Petition for Writ of Certiorari — Certain Underwriters at Lloyd's of London v. Transit Casualty Co. in Receivership

iS 2 oe

8? °638 OCT - 8 1997

OFFICE OF THE CLERK

IN THE

Supreme Court of the GQnited States

OCTOBER TERM, 1997

CERTAIN UNDERWRITERS AT LLOYD’S OF

LONDON who are Members of Syndicate No. 553, as

Subscribers to Contracts of Reinsurance with

Transit Casualty Company, and C.J. Warrilow, an

Underwriter at Lloyd’s of London, Individually, and

on behalf of Certain Underwriters at Lloyd’s of

London who are Members of Syndicate No. 553,

Petitioners,

v.

TRANSIT CASUALTY COMPANY

IN RECEIVERSHIP,

Respondent.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Eighth Circuit

PETITION FOR WRIT OF CERTIORARI

R.R. MCMAHAN

Counsel of Record

ROBERT A. KNUTI

SARAH MARION WEIL

LORD, BISSELL & BROOK

115 South LaSalle Street

Chicago, Illinois 60603

(312) 443-0700

Attorneys for Petitioners

Midwest Law Printing Co., Chicago 60610, (312) 321-0220

Lag TECLOM Mee 9

nl yy ‘

i

QUESTION PRESENTED

Does 28 U.S.C. §1447(d) forbid appellate review of a

federal district court’s decision that enforcement of an

arbitration agreement falling under the Convention on

the Recognition and Enforcement of Foreign Arbitral

Awards is barred by a state anti-arbitration law, just

because the district court made that ruling in, and as a

predicate for, an order remanding the case to state court,

ostensibly pursuant to 28 U.S.C. §1447(c)?

il

PARTIES TO THE PROCEEDING

AND RULE 29.1 STATEMENT

Petitioners are certain Underwriters at Lloyd’s,

London, who through their membership in Lloyd’s

Syndicate No. 553 subscribed to reinsurance agreements

with Transit Casualty Company identified in Respon-

dent’s pleadings as Quota Share Reinsurance Agreement

effective December 1, 1978, Quota Share Reinsurance

Agreement No. 7080/1/81 effective June 1, 1981, and

First Casualty Quota Share Reinsurance Agreement No.

7080/1/84 effective January 1, i984 and Interests and

Liabilities Contract.

Respondent is the receivership of Transit Casualty

Company, an insurance company organized and incorpo-

rated in Missouri. The company was declared insolvent

in the Circuit Court of Cole County, Missouri in 1985

and placed in liquidation pursuant to the provisions of

the Missouri insurance code.

ot Ji eal ret ti late

Sore

ill

TABLE OF CONTENTS

PAGE

UE IUIN PIUOIUINATE) Sic cc cc cece eee ius i

PARTIES TO THE PROCEEDING

AND RULE 29.1 STATEMENT ............. ii

Reeede CIP APP UIOES. 6 oe ov cb kec se iv

SeaeA UE PAPE oe be ee ed eawen Vv

Se SE ong SSS De wi ee eid lw oe 1

RUNGE oe PS oie cs alc owt aloes 1

PERTINENT STATUTORY PROVISIONS ........ 1

SIATEMENT OF THE CASE .............-5.. 2

REASONS FOR GRANTING THE WRIT ......... 6

SPU 6 oo OSU OA ab cscs Sa caer: 15

iV

APPENDICES

Opinion of the U.S. Court of Appeals for the

Eighth Circuit, filed euhy 10,3007 2. :

Judgment Order of the U.S. District Court

for the Western District of Missouri,

ant dome 6, 1906. ae

Memorandum Opinion and Order of the U.S.

District Court for the Western District

of Missouri, filed June Mh Se a

Excerpt from the Convention on the

Recognition and Enforcement of Foreign

Arbitral Awards, June 10, 1958,

21 U.S.T. 2517, 330 U.N.T.S.38........

Pertinent Provisions of Chapter 2 of Title 9,

U.S.C. (the Federal Arbitration Act) .....

EE Ee Bee A

Vv

TABLE OF AUTHORITIES

Cases

Anusbigian v. Trugreen/Chemlawn, Inc.,

72 F.3d 1253 (6th Cir. 1996) ............

Baldridge v. Kentucky-Ohio Transp. Inc.,

983 F.2d 1341 (6th Cir. 1993) ...........

Carney v. BIC Corp.,

88 F.3d 629 (8th Cir. 1996) ............

Caterpillar, Inc. v. Williams,

GOR Ni DOO RAMED Fos es eek ec a

Clorox Co. v. U.S. District Court,

779 F.2d 517 (9th Cir. 1985) ............

Cohen v. Beneficial Industrial Loan Corp.,

De Set CIO ek sod ees ce a

In re Delta America Re Ins. Co.,

900 F.2d 890 (6th Cir. 1990)............

Foster v. Chesapeake Ins. Co.,

933 F.2d 1207 (8d Cir. 1991) ...........

Franchise Tax Bd. of Cal. v. Constr. Laborers

Vacation Trust, 463 U.S. 1(1983)........

Gonzales-Garcia v. Williamson Dickie

Manufacturing Co., 99 F.3d 490

Cee Ey a er

J. W. Soley v. First Nat'l Bank of Commerce,

923 F.2d 406 (5th Cir. 1991)............

Jain v. de Mere,

51 F.3d 686 (7th Cir. 1995) ............

vi

Karl Koch Erecting Co., Inc. v. New York

Convention Center Development Corp.,

oad Wome OO CC, TON) 8. oe ee beck. 7

Ledee v. Ceramiche Ragno,

Oo4 F.9d 4 RE Ce, TOR) Co 8

Metropolitan Life Ins. Co. v. Taylor,

OOS Man GRTIETE op een eG tr ree 10

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth, Inc., 473 U.S. 614 (1985) ...... 11, 12

Pelleport Investors, Inc. v. Budco Quality

Theatres, Inc., 741 F.2d 273 (9th Cir. 1064) ....7

Perry v. Thomas,

ORS Ai BOP TA oie ee ik 11

Powers v. Southland Corp.,

4? Gage ee Ue wee. ee 14

Quackenbush v. Allstate Ins. Co.,

snain' SO0U> iia Aa AER CO 4

Quasem Group, Ltd. v. W.D. Mask Cotton Co.,

967 F.Supp. 288 (W.D. Tenn. 1997) .......... )

Scherk v. Alberto-Culver Co.,

Ont MEN MORTABTE) 4s) scac ce Li, 32

Severonickel v. Gaston Reymenants,

S00 Poa 906 (60h Cir, 1007). 8

Southland Corp. v. Keating,

Se CRUE ck ck oe ee: 11

In re TMI Litigation Cases,

940 F.2d 832 (8d Cir. 1991. ............ 7,14

Thermtron Products, Inc. v. Hermansdorfer,

ee Se SOO RU 58 ok re oe 6, 12

vii

Trans Penn Wax Corp. v. McCandless,

50 F.3d 217 (3d Cir. 1905) .. 0. nce veceees 13

United States v. Rice,

og RS Ey. Te | | ee ee eae eee 12

Waco v. United States Fidelity & Guaranty Co.,

te STE cco css ccs scewunsess 6, 7

Whitman v. Raley’s, Inc.,

886 F.2d 1177 (Oth Cir. 1989)... wc ween 9

Statutes and Treatises

Re ne. be a 6 Stacraew beled ea es 8

| rae te ear OR rr. a ee eee 8

ss is wh 6b a's b Mine ome RE 4

pe a eens ee ere ere eo e ant wei ya 8

ee as ok) 8 ka Boh a 36 ae ee on 8,9

eC an ch cae ob cme eae bees 2, 3, 4, 5, 11

a ek ss 046s RAS A aE S ON Se OED 8

Re as kk a ac bis 6 be ed Op eee baa ew wis l

Ct Ee oN ced ew beec cde ataspe ves 4

eR EE le iA ey se Uw ON GRMN Oh gk ewe 10

SP EEE Ak chlacks bie hte Seow eles 10

SE FF SOOT AS Ck He POS ek 7, 13, 14

Se Ree, OES oy 50's 9.3.4 RA ORE eee passim

McCarran-Ferguson Act, 15 U.S.C. §§1011-1015.... 2

Convention on the Recognition and Enforcement

of Foreign Arbitral Awards, June 10, 1958,

So Ua. ks, GOO UINES. SS ow eee tw 1

Viii

Miscellanecus

Aksen, American Arbitration Accession Arrives

in the Age of Aquarius: United States

Implements United Nations Convention

on the Recognition and Enforcement of _

Foreign Arbitral Awards, 3 Sw. U. L. REV. 1

SOTEE Ned Ce sah sou Cees FEUER 12

1

PETITION FOR WRIT OF CERTIORARI

Petitioners Certain Underwriters at Lloyd’s of London

who are Members of Syndicate No. 553, as Subscribers

to Contracts of Reinsurance with Transit Casualty Com-

pany respectfully pray that a writ of certiorari issue to

review the judgment and opinion of the United States

Court of Appeals for the Eighth Circuit entered in the

above captioned case on July 10, 1997.

CPINIONS BELOW

The opinion of the Court of Appeals is reported at 119

F.3d 619 and is reprinted in the appendix (“App.”) hereto

at App. Al. The Judgment Order of the United States

District Court for the Western District of Missouri is

published and is reprinted at App. B1. The Memorandum

Opinion and Order of the District Court is unpublished

and is reprinted at App. Cl.

JURISDICTION

The Court of Appeals filed its opinion on July 10, 1997.

App. Al. The jurisdiction of this Court rests on 28 U.S.C.

§1254.

PERTINENT STATUTORY PROVISIONS

Pertinent provisions of the Convention on the Recogni-

tion and Enforcement of Foreign Arbitral Awards, June

10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38, are set forth

at App. D1. Pertinent provisions of Chapter 2 of Title 9,

U.S.C. (the Federal Arbitration Act), are set forth at

App. E1-E2.

2

STATEMENT OF THE CASE

Respondent sued Petitioners in a Missouri state court

for damages for breach of reinsurance agreements

entered into between Petitioners and Transit Casualty

Company. These reinsurance agreements contained

broad arbitration clauses. App. A3-A4.

Petitioners moved to dismiss the suit on the ground

that the arbitration agreements fell under the Conven-

tion on the Recognition and Enforcement of Foreign

Arbitral Awards and that the disputes raised by the

Respondent’s suit must be referred to arbitration pursu-

ant to the Convention’s terms. Petitioners then removed

the action to the District Court for the Western District

of Missouri pursuant to 9 U.S.C. §205, the removal pro-

vision of the legislation enacted by Congress to enforce

the Convention, and sought an order from the District

Court compelling arbitration and dismissal of the action.

App. E2.

Respondent moved to remand the case to the state

court on the grounds that the Petitioners had waived

their right to remove, that the District Court lacked sub-

ject matter jurisdiction because the Convention was

“reverse-pre-empted”! by Missouri’s arbitration laws, that

the District Court had no jurisdiction over two “show

cause” orders issued by the state court, and that the Dis-

trict Court must abstain from exercising its jurisdiction

under the Burford and Colorado River abstention doc-

trines. App. A5. On June 5, 1996, the District Court

issued a final judgment remanding the action to the

Missouri state court. App. B1.

' By operation of the McCarran-Ferguson Act, 15 U.S.C.

§§1011-1015.

i ire Me™ ht 5 Cet AiO "aaa ila Mita ital lta ao WADE by cia

oe EAD Nek GR RO ti,

3

On June 10, 1996, the District Court issued a Memo-

randum Opinion and Order explaining the grounds upon

which its remand order was based. App. C1. The Court

acknowledged that the Petitioners had removed the case

under 9 U.S.C. §205 in order to compel Respondent to

arbitrate and that “as a general rule the arbitration

clauses contained in the reinsurance agreements at issue

would be enforceable under the Convention and the

Federal Arbitration Act.” App. C2. However, the Court

concluded that in this case the Petitioners’ rights under

the Convention were superseded by a provision of the

Missouri Uniform Arbitration Act exempting arbitration

agreements in insurance contracts from enforcement.

App. C3. The District Court also accepted the Respon-

dent’s argument that a service of suit clause contained

in the underlying reinsurance agreements should be

interpreted as a waiver by the Petitioners of their right

to remove the case to the federal courts pursuant to 9

U.S.C. §205. App. C6-C8.”

2 On July 9, 1996, the Governor of Missouri signed a law

(Missouri H.B. No. 929) amending the section of the Missouri

Uniform Arbitration Act that the District Court had found

pre-empted Petitioners’ federal right to arbitration to express-

ly exclude arbitration agreements in reinsurance contracts

from its operation. On June 18, 1997—13 days after the case

was remanded to it—the state court allowed Respondent to file

a Second Amended Petition and Motion for Order to Show

Cause against Petitioners based on the same reinsurance

agreements. Petitioners moved to compel arbitration of the Re-

spondent’s claims and to dismiss or stay the judicial action.

The state court decided the motion the next day, denying the

motion to compel on the grounds that a service of suit clause

in the reinsurance agreements superseded the arbitration

clause and that the Missouri Insurers Liquidation Act

(continued...)

4

Petitioners immediately appealed the District Court’s

order to the Eighth Circuit, invoking two grounds for

appellate jurisdiction: 9 U.S.C. §16, which expressly

authorizes appeal of orders denying petitions to compel

arbitration and the collateral order doctrine, under which

the District Court’s denial of Petitioner's petition to

compel arbitration is treated as final for purposes of 28

U.S.C. §1291. Cohen v. Beneficial Industrial Loan Corp..,

337 U.S. 541 (1949) and Quackenbush v. Allstate Ins.

Co., __ U.S. __, 116 S.Ct. 1712 (1996).3 Responcent

filed a motion to dismiss the appeal based on the ground

that the Court had no appellate jurisdiction because the

District Court’s remand was based on a lack of subject

matter jurisdiction. The Court of Appeals denied the

motion. App. A9.

* (...continued)

(§375.1188, RSMo.) prohibited Petitioners’ motion to compel

arbitration. Petitioners have appealed that ruling to the

Missouri Court of Appeals.

* In August of 1997, Respondent filed another action in the

Same state court against Petitioners and the members of nine

other Lloyd’s syndicates seeking substantially the same relief

with respect to a different set of reinsurance agreements. Peti-

tioners again removed the action to the United States District

Court for the Western District of Missouri pursuant to 9

U.S.C. §205, and District Judge Fernando J. Gaitan, Jr., char-

acterizing the case as a companion to the instant case that

presented substantially the same issues, remanded the case to

the state court. Transit Casualty Company in Receivership v.

Certain Underwriters at Lloyd’s, U.S.D.C., W.D. Mo. Cause

No. 96-4386-CV-6-2 (September 23, 1997). This time, however,

the District Court ruled that the Missouri Insurers Liquida-

tion Act barred a petition to compel arbitration under the Con-

vention. The District Court did not base its remand order on

28 U.S.C. §1447(d) nor did it make a finding that it lacked

subject matter jurisdiction on removal.

——

5

As grounds for reversal by the Eighth Circuit, Petition-

ers argued that the McCarran-Ferguson Act does not

encompass the interpretation or operation of the Conven-

tion or its enforcing legislation, and that the reinsurance

agreements in question could not be interpreted as waiv-

ing Petitioners’ rights under 9 U.S.C. §205. The Eighth

Circuit did not reach the merits of Petitioners’ appeal.

Characterizing the District Court’s holding that “there

clearly exists a state statute which precludes the enforce-

ment of arbitration in insurance contracts” (App. C6) as

a finding that the court lacked subject matter jurisdic-

tion on removal, the Eighth Circuit concluded that it

lacked appellate jurisdiction to review the order by vir-

tue of 28 U.S.C. §1447(d), which blocks review of district

court remand orders based on findings of lack of subject

matter jurisdiction. The Court of Appeals viewed the

District Court’s opinion on the question of whether the

service of suit clause in the reinsurance agreements

constituted a waiver of the right to remove by Petitioners

as immaterial to the remand order or its reviewability,

reasoning that “[o]nce the district court determined that

the Convention did not apply and therefore removal jur-

isdiction was lacking, there was no need to rule on the

receivership’s contention that the underwriters had con-

tractually waived any removal rights.” App. A16.

6

REASONS FOR GRANTING THE WRIT

I.

The Eighth Circuit’s conclusion that 28 U.S.C.

$1447(d)* deprives it of jurisdiction to review the District

Court’s extraordinary ruling that the Missouri Uniform

Arbitration Act pre-empted enforcement of Petitioners

rights under an international treaty flies in the face of

this Court’s decision in Waco v. United States Fidelity &

Guaranty Co., 293 U.S. 140 (1934). In Waco, this Court

held that rulings made as predicates for remands for

lack of removal jurisdiction are not immune to review

party, this Court said:

[I]f the District Court was right, the cause could

not have been remanded except for the exclusion

of the... [improper party]. True, no appeal lies

* Section 1447(d) provides:

(d) An order remanding a case to the State court

from which it was removed is not reviewable on

tS iE?

7

from the order of remand; but in logic and in fact

the decree of dismissal preceded that of remand

and was made by the District Court while it had

control of the cause.

Id. at 143. A number of courts have resolved issues of

reviewability on the principles of Waco in cases where a

district court’s remand order was based on a resolution

of the merits of some matter of substantive law. See, e.g.,

Pelleport Investors, Inc. v. Budco Quality Theatres, Inc.

741 F.2d 273 (9th Cir. 1984); Clorox Co. v. U.S. District

Court, 779 F.2d 517 (9th Cir. 1985); Foster v. Chesa-

peake Ins. Co., 933 F.2d 1207 (3d Cir. 1991); In re Delta

America Re Ins. Co., 900 F.2d 890 (6th Cir. 1990); Karl

Koch Erecting Co., Inc. v. New York Convention Center

Development Corp., 838 F.2d 656 (2d Cir. 1988): In re

TMI Litigation Cases, 940 F.2d 832 (3d Cir. 1991).

In the case at bar, the Court of Appeals recognized

that the reference to 28 U.S.C. §1447(c) in the District

Court’s memorandum opinion was “somewhat ambigu-

ous”,’ and acknowledged its responsibility under such

circumstances to look past textually ambiguous allusions

and even specific citations to Section 1447(c) and inde-

pendently determine the actual grounds or basis for the

District Court’s decision to remand the action. App. A12.

The flaw in the Eighth Circuit’s independent conclusion

that the remand order was based on a lack of removal

jurisdiction lies in its failure to recognize that a district

court’s jurisdiction to entertain a petition to enforce an

arbitration agreement under the Convention and the

° The remand order itself, issued five days before the memo-

randum opinion, made no mention of Section 1447(d) or (c).

App. B1.

8

petitioner’s entitlement to the relief sought are separate

and distinct questions.

Congress has invested the district courts with original

jurisdiction over actions involving arbitration agreements

that “fall under’ the Convention, 9 U.S.C. §203, and has

specified that an agreement “falls under” the Convention

if it “aris[es] out of a legal relationship . . . considered as

commercial . . .” and one of the Parties is not a citizen of

the United States, or the relationship involves property

located abroad, envisages performance or enforcement

abroad, or has some other reasonable relation with one

ferent question, dependent upon different facts: whether

the agreement “is nu]] and void, inoperative or incapable

of being performed” and whether the dispute sought to

be arbitrated falls within the scope of the parties’ arbi-

tration agreement.’ A number of federal courts have

recognized that adjudication of a petition to compel

arbitration involves this two step analysis. See, e.g.,

Severonickel v. Gaston Reymenants, 115 F.3d 265 (4th

Cir. 1997): Jain v. de Mere, 51 F.3d 686 (7th Cir. 199:

Ledee v. Ceramiche Ragno, 684 F.2d 184 (2d Cir. 1982):

° Convention, Art. IT, 93. App. D1.

direct the parties to arbitration upon being satisfied that the

making of the arbitration agreement is not in issue.

9

Quasem Group, Ltd. v. W.D. Mask Cotton Co., 967

F.Supp. 288, 293 (W.D. Tenn. 1997).

There is no question that the arbitration agreements

at issue in this case fall under the Convention within the

meaning of Section 202, and the District Court’s opinion

bears no hint to the contrary.* The District Court’s

determination that Petitioners were not entitled to an

order compelling arbitration clearly rested, not on any

failure to satisfy the jurisdictional requirements of Sec-

tion 202, but upon the court’s conclusion that enforce-

ment of the Convention was pre-empted by a state

statute. The District Court undeniably exercised the

subject matter jurisdiction granted it by Congress in 9

U.S.C. §203 to decide whether or not the case was

arbitrable—and concluded that it was not. The conclu-

sions of law upon which the District Court predicated its

remand order go directly to the merits of the Petitioners’

claim that they were entitled to an order under the

Convention Act referring this case to arbitration, and the

Court fully and finally decided that claim against them.

The authorities cited by the Eighth Circuit in support

of its conclusion that the District Court’s finding was

jurisdictional in nature do not support the court’s rea-

soning. Three of those decisions® involved situations

® Indeed, as noted above, the Court acknowledged that “[a]s

a general rule, the arbitration clauses contained in the rein-

surance agreement at issue would be enforceable under the

Convention and the Federal Arbitration Act and would pre-

empt Missouri statutes under the supremacy clause.” App. C3.

* Whitman v. Raley’s, Inc. 886 F.2d 1177 (9th Cir. 1989); oJ.

W. Soley v. First Nat'l Bank of Commerce, 923 F.2d 406 (5th

Cir. 1991); Baldridge v. Kentucky-Ohio Transp. Inc., 983 F.2d

1341 (6th Cir. 1993).

10

where a case removed pursuant to the District Court’s

general federal question jurisdiction was remanded be-

cause the federal question was raised by way of defense

and the court found that it had no jurisdiction under any

of the exceptions to the well-pleaded complaint rule.

Normally, a complaint may not be removed from state

court to federal court unless it could originally have been

filed in federal court. 28 U.S.C. §§1331, 1441; Caterpil-

lar, Inc. v. Williams, 482 U.S. 386, 392 (1987). Under the

well-pleaded complaint rule, federal question jurisdiction

only exists if the federal question is presented on the

face of the complaint. Caterpillar, 482 U.S. at 392. A

case may not be removed on the basis of a federal de-

fense, such as pre-emption, even if the defense is antici-

pated in the complaint and both parties concede that it

is the only question at issue. Franchise Tax Bd. of Cal.

v. Constr. Laborers Vacation Trust, 463 U.S. 1, 12

(1983). The courts have recognized an exception to the

rule in cases where a complaint pleads state law claims

that have been completely pre-empted by Congress.

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987).

The fourth case’ cited by the Court was removed on

diversity grounds and remanded when the court deter-

mined that complete diversity did not exist because a

nondiverse party who had been voluntarily dismissed

was still deemed a party by operation of a state statute.

In each of these four cases, the predicate question

decided by the District Court to reach its decision to

remand truly was also determinative of the court’s lack

of subject matter jurisdiction at the time the case was

removed, whereas, as shown above, in the instant case

"© Carney v. BIC Corp., 88 F.3d 629 (8th Cir. 1996).

11

the predicate question decided by the court was distinct

from the question of its subject matter jurisdiction. The

instant case was removed, not on the basis of diversity

or federal question jurisdiction, but pursuant to a re-

moval statute expressly providing that the grounds for

removal jurisdiction “need not appear on the face of the

complaint.” 9 U.S.C. §205.

II.

The Convention embodies the policy of the United

States with regard to agreements to resolve international

commercial disputes by arbitration. Scherk v. Alberto-

Culver Co., 417 U.S. 506, 517 n.10 (1974) (“[t]he goal of

the Convention, and the principal purpose underlying

American adoption and implementation of it, was to en-

courage the recognition and enforcement of commercial

arbitration agreements and international contracts and

to unify the standard by which the agreements to arbi-

trate are observed and arbitral awards are enforced in

the signatory countries.”); Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).

Chapter 2, which was added to Title 9 of the U.S. Code

to make arbitration agreements comprehended by the

Convention enforceable in the federal courts as a matter

of federal substantive law, Perry v. Thomas, 482 U.S.

483 (1987); Scherk v. Alberto-Culver, supra; Southland

Corp. v. Keating, 465 U.S. 1 (1984), creates a strong

presumption in favor of arbitration, especially in interna-

tional commercial agreements. Mitsubishi Motors Corp.

v. Soler Chrysler-Plymouth, Inc. 473 U.S. at 638-40.

Chapter 2 supplanted widely varying, and usually

hostile, state arbitration laws—a necessity if the United

12

States were to guarantee the nationwide uniformity of

enforcement demanded of nations acceding to the Con-

vention. See Aksen, American Arbitration Accession

Arrives in the Age of Aquarius: United States Imple-

ments United Nations Convention on the Recognition

and Enforcement of F oreign Arbitral Awards, 3 Sw.U.L.

REV. 1, 18 (1971).

The Eighth Circuit recognized the national policy

served by the Convention (App. A4) but nonetheless

concluded that it was helpless to review the District

Court’s finding that a state statute prevents enforcement

of the Convention in this case, because 28 U.S.C.

§1447(d) prohibits appellate review of remands for want

of federal subject matter jurisdiction. Section 1447(d)

reflects a policy disfavoring the interruption of the liti-

gation of the merits of a removed cause by prolonged

litigation of questions of jurisdiction of the District Court

to which the cause is removed. United States v. Rice, 327

U.S. 742 (1946); Thermtron Products, Inc. v. Hermans.-

dorfer, 423 U.S. 336 (1976). The Eighth Circuit’s ruling

draws that policy into direct conflict with the strong na-

tional policy favoring enforcement of international arbi-

tration agreements described by this Court in its Scherk

and Mitsubishi decisions and undermines the ability of

the United States to discharge its obligations as a signa-

tory to the Convention, as well.

It is not reasonable to think that Congress intended

Section 1447(d) to preclude appellate review of a district

court ruling that a state statute bars enforcement of an

international treaty and thereby to exclude from appel-

late review an entire category of district court decisions

that subordinate the strong national policy favoring in-

13

ternational commercial arbitration agreements to state

anti-arbitration laws.

ITI.

The Courts of Appeals have taken widely varying and

sometimes inconsistent approaches to determining

whether a substantive ruling upon which a remand order

is predicated is reviewable on appeal, especially where

the remand order ostensibly is based on a lack of subject

matter jurisdiction. Although it is difficult to classify the

many opinions that have grappled with this problem,"

the extremes appear to be represented by the view, on

the one hand, that the only remand orders made unre-

viewable by Section 1447(d) are those based on a finding

that the removed action was not one Congress intended

to be tried in federal court and, on the other hand, by

the view that when a district court states that a remand

order is issuea pursuant to Section 1447(c), it is beyond

all appellate review, no matter how erroneous the sub-

stantive findings upon which it is based might be. In be-

tween, lie decisions declining to review remand orders if

a district court “believed” that it had no subject matter

jurisdiction and decisions distinguishing between re-

mands based on a district court’s belief that no jurisdic-

tion existed at the time of remand and those based ona

‘' “While the language seems straightforward, analysis of

§1447(d) is not simple and its bar is not absolute .. . ‘straight-

forward’ is about the last word judges attach to §1447(d) these

days.” Trans Penn Wax Corp. v. McCandless, 50 F.3d 217, 222

(3d Cir. 1995) (quoting In re Amoco Petroleum Additives Co.,

864 F.2d 706, 708 (7th Cir. 1992), Decisions from a number of

Circuits are surveyed in Baldridge v. Kentucky-Ohio Trans-

port, Inc., 983 F.2d 1341 (6th Cir. 1993),

14

belief that a subsequent development in the case de-

stroyed subject matter jurisdiction.

The view that the congressional intent underlying Sec-

tion 1447(c) and (d) is the key to determining review-

ability is represented by the Third Circuit’s decision In

re TMI Litigation, 940 F.2d 832, 845 (3d Cir. 1991) (In

order to fall within Sections 1447(c) and 1447(d), a re-

mand order must be based upon a finding that removal

was not authorized by Congress). The more restrictive

view is represented by the Sixth Circuit’s opinion in

Anusbigian v. Trugreen/Chemlawn, Inc., 72 F.3d 1253

(6th Cir. 1996) (If a district court determines, rightly or

wrongly, that it lacks subject matter jurisdiction over a

removed case, the court of appeals lacks jurisdiction to

review its remand order). See, also, Powers v. Southland

Corp., 4 F.3d 223 (3d Cir. 1993) (disagreeing with Till-

man v. CSX Transp., Inc., 929 F.2d 1023 (5th Cir. 1991)

and, to some extent, with Washington Suburban Sani-

tary Comm'n v. CRS Sirrine, Inc., 917 F.2d 834 (4th Cir.

1990) on the proper interpretation of this Court’s deci-

sion in Waco); Gonzales-Garcia v. Williamson Dickie

Manufacturing Co., 99 F.3d 490 (1st Cir. 1996) (disagree-

ing with Tingey v. Pixley-Richards West, Inc., 953 F.2d

1124 (9th Cir. 1992)).

Until this Court provides some direction to the district

courts responsible for fashioning remand orders, and the

Courts of Appeals who now mechanistically apply Section

1447(d) in determining the reviewability of such orders,

Significant questions of substantive federal law, upon

which Congress did not intend the district courts to have

the last word, will never see the light of appellate re-

view. As long as substantive rulings on federal law and

policy with respect to international commercial arbitra-

15

tion go unreviewed on the Eighth Circuit’s rationale in

the instant case, the United States’ ability to comply

with its commitment under the Convention to “federal-

ize” judicial enforcement of the Convention will remain

seriously in doubt.

CONCLUSION

For the reasons stated herein, this Court should grant

the writ and reverse the decision below.

Respectfully submitted,

R.R. MCMAHAN

Counsel of Record

ROBERT A. KNUTI

SARAH MARION WEIL

LORD, BISSELL & BROOK

115 South LaSalle Street

Chicago, Illinois 60603

(312) 443-0700

Attorneys for Petitioners

APPENDICES

Al

APPENDIX A

119 F.3d 619

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 96-2532

Transit Casualty Company,

in Receivership,

Appellee,

Certain Underwriters at Lloyd’s

of London, who are members of

Syndicate No. 553, As subscribers

to contracts of Reinsurance with

Transit Casualty Company; C.J.

Warrilow, An Underwriter at

Lloyd’s of London, individually,

and on Behalf of Certain Under-

writers at Lloyd’s of London Who

are Members of the Syndicate

No. 553,

Appeal from the

United States District

Court for the Western

District of Missouri

Appellants.

The Reinsurance Association

of America,

RRR HRHRKRHEK HEHEHE HE HE HE HK OF

Amicus Curiae.

Submitted: November 18, 1996

Filed: July 10, 1997

A2

Before McMILLIAN, Circuit Judge,

HENLEY, Senior Circuit Judge, and

MORRIS SHEPPARD ARNOLD, Circuit Judge.

McMILLIAN, Circuit Judge.

Plaintiff Transit Casualty Company, in Receivership

(the receivership), originally filed, in Missouri state

court, a petition and motion for order to show cause

based upon the failure to pay reinsurance recoveries and

the interference with the liquidation of Transit Casualty

Company (Transit) by certain underwriters at Lloyd’s of

London who are members of Syndicate No. 553 in

London (the underwriters). The underwriters subse-

quently removed the case to federal district court. The

underwriters now appeal from a final order entered in

the United States District Court! for the Western Dis-

trict of Missouri remanding the cause of action to the

state court and denying their motion to stay the execu-

tion of the remand order. Transit Cas. Co., in Receiver-

ship v. Certain Underwriters at Lloyd's of London, No.

96-4173-CV-C-2 (W.D. Mo. June 10, 1996). For reversal,

the underwriters argue the district court erred in holding

that (1) Missouri’s arbitration laws govern this case and

(2) the service of suit clause contained in the parties’

reinsurance agreements waived the underwriters’ right

to remove this cause of action. For the reasons discussed

below, we dismiss the appeal pursuant to 28 U.S.C.

§ 1447(d) for lack of jurisdiction.

' The Honorable Fernando J. Gaitan, Jr., District Judge,

United States District Court for the Western District of

Missouri.

A3

I. Background

Transit is an insurance company which was organized

and incorporated in 1945 under the laws of Missouri. On

December 3, 1985, the Circuit Court of Cole County, Mis-

souri, acting as the receivership court, declared Transit

insolvent and ordered liquidation pursuant to Mo. Rev.

Stat. § 375.660 (1994). The receivership is proceeding

with the liquidation of Transit and has approved certain

claims on policies issued by Transit and reinsured by cer-

tain Lloyd’s of London underwriters who, as members of

Syndicate No. 553, subscribed to contracts of reinsurance

with Transit.

On February 21, 1996, the receivership filed a petition

and motion to show cause in the state court, alleging

that the underwriters owe Transit $1,431,856.76 under

three separate reinsurance agreements which became

effective on December 1, 1978, January 1, 1981, and Jan-

uary 1, 1984. On May 6, 1996, the underwriters removed

the case to federal district court pursuant to 9 U.S.C.

§ 205 (1994), which permits removal, before trial, of an

action that relates to an arbitration agreement or award

governed by the Convention on the Recognition and En-

forcement of Foreign Arbitral Awards (the Convention),

June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38, reprint-

ed in 9 U.S.C.A. § 201 note (West Supp. 1997). The un-

derwriters sought to compel Transit to arbitrate its

claims in accordance with an arbitration clause con-

tained in the reinsurance agreements:

Art. XXI]—Arbitration Cl

All disputes or differences arising out of this

Agreement shall be submitted to the decision of

two Arbitrators, one to be chosen by each party,

A4

and in the event of the Arbitrators failing to

agree, to the decision of the Umpire to be chosen

by the Arbitrators.

The goal of the Convention is to facilitate and stabilize

international business transactions by promoting the en-

forcement of arbitral agreements in contracts involving

international commerce. Threlkeld & Co. v. Metallgesell-

schaft Ltd. (London), 923 F.2d 245, 248, 250 (2d Cir.),

cert. dismissed, 501 U.S. 1267 (1991). An arbitration

agreement or arbitral award falls under the Convention

if it “aris[es] out of a legal relationship, whether contrac-

tual or not, which is considered as commercial, including

a transaction, contract, or agreement described in [9

U.S.C. § 2}.” 9 U.S.C. § 202.

When Congress amended the Federal Arbitration Act

(the FAA)’ in 1970 to implement the Convention,” it in-

cluded the removal provision on which the underwriters

based their petition for removal:

Where the subject matter of an action or pro-

ceeding pending in a State court relates to an

arbitration agreement or award falling under the

Convention [on Recognition and Enforcement of

Foreign Arbitral Awards], the defendant or the

defendants may, at any time before the trial

thereof, remove such action or proceeding to the

district court of the United States for the district

and division embracing the place where the

action or proceeding is pending. The procedure

for removal of causes otherwise provided by law

shall apply, except that the ground for removal

? 9 U.S.C. §§ 1-307 (1994).

* 9 U.S.C. §§ 201-208 (1994).

A5

provided in this section need not appear on the

face of the complaint but may be shown in the

petition for removal.

9 U.S.C. § 205. In seeking to compel arbitration of the

dispute, the underwriters relied on 9 U.S.C. § 206, which

provides that “a court having jurisdiction under this

chapter may direct that arbitration be held in accordance

with the agreement at any place therein provided for,

whether that place is within or without the United

States. Such court may also appoint arbitrators in ac-

cordance with the provisions of the agreement.”

On May 20, 1996, the receivership filed a motion in the

district court to remand the case to state court on the

grounds that: (1) the service-of-suit clause contained in

the parties’ reinsurance agreements waives the un-

derwriters’ right of removal; (2) removal was defective;

(3) the district court lacks subject matter jurisdiction

because, under the McCarran-Ferguson Act, 15 U.S.C.

§§ 1011-1015 (1994), Missouri’s arbitration laws super-

sede the Convention; (4) the district court lacks subject

matter jurisdiction over two show cause orders issued by

the state court sui generis; and (5) the district court

must abstain under the Burford‘ and Colorado River’

abstention doctrines. On June 5, 1996, the district court

granted the receivership’s motion for remand. Transit

Cas. Co., in Receivership v. Certain Underwriters at

Lloyd’s of London, No. 96-4173-CV-C-2 (W.D. Mo. June

5, 1996). In its June 5, 1996, order, the district court

* Burford v. Sun Oil Co., 319 U.S. 315 (1943).

° Colorado River Water Conservation Dist. v. United States,

424 U.S. 800 (1976).

A6

indicated that it would issue a supporting memorandum

on or before June 10, 1996.° Id. On June 6, 1996, the

underwriters filed a motion to stay the execution of the

remand pending their appeal of the remand order. On

June 10, 1996, the district court issued its memorandum

opinion and order. Transit Cas. Co., in Receivership v.

Certain Underwriters at Lloyd’s of London, No. 96-4173-

CV-C-2 (W.D. Mo. June 10, 1996) (hereinafter “slip op.”).

While the receivership presented a multitude of argu-

ments for remanding this cause of action, the district

court relied on only two reasons for granting the remand.

Because the basis of the remand is dispositive of this

court’s ability to review the district court’s order, we dis-

cuss in detail the district court’s analysis.

In the district court, the receivership relied in part on

Missouri’s Uniform Arbitration Act, which provides that

written agreements to arbitrate disputes are valid, en-

forceable, and irrevocable, except in contracts of insur-

ance and contracts of adhesion. Mo. Rev. Stat. § 435.350

(1994). The receivership posited that Missouri’s arbitra-

tion statute is not preempted by the FAA or the Conven-

tion because the McCarran-Ferguson Act preserves state

statutes enacted “for the purpose of regulating the busi-

ness of insurance” and excepts them from the usual rules

of preemption. 15 U.S.C. § 1012(b). The McCarran-Fer-

guson Act provides that “[nJo Act of Congress shall be

construed to invalidate, impair or supersede any law

6 The district court also denied the underwriters’ motions for

a temporary restraining order and a preliminary injunction

relating to a motion for contempt filed by the receivership in

state court. The contempt motion is not relevant to this ap-

peal; we therefore do not address it.

A7

enacted by any State for the purpose of regulating the

business of insurance . . . unless such Act specifically

relates to the business of insurance.” Jd. The receivership

maintained that because neither the Convention nor the

FAA specifically relates to the business of insurance,

neither preempts Missouri’s arbitration statute.

In determining whether the Missouri arbitration

statute is saved from preemption by the McCarran-Fer-

guson Act, the district court considered: first, whether

the federal statutes specifically relate to the business of

insurance; second, whether the state law at issue was

enacted for the purpose of regulating the business of

insurance; and third, whether the application of the

federal laws invalidates, impairs, or supersedes the state

law. Slip op. at 3, citing United States Dep't of Treasury

v. Fabe, 508 U.S. 491[, 501] (1993) (the McCarran-Fer-

guson Act reverses the normal rules of preemption by

imposing a rule that state laws enacted “for the purpose

of regulating the business of insurance” do not yield to

conflicting federal statutes unless a federal statute spe-

cifically requires otherwise); see also Murff v. Profes-

sional Med. Ins. Co., 97 F.3d 289, 291 (8th Cir. 1996)

(applying same three-part test), cert. denied, 65 U.S.L.W.

3572 (U.S. June 16, 1997) (No. 96-1252). Both parties

agreed that neither the FAA nor the Convention specifi-

cally relates to the business of insurance. Slip op. at 3.

The district court then determined that the Missouri

arbitration statute was enacted for the purpose of regu-

lating the business of insurance because it is aimed at

protecting or regulating the performance of an insurance

contract. Jd. at 4-5. It further found that the application

of the Convention to the parties’ reinsurance agreements

would impair, invalidate, and supersede the Missouri

A8&

arbitration statute which expressly proscribes the en-

forcement of arbitration provisions contained in contracts

of reinsurance.’ Jd. at 5. Accordingly, the district court

concluded that Missouri’s arbitration statute precludes

the enforcement of the arbitration clause in the reinsur-

ance agreements. Id.

The receivership also argued that remand was appro-

priate because the underwriters waived their right of

removal based on the service-of-suit clause contained in

the parties’ reinsurance agreements:

art, XVII—Servi f Suit C}

In the event of the failure of the Reinsurer to pay

an amount claimed to be due hereunder, the

Reinsurer will, at the request of the Reinsured,

submit to the jurisdiction of any court of compe-

tent jurisdiction within the United States and

will comply with all requirements necessary to

give such Court jurisdiction and all matters aris-

ing hereunder shall be determined in accord with

the law and practice of such Court.

{I]n any suit instituted against the Reinsurer

under this Agreement the Reinsurer will abide by

the final decision of such Court or of any review-

ing Court.

The district court held that, as a matter of contract

interpretation, the service-of-suit clause waived the un-

derwriters’ right to remove. Jd. at 6. The district court

interpreted the clause to provide that, by consenting to

’ The district court “decline{d] to make a distinction in this

case between contracts of insurance and reinsurance.” Slip op.

at 4, citing Mutual Reins. Bureau v. Great Plains Mut. Ins.

Co., 969 F.2d 931 (10th Cir.), cert. denied, 506 U.S. 1001

(1992).

1

cnimaendinad

A9

submit to any court of competent jurisdiction at the re-

quest of the reinsured, the underwriters agreed to go to,

and stay in, the forum chosen by the receivership, which

was the state court. Jd. at 7, citing Foster v. Chesapeake

Ins. Co., 933 F.2d 1207, 1217 (3d Cir.) (holding that a

similar service-of-suit clause waived the defendant’s

right to remove), cert. denied, 502 U.S. 908 (1991). The

district court interpreted the parties’ reinsurance agree-

ments to give equal effect to both the arbitration clause

and the service-of-suit clause and held that a reasonable

reading of the contract required the underwriters to sub-

mit to the jurisdiction of any court of competent jurisdic-

tion chosen by the receivership, “whether it be to deter-

mine the arbitrable nature of the dispute, to confirm an

arbitration award, to compel arbitration, or to resolve on

the merits a claim not subject to arbitration.” Id. at 8.

The district court held that remand was appropriate

and denied the underwriters’ motion to stay the execu-

tion of the remand order. Jd. This appeal followed.

II. Discussion

As a preliminary matter, we consider whether this

court has jurisdiction to review the district court’s re-

mand order.* Title 28 U.S.C. § 1447(d) (1994) provides

that, with the exception of civil rights cases, “[aJn order

remanding a case to the State court from which it was

removed is not reviewable on appeal or otherwise.” The

Supreme Court has narrowly construed this restriction,

* The receivership previously filed a motion to dismiss this

lack of jurisdiction, which this court summarily denied on July

12, 1996.

Al0

however, and explained that only cases remanded under

28 U.S.C. § 1447(c) are subject to this nonreviewability

provision. Quackenbush v. Allstate Ins. Co., 116 S.Ct.

1712, 1718 (1996) (Quackenbush); Thermtron Prods., Inc.

v. Hermansdorfer, 423 U.S. 336, 346 (1976) (Thermtron).

Under § 1447(c), the district court must remand the case

if any defect in removal procedure is timely raised or “[i}f

at any time before final judgment it appears that the

district court lacks subject matter jurisdiction.” 28 U.S.C.

§ 1447(c) (1994).° Where the district court’s remand order

is based upon § 1447(c), review of that remand order is

prohibited “whether erroneous or not and whether review

is sought by appeal or by extraordinary writ.” Therm-

tron, 423 U.S. at 348; see also Gravitt v. Southwestern

Bell Tel. Co., 430 U.S. 723 (1977) (per curiam); Jn re

Business Men’s Assurance Co. of Am., 992 F.2d 181, 182

(8th Cir. 1993) (per curiam) (rule that remand order

issued under § 1447(c) is unreviewable applies “whether

or not that order might be deemed erroneous by an ap-

pellate court”). Thus, if the district court believed that it

lacked subject matter jurisdiction at the time of removal,

review of the remand order is barred under § 1447(d). Jn

the Matter of Amoco Petroleum Additives Co., 964 F.2d

706, 708 (7th Cir. 1992).

The underwriters argue that this court may review the

district court’s order under 28 U.S.C. § 1291 (1994),

which confers jurisdiction over appeals from “final de-

cisions” of the district courts. They characterize the dis-

® At the time the Supreme Court decided Thermtron Prods.,

Inc. v. Hermansdorfer, 423 U.S. 336 (1976), § 1447(c) provided

that “{i}f at any time before final judgment it appears that the

case was removed improvidently and without jurisdiction, the

district court shall remand the case.”

All

trict court’s order as a denial of arbitrability and, as

such, contend that it falls within

a narrow class of collateral orders which do not

meet this definition of finality, but which are

nevertheless immediately appealable under

§ 1291 because they conclusively determine a dis-

puted question that is completely separate from

the merits of the action, effectively unreviewable

on appeal from a final judgment, and too impor-

tant to be denied review.

Brief for Appellant at 10-11, quoting Quackenbush, 116

S.Ct. at 1718-19 (citations omitted). The underwriters al-

ternatively argue that this court may review the district

court's remand order under 9 U.S.C. § 16(a)(1)(B), (C)

(1994), which expressly authorizes appeal of orders deny-

ing petitions to compel arbitration. On the merits, the

underwriters, concluding that the district court’s remand

order was based on abstention principles, argue that

abstention is improper in this case because the federal

interests in this case are pronounced and, furthermore,

because federal courts may remand a case based on

abstention principles only where the relief being sought

is equitable or otherwise discretionary, whereas the re-

ceivership is seeking money damages. Jd. at 12, citing

Quackenbush, 116 S.Ct. at 1727-28.

We disagree with the underwriters’ characterization of

the district court’s remand order and interpret the order

as holding that it lacked subject matter jurisdiction and

remanding on that basis. Specifically, the district court

held that “ijn the present action, there clearly exists a

state statute which precludes the enforcement of arbitra-

tion in insurance contracts.” Slip op. at 5. The district

court determined that the McCarran-Ferguson Act’s in-

Al2

verse-preemption prevented the parties’ reinsurance

agreements from governance by the Convention. Because

the parties’ reinsurance agreements must fall under the

Convention in order for the underwriters to remove

under 9 U.S.C. § 205, the district court’s finding that the

Convention does not apply to this cause of action result-

ed in a lack of removal jurisdiction and necessitated

remand. See Whitman v. Raley’s Inc., 886 F.2d 1177,

1181 (9th Cir. 1989) (“A remand based on lack of ‘com-

plete preemption’ [under ERISA] is a remand required by

28 U.S.C. § 1447(c).”).

Furthermore, the district court cited 28 U.S.C.

§ 1447(c) in its order granting the receivership’s motion

for remand. See slip op. at 2. We reject the underwriters’

contention that, although cited by the district court,

neither ground contained in § 1447(c) was the actual

basis for remand. See Mangold v. Analytic Servs., Inc.,

77 F.3d 1442, 1450 (4th Cir. 1996) (appellate court has

power and responsibility to look past contextually am-

biguous allusions and even specific citations to § 1447(c)

to determine by independent review of the record the

actual grounds or basis upon which the district court

considered it was empowered to remand). Because the

district court’s citation to § 1447(c) was somewhat am-

biguous in that the district court simply recited the

statute without expressly relying on it, slip op. at 2, we

will look past the district court's reference to § 1447(c).

In so doing, we determine that the true basis for the

district court’s decision to remand was a lack of removal

jurisdiction. See Baldridge v. Kentucky-Ohio Transp.,

Inc., 983 F.2d 1341, 1350 (6th Cir. 1993) (interpreting

district court’s remand order as jurisdictional and falling

within § 1447(c); thus, barring appellate review under

Al13

§ 1447(d)); Soley v. First Nat’l Bank of Commerce, 923

F.2d 406, 410 (5th Cir. 1991) (same).

This case is analogous to Carney v. BIC Corp., 88 F.3d

629, 632 (8th Cir. 1996), cert. denied, 117 S.Ct. 738

(1997), in which this court held that the district court’s

remand for lack of removal jurisdiction was unreviewable

under § 1447(d). In Carney v. BIC Corp., the district

court applied a Missouri dismissal statute in ruling that

the parties were not diverse and, thus, removal jurisdic-

tion did not exist. Jd. This court held that the district

court’s consideration of Missouri’s dismissal statute in

concluding that the parties were not diverse was in no

way separate from the jurisdictional determination. /d.

Similarly, in the present case, the district court’s consid-

eration of Missouri’s arbitration statute in concluding

that the parties’ reinsurance agreements are not subject

to the Convention was necessary to determine whether

removal jurisdiction existed. Furthermore, because the

district court remanded for a lack of subject matter jur-

isdiction, it lacked jurisdiction to make any substantive

rulings, and, thus, “no rulings of the federal court have

any preclusive effect on the substantive matters before

the state court.” Whitman v. Raley’s Inc., 886 F.2d at

1182; cf. In re Life Ins. Co. of N. Am., 857 F.2d 1190,

1193 (8th Cir. 1988) (because the district court had jur-

isdiction over the subject matter and the parties, its rul-

ing that ERISA did not preempt the state claim would be

binding on the state court “as res judicata and the law of

the case”).”°

© Several circuits have read Jn re Life Ins. Co. of N. Am., 857

F.2d 1190 (8th Cir. 1988), as holding that a district court’s

(continued...)

Al4

The fact that the underwriters removed this case under

9 U.S.C. § 205 rather than under the general removal

statutes, 28 U.S.C. §§ 1441-1452, does not change the

result that the district court’s remand order is unreview-

able. General removal law applies to cases which are

removed under the Convention's removal provision be-

cause § 205 incorporates the “procedure for removal of

causes otherwise provided by law,” which means 28

U.S.C. §§ 1441-1452. In the Matter of Amoco Petroleum

Additives Co., 964 F.2d at 712. In particular, this lan-

guage includes § 1447(c), authorizing remand for defects

in the removal procedure, and § 1447(d), blocking appel-

late review of remands issued under § 1447(c). 964 F.2d

© (...continued)

findings incident to an order of remand have a preclusive

effect on the state court, and they have explicitly rejected that

holding. See, e.g., Gonzalez-Garcia v. Williamson Dickie Mfg.

Co., 99 F.3d 490, 492 (ist Cir. 1996); Nutter v. Monongahela

Power Co., 4 F.3d 319, 322 (4th Cir. 1993); Baldridge v.

Kentucky-Ohio Transp., Inc., 983 F.2d 1341, 1347-50 (6th Cir.

1993); Soley v. First Nat'l Bank of Commerce, 923 F.2d 406,

409 (5th Cir. 1991); Whitman v. Raley’s Inc., 886 F.2d 1177,

1181 (9th Cir. 1989); Glasser v. Amalgamated Workers Union

Local 88, 806 F.2d 1539, 1540-41 (11th Cir. 1986) (per curiam).

Those courts have failed to recognize, however, that the dis-

trict court in In re Life Ins. Co. of N. Am. did not issue its

remand order pursuant to 28 U.S.C. § 1447(c), but rather exer-

cised its discretionary power to remand a pendent state law

claim after all federal claims had been eliminated. 857 F.2d at

1193 n. 1, citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343

(1988). Because the district court had pendent jurisdiction over

the remanded state law claim, its adjudication of the preemp-

tion issue was binding on all other courts, subject only to the

appellate process. Jd. at 1193, citing United States ex rel.

Lawrence v. Woods, 432 F.2d 1072, 1076 (7th Cir. 1970), cert.

denied, 402 U.S. 983 (1971).

Al5

at 712; LaFarge Coppee v. Venezolana De Cementos,

S.A.C.A., 31 T.3d 70, 71 (2d Cir. 1994).

Section 1447(d) applies not only to remand orders

made in suits removed under the general remov-

al statute, but to orders of remand made in cases

removed under any other statutes, as well. Ab-

sent a clear statutory command to the contrary,

we assume that Congress is aware of the univer-

sality of the practice of denying appellate review

of remand orders when Congress creates a new

ground for removal.

Things Remembered, Inc. v. Petrarca, 116 S.Ct. 494, 497

(1995) (emphasis in original) (citations omitted). Giving

effect to both 28 U.S.C. § 1447(d) and 9 U.S.C. § 205, the

remand order at issue is not reviewable on appeal. See

116 S.Ct. at 497. Moreover, this court has held that a

district court is required to resolve all doubts about fed-

eral jurisdiction in favor of remand. Jn re Business Men’s

Assurance Co. of Am., 992 F.2d at 183.

We reject the underwriters’ argument, based on Trav-

elers Ins. Co. v. Keeling, 996 F.2d 1485 (2d Cir. 1993)

(Keeling), that this court may review, under the collater-

al order doctrine, the district court’s finding that the re-

ceivership’s claims are not arbitrable because the under-

writers’ waived their right to remove."' In Keeling, the

district court’s remand order was based upon the defen-

dant’s waiver of the right of removal pursuant to a forum

selection clause contained in reinsurance agreements.

996 F.2d at 1488 n. 2. Because remand was not based on

a lack of subject matter jurisdiction, § 1447(d) did not

" Again, we point out that the underwriters mischaracterize

the district court’s holding.

Al6

bar review. Jd. By contrast, in the present case, the dis-

trict court remanded, at least in part, for lack of subject

matter jurisdiction, finding that the Convention did not

apply to this case. Slip op. at 5. Once the district court

determined that the Convention did not apply and

therefore removal jurisdiction was lacking, there was no

need to rule on the receivership’s contention that the

underwriters had contractually waived any removal

rights. See Mobil Corp. v. Abeille Gen. Ins. Co., 984 F.2d

664, 666 n. 3 (5th Cir. 1993) (district court’s order re-

manding case for lack of subject matter jurisdiction and

for waiver of right to remove is unreviewable under

§ 1447(d)). Because the district court remanded on the

ground that it lacked removal jurisdiction, we lack jur-

isdiction to review the district court’s finding that the

underwriters waived their right of removal.

III. Conclusion

Accordingly, the appeal is dismissed pursuant to 28

U.S.C. § 1447(d) for lack of jurisdiction. We therefore do

not consider any of the underwriters’ arguments regard-

ing the merits of the district court’s decision to remand

or the district court’s denial of the underwriters’ motion

to stay the remand order pending appeal. The parties’

various outstanding motions are denied as moot.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

Bl

APPENDIX B

[Filed June 5, 1996]

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MISSOURI

CENTRAL DIVISION

TRANSIT CASUALTY COMPANY

IN RECEIVERSHIP,

Plaintiff,

VS. Case No.

96-4173-CV-C-2

OF LONDON WHO ARE MEMBERS OF

SYNDICATE NO. 553, AS SUBSCRIBERS

TO CONTRACTS OF REINSURANCE WITH

)

)

)

)

)

CERTAIN UNDERWRITERS AT LLOYD'S )

)

)

)

TRANSIT CASUALTY COMPANY, et al., )

)

)

Defendants.

ORDER

After careful consideration and oral argument on the

issues now pending before the court, it is hereby

ORDERED that defendants’ motions for a temporary

restraining order and preliminary injunction are DE-

NIED. It is further ORDERED that plaintiff’s motion to

remand the above-captioned action to the Circuit Court

of Cole County, Missouri is GRANTED. A Memorandum

Order reciting the court’s rationale will follow on or

before June 10, 1996. All other pending motions are

denied as moot.

/s/ Fernando J. Gaitan, Jr.

United States District J udge

Dated: June 5, 1996

Kansas City, Missouri

Cl

APPENDIX C

[Filed June 10, 1996]

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF MISSOURI

CENTRAL DIVISION

TRANSIT CASUALTY COMPANY

IN RECEIVERSHIP,

Plaintiff,

Vs. Case No.

96-4173-CV-C-2

OF LONDON WHO ARE MEMBERS OF

SYNDICATE NO. 553, AS SUBSCRIBERS

TO CONTRACTS OF REINSURANCE WITH

TRANSIT CASUALTY COMPANY , et al.,

)

)

)

)

)

CERTAIN UNDERWRITERS AT LLOYD’S )

)

)

)

)

)

Defendants. )

MEMORANDUM OPINION AND ORDER

On June 5, 1996, this court denied defendants’ motions

for temporary restraining order and preliminary injunc-

tion. In addition, plaintiff's motion for remand was

granted. Presently pending before this court is defen-

dants’ motion to stay the execution of the remand pend-

ing defendants’ appeal of the Order.

Plaintiff in the present action is an insurance company

which was organized and incorporated under the laws of

Missouri in 1945. On December 3, 1985, the Circuit

Court of Cole County Missouri (Receivership Court) de-

clared Transit to be insolvent pursuant to Mo. Rev. Stat.

§ 375.660. The receiver is proceeding with the liquidation

of the company and has approved certain claims on poli-

cies issued by Transit and reinsured by defendant.

C2

Plaintiff originally filed its complaint in the Cole

County Circuit court on February 21, 1996, alleging that

defendant owes plaintiff $1,431,856.76 under three sepa-

rate agreements which became effective December 1,

1978, January 1, 1981 and January 1, 1984. On May 6,

1996, defendant removed this case to compel plaintiff to

arbitrate.

Defendants removed this lawsuit from state court pur-

suant to 9 U.S.C. § 205, Convention on Recognition and

Enforcement of Foreign Arbitral Awards (Convention)

which provides that

[wJhere the subject matter of an action or pro-

ceeding pending in a State court relates to an

arbitration agreement or award falling under the

Convention, the defendant or the defendants

may, at any time before the trial thereof, remove

such action or proceeding to the district court of

the United States for the district and division

embracing the place where the action or proceed-

ing is pending.

Defendant relies on an arbitration provision contained in

the agreements entered into by defendant with plaintiff

which provide

All disputes on differences arising out of this

Agreement shall be submitted to the decision of

two Arbitrators . . . and in the event of the

Arbitrators failure to agree, to the decision of the

Umpire to be chosen by the Arbitrators.

Plaintiff presents myriad reasons why the present

action should be remanded back to state court. Section

1447(c) of Article 28 of the United States Code provides

that “[i]f any time before final judgment it appears that

C3

the district court lacks subject matter jurisdiction, the

case shall be remanded.” Based on the following discus-

sion, plaintiff's motion to remand is granted.

Plaintiff opposes defendants’ removal of the above-cap-

tioned action based on Mo. Rev. Stat. § 357.1188.1 which

provides that once an order is issued appointing a liqui-

dator for a domestic insurer, no action may be brought

against the liquidator in law, equity or in arbitration and

Mo. Rev. Stat. § 435.350 of Missouri’s Uniform Arbitra-

tion Act, which provides that agreements to arbitrate

disputes will be given effect with the exception of “con-

tracts of insurance.” As a general rule, the arbitration

clauses contained in the reinsurance agreements at issue

would be enforceable under the Convention and the

Federal Arbitration Act and would preempt Missouri

statutes under the supremacy clause. Congress, with the

enactment of the McCarran-Ferguson Act, has created an

exception to the usual rules of preemption which pre-

Serves state statutes enacted “for the purpose of regulat-

ing the business of insurance.” 15 U.S.C. § 1012 (b).

The McCarran-Ferguson Act provides that “[n]o Act of

Congress shall be construed to invalidate, impair or

supersede any law enacted by any State for the purpose

of regulating the business of insurance .. . unless such

Act specifically relates to the business of insurance.” 15

U.S.C. § 1012. To determine whether the Missouri state

Statutes are saved from preemption by the McCarran-

Ferguson Act, courts must consider first, does the federal

statute specifically relate to the business of insurance,

second, was the state law at issue enacted for the pur-

pose of regulating the business of insurance and third,

does the application of the federal law invalidate, impair

C4

or supersede the state law. See United State Department

of Treasury v. Fabe, 508 U.S. 491 (1993).

In the present action, both parties agree that neither

the Convention nor the Federal Arbitration Act specifi-

cally relate to the business of insurance. Thus, this re-

quirement of the McCarran-Ferguson Act is satisfied.

Next, it must be determined whether the state statute

at issue was enacted for the purpose of regulating the

business of insurance. Defendants dispute, in the first

instance, that the Missouri statutes cited by plaintiff are

applicable to the contracts at issue in that the statutes

were enacted after the effective date of the reinsurance

agreements and that section 435.350 is inapplicable to

contracts of reinsurance.

The court, however, finds section 435.350 of the Mis-

souri Uniform Arbitration Act applicable to all agree-

ments, the amendments to the 1978 contract bringing

that agreement within the scope of the Act. See Hefele

v. Catanzaro, 727 S.W.2d 475 (Mo. App. 1987). Further-

more, the court declines to make a distinction in this

case between contracts of insurance and reinsurance. See

Mutual Reinsurance Bureau v. Great Plains Mutual Ins.

Co., Inc., 969 F.2d 931 (10th Cir.), cert. denied, 506 U.S.

1001 (1992).’

In addition, the court finds that section 435.350 was

enacted for the purpose of regulating the business of

insurance in that the statute is “‘aimed at protecting or

regulating’ the performance of an insurance contract.”

‘ The court additionally rejects defendants’ contention that

California law is applicable to one of the contracts at issue.

See Allendale Mutual Insurance Co. v. Melahn, 773 F. Supp.

1283 (W.D. Mo. 1991).

C5

Fabe, 508 U.S. at 505 (citing Securities and Exchange

Comm’n v. National Securities, 393 U.S. 453, 460

(1969)). See also Mutual Reinsurance Bureau v. Great

Plains Mutual Ins. Co., Inc., 969 F.2d at 932-33 (finding

that a similar Kansas statute which expressly invali-

dated an arbitration agreement contained in the insur-

ance contract touched the “core” of the business of in-

surance and holding that the Kansas statute placed

limited on the enforceability of an agreement to spread

risk).

Finally, the court finds that the application of the fed-

eral statute which would enforce the arbitration agree-

ment contained in the reinsurance contracts would

“impair, invalidate and supersede” the Missouri statute

which expressly proscribes the enforcement of arbitration

provisions contained in contracts of reinsurance. Defen-

dants rely on the decision in Ainsworth v. Allstate Insur-

ance Co., 634 F. Supp. 52 (W.D.Mo. 1985), for the propo-

sition that application of the FAA will not impair plain-

tiffs “substantive” remedy under Missouri law but would

merely require the receiver to seek that relief through

arbitration. Jd. at 57. It is important to note, however,

that the court found that plaintiff could not point to any

provisions in the Missouri Insurance Code which would

prohibit the arbitration of disputes under the circum-

stances. Id.’ The court failed to consider the application

of Missouri’s Arbitration Act which did not apply retroac-

* It appears that the court felt the presence of such a provi-

sion may have necessitated a different result. Jd. (citing

Bernstein v. Centaur Insurance Co., 606 F. Supp. 98, 101-102

(S.D.N.Y. 1984) (holding that if New York had a law which

specifically prohibited arbitration in disputes involving the

insurance business, arbitration may be precluded)).

C6

tively to the contracts at issue in the case. Jd. at 56-57.

In the present action, there clearly exists a state statute

which precludes the enforcement of arbitration in in-

surance contracts.

Plaintiff additionally argues that defendants have

waived their right to remove this cause of action by rea-

son of the service-of-suit clauses contained in the Rein-

surance Agreements between the parties. The language

of the contract provides

art. XVII - Servi f Suit C]

In the event of the failure of the Reinsurer to pay

an amount claimed to be due hereunder, the

Reinsurer will, at the request of the Reinsured,

submit to the jurisdiction of any court of compe-

tent jurisdiction within the United States and

will comply with all requirements necessary to

give such court jurisdiction and all matters shall

be determined with the law and practice of such

court. In any suit instituted against the Reinsur-

er under this Agreement the Reinsurer will abide

by the final decision of such court or of any re-

viewing court.

As a matter of contract interpretation, this court has

determined that the legal effect of the clause contained

in the reinsurance agreements at issue is to waive de-

fendants right to remove. Certainly, the right to remove

may be waived. Foster v. Chesapeake Ins. Co., Ltd., 933

F.2d 1207, 1216 (3d Cir.), cert. denied, 502 U.S. 908

(1991). Moreover, there does not exist anything in the

Convention Act’s legislative history to suggest that Con-

gress intended to accord a nonwaivable removal right to

Convention defendants. McDermott International, Inc. v.

Lloyds Underwriters of London, 944 F.2d 1199, 1209 (5th

Cir. 1991).

C7

The language of the service-of-suit clause suggests that

by consenting to “submit” to “any court of competent

jurisdiction at the request of the reinsured,” defendant

agreed to “go to, and stay in, the forum chosen” by

Transit. Foster v. Chesapeake Ins. Co., Ltd., 933 F.2d at

1217. This is supported by additional language which

provides that “all matters shall be determined with the

law and practice of such court” and that the reinsurer

will “abide by the final decision of such court,” such court

referring to the court to which defendant agreed to sub-

mit at the request of plaintiff, in this case, the Circuit

Court of Cole County, Missouri. Jd.

As plaintiff correctly notes, many courts have held that

a service of suit clause identical to the one at issue in

the present action waives defendant’s privilege of re-

moval. General Phoenix Corp. v. Maylon, 88 F. Supp.

502, 503 (S.D.N.Y. 1949); Foster v. Chesapeake Ins. Co.,

933 F.2d 1207, 1216-18 (3d Cir. 1991); City of Rose v.

Nutmeg, 931 F.2d 13, 16 (5th Cir. 1991); Wellborn v.

Classic Syndicate, Inc., 1992 WL 358104 (W.D.N.C. Nov.

25, 1992) (holding that a service of suit clause waived

defendant’s removal rights, even though the contract also

contained an arbitration clause); Travelers Insurance

Company uv. Keeling, 1993 WL 18909, at *3 (S.D.N.Y.

1993) (see cases cited therein).

Defendants rely on the Fifth Circuit case of McDermott

Int'l, Inc. v. Lloyd’s Underwriters of London, 944 F.2d

1199 (5th Cir. 1991), in which the court found that the

presence of a service of suit clause coupled with an ar-

bitration clause rendered the former ambiguous. Because

of the ambiguity, the court found that a waiver of the

right of removal must be “clear and unequivocal” if the

contract falls under the Convention Act. Id. at 1204-05.

C8

The court finds persuasive, however, the analysis

espoused in Keeling, supra, which found that “[w]here

two seemingly conflicting contract provisions reasonably

can be reconciled, a court is required to do so and to give

both effect.” Id. at *4 (citations omitted). Thus, giving

both provisions equal effect, a reasonable reading of the

contract would require defendants to submit to the

jurisdiction of any court of competent jurisdiction chosen

by plaintiff, whether it be to determine the arbitrable

nature of the dispute, to confirm an arbitration award,

to compel arbitration, or to resolve on the merits a claim

not subject to arbitration. Jd. Although the court is

aware of the importance of the Convention and the policy

concerns expressed in McDermott, the court is equally

aware of the strong federal policy of deferring to state

regulation of the insurance industry as exhibited in tne

McCarran-Ferguson Act, 15 U.S.C. § 1012. See also

Department of Treasury v. Fabe, 508 U.S. 491 (1993).

Based on the above discussion, the court finds it ap-

propriate to remand the above-captioned action back to

the Circuit Court of Cole County, Missouri. In addition,

it is hereby

ORDERED that defendants’ motion to stay the execu-

tion of the Order remanding this action back to state

court is DENIED.

/s/ Fernando J. Gaitan, Jr.

United States District Judge

Dated: June 10, 1996

Kansas City, Missouri

D1

APPENDIX D

EXCERPT FROM THE CONVENTION

ON THE RECOGNITION AND ENFORCEMENT

OF FOREIGN ARBITRAL AWARDS

June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38,

reprinted following 9 U.S.C.A. § 201

* * *

Article II

1. Each Contracting State shall recognize an agree-

ment in writing under which the parties undertake to

submit to arbitration all or any differences which have

arisen or which may arise between them in respect of a

defined legal relationship, whether contractual or not,

concerning a subject matter capable of settlement by

arbitration.

2. The term “agreement in writing” shall include an

arbitral clause in a contract or an arbitration agreement,

signed by the parties or contained in an exchange of

letters or telegrams.

3. The court of a Contracting State, when seized of an

action in a matter in respect of which the parties have

made an agreement within the meaning of this article,

shall, at the request of one of the parties, refer the par-

ties to arbitration, unless it finds that the said agree-

ment is null and void, inoperative or incapable of being

performed.

El

APPENDIX E

PERTINENT STATUTES

9 U.S.C.A. § 202

§ 202. Agreement or award falling under the Con-

vention

An arbitration agreement or arbitral award arising out

of a legal relationship, whether contractual or not, which

is considered as commercial, including a transaction, con-

tract, or agreement described in section 2 of this title,

falls under the Convention. An agreement or award aris-

ing out of such a relationship which is entirely between

citizens of the United States shall be deemed not to fall

under the Convention unless that relationship involves

property located abroad, envisages performance or en-

forcement abroad, or has some other reasonable relation

with one or more foreign states. For the purpose of this

section a corporation is a citizen of the United States if

it is incorporated or has its principal place of business in

the United States.

9 U.S.C.A. § 203

§ 203. Jurisdiction; amount in controversy

An action or proceeding falling under the Convention

shall be deemed to arise under the laws and treaties of

the United States. The district courts of the United

States (including the courts enumerated in section 460

of title 28) shall have original jurisdiction over such an

action or proceeding, regardless of the amount in contro-

versy.

E2

9 U.S.C.A. § 205

§ 205. Removal of cases from State courts

Where the subject matter of an action or proceeding

pending in a State court relates to an arbitration agree-

ment or award falling under the Convention, the defen-

dant or the defendants may, at any time before the trial

thereof, remove such action or proceeding to the district

court of the United States for the district and division

embracing the place where the action or proceeding is

pending. The procedure for removal of causes otherwise

provided by law shall apply, except that the ground for

removal provided in this section need not appear on the

face of the complaint but may be shown in the petition

for removal. For the purposes of Chapter 1 of this title

any action or proceeding removed under this section

shall be deemed to have been brought in the district

court to which it is removed.