Opposition Brief — New England Insurance v. International Bank of Miami, N. A.

FILE i?)

AMAR iLL (9988

ae es

(CLERK

No. 87-1411

in the ’

Supreme Court

of the

United States

OCTOBER TERM, 1987

NEW ENGLAND INSURANCE COMPANY,

Petitioner,

VS.

INTERNATIONAL BANK OF MIAMI, N.A.,

Respondent.

On Petition for Writ of Certiorari to the District

Court of Appeal of Florida, Third District

RESPONDENT'S BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

TO THE DISTRICT COURT OF

APPEAL OF FLORIDA, THIRD DISTRICT

John H. Schulte

Counsel of Record

W. Barry Blum

TEW JORDEN & SCHULTE

701 Brickell Avenue

Miami, Florida 33131

Telephone: (305) 371-2600

Counsel for Respondent,

The International Bank of Miami, N.A.

.

(1)

DESIGNATION OF CORPORATE RELATIONSHIPS

International Bancorp of Miami N.V.

International Bancorp of Miami, Inc.

Granvalour Holdings, S.A.

(ii)

QUESTIONS PRESENTED

=

WHETHER THIS COURT HAS JURISDICTION

UNDER 28 U.S.C. §1257(3) TO REVIEW A STATE

COURT JUDGMENT WHEN, IN THE STATE COURT

PROCEEDINGS, THE PETITIONER NEVER CITED

OR REFERRED TO THE FEDERAL CONSTITU-

TIONAL PROVISION RELIED UPON TO INVOKE

THIS COURT’S CERTIORARI JURISDICTION

II.

WHETHER A DEFENDANT WHO ADMITTEDLY IS

SERVED WITH PROCESS IN A STATE COURT PRO-

CEEDING, BUT FAILS OR REFUSES TO DEFEND,

MAY ARGUE THAT A DEFAULT JUDGMENT EN-

TERED AGAINST IT VIOLATES THE DUE PRO-

CESS CLAUSE OF THE FOURTEENTH

AMENDMENT TO THE UNITED STATES

CONSTITUTION

(iii)

TABLE OF CONTENTS

DESIGNATION OF CORPORATE RELATION-

QUESTIONS PRESENTED....................

pe ag cs 4”

STATEMENT OF THE CASE..................

SUMMARY OF ARGUMENT...................

We eee Gis cae eksdevagdae sees

I.

II.

III.

THIS COURT HAS NO JURISDICTION

OVER THIS CASE BECAUSE PETI-

TIONER FAILED TO RAISE OR PRE-

SERVE A FEDERAL DUE PROCESS

CLAIM IN THE STATE COURT PRO-

EEE ob yk 9h a9 6 pmaR ase he ROD

PETITIONER WAS AFFORDED THE

NOTICE AND OPPORTUNITY TO DE-

FEND CONTEMPLATED BY THE

DUE PROCESS CLAUSE OF THE

FOURTEENTH AMENDMENT .......

THE ISSUE PRESENTED BY PETI-

TIONER INVOLVES ONLY STATE

LAW, AND THE FLORIDA COURTS

CORRECTLY APPLIED THAT LAW..

a ME PE eee TEP ECR TR TCE Lee T eee

~

(iv)

TABLE OF AUTHORITIES

Cases

Page

Boddie v. Connecticut,

Ue Se Oe ED oi ods 0 Sa ed 7,8

Bowman v. Kingsland Development, Inc..

432 So.2d 660 (Fla. Dist. Ct. App. 1983) ...... 5, 9

Calder v. McNess,

427 So.2d 393 (Fla. Dist. Ct. App. 1983) ...... 10

Curdinale v. Louisiana,

ee 4

Cleveland Board of Education v. Loudermill.

Coe Ge ee Ce 3 bv ke ook cic. S. 7

Coleman v. Alabama,

Oe Ste 8 COE 5 5 kien Ae... 10

In re The Florida Bar: Rules of Civil Procedur.

339 So.2d 626 (Fla. 1976) ................... 9

In re The Florida Bar: Rules of Civil Procedure.

ane MGs Sh fee eee)... ....3 5... 9

Kingsley International Pictures Corp. v. Regenis of

the University of New York,

oe fa ee ee ee 10

Mullane v. Central Hanover Bank & Trust Cv.,

ee ene 7

National Equipment Rental, Ltd. v. Szukhent,

i | er ae 7

New England Insurance Co. v. International Bunk

of Miami, N.A.,

514 So.2d 390 (Fla. Dist. Ct. Rm. IHS) i... <.. 3,4

(v)

TABLE OF AUTHORITIES (Continued)

Cases

New York ex rel. Bryant v. Zimmerman,

a) Wap. We: Gl) Parone

Orley Stave Co. v. Butler County,

166 U.S. 648 (1897) ....... cece eee e eee eeee

Peralta v. Heights Medical Center, Inc.,

56 U.S.L.W. 4189 (U.S. Feb. 24, 1988) ........

Shingleton v. Bussey,

299 Sei TIS (Pia. 1960) ....5 2.0 cece eens

Stevenson v. Arnold,

250 So.2d 270 (Fla. 1971) .......-- eee eee eee

Street v. New York,

ae |

394 U.S. 576 (1969) ..... cece eee eee eee

Tallman Pools of Georgia, Inc. v. Wood,

399 So.2d 112 (Fla. Dist. Ct. App. 1981) ......

VanBibber v. Hartford Accident & Indemnity Co.,

439 So.2d 880 (Fla. 1983) ...... 6... eee eee ees

Webb v. Webb,

481 U.S. 493 CEBGL) oun cece cee cceee

Constitutional Provisions

3.8. Comet. art. TV, $1 .. 5. cc cece eww e cc cccess

U.S. Const. amend. XIV ............-55: (ii), :

Wie. Comets art: TF, $9... nc ccc ccccrssseseccces

(vi)

TABLE OF AUTHORITIES (Continued)

Statutes and Rules

Page

28 UBC. § IBBT(S) (IGT) 2 oon oc cc cc ccc meccce (ii)

Wie. Stat. 6 OFF (HOT) .... cc cane cc eue 1

ee OM A CO eee i)

ee te eras 5,9

ee ee a 3

ee et ee ee ae ees eee 3

Pus. Bs Civ. Pudi) oo nc so « kcteabcenccen 3

1

STATEMENT OF THE CASE

Petitioner New England Insurance Company (“New

England Insurance”) issued a directors and officers lia-

bility insurance policy (the “Policy”) insuring the direc-

tors and officers of respondent The International Bank of

Miami, N.A. (“International Bank”). The Policy required

New England Insurance to pay

any amount which the insureds are legaliy obligated

to pay for a claim or claims made against them for

Wrongful Acts and shall include but not be limited to

damages, judgments, settlements and costs ...and

defense of legal actions, claims or proceedings and

appeals therefrom.

International Bank brought suit in the Cireuit Court

for the Eleventh Judicial Cireuit of Florida, in and for

Dade County, and obtained a judgment for 34.6 million

against the bank’s former president, Frank Preve, Jr.

(“Preve’), an insured under the Policy.

International Bank’s complaint included a direct action

against New England Insurance under the doctrine estab-

lished in Shingleton v. Bussey, 223 So.2d 713 (Fla. 1969).

Shingleton and its progeny hold that, under the public

policy of Florida, an injured party is a third-party benefi-

ciary of a liability insurance policy and may bring a direct

cause of action against the insurer in a suit against the

insured.’

‘Fla. Stat. § 627.7262 (1987), enacted in 1982, provides that a

judgment against the insured is a condition precedent to a direct

action against an insurer. However, causes of action accruing prior to

October 1, 1982, as International Bank's did, are still governed by

2

New England Insurance was properly served with pro-

eess in July 1984, but failed or refused to respond. The

notice of service of process, the summons and the com-

plaint were received by the chairman of New England

Insurance, who forwarded it to a senior vice-president,

the director of New England Insurance's claims depart-

ment. The senior vice-president wrote on the process the

word “New”, the date, “*7-18-84"", and the name “Bill”.

“Bill” was William P. Hutt, a senior claims supervisor,

who wrote on the process the word “Priority” and under-

lined it twice. At New England Insurance, documents

labeled “Priority” required a response before the sum-

mons and complaint were sent to clerical personnel for

filing.”

Despite all of the foregoing, New England Insurance

failed, or refused, to file or serve any paper in the action.

A default was entered and, on April 30, 1986, a final

judgment was entered against both Preve and New Eng-

land Insurance in the amount of $4.6 million. The final

judgment was amended on September 19, 1986, and the

amended fina! judgment was received by New England

Insurance on September 26, 1986.

New England Insurance did not appeal from the

amended final judgment. Instead, on November 19, 1986,

New England Insurance served in the Florida trial court

a motion for relief from final judgment and to vacate

Shingleton. See VanBibber v. Hartford Accident & Indim. Co., 439

So.2d 880 (Fla. 1983).

_ *Additionally, both prior to and after New England Insurance was

served with process, it was notified of the action by four different law

firms. It received from the law firms several copies of the complaint

naming it as a defendant, as well as a copy of the entire court file.

a

3

default under Florida Rule of Civil Procedure

1.540(b) (1) and (3). After several evidentiary hearings,

the trial judge determined that New England Insurance

was not entitled to relief and denied the motion. New

England Insurance then filed a motion for rehearing

which, after a hearing, also was denied.

New England Insurance appealed the trial court's or-

der denying its Rule 1.540(b) motion to the District

Court of Appeal of Florida, Third District. In neither the

trial court nor the court of appeal did New England

Insurance argue that the Florida procedure regarding

defaults and default judgments violates the due process

elause of the fourteenth amendment to the United States

Constitution.

Following briefing and oral argument, the court of

appeal affirmed the trial court’s ruling. Vew Enylund Ins.

Co. v. International Bank of Miami, N.A., 514 So.2d 390

(Fla. Dist. Ct. App. 1987). It was only after the court of

appeal’s decision that petitioner, having failed in its state

law arguments, developed the federal due process argu-

ment presented in its petition for writ of certiorari.

SUMMARY OF ARGUMENT

This Court has no jurisdiction to grant a writ of

certiorari because petitioner never raised, presented or

preserved below the federal claim put forth as the basis

for certiorari. Petitioner never once cited the fourteenth

amendment in the state court proceedings. The Florida

eourt of appeal’s opinion did not pass upon a federal due

process question. Petitioners arguments below were

based entirely upon state law procedural and factual

ciaims. Because no federal claim was presented or pre-

siete all

4

served below, this Court is without jurisdiction over this

case.

Moreover, petitioner was afforded due process. Peti-

tioner admittedly was served with process, but failed or

refused to appear in the case and defend. It cannot now

argue that its own failure or refusal to respond to the

notice and opportunity to be heard was somehow a denial

of due process.

Finally, the issue petitioner brings to this Court is

purely a state law question. The Florida courts correctly

determined that, under Florida law, the damages against

petitioner were liquidated and petitioner was not entitled

to additional notice of a hearing on damages. Petitioner

improperly asks this Court to review that issue of state

law.

ARGUMENT

I. THIS COURT HAS NO JURISDICTION OVER

THIS CASE BECAUSE PETITIONER FAILED TO

RAISE OR PRESERVE A FEDERAL DUE PRO.-

CESS CLAIM IN THE STATE COURT

PROCEEDINGS

This Court consistently holds that it will not decide

federal constitutional issues that were not raised, pre-

served or ruled upon in the state court proceedings below.

Webb v. Webb, 451 U.S. 493, 498-99 (1981); Curdinale v.

Louisiana, 394 U.S. 437, 438 (1969). In this case, peti-

tioner never raised in the state courts any claim based

upon the fourteenth amendment to the United States

Constitution. This Court thus should deny the petition for

writ of certiorari for want of jurisdiction.

Petitioner's assertion that “[t]he record as a whole

shows that Petitioner's federal claim was presented and

ra et Rar BOE ee a a Ae

Re <b bce ake eee

5

considered in the state court” (Petition at 6-7) is incor-

rect. In all the papers petitioner filed below attacking the

judgment entered against it,” petitioner never once cited

or mentioned the fourteenth amendment, the United

States Constitution, or a decision of this Court. In fact,

petitioner used the words “due process” in its papers only

five times, and never in reference to the United States

Constitution. Three of those five references were to a

passage, quoted three different times, from a Florida

ease, Bowman v. Kingsland Development, Inc., 4382 So.2d

660, 663 (Fla. Dist. Ct. App. 1983), that does not involve

the fourteenth amendment, but rather Florida Rule of

Civil Procedure 1.440(¢).

In Webb v. Webb, 451 U.S. 493 (1981), petitioner sought

certiorari by attempting to raise a federal claim under the

full faith and credit clause, U.S. Const. art. IV, § 1. Zd. at

494. The petition alleged that the federal question had

been raised properly in the state courts. This Court

dismissed the petition explaining:

Although petitioner did use the phrase “full faith

and credit” at several points in the proceedings

below, nowhere did she cite to the Federal Constitu-

tion or to any cases relying on the Full Faith and

Credit Clause of the Federal Constitution. ...

“The papers filed by petitioner were: (1) a verified motion for relief

from final judgment and to vacate default; (2) a renewed and/or

amended Rule 1.540(b) motion for relief, ete.; (3) a motion for

rehearing on defendant's motion for relief from final judgment; (4)

appellant’s main brief; (5) appellant's reply brief; and (6) a petition

for rehearing.

It is a long-settled rule that the jurisdiction of this

Court to re-examine the final judgment of a state

court can arise only if the record as a whole shows

either expressly or by clear implication that the

federal claim was adequately presented in the state

system. New York ez. rel. Bryant v. Zimmerman, 278

U.S. 63, 67 (1928); Oxley Stave Co. v. Butler County,

166 U.S. 648, 655 (1897). Petitioner argues that

since the Georgia Constitution has no full faith and

credit clause, there can be no doubt that the above

references in the record were to the Federal Consti-

tution and therefore that her federal claim was prop-

erly presented. ...We are unpersuaded. In fact, we

find it far more likely that petitioner was referring to

state law.

451 U.S. at 496-97.

Similarly, in the instant case, petitioner's occasional

and incidental uses of the term “due process”, with no

reference ever to the United States Constitution or any

ease relying on the fourteenth amendment, make it clear

that no federal claim was adequately presented below.*

The Court in Webb also observed that “nowhere in the

opinion of the Georgia Supreme Court is any federal

question mentioned, let alone expressly passed upon.” Jd.

at 495. In such circumstances, this Court assumes “that

the omission was due to want of proper presentation in

the state courts, unless the aggrieved party in this Court

‘The Florida state constitution does have a due process clause, Fla.

Const. art. I, §9, which was a possible basis of petitioner's “due

process references.

iii a an

7

ean affirmatively show the contrary.” Jd. (quoting Street

v. New York, 394 U.S. 576, 582 (1969) ).

In this case, the Florida court of appeal’s opinion does

not pass upon any federal due process issue and no case

cited by the court of appeal involves a federal due process

elaim. 514 So.2d 390.

No federal claim having been presented or preserved

below, either expressly or by clear implication, this Court

must deny the petition for writ of certiorari.

II. PETITIONER WAS AFFORDED THE NO-

TICE AND OPPORTUNITY TO DEFEND CON.

TEMPLATED BY THE DUE PROCESS CLAUSE

OF THE FOURTEENTH AMENDMENT

Due process requires that a party be afforded “notice

and opportunity for a hearing”. Cleveland Bd. of Educ. v.

Loudermill, 470 U.S. 532, 542 (1985); Mullane v. Central

Hanover Bank & Trust Co., 339 U.S. 306, 313 (1950). It

does not uire that a defaulting defendant actually

seize upomthat opportunity. Boddie v. Connecticut, 401

U.S. 371, \378 (1971). If a defendant is served with

process and has notice of a lawsuit against it, as New

England Insurance admittedly did here (Petition at +),

but fails or refuses to defend, it cannot be heard to

complain that it was denied due process. Id.; cf. National

Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 315 (1964)

(“Sinee the [defendants] did in fact receive complete and

timely notice of the lawsuit pending against them, no due

process claim has been made’’).

As this Court stated in Boddie:

Due process does not, of course, require that the

defendant in every civil case actually have a hearing

8

on the merits. A State can, for example, enter a

default judgment against a defendant who, after

adequate notice, fails to make a timely appearance

401 U.S. at 378.

Here, New England Insurance was afforded notice and

opportunity for a hearing consistent with due process

requirements. It was served with process, and several

senior officers in its claims department reviewed and

discussed the process. New England Insuranee failed to

respond. This is not a case where property was seized or a

judgment entered without prior notice. See, ¢.g., Peralta v.

Heights Medical Center, Inc., 56 U.S.L.W. 4189 (U.S. Feb

24, 1988).

Because New England Insurance was validly served

with process, there was no denial of due process by the

entry of the default judgment. Moreover, petitioner was

afforded and participated in three hearings in the trial

court, as well as a full hearing before the district court of

appeal. Its belated effort to elevate to constitutional

status its disagreement with the Florida courts’ interpre-

tations of Florida law is misguided. The petition for writ

of certiorari should be denied. Boddie, 371 U.S. at 378.

Ill. THE ISSUE PRESENTED BY PETITIONER IN-

VOLVES ONLY STATE LAW, AND THE FLOR-

IDA COURTS CORRECTLY APPLIED THAT

LAW

Petitioner's claim of entitlement to notice of a hearing

on damages is purely a matter of Florida state procedure.

Historically, a defaulted defendant in Florida had no

right to any notice of a hearing on damages, even when

the damages were unliquidated. Stevenson v. Arnold, 250

pis bape

9

So.2d 270, 271-72 (Fla. 1971). Effective January 1, 1977,

however, Florida Rule of Civil Procedure 1.440(c) was

amended to require that “[i]n actions in which the dam-

ages are not liquidated, the order setting an action for

trial shall be served on parties who are in default in

accordance with Rule 1.080(a).”” Compare In re The Fla.

Bar: Rules of Civil Procedure, 339 So.2d 626, 629 (Fla.

1976) and In re The Fla. Bar: Rules of Civil Procedure, 265

So.2d 21, 40 (Fla. 1972). In reality, the issue presented in

the petition for certiorari is whether the Florida courts

properly interpreted Florida Rule of Civil Procedure

1.440(c).

In this case, the courts below correctly determined

that, under Florida law, the damages awarded against

New England Insurance were liquidated and that peti-

tioner, being in default, was not entitled to notice of a

hearing on damages. Under Florida law, damages are

liquidated when the amount may be ascertained with

exactness from the cause of action as pleaded. Bowman v.

Kingsland Dev., Inc., 432 So.2d 660 (Fla. Dist. Ct. App.

1983).

International Bank’s cause of action against New En-

gland Insurance was a direct action founded upon Shin-

gleton v. Bussey, 223 So.2d 713 (Fla. 1969). International

Bank, as a third-party beneficiary of the Policy under

Florida law, was entitled to recover from New England

Insurance the amount of any judgment entered in Inter-

national Bank’s favor and against one of New England

Insurance's insureds. International Bank secured a judg-

ment against Preve, New England Insurance's insured,

for $4.6 million and, under Florida law, was entitled to a

judgment against New England Insurance for that same

exact amount.

10

Petitioner's suggestion that there exists a Florida rule

automatically “liquidating” damages upon default (Peti-

tion at 10) is absolutely incorrect. There is a plethora of

Florida authority providing that when damages are unliq-

uidated, Florida's rules of procedure require notice of a

hearing on damages even though the defendant is in

default. See, ¢.9., Calder v. McNess, 427 So.2d 393 (Fla.

Dist. Ct. App. 1983); Tallman Pools of Georgia, Inc. v.

Wood, 399 So.2d 112 (Fla. Dist. Ct. App. 1981).

Here, under a specific provision of Florida law, the

direct action claim permitted by Shingleton, the damages

against New England Insurance were liquidated by the

judgment against its insured, Preve. It was the judgment

against Preve, New England Insurance's insured, not

New England Insurance's default, that “liquidated” In-

ternational Bank’s damages against New England

Insurance.

The Florida court of appeal’s reference to Shingleton

demonstrates that its decision was founded upon that

determination of Florida law. This Court, of course, must

accept the state court’s construction of controlling Flor-

ida law and its application to the state’s default proce-

dures. Coleman v. Alabama, 399 U.S. 1, 9 (1970); Kingsley

Int’l Pictures Corp. v. Regents of the Univ. of N.Y., 360 U.S.

684, 688 (1959).

The instant petition does not present a viable federal

due process issue. Rather, petitioner in effect asks this

Court to review the state court’s interpretation and appli-

eation of Florida law and the Florida Rules of Civil

11

Procedure. That request is not a proper basis for certio-

rari review by this Court.

CONCLUSION

For the foregoing reasons, New England Insurance's

petition for writ of certiorari to the District Court of

Appeal of Florida, Third District, should be denied.

Respectfully submitted,

John H. Schulte

Counsel of Record

W. Barry Blum

TEW JORDEN & SCHULTE

701 Brickell Avenue

Miami, Florida 33131

Telephone: (305) 371-2600

Counsel for Respondent,

The International Bank of Miaini, N.A.