Appendix — Bennett v. Society of Lloyd's
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APPENDIX A — OPINION OF THE UNITED STATES
COURT OF APPEALS FOR THE TENTH CIRCUIT
DECIDED AND DATED MARCH 23, 2005,
AMENDED MAY 6, 2005
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
No. 02-2301
SOCIETY OF LLOYD’S,
Plaintiff-Appellee,
¥
~ RICHARD A. REINHART,
Defendant-Appellant.
No. 03-4065
SOCIETY OF LLOYD’S,
Plaintiff-Appellee,
v.
GRANT R. CALDWELL, DAVID L. GILLETTE, JAMES
R. KRUSE, EDWARD W. MUIR, and KENT B. PETERSEN,
Defendants-Appellants.
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Appendix A
No. 03-4082
SOCIETY OF LLOYD’S,
Plaintiff-Appellee,
V. |
STEPHEN M. HARMSEN; KELLY C. HARMSEN, ~
Defendants-Appellants.
Nos. 03-4094 and 03-4183
SOCIETY OF LLOYD’S,
Plaintiff-Appellee,
v.
WALLACE R. BENNETT,
Defendant-Appellant.
Before SEYMOUR, HENRY, and LUCERO, Circuit Judges.
HENRY, Circuit Judge.
This consolidated appeal involves the Plaintiff-Appellee
Lloyd’s of London’s request for the court’s recognition and
enforcement of money judgments issued by the High Court
of Justice, Queen’s Bench Division, London, England, in its
favor against each of the defendants. Lloyd’s obtained money
judgments in England against each of the six New Mexicans
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Appendix A
(the “New Mexico Names”) and the nine Utahns (the “Utah
Names”) (collectively, the “Names”) in connection with
underwritin, »bligations. Lloyd’s then brought actions in the
United States District Court for the Districts of New Mexico
and Utah seeking recognition of these judgments as final and
enforceable, entitled to full faith and credit in New Mexico
and Utah, respectively. Each federal district court granted
summary judgment in favor of Lloyd’s. Of the Utah Names,
one defendant reached a settlement with Lloyd’s, leaving
eight in this litigation. Five of the six New Mexico Names
reached settlements with Lloyd’s. We have consolidated these
cases for disposition on appeal.
On appeal, the New Mexico Name raises several
arguments. First, he argues that the English judgment
deprived him of due process under New Mexico’s Uniform
Foreign Money-Judgment Recognition Act. Second, the New
Mexico Name maintains that the English judgment stemmed
from an action that is repugnant to New Mexico’s public
policy as the judgment: (a) violates New Mexico’s securities
laws; (b) is based on unconscionable contracts; (c) stems from
adhesion contracts; (d) comprises unlawful cognovit notes,
(e) is based on illusory contacts; and (f) violates the New
Mexico Unfair Practices Act.
The Utah Names offer similar arguments. They contend
that the district court cannot enforce the English judgments
under Utah law, because the English system of jurisprudence
is incompatible with American standards of due process, and
that they did not receive an opportunity for a full and fair
trial. The defendants also maintain that the English judgments
conflict with Utah public policy. One Utah Name questions
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Appendix A
whether diversity jurisdiction exists, and also challenges the
enforcement of the English judgments as violative of Utah
securities laws. Two Utah Names also contend that the district
court’s approval of the English post-judgment interest of eight
percent per annum was incorrect.
We hold that the Utah and New Mexico Names received
due process under the English system of jurisprudence and
that, in the thirty-two days of hearing before English trial
and appellate courts, they received an opportunity for a full
and fair trial. As to the New Mexico Name, specifically, the
English legal proceedings provided ample due process
pursuant to New Mexico’s Uniform Foreign Money-
Judgment Recognition Act. We also hold that the Lloyd’s
judgments are not repugnant to New Mexico’s public policy.
As to the Utah Names, we hold that the English
proceedings satisfied Utah’s due process requirements and
the English judgments do not conflict with Utah’s public
policy. We also affirm the district court’s denial of a motion
for discovery and a motion to certify questions of law to the
Utah Supreme Court. We hold that the parties in this case
are diverse, and that enforcement of the English judgments
does not violate Utah’s securities laws. Finally, we reverse
the district court’s determination that Lloyd’s English
judgments should accrue interest at the English post-
judgment interest rate.
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Appendix A
I. BACKGROUND
Numerous courts have summarized the basic facts
applicable to the underlying litigation, and these facts are
not in dispute. See Soc’y of Lloyd’s v. Ashenden, 233 F.3d
473 (7th Cir. 2000); Haynsworth v. The Corp.,.121 F.3d 956
(Sth Cir. 1997); Allen v. Lloyd’s of London, 94 F.3d 923
(4th Cir. 1996); Soc’y of Lloyd's v. Webb, 156 F. Supp. 2d
632 (N.D. Tex. 2001). We shall summarize the pertinent facts
here, borrowing heavily from the detailed and well-reasoned
Webb decision.
Lloyd’s is not an insurer, but rather is the regulator of an
insurance market located in London. Through Parliamentary
Acts, specifically the Lloyd’s Acts of 1871-1982, Parliament
created Lloyd’s and authorized it to regulate the English
insurance market. Individual and corporate members of
Lloyd’s known as “Names” underwrite insurance. The New
Mexico defendants and Utah defendants became Names in
the Lloyd’s market between the late 1970’s and late 1980’s.
The Names underwrite insurance by forming groups
known as syndicates. Names are passive investors in the
sophisticated scheme, but along with potential profits they
may incur substantial personal and direct liability with respect
to a portion of a syndicate’s risk in the Lloyd’s market.
The liability of each Name is several rather than joint.
As a condition of becoming members of Lloyd’s, Names enter
into agreements governing their membership in Lloyd’s and
their underwniting in the Lloyd’s market. At issue here is the
General Undertaking Agreement, which obligated the New
Mexico and Utah Names, and all other Names, to comply
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Appendix A
with the Parliamentary Acts under which Lloyd’s was created
and to submit any dispute arising out of their memberships
or underwriting at Lloyd’s to the English courts for resolution
pursuant to English law. Each Name “irrevocably agree[d]
that the courts of England [had] exclusive jurisdiction to settle
any dispute” arising out of the underwriting of insurance
business, and agreed that such “[p]roceedings brought in the
English courts [were] conclusive and binding upon any party
and may be enforced in the courts of any other jurisdiction.”
Case No. 02-2301, Aplts’ App. vol. 1, at 43 (General
Undertaking Agreement).
By the early 1980’s, which is about the time that Lloyd’s
solicited the Utah and New Mexico Names,
Lloyds knew that it had problems with rising
asbestos and toxic tort claims. The syndicates’
reserves were inadequate to handle these rising
claims and a committee known as the Asbestos
Working Party was formed to gather information
about the breadth of the problem. The problem
was described as “the largest phenomenon that has
ever hit the casualty insurance industry” and “the
most significant legal and loss cost issue in the
history of the industry.” Information about these
claims was not published in the marketplace, was
omitted from the audit instructions, and was not
published in Lloyds financial statements for the
year. Although a letter was prepared that provided
the necessary disclosures to the Names, it was
merely placed in a file and never distributed to
the intended Names. Simultaneously, Lloyds was
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Appendix A
campaigning in Parliament for passage of the
Lloyds Act of 1982 which granted Lloyds and its
governing body extraordinary bylaw-making
powers and immunity. In exchange, Lloyds
committed to providing better quality information
to prospective Names. This promise was not
fulfilled and Lloyds admitted to Parliament that
it had not kept its promise. “The Council of Lloyds
very much regrets that the undertaking to
implement the recommendations ... within 2
years of the Royal Assent has not been kept.”
Webb, 156 F. Supp. 2d at 635 (emphasis supplied) (internal
citations omitted).
According to former Name and lead plaintiff in the fraud
action against Lloyd’s, Sir Peter Jaffray, “[t]he only way they
could keep going was to suppress the asbestos information,
cook the books to ensure they were still showing profits and
go after new investors.” Case No. 02-2301, Aplts’ App. vol.
I, at 84 (Combined Mem. in Opp. to Summ. Judgment and
in Support of Motion in Alt. for Discovery under Rule 56(c),
Ex. | at 3 (Lloyd's of London 1688 —?, TIME Feb. 21, 2002)).
Further,
{djuring the five years that Lloyds failed to
improve information disseminated to prospective
Names, approximately 10,000 new Names had
joined Lloyds, most of whom were U.S. investors.
Webb, 156 F. Supp. 2d at 635. The New Mexico and Utah
Names contend that the Lloyd’s representative emphasized
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Appendix A
Lloyd’s long history of profitability, its exclusive and
selective members, its program of annual audits, and that
the risk of “unlimited liability” had been of little consequence
in Lloyd’s three-hundred-year history. See Case No. 02-2301,
Aplts’ App. vol. I, at 276- 320 (Mem. in Opp. to Summ.
Judgment, exs. 3-8 (Affids. from Utah Names)).
For the years of account 1988 through 1992,
Lloyds suffered losses in excess of £8 billion
(these were reported in 1991-1995). Once the
Names’ inquiries into the cause for the losses
began, they concluded that Lloyds had been guilty
of serious negligence and/or fraud. . . .
The Names eventually filed suits in numerous
cities across the United States claiming fraud
against Lloyds in connection with their
recruitment as investors, their placement on high-
risk syndicates and their continuing to underwrite
at Lloyds. In each of the cases Lloyds moved to °
dismiss based on a forum selection (the forum
being in England) and choice of law (the law being
English) clauses contained in the General
Undertaking (i.e., a contract) that the Names had
signed. In each of the cases filed, the courts of
appeals enforced the forum selection and choice
of law clauses.
Webb, 156 F. Supp. 2d at 635-36 (internal citations omitted).
Apparently, the New Mexico Name and several Utah
Names were parties to one of these suits, Richards v. Lloyd's
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Appendix A
of London, 135 F.3d 1289 (9th Cir. 1998). The Richards
complaint indicates that all but Utah Names Stephen and Kelly
Harmsen and were plaintiffs. See Case Nos. 03-4064, -4082,
-4094, -4193, Aple’s Supl.App. vol. I, doc. 3 at 43-49.
The Richards litigation addressed and rejected the Names’
contention that “their disputes with Lloyd’s should be litigated
in the United States despite contract clauses binding the parties
to proceed in England under English law.” Richards, 135 F.3d
at 1292. The Ninth Circuit held that to invalidate the choice of
law provisions in the Lloyd’s General Undertaking Agreement
would result in an “unbounded” reach of the United States
securities laws, and would hamper international commerce. Jd.
at 1293. Moreover, the court stated that “[t]he Names have
recourse against [Lloyd’s] for fraud, breach of fiduciary duty,
or negligent misrepresentation.” Jd. at 1296.'
We reached a similar conclusion in Riley v. Kingsley
Underwriting Agencies, Ltd., 969 F.2d 953, 958 (10th Cir.
1992). We rejected the plaintiff Name’s contentions and held
that '
English law does not preclude [the Name] from
pursuing an action for fraud and we agree with
1. To the extent that Lloyds raises res judicata and collateral
estoppel as: affirmative defenses with respect to Mr. Bennett’s
arguments against the enforcement of the choices of law and forum,
these matters are addressed in Richards, as discussed in § II1(C)(4)(b),
infra, and we hold such claims are precluded. Although Richards
also discussed the policies of the anti-waiver provisions of the federal
securities laws and referenced various state securities laws, Richards
was limited to the choices of law and forum proceedings. To the
extent the Names challenge the choices of law and forum under the
state securities laws, these too are precluded. See infra § II(B)(2)(a).
10a
Appendix A
the Defendants that the Lioyd’s Act does not grant
statutory immunity for such claims. We have been
shown nothing to suggest that an English court
would not be fair, and in fact, our courts have long
recognized that the courts of England are fair and
neutral forums.
Id. (internal citations omitted). As such, trial proceeded in
England. Following trial,
the English courts found Lloyds guilty of
negligence with respect to their Names and
awarded the Names damages totaling £1 billion.
Pursuant to the Lloyds’ Act of 1982, however, the
Lloyds’ Council enacted a by-law that caused the
funds awarded to the Names to be frozen. The
Lloyds’ Council placed Lloyds as trustee of the
trust funds. The appellate court of England upheld
Lloyds’ right to freeze the funds and appoint
Lloyds as trustee under the Lloyds Act of 1982.
Because the losses were widely spread
throughout the various syndicates, Lloyds
developed a reorganization program in 1995-96
called Reconstruction and Renewal (“R & R”).
This was a mandatory plan of reinsurance of all
years of account prior to 1993 into one reinsurance
company called Equitas Reinsurance Ltd. The
available syndicate assets were £9.9 billion; yet
the premium needed for the reinsurance (by
December 31, 1995) was £14.7 billion. . ..
Webb, 156 F. Supp. 2d at 636 (internal citations omitted).
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Appendix A
In implementing the reorganization plan, Lloyd’s
required each Name to become a party to the Equitas
reinsurance contract through an appointed, substituted agent,
who signed the contract on behaif of the Name. The Equitas
contract contained a “pay now, sue later” clause that
precluded Names from asserting claims they might have
against Lloyd’s or others as a set-off or counterclaim to their
Equitas Premium. The Equitas contract also contained a
“conclusive evidence” clause, which provided that, in the
absence of manifest error, Lloyd’s determination of a Name’s
Equitas premium was conclusive:
The Equitas premium was mandatory and each
Name was required to pay Equitas the amount
shown on his statement. If, however, the Name
signed the settlement agreement included in the
R & R package, the Name would be awarded a
credit, which would result in a reduction in the
amount he paid in.
Id.
The New Mexico and Utah Names were Names who
neither signed the settlement agreement nor paid the
assessment. When they did not pay, Lloyd’s used its by-law
powers from the Lloyd’s Act of 1982 to appoint a Substitute
Agent. This Substitute Agent was instructed to sign the
Equitas contract on behalf of the Names who refused to sign
the Equitas settlement. Next, Lloyd’s began suing these non-
settling Names. Lloyd’s paid Equitas the premium allegedly
owed by the non-settling Names and received an assignment
for the premium in exchange. In late 1996, Lloyd’s then sued
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Appendix A
the New Mexico and Utah Names (and all remaining non-
settling Names) for the amounts paid on their behalf.
Lloyd’s served a writ of summons on each of the New
Mexico and Utah Names, notifying them of the
commencement of the English action against them. Each of
the Names filed an Acknowledgment of Service of Writ of
Summons through their solicitors of record. Through the
filing of the Acknowledgment, each Name appeared in the
English Court and notified Lloyd’s of his or her intent to
contest the claim. Although other Names actively defended
in the English litigation, the New Mexico and Utah Names
did not submit a notice of intention to defend, nor did they
contest Lloyd’s claims.
Those Names who did defend presented common
objections and defenses. They alleged that Lloyd’s lacked
the regulatory authority to pursue certain aspects of the
reorganization program, that they were entitled to rescind
based on fraud in the inducement of their underwriting at
Lloyd’s, that they were entitled to litigate these claims of
fraud, and that they were not bound by the Equitas reinsurance
contract’s “pay now, sue later” and “conclusive evidence”
clauses. The English court found in favor of Lloyd’s and
entered judgment against each of the defendants. See Webb,
156 F. Supp. 2d at 636 (citing English cases).
Specifically, the court found that the “pay now, sue later”
clause was enforceable and the Names could not assert a fraud
claim as a set-off to the Equitas premium due. At the trial
level, several hearings were held regarding the premium
amounts and the trial court concluded that Lloyd’s produced
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Appendix A
sufficient documents justifying the premiums it claimed.
Subsequently, each Name had the opportunity to present
evidence that the calculation of the premium was “manifest
error” pursuant to the Equitas contract. The court ruled
against the Names with respect to the “manifest error” claims.
See Webb, 156 F. Supp. 2d at 636.
The English court did find, however, that Lloyd’s could
be sued for freud damages and that the Names were free to
pursue separate fraud claims against Lloyd’s. Approximately
two-hundred non-settling Names brought a fraud case in
England against Lloyd’s titled The Society of Lloyds v. Jaffray.
The Honorable Justice Cresswell of the High Court of Justice
of England and Wales issued a 635-page decision in the
Jaffray litigation in November 2000 dismissing sample
Names’ claims for deceit and fraudulent misrepresentation
after a trial spanning nineteen weeks. See 2000 WL 1629463
(Q.B. 3 Nov. 3, 2000), aff'd, Ct.App. Civ. Div. 26 July 2002.
In October 1999, while the Jaffray case was pending,
the court issued an order requiring any Names wishing to
bring a fraud claim against Lloyd’s to join the Jaffray action.
Lloyd’s sent a copy of a statement regarding the terms of
the Order to every Name who had not accepted Lloyd’s
Reconstruction and Renewal settlement offer, including each
of the New Mexico and Utah Names. See Case No. 03-4002,
vol. V, doc. 95 at 3. Neither the Utah Names nor the New
Mexico Name gave notice that they reserved the right to
advance such allegations or otherwise become parties to the
Jaffray litigation.
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Appendix A
The English judgments against the Names were affirmed
on appeal. All appeals from the entry of the English
judgments have been exhausted. Following these rulings, the
English Court entered individual judgments in favor of
Lloyd’s against each of the New Mexico and Utah Names.’
On March 8, 2002 Lloyd’s filed this action to collect on the
judgments.
li. DISCUSSION
The Names raise two overarching arguments regarding
the errors of the New Mexico and Utah district courts:
(1) the courts erred when they determined that the English
proceedings provided due process to the Names; and (2) the
courts erred when they found that the English cause of action
did not violate the public policy of either New Mexico or
Utah. They also challenge the district courts’ denial of other
motions, and two Utah Names challenge the calculation of
post-judgment interest.
At the outset, we note that the Names’ two principal
arguments have been raised unsuccessfully in various federal
2. As of March 7, 2002 the U.S. dollar amounts for the principal
portions of the judgments were, in the aggregate, as follows:
Utah Names: $1,757,549.31
New Mexico Name: $ 262,124.54
See Case Nos. 03-4065, -4082, -4094, -4183, Aple’s Supl.App. vol.
I, doc. 1, at 15-18 (Complaint filed Mar. 8, 2002); Case No. 02-
2301, Aplts’ App. vol. I, at 16 (Complaint filed Mar. 8, 2002).
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Appendix A
and state courts, by defendants from several states.’ Although
we affirm the grant of summary judgment to Lloyd’s for
largely the same reasons as our sister circuits, our analyses _
of the defenses brought by the New Mexico and Utah Names
are slightly different because of the defenses the Names
assert. Furthermore, Utah, unlike the states whose law was
applied by each court that has addressed the issue, has not
adopted the Uniform Foreign Money-Judgment Recognition
Act. Although the decisions of the other courts are highly
persuasive, we must detour slightly as we apply Utah’s comity
3. See e.g.; Soc’y of Lloyds v. Turner, 303 F.3d 325 (Sth Cir.
2002) (affirming summary judgment for Lloyd’s, under Uniform
Foreign Country Money-Judgment Recognition Act, on grounds that
English courts provide due process and enforcement of English
judgment is not repugnant to Texas public policy); Ashenden, 233
F.3d 473 (7th Cir. 2000) (affirming summary judgment for Lloyd’s
under illinois Uniform Foreign Money-Judgment Recognition Act,
explaining that existence of due process in English courts is a
“question ... not open to doubt”); Soc’y of Lloyd’s v. Mullin, 255
F. Supp. 2d 468, 476, 477 (E.D. Pa. 2003) (granting summary
judgment for Lloyd’s under Pennsylvania’s Uniform Foreign Money
Judgment Act, noting that “recognition of the English Judgment
would not so offend Pennsylvania’s notions of due process grounds,”
and that defendant’s argument “fails to meet the high threshold for
nonrecognition on public policy grounds”), aff'd, 96 Fed. Appx. 100
(3d Cir. May 5, 2004); Soc’y of Lloyd’s v. Grace, 718 N.Y.S.2d 327,
328 (N.Y. App. Div. 2000) (affirming summary judgment for Lloyd’s,
explaining that “since the underlying English judgments are
procedurally sound and do not violate any public policy of New York
or the United States, they are entitled to comity”); Soc ’y of Lloyds v.
Baker, 673 A.2d 1336, 1338 (Me.1996) (affirming summary judgment
for Lloyd’s and stating that the “application [of doctrine of comity]
is a question of law that may be resolved by the court on a motion
for a summary judgment”) (citations omitted).
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analysis to the assertions of the Utah Names. Although we
empathize with the losses that the New Mexico Name and
Utah Names have incurred, and we appreciate the sincerity
of their arguments, and we find many of Lloyd’s acts to be
distinctly distasteful, the agreements the Names signed and
the applicable law require that we must affirn. the thorough
and well-reasoned orders of the district courts, with one slight
exception.
A. Standard of Review
We review the district court’s grant or denial of summary
judgment de novo, applying the standard applied by the
district court pursuant to Federal Rule of Civil Procedure
56(c). Qwest Corp. v. City of Santa Fe, New Mexico, 380
F.3d 1258, 1264 (10th Cir. 2004). “Summary judgment is
appropriate if there is no genuine issue as to any material
fact and [ ] the moving party is entitled to judgment as a
matter of law.’ We view the evidence in a light most favorable
to the non-moving party.” /d. (quoting Fed. R. Civ. P. 56(c)).
B. New Mexico Law
The New Mexico Name contends that the district court
erred when it failed to consider the procedures the English
courts actually employed, and instead relied on the general
proposition that the English courts are fair and neutral. The
New Mexico Name also asserts that the enforcement of the
English judgments violates New Mexico public policy.
Applying New Mexico law, we hold that the district court
appropriately assessed the English judicial system and no
violation of due process or New Mexico public policy
occurred.
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1. Due Process concerns were met.
The New Mexico Name claims the district court failed
to appreciate how its enforcement of the English judgment
deprived him of his due process rights. While the Full Faith
and Credit Clause applies to the recognition and enforcement
of judgments among sister states, it does not apply to
judgments rendered in foreign countries. Al/state Ins. Co. v.
Hague, 449 U.S. 302, 322 n.4 (1981) (Stevens, J., concurring
in the judgment) (“The Full Faith and Credit Clause, of
course, was inapplicable ... because the law of a foreign
nation, rather than of a sister State, was at issue... .”’).
The parties cite no federal statute applicable to the
enforcement of foreign court money judgments in U.S. courts,
nor any applicable treaty. Instead, the recognition and
enforcement of foreign judgments are governed by state law.
See See Transport Wiking Trader Schiffarhisgesellschaft
MBH & Co., Kommanditgesellschaft v. Navimpex Centrala
Navala, 989 F.2d 572, 582 (2d Cir. 1993) (“We note that. . .
the recognition of foreign judgments is governed by state
law.”); see Restatement (Third) of the Foreign Relations Law
of the United States § 481 cmt. a (1987).
New Mexico has adopted the Uniform Foreign Money-
Judgment Recognition Act. See N.M. STAT. ANN. §§ 39-
4B-1 to 39-4B-9 (1978). Pursuant to the Act, “[a] foreign
judgment is not conclusive” if
the judgment was rendered under a system that
does not provide impartial tribunals or procedures
compatible with the requirements of due process
of law;
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Appendix A
and it “need not be recognized if:”
(1) the defendant in the proceedings in the foreign
court did not receive notice of the proceedings in
sufficient time to enable him to defend;
(2) the judgment was obtained by fraud;
(3) the cause of action on which the judgment is
based is repugnant to the public policy of this
State...
N.M. Stat. Ann. § 39-4B-5 (emphasis supplied).
The New Mexico Name contends that the New Mexico
district court conflated the widely recognized general fairness
of the English system, with this particular judgment, which,
in his view, conflicts with his constitutional due process
rights. Specifically, the New Mexico Name objects to
(1) the English Courts’ enforcement of the “pay-now, sue-
later” clause, which prohibited him from raising certain
defenses and counterclaims during the English action;
(2) the “conclusive evidence” clause, because it renders the
amount of the assessment determined by Lloyd’s conclusive
absent manifest error, and thereby fails to meet due process
requirements; and (3) the fact that the cumulative effect of
both these clauses is that the New Mexico Name could not
receive a pre-deprivation hearing, could not obtain discovery
as to the amount of Lloyd’s claim, and could not challenge
Lloyd’s calculation of the amount due.
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Appendix A
As to whether the contested clauses, taken separately or
together, amounted to a forfeit of the Name’s due process righis,
“(t]he question is not whether Lloyd’s accorded due process to
the names, but whether the English courts did... . Stated
differently, the courts held that the names had waived their
procedural rights in advance. . . .” Ashenden, 233 F.3d at 479
(emphasis supplied). Waiver of procedural rights in advance is
clearly permitted, see e.g., D.H. Overmyer Co. v. Frick Co.,
405 U.S. 174, 185 (1972) (“The due process rights to notice
and hearing prior to a civil judgment are subject to waiver.”’).
Moreover, given the New Mexico Name’s “utter failure to
participate in any stage of any of the English proceedings, ’we
not only look with skepticism, but we flatly reject the due process
complaint of a party who was given, and ... waived, the
opportunity of making the adequate presentation in the English
Court.’” Turner, 303 F.3d at 331 n. 20 (quoting British Midland
Airways Ltd. v. Int’l Travel Inc., 497 F.2d 869, 871 (9th Cir.
1974) (internal quotation marks omitted)).
Although the New Mexico Name would prefer to have us
focus on this particular judgment, rather than the English system,
at this stage of these matters, we are not permitted to do so.
See N.M. Stat. Ann. § 39-4B-5 (indicating that to determine
“conclusive[ness]” of a “foreign judgment,” a court examines
the foreign country’s “system” and whether it maintains
“procedures compatible with the requirements of due process
of law”). The procedures the English courts afford need not be
identical to ours, they must only be compatible in that they do
not offend the notion of basic fairness. See Turner, 303 F.3d at
331 (“the courts of England are fair and neutral forums”)
(footnoted citation omitted); Hilton v. Guyot, 159 U.S. 113, 205
(1895) (“[W]e are not prepared to hold that the fact that the
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[foreign] procedure . . . differed from that of our own courts is,
of itself, a sufficient ground for impeaching the foreign
judgment.”); Uniform Foreign-Money Judgments Recognition
Act § 4 cmt. (“[A] mere difference in the procedural system is
not a sufficient basis for non-recognition. A case of serious
injustice must be involved.”);1 Restatement (Third) of Foreign
Relations § 482 cmt. b (1987) (“A court asked to recognize or
enforce the judgment of a foreign court must satisfy itself of the
essential fairness of the judicial system under which the
judgment was rendered.”’).
And when we look to the basic fairness of the system, the
answer is clear: “[OJur courts have long recognized that the
courts of England are fair and neutral forums.” Riley, 969 F.2d
at 958 (collecting cases); see also Haynsworth, 121 F.3d at 967
(“This is particularly so in the case of England, a forum that
American courts repeatedly have recognized to be fair and
impartial.”). The Seventh Circuit similarly lauded the English
system’s regard for due process in its highly persuasive opinion
involving nearly identical claims:
Any suggestion that [the English] system of courts
does not provide impartial tribunals or procedures
compatible with the requirements of due process of
law borders on the risible. [T]he courts of England
are fair and neutral forums. The origins of our
concept of due process of law are English. .. . and
the English courts ... are highly regarded for
impartiality, professionalism, and scrupulous regard
for procedural rights.
Ashenden, 233 F.3d at 476 (internal citations and quotations
omitted).
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Appendix A
We agree with the Seventh Circuit’s reasoning and hold
that given the structure of the English system, which is
substantially similar to our own, the New Mexico Name’s
suggestion that the English court system does not provide
tribunals compatible with due process is untenable. See also
Webb, 156 F. Supp. 2d. at 640.
2. New Mexico’s Public Policies were not violated.
The New Mexico Name also challenges the enforcement
of the English judgments as a violation of New Mexico’s
public policy. First, he argues that Lloyd’s violated the New
Mexico Securities Act through its solicitation of unregistered
securities and by making fraudulent representations. Second,
he asserts that the Equitas contract is both procedurally and
substantively unconscionable. Third, the New Mexico Name
contends that the Equitas contract amounts to a contract of
adhesion. Fourth, he asserts the Equitas contract is a
“cognovit note,” which both violates New Mexico public
policy and New Mexico law. Fifth, he maintains that the
Equitas contract is illusory. Finally, he contends the New
Mexico Unfair Practices Act bars recognition of the Equitas
contract.
Even if we assume the shaky premises of these assertions
to be true (that Lloyd’s made material misrepresentations and
those misrepresentations would allow rescission under New
Mexico law), we reject each of these claims for one
overriding reason: English law as applied here does not
violate New Mexico’s public policy. As we iterate throughout
the opinion, “[t]he view that every foreign forum’s remedies
must duplicate those available under American law would
22a
Appendix A
render all forum selection clauses worthless. . . .” Haynsworth,
121 F.3d at 969; see also Riley, 969 F.2d at 958.
Furthermore, we reiterate that we must focus on the
“cause of action” and the “claim for relief’ underlying the
English Judgment, not the differences in the bodies of law,
because slight differences between England’s and New
Mexico’s laws do not trigger the public policy exception.
N.M. Stat. Ann § 39-4B-5(b)(3); see Turner, 303 F.3d at 332-
33. Neither a breach of contract action nor a claim for money
damages is repugnant to New Mexico public policy.
a. The State Agreement trumps the New
Mexico Securities Act.
The New Mexico Name emphasizes that the New Mexico
Securities Act embodies a public policy to protect New Mexico,
and New Mexicans, and that the contract on which Lloyd’s sued
violated the state securities act. He relies heavily upon the
declaration of Michael J. Vargon, Deputy Director of the
Securities Division in the New Mexico Department of
Regulation and Licensing. In an affidavit, Mr. Vargon states that
after receiving various complaints from New Mexicans
regarding Lloyd’s solicitations to become Names, the Division
concluded that the interest in the Names program was an
investment contract and therefore a security, subject to the New
Mexico Securities Act. Lloyd’s failed to register these securities,
and furthermore, “the information available to the Division
strongly suggest[ed] fraud and misrepresentation in the
inducement and continuing misrepresentation made to
Names. . . .” Case No. 02-2301, Aplts’ App. vol. I, at 325.
23a
Appendix A
In response, Lloyd’s points to the July 1996 State
Agreement between Lloyd’s and participating state securities
regulators, including the Acting Director of the New Mexico
Securities Division. The State Agreement recognizes that
“certain State Securities Regulators have asserted the
activities of Lloyd’s ... fall within the scope of their
regulatory jurisdiction” and that “the activities of Lloyd’s
may have violated laws subject to their enforcement
authority.” /d. vol. II, at 747. The State Agreement also
indicates that “Lloyd’s denies it has violated any U.S. laws
and denies it is subject to the jurisdiction of the States
Securities Regulators with regard to the issues raised.” /d.
The State Agreement appears to have been a necessary
precursor to the enactment of the Reconstruction and
Renewal plan. Under the State Agreement, Lloyd’s promised
to allocate credits to qualified State Names, in exchange for
which the State Securities Regulators agreed to take steps
necessary to terminate all proceedings and investigations
pending against Lloyd’s. In addition, the State Securities
Regulators agreed not to “assist any private person or entity
who seeks to pursue any action against Lloyd’s....”
Id. vol. Il, at 757. Because the Acting Director of the New
Mexico Securities Division is a signatory to the State
Agreement, and Mr. Vargon’s declaration conflicts with the
State Agreement, we reject the New Mexico Name’s
assertions based upon it. Furthermore, the New Mexico Name
offers no explanation for this anomaly.
Moreover, as explained above, the New Mexico Name
agreed in the General Undertaking Agreement that English
law, not New Mexico law, would govern any disputes
24a
Appendix A
between Lloyd’s and him. The choice of law and choice of
forum clause are not at issue in this litigation, and to enforce
the New Mexico securities laws in this context would be
inappropriate. See Riley, 969 F.2d at 958 (approving forum
selection clause of General Undertaking Agreement); —
Richards, 135 F.3d at 1292 (holding the same as to the
majority of the defendant Names in this case).
b. The English Judgments were not based on
an unconscionable contract.
Next, the New Mexico Name invites us to examine the
underlying contractual dispute through his contention that
the Equitas contract is both procedurally and substantively
unconscionable under New Mexico law. Procedural
unconscionability is determined “by examining the
circumstances surrounding the contract formation, including
the particular party’s ability to understand the terms of the
contact and the relative bargaining power of the parties.”
Guthmann v. LaVida Llena, 709 P.2d 675, 679 (1985).
“Factors to be considered include the use of sharp practices
or high pressure tactics and the relative education,
sophistication or wealth of the parties, as well as the relative
scarcity of the subject matter of the contract.” Jd.
The New Mexico Name is a highly sophisticated investor
who had to pass a “means” test and was required to post
large sums of money as security for the unlimited liability
that he knowingly undertook. Unquestionably Lloyd’s
presented no high pressure tactics: each Name was afforded
the opportunity to read the General Undertaking Agreement
in its entirety, and to fully understand the implications of its
25a
Appendix A
terms. See id. at 680. The Equitas contract was not a new
investment decision; it was the implementation of specific
provisions to address the unlimited liability undertaken by
all Names, pursuant to the General Undertaking Agreement’s
broad powers. There is no basis for concluding that there
was any procedural unconscionability in the contracts on
which the judgments were based.
The New Mexico Name’s arguments regarding
substantive unconscionability are equally unavailing.
“Substantive unconscionability is concerned with contract
terms that are illegal, contrary to public policy, or grossly
unfair.” Id. at 679. When terms are unreasonably favorable
to one party a contract may be held to be substantively
unconscionable. /d. at 680. “The terms are to be considered
in the light of the general commercial background and the
commercial needs of the particular trade or case.” Jd. (internal
quotation marks omitted). Here, despite the apparently
massive losses Lloyd’s was absorbing, the terms of the
General] Undertaking Agreement were not so grossly unfair
to the Names when the Agreement was formed.
Approximately ninety-five percent of the Names accepted
the subsequent Equitas contract, and forty-seven U.S. states
signed the State Agreement to facilitate the Reconstruction
and Renewal plan. Under these circumstances, we cannot
say these were terms that “no man in his senses and not under
delusion would make on the one hand, and .. . no honest
and fair man would accept on the other.” /d. (internal
quotation marks omitted).
26a
Appendix A
c. The English Judgments were not based on
an adhesion contract.
The New Mexico Supreme Court’s Guthmann holding
also undergirds our rejection of the New Mexico Name’s
contention that the Equitas contract is an adhesion contract ~
that violates New Mexico’s public policy.
Three elements must be satisfied before an
adhesion contract may be found. First, the
agreement must occur in the form of a
standardized contract prepared or adopted by one
party for the acceptance of the other. Second, the
party proffering the standardized contract must
enjoy a superior bargaining position because the
weaker party virtually cannot avoid doing business
under the particular contract terms. Finally, the
contract must be offered to the weaker party on a
take-it-or-leave-it basis, without opportunity for
bargaining.
Id. at 678 (internal citations omitted). Here, the second and
third elements are not met: the New Mexico Name was not
in a weaker bargaining position nor did Lloyd’s compel his
investment.
d. The English Judgments were not based on
a “cognovit note.”
Next, the New Mexico Name contends that the General
Undertaking Agreement and Equitas contract amount to a
cognovit note, which is an ancient legal device “signed by a
27a
Appendix A
defendant in an action actually commenced confessing the
plaintiff's demand to be just, and empowering the plaintiff
to sign judgment against him in default of his paying the
plaintiff the sum due to him within the time mentioned in
the cognovit.” BLACK’S LAW DICTIONARY (8th ed.
2004); see Overmyer, 405 U.S. at 176. Thus the debtor agrees
in advance to the entry of a judgment against him without
notice or hearing. New Mexico public policy and New
Mexico law prohibit cognovits and condemn judgments
obtained through cognovits, enforcing them only where a
defendant “voluntarily, knowingly and intelligently” waives
his or her rights. As established above, the New Mexico Name
did “voluntarily, knowingly and intelligently” waive his
rights, in addition to receiving notice and being provided an
opportunity to defend prior to the entry of the judgments.
We have rejected the perceived lack of due process argument
above, and consequently, this argument is foreclosed.
e. The English Judgments were not based on
illusory contracts.
Next, the New Mexico Name maintains that Lloyd’s
judgments are repugnant to New Mexico’s public policy
because they are based on illusory contracts. Specifically, he
contends that the General Undertaking Agreement and the
Equitas contract lack consideration. The General Undertaking
Agreement was part of the overall investment agreement
between the Names and Lloyd’s. The Agreement certainly
placed obligations upon Lloyd’s: when underwriting or
investment profits were made, Lloyd’s had to distribute to
each Name his or her proper share. Likewise, the Equitas
contract was supported by consideration: this reinsurance
28a
Appendix A
contract helped Lloyd’s survive and protected the Names
from unlimited personal liability. The complaints about how
Lloyd’s may have met, or failed to meet, its obligations are
another matter, which have also been considered by the
English courts and 1n the Jaffray litigation.
f. The New Mexico Unfair Practices Act does
not apply.
Finally, the New Mexico Name contends that the
enforcement of the English judgment violates New Mexico’s
public policy because the contracts violated the New Mexico
Unfair Practice Act, N.M. Stat. Ann. § 57-12-1 et seg. The
Unfair Practice Act defines an unconscionable trade practice
as any act or practice in connection with the sale for offering
for sale of any goods or services that takes advantage of the
lack of knowledge, ability, experience, or capacity of a person
to a grossly unfair degree or results in a gross disparity
between the value received by a person and the price paid.
See id. § 57-12-2(E). Neither party addresses whether the
New Mexico Unfair Practice Act encompasses an action
involving the interests of the New Mexico Name in
underwriting insurance. See, e.g., Russell v. Dean Witter
Reynolds, Inc., 510 A.2d 972, 977-78 (1986) (“[Connecticut
Unfair Trade Practice Act] does not apply to deceptive
practices in the purchase and sale of securities” because
“Connecticut has long separated regulation of the purchase
and sale of securities from the regulation of unfair trade
practices in other industries.””); Simpson v. Grimes, 849 So.2d
740, 745-746 (La. Ct. App. 2003) (“Although the plaintiffs
allege unfair trade practices pursuant to [the Louisiana Unfair
Trade Practices Act}, this type of action under the. . . Unfair
29a
Appendix A
Trade Practices Act has been found inapplicable to cases
involving securities.”).
To the extent the New Mexico Name asserts that
Lloyd’s took unreasonable advantage of him through its
misrepresentation regarding asbestos claims, the English
_ courts have considered and rejected such claims. As above,
we cannot allow the New Mexico Name to relitigate the
underlying cause of action under New Mexico law, despite
his attempt to frame the action as violating New Mexico
public policy.
a Utah Law
Turning to the defenses of the Utah Names, we hold that
these defenses fail for similar reasons. The Utah Names first
assert that the district court improperly analyzed Utah’s
principles of comity when it determined that the process
underlying the English judgments comported with
constitutional norms of due process and of Utah public policy.
Specifically, the Utah Names contend they did not have a
full and fair trial in England, because they were bound by
unlawful contracts, prohibited from asserting affirmative
defenses, and prohibited from discovering or presenting
evidence to refute the existence of the amount of liability.
Utah Names Stephen and Kelly Harmsen raise the related
argument that Lloyd’s made material misrepresentations
when it induced them to become Names in the Lloyd’s market
by failing to disciose information about potential asbestos
and toxic tort liability. As a result, neither the forum selection
clause nor the “pay-now, sue-later” clause should be held
enforceable as matters of public policy.
30a
Appendix A
The Utah Names also argue that they were entitled to
discovery, and that the district court should have certified
certain questions of law to the Utah Supreme Court. Utah
Name Wallace Bennett contends that the district court lacked
diversity jurisdiction, and that the enforcement of the
judgment violates Utah’s securities laws. Finally, Utah Names
Stephen and Kelly Harmsen also challenge the district court’s
imposition of eight percent per annum post-judgment interest.
With the exception of the post-judgment interest argument,
we reject each of the Utah Names’ contentions.
1. Principles of comity apply in this case.
Unlike New Mexico, Utah has not adopted the Uniform
Foreign-Money Judgment Recognition Act. The Utah
Supreme Court has indicated that a foreign country judgment
can be enforced in Utah courts “under principles of comity.”
Mori v. Mori, 931 P.2d 854, 856 (Utah 1997) (citing Hilton,
159 U.S. 113). Under the Supreme Court’s holding in Hilton,
the principles of comity require recognition of a foreign
judgment if
(1) there has been opportunity for a full and fair
trial abroad before a court of competent
jurisdiction,
(2) conducting the trial upon regular proceedings,
after due citation or voluntary appearance of the
defendant,
(3) under a system of jurisprudence likely to
secure an impartial administration of justice
3la
Appendix A
between the citizens of its own country and those
of other countries,
(4) there is nothing to show either prejudice in
the court, or in the system of laws under which it
was sitting, or fraud in procuring the judgment,
or
(5) no other special reason exists indicating why
the comity of this nation should not allow it full
effect.
Hilton, 159 U.S. at 202 (emphasis added).
According to the Utah Names, and in seeming contrast
to Hilton, Utah’s comity requires an analysis of the fairness
of the English judgment, not merely of the English judicial
system. The judgment here was based upon the Utah Names’
signing the General Undertaking, which is a standardized
contract between Lloy:!’s and the individual Names.
According to the Utah Names, their assent to the General
Undertaking resulted in *%eir unknowing waiver of future
due process rights in the Equitas contract.
Utah law provides that questions regarding the validity
of a foreign judgment “should be tested by the law of the
jurisdiction where the judgment was rendered.” Rocky Mtn.
Claim Staking v. Frandsen, 884 P.2d 1299, 1300-01 (Utah
Ct.App.1994). We have no choice under Hilton and Rocky
Mountain but to examine the entirety of the foreign judicial
system, and not the particularity of individual judgments.
See also 1 Restatement (Third) of Foreign Relations § 482
32a
Appendix A
cmt. b (1987) (“A court asked to recognize or enforce the
judgment of a foreign court must satisfy itself of the essential
fairness of the judicial system under which the judgment was
rendered.”). Like all the other circuits: that have examined
the question, we have already determmed that the English
judicial system is procedurally above reproach. See, e.g.
Ashenden, 233 F.3d at 478 (“Even if the [defendants’]
approach is valid—and we want to emphasize our belief that
it is not—it cannot possibly avail the defendants here unless
they are right that the approach requires subjecting the foreign
proceeding to the specifics of the American doctrine of due
process.”); see also Hilton, 159 U.S. at 205 (“[W]e are not
prepared to hold that the fact that the [foreign] procedure
... differed from that of our own courts is, of itself, a
sufficient ground for impeaching the foreign judgment.”).
Here, for the sake of completeness, the district court
looked to the underlying decisions rendered by the English
courts that have considered and rejected each of the Utah
Names’ challenges to the “pay-now, sue-later” and
“conclusive evidence” clauses. Case No. 02-2301, Aple’s
Sup!.App. at 230 (Utah Dist. Ct. Order filed Nov. 12, 2002).
The “pay-now, sue-later” provision left the Names free to
pursue claims of fraud against Lloyd’s in a separate
proceeding, which many Names pursued unsuccessfully in
the Jaffray litigation. See id. (citing Soc’y of Lloyd’s v.
Wilkinson & Others, at 17, 21 (Q.B. 23 Apr. 1997), aff'd
Soc’y of Lloyd's v. Lyon, Leighs & Wilkinson (C.A. 31 July
1997) (Case Nos. 03-4065, -4082, -4094, -4183, Aple’s
Supl.App. vol. III, doc. 4, ex. J, at 682)).
33a
Appendix A
The district court observed that the English courts held
that the “conclusive evidence” clause was “not an unusual
type of clause and [was] in principle appropriate to [the]
contract.” Case No. 02-2301, Aple’s Supl.App. at 230
(quoting Soc’y of Lloyd's v. Fraser & Others, at 27 (C.A. 31
July 1998) (Case Nos. 03-4065, -4082, -4094, -4183, Aple’s
Supl.App. vol. III, doc. 4, ex. J, at 707)). Furthermore, the
English courts “considered and rejected the argument that
the Names should not be bound by the Equitas contract.”
Case No. 02-2301, Aple’s Supl.App. at 230 (citing Soc’y of
Lloyd's v. Fitzgerald, Leigh and Others, (Q.B. 20 Feb. 1997),
aff'd, Soc’y of Lloyd’s v. Lyon, Leighs & Wilkinson (C.A. 31
July 1997) (Case Nos. 03-4065, -4082, -4094, - 4183, Aple’s
Supp, App. vol. III, doc. 4, ex. J, at 622)).
We must reject the Utah Names’ contentions that they
were bound by unlawful contracts, that they were prohibited
from asserting affirmative defenses, and that they were
prohibited from discovering or presenting evidence to refute
the existence of amount or liability. We therefore agree with
the district court that the Utah Names were given a full and
fair opportunity to litigate their claims before the English
courts.
Similarly, we must reject the defenses mounted by the
Harmsens. The English court considered and rejected the
allegations involving material misrepresentations made by
Lloyd’s in connection with the solicitation of investment by
potential Names.
34a
Appendix A
2. The District Court did not Abuse its Discretion
when it Denied Discovery.
The Utah Names sought discovery regarding
(1) information about the basis for the amount of the alleged
liability set forth in the English judgments; (2) information
relating to Lloyd’s appointment of the substitute agent and
other details regarding the formation of the Equitas contract;
and (3) information concerning Lloyd’s contractual intent in
entering into the General Undertaking Agreement.
Discovery rulings are generally within the sound
discretion of the trial court, and we review only for abuse of
discretion. GWN Petroleum Corp. v. OK-Tex Oil & Gas, Inc.,
998 F.2d 853, 858 (10th Cir. 1993). The discovery sought by
the Utah Names was unnecessary to the district court’s grant
of summary judgment in favor of Lloyd’s. To have granted
the discovery would have resulted in a relitigation of the
underlying General Undertaking Agreement and Equitas
contract, both of which have been considered and litigated
before the English courts. After reviewing the record, we
find no abuse of discretion regarding the rulings on these
motions.
3. Certification of Questions of State Law
The Utah Names suggest that (1) the district court erred
when it refused to certify certain questions to the Utah
Supreme Court and (2) we should sua sponte certify the
questions of whether the English court met the “open courts
provision” of the Utah Constitution. We reject each
contention and hold that the district court did not abuse its
discretion.
35a
Appendix A
a. District court’s denial of the motion was not
an abuse of discretion.
We review the district court’s decision not to certify
questions of state law for abuse of discretion. Armijo v. Ex
Cam, Inc., 843 F.2d 406, 407 (10th Cir. 1988). Utah’s open
courts provision requires:
All courts shall be open, and every person, for an
injury done to him in his person, property or
reputation, shall have remedy by due course of
law, which shall be administered without denial
or unnecessary delay; and no person shall be
barred from prosecuting or defending before any
tribunal in this State, by himself or counsel, any
civil cause to which he is a party.
Uta Const. art. I, § 11.
In general, open courts provisions in Utah serve two
principal purposes: “First, they were intended to help
establish an independent foundation for the judiciary as an
institution. . . . Second, open courts or remedies clauses were
intended to grant individuals rights to a judicial remedy. . . .”
Laney v. Fairview City, 57 P.3d 1007, 1016 (Utah 2002).
The Names attempt to invoke the open courts provisions in
connection with their alleged waiver of their at the
time-unknown due process rights.
While certification is appropriate “where the legal
question at issue is novel and the applicable state law is
unsettled,” Allstate Ins. Co. v. Brown, 920 F.2d 664, 667 (10th
36a
Appendix A
Cir. 1990), it is never compelled. See Lehman Bros. v. Schein,
416 U.S. 386, 390-91 (1974). “[U]nder the diversity statutes
the federal courts have the duty to decide questions of state
law even if difficult or uncertain.” Copier v. Smith & Wesson
Corp., 138 F.3d 833, 838 (10th Cir. 1998) (citing Meredith
v. Winter Haven, 320 U.S. 228, 235 (1943)). There is little
caselaw suggesting that English law or any foreign law
somehow abrogates the Utah Constitution. We have
established there is no due process violation and that the
Names waived their procedural rights in advance.
See Overmyer, 405 U.S. at 185. The district court did not
abuse its discretion when it reyected the Utah Names’ motion
to certify.
b. Sua sponte certification is unnecessary here.
We next consider whether we should certify this question
to the Utah Supreme Court directly. Utah Rule of Appellate
Procedure 41(a) states:
The Utah Supreme Court may answer a question
of Utah law certified to it by a court of the United
States when requested to do so by such certifying
court acting in accordance with the provisions of
this rule if the state of the law of Utah applicable
to a proceeding before the certifying court is
uncertain.
Thus, there is a procedural mechanism for certification to
the state court that we may consider using. However, we note
that a necessary but not controlling component is the
difficulty in determining the local law. Cf, Lehman Bros.,
37a
Appendix A
416 U.S. at 390 (“[T]he mere difficulty in ascertaining local
law is no excuse fer remitting the parties to a state tribunal
for the start of another lawsuit.”). Lehman Brothers further
noted that “[w]Je do not suggest that where there is doubt as
to local law and where the certification procedure is available,
resort to it is obligatory.” Jd. at 390-91.
While no Utah court has rendered a decision on the
precise issue in question, our analysis above establishes that
there is no unusual difficulty in deciding the state law
question or a likelihood that Lloyd’s theory of liability would
be adopted by the Utah courts. Thus, given the above
conclusions, certification is unnecessary.
4. Outstanding Issues Presented by Utah Name
Mr. Bennett
Mr. Bennett maintains there is not complete diversity
between the parties, and he challenges the district court’s
enforcement of the English judgments as a violation of Utah
securities law. He also raises defenses we have previously
rejected. We address each defense briefly.
a. Diversity jurisdiction is present.
Mr. Bennett contends that Lloyd’s is not a corporation,
but is rather more like an association, which adopts the
citizenship of each of its syndicate investment members.
“Lloyd’s and Equitas are merely agents for the syndicates,
collecting cash calls from syndicate investor Names to pay
off the liabilities arising from syndicate insurance policies.”
Bennett Rep. Br. at 5. Under this interpretation, “Lloyd’s
38a
Appendix A
attempt to claim federal diversity jurisdiction is a sham” and
there is no federal subject matter jurisdiction. Jd.
We must reject Mr. Bennett’s assertions. Early on,
Lloyd’s may have been a form of an unincorporated
association, but under the Lloyd’s Act of 1871, the company
was incorporated. Aithough we agree that Lloyd’s is not a
corporation within the traditional sense of the word, see
Ashenden v. Lloyd's of London, 934 F. Supp. 992, 998-99
(N.D.I11.1996), there is no challenge to or question regarding
Lloyd’s place of incorporation (it is duly incorporated under
the laws of England). Similarly it maintains its principal place
of business in London, England. These facts are
unchallenged, and comprise the weightiest part of our inquiry.
See id. (noting that the most important consideration is
Supreme Court precedent “indicating that the citizenship of
business entities must be determined by the simple fact of
legal incorporation or the lack thereof, rather than the nature
or attributes of the entity in question.”). We thus hold that
the jurisdiction is proper pursuant to 28 U.S.C. § 1332(a)(2).
Equitas Reinsurance, Limited (the assignor of Lloyd’s
underlying claims against the Names) is also a duly
incorporated English company formed under the laws of
England, and Mr. Bennett’s similar allegations against
Equitas must also fail.
b. The Utah Securities Act offers Mr. Bennett
no relief.
Mr. Bennett points to the Utah Securities Acts’
“anti-waiver” provision as a bar to the enforcement of the
English judgments. The anti-waiver provision declares that
39a
Appendix A
“a condition, stipulation or provision binding a person
acquiring a security to waive compliance with the chapter or
rule hereunder is void.” Utah Code Ann. § 61-22(9).
We note that the anti-waiver provisions of the Securities
Acts of 1933 and 1934 are substantially the same as those
found in the Utah statute. See 15 U.S.C. § 77n (1982) (“Any
condition, stipulation, or provision binding any person
acquiring any security to waive compliance with any
provision of this subchapter or of the rules and regulations
of the Commission shall be void.”); 15 U.S.C. § 78cc(a)
(1982) (“Any condition, stipulation, or provision binding any
person to waive complianc - with any provision of this chapter
or of any rule or regulation thereunder, or of any rule of an
exchange required thereby shall be void.”).
The district court determined that our holding in Riley
precluded enforcement of state as well as federal securities
statutes. See Riley, 969 F.2d at 956. In Riley, the plaintiff
claimed that Lloyd’s engaged in the offer and sale of
unregistered securities and made untrue statements of
material fact and material omissions in connection with the
sale of securities, violating both federal and Colorado’s state
securities laws. By enforcing the General Undertaking
Agreement’s forum selection clause requiring the application
of English law, we did not deprive Mr. Riley of his day in
court, but rather instructed Mr. Riley to “structure his case
differently than if proceeding in federal district court.”
Id. at 958. Thus, we cannot accept Mr. Bennett’s contentions
and note that, as in the Ninth Ciccuit’s decision in Richards
(litigation to which Mr. Bennett was a party}, “[w]e disagree
with the dramatic assertion that the available English
40a
Appendix A
remedies are not adequate substitutes for the firm shields
and finely honed swords provided by American securities
law.” Richards, 135 F.3d at 1296.
c. Mr. Bennett’s remaining defenses are
unavailing.
Mr. Bennett’s remaining claims duplicate the Utah
Names’ arguments, or are without merit. For example, he
challenges whether the General Undertaking Agreement can
be binding upon him. He suggests that Lloyd’s engaged in
breaches of fiduciary duty, concealment and material
misrepresentations because the General Undertaking does not
warn a committing investor that he or she might later be made
subject to an entirely different undertaking. Mr. Bennett also
contends that the district court erred in its application of
Hilton. For the reasons given above, we reject all of
Mr. Bennett’s defenses.
5. Post-Judgment Interest
Finally, Utah Names Stephen and Kelly Harmsen
challenge the district court’s application of an eight percent
per annum post-judgment interest rate. They argue that once
the federal district court enforced the judgments, the
then-applicable interest rate of 1.16% was applicable.
We review de novo the district court’s interpretation and
application of 28 U.S.C. § 1961. O’Tool v. Genmar Holdings,
Inc., 387 F.3d 1188, 1207 (10th Cir. 2604).
Interest shall be allowed on any money judgment
in a civil case recovered in a district court... .
4la
Appendix A
Such interest shall be calculated from the date of
the entry of the judgment at a rate equal to the
weekly average 1-year constant maturity Treasury
yield, as published by the Board of Governors of
the Federal Reserve System, for the calendar week
preceding.
28 U.S.C. § 1961(a). “This section shall not be construed to
affect the interest on any judgment of any court not specified
in this section.” Jd. § 1961(c)(4).
The district court reasoned that the English court is not
a court specified by § 1961, and because the Names agreed
that English law would govern the litigation, the post-
judgment interest rate should be determined by English law,
which would be 8%. Lloyd’s argues that because the Names
agreed to be bound by English law, English post-judgment
interest applies. Furthermore, Lloyd’s rejects the Harmsens’
suggestion that the English judgments merge into the
U.S. judgments.
We disagree with such reasoning. First, we acknowledge
that parties may contract to, and agree upon, a post-judgment
interest at a rate other than that specified in § 1961.
See Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96, 101
(2d Cir. 2004) (“We agree that parties may by contract set a
post-judgment rate at which interest shall be payable.”).
However, agreeing to be bound by English law does not
amount to agreeing to a particular post-judgment interest rate.
The general rule under federal and Utah law is that “when a
valid and final judgment for the payment of money is
rendered, the original claim is extinguished, and a new cause
42a
Appendix A
of action on the judgment is substituted for it. In such a case,
the original claim loses its character and identity and is
merged in the judgment.” See Carte Blanche (Singapore)
Pte., Ltd. v. Carte Blanche Int'l, Ltd., 888 F.2d 260, 269
(2d Cir. 1989); Yergensen v. Ford, 16 Utah 2d 397, 402 P.2d
696, 697 (1965). “If parties want to override the general rule
on merger and specify a post-judgment interest rate, they must
express such intent through clear, unambiguous and
unequivocal language.” Westinghouse Credit Corp., 371 F.3d
at 102 (internal quotation omitted). Such language is not
present in the agreements before us.
Second, the policies behind § 1961(a) support the
application of the U.S. interest rate. “The purpose of
postjudgment interest is to compensate the successful
plaintiff for being deprived of compensation for the loss from
the time between the ascertainment of the [judgment] and
the payment by the defendant.” Kaiser Aluminum & Chem.
Corp. v. Bonjorno, 494 U.S. 827, 835- 36 (1990) (quotations
and alterations omitted). It preserves the value of the award
as originally decided, affording neither party a benefit.
[T]he universal application of Section 1961 to all
types of claims makes for logical uniformity. Once
a claim is reduced to judgment, the original claim
is extinguished and merged into the judgment; and
a new claim, called a judgment debt, arises.
See RESTATEMENT OF JUDGMENTS § 47 (1942).
A single rule should govern interest on any such
debt, the nature of the original claim having
become irrelevant under the doctrine of merger.
Kotsopoulos v. Asturia Shipping Co., 467 F.2d 91, 95
(2d Cir. 1972).
43a
Appendix A
_ Thus, the federal rate reflects the economic conditions
at the time the district court rendered its judgment, and,
despite the disparity between the rates, we must apply
§ 1961(a), so interest accrues under the federal rate from the
time the federal district court entered an order enforcing the
judgment. See Carte Blanche, 888 F.2d at 268 (noting the
provisions of § 1961(a) are mandatory).
We note that the application of § 1961 also fosters
stability and certainty in international commercial
transactions. Moreover, it provides “make whole” relief
without overcompensating Lloyd’s. Lloyd’s derives various
benefits from utilizing the federal court system to procure
the execution and enforcement of its judgments. In return,
Lloyd’s is subject to the federal formula for determining an
equitable post-judgment interest.
Finally, as to the district court’s concerns with the
limitations provided in § 1961(c)(4), we agree that the
U.S. post-judgment interest rate applies to the district
court’s judgments, but not to the English court’s judgments.
The U.S. post-judgment rate should apply as of the date of
the entry of the judgment in the U.S. district court.
Here, the eight percent figure appears to have been
calculated in 1993, five years before the entry of the English
judgment. See Case Nos. 03-4065, - 4082,-4064, -4183,
Aple’s Supl.App. vol. IV, at 995-96 (Section 17 of the
Judgments Act of 1838 as amended by Statutory Instrument
1993 564(L.2) and provision of the Civil Procedure Rule
1998). The federal rate is calculated on a more current weekly
basis, and better reflects the value of the award once entered
in the United States.
44a
Appendix A
Therefore, on remand, we instruct the Utah district court
to clarify that the English post-judgment rate applies to the
Harmsens’ judgments from the entry of the English judgment
(March 11, 1998) until the entry of the U.S. judgment
enforcing the English judgment (November 2002) and that
the federal rate, calculated pursuant to § 1961, applies
thereafter.
Ili, CONCLUSION
There is no question that the New Mexico and
Utah Names suffered substantial losses after investing in what
had been, for three centuries, a well-regarded institution.
There is also no question that Lloyd’s was not forthcoming
with all the information regarding its substantial financial
losses. However, the English courts thoroughly and fairly
considered and examined the plight of the Names before
entering judgments against them. We must respect the ample
process afforded by the English system of justice.
We affirm the New Mexico and Utah district courts’
grants of summary judgment to Lloyd’s. We reverse and
remand with respect to the post-judgment interest as applied
to the Harmsens’ judgment, with instructions to recalculate
the post-judgment interest in accordance with this opinion.
45a
APPENDIX B — ORDER OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF UTAH,
CENTRAL DIVISION
DATED AND FILED NOVEMBER 12, 2002
IN THE UNITED STATES COURT FOR THE
DISTRICT OF UTAH CENTRAL DIVISION
Case No. 2:02-CV-204TC
THE SOCIETY OF LLOYD’S
Plaintiff,
VS.
WALLACE R. BENNETT, GRANT R. CALDWELL,
CALVIN P. GADDIS, DAVID L. GILLETTE, STEPHEN M.
HARMSEN, KELLY C. HARMSEN, JAMES R. KRUSE,
EDWARD W. MUIR, and KENT B. PETERSEN,
Defendants.
ORDER
Plaintiff The Society of Lloyd’s (“Lloyd’s”) filed this
lawsuit to enforce money judgments it had obtained against
the Defendants in England. Lloyd’s has now filed the present
Motion for Summary Judgment. For the reasons explained
below, Lloyd’s Motion for Summary Judgment is hereby
GRANTED.
46a
Appendix B
Various ‘parties have also filed a number of motions, all
of which are collateral to the Motion for Summary Judgment.
The court’s decision as to each of these motions is set forth
in this Order.
BACKGROUND
1. Factual Background
Through Parliamentary Acts—the Lioyd’s Acts
1871-1982—the United Kingdom Parliament has created and
authorized Lloyd’s to regulate the English insurance market.
Lloyds promulgates and enforces regulations under the
Lloyd's Acts, and exercises disciplinary authority over persons
in the Lloyd’s markets.
In Lloyd’s, individual and corporate members known
as “Names” underwrite insurance. The U.K. Insurance
Companies Act permits Names to conduct insurance business
only as long as they become and remain subject to Lloyd’s
regulatory jurisdiction.
As a condition of becoming members of Lloyd’s, Names,
including the Defendants, entered into agreements governing
their membership in Lloyd’s and underwniting in the Lloyd’s
market. Among these agreements and central to the issues in
this lawsuit is the General Undertaking. In the General
Undertaking, Defendants agreed, in part, (1) that they would
comply with the provisions of the Lloyd's Acts 1871-1982
and any bylaws or regulations promulgated thereunder in
connection with their membership of and underwriting at
Lloyd’s; and (2) that any dispute arising out of or relating to
47a
Appendix B
their membership of and underwriting insurance business at
Lloyd’s would be resolved in English courts pursuant to
English law. Pursuant to the Lloyd's Acts, Names could only
participate in the Lloyd’s market through an underwriting
agent, who would contractually assume management
responsibilities over Names’ underwriting activities.'
Names underwrite insurance by forming groups known
as “syndicates.” Names’ liability is several rather than joint.
Each of the Defendants incurred liabilities with respect to
insurance commitments that he or she undertook by assuming
a portion of a syndicate’s risk in the Lloyd’s market. In order
to close the syndicate at the end of each underwriting year of
account, reinsurance is purchased to cover any outstanding
liabilities as well as liabilities that have been incurred but
not reported.
Underwriiing in the Lloyd’s market was historically a
profitable venture. In the late 1980s and early 1990s, however,
Names in the Lloyd’s market incurred substantial losses.
_ Asaresult of these losses, Names underwriting in those years
were unable to purchase affordable reinsurance for their
outstanding liabilities, thus facing open-ended liabilities.
Many Names defaulted on their underwriting obligations as
they came due, putting policyholders at risk of non-payment.
To address these issues, Lloyd’s devised the
reconstruction and renewal (“R&R”) plan. The R& R plan
provided reinsurance otherxise unavailable to each Name in
1. This underwriting agent is not to be confused with the
substituted agent, discussed below, whom Lloyd’s appointed to
implement its reconstruction and renewal (“R&R”) plan.
48a
Appendix B
respect to his or her pre-1993 underwriting obligations
through a newly formed company, Equitas Reinsurance Ltd.
(“Equitas”). The R&R plan also provided an offer of
settiement (the “Settlement Offer”) to each Name with
pre-1993 underwriting liabilities to end litigation and assist
the Names in meeting their underwriting obligations.
According to Lloyd’s, the cost of reinsuring each Name’s
pre-1993 liabilities (the “Equitas Premium”) was individually
calculated and charged to the particular Name. Names who
wished to resign their membership in Lloyd’s would be able
to do so upon payment of their Equitas Premium and other
outstanding obligations. Names who did not accept the
Settlement Offer did not receive credits to offset their Equitas
premiums. The non-settling Names, however, could continue
to litigate with Lloyd’s and others who did business in the
Lloyd’s market. If the Settlement Offer was not accepted, a
Name was still required to pay the full amount of his
underwniting obligations, including the Equitas Premium.
Lloyd’s, in implementing the R&R plan, required each
Name to become a party to the Equitas reinsurance contract
through an appointed, substituted agent. This substituted
agent signed the contract on behalf of the Name.
The Equitas policy contained two key provisions, both
at issue in this case. First, the Equitas reinsurance contract
contained a “pay now, sue later” clause that precluded Names
from asserting claims they might have had against Lloyd’s
as a set-off or counterclaim. The Equitas reinsurance contract
also contained a “conclusive evidence” clause which
provided that, “in the absence of manifest error,” Lloyd’s
determination of a Name’s Equitas premium was conclusive.
49a
Appendix B
According to Lloyd’s, less than five percent of all Names
did not accept the Settlement Offer. A still smaller number,
including the Defendants, refused to pay the Equitas
Premium. The R&R plan became effective on September 3,
1996, and the Equitas Premium became due and payable on
September 30, 1996. Equitas subsequently assigned the right
to recover payment of the Equitas premium to Lloyd’s.
Beginning in late 1996, Lloyd’s brought separate actions
in England against the Defendants and other Names who had
not paid the Equitas Premium. In the English Actions, Lloyd’s
sought payment of each of the Defendants’ respective Equitas
Premiums plus unpaid interest and costs. The English Actions
were commenced by filing a Writ of Summons in the English
Court against each of the Defendants.
Lloyd’s notified each of the Defendants of the
commencement of the English Action against him or her by
serving each Defendant through his or her agent, duly
appointed to accept service, with a writ of summons. Each
of the Defendants filed an Acknowledgment of Service of
Writ of Summons through their solicitors of record, the firm
of Epstein Grower and Michael Freeman. By filing the
Acknowledgment, each Defendant appeared in the English
Court and notified Lloyd’s of his or her intent to contest the
claim.
In lengthy hearings, the Names raised several defenses
to entry of the judgments by the English Court. The defenses
included the following, ail of which were rejected: (1) that
Lloyd’s lacked the regulatory authority under the Lloyd's Acts
1871-1982 to mandate that all Names purchase reinsurance
50a
Appendix B
coverage from Equitas; (2) that Names were entitled to
rescind their membership of Lloyd’s as a result of alleged
fraud in the inducement of their membership of, or
underwriting at, Lloyd’s; (3) that Names were entitled to
litigate claims of fraud in the inducement of their membership
of, or underwriting at, Lloyd’s as a defense or set-off to their
_ obligation to pay the Equitas premium; and (4) that the Names
were not bound by certain provisions of the Equitas
reinsurance contract, namely the “pay now, sue later” clause
and the “conclusive evidence” clause. See Society of Lloyd’s
v. Dennis Hugh Fitzgerald Leighs and Others, [1997]
(Demery Aff., Ex. J); Society of Lloyd's v. Wilkinson & Ors.
(Q.B. 1997) (Demery Aff., Ex. J); Society of Lloyd's v. Lyon;
v. Leighs; v. Wilkinson, (C.A. 1997) (Demery Aff., Ex. J)
(affirming rulings of lower court); Society of Lloyd's v. Fraser
& Ors. (C.A. 1998) (Demery Aff., Ex. K).
The English Court entered judgments in favor of Lloyd’s
against the Names on March 11, 1998. (See Demery Aff. Exs.
A-I.) A three judge panel of the United Kingdom Court of
Appeal heard argument on the application for leave to appeal
by Names from June 15-19, 1998. Leave to appeal was denied
on July 31, 1998. See Society of Lloyd's v. Fraser & Ors.
(C.A. 1998) (Demery Aff., Ex. K). All appeals from the entry
of the Judgments have been exhausted.
The Defendants have not satisfied their judgment debts.
On March 8, 2002, the Society of Lloyd’s filed a Complaint
in this court to enforce the English judgments against the
Defendants.
Sla
Appendix B
Il. Pending Motions
The following substantive motions are pending before
the court:
(1)
(2)
(3)
(4)
(5)
(6)
Wallace Bennett’s motion to declare a particular
foreign writ to be subject to Utah substantive law
and unenforceable;
Lloyd’s motion for summary judgment;
Lloyd’s motion to dismiss the counterclaim of
Stephen and Kelly Harmsen;
Mr. Bennett’s motion for certification of state law
questions;
The Caldwell Defendants’? motion for
certification; and
The Caldwell Defendants’ motion for discovery
under Federal Rule of Civil Procedure 56(f).
Additionally, the following procedural motions are
pending:
(7)
Lloyd’s motion to strike paragraph 6(g) of motion
to declare a foreign writ unenforceable;
2. The “Caldwell Defendants,” who are represented by the same
counsel, consist of Grant R. Caldwell, Calvin P. Gaddis, David L.
Gillette, James R. Kruse, Edward W. Muir, and Kent B. Peterson.
52a
Appendix B
(8) Lloyd’s motion to strike affidavit of Wallace
Bennett; |
(9) The Caldwell Defendants’ motion to strike
declaration of Nicholas Demery;
(10) Lloyd’s motion to strike portions of the affidavit
of Stephen Harmsen; and
(11) Lloyd’s motion to strike exhibits in support of the
Caldwell Defendants’ combined memorandum in
opposition to motion for summary judgment and
in support of motion in the alternative for
discovery under Rule 56(f).
ANALYSIS
I. Motions for Summary Judgment
The Plaintiff moves for summary judgment. Defendant
Wallace R. Bennett moves to declare a particular foreign
country writ to be (1) subject to Utah substantive law and
(2) unenforceable. Mr. Bennett’s motion is, in essence, a
motion for summary judgment and the court will treat it as
such.
A. Legal Standard
Under Federal Rule of Civil Procedure 56, a court may
enter summary judgment “if the pleadings, depositiozxs,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue
53a
Appendix B
as to any material fact and that the moving party is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(c); see
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Adler
v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998).
The party moving for summary judgment bears the initial
burden of demonstrating that there is an absence of evidence
to support the non-moving party’s case. Celotex Corp., 477
U.S. at 323; Adler, 144 F.3d at 670-71. A movant “may make
its prima facie demonstration simply by pointing out to the
court a lack of evidence for the nonmovant on an essential
element of the nonmovant’s claim.” Adler, 144 F.3d at 671.
In applying this standard, the court views the factual record
and must construe all facts and reasonable inferences
therefrom in the light most favorable to the nonmovant.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986); Aramburu v. Boeing Co., 112 F.3d 1398,
1402 (10th Cir. 1997).
Once the moving party has carried its initial burden, Rule
56(e) requires the nonmovant to “go beyond the pleadings
and ‘set forth specific facts’ that would be admissible in
evidence in the event of trial from which a rational trier of
fact could find for the nonmovant.” Adler, 144 F.3d at 671
(quoting Fed. R. Civ. P. 56(e)). The specific and pertinent
facts put forth by the nonmovant “must be identified by
reference to an affidavit, a deposition transcript or a specific
exhibit incorporated therein.” Thomas v. Wichita Coca-Cola
Bottling Co., 968 F.2d 1022, 1024 (10th Cir. 1992). Mere
allegations and references to the pleadings will not suffice.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). —~
54a
Appendix B
B. Discussion
: 1. Can the English Judgments be Enforced under
Principles of Comity?
“Comity,” in the legal sense, is neither a
matter of absolute obligation, on the one hand,
nor of mere courtesy and good will, upon the other.
But it is the recognition which one nation allows
within its territory to the legislative, executive,
or judicial acts of another nation, having due
regard both to international duty and convenience,
and to the rights of its own citizens, or of other
persons who are under the protection of its laws.
Hilton v. Guyot, 159 U.S. 113, 164 (1895).
The court’s jurisdiction is based on diversity of
citizenship. Utah law therefore applies concerning whether
to enforce foreign judgments. See Smith v. Toronto-Dominion
Bank, 166 F.3d 1222 (10th Cir. 1999), available at 1999 WL
38160, at **2 (applying Utah law when determining whether
to recognize a Canadian judgment) (unpublished decision).
The Utah legislature, unlike many other states’
legislatures, has not adopted the Uniform Foreign Money
Judgments Recognition Act (the “Uniform Act”). See Smith,
1999 WL 38160, at **2. In Mori v. Mori, the Utah Supreme
Court indicated that in Utah, “[a]bsent a treaty or statute, a
foreign country judgment can be enforced only under
principles of comity.” 931 P.2d 854, 856 (Utah 1997) (citing
55a
Appendix B
Hilton, 159 U.S. at 163-64). General p:inciples of comity
require a court to recognize a foreigr judgment if
there has been an opportunity for a full and fair
trial abroad before a court of competent
jurisdiction, conducting the trial upon regular
proceedings, after due citation or voluntary
appearance of the defendant, and under a system
of jurisprudence likely to secure an impartial
administration of justice between the citizens of
its own country and those of other countries, and
there is nothing to show either prejudice in the
court, or in the system of laws under which it was
sitting, or fraud in procuring the judgment.
Smith, 1999 WL 38160, at **2 (quoting Hilton, 159 U.S. at
202). Determining whether to enforce another country’s
judgment is a matter of “judicial discretion.” Mori, 931 P.2d
at 856 (quoting Pan Energy v. Martin, 813 P.2d 1142, 1146
(Utah 1991)).
In an unreported decision, the Tenth Circuit has provided
guidance regarding the proper analysis of comity under Utah
law. See Smith, 1999 WL 38160, at **2. In Smith, a diversity
action. in which the Tenth Circuit applied Utah law, the court
determined whether Utah courts would recognize a Canadian
judgment. Jd. at **2. No Utah court had yet “been called
upon to recognize a Canadian Judgment.” /d. The court,
however, found it “reasonable to believe the Utah courts
would [] recognize a Canadian judgment if that judgment
satisfied the requirements outlined in Hilton and otherwise
comported with Canadian law.” /d. In making its finding,
56a
Appendix B
the court relied upon “the Utah Supreme Court’s statements
in Mori, as well as the long history of other courts recognizing
Canadian judgments under principles of comity.” Jd.
a. The English system of jurisprudence
In Hilton, the Supreme Court required that a foreign
judgment sought to be enforced come from a country with
“a system of jurisprudence likely to secure an impartial
administration of justice between the citizens of its own
country and those of other countries.” Hilton, 159 U.S. at
202. As stated by the Ninth Circuit in a decision recognizing
an English judgment, “[iJt has long been the law that unless
a foreign country’s judgments are the result of outrageous
departures from our own motions of ‘civilized jurisprudence,’
comity should not be refused.” British Midland Airways Ltd.
v. Int'l Travel, Inc., 497 F.2d 869, 871 (9th Cir. 1974) (citing
Hilton, 159 U.S. at 205).
There is little argument that the English courts are part
ofa judicial system that has procedures compatible with
American standards of due process and impartial tribunals.
See Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d
953, 958 (10th Cir. 1992) (“We have been shown nothing to
suggest that an English court would not be fair, and in fact,
our courts have long recognized that the courts of England
are fair and neutral forums.”) As stated by Judge Posner for
the Seventh Circuit in an opinion upholding the lower court’s
decision to enforce judgments against American Names,
“[a]ny suggestion that [the English] system of courts ‘does
not provide impartial requirements of due process of law’
borders on the risible.” Soc’y of Lloyd's v. Ashenden, 233
F.3d 473, 476 (7th Cir. 2000).
57a
Appendix B
b. Opportunity for a full and fair trial
The Defendants contend that they were not given an
opportunity for a full and fair trial. According to the
Defendants,’ they were denied due process in a number of
ways. Specifically, they contend that (1) they were unlawfully
bound to unlawful contracts because an appointed substitute
agent signed the Equitas contracts, (2) they could not assert
affirmative defenses in the English proceedings, and (3) they
could not engage in discovery or present evidence to
challenge the existence or amount of liability. These alleged
~ deficiencies all stem from the “pay now, sue later” and
“conclusive evidence” provisions in the Equitas contract and
the fact that an appointed agent signed the contract for the
Defendants.
As a threshold matter, in cases in which the particular
proceedings that are being challenged by the Defendants here
were at issue, both the Seventh and Fifth Circuits have
found that English courts provided adequate due process.
See Ashenden, 233 F.3d at 476-77; Soc’y of Lloyd’s v. Turner,
303 F.3d 325, 329-30 (Sth Cir. 2002). These courts were
deciding cases from jurisdictions which had passed the-
Uniform Foreign Money-Judgments Recognition Act. The
courts’ analyses, however, apply here, even though Utah has
not adopted the Uniform Act.* In Ashenden, the court
3. Although the various Defendants filed separate memoranda
and raised a number of independent arguments, the court will treat
all Defendants and their arguments collectively, unless otherwise
indicated.
4. Although not determinative, the court finds Ashenden, 233
F.3d at 482, and Turner, 303 F.3d at 329-30, to be persuasive. Like
(Cont’d)
58a
Appendix B
explained that the Uniform Act merely required that a foreign
country’s due process doctrines must be “compatible” with
American doctrines. 233 F.3d at 477. This meant that foreign
procedures must be “fundamentally fair” and not offend
“basic fairness.” Jd. (quoting /ngersoll Milling Machine Co.
v. Granger, 833 F.2d 680, 687-88 (7th Cir. 1987), and citing
Hilton, 159 U.S. at 202-03). The court emphasized that
“{h]ow much process is due depends on the circumstances.”
Ashenden, 233 F.3d at 479. The “pay now, sue later” clause
“enable[d] Equitas to be fully funded immediately,” which
“would work to the benefit of the names by giving them surer,
earlier, and fuller reinsurance.” Jd. The conclusive-evidence
clause “extinguishe[d]” claims by the Names. Jd. at 480. The
Seventh Circuit found that these clauses did not constitute
procedural due process offenses. See id. at 479-80. The court
also found that the English court’s holding that Lloyd’s could
appoint agents to bind the Names without the Names’
permission was not impermissibly unreasonable. See id. at
480-81.
In Turner, as in Ashenden, the Defendants raised many
of the same arguments raised by the Defendants here,
(Cont'd)
the Uniform Act, the operative and often cited language in Hilton,
the Supreme Court decision cited with approval by the Utah Supreme
Court in Mori, 931 P.2d at 856, emphasizes the soundness of a foreign
country’s “system of jurisprudence” and “system of laws.” Compare
Smith, 1999 WL 38160, at *2 (quoting Hilton, 159 U.S. at 202), with
Ashenden, 233 F.3d at 476 (emphasizing the Illinois Uniform Act’s
reference to a foreign country’s “system” of courts). Additionally,
the Seventh and Fifth Circuits in Ashenden, 233 F.3d a: 478-80, and
Turner, 303 F.3d at 331 n.22, respectively, analyzed the underlying
facts and the foreign proceedings sought to be enforced.
59a
Appendix B
* including a claim that the “pay now, sue later” clause and
the “conclusive evidence” clause violated due process. See
Turner, 303 F.3d at 327-28; see also Soc ’y of Lloyd's v. Webb,
156 F. Supp. 2d at 639 (N.D. Tex. 2001), aff’d sub nom,
Soc’y of Lloyd's v. Turner, 303 F.3d at 333. The Fifth Circuit
rejected their arguments, noting that “[Defendants] Webb and
Turner [had] provided no evidence that the English court
proceedings [] were unfair.” Turner, 303 F.3d at 331 n.22.
It is also important to recognize that the English courts
have considered and rejected the Defendants’ claims. In
Society of Lloyd’s v. Wilkinson & Others, at 17, 21 (Q.B.
1997) (Demery Aff., Ex. J), the court considered and rejected
the Names’ challenge of the “pay now, sue later” clause. This
decision left the Names free to pursue claims of fraud against
Lloyd’s in a separate proceeding.’ See id. at 21 (stating that
the clause could “[iJn no sense . . . be described as excluding
or restricting the remedy by way of damages for fraudulent
misrepresentation”). In Society of Lloyd's v. Fraser & Others,
at 27 (C.A. 1998) (Demery Aff., Ex. K), the court rejected
the Names’ challenge of the “conclusive evidence” clause.
The court found that the provision was “not an unusual type
of clause and [was] in principle appropriate to [the] contract.”
Id. The court also stated that “[n]o issue ha[d] been raised
which [was] sufficient to justify going behind the figures
produced under [the “conclusive evidence” clause] nor have
5. Many Names did bring fraud claims against Lloyd’s in a
separate action in England. See Society of Lloyds v. Jaffray, 2000
WL 1629463 (Q.B. Nov. 2, 2000), aff’d, 2002 WL 1654876 (C.A.
July 26, 2002). The English courts determined that the Names had
not met their burden of proving that Lloyd’s alleged
misrepresentations were made fraudulently.
60a
Appendix B
the Applicants succeeded in making out a case of manifest
error in those figures.” Jd. at 28. Finally, the court in
The Society of Lloyd's v. Dennis Hugh Fitzgerald Leighs and
Others, [1997], at 5-10, 31 (Demery Aff., Ex. J), considered
and rejected the argument that the Names should not be bound
by the Equitas contract.
In sum, Defendants were given a full and fair opportunity
to litigate their claims in the English courts.
2. Public Policy Challenge
- The Defendants claim that the English Judgments
conflict with Utah public policy. Their arguments in support
of this claim are basically the same as those supporting their
due process claim. According to the Defendants, (1) the ©
English Judgments violated public policy by binding the Utah
Names to an unconscionable contract which was signed by
an unauthorized agent; (2) the “pay now, sue later” provision
in the Equitas contract violated public policy by not allowing
the Names to raise affirmative defenses; and (3) the
“conclusive evidence” clause violated public policy by
preventing the Names from discovering or presenting
evidence to refute the existence or amount of liability. In
addition, Mr. Bennett contends that enforcing the Equitas
contract would violate the anti-waiver provision of the Utah
Uniform Securities Act.*° See Utah Code Ann. § 61-1-22(9)
6. The effect of Utah Code Annotated section 61-1-22 in this
case is one of the issues Mr. Bennett urges the court to certify to the
Utah Supreme Court. (See Mem. Supp. Mot. for Certification of State
Law Questions by Def. Wallace Bennett, at 10-12.)
6la
Appendix B
(2000) (stating that “[a] condition, stipulation, or provision
binding a person acquiring a security to waive compliance
with this chapter or a rule or order hereunder is void”).
The district court in Webb rejected arguments similar to
the Defendants’ here. See Webb, 256 F. Supp. 2d at 643-44.
Although its analysis was based on the Texas Uniform Act,
the analysis is helpful here. The court distinguished between
the cause of action on which the judgment is based and the
judgment itself. The court stated that if the cause of action
on which the judgment is based is repugnant to public policy,
a court could refuse to recognize it. See id. at 643; see also
Turner, 303 F.3d at 332. But if the judgment itself offends
public policy, that fact, in and of itself, is not grounds for a
court to refuse to recognize it. Webb, 156 F. Supp. 2d at 643.
Additionally, the court in Webb noted that to refuse to enforce
a foreign country judgment on public policy grounds, “[t]he
level of contravention would have to be high,” such that the
foreign law was “inimical to good morals, natural justice, or
the general interests of the citizen [sic] of this state.” Jd. at
644 (quoting Hunt v. BP Exploration Co., 492 F. Supp. 885,
899 (N.D. Tex. 1980), and Gutierrez v. Collins, 583 S.W.2d
312, 322 (Tex. 1979)); see also Somportex Ltd. v.
Philadelphia Chewing Gum Corp., 453 F.2d 435, 443 (3rd
Cir. 1971); Restatement (Third) of Foreign Relations § 482
cmt. f (1987) (stating that “[cJourts will not m ‘ognize or
enforce foreign judgments based on claims perceived to be
contrary to fundamental notions of decency and justice”).
As in Webb, Lioyd’s cause of action in this case—for
breach of contract—is not repugnant to Utah public policy.
See Webb, 156 F. Supp. 2d at 643-44; see also Turner, 303
~ 62a
Appendix B
F.3d at 332. Additionally, the Defendants’ claims of
conflicting public policy, which focus primarily on the
“pay now, sue later” and “convincing evidence” provisions
in the Equitas contract and the appointment of a substitute
agent, do not rise to levels that would require the court to
not enforce the foreign judgment. See Webb, 156 F. Supp. 2d
at 644; Turner, 303 F.3d at 331-32.
Finally, when the Names signed Lloyd’s General
Undertaking, they agreed that English law, not Utah law,
would govern disputes arising between them and Lloyd’s.
See Webb, 156 F. Supp. 2d at 643 (rejecting public policy
arguments because the Fifth Circuit had upheld the choice
of law and choice of forum clause). The Tenth Circuit has
upheld the choice of law and choice of forum clauses
contained in the General Undertaking. See Riley, 969 F.2d at
958; see also Richards v. Lloyd’s of London, 135 F.3d 1289,
1294 (9th Cir. 1998) (following the court’s “six sister circuits
that have ruled to enforce the choice clauses”). Implicit in
the Tenth Circuit’s decision in Riley was an understanding
that the resulting English Judgments could differ from
decisions rendered in American courts. See Riley, 969 F.2d
at 958 (stating that “[t]he fact that an international transaction
may be subject to laws and remedies different or less
favorable than those of the United States is not a valid basis
to deny enforcement, provided that the law of the chosen
forum is not inherently unfair”).
Based on the above, the court concludes that the
Defendants’ arguments that enforcement of the Lloyd’s
judgments would violated Utah public policy are not
persuasive.
63a
Appendix B
In addition, authority from both the Tenth Circuit and
elsewhere also weighs against Mr. Bennett’s claim that
enforcing the English Judgments would conflict with Utah
Code Annotated section 61-1-22. Section 6i-1-22 provides
that “[a] condition, stipulation, or provision binding a person
acquiring a security to waive compliance with this chapter
or a rule or order hereunder is void.” Utah Code Ann. § 61-
1-22(9). To date, no reported decision appears to have
discussed the scope of this anti-waiver provision. It follows
that no decision has discussed whether Lloyd’s General
Undertaking, which calls for the application of English law,
and the Lloyd's Act of 1982, which immunizes Lloyd’s from
many American securities laws, violate the public policy
expressed in section 61-1-22. See Richards, 135 F.3d at 1296
(discussing the Lloyd’s Act of 1982). There is no reason to
believe, however, that Utah law would deal with this question
any differently than the Ninth and Tenth Circuits have in
recent years. See id.; Riley, 969 F.2d at 959.
In Richards, the Ninth Circuit determined that Lloyd’s
choice of law and choice of forum ciauses did not “contravene
a strong public policy embodied in federal and state securities
laws.” 135 F.3d at 1294-95. In that case, the Names relied
upon Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 634 (1985), to “argue that federal and
State securities laws are of ‘fundamental importance to
American democratic capitalism.’” Richards, 135 F.3d at
1295. Relying on what the Ninth Circuit referred to as
“dictum in a footnote regarding antitrust law,” id, the Names
“claim[ed] that enforcement of the choice clauses [would]
deprive them of important remedies provided by our
securities laws.” Jd. The court, however, emphasized that the
64a
Appendix B
Supreme Court had recognized “that parties to an
international securities transaction may choose law other than
that of the United States, . . . yet [had] never suggested that
this affected the validity of a forum selection clause.” /d.
(discussing Scherk v. Alberto-Culver Co., 417 U.S. 506, 508
(1974)).
The court in Richards recognized that “the Lloyd’s Act
immunizes Lloyd’s from many actions possible under our
securities laws.” 135 F.3d at 1296. It explained, however,
that “Lloyd’s is not immune from the consequences of actions
committed in bad faith, including fraud.” Jd.; see also Riley,
969 F.2d at 958 (stating that “English law does not preclude
Riley from pursuing an action for fraud and we agree with
the Defendants that the Lloyd’s Act does not grant statutory
immunity for such claims”). In part because such remedies
were available, the court held that the anti-waiver provisions
in the Securities Act of 1933 and the Securities Exchange
Act of 1934 did not void the choice clauses in Lloyd’s
transaction with the Names. See Richards, 135 F.3d at 1296;
see also Riley, 969 F.2d at 957 (giving effect to Lloyd’s choice
provisions and rejecting argument that the defendant was
“being deprived of all substantive rights under the federal
securities laws”).
Mr. Bennett points outs that one California appellate
court decision has declined to dismiss a claim against Lloyd’s
on the basis of the choice of forum and law clauses.
(See Mem. Supp. Mot. to Declare Particular Foreign-Country
Wnit Unenforceable at 9); West v. Lloyd’, No. B095440, 1997
WL 1114662, at *8-9 (Cal. Ct. App. Oct. 23, 1997)
(unpublished opinion). The court in West voided Lloyd’s
65a
Appendix B
choice clauses because the clauses “violatfed} California’s
fundamental public policy against waivers of the protections
afforded by its securities laws.” See 1997 WL 1114662, at
*1. This case, however, is not good law. The California
appellate court in West relied on the Ninth Circuit’s first
opinion in Richards v. Lloyd's, 107 F.3d 1422 (9th Cir. 1997).
See West, 1997 WL 1114662, at *6 n.8, *8 n.11. The first
Richards decision was subsequently withdrawn by the Ninth
Circuit sitting en banc in Richards v. Lloyd's, 135 F.3d at
1291.
As Lloyd’s explains, in Richards, the plaintiffs
specifically referenced state securities laws—including
Utah’s— in Appendix D to their Amended Complaint, and
argued that these laws constituted a public policy against the
choice of law and forum clauses. See Richards, 135 F.3d at
1295-96 (discussing the effect of federal and state securities
laws on Lloyd’s choice clauses). In this case, Mr. Bennett
makes the same public policy argument that both the Ninth
and Tenth Circuits rejected in Richards and Riley,
respectively. See Richards, 135 F.3d at 1295-96; Riley, 969
F.2d at 957-58. The only apparent difference is that the
provision Mr. Bennett relies upon, Utah Code Annotated
section 61-1-22, has not been singled out and specifically
discussed in either decision. Given the fact that the Richards
and Riley decisions dealt with the same underlying
transactions at issue here, Mr. Bennett’s public policy
argument should not defeat Lloyd’s motion for summary
judgment.
Based on the above; the court concludes that all the
requirements set forth by the Court in Hilton have been met
66a
Appendix B
and the Lloyd’s judgments are entitled to recognition.
Accordingly, Lloyd’s Motion for Summary Judgment is
GRANTED.
ll. Related Matters
A. -Lloyd’s Motion to Dismiss the Harmsens’
Counterclaim
The Harmsens’ counterclaim alleges fraud in the
inducement and negligent misrepresentation by Lloyd’s. The
Harmsens seek an accounting and a declaratory judgment.
These claims concern the underlying transaction involving
Lloyd’s. Lloyd’s argues that the forum selection and choice
of law provisions signed by the Harmsens preclude litigation
of their counterclaim in this court.
In opposition to Lloyd’s motion to dismiss, the Harmsens
make the following arguments: (1) the choice clauses should
not apply here because Lloyd’s availed itself in a United
States court to enforce an English judgment; (2) Lloyd’s is
exempt from fraud claims in England, making any
opportunity to bring such a claim in English courts illusory;
and (3) the counterclaim is required as a mandatory
counterclaim under Utah Rule of Civil Procedure 13(a). But
the Harmsens provide no law in support of their arguments.
As discussed in detail above, the agreements between
Lloyd’s and each of the Defendants, including the Harmsens,
contain forum selection and choice of law clauses that
obligate the Defendants to litigate any claims they may have
against Lloyd’s in the courts of England under English law.
67a
Appendix B
Section 2.2 of the General Undertakings signed by Mr. and
Mrs. Harmsen, respectively, states in part that the parties
agreed “that the courts of England shall have exclusive
jurisdiction to settle any dispute and/or controversy of
whatsoever nature arising out of or relating to the Member’s
membership of, and/or underwriting of insurance business
at, Lleyd’s.” (See Demery Aff. Ex. E., Ex. F.) The Tenth
Circuit in Riley found these provisions to be valid. See 969
F.2d at 958. In addition, at least seven other circuits have
held these same clauses to be valid. See Lipcon v.
Underwriters at Lloyd’s, London, 148 F.3d 1285 (11th Cir.
1998); Richards, 135 F.3d at 1294; Haynsorth v. The
Corporation, a/k/a Lloyd’s of London, 121 F.3d 956 (Sth Cir.
1997); Allen v. Lloyd’s of London, 94 F.3d 923 (4th Cir. 1996);
Shell v. R. W. Sturge, Ltd.,55 F.3d 1227 (6th Cir. 1995); Bonny
v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993); Roby v. Corp.
of Lloyd's, 996 F.2d 1353 (2d Cir. 1993). Because no reported
case law indicates that the court should disregard the choice
clauses merely because Lloyd’s is a plaintiff in this
enforcement action, the court GRANTS Lloyd’s motion to
dismiss the Harmsens’ counterclaim.
B. Motions for Certification of State Law Questions
Mr. Bennett and the Caldwell Defendants move to certify
state law questions. Under Utah Rule of Appellate Procedure
41, a United States court, either on a motion or sua sponte,
may certify certain questions of Utah law to the Utah Supreme
Court. Utah R. App. P. 41(b) (2002).
Certification cf legal questions to the state court is
appropriate only where there is doubt about the application
68a
Appendix B
of state law in a federal case. See Houston v. Hill, 482 U.S.
451, 471 (1987). The Tenth Circuit has stated that
“{cjertification is not to be routinely invoked whenever a
federal court is presented with an unsettled question of state
law.” Copier v. Smith & Wesson Corp., 138 F.3d 833, 838
(10th Cir. 1998) (quoting Armijo v. Ex Cam, Inc., 843 F.2d
406, 407 (10th Cir. 1988)). Instead, certification should be
invoked only in “exceptional cases” because the federal
courts must “decide questions of state law whenever
necessary to the rendition of a judgment.” Copier, 138 F.3d
at 838 (quoting Meredith v. City of Winter Haven, 320 U.S.
228, 234 (1943)).
The questions that the Defendants seek to certify are as
follows:
1. Does Utah Substantive Law Apply in a
Jurisdictional Diversity of Citizenship Case
Seeking Enforcement of an English Judgment?
Mr. Bennett seeks to certify to the Utah Supreme Court
the question of what substantive law applies in this
enforcement action. As discussed in detail above, the Utah
Supreme Court has stated that, absent a treaty or statute,
“principles of comity” determine whether foreign country
judgments are enforceable in Utah. See Mori, 931 P.2d at
856. Mori favorably cited Hilton, 159 U.S. at 163-64, one of
the Supreme Court’s seininal comity decisions. Further, the
Tenth Circuit, applying Utah law, recently employed
_ principles of comity with respect to the res judicata effect of
a Canadian judgment. See Smith, 1999 WL 38160, at **2.
This decision applied Utah law with respect to whether the
69a
Appendix B
foreign judgments should be given effect, id., but noted that
“questions regarding the validity of a foreign judgment
‘should be tested by the law of the jurisdiction where the
judgment was rendered.’” Jd. at **2, n.2 (quoting Rocky
Mountain Claim Staking v. Frandsen, 884 P.2d 1299, 1300-
01 (Utah Ct. App. 1994)). These decisions provide clear
answers to Mr. Bennett’s proposed question for certification.
2. Would Enforcement of Lloyd’s English
Judgments Against the Utah Names Violate
Article I, Section 11 of the Constitution of Utah
(the “Open Courts Provision”)?
Defendants contend that the applicability of the Utah
Constitution’s open courts provision in the context of
enforcing a foreign country judgment presents a question of
first impression in Utah. They also claim that this question
is potentially dispositive in this case and that certification is
therefore necessary. Although Defendants are correct that this
issue has not yet been considered by a Utah court, the court
believes that certification is not appropriate.
The Utah Constitution’s open courts provision is similar
to its due process provisions. Article I, section 11 states that
[a]ll courts shall be open, and every person, for
an injury done to him in his person, property or
reputation, shall have remedy by due course of
law, which shall be administered without denial
or unnecessary delay; and no person shall be
barred from prosecuting or defending before any
70a
Appendix B
tribunal in this State, by himself or counsel, any
civil cause to which he is a party.
Utah Const., art. I, § 11. In Brown v. Wightman, the Utah
Supreme Court stated that Utah’s open court’s provision did
not create new rights or remedies. 151 P. 366, 366-67 (1915).
Instead, this provision “plac[ed] a limitation upon the
Legislature to prevent that branch. . . from closing the doors
of the courts against any person who has a legal right which
is enforceable in accordance with some known remedy.” Jd.
at 366-67; see also Laney v. Fairview City, No. 981729, 2002
WL 1822152, at *7-8 (Utah Aug. 9, 2002) (discussing Brown,
151 P. at 366-67); Berry v. Beech Aircraft Corp., 717 P.2d
670, 686 (Utah 1985) (declaring that a products liability
statute of repose violated Article I, section 11 of the Utah
Constitution).
This case does not involve a legislative limitation on
the Names’ ability to enforce their legal rights. As such,
Article i, section 11 of the Utah Constitution is not relevant,
much less potentially dispositive, in this case. Cf Berry, 717 .
P.2d at 676 (discussing the open courts provision in the
context of a legislative limitation on remedies). Additionally,
the Defendants have not been barred from defending Lloyd’s
claims. Under Mori, the Defendants have been able to
challenge the enforcement of the English Judgments under
common law principles of comity. See Mori, 931 P.2d at 856.
Tla
Appendix B
3. Would Enforcement of Lloyd’s English
Judgments Violate Article I, Section 7 of the
Utah Constitution, Utah’s Due Process
Clause?
The court has considered Defendants’ due process
challenges in this decision. The same analysis applies to the
due process clause contained in Article I, Section 7 of the
Utah Constitution.
4. Would Enforcement of Lloya’s English
Judgments Violate Article I, Section 27 of the
Utah Constitution?
Mr. Bennett moves to certify the question of whether
Article I, section 27, the “fundamental rights” section,
precludes enforcement of the English Judgments. Section 27
of Article I of the Utah Constitution states that “[f]requent
recurrence to fundamental principles is essential to the
security of individual rights and the perpetuity of free
government.” Utah Const., art.I,§27. = -
As Lloyd’s explains, its action is an ancillary proceeding
to collect a money judgment. Mr. Bennett has not identified |
any fundamental rights or principles at issue, other than due
process. This is not an appropriate basis for certification.
72a
Appendix B
5. Does Section 61-1-22(9) of the Utah Code
Annotated Override the Forum Selection and
Choice of Law Provisions in the General
Undertaking? :
The court has dealt with this issue above. As discussed,
no Utah case appears to have directly discussed whether
section 61-1-22(9) of the Utah Code Annotated would void
a choice of law or forum selection clause that precludes
application of Utah securities laws. However, substantial case
law from both the Tenth Circuit and elsewhere provide
adequate guidance for the court on this question.
C. Motion for Discovery Under Federal Rule of Civil
Procedure 56(f)
The Defendants move the court to grant the Utah Names
the opportunity for discovery under Federal Rule of Civil
Procedure 56(f). Under Federal Rule of Civil Procedure 56(f),
a court may delay ruling on a motion for summary judgment
or refuse summary judgment outright “where the non-moving
party has not had the opportunity to discover information
that is essential to his opposition.” Jnt’] Surplus Lines Ins.
Co. v. Wyoming Coal Refining Sys., Inc., 52 F.3d 901, 905
(10th Cir. 1995); see Fed. R. Civ. P. 56(f). The party opposing
a motion for summary judgment must provide affidavits
indicating why that party cannot “present by affidavit facts
essential to justify the party’s opposition” to summary
judgment. Lewis v. City of Fort Collins, 903 F.2d 752, 758
(10th Cir. 1990) (quoting Fed. R. Civ. P. 56(f)); nt’] Surplus
Lines Ins. Co., 52 F.3d at 905.
73a
Appendix B
The Defendants seek three types of discovery. First, the
Defendants seek discovery about the basis and amount of
the alleged liability on which the English judgments- were
based. The Defendants “expect to show that the amounts Were
completely arbitrary and therefore in violation of due process
and public policy.” Second, the Defendants seek discovery
related to Lloyd’s appointment of a substitute agent as well
as the facts and circumstances surrounding the formation and
execution of the Equitas contract. Third, the Utah Names
seek discovery concerning Lloyd’s contractual intent in
entering into the General Undertaking.
The discovery sought by the Defendants goes to the
validity of the underlying Equitas contracts and the
appointment of a substituted agent to sign those contracts.
The discovery sought by the Defendants is not relevant in
light of the limited scope of this enforcement action. The
Defendants’ motion for discovery under Rule 56(f) is
DENIED.
D. Motions to Strike
The parties’ have filed various motions to strike materials
submitted to the court. Those motions are DENIED AS
MOOT.
IT IS SO ORDERED.
74a
Appendix B
DATED this 12 day of November, 2002
BY THE COURT
s/ Tena Campbell
TENA CAMPBELL
United States District Judge
Supreme Court, U.S.
FILED
2 JUL 20 2005
No. 04-1731 OFFICE OF THE CLERK
IN THE 2
Supreme Court of the United States
WALLACE R. BENNETT, x
Petitioner,
v,
THE SOCIETY OF LLOYD’S,
Respondent.
On PETITION FOR A WRit OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
BRIEF IN OPPOSITION
MICHAEL N. ZUNDEL
Counsel of Record
JAMES A. BOEVERS
Prince, YEATES AND GELDZAHLER
Attorneys for Respondent
175 East 400 South, Suite 900
Salt Lake City, UT 84111
(801) 524-1000
195521 ce
COUNSEL PRESS
(800) 274-3321 + (800) 359-6859
i
QUESTIONS PRESENTED
Did the Tenth Circuit correctly determine that there is
complete diversity of citizenship between the plaintiff in the
district court (respondent here), The Society of Lloyd’s
(“Lloyd’s”), an English corporation, and the defendants in
the district court [including petitioner here, Mr. Bennett
(“Bennett”)], who are all individual residents of the State of
Utah?
Did the Tenth Circuit correctly determine that an
assignment of claims against Bennett from one English
corporation, Equitas Reinsurance Limited (“Equitas”), to
another English corporation, Lloyd’s, was not a collusive
assignment under 28 U.S.C. § 1359, for purposes of creating
diversity of citizenship subject matter jurisdiction in the
district court?
Did the Tenth Circuit, in this diversity action, correctly
interpret Utah law in determining that Lloyd's English
Judgment against Bennett is enforceable under principles of
comity?
il
PARTIES BELOW AND
CORPORATE DISCLOSURE STATEMENT
In addition to Lloyd’s and Bennett, the parties in the
Tenth Circuit included the following defendants-appellants:
Richard A. Reinhart, Grant R. Caldwell, David L. Gillette,
James R. Kruse, Edward W. Muir, Kent B. Petersen, Calvin
P. Gaddis,’ Stephen M. Harmsen and Kelly C. Harmsen.
Lloyd’s has no parent corporation and there is no publicly
held company owning 10% or more of its stock.
' During the pendency of the appeals in the Tenth Circuit,
Lloyd's reached a settlement with Mr. Gaddis resulting in the
dismissal of his appeal.
itt
TABLE OF CONTENTS
CIGSHONS PICSCRIOS © oo i ea ek
Parties Below and Corporate Disclosure Statement
ee OF Ome ns ec es ss ee es
Table of Cited Authorities 3 ooo bos ee ce
SaRee OF PODCMNOES oo oa ie es Sa mee
Rinhemest of te C Obes oo es ee eee eee:
oe
Reasons for Denying the Petition ...............
I.
Il.
The Tenth Circuit Correctly Determined that
there was Complete Diversity of Citizenship
Between Lloyd’s, an English Corporation,
and the Defendants in the District Court, Who
are All Individual Residents of the State of
RE i ee bc Fe i os ie de
Pi. TO ee es ee ee Se
B. As an English Corporation, Lloyd’s is a
CMEECN OF TRTAINE o ok. i i Ae eka
The Tenth Circuit Correctly Determined that
an Assignment of Claims from One English
Corporation, Equitas, to Another English
Corporation, Lloyd’s, was not a Collusive
Assignment for Purposes of Creating
EUVECBELY OF CSUZCRIGUID oo is ea
il
Xi
iv
Contents
Page
A. The Assignment at Issue is Equitas’
Assignment to Lloyd's of Equitas’ Claim
Against Bennett Based on Bennett’s
Failure to Pay the Equitas Premium ... = 13
B. Because Equitas is Also an English
Corporation, Its Assignment to Lloyd’s
Was NOL COMURIVE 5 ee 15
It]. The Other Issues the Petition Raises are
essues oF Utah Law Only 9. oo cic cess 16
IV. The Tenth Circuit Correctly Interpreted Utah
Law in ‘Determining that Lloyd’s English
Judgment Against Bennett is Enforceable
Under Principles of Comity ............. 18
co NEE DPS Bae a a PN ENV IG OE SS RE ae 23
TABLE OF CITED AUTHORITIES
Page
FEDERAL CASES
Amoco Rocmount Co. v. Anschutz Corp., 7 F.3d 909
(10th Cir. 1993), cert. den., 510 U.S. 1112
CE do eer as a es % él x 68 odes 13
Bank of the United States v. Deveaux, 5 Cranch
(9 US3G1, 3bi Bd. SOCIO) | ok eee. 11
Hilton v. Guyot, 159 U.S. 113 (1895) ........... 19, 20
Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314
E, (8 A... Sp RN Taree nn 12 -
Marshall v. Baltimore & Ohio Railroad Co., 16 How.
Cy Sead ee Oe a Os OY sc cae ee 1]
National S.S. Co. v. Tugman, 106 U.S. 118 (1882)
Richards v. Lloyd’s of London, 135 F.3d 1289
(9th Cir. 1998), cert. den., 525 U.S. 943 (1998) ... 22
Riley v. Kingsley Underwriting Agencies, Ltd., 969
F.2d 953 (10th Cir. 1992), cert. den., 506 U.S.
SR AN ooo ea eh agiteas eb ea eS 22
Society of Lloyd’s v. Ashenden, 233 F.3d 473
Eee Re EN iacard Freeh oon 5 caen es vain 18, 19, 21
Society of Lloyd’s v. Bila, Civil No. A-03-CA-9
re kan ED oso nue beeen cee’ 13
vi
Cited Authorities
Page
Society of Lloyd’s v. Blackwell, 127 Fed. Appx. 961
(9th Cir. April 13, 2005) ......... ge a eee 18
Society of Lloyd's v. Borgers, 127 Fed. Appx. 959
(OU <a. et 19; DO 6a im vo cece te 18
Society of Lloyd’s v. Byrens, Civil No. 02CV449
(SD: Cal: May 29, 2003) 2. eee 19
Society of Lloyd's v. Davies, 107 Fed. Appx. 887
CR IGA OEY 2, Cee: nso k See cals wees 18
Society of Lloyd's v. Edelman, 03 Civ. 4921 (WHP)
Cbs. eR EA, AOD oe sk wows 19
Society of Lloyds v. Evnen, No. 8:02CV 118 (D. Neb.
6 ee er eee 19
Society of Lloyd's v. Fuerst, Case No. 04-2964
Gaeet Gears et 8 0, GD os oP ir be ren ae 19
Society of Lloyd’s v. Hudson, 276 F. Supp. 2d 1110
ie; SN SE Ghee a 5 ky aceasta as 19
Society of Lloyd's v. Mullin, 96 Fed. Appx. 100
CE Sa aa Eh cs es ee sa ee
Society of Lloyd's v. Reinhart, 402 F.3d 982
COS ae ee ies oe oh oh cs Ee passim
vil
Cited Authorities
Page
Society of Lloyd’s v. Rosenberg, No. 02-1195
(ED. Pa. August 13; 2002) 3 on ee ess 19
Society of Lloyd’s v. Shields, 118 Fed. Appx. 12
(November 17, 2006)... ee eee A 18
Society of Lloyd’s v. Siemon-Netto, Civil Action
No. 03-1524 (JR) (D.D.C. 2004) ............. 19
Society of Lloyd’s v. Sommer, Civil Action No.
02-RB-1959 (OES) (D. Colo. September 9,
TON GS i as ee ee eee 13
Society of Lloyd’s v. Turner, 303 F.3d 325 (Sth Cir.
fit 9 5 reir ren Reraurae nr a mrvaee Nee Foren 8, 18, 19
Steele v. Hartford Fire Ins. Co., 788 F.2d 441
C7 Cae TR as 5 eee ee 15
Torres v. Southern Peru Copper Corp., 113 F.3d 540
(Sal: Cir. 1999): ooo oi a ees 10, 11
Western Farm Credit Bank v. Hamukua Sugar Co.,
Inc., 841 F. Supp. 976 (D. Hawaii 1994), aff’d,
87 £36 1326 (9 Cir. 1996) 2 ea eee 15
vill
Cited Authorities
STATE CASES
Mori v. Mori, 931 P.2d 854 (Utah 1997) .........
Rocky Mtn. Claim Staking v. Frandsen, 884 P.2d
1299 (Utah App. 1994), cert. den., 899 P.2d
See AIUD SHOOT iss gh odors woes hl awe es eran
Society of Lloyd's v. Collins, Case No. 00-713-CA-
22 (19th Cir. Ct., Indian River County, Florida,
June 4, 2003) aff'd, Case No. 4D03-2674
(Fla. 4th Dist. Ct. App. May 19, 2004) ........
ENGLISH CASES
Society of Lloyd's v. Fraser & Others (C.A. July 31,
| EEE REO EOE PEE ER LOT SESE re oe
Society of Lloyd's v. Jaffray, 2000 WL 1629463 (High
Court of Justice November 2, 2000), aff'd,
2002 WL 1654876 (C.A. July 26, 2002) .......
Society of Lloyd’s v. Leighs and Others (High Court
of Justice February 20, 1997) ................
Society of Lloyd's v. Lyon v. Leighs v. Wilkinson,
adh: SREY Shy SOE) cnes-on ass sete recesses
Society of Lloyd’s v. Wilkinson & Others (High Court
OF FOSS AMEN ZI: ISSEY 5 onc kicks se Hea
Page
ix
Cited Authorities
Page
FEDERAL STATUTES
Sas EE 4 oan ea ca aes teak oebnt eee 9, 11
RE Ee RSPR Tie rye ree i, 13, 15
STATE STATUTES
Utah Code Ann. § 61-1-22(9) .............2..2.. 22
ENGLISH STATUTES
ROOD OE TEE i 8 SS RR Pe kee 1,9
Fe fe Bi | SEP PEER ETE ED ETE ea Pree TT 1,5,9
LaORES Atte TETAS OS acct ve avndvesc tn 2, 3c he tae
Insurance Companies Act 1982 ................ 2
Financial Services and Markets Act 2000 . 4 Sis 2
FEDERAL RULES
WN CE: Ts Saeco io Redters ues ones 16, 17
FOC 24s eo kkNS eos kSs Kon canbaeneseen 1,2
Pg te Re SES ORO REE I ry ene eet l
x
Cited Authorities
Page
OTHER AUTHORITIES
O’Connor’s Federal Rules, Civil Trials 2003 ..... 12
1 Restatement (Third) of Foreign Relations § 482
so OER aR ie ie rors ae ATEN Te NE 21
Uniform Foreign Money - Judgment Recognition Act,
Uniform Laws Annotated, Vol. 13, Part II (West
PR ARS ee ee A Ab EE ROE OE ES 18, 19
Wright, Miller & Cooper, Federal Practice and
Procedure: Jurisdiction 2d Vol.-13B, § 3623
POreel Se 5h kbd hse aa eet eee 10, 11
xi
TABLE OF APPENDICES
Page
Appendix A — Order Of The United States District
Court For The District Of Utah, Central Division
Pee See ee ee ee hs vee Reo eb eeu’ la
Appendix B — Order Of The United States District
Court For The Western District Of Texas, Austin
Division Filed May 21,2003 2.006. cis cece ss 6a
Appendix C — Order Granting Motion For
Reconsideration Of The United States District
Court For The District Of Colorado Filed
EE OD 2s vb kee haa Wne db ee Mea ees 9a
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