2005 WL 1811839

For opinion see 74 USLW 3013

 

Supreme Court of the United States.

 

Wallace R. BENNETT, Petitioner,

v.

THE SOCIETY OF LLOYDS, Respondent.

 

No. 04-1731.

 

July 29, 2005.

 

On Petition for a Writ of Certiorari to the United States Court of Appeals for the Tenth Circuit

 

Reply Brief

 

Wallace R. Bennett, Petitioner, Pro Se, 1723 South 2100 East, Salt Lake City, Utah 84108, (801) 581-1516.

 

TABLE OF CONTENTS

 

Table of Cited Authorities ... ii

 

I. Jurisdictional Requisites Not Met ... 1

 

II. Determinative Facts and Law ... 2

 

III. The Deeper problem of Enforceability In Utah of This Foreign-Nation [English] Judgment ... 4

 

IV. This Lloyds Case in Overview ... 7

 

TABLE OF CITED AUTHORITIES

 

Cases

 

Carden v. Arkoma Associates, 494 U.S. 185 (1989) ... 2

 

Dweck v. Japan CBM Corporation, 877 F.2d 790 (9th Cir. 1989) ... 3

 

Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) ... 5, 6, 7

 

Guaranty Trust Co. v. York, 326 U.S. 99 (1945) ... 5

 

Hilton v. Guyot, 159 U.S. 113 (1895) ... 4

 

Hummel v. Townsend, 883 F.2d 367 (5th Cir. 1989) ... 2

 

Indiana Gas Co., Inc. v. Home Ins. Company, 141 F.3d 314 (7th Cir. 1998) ... 2, 8

 

Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) ... 6

 

Kramer v. Caribbean Mills, Inc., 394 U.S. 823 (1969) ... 3

 

Mitchell v. Maurer, 293 U.S. 237 (1934) ... 2

 

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) ... 4

 

Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978) ... 1

 

Prudential Oil Corp. v. Phillips Petroleum Co., 546 F.2d 469 (2nd Cir. 1976) ... 3

 

Society of Lloyds's v. Ashenden, 233 F.3d 473 (7th Cir. 2000) ... 7

 

Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998) ... 1

 

Strawbridge v. Curtiss, 7 U.S. 267 (1806) ... 2

 

United States v. Rutherford, 442 U.S. 554 (1979) ... 6

 

Vimar Seguros Y Reaseguros, S. A. v. M/V Sky Reefer, 515 U.S. 528 (1995) ... 4, 5

 

Wainwright v. Goode, 464 U.S. 78 (1983) ... 5

 

Whitmore v. Arkansas, 495 U.S. 149 (1990) ... 1

 

U.S. Statutes Cited

 

28 U.S.C. § 1331 (Federal Question) ... 4

 

28 U.S.C. § 1332 (Diversity of Citizenship Jurisdiction) ... 1, 2, 4, 5, 8

 

28 U.S.C. § 1359 (Diversity Jurisdiction - Collusive Assignments) ... 3

 

28 U.S.C. § 1652 (The Rules of Decision Act) ... 5, 8

 

Utah Statutes Cited

 

Utah Code Ann. § 61-1-22 (1988) ... 6, 11

 

Utah Code Ann. § 78-22b-107(3) (1990) (Judicial Code, Asserting and defending a foreign-money claim) ... 6

 

Utah Code Ann. § 78-22b-114 (1990) (Judicial Code, Supplemental general principles of law) ... 6

 

English Statutes Cited

 

Lloyd's Act of 1871 ... 7

 

Lloyd's Act of 1982 ... 7

 

Restatements of Law Cited

 

1 Restatement (Third) of Foreign Relations Law of the United States § 482 (1986) ("Grounds for Nonrecognition of Foreign Judgments") ... 5

 

Other Authorities

 

Christine M. Durham, Employing the Utah Constitution in the Utah Courts, 2 Utah Bar Journal 25 (Issue No. 9, November 1989) ... 6

 

Darrell Hall, No Way Out: An Argument Against Permitting Parties to Opt Out of U.S. Securities Laws in International Transactions, 97 Colum. L. Rev. 57 (Issue No. 1, January 1997) ... 7

 

Courtland H. Peterson, Choice of Law and Forum Clauses and the Recognition of Foreign Country Judgments Revisited Through the Lloyd's of London Cases, 60 La. L. Rev. 1259 (Issue No. 4, Summer 2000) ... 7, 8

 

Charles Alan Wright, Law of Federal Courts (5th ed. 1994) ... 5

 

Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, 14 Federal Practice and Procedure: Jurisdiction (2d ed. 1985) ... 3

 

I. Jurisdictional Requisites Not Met

To sue under 28 U.S.C. § 1332, Congress has determined that there must be "complete diversity of citizenship." Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365,377 (1978). Complete diversity must be manifest "as a threshold matter". Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 95 (1998). "Standing to sue is part of ... what it takes to make a justiciable case." Whitmore v. Arkansas, 495 U.S. 149, 155 (1990).

In the case at bar, Wallace Bennett signed a seminal Agency Agreement having extensively detailed rights and duties with Edward Williams Coutts & Partners, Ltd., an unincorporated British insurance agency. [See Bennett Petition for Certiorari, pp. 13-15] Thereafter Lloyds of London caused a sequence of unilateral "assignments" whereby Coutts was wholly displaced by "Substituted agent" Castle Agency; followed by "AUA9"; then by "Equitas"; then to the "Society of Lloyds", the designated unincorporated-society-and-also corporation plaintiff herein. [Docs. 32, 178; Doc. 244, pp. 114-119].

Wallace Bennett became a constituent Member of "The Society" (#24021C) and a "Name" in Lloyds "community". [Compare this factually with Lloyds assertion that there exists "complete diversity" between "The Society and Bennett".]

Under the applicable law set forth in II. below, requisite § 1332 complete diversity is not clearly met; the Society should not be regarded as having unquestioned standing to sue through these assignments and as if it were a typical corporation; the case should be dismissed for failure of fundamental jurisdiction.

II. Determinative Facts and Law

Section 1332(a)(2), 28 U.S. Code specifically requires foreign plaintiffs to be "citizens or subjects of a foreign state...." "The Society of Lloyds", designated collection agent for a consortium, is not itself comprised, even primarily, of "subjects of a foreign state". This failure should have been revealed by a non-U.S, government corporate disclosure statement required of Lloyds by Supreme Court Rule 30.6.

For diversity determinations, American case law deems an unincorporated association to be "a citizen of every state in which its members reside". [Hence requisite § 1332 diversity is not present.] Hummel v. Townsend, 883 F.2d 367, 369 (5th Cir. 1989). Carden v. Arkoma Associates, 494 U.S. 185 (1989).

The Seventh Circuit Court in Indiana Gas Company, Inc. v. Home Insurance Company, 141 E3d 314, 316 (1998) held that complete diversity was lacking in that Lloyds case and dismissed the litigation pronouncing this policy:

This approach reflects a strong reluctance to extend the diversity jurisdiction by judicial interpretation - a reluctance that has characterized the Supreme Court's jurisprudence ever since Strawbridge held that complete diversity is essential.

Id. at 319. [Quoted therein was Mitchell v. Maurer, 293 U.S. 237, 244 (1934):

[E]very federal appellate court has a special obligation to "satisfy itself not only of its own jurisdiction; but also that of the lower courts in a cause under review", even though the parties are prepared to concede it.]

Kramer v. Caribbean Mills, Inc., 394 U.S. 823,827-829 (1969) indicated factors that exclude jurisdiction recognition of successive assignments, especially among entities as to which truly independent status and consideration are questionable:

... there can be little doubt that the assignment was for purposes of collection. ... "... motivated ... to make diversity jurisdiction available ...."

If federal jurisdiction could be created by assignments of this kind, ... a vast quantity of ordinary contract and tort litigation could be channeled into the federal courts at the will of one of the parties. Such "manufacture of Federal jurisdiction" was the very thing which Congress intended to prevent when it enacted § 1359 and its predecessors.

To this effect also see Dweck v. Japan CBM Corporation, 877 F.2d 790, 792- 793 (9th Cir. 1989).

Prudential Oil Corp. v. Phillips Petroleum Co., 546 F.2d 469, 475 (2nd Cir. 1976) concluded:

... it was suggested by the Supreme Court almost a century ago that an intercorporate assignment between a parent and its subsidiary should be treated as presumptively ineffective for jurisdictional purposes."

An evident absence of consideration especially taints the substantive bona fides of Lloyds' "assignments" herein. See 14 Wright, Miller & Cooper, Federal Practice and Procedure § 3639, atp. 109 (2d ed. 1985).

III. The Deeper Problem of Enforceability In Utah of This Foreign-Nation

[English] Judgment

Although this particular 28 U.S.C. § 1332 case should be dismissed outright for lack of a clear showing by Lloyds of standing to sue and complete diversity jurisdiction, the history of this important international litigation provides a timely context for the High Court to deal with entwined federal - state relationships.

Two principal vectors impinge: a concern to pay special deference to agreed English contract clauses, processes and adjudications / opposed to a Congressional mandate that except in "federal - question" cases [28 U.S.C. § 1331], the law and equity of the involved forum state "shall be regarded as rules of decision."

The ratio decidendi of the Tenth Circuit opinion at bar seems: "We have already determined that the English judicial system is procedurally above reproach" [Op. p. 38]; and that "We have no choice under Hilton [c.f. analysis in Bennett Petition for Cert. p. 10] ... "but to examine the entirety of the foreign judicial system, and not the particularity of individual judgments." [Op. p. 32]

The Tenth Circuit did qualify the conviction of its overall endorsement: "English courts found Lloyds guilty of negligence with respect to their Names" [Op. p. 10] and "Lloyds had been guilty of serious negligence and/or fraud" [Op. p. 8].

Clauses that prospectively disenable parties from pursuing statutory remedies in international cases have been questioned by the Supreme Court: Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) atp. 637, n. 19, ¶ 2 quoted in Vimar Seguros Y Reaseguros, S. A. v. M/V Sky Reefer, 515 U.S. 528 (1995). The Supreme Court stated:

... 1 Restatement (Third) of Foreign Relations Law of the United States § 482(2)(d) (1986) ("A court in the United States need not recognize a judgment of the court of a foreign state if ... the judgment itself is repugnant to the public policy of the United States"). Were there no subsequent opportunity for review and were we persuaded that "the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies ... , we would have little hesitation in condemning the agreement as against public policy."

Vimar Seguros, at p. 540, ¶ 2. [Emphasis added.]

Under The Rules of Decision Act, 28 U.S.C. § 1652, state law - not federal, not foreign - should govern the resolution of the legal and equitable claims and defenses of true divergent parties in a § 1332 action. Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938); Guaranty Trust Co. v. York, 326 U.S. 99 (1945); and Wainwright v. Goode, 464 U.S. 78 (1983): "The views of the State's highest court with respect to state law are binding on the federal courts." Id. at p. 84, ¶ 2; "the petition for certiorari is granted, the judgment of the Court of Appeals ... is reversed...." Id. at p. 87, ¶ 3.

The late eminent constitutional authority Charles Alan Wright put it this way:

The federal court must keep in mind ... that its function is ... to choose the rule it believes the state court, from all that is known about its methods in reaching decisions, is likely in the future to adopt.

Wright, Law of Federal Courts (5th ed. 1994) at p. 397.

Current Utah Supreme Court Chief Justice Christine M. Durham presciently emphasized in an article published in 1989 that a State may afford greater protections than under similarly worded federal statutes. See Bennett Petition for Certiorari, p. 28.

The Tenth Circuit Court did not understandingly apply this fundamental tenet of federal - state jurisprudence, and ignored what should have been controlling state law. [FN1] The Supreme Court declared in United States v. Rutherford, 442 U.S. 554, 555 (1979):

 

    FN1. "A federal court sitting in diversity applies the choice of law rules of the state in which it sits." Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941). Erie established that there was to be no general "federal common law." Even Congress has no power to declare substantive rules of common law applicable in a state; and only Congress can determine lower federal court subject-matter jurisdiction. [As with many other states, Utah has not adopted the Uniform Foreign - Money Judgments Recognition Act. (10th Cir. Op. p. 31)]

 

 

 

Under our constitutional framework, federal courts do not sit as councils of revision empowered to rewrite Legislation in accord with their own conceptions of prudent public policy.

Whatever some federal court somewhere might determine, for example, about waiverability of federal securities act protections, the Utah Uniform Securities Act is unmistakable: there can be no waiver of compliance with its investor protections [Utah Code Ann. § 61-1-22(9)], and no suit can be brought in Utah on any investment contract that is in violation of the statute [Utah Code Ann. § 61-1-22(8)]. Other outcome-altering statutes, Utah Code Ann. 78-22b-107(3) and 78-22b-114, should also have been looked at relative to ordering enforcement executions in this state. The questions were not certified to the Utah Supreme Court, although motions for such were made.

IV. Tins Lloyds Case in Overview

The course of this tortuous lawsuit has flowed from solicitations of a prospective Utah investor by visiting British insurance representatives in 1978 to adjudications "irrevocably and unconditionally" submitted to the English Courts. A "Name", trusting the "entire good faith" of Lloyds of London, later agreed in 1986 in an unnegotiated, convoluted Agency Agreement having lurking consequences that he would make "no off-set, counterclaim or other deduction on any account whatsoever"; that he "would accede to all agreements required by the Council"; and that he would be bound by Lloyds Acts, not then disclosed.

The Lloyds Act of 1982 exempted:

the Society from liability in damages at the suit of a member of the Lloyd's community.... Whether for negligence or other tort, breach of duty or otherwise, in respect of any exercise of omission to exercise any power, duty or functions conferred by Lloyd's Act 1871 to 1982.

Lloyds pattern of deceptively calculated agreements received scholarly analyses particularly by Professor of International Law Emeritus Courtland H. Peterson, 60 LA. L. Rev. 1259 (2000) and Darrell Hall, 97 Colum. L. Rev. 57 (1997). Professor Peterson faulted a due process breakdown in justice for American Names to a "me-too-ism" [Ibid. at 1274 -1275] by federal circuit courts in allowing enforcement of unconscionable and statutorily violative clauses in deference to the English system. The learned professor made profound penetration into cases such as Ashenden, 233 F.3d 473 (7th Cir. 2000) and their implications.

Contrary to the Erie doctrine, circuit court cases created a verboten variant of federal common law, and implicitly ignored the supremacy of state law. The cases mock historic Anglo-American jurisprudence regarding the fiduciary duties of agents to a principal, and current ethics in international business transactions. [FN2] Professor Peterson recommended that:

 

    FN2. An intriguing footnote is that the same Judge Posner who wrote Ashenden and the often repeated notion that it would be "risible" to suggest the English system would not be a sufficient protector of American and international standards, concurred in Indiana Gas [141 F3d. 314 (7th Cir. 1998)] which dismissed that case then before it for lack of diversity jurisdiction.

 

 

 

An important first step in setting the record straight would be an outright reversal of Ashenden....

60 LA. L. Rev. 1259, p. 1279 ¶ 2.

Not based upon a treaty or applicable national statute, the Tenth Circuit Court followed an erroneous "federal common law" trend that allowed a foreign-country judgment (England) to be enforced in a state (Utah) without perceptive regard for predicate threshold jurisdictional limitations (§ 1332) or the transcendent federalism principle mandated by the U.S. Rules of Decision Act.