, James G. Burke, Jr., David L. Carrigee, Kimbley A. Kearney, New Orleans, La., for Glacier General Assur. Co.

Sam E. Haddon, Boone, Karlberg & Haddon, Missoula, Mont., Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for Syndicate 420 at Lloyds.

Faris, Ellis, Cutrone & Gilmore, Clarence A. Frost, New Orleans, La., for Underwriters at Lloyds.

Stone, Pigman, Walther, Wittmann & Hutchinson, Phillip A. Wittmann, New Orleans, La., for defendants.

Robert E. Leake, Jr., Joseph F. Clark, Jr., Hammett, Leake & Hammett, New Orleans, La., for E & O Underwriters.

Sessions, Fishman, Rosenson, Boisfontaine, Nathan & Winn, Robert E. Barkley, Jr., T.A., Francis R. White, III, Arnd N. Von Waldow, New Orleans, La., for All-state Ins. Co., Ltd.

Preis, Kraft, Laborde & Daigle, Gregory J. Laborde, Lafayette, La., for International Surplus Lines Ins. Co.

Philip Rocher, London, England, Liquidator for KBS.

Brunswick G. Deutsch, Francis J. Barry, Jr., T.A., Deutsch Kerrigan & Stiles, New Orleans, La., for Lowndes Lambert Group.

Larzelere, Ellefson & Pulver, W.J. Larzelere, Jr., Russel D. Pulver, New Orleans, La., for Standard Marine Underwriters, Inc. and Edward G. Brennan.

ORDER AND REASONS

FELDMAN, District Judge.

Defendants, Standard Marine Underwriters, Inc. (SMU) and Edward G. Brennan move the Court to dismiss the claim of plaintiff, Syndicate 420 at Lloyd's London, for lack of subject matter jurisdiction.

Syndicate 420 instituted this declaratory judgment action under 28 U.S.C. §§ 2201 and 2202, against Glacier General Assurance Company to have the Court declare null and void the reinsurance by SMU of the marine insurance portfolio of Glacier. The reinsurance was procured under a binding authority issued by Syndicate 420. Alternatively, Syndicate 420 sued SMU, Brennan, the Errors and Omissions insurer of SMU and Brennan, A.W. Knott Becker Scott, Ltd., and KBS's E & O underwriters for indemnification, alleging that SMU, Brennan and KBS breached their duties of utmost good faith in failing to disclose material facts and abused, or allowed the abuse of, the binding authority. The Court previously denied a motion to dismiss brought by defendant, Glacier, and held that the Court had admiralty jurisdiction over plaintiff's claim against Glacier, which concerns marine reinsurance.

SMU and Brennan, however, again challenge the Court's jurisdiction as to plaintiff's claims against them. They urge a new ground. Defendants contend that since several of the members of Syndicate 420 are Louisiana citizens, this Court has no diversity jurisdiction over the Syndicate's claim against SMU and Brennan because both defendants are also citizens of Louisiana. Defendants also contend that this Court does not have admiralty jurisdiction over them. Defendants argue that plaintiff is seeking a declaration of its rights and obligations under a Cover Note which is a contract between Syndicate 420 and SMU. In the Cover Note, SMU was given authority to adjust, settle or compromise claims on behalf of Syndicate 420. Discovery has established that the only issue between plaintiff, SMU and Brennan relates to the contract negotiations and representations made concerning the use of the Cover Note.

Defendants argue that the Cover Note is not a policy of insurance, nor is it a policy of reinsurance. On its face, the Cover Note provides that the contract holder, SMU, may insure or reinsure the risks specified up to a limit of $125,000 under terms accepted by the contract holder. They contend that the Cover Note is nothing more than permission granted to SMU by the Syndicate to write insurance risks on its behalf; that it is merely a contract preliminary to the formation of a contract of insurance. Defendants contend that admiralty law does not apply to such a contract. Frank B. Hall & Co. v. S.S. SEAFREEZE ATLANTIC, 423 F.Supp. 1205, 1209 (S.D.N.Y.1976); F.S. Royster Guano Co. v. W.E. Hedger Co., 48 F.2d 86 (2nd Cir.1931) cert. denied 283 U.S. 858, 51 S.Ct. 651, 75 L.Ed. 1464; Koch-Ellis Marine Contract v. Phillips Petroleum Co., 219 F.2d 520 (5th Cir.1955); Home Ins. Co., New York v. Merchant's Trans. Co., 16 F.2d 372, 373 (9th Cir.1926). They claim, therefore, that the Court must dismiss the plaintiff's claim against Brennan and SMU for lack of subject matter jurisdiction.

Plaintiff argues that the demand against SMU and Brennan is based upon the same nucleus of facts as those involving Glacier; that is, the misrepresentations and failure to disclose material facts in obtaining the binding authority and abuse of the binding authority to reinsure the Glacier marine portfolio. Although plaintiff does not concede that there is no admiralty jurisdiction over its claim against SMU and Brennan, it argues that jurisdiction nevertheless exists by reason of pendent party jurisdiction, and that no independent ground for jurisdiction is needed. Leather's Best, Inc. v. S.S. MORMACLYNX, 451 F.2d 800 (2nd Cir. 1971); In re Oil Spill by the Amoco Cadiz Off the Coast of France, 699 F.2d 909 (7th Cir.1983) cert. denied, Astilleros Espanoles, S.A. v. Standard Oil Company (Indiana), 464 U.S. 864, 104 S.Ct. 196, 78 L.Ed.2d 172 (1983).

Plaintiff admits that the Cover Note is not a maritime contract, but goes on to urge that the claims asserted by Syndicate 420 against Brennan and SMU "arise out of an underlying maritime contractual relationship", thus making such claims subject to the admiralty jurisdiction of the Court. (Plaintiffs alternative claims of the existence of diversity jurisdiction in a consolidated case are unnecessary to a decision on this Motion.)

For the reasons herein stated, the Court denies defendant's Motion.

Defendants contend that this Court lacks both diversity and admiralty jurisdiction over SMU and Brennan in this controversy. The Court agrees with these contentions, but the analysis does not stop there.

The law is settled that contracts or agreements to procure marine insurance are not maritime and fall outside the admiralty jurisdiction. See Home Ins. Co., New York v. Merchant's Transp. Co., 16 F.2d 372 (9th Cir.1926); Frank B. Hall & Co. v. S.S. SEAFREEZE ATLANTIC, 423 F.Supp. 1205, 1209 (S.D.N.Y.1976); Warner v. THE BEAR, 126 F.Supp. 529, 1 Alaska 370 (D.C.1955). Thus, the Cover Note and the representations which form the basis of the plaintiff's claims against these defendants are clearly not within the Court's admiralty jurisdiction since they do not directly concern the marine reinsurance over which plaintiff has sued Glacier. The claims, however, are closely related. They are inextricably intertwined. They are inseparable under these facts. The close nature of these claims triggers the applicability of the doctrine of pendent party jurisdiction, which the Court finds particularly suited to the circumstances of this case.

The Court has reviewed the cases which discuss the doctrine of pendent party jurisdiction, beginning with Leather's Best, Inc. v. S.S. MORMACLYNX, 451 F.2d 800 (2nd Cir.1971). In that seminal case, the Second Circuit held that where the facts underlying the state and federal claims are identical, a federal court vested with admiralty jurisdiction, has the power to hear a state tort claim against a non-diverse party. That case established the special sensitivity which federal courts should consider exercising in cases where the anchor claim is based upon some exclusive claim of federal jurisdiction, such as the general maritime law. That is precisely what we have here. More recently, the Supreme Court in Aldinger v. Howard, 427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976), recognized and refined these special considerations:

"When the grant of jurisdiction to a federal court is exclusive, for

...