Opposition Brief — Falcon Insurance Co. v. Eli Lilly & Co.

IN THE

Supreme Court of the United States

OcToBER TERM, 1986

FALCON INSURANCE COMPANY

and

MUTUAL FIRE, MARINE AND INLAND INSURANCE COMPANY,

Petitioners,

Vv.

Ev! LILLY AND COMPANY,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

RESPONDENT'S BRIEF IN OPPOSITION

THEODORE R. BOEHM *

CHRISTOPHER G. SCANLON

JOHN R. SCHAIBLEY, III

BAKER & DANIELS

810 Fletcher Trust Building

Indianapolis, IN 46204

(317) 636-4535

Counsel for Respondent

* Counsel of Record

Wreow . Bree Peerriwe Co.. Inc. - 789-0096 - WasHINGTON, D.C. 20001

“#3

’

—

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QUESTIONS PRESENTED

1. Did petitioners consent to suit in the forum of re

spondent’s choice?

2. Is the fact bound issue whether petitioners’ contacts

with the forum are such that they should have reasonably

anticipated being haled into court there worthy of this

Court’s review?

(i)

ii

LIST OF PARTIES

Respondent Eli Lilly and Company was plaintiff-appellee

below, urging affirmance of the district court’s judgment.

Pursuant to Rule 28.1, respondent states that it has no

parent company, non-wholly owned subsidiary, or affili-

ate corporation. The petitioners, defendants-appellants

below, are listed in the Petition for a Writ of Certiorari

at ii, along with information regarding petitioners’ par-

ents, affiliates and subsidiaries.

TABLE OF CONTENTS

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OPINIONS BELOW, JURISDICTION AND CONSTI-

TUTIONAL AND STATUTORY PROVISIONS

RENEE OS RUE UA Oe oe

STATEMENT OF THE CASE ....W20......2...eeeeeceseeeeeees

SUMMARY OF ARGUMENT QW... eee eeeeeeeee

REASONS FOR DENYING THE WRIT ......................

I. THESE INSURERS HAVE CONSENTED TO

SUIT IN THE DISTRICT OF COLUMBIA....

A. The Consent To Suit Constitutes A Waiver

Of Any Objection To Personal Jurisdiction...

B. Mutual Fire’s Stipulation Has Waived Its

Personal Jurisdiction Defense .........................

II. ASSERTION OF PERSONAL JURISDIC-

TION WOULD NOT OFFEND DUE PROC-

ESS EVEN IF PETITIONERS HAD NOT

EXPLICITLY CONSENTED ............ Jeinibenians

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APPENDIX

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(iii)

iv

TABLE OF AUTHORITIES

CASES Page

American and Foreign Insurance Association v.

Commercial Insurance Co., 575 F.2d 980 (1st

AN RARE eet ASME RIE rn Sie ak a CR 15 n.12

Ashwander v. Tennessee Valley Authority, 297

ok S|. RIES AE oe Ce aire eee 9

Black v. Cutter Laboratories, 351 U.S. 29

UII secnics és. capsc bases keeethise sda emecedaibaascattaiatsadescolin 8

Burger King Corp. v. Rudzewicz, 471 U.S. 462

SIRO SIT PS Al 9 IE eo RAIS AES ROR 5, 12,14

Calder v. Jones, 465 U.S. 783 (1984) ...0000000 11

Commonwealth of Puerto Rico v. S.S. Zoe Colo-

cotront, 628 F.2d 652 (1st Cir. 1980), cert. de-

SUN, A Wai Re CD ecetvcctcbccceeciesernesaensrcoseances 15 n.12

Hanson v. Denckla, 357 U.S. 235 (1958) ............... 14

International Shoe Co. v. Washington, 326 U.S.

SE EE | sai bc etkcnchatatondkdceniotdnedtdbanbaibdinine 9,11

Keaton v. Hustler Magazine, Inc., 465 U.S 1770

Bo RONAN aD; gullies ner AMARC ase) Roe do 13 ©

Kulko v. Superior Court of California, 436 U.S.

Re SIE entesctlariines Li Acre A a 10,11 &n.9

McGee v. International Life Insurance Co., 355

oS Ee Lt 5 RON hee toes See ae ee 10, 11, 14

National Equipment Rental, Ltd. v. Szukhent,

Oe I EE nc 5

Petrowski v. Hawkeye-Security Insurance Co.,

350 U.S. 495 (1956) (per curiam) ........................ 8

Rush v. Savchuk, 444 U.S. 320 (1980) .......00...00.... 13

Shaffer v. Heitner, 433 U.S. 186 (1977) ................. 10

United Farm Bureau Mutual Insurance Co. v.

United States Fidelity & Guarantee Co., 501 Pa.

646, 462 A.2d 1800 (Pa. 19838) .............000000000000..... 15

World-Wide Volkswagen Corp. v. Woodson, 444

SIR ND ee ee 10, 11, 12

STATUTES

— ee | iby nection eet eke ae 3

D.C. Code § 13-423 (1981 & Supp. IV 1986)........ 9

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

No. 86-818

FALCON INSURANCE COMPANY

and

MUTUAL FIRE, MARINE AND INLAND INSURANCE COMPANY,

Petitioners,

, -

ELI LILLY AND COMPANY,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

RESPONDENT’S BRIEF IN OPPOSITION

Respondent respectfully urges the Court to deny the

Petition for a Writ of Certiorari to review the judgment

of the United States Court of Appeals for the District of

Columbia Circuit entered on June 24, 1986.

OPINIONS BELOW, JURISDICTION AND

CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED

Respondent accepts petitioners’ statement as to opin-

ions below, jurisdiction, and constitutional and statutory

provisions involved.

2

STATEMENT OF THE CASE

This is a declaratory judgment action filed by Respond-

ent Eli Lilly and Company (“Lilly”) against over one

hundred insurers seeking a single uniform judicial res-

olution of a dispute between, and among, those carriers

and Lilly as to how Lilly’s standard product liability in-

surance applies to claims arising from the sale of one of

its nationally distributed pharmaceutical products.

Petitioners are two among many insurers who issued

excess liability policies to Lilly. As is common in the ex-

cess lines insurance business, the policies issued by the

two petitioners are “following form” policies. Rather

than setting forth detailed provisions regarding the terms

and conditions governing the insurance agreement, these

policies adopt the terms and conditions of the policies of

the underlying carriers.

Faleon Insurance Company (“Falcon”) issued three

policies to Lilly during the years 1960-68. Each of the -

policies was issued on the same form and each incorpo-

rated by reference the terms and conditions of an under-

lying initial layer policy issued by Lloyd’s Underwriters.

Both the terms and conditions of each of Falcon policies

and the underlying Lloyd’s policies contain agreements

by the insurer to submit to the jurisdiction of any court

of competent jurisdiction in the United States.

Mutual Fire, Marine and Inland Insurance Company

(“Mutual Fire”) issued Lilly one policy containing its

own consent-to-suit clause which is the same as the

Falcon clauses for these purposes.

Both etitioners insured Lilly against liability arising

from the manufacture, sale or use of Lilly’s products.

At the time of issue of each policy, Lilly’s products were

distributed, sold and used all over the United States, in-

cluding the District of Columbia. Moreover, three prod-

uct liability cases (including one involving 12 plaintiffs)

- were pending against Lilly in the District of Columbia

3

at the time these insurers filed their motion to dismiss

and one other was pending at the time this lawsuit was

filed. Companies that write excess coverage are generally

not required to be licensed (but could constitutionally be

required to be licensed) in the jurisdiction. Neither Fal-

econ nor Mutual Fire is licensed in the District of Colum-

bia. Both Falcon and Mutual Fire report premiums at-

tributable to the District.

Petitioners moved to dismiss on grounds of lack of

jurisdiction over their persons. The district court was

persuaded that petitioners had contractually consented to

suit and denied petitioners’ motion without written opin-

ion. On appeal, petitioners challenged the district court’s

holding on the consent-to-suit provisions in their policies

and further argued that assertion of personal jurisdiction

violated the Due Process Clause. With respect to Mutual

Fire, the Court of Appeals concluded that a perceived

condition precedent to the consent-to-suit clause had not

occurred. With respect to Falcon, the Court of Appeals

determined that resolution of the consent to suit issue

would require further determinations by the district

court. As to both, however, the Court of Appeals held

that a remand was unnecessary because personal juris-

diction was properly and constitutionally exercised under

the District of Columbia Long Arm Statute. Applying

the test for determining the due process limits of the

exercise of personal jurisdiction enunciated in World-

Wide Volkswagen Corp. v. Woodson to the facts of this

case, the court held that the assertion of personal juris-

diction over the defendants comported with the require-

ments of due process.

On the record before it, the court also held that both

petitioners engaged in transactions in the District to

such an extent that the District could constitutionally

require them to be licensed in the District, and hence

were “doing business” in the District under 28 U.S.C.

§1391(c). Pet. App. at 22a-28a. Petitioners do not

challenge the venue holding in this Court.

4

SUMMARY OF ARGUMENT

No constitutional issue is presented by this case. Peti-

tioners contractually consented to suit in the forum of

Lilly’s choice. Application of the minimum contacts test

was therefore not even required in the case.

In any event, this case presents merely the application

of well-settled principles of law to the facts of this par-

ticular case. The issue is whether the relationship among

the insurers, the forum, and the litigation was such that

under traditional notions of fair play and substantial

justice, the insurers should have reasonably anticipated

being haled into the District of Columbia courts. This is

an intensely fact bound inquiry and does not warrant

this Court’s review. Petitioners present no special or

important reasons for this Court to exercise its discre-

tionary certiorari jurisdiction in this case. The Court of

Appeals’ judgment correctly concludes that these excess

insurers, by contracting to insure risks within the Dis-

trict of Columbia, are subject to that forum’s exercise of

personal jurisdiction to adjudicate the scope of coverage

that their policies provide. That conclusion is correct and

not at all novel.

Finally, no live controversy affecting the substantive

rights of the parties remains; only further delay is at

stake.

REASONS FOR DENYING THE WRIT

I. THESE INSURERS HAVE CONSENTED TO SUIT

IN THE DISTRICT OF COLUMBIA

A. The Consent To Suit Constitutes A Waiver Of Any

Objection To Personal Jurisdiction

Both Mutual Fire and Faleom issued policies to Lilly

that contain, or expressly incorporate by reference, stand-

ard “consent-to-suit” clauses.’ It is well settled that per-

‘1 Petitioners’ assertion that the Court of Appeals concluded that

the consent-to-suit clauses “provided no basis for personal jurisdic-

tion over petitioners,” Pet. at 5 n.2 is misleading. The Court of

5

sonal jurisdiction is a personal right that may be waived.

Such a waiver is effective if accomplished by contract

before any suit is filed. Burger King Corp. v. Rudzewicz,

471 U.S. 462 (1985) (slip op. at 9-10 n.14); National

Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311

(1964). Under the terms of the insurers’ policies, the

carriers have consented to jurisdiction in any court

chosen by the insured.

The consent-to-suit clauses are dispositive of the in-

surers’ objections to personal jurisdiction here. Pursuant

to those clauses, the insurers submit themselves to the

jurisdiction of any “court of competent jurisdiction” in

the United States selected by the insured.? They contrac-

tually obligated themselves to take whatever steps are

necessary to comply with any of the requirements neces-

sary to give the court jurisdiction.*

Appeals rejected petitioners’ arguments that the clauses did not

cover in personam jurisdiction. Pet. App. at 18a. Moreover, with

respect to Falcon, the Court believed that it was simply not possible

to determine on the basis of the record before it whether the clause

was applicable, indicating that it would remand the issue if it were

not affirming on another ground. As to Mutual Fire, the Court held

that Mutual Fire’s refusal to take a specific position on the coverage

provisions of its policies did not constitute a repudiation of its

liability. The Court viewed such a repudiation as a condition prece-

dent of the consent-to-suit clause. Mutual Fire has since been

presented with a dollar claim and has not paid, thereby “repudiat-

ing,”’ in Lilly’s view more than is necessary.

* Both carriers are bound by the following contractual provision:

It is agreed that in the event of the failure of the Insurer (s)

hereon to pay any amount claimed to be due hereunder, In-

surer(s) hereon, at the request of the Insured, wil) submit to

the jurisdiction of any Court of competent jurisdiction within

the United States and will comply with all requirements neces-

sary to give such Court jurisdiction and all matters arising

hereunder shall be determined in accordance with the law and

practice of such Court.

% Below, Mutual Fire and Falcon argued that the term “compe-

tent jurisdiction” required in personam jurisdiction without refer-

6

Faleon and Mutual Fire raised the issue of a “condi-

tion precedent,” arguing that until they fail to honor a

dollar-claim from Lilly, Lilly could not invoke the clause.

Both carriers anticipatorily repudiated their obligations

to Lilly—indeed, if there had not been such an anticipa-

tory repudiation, there would be no issue of coverage to

litigate on the merits. There clearly was such an issue.‘

Lilly and Mutua! Fire and Falcon, together with the other

insurers, litigated the issue of coverage. Mutual Fire and

Falcon should not be heard to say that they have not re-

pudiated their liability to Lilly, while at the same time

litigating the issue of their liability to Lilly for the past

five years.

The alleged “condition precedent” of the insurers’ con-

sent to suit is “the failure of the insurer(s) hereon to

pay any amount claimed to be due hereinunder... .”

What Lilly claims to be due under the policy is any

amount of Lilly’s damages for products liability claims

(up to the policy limits) which are covered by these

insurers under Lilly’s interpretation of the policies. The

insurers have expressly repudiated their obligation to

pay such claimed amount, and hence the “condition prec-

edent” has occurred. The issue of what amounts are due

under these particular policies is simply a question on

the merits, and has nothing to do with personal jurisdic-

tion. Lilly paid premium dollars for the right to choose

the forum in which to litigate those questions on the

ence to the consent to suit clause. The Court of Appeals properly

rejected the argument.

* Petitioners herein and others have petitioned for certiorari on

the merits of the coverage issue in The Home Insurance Company,

et al. v. Eli Lilly and Company, No. 86-822 (Pet. for Cert. filed

Nov. 20, 1986).

7

merits, and that should be the end of the personal juris-

diction issue in this case.*

Mutual Fire’s refusal to take an affirmative position

on the meaning of the coverage provision at issue in this

litigation should not be equated with a non-repudiation

of liability. The Court of Appeals noted that in answers

to interrogatories, Mutual Fire asserted that its inter-

pretation of the policies differed from that advanced by

Lilly without revealing Mutual Fire’s view of the mean-

ing of the policy. But whatever interpretation is secretly

embraced by Mutual Fire, it must be materially different

than that advanced by Lilly. If it is not, then Mutual

Fire is simply engaged in bad faith litigation.

Moreover, a party should not be permitted to assert

the failure of a condition precedent by simply taking a

litigation position which raises the mere possibility that

the condition has not occurred. At bottom, Mutual Fire’s

position is that when an insured notifies it of claims and

the insured’s position on how such claims are to be han-

dled, when the insurer disputes the insured’s position, it

has not repudiated its obligation. The insurer cannot as-

sert his own failure to take a substantive position on the

grounds for its repudiation as a failure of a repudiation

condition precedent.*

® Indeed, in supplemental proceedings now ongoing in the district

court, Mutual Fire, along with other insurers as to whom Lilly has

made a dollar-demand for payment, are litigating questions concern-

ing the payment of the amounts due Lilly under the policies and

other claim specific matters.

*In addition to the consent-to-suit clause discussed above, Mutual

Fire's policy also provided:

“Further, pursuant to any statute of any state, territory or

district of the United States which make provision therefor, the

Insurer(s) hereon hereby designate the superintendent, com-

missioner or director of insurance or other officers specified for

that purpose in the statute, or his successor or successors in

office, as their true and lawful attorney upon whom may be

B. Mutual Fire’s Stipulation Has Waived Its Personal

Jurisdiction Defense

Mutual Fire has stipulated that it “agrees to be bound

. . . by whatever final order is entered” in this action

as to The Home Insurance Company, the issuer of the

first tier policy underlying its excess policy. Stipulation

dated July 5, 1983. Appendix. That stipulation con-

stitutes a waiver of its personal jurisdiction argument."

A personal jurisdiction objection can be waived at any

point in the proceedings below, and a stipulation by a

party previously asserting personal jurisdiction as a de-

fense providing that the party will be bound by the

Court’s judgment, waives the personal jurisdiction issue.

See Petrowski v. Hawkeye-Security Ineurance Co., 350

U.S. 495 (1956) (per curiam) (reversing 226 F.2d 126

(7th Cir. 1955) )."

This Court reviews judgments, not statements in opin-

ions. E.g., Black v. Cutter Laboratories, 351 U.S. 292,

served any lawful process in any action, suit or proceeding

instituted by or on behalf of the insured or any beneficiary

hereunder arising out of this contract of insurance... .”

Falcon's policies contain a similar provision.

* The agreement to be bound by the judgment in this case also

renders the personal jurisdiction issue essentially moot as to

Mutual Fire.

of men-

tion personal jurisdiction, this Court observed that the other stipu-

lations as well supported its conclusion that the insurer had waived

the personal jurisdiction issue.

9

297 (1956). The judgment of the Court of Appeals that

there was personal jurisdiction over these insurers was

correct. Indeed, no constitutional issue is presented by

this case because the insurers consented to suit in the

forum of Lilly’s choice. Under fundamental principles of

constitutional adjudication, this Court “will not pass

upon a constitutional question .. . if there is also present

some other ground upon which the case may be disposed

of.” Ashwander v. Tennessee Valley Authority, 297 US.

288, 347 (1936) (Brandeis, J., concurring). In this case,

the constitutional issue should not even be reached be-

cause the insurers contractually consented to jurisdiction.

Il. ASSERTION OF PERSONAL JURISDICTION

WOULD NOT OFFEND DUE PROCESS EVEN

IF PETITIONERS HAD NOT EXPLICITLY

CONSENTED

Petitioners do not challenge the Court of Appeal’s hold-

ing that the District of Columbia Long Arm Statute, D.C.

Code § 13-423/a) (1981 & Supp. IV 1986) provides for

personal jurisdiction over petitioners in this case because

they contracted to insure risks within the District of

Columbia. Rather, petitioners argue that the Due Proc-

ess Clause renders application of that statute void in this

case.

This issue turns on well known doctrine. It has long

been settled that where, as here, the adequacy of notice

is not at issue,

“due process requires only that in order to subject

a defendant to a judgment in personam, if he be not

present within the territory of the forum, he have

certain minimum contacts with it such that the

maintenance of the suit does not offend ‘traditional

notions of fair play and substantial justice.’” Jnter-

national Shoe Co. v. Washington, 326 U.S. 310, 316

(1945) (citation omitted).

Whether maintenance of this suit against the petition-

ers in the courts of the District of Columbia offends tra-

10

ditional notions of fair play and substantial justice ulti-

mately requires determining the “reasonableness” or “fair-

ness” of requiring a corporation to defend a particular

suit in a particular forum. Under well-settled doctrine,

the following factors are to be considered:

“!T]he burden on the defendant . .. will in an

appropriate case be considered in light of other rele-

vant factors, including the forum State’s interest in

adjudicating the dispute, see McGee v. International

Life Ins. Co., 355 U.S. 220, 223 (1957); the plain-

tiff’s interest in obtaining convenient and effective

relief, see Kulko v. California Superior Court, supra,

436 U.S., at 92, at least when that interest is not

adequately protected by the plaintiff’s power to

choose the forum, cf. Shaffer v. Heitner, 433 U.S.

186, 211, n. 37 (1977); the interstate judicial sys-

tem’s interest in obtaining the most efficient resolu-

tion of controversies; and the shared interest of the

several States in furthering fundamental substantive

social policies... .”” World-Wide Volkswagen Corp.

v. Woodson, 444 U.S. 286, 292 (1980).

Each of these factors demonstrates the reasonableness

of the assertion of personal jurisdiction in this case. The

forum, through its long arm statute, has specifically ex-

pressed an interest in adjudicating contracts to insure

any risk within the District of Columbia at the time of

contracting. Moreover, Lilly’s interest (and indeed the

interest of the petitioners themselves) in obtaining con-

venient and effective resolution of a controversy and the

interstate judicial system’s interest in obtaining the most

efficient resolution of controversies are manifest. Peti-

tioners seek multiple and duplicative litigation in several

forums; indeed, petitioners’ pursuit of this issue is eco-

nomically irrational unless inefficiency and its attendant

delays are their only goals.

The doctrine to be applied has been often revisited. A

central question is whether “the defendant’s conduct and

connection with the forum State are such that he should

reasonably anticipate being haled into court there.”

11

World-Wide Volkswagen, 444 U.S. at 297. “Whether due

process is satisfied must depend .. . upon the quality and

nature of the activity in relation to the fair and orderly

administration of the laws which it was the purpose of

the due process clause to insure.” International Shoe,

326 U.S. at 319. Moreover, when a corporation purposely

avails itself of the privilege of conducting activities with-

in the forum state, it should reasonably anticipate being

haled into court there. World-Wide Volkswagen, 444

U.S. at 297. And as this Court has squarely held in

Calder v. Jones, 465 U.S. 788, 788 (1984), a plaintiff’s

contacts with the jurisdiction “may be so manifold as to

permit jurisdiction when it would not exist in their

absence.”

The Court of Appeals correctly applied these well estab-

lished principles to the facts of this particular case.® In

this case, “the plaintiff is the focus of the activities of

the defendant out of which the suit arises. See McGee v.

International Life Insurance Co., 355 U.S. 220 (1957).”

Calder v. Jones, 465 U.S. at 788. Lilly’s cause of action

arises from the insurers’ “commercial transactions in in-

terstate commerce” with Lilly. See Kulko v. Superior

Court of California, 436 U.S. at 97. These insurers “pur-

posefully derive[d] benefit from activities relating to”

the District of Columbia, id. at 96, and clearly derived

“commercial benefit” from insuring risks within the Dis-

trict of Columbia. 7d. at 100. The District of Columbia

long arm statute rests on the entirely reasonable premise

that insuring risks in the District affects conduct in the

*“Like any standard that requires a determination of ‘reason-

ableness,’ the ‘minimum contacts’ test of Jnternational Shoe is not

susceptible of mechanical application; rather, the facts of each case

must be weighed to determine whether the requisite ‘affiliating cir-

cumstances’ are present... . [T]his determination is one in which

few answers will be written ‘in black and white. The grays are

dominant and even among them the shades are enumerable.’”

Kulko v. Superior Court of California, 486 U.S. 84, 93 (1978)

(citations omitted).

12

District. To put it another way, Lilly’s tort liability in

the District is the defendants’ liability in the District.

These insurers do not and cannot dispute the fact that

they were aware of Lilly’s nationwide business. And they

intentionally and purposefully insured the risks posed by

Lilly’s products distributed in all of those jurisdictions.

In the context of this case these factors are particularly

forceful. The underlying carriers and most excess car-

riers are all indisputably subject to jurisdiction and _

venue in the District of Columbia. These two excess car-

riers agreed to insure the same risks as primary insurers.

That in itself avails petitioners of benefits and protection

of the law wherever the first tier policy is in litigation.

Moreover, a contrary rule simply encourages multiple

suits to resolve the same controversy.

Petitioners’ analogy to the facts of World-Wide Volks-

wagen simply does not wash. Unlike the automobile in

World-Wide Volkswagen, the presence of Lilly’s products

in the District of Columbia was in no sense “fortutious”

and petitioners’ assumption of the risk posed by those

products in the District of Columbia or elsewhere is in

no sense involuntary. The petitioners’ business is the

assumption of just such risk. Petitioners entered into a

“carefully structured” relationship with Lilly that en-

visioned “wide reaching contacts” with Lilly on a nation-

wide basis. See Burger King Corp, v. Rudzewicz, 471

U.S. 462 (1985) (slip op. at 17). Petitioners are per-

fectly free to “structure their primary conduct” with

assurances as to where that conduct will render them lia-

ble to suit. See World-Wide Volkswagen, 444 U.S. at

297. Petitioners have consciously decided to issue excess

product liability insurance for products marketed nation-

wide." Petitioners are free to issue different kinds of

%© Moreover, their form policies contain consent-to-suit clauses

in the forum of the insureds’ choice, providing jurisdiction even in

those forums that do not assert long-arm jurisdiction to the limits

of due process, and in other forums preventing needless litigation

of meritless challenges to jurisdiction on due process grounds.

:

13

insurance policies, or issue policies to local enterprises.

In view of their primary conduct as professional risk

takers, to accept petitioners’ position that they cannot

reasonably anticipate suit where their customers whom

they have indemnified are subject to suit is to blink at

reality.

Petitioners’ reliance on Rush v. Savehuk, 444 U.S. 320

(1980), is equally misplaced. In Rush, a state attempted

to exercise quasi in rem jurisdiction over an individual

who had no forum contacts by attaching the contractual

obligation of an insurer to defend and indemnify him in

connection with the suit. The Court held that the rela-

tionship of the insurer to the state did not provide a

basis for asserting personal jurisdiction over the individ-

ual policyholder. The purpose of the insurance policy, of

course, was to reduce the risk of the insured, not to in-

crease it by subjecting him to suit in additional jurisdic-

tions. Moreover, the insurance policy was “not the sub-

ject matter of the case... .” Jd, at 329. In short, it

was unfair to attribute the insurer’s contacts with the

forum to the hapless policyholder. The insured had bar-

gained under his automobile insurance policy to shift his

risks to the insurer, not to have the insurer’s risks

shifted to him. In the instant ease, of course, the situa-

tion is just the reverse. The subject matter of the case

is the insurance policy, and the risk taker is merely being

asked to assume the risk it consciously and voluntarily

assumed.

Moreover, petitioners surely reasonably had to expect

that if Lilly was sued in the District it was likely to at-

tempt to implead petitioners if a dispute arose over their

duty to indemnify or pay defense costs. Such a dispute

has arisen, and while the full scope of the dispute tran-

scends the particular lawsuits which have thus far been

filed against Lilly in the District of Columbia, the “issue

is personal jurisdiction, not choice of law.” Keaton v.

14

Hustler Magazine, Inc., 465 U.S. 770, 778 (1984) (quot-

ing Hanson v. Denckla, 357 U.S. 235, 254 (1958) .™

Petitioners, in the form of premiums, purposefully ob-

tained benefits from Lilly as a result of its national ac-

tivities. They now seek to avoid the risks they knowingly

assumed. The consequences of their repudiation of their

agreement to indemnify Lilly affect Lilly in the District

of Columbia and on a nationwide basis.

“(Where individuals ‘purposeful derive benefit’

from their interstate activities, it may well be unfair

to allow them to escape having to account in other

States for consequences that arise proximately from

such activities; the Due Process Clause may not read-

ily be weilded as a territorial shield to avoid inter-

state obligations that have been voluntarily assumed.

And because ‘modern transportation and communica-

tions have made it much less burdensome for a party

sued to defend himself in a State where he engages

in economic activity,’ it usually will not be unfair

to subject him to the burdens of litigating in another

forum for disputes related to such activity. McGee

v. International Life Insurance Co.,... .” Burger

King Corp. v. Rudzewicz, 471 U.S. 462 (1985) (slip

op. at 11).

The insurers should not be permitted to cast aside their

obligations voluntarily assumed.”

11 Petitioners’ only answer on this point is the assertion that

impleader of these petitioners by Lilly was impossible because there

has been no refusal by petitioners to indemnify Lilly. Pet. at

11, n.5. The question, however, is personal jurisdiction, not the

merits of the parties’ various contractual arguments. Petitioners

certainly had to reasonably foresee the possibility that they would

be haled into court in the District of Columbia in one of the foresee-

ably many products liability actions which might be filed against

Lilly in the District. Once impieaded, they could of course argue

that under the policies they were not substantively liable, but that

would have nothing whatever to do with the court’s jurisdiction

over their person to determine such substantive legal questions.

12 Given that standard form business liability insurance contains

consent-to-suit clauses, and that liability issuers do reasonably

15

Finally the insurers’ contention that the decision below

conflicts with the holding of the Supreme Court of Penn-

sylvania in United Farm Bureau Mutual Insurance Co.

v. United States Fidelity & Guarantee Co., 501 Pa. 646,

462 A.2d 1300 (Pa. 1983) rests on a misreading of the

Pennsylvania decision. The court struck down the asser-

tion of personal jurisdiction in that case because of its

conclusion that the “policies inherent in federalism would

not permit [its] legislature to require a totally foreign

insurance company, such as United Farm, to provide no

fault insurance to its policyholders.” Jd. at 1307. The

issue, thus, was the extraterritorial assertion of the sub-

stantive law of the State of Pennsylvania, and the court

simply reasoned that because the substantive basis of the

lawsuit against the defendant was invalid, the courts of

the commonwealth could not reqiure the defendant to de-

fend such an unconstitutional action. Jd. Indeed, the court

expressly stated, albeit in dictwm, that “traditional no-

tions of fair play and due process would not be offended

by requiring United Farm [the insurer] to defend [its

insured] in our courts,” because United Farm should

have foreseen the possibility of a suit against the insured

in its courts. Jd. at 1307 (emphasis added). Hence, the

Pennsylvania case does not deal with the issue presented

here.

In closing, Lilly submits that the outcome on the per-

sonal jurisdiction. issue will not affect the substantive

rights of the parties and hence is of limited interest to

them. Because a grant of this petition for certiorari

would cause additional, needless delay, Lilly has filed this

anticipate and engage in national litigation, the constitutional issue

seldom arises regarding such insurance. The decision below is con-

sistent with the only other decisions dealing with this issue. Com-

monwealth of Puerto Rico v. S.S. Zoe Colocotroni, 628 F.2d 652 (ist

Cir. 1980), cert. denied, 450 U.S. 912 (1981); American and For-

eign Insurance Association v. Commercial Insurance Co., 575 F.2d

980 (1st Cir. 1978). No question of general importance is pre-

sented by this case.

16

brief. However, even if the Court of Appeals had ruled

against Lilly on the personal jurisdiction issue, the issue

on the merits between Lilly and these parties was never-

theless resolved in the case below. If the petitioners fail

to recognize that, Lilly can bring suit where petitioners

have conceded jurisdiction is proper and move for sum-

mary judgment. That, of course, would spin wheels for

no useful purpose. At bottom, that is precisely what pe-

titioners seek.

CONCLUSION

For the foregoing reasons, the petition should be

denied.

Respectfully submitted,

THEODORE R. BOEHM *

CHRISTOPHER G. SCANLON

JOHN R. SCHAIBLEY, III

BAKER & DANIELS

810 Fletcher Trust Building

Indianapolis, IN 46204

(317) 636-4535

Counsel for Respondent

* Counsel of Record

December 20, 1986

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APPENDIX

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

Civil Action No. 82-0669

Judge Norma Holloway Johnson

ELI LILLY AND COMPANY,

Plaintiff

We

THE HOME INSURANCE COMPANY, et al.,

Defendants

STIPULATION

It is hereby stipulated and agreed between counsel for

plaintiff and counsel for defendant Mutual Fire, Marine

and Inland Insurance Company that

a) such defendant agrees to be bound as to each of its

own policies of insurance issued to plaintiff by whatever

final order is entered in this declaratory judgment action

as to the triggering language of those policies of insur-

ance of other carrier defendants (see Schedule B to Plain-

tiff’s Motion for Summary Judgment, filed March 31,

1983) that underlie and govern each policy of the defend-

ant as shown on Attachment A to this Stipulation;

b) such defendant will not be obligated to respond to

any discovery requests or other pretrial filings or mo-

tions made by plaintiff;

ce) such defendant shall not seek discovery from plain-

tiff or make any request requiring decision or approval

by the Court on any matter that could affect plaintiff's

interests after the effective date hereof.

2a

d) notwithstanding Paragraphs “b” and “c” above,

defendant shall remain a party herein and be served with

all filings and other communications required to be

served on parties by the Federal Rules of Civil Proce-

dure.

/s/ Richard H. Gimer

Richard H. Gimer

M. Stuart Madden

Waltraut S. Addy

SANTARELLI & GIMER

2033 M Street, N.W.

Suite 700

Washington, D.C. 20036

Attorneys for Defendant

Mutual Fire, Marine &

Inland Insurance

Company

SO ORDERED:

/s/ Norma Holloway Johnson

Norma Holloway Johnson

United States District Judge

/s/ Peter C. Ward

Peter C. Ward

Michael A. Nardolilli

BAKER & DANIELS

Suite 600

1920 N Street, N.W.

Washington, D.C. 20036

Theodore R. Boehm

Christopher G. Scanlon

BAKER & DANIELS

810 Fletcher Trust Building

Indianapolis, Indiana 46204

Attorneys for Plaintiff

Eli Lilly and Company

DATE: July 5, 1983

3a

ATTACHMENT A

Policy

Number

(Lilly No.)

Insurer

Mutual Fire, Marine

and Inland Insurance (75-5)

Company

CN 500528

Governed By

Company/ Policy No.

(Lilly No.)

Home HEC-44-29-972

(78-1)