United States District
Court,
N.D. Texas, Dallas
Division.
THE SOCIETY OF LLOYD'S
Plaintiff,
v.
Reyburn Upshaw
ANDERSON Defendant.
2004 WL 905618
(N.D.Tex.)
No. 3-03-MC-112-D.
April 27, 2004.\
Andrew M. Edison, Bracewell &
Patterson, Houston, TX, for Plaintiff.
Kenneth A. Thomas, Thomas & Gay,
Dallas, TX, for Defendant.
FINDINGS AND RECOMMENDATION OF THE
UNITED STATES MAGISTRATE JUDGE
KAPLAN, Magistrate J.
*1 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.
I.
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, ¦ 5). 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
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, ¦¦ 2- 4). Anderson
signed this contract, called a "General Undertaking," on January 1,
1987. (Id., Exh. A at 1, ¦ 5 & Exh. A-1). [FN1]
FN1. 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).
In the late 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, ¦ 7). 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, ¦ 8
& 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 of any proceedings in the English courts on his behalf.
(Id., Exh. A-4 at 69, ¦ 25.2). 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, ¦ 8 & 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.).
*2 Equitas subsequently assigned its
right to collect unpaid premiums to Lloyd's. (Id., Exh. A at 3, ¦ 9). 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, ¦ 11). Lloyd's served AUA9 as
agent for Anderson on October 11, 2002. (Id ., Exh. C at 160, ¦ 2 & 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, ¦ 3 & 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 in U.S. dollars, plus costs. (Id., Exh. A at 3, ¦ 11
& 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. [FN2] 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.
FN2. 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).
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." 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;
(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
*3 (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. ¤ 36.004(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 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, ¦ 19; Def. Sec. Reply Br. at 13). [FN3] 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 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.
FN3. In his reply brief, Anderson
admits that "the Judgment is probably perfectly valid in the United
Kingdom." (Def. Sec. Reply Br. at 13).
A.
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, ¦ 20). Whatever the merits of this
limitations defense, [FN4] 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.
FN4. 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.
B.
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).
*4 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 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, ¦ 1). 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, ¦ 25.2). Lloyd's served
Hugh Walsh, an authorized signatory of AUA9, with a copy of the Claim Form and
Particulars of Claim against Anderson on October 11, 2002. (Id., Exh. C at 160,
¦ 2). Duplicate copies of the litigation papers were mailed to Anderson the
same day. (Id ., Exh. C at 160, ¦ 3). 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). [FN5]
Consequently, the court should overrule this ground for nonrecognition. See Banque
Libanaise, 915 F.2d at 1005.
FN5. Nor has Anderson shown that his
right of appeal is irrevocably precluded under English law.
C.
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, 25 L.Ed.
93 (1878); see also Standard Steamship Owners' Protection and Indemnity Ass'n
(Bermuda) Ltd. v. C & G Marine Services, Inc., 1992 WL 111186 at * 3
(E.D.La. May 13, 1992) (applying Louisiana version of uniform law); Tonga Air
Services, Ltd. v. Fowler, 118 Wash.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.
*5 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). [FN6] (See Def. Mot. at 2, ¦ 25). 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, ¦ 2.2) (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. [FN7] 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.
FN6. Anderson also attempts to bring
a cross-claim against AUA9 for fraud and breach of fiduciary duty. (See Def.
Mot. at 2, ¦¦ 26-27). However, AUA9 has never been joined as a party to this
action.
FN7. 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."
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.
History
(Showing 5 of 6 documents)
Direct History
1 Society
of Lloyd's v. Anderson, 2004 WL 905618 (N.D.Tex. Apr 27, 2004) (NO.
3-03-MC-112-D)
Opinion Supplemented by
2 Society
of Lloyd's v. Anderson, 2004 WL 1243220 (N.D.Tex. Jun 04, 2004) (NO.
3-03-MC-112-D)
Report and Recommendation Adopted
by
3 Society
of Lloyd's v. Anderson, 2004 WL 1490072 (N.D.Tex. Jul 01, 2004) (NO. 3:03-MC-112-D)
4 Society
of Lloyd's v. Anderson, 2004 WL 905618 (N.D.Tex. Apr 27, 2004) (NO.
3-03-MC-112-D)
Report and Recommendation Adopted
by
5 Society
of Lloyd's v. Anderson, 2004 WL 1490072 (N.D.Tex. Jul 01, 2004) (NO.
3:03-MC-112-D)