Society of Lloyd's v. Anderson

THE SOCIETY OF LLOYD'S, Plaintiff, VS. REYBURN UPSHAW ANDERSON, Defendant.

NO. 3-03-MC-112-D

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION

2004 U.S. Dist. LEXIS 7351

April 27, 2004, Decided

April 27, 2004, Filed

SUBSEQUENT HISTORY: Magistrate's recommendation at Soc'y of Lloyd's v. Anderson, 2004 U.S. Dist. LEXIS 10335 (N.D. Tex., June 4, 2004)

DISPOSITION: [*1] Anderson's motion for nonrecognition of foreign judgment denied. Lloyd's cross-motion for recognition of judgment and motion to dismiss counterclaim granted. Anderson's counterclaim against Lloyd's dismissed with prejudice.

COUNSEL: For Society of Lloyd's, Plaintiff: Andrew M Edison, Bracewell & Patterson, Houston, TX.

For Reyburn Upshaw Anderson, Defendant: Kenneth A Thomas, Thomas & Gay, Dallas, TX.

JUDGES: JEFF KAPLAN, UNITED STATES MAGISTRATE JUDGE.

OPINIONBY: JEFF KAPLAN

OPINION: FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

This case is before the court on defendant's motion for nonrecognition of foreign judgment and plaintiff's cross-motion for recognition of the judgment and motion to dismiss defendant's counterclaim. For the reasons set forth herein, defendant's motion should be denied and plaintiff's motions should be granted.

In 1985, Reyburn Upshaw Anderson, an American citizen, was elected as a member, or "Name," of The Society of Lloyd's ("Lloyd's"). (See Plf. App., Exh. A at 1, P5). Lloyd's is an insurance market made up of syndicates. Each syndicate is comprised of brokers and underwriters, who engage in the daily business of insurance, and [*2] outside investors, or Names, who provide operating capital for Lloyd's. By becoming a Name, the member receives a certain amount of the premium paid for an insurance policy and is assigned a corresponding pro rata share of the insurance risk. Profits are derived from the amount of money, if any, remaining of the premium and earned investment income after the Name pays his pro rata share of expenses and claims. In order to become a Name, each member must execute a standardized contract with Lloyd's agreeing to abide by all bylaws and parliamentary acts. (See, generally id., Exh. A at 1, PP2-4). Anderson signed this contract, called a "General Undertaking," on January 1, 1987. (Id., Exh. A at 1, P5 & Exh. A-1). n1

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n1 For a more detailed discussion of the unique organizational structure of Lloyd's of London, see Haynsworth v. The Corporation, 121 F.3d 956, 958-59 (5th Cir. 1997), cert. denied, 523 U.S. 1072, 118 S. Ct. 1513, 140 L. Ed. 2d 666 (1998).

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In the late [*3] 1980s and early 1990s, Lloyd's sustained more than $ 12 billion in losses, due primarily to liabilities associated with toxic tort cases. (Id., Exh. A at 2, P7). The enormity of those losses and the inability of Names to satisfy their financial obligations threatened the very existence of the member syndicates. In an effort to rectify this situation, Lloyd's devised a Reconstruction and Renewal ("R&R") plan whereby it offered to settle the outstanding liabilities of each Name for the 1992 and prior underwriting years. In return, each Name was required to pay a reinsurance premium to Equitas Reinsurance, Ltd. ("Equitas"), a newly-formed company. Payment of the reinsurance premium was mandatory whether the Name accepted or rejected the settlement offer. (Id.).

Lloyd's appointed the Additional Underwriting Agencies (No. 9), Ltd. ("AUA9") as a substitute agent to execute the reinsurance contract on behalf of all Names. (Id., Exh. A at 2, P8 & Exhs. A-2, A-3). Of particular relevance in this case, the reinsurance contract provided:

25.2 Each Name . . . not domiciled in the United Kingdom hereby irrevocably appoints the Substitute Agent [AUA9] as agent to accept service [*4] of any proceedings in the English courts on his behalf.

(Id., Exh. A-4 at 69, P25.2). When AUA9 signed the reinsurance contract on September 3, 1996, the Names became obligated to pay their premiums to Equitas by September 30, 1996. (Id., Exh. A at 3, P8 & Exh. A-4). According to Lloyd's, approximately 95% of the Names accepted the settlement offer and paid the reinsurance premium. Anderson was among the small percentage of Names who failed to honor their obligations under the R&R plan. (Id.).

Equitas subsequently assigned its right to collect unpaid premiums to Lloyd's. (Id., Exh. A at 3, P9). On August 23, 2002, Lloyd's sued Anderson in the High Court of Justice, Queen's Bench Division, in London, England. (Id., Exh. A at 3, P11). Lloyd's served AUA9 as agent for Anderson on October 11, 2002. (Id., Exh. C at 160, P2 & Exh. C-1). That same day, duplicate copies of the litigation papers were mailed to Anderson at his office in Dallas, Texas. (Id., Exh. C at 160, P3 & Exh. C-2). Anderson did not contest the proceeding. On January 12, 2003, the London court entered a judgment against Anderson in the amount of £ 136,913.91, which equates to $ 219,472.99 [*5] in U.S. dollars, plus costs. (Id., Exh. A at 3, P11 & Exh. A-5).

On December 23, 2003, Lloyd's filed this action in federal district court under the Uniform Foreign Country Money-Judgment Recognition Act ("Recognition Act"), Tex. Civ. Prac. & Rem. Code Ann. § 36.001, et seq. n2 Anderson timely filed a motion for nonrecognition of judgment. Lloyd's has responded to Anderson's motion and filed a cross-motion for recognition of the judgment. The motions have been fully briefed by the parties and are ripe for determination.

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n2 Federal subject matter jurisdiction is proper because the parties are citizens of a State and citizens or subjects of a foreign state and the amount in controversy exceeds $ 75,000, exclusive of interest and costs. See 28 U.S.C. § 1332(a)(2).

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II.

The Recognition Act, as codified by Texas law, provides for the recognition and enforcement of foreign judgments that are "final and conclusive and enforceable where rendered. [*6] " TEX. CIV. PRAC. & REM. CODE ANN. § 36.002(a)(1) (Vernon 1997). A party seeking recognition must file an authenticated copy of the judgment with the clerk of the court in the county of residence of the party against whom recognition is sought. Id. § 36.0041. Within 30 days of receiving notice of the filing, the party against whom recognition is sought may file a motion for nonrecognition. Id. § 36.0044(a). A foreign judgment is not conclusive and shall not be recognized if:

(1) the judgment was rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law;

(2) the foreign country court did not have personal jurisdiction over the defendant; or

(3) the foreign country court did not have jurisdiction over the subject matter.

Id. § 36.005(a). In addition to these mandatory grounds for nonrecognition, a court may refuse to recognize a foreign judgment if:

(1) the defendant in the proceedings in the foreign country court did not receive notice of the proceedings in sufficient time to defend;

(2) the judgment was obtained by fraud; [*7]

(3) the cause of action on which the judgment is based is repugnant to the public policy of this state;

(4) the judgment conflicts with another final and conclusive judgment;

(5) the proceeding in the foreign country court was contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court;

(6) in the case of jurisdiction based only on personal service, the foreign country court was a seriously inconvenient forum for the trial of the action; or

(7) it is established that the foreign country in which the judgment was rendered does not recognize judgments rendered in this state that, but for the fact that they are rendered in this state, conform to the definition of "foreign country judgment."

Id. § 36.005(b). The grounds for nonrecognition set forth in the Act are exclusive and "the court may not, under any circumstances, review the foreign judgment in relation to any matter not specified in [the Act]." Id. § 36.0044(g); see also Dart v. Balaam, 953 S.W.2d 478, 480 (Tex. App.--Fort Worth 1997, no writ).

The burden of proof is on the party seeking [*8] to avoid recognition of the judgment. Banque Libanaise Pour Le Commerce v. Khreich, 915 F.2d 1000, 1005 (5th Cir. 1990); Dart, 953 S.W.2d at 480. If the party fails to prove one or more of the mandatory or discretionary grounds for nonrecognition, the court must recognize the foreign country judgment. The Courage Company, L.L.C. v. The Chemshare Corp., 93 S.W.3d 323, 331 (Tex. App.--Houston [14th Dist.] 2002, no pet.). Once recognized, the foreign judgment "is conclusive between the parties to the extent that it grants or denies recovery of a sum of money" and "is enforceable in the same manner as a judgment of a sister state that is entitled to full faith and credit." TEX. CIV. PRAC. & REM. CODE ANN. § 36.004.

III.

The parties agree that the judgment at issue is final, conclusive, and fully enforceable in England. (See Plf. App., Exh. A at 5, P19; Def. Sec. Reply Br. at 13). n3 Nevertheless, Anderson maintains that the judgment should not be recognized in Texas because: (1) the underlying claim was barred by limitations; (2) the judgment violates due process because he was not properly served [*9] and did not receive timely notice of the judgment; and (3) the judgment was obtained by fraud. The court will examine these arguments in turn.

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n3 In his reply brief, Anderson admits that "the Judgment is probably perfectly valid in the United Kingdom." (Def. Sec. Reply Br. at 13).

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Anderson first contends that Lloyd's claim was barred by the six-year statute of limitations governing contract actions in England. (Def. Mot. at 2, P20). Whatever the merits of this limitations defense, n4 it is not one of the statutory grounds warranting nonrecognition of a foreign judgment. The court has no authority to review this issue. See TEX. CIV. PRAC. & REM. CODE ANN. § 36.0044(g); Dart, 953 S.W.2d at 480.

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n4 Anderson believes that the breach made the basis of Lloyd's contract claim occurred sometime in 1987. In fact, Anderson was sued for failing to make his reinsurance premium payment to Equitas on September 30, 1996.

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Anderson also claims that the foreign judgment does not comport with due process. Any suggestion that the English court system, which is substantially similar to our own, does not provide fair and impartial tribunals compatible with due process is not tenable. See The Society of Lloyd's v. Turner, 303 F.3d 325, 330-31 (5th Cir. 2002). However, Anderson appears to argue that the judgment violates due process because he was not properly served and did not receive timely notice of the judgment. These allegations, if proved, may warrant nonrecognition. See TEX. CIV. PRAC. & REM. CODE ANN. § 36.005(a)(2) (lack of personal jurisdiction over defendant) & id. § 36.005(b)(1) (failure of defendant to receive notice of foreign proceeding in sufficient time to defend).

In support of his due process argument, Anderson claims that he never authorized the appointment of AUA9 as his agent for service of process. Sometime after becoming a member of Lloyd's, Anderson signed a General Undertaking which provided, in pertinent part:

Throughout the period of his membership of Lloyd's the Member shall comply with the provisions of [*11] Lloyd's Acts 1871-1982, any subordinate legislation made or to be made thereunder and any direction given or provision or requirement made or imposed by the Council or any person(s) or body acting on its behalf pursuant to such legislative authority and shall become a party to, and perform an observe all the terms and provision of, any agreements or other instruments as may be prescribed and notified to the Member or his underwriting agent by or under the authority of the Council.

(Plf. App., Exh. A-1) at 6, P1). In 1983, Lloyd's enacted a Substitute Agents Byelaw giving the Council sole discretion to appoint substitute agents for its members. (See id., Exh. A-2). See also Turner, 303 F.3d at 328 n.3. By resolution adopted September 3, 1996, Lloyd's appointed AUA9 as a substitute agent to execute the reinsurance contract on behalf of its Names, including Anderson. (Plf. App., Exh. A-3). The reinsurance contract specifically appointed AUA9 "as agent to accept service of any proceedings in the English court" on behalf of any Name not domiciled in the United Kingdom. (Id., Exh. A-4 at 69, P25.2). Lloyd's served Hugh Walsh, an authorized signatory of AUA9, [*12] with a copy of the Claim Form and Particulars of Claim against Anderson on October 11, 2002. (Id., Exh. C at 160, P2). Duplicate copies of the litigation papers were mailed to Anderson the same day. (Id., Exh. C at 160, P3). The court determines that service in this manner, which was authorized by the Lloyd's bylaws and the reinsurance contract, comports with due process. See National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-17, 84 S. Ct. 411, 414-15, 11 L. Ed. 2d 354 (1964).

Anderson further contends that he did not receive timely notice of the judgment. Having been duly notified of the lawsuit filed by Lloyd's, Anderson was put on notice that his rights might be affected by a decision of the English courts. Anderson has failed to prove that he "did not receive notice of the proceedings in sufficient time to defend." See TEX. CIV. PRAC. & REM. CODE ANN. § 36.005(b)(1). n5 Consequently, the court should overrule this ground for nonrecognition. See Banque Libanaise, 915 F.2d at 1005.

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n5 Nor has Anderson shown that his right of appeal is irrevocably precluded under English law.

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Finally, Anderson maintains that Lloyd's committed fraud by entering into the reinsurance contract in order to re-start the limitations clock on its breach of contract claim. Assuming arguendo that this allegation is true, it does not provide a basis for nonrecognition of the judgment. The only type of fraud that will support nonrecognition is "extrinsic fraud," that is, fraud in the underlying judicial proceeding that deprived the unsuccessful party of an adequate opportunity to present its case. United States v. Throckmorton, 98 U.S. (8 Otto) 61, 68, 98 U.S. 61, 25 L. Ed. 93 (1878); see also Standard S.S. Owners' Protection & Indem. Ass'n v. C&G Marine Services, Inc., 1992 U.S. Dist. LEXIS 7086, 1992 WL 111186 at *3 (E.D. La. May 13, 1992) (applying Louisiana version of uniform law); Tonga Air Services, Ltd. v. Fowler, 118 Wn.2d 718, 826 P.2d 204, 210 (Wash. 1992) (en banc) (applying Washington version of uniform law). This ground for nonrecognition should be overruled.

IV.

As part of his motion for nonrecognition of judgment, Anderson asserts a counterclaim against Lloyd's for filing a "false pleading" in violation of Tex. Civ. Prac. & Rem. Code Ann. § 12.003(a)(7) [*14] . n6 (See Def. Mot. at 2, P25). The court initially observes that the General Undertaking contains a forum selection clause vesting the courts of England with exclusive jurisdiction over "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, Lloyd's . . ." (Plf. App., Exh. A-1 at 6, P2.2) (emphasis added). To the extent Anderson attempts to sue Lloyd's for actions which fall outside the scope of the forum selection clause, his claim is legally frivolous. The statute cited by Anderson, Tex. Civ. Prac. & Rem. Code Ann. § 12.003(a)(7), provides a cause of action to recover money damages or injunctive relief related to the filing of a fraudulent judgment lien. n7 Under Texas law, a judgment lien is created only when the judgment creditor records and indexes an abstract of judgment. See Olivares v. Nix Trust, 126 S.W.3d 242, 247-49 (Tex. App.--San Antonio 2003, pet. denied). Anderson fails to allege, much less prove, that Lloyd's has perfected a judgment lien against him. Accordingly, this counterclaim should be dismissed.

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n6 Anderson also attempts to bring a cross-claim against AUA9 for fraud and breach of fiduciary duty. (See Def. Mot. at 2, PP26-27). However, AUA9 has never been joined as a party to this action. [*15]

n7 Anderson also cites Tex. Civ. Prac. & Rem. Code Ann. § 13.002. However, that statute merely provides that a judgment for costs in an in forma pauperis proceeding may be rendered "at the conclusion of the action as in other cases, but the state is not liable for any of those costs."

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RECOMMENDATION

Anderson's motion for nonrecognition of foreign judgment should be denied. Lloyd's cross-motion for recognition of judgment and motion to dismiss counterclaim should be granted. The judgment against Anderson rendered by the High Court of Justice, Queen's Bench Division, London, England, should be recognized in all respects. Anderson's counterclaim against Lloyd's should be dismissed with prejudice.

DATED: April 27, 2004.

JEFF KAPLAN

UNITED STATES MAGISTRATE JUDGE