Richard A. Tropp, individually,
DATE: March 25, 2008 COUNSEL: Raymond A. Bragar, Esq., Attorney for Richard A. Tropp, Brager Wexler & Eagel, P.C.
Debra Torres, Esq., Attorney for the Corporation of Lloyds, Fried Frank Harris Shriaver & Jacobsen LLP
JUDGE: Naomi Reice Buchwald, U.S.D.J.
Plaintiff Richard Tropp brings this suit seeking (1) a declaratory judgment that a judgment obtained against him in England (English judgment) by the Corporation of Lloyds (also known as the Society of Lloyds, hereinafter Lloyds) is unenforceable here under New York statutory law or the Due Process Clause of the Fifth Amendment; (2) an accounting of all transactions between himself and Lloyds; (3) an injunction restraining Lloyds from enforcing the English judgment in New York; and (4) class certification of all similarly situated plaintiffs.
Defendant Lloyds moves to dismiss all claims pursuant to Fed. R. Civ. P. 12(b) (3) for improper venue, since Tropp agreed in the Choice Clause of his contract with Lloyds to litigate all disputes with Lloyds in England, or in the alternative pursuant to Fed. B. Civ. P. 12(b) (6) for failure to state a claim. [*2]
Tropp is an individual underwriter, or Name, in the English insurance market that is regulated by Lloyds. Whereas Tropp initially invested $160,000 (the bulk of his retirement savings) in that market, due to its collapse, unlimited personal liability, and, according to Tropp, mismanagement and fraud on the part of Lloyds, Tropp now stands personally liable on a judgment entered by an English court for upwards of $900,000[FN1] The Society of Lloyds, extensively below, the judgment represents both Tropps purported individual underwriting losses as well as his share of a mandatory reinsurance premium imposed on all Names by Lloyds.
FN1 A judgment against Tropp for £463,801.28 (including interest and costs) was entered by the High court of Justice, Queens Bench Division on May 24, 2004. See Declaration of Richard A. Tropp Ex. AE (Socy of Lloyds v. Tropp  EWEC l39 (Comm.) (Gross, J.) Tropp subsequently was denied permission to appeal. Tropp Decl. Ex. AF, [Tropp v. Socy of Lloyds,  EWCA Civ. 1544 (Waller J.) ] The judgment is final. Under exchange rates as of March 4, 2008 (1.98 dollars to the pound) the judgment equates to approximately $918,484.93.
FN2 See also Socy of Lloyds v. Reinhart 402 F.3d 982, 988 (10th Cir. 2005) ([N]umerous courts have summarized the basic facts applicable to the underlying litigation, and these facts are not in dispute).
This case presents the latest episode in an epic saga between Names such as Tropp and Lloyds. The story — Dickensian in length and complexity — has been retold countless times by American courts. See, e.g. Socy of Lloyds v Siemon-Netto, 457 F.3d 94, 96 (D.C.Cir. 2006) (Eight circuit courts have set forth the background information that is relevant to this appeal [there is] no need to reinvent the wheel.)[FN2] Not only are the basic facts well-known, but the results are as well. Since the year 2000, by this Courts tally, Names have lost at least 23 separate challenges [*3] in American courts (including appeals in eight federal circuit courts) to various aspects of the enforceability of English judgments obtained by Lloyds.[FN3] Not a single Name has yet prevailed.
FN3 Names have generally lost challenges on one of two grounds. First, those Names that have sued Lloyds here have lost on the basis of the Choice Clause, which requires Names to litigate against Lloyds in England under English law. Second, Names against whom Lloyds has sought to enforce judgments here have lost under the various states enactment of the Uniform Foreign Country Money-Judgments Recognition Act, or under general common law principles of comity.
Cases that have enforced the Choice Clause include: Lipcon v. Underwriters at Lloyds, 148 F.3d 1285 (11th Cir. 1998); Richards v. Lloyds of London, 135 F.3d 1289 (9th Cir. 1998) (en banc); Haynswsorth v. Corp. of Lloyds, 121 F.3d 956 (5th Cir. 1997); Allen v. Lloyds of London, 94 F.3d 923 (4th Cir. 1996); Shell v. R.W. Sturge, Ltd., 55 F.3d 1227 (6th Cir. 1995); Bonny v. Socy of Lloyds, 3 F.3d 156 (7th Cir. 1993); Riley v. Kingsley Underwriting Agencies Ltd., 969 F.2d 953 (10th Cir. 1992).
Cases that have enforced Lloyds judgments against Names include: Socy of Lloyds v. Siemon-Netto 457 F.3d 94 (D.C. dr. 2005); Lloyds v Reinhart 402 F.3d 982 (10th Cir. 2005), cert. denied 126 S.Ct. 366 (2005); Socy of Lloyds v. Blackwell 127 Fed.Appx. 961 (5th Cir. 2005); Socy of Lloyds v. Borgers 127 Fed. Appx. 959 (9th dir. 2005); Socy of Lloyds v. Fuerst 138 Fed.Appx. 873 (6th Cir. 2005); Socy of Lloyds v. Cohen 108 Fed.Appx 126 (5th Cir. 2004); Socy of Lloyds v. Mullin, 96 Fed. Appx. 100 (3d dir. 2004); Socy of Lloyds v. Shields 118 Fed.Appx. 12 (6th Cir. 2004); Socy of Lloyds v Turner, 303 F.3d 325 (5th dir. 2002); Socy of Lloyds v. Ashenden et al., 233 F.3d 473 (7th Cir. 2000); Socy of Lloyds v. Edelman 2005 WL 639412 (S.D.N.Y. Mar. 21, 2005); Socy of Lloyds v Hudson 276 F.Supp.2d 1110 (D. Nev. 2003); Socy of Lloyds v. Byrens, U.S. Dist. LEXIS 26719[, Case #: 3:02-cv-00449-J-AJB] (S.D. Cal. May 29, 2003); Socy of Lloyds v. Webb, 156 F.Supp.2d 532 (N.D.Tex. 2001); Socy of Lloyds v Anderson, 2004 U.S. Dist. LEXIS 7351 (N.D.Tex. Apr. 27, 2004); Socy of Lloyds v. Campbell-White, 2005 U.S.Dist. LEXIS 22403 (D. Mass. Aug. 23, 2005); Socy of Lloyd v. Grace 718 N.Y.S.2d 327 (1st Dept 2000); Collins v Socy of Lloyds 874 So.2d 672 (Fla. App. 4 Dist,, 2004). Additionally, the following cases enforcing Lloyds judgments are unreported: Socy of Lloyds v. Tufts, No. 03-2316 (E.D.Mo. May 18, 2004); Socy of Lloyds v. McCarthy, No. 03-80247-CJV (S.D. Fla. July 16, 2003); Socy of Lloyds v. Evnen 02-07-118 (D. Neb. Apr. 26, 2003); Socy of Lloyds v. Davies, No. 02-07-1602-GET (N.D.Ga. Apr. 23, 2003), affd No. 03-13794 (11th dir. May 21, 2004); Socy of Lloyds v Bennett, No. 02-CV-204TC (D.Utah Nov. 12, 2003); Socy of Lloyds v Rosenberg, No. 02-1195 (E.D.Pa. Aug. 12, 2002); Socy of Lloyds v. El1is, No. 05-159-CA (Fla. Mat. Ct. 4th Dist. 2005); Socy of Lloyds v. Almond, No. 03CP406075 (S.C. Cir. Ct. Richland 2005). Defendants Appendix of Unreported Decisions, attached to the Declaration of Nicholas P. Demery, and filed concurrently with Defendants Motion to Dismiss.[*4] Against this avalanche of prior case-law, Tropp argues that his case is different. However, as explained more fully below, even though Tropps record may be more extensive, his legal claims do not differ in any material aspect from those of previous Names. Accordingly, we deny Tropps motion for partial summary judgment, and we grant Lloyds motion to dismiss the complaint on the basis of improper venue, or, in the alternative, for failure to state a claim.
While we concur with the D.C. Circuit that there is no need to reinvent the wheel, we need to provide enough factual background to set forth Tropps arguments.
I. Tropps Underwriting
A. The Lloyds Insurance Market
Lloyds is a 300-year-old market in which individual and corporate underwriters known as Names underwrite insurance. "The Corporation of Lloyds, which is also known as the Society of Lloyds, provides the building and personnel necessary to the markets administrative operations. The Corporation is run by the Council of Lloyds,[FN4] which promulgates Byelaws regulates the market, and generally controls Lloyds administrative functions.
FN4 The Lloyds Council is elected primarily by Managing Agents of the various syndicates.[*5] Haynsworth v. The Corporation of Lloyds, 121 F.3d 956, 958 (5th Cir. 1997)[FN5] See also Roby v. Corporation of Lloyds, 996 F.2d 1553, 1557 (2d Cir, 1993) (stating that Lloyds is a market somewhat analogous to the New York Stock Exchange). See Lloyds Acts, 1871-1982
In order to participate in the Lloyds market, Names are required by English law to become members of the Society of Lloyds.[FN6] As members they underwrite insurance by joining various syndicates which pool and manage investments in assorted risks. While investment in Lloyds has typically been a profitable venture&,#148;[FN7] Names are personally liable on losses incurred by the syndicates that they join, unless they buy a stop-loss insurance policy.[FN8]
Names underwriting activities are mediated by two sets of agents — Members Agents and Managing Agents. Members Agents, somewhat analogous to brokers, open the Names accounts, place their Names [sic] on various syndicates, and generally oversee their Names underwriting activities. Managing Agents, underwriting specialists, run the day-to-day business operations of each
FN5 See also Declaration of Nicholas P. Demery ¶ 3.
FN6 Demery Decl. ¶ 5.
FN 7 Socy of Lloyds v. Mullin, 96 Fed. Appx. 100, 102 (3d Cir. 2004) (Underwriting in the Lloyds market has traditionally been a profitable venture, but Names began to incur substantial losses in the late 1980s and early 1990s)
FN8 See Tropp Decl. ¶¶ 20, 26-30.
[*6] syndicate, and decide which insurance policies to underwrite. Both sets of agents assume contractual responsibilities over Names underwriting activities, and owe fiduciary duties to the Names.[FN9]
Each syndicate underwrites insurance for exactly one calendar year, beginning on January 1 and ending December 31. In order to calculate gains and losses, syndicates must stay open for at least three years afterwards.[FN10] After three years, a closing syndicate must find a new, open syndicate to reinsure its outstanding liabilities. This type of reinsurance is called RITC (reinsurance to close). In exchange for a certain premium, (RITC premium), a new syndicate agrees to accept the bundle of all outstanding liabilities from a closing syndicate, including the RITC policies that the closing syndicate itself had underwritten for prior syndicates. Thus, a single new RITC policy may pass down many syndicates worth of outstanding liabilities, thereby exposing new syndicates to potentially vast pre-existing liabilities.
Pursuant to § 14(3) of the Lloyds Act of 1982, Lloyds itself, as regulator of the market, is provided with immunity (Lloyds Immunity) from suits brought by Names, except for claims of fraud or bad faith. See, e.g., Socy of Lloyds v. Jaffray, 2000 WL 1629463[, Transcript] (Queens Bench Division (Comm. Court), Nov. 3, 2000) (Cresswell, J.) affd (2002) 146 S.J.L.B. 214 (AC), available
FN9 Compl. ¶¶ 26-34; Roby, 996 F.2d at 1357.
FN10 See Demery Decl. ¶ 11[*7] at 2002 WL 1654876 at *1. See also Bonny v. Socy of Lloyds, 784 F.Supp. 1350, 1359 (N.D.Ill. 1992) (Lloyds immunity represents an important English public policy choice.). Members Agents and Managing Agents, however, do not have such immunity. See, e.g., Socy of Lloyds v. Robinson, [] 1 W.L.R. 756, 767 (House of Lords, 1999).
Tropp Becomes a Name
Tropp was recruited to join Lloyds in 1987 through a Members Agent named John Hayter.[FN11] Tropp had recently retired from his job at the United States Agency for International Development, and had worked previously at the Environmental Protection Agency (E.P.A.).
Tropp complied with the various requirements to become a member of Lloyds: he passed a means test to ensure he had the ability to meet underwriting obligations, signed the necessary contracts, posted a fully collateralized $160,000 letter of credit,[FN12] and went through the required screening interview with the Lloyds Rota Committee on August 11, 1987. (As described by the Fifth Circuit: Names must personally appear in London before a representative of the Council of Lloyds to acknowledge
FN11 It appears that John Hayter originally worked for Hayter Agencies Ltd., and then later with a firm by the name of Hayter Brockbank
FN12 With leverage, such a letter of credit allowed Tropp to take on risks of up to $640,000.[*8] their awareness of the various risks and requirements of membership, and in particular the fact that underwriting in the Lloyds market subjects them to unlimited personal liability. Haynsworth, 121 F.3d at 958-59.
The central contract that Tropp signed with Lloyds was the General Undertaking[FN13] The General Undertaking obliges Names to comply with all provisions of the Lloyds Acts, as well as with any current or future provisions of the Lloyds Acts, as well as with any current or future Byelaws promulgated by the Council of Lloyds.[FN14] Clause 2.2 (the Choice Clause) requires Names to litigate any and all disputes with Lloyds in English courts under English law, and also sets forth that the Names agree to personal jurisdiction in England is enforceable in other jurisdictions.[FN15]
Because of his work at the E.P.A. Tropp was sensitive looming environmental, particularly asbestos-related liabilities and wished to avoid investing in any syndicates exposed to such environmental risks. Tropp apparently confirmed with the Lloyds
FN13 Tropp Decl. Ex. B. (General Undertaking between Richard A. Tropp and the Society of Lloyds, effective as of January 1, 19881; see also Demery Decl. Ex. 2 [same].
FN15 Clause 2.2 of the General undertaking reads in pertinent part: [T]he courts of England shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature [the Name] irrevocably agrees that a judgment in any Proceeding brought in the English courts shall be conclusive and binding upon each party and may be enforced in the courts of any other jurisdiction. Tropp Decl. Ex. B at ¶ 2.2; Demery Decl, Ex. 2 at ¶ 2.2.[*9] Rota Committee at his screening interview in August, 1987,[FN16] and again with his Members Agent both orally and by letter dated September 11, 1987.[FN17] that he would not be placed on any syndicates exposed to such environmental risks. He also purchased stop-loss insurance. Tropp underwrote insurance through various syndicates for the years beginning on January 1, 1988, January 1, 1989, and January 1, 1990.
In April, 1990, however, things began to unravel. Tropp received back from Hayter Brockbank (his re-named Members Agent) an uncashed check for his stop-loss insurance policy for his 1990 syndicates. Hayter Brockbank told Tropp that stop-loss insurance was no longer available. Tropp now maintains that this was a lie, since Hayter Brockbanks directors and officers had in fact procured stop-loss insurance to cover themselves for 1990 syndicates.[FN18]
Upon learning that he was no longer covered by stop-loss insurance, Tropp immediately tried to stop underwriting. Tropp
FN16 Tropp Decl. ¶¶ 12-13. Whereas Lloyds Rota Committee normally retains minutes, transcripts, and tape recordings of Rota Committee meeting, Lloyds has represented to Tropp that no such evidence can be found with respect to his August 11, 1987 interview. Id.
FN17 Tropp. Decl. Ex. F [Letter from Richard A. Tropp to John Hayter, dated September 11, 19871 (This letter is to reconfirm that you have placed me on no syndicate, under any circumstances, which either is or could become exposed to environmental liability of any kind. This is an absolute condition to my joining Lloyds, to my approving the Syndicate Arrangements enclosed, and to my underwriting for all future years, and I rely on your assurance – per our discussions on this – that none of the syndicates onto which the agency places me will ever carry such potential liability.)).
FN10 See Tropp Decl. ¶ 15.
[*10] called Hayter Brockbank and orally resigned for the following year, beginning January 1, 1991. But, apparently because Tropp was an army-reservist called up to active military duty, he did not send written notice of his resignation until months later, on August 3, 1990. At that time, Hayter Brockbank refused to recognize his resignation for 1991 – again fraudulently according to Tropp[FN19] – because they maintained that resignations msut be made in writing by the end of June, at least six months prior to the start of the next calendar year. Therefore, Hayter Brockbank again placed Tropp on syndicates for the 1991 year, again without stop-loss insurance.[FN20]
C. Collapse of the Insurance Market
Tropps loss of stop-loss insurance, and his having been, in his words, conscripted to underwrite for another year could not have come at a worse time. Beginning in the early 1990s, syndicates at Lloyds were wracked by staggering losses of upwards of twelve billion dollars.[FN21] Ashenden 233 F.3d at 478 (Huge
FN19 Tropp Decl. ¶¶ 16-17. Tropp maintains that Lloyds Byelaws only require four months notice before a resignation becomes effective. Lloyds counters that Tropp erred by sending his August 3, 1990 letter only to Hayter Srockbank, and not to Lloyds itself. Demery Decl. ¶ 12. Had Tropp written to Lloyds itself, on August 3, 1990, the letter would have amounted to effective resignation. But, under Lloyds Byelaws, Members Agents are not authorized officers or employees of Lloyds for purposes of accepting resignations.
FN20 Tropps resignation appears to have been effective at least for the 1992 calendar year. There is no evidence of any losses from 1992 syndicates.
FN21 The $12 billion figure comes from Lloyds itself. Demery Decl. 14. See also Edelman, 2005 WL 639412 at *3. A 1995 New York State Insurance
[*11] underwriting losses [ ] threatened to destroy the London insurance market). The losses were due in large part to previously incurred but not yet reported environmental liabilities, which had cascaded down from previous syndicates through RITC reinsurance.
As the losses began to mount, Tropp received cash calls on his letter of credit in 1992 and then again in 1993,[FN22] to which he consented.[FN23] He then received a third cash call in 1994, which would have drained his original investment of $160,000 down to zero, and, according to Tropp, forced a second mortgage on his home.[FN24]
But, rather than accept the last cash call, Tropp began investigating. Tropp managed to inspect the accounts of six of his
Department audit of Lloyds for the period ended December 31, 1993 found an $18.4 billion deficiency. A copy of the report is available at www.truthaboutlloyds.com/regulation/nyidreport.html
FN22 Tropp Decl. ¶ 18. Cash calls were typically made by Members Agents, based on information provided to them by the managing agents for each of the Names respective syndicates. See also Demery Decl. ¶ 12.
FN23 Tropp Decl. ¶ 9.
FN24 Tropp Decl. ¶ 19. We, like previous courts in Namess cases, remain sympathetic to the situation that Names found themselves in. As one English court put it:It is easy to understand the depth of feeling of those names who became members of Lloyds between 1977 and 1987. They joined Lloyd.s at a time when there were many syndicates infected with asbestos-related risks which were persistently underestimated. The procedure at Lloyds was that each years accounts were, at the end of a three-year period, closed into the next years accounts. The effect was that the new names inherited losses of massive proportions.
[*12] largest-loss syndicates.[FN25] He also hired a forensic accountant, who determined that approximately 98-99% of Tropps alleged losses stemmed from his being placed on syndicates which, ultra vires of his entering prohibition, were exposed to environmental risks through RITC policies.[FN26] According to Tropp, some of his syndicates were not underwriting new policies at all, but only writing RITC reinsurance of earlier syndicates, which had been exposed to massive environmental risks. In addition, Tropp further learned that his Member him on these risky RITC-heavy syndicates.[FN27]
Tropp then began negotiating with Lloyds for a settlement. Tropp claims that he reached an agreement in principle with senior Lloyds management in November, 1995, and was sent a Settlement and Release Agreement on December 11, 1995 that would have absolved him of liability.[FN28] Before any such agreement was formally executed, however, the Lloyds Council announced its massive Reconstruction and Renewal Plan (R & R) which applied mandatorily to all Names.
D. Lloyds R & R
FN25 Tropp Decl. ¶¶ 21-25.
FN26 Tropp Decl. ¶ 24.
FN27 Tropp Decl. ¶ 22.
FN28 Tropp Decl. ¶ 25.[*13] The Lloyds Council enacted the Reconstruction and Renewal plan (R & R) to protect both those who had purchased insurance from Lloyds and the Names themselves, who might otherwise face unlimited personal liability. See generally Ashenden, 233 F.3d at 478.[FN29] R & R had two major components.
First, Lloyds syndicates transferred all open liabilities for 1992 and preceding years onto a new special-purpose entity called Equitas, which would reinsure those risks.[FN30] In order to pay for this reinsurance, Equitas assessed on each Name a premium (the Equitas Additional Premium), which was individually calculated based on the Names current and projected future losses.[FN31] Equitas then assigned the right to collect these premiums to Lloyds.[FN32]
Second, Lloyds sent a Settlement Offer to each Name, whereby Names could agree to pay a discounted amount of moneys allegedly owed in exchange for a release from future liabilities. The Settlement offer contained a "Finality Statement, which set forth the aggregate amount required to satisfy the Names prior
FN29 For other descriptions of R & R, see Allen 94 F.3d at 929-31; Haynsworth 121 F.3d at 958-6l, Roby 996 F.2d at 1357.
FN30 Tropp Decl. ¶ 30; Demery Decl. ¶ 15. Officially, Equitas is a holding company, owned by a trust, the beneficiaries of which are the reinsured Names, but the trust itself is controlled by the Lloyds Corporation.
FN31 Technically, Names were assessed an Equitas Premium, but only had to pay the amount by which the Equitas Premium exceeded their reserves with Lloyds, hence their Equitas Additional Premium. see, e.g. Lloyds Memorandum of Law at 17 n.13; Tropp Decl. Ex. Z [Lloyds Statement of Reinsurance issued to Mr. RA Tropp]. For the sake of convenience and brevity, we refer exclusively to the Equitas Additional Premium.
FN32 Demery Decl. ¶ 20; Reinhart, 402 F.3d at 991.
[*14] unpaid underwriting liabilities (if any) and the Equitas Additional Premium. The Finality Statement also included and [sic] an individually calculated package of settlement credits that each Name who accepted the Settlement Offer by a certain date could use to reduce the amount owed.[FN33]
Tropp received his Finality Statement in August, 1996. It called for him to pay £253,409 in uncalled accrued cash calls (with interest) from his 1989, 1990, and 1991 syndicates, as well as £114,439 for his Equitas Additional Premium, a total of £367,848.[FN34] Tropp was also offered £281,077 in settlement credits, meaning he would have to pay only £86,771 if he accepted the Settlement Offer.[FN35]
Names were given until September 11, 1996 to accept. Although the Settlement Offer was optional, Lloyds exercised its regulatory authority to require all Names to reinsure outstanding liabilities with Equitas and pay the Equitas Additional Premium by September 30, 1996.[FN36] Lloyds did so pursuant to its authority under § 18(b) of Schedule 2 of the Lloyds Act of 1982 to appoint śsubstitute agents for the Names whenever the Lloyds Council deemed it necessary. Through a series of Byelaws and resolutions
FN33 Demery Decl. ¶ 15; Allen, 94 F.3d at 927. In order to receive the settlement credits, Names had to agree to release not only Lloyds, but also their Members Agents, Managing Agents, and other market participants. Id.
FN34 Tropp Decl. ¶ 34; Demery Decl. ¶ 16.
FN35 Demery Decl. ¶ 16.
FN36 Demery Decl. ¶ 18; Turner 303 F.3d at 327-28.
[*15] under this Act, the Lloyds Council appointed an entity known as AUA9 (Additional Underwriting Agencies (No. 9) Ltd.) as a substitute agent for the Names.[FN37] In turn, AUA9 signed the Equitas Reinsurance Contract (Equitas Contract) with Lloyds on behalf of all Names.[FN38]
According to Lloyds, close to 95% of all Names agreed to the Settlement Offer by September 11, 1996.[FN39] A few Names, including Tropp, did not (non-accepting Names).[FN40] It appears that Tropp refused to pay for a variety of reasons – he believed that the numbers in his Finality Statement were incorrect and overstated; he felt that the purported release would be ineffective since Lloyds reserved the right to collecdt future shortfalls even from those Names who accepted;[FN41] but most of all Tropp was still engaged in his own negotiations concerning a personal settlement for far less.
Indeed, Tropp appears to have been engaged in negotations with Lloyds throughout the entire time period from 1995 to 2001. The parties seem to have drawn the closest a few years later, in 1998. For instance, Tropp received a letter dated July 9, 1998
FN37 See Byelaw No. 82 of 1995; AUA9 Resolution of 1996. The sole shareholder of AUA9 is the Society of Lloyds. Simon-Netto, 457 F.3d at 97.
FN38 Demery Decl. ¶ 18.
FN39 Demery Decl. ¶ 17; Socy of Lloyds v. Ashenden, 233 F.3d at 478.
FN40 While Lloyds maintains that only about five percent of the Names did not accept their Settlement Offer, Tropp believes the number may be slightly higher. Tropp Decl. ¶ 33 n. 2.
FN41 Tropp Decl. ¶¶ 31-32.
[*16] from the Head of Lloyds Financial Recovery Department reconfirming that once the necessary paperwork was complete, Lloyds would release Tropp in exchange for a payment of only $5,000.[FN42] Tropp later received similar letters confirming a settlement of £3,125 (approximately $5,000 at the time) on January 25, 2001, and March 15, 2001.[FN43] However, unfortunately for Tropp, the necessary paperwork was never completed.[FN44]
II. Legal Proceedings Arising From Lloyds R & R
A. Lloyd Enforces the Equitas Premium
Lloyds brought suits for breach of contract against non-accepting Names. Lloyds efforts to collect were aided by two highly controversial clauses in the Equitas Contract – the pay now, sue later clause, and the conclusive evidence clause. The pay now, sue later clause forbid Names, in suits brought by Lloyds, from raising any claims for set-off or fraud on the part
FN42 Tropp Decl. ¶¶ 35-37; Ex. L [Letter from Phillip R. Holden to Richard A Tropp dated July 9, 1998].
FN43 Tropp Decl. ¶¶ 35-37; Ex. M [Letters from Sarah Wilton, Financial Controller at Lloyds to Richard A. Tropp dated January 25, 2001. and March 15. 2001].
FN44 The ultimate reasons why a settlement was never finalized are missing from the record. The courts in England were sympathetic to Tropps near-settlement, but found his legal estoppel argument unavailing. See e.g., Tropp v. Socy of Lloyds,  EWCA Civ. 1544 (Waller, J.) at ¶ 20 (I have to say that I have some sympathy with Mr. Tropp on that, as far as I have looked at the correspondence. But one thing is clear, and that is that the judge was right in law [that Tropp could not assert estoppel.]). See also Socy of Lloyds v. Tropp,  EWHC 1397 (Comm.) (Gross, J.) at & 46 (noting that Tropp and Lloyds were within a whisker of settlement, arid it is a matter to be much regretted [that they) drew further apart.).
[*17] of Lloyds. Instead, Names had to press such claims in a separate proceeding, where the claims were denoted as counterclaims. The conclusive evidence clause made Lloyds determination of the amount of a Names Equitas Additional Premium conclusive in the absence of manifest error.
Non-accepting Names challenged the Equitas Contract, and specifically the pay now, sue later and conclusive evidence clauses, but to no avail.[FN45] Lloyds won across the board, and courts unanimously upheld the validity of the Equitas Contract despite the fact it had only been signed on the Names behalf by substitute agent AUA9. See generally Socy of Lloyds v. Ashenden, 233 F.3d 473; Socy of Lloyds v. Leighs,  C.L.C. 759 (QBD) available at 1997 WL 1104338, affd, Socs of Lloyds v. Lyon, Leighs & Wilkinson,  C.L.C. 1398 available at 1997 WL 1104500.
After winning judgments in England, Lloyds sought to enforce judgments against non-accepting American names in United States courts. American Names fought the enforceability of the English judgments, contending that the pay-now-sue-later clause end the conclusive evidence clause deprived Names of due process of law, and rendered the English judgments unenforceable here. American
FN45 See Demery Decl. ¶ 22. The defenses of the recalcitrant Names included that Lloyds lacked the regulatory authority to require Names to purchase reinsurance from Equitas that Lloyds lacked the regulatory authority to appoint substitute agents to negotiate on behalf of Names; that Lloyds lacked proper title to sue; that Names were entitled to litigate fraud in the inducement arid that Names were not bound by the pay now, sue later or the conclusive evidence clauses od the Equitas contract.
[*18] Names also lost these challenges across the board. See, e.g., Socy of Lloyds v. Ashenden, 233 F.3d at 479-481; Socy of Lloyds v. Edelman, 2005 WL 639412 at *4-6 (S.D.N.Y. Mar. 21, 2005) (collecting cases and noting that Names had already lost challenges to English judgments in fourteen separate federal and state courts.)
B. Tropps Legal Proceedings
Apparently since Tropp and Lloyds were still negotiating, Lloyds did not bring suit against Tropp in the first wave of enforcement actions in 1997 and 1998. But, as the parties never reached a final settlement, Lloyds eventually sued Tropp on August 22, 2002 in the High Court of Justice, Queens Bench Division.[FN46] Lloyds sought £433,560.19, representing Tropps unsatisfied underwriting liabilities, his unpaid Equitas Additional Premium, interest and costs.[FN47]
After yet another round of settlement talks failed,[FN48] Tropp moved to dismiss the complaint on April 28, 2003 for lack of proper
FN46 Demery Dccl. ¶ 23.
FN47 Interestingly, the amount claimed by Lloyds, pre-interest and costs, was less that the amount on Trcpps Finality Statement. Apparently. Lloyds did not sue Tropp for his "Central Fund Debt," one alleged component of the unpaid underwriting obligations, See Demery fled. ¶ 25.
FN48 Tropp Decl. ¶ 38, Demery Decl. ¶ 23. A sticking point appears to have been that Lloyds was only willing to settle with respect to itself, whereas Tropp insisted that any settlement cover Lloyds, Equitas, and any other subsidiary or affiliate.
[*19] service.[FN49] (Like other Names, Tropp was only served by means of his substitute agent, the same AUA9 entity that had signed the Equitas Contract on his behalf.) The court denied Tropps motion by order dated January 20, 2004.[FN50]
On May 14, 2004, Tropp filed his Defence and Counterclaim.[FN51] Tropp argued inter alia athat the Equitas Equitas [sic] Contract was invalid because it was signed by AUA9 on his behalf;[FN52] that his purported losses stemmed from risks that he had not agreed to underwrite, either because he refused from the inception to underwrite environmental risks or because he timely resigned from the 1991 syndicates;[FN53] that the Managing Agents of his syndicates were engaged in fraud and self-dealing in underwriting RITC policies exposed to massive environmental liabilities, and in churning Names accounts;[FN54] that Lloyds was aware of the Managing Agents fraud and systematically failed to prevent it,[FN56] and also that Lloyds was in possession of substantial funds that should
FN49 Tropp Decl. ¶ 39; Ex. N. [Tropps;s statement of the Case]. Tropp argued that Lloyds had only served a local members agent, wholly controlled by Lloyds, and Tropp himself had never been properly served.
FN50 Tropp Decl. Ex. O [Socy of Lloyds v. Tropp,  EWHC 33 (Comm.) (Gross, J.)]; Demery Decl. Ex. 5 [same].
FN51 Tropp Decl. Ex. P. [Tropps Defence and Counterclaim].
FN52 Tropp Decl. Ex. P at ¶¶ 8-9.
FN53 Tropp Decl. Ex. P at ¶¶ 22-24.
FN54 Tropp Decl. Ex. P at ¶¶ 19-20.
FN55 Tropp Decl. Ex. P at ¶ 38.
[*20] have been credited to Tropps account but had not been, including his stop-loss insurance proceeds of £28,831.29 for his 1989 syndicates, various proceeds of other successful syndicates, proceeds from various Namess litigations against Managing Agents, and certain surpluses owing from Equitas to Lloyds which Tropp maintained had never been properly accounted for.[FN56]
Following submission of written argument, documentary evidence, and oral argument by both parties, on May 24, 2004 the High Court of Justice, Queens Bench Division granted summary judgment in favorf of Lloyds.[FN57] The court entered a 22-page opinion which summarized Tropps arguments and the research he had done, but found that Tropps objections to the Equitas Contract were precluded by earlier case-law;[FN58] that Tropps allegations of malfeasance on the part of his Members Agent and Managing Agents did not properly lie against Lloyds, since Names themselves bore the risk of negligence or mismanagement on the part of their Agents;[FN59] and, ultimately, in light of the conclusive evidence clause and the pay now, sue later clause, Tropps allegations against Lloyds were not sufficiently plausible or well-plead [sic] to
Tropp Decl. ¶¶ 40-74; Ex. P. at ¶¶ 25-28.
Compl. ¶¶ 147, 149; Tropp Decl. Ex. AD [Socy of Lloyds v. Tropp,  EWHC 1397 (Comm.) (Gross, J.)]; Demery Decl. Ex. 6 [same].
Tropp Decl. Ex. AD at ¶¶ 16 [sic].
Tropp Decl. Ex. AD at ¶¶ 16(1); 18 ([C]omplaints about whether the Managing Agents were properly running the syndicate business do not lie against Lloyds.].
[*21] meet the applicable stgandard of manifest error in the amount claimed by Lloyds.[FN60] Accordingly, the court entered an order in the amount of £463,881.28, representing principal and interest owed to Lloyds.[FN61]
Tropp then sought permission to appeal. Following another round of briefing, and another hearing, a judge of the Court of Appeals denied Tropp permission to appeal on November 2, 2004.[FN62] The appeals judge concurred with the court below that Tropps challenge to the Equitas Equitas Contract as a whole was fruitless, since his claims regarding his entering prohibitions, being wrongly conscripted into underwriting for 1991, and fraud on the part of his Managing Agents in underwriting certain RITC policies lay properly against his Members Agent or Managing Agents, not against Lloyds.[FN63] In this light, Tropps allegations against Lloyds
FN60 Tropp Decl. Ex. AD at ¶¶ 17-18. Thus, the court concluded that most of Tropps arguments are hopeless.
FN61 Tropp Decl. Ex. AE [Order]; Demery Decl. Ex. 7 [same]. We note again that the court appears to have had much sympathy for Tropps plight, and expressed regret that a settlement between Tropp and Lloyds was never reached. The court examined the settlement documents and concluded that the parties were swithin a whisker of settlement, and it is a matter to be much regretted [that they] drew further apaert. Tropp Decl. Ex. AD at ¶ 46.
FN62 Compl. ¶ 149; Tropp Decl. Ex. AF [Tropp v. Socy of Lloyds,  EWCA Civ. 1544 (Waller, J.)]; Demery Decl. Ex. 8 [same].
FN63 Tropp Decl. Ex. AF at ¶¶ 8-24. Indeed, Justice Waller concluded by suggesting that although Tropp would be disappoainted by his decision to deny him leave to appeal, he believed that he was in fact doing Tropp a favor because an appeal would simply rachet up the fees and costs that Lloyds could eventually saddle onto Tropp. Tropp Decl. Ex. AF at ¶ 25.
[*22] failed to state a plausible claim of manifest error in Lloyds calculations.
Next, unlike many American Names who later challenged English judgments in American courts, Tropp fought on. He pursued his counterclaim against Lloyds in a separate proceeding,[FN64] maintaining that Lloyds acted fraudulently and in bad faith, in particularly by turning a blind eye on Managing Agents RITC practices, which, in Tropps account, were more like a Ponzi scheme than a legitimate investment. Tropp alleged a systematic institutional performance failure by Lloyds in turning its head to and consciously avoiding wrongful behavior by particular agencies which victimize Mr. Tropp and others on his particular syndicates.[FN65]
Following yet another round of written and oral arguments, and the submission of testimonial and documentary evidence, on November 5, 2004, the High Court of Justice struck Tropps counterclaim.[FN66] The Court noted that while Tropp may have stated claims against his Members Agent and Managing Agents, Lloyds itself was not liable for the acts of those agents.[FN67] Further, Lloyds was protected from suits for mere negligence by Lloyds Immunity under section 14 (3)
FN54 Compl. ¶ 149.
FN65 Tropp Decl. Ex. P [Tropps Defence and counterclaim] at ¶ 38, See also Tropp Decl. Ex. AG [Socy of Lloyds v. Tropp,  EWEC 3335 (Comm.) (Gloster, j.)] at ¶ 5.
FN66 Tropp Decl. Ex. AG. The court also denied Tropp leave to amend his complaint so as to add numerous other parties, including his Managing Agent and his Members Agent.
FN67 Tropp Decl. Ex. AG at ¶ 10.
[*23] extensive research which showed that Parliament had only intended Lloyds Immunity to protect Lloyds acting in its public capacity as regulator of the insurance market, not in its private capacity as an institution; and that Lloyds Immunity applied only to suits for damages, not suits seeking equitable remedies." 'rropp forcefully presented these arguments in his appeal, but on January 23, 2006 a judge of the Court of Appeals denied Tropp permission to appeal. The judge commended Tropps redoubtable research, but held that, even assuming arguendo that Tropp was correct, his counterclaim failed because his claim against Lloyds was against Lloyds in its public capacity as regulator of the insurance market, and even though Tropp nominally sought equitable remedies
FN68 Tropp Decl. Ex. AG at ¶¶ 2, 17, 25. The court also dismissed Tropps claims against Lloyds for libel and slander as unfounded.
FN69 Tropp Decl. ¶¶ 92-92; Ex. AH [Socy of Lloyds v. Tropp,  EWCA Civ. 88 (Rix, J.)] at ¶¶ 21-23; Demery Decl. Ex. 10 [same].
FN70 Id. See also Compl. ¶¶ 15O, 151.
FN71 Tropp Decl. Ex. AH at ¶ 22.
[*24] such as a declaration, unwinding and disgorgement, his claims were in essence claims for monetary damages against Lloyds.[FN72]
On April 27, 2006 Tropp petitioned the House of Lords for review of the Court of Appeals decision,[FN73] but his petition was denied by decision dated July 18, 2006.[FN74]
The Instant Suit
Tropp acknowledges that he has not paid Lloyds judgment against him.[FN75] Upon receiving correspondence from Lloyds suggesting that Lloyds would seek to have its English judgment enforced in the United States,76 Tropp filed the instant suit on January 18, 2007.
Tropp has now moved for partial summary judgment on his claim for a declaratory judgment that the English judgment is unenforceable here, and Lloyds has moved to dismiss under both Fed. R. Civ. P. 12(b)(3) and 12(b)(6). After extensive briefing from both parties, this Court held oral argument on these cross motions on December 7, 2001.
FN72 Tropp Decl. Ex. AE at ¶ 23.
FN 73 Tropp Decl. Lx. AlT [Tropps Petition to the House of Lords].
FN74 compi. & 153; Tropp Decl. Ex. AK [Tropp v. Socy of Lloyds,  Parl. Deb. H.L. (6th ser.) (2006) (July 16, 2006)].
FN75 Compl. ¶ 154.
FN76 Tropp Decl. Ex. AL [Email from Ian Bradford, Lloyds Legal & Compliance to Tropp, dated January 16, 2007].
I. Applicable Law
A. Summary Judgment
Tropps motion for partial summary judgment under Fed. R. Civ. P. 56(c) may only be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. p. 56(c). See, e.g., Amaker v. Foley, 274 F.3d 677, 682 (2d Cir. 2001)
B. Motions to Dismiss
For the purposes of Lloyds motion to dismiss under Fed. P. Civ. P. 12(b) (3) for improper venue, given the forum-selection clause in the General Undertaking, Tropp bears the burden of making a prima face showing by alleging facts which, if true, would support the courts exercise of jurisdiction. Marine Midland Bank N.A v. Miller, 664 F.2d 899, 904 (2d Cir. 1981); New Moon Shipping Co. Ltd. v. MAN B&W Diesel AG 121 F. 3d 24, 29 (2d Cir. 1997). When analyzing this preliminary showing, the facts must be viewed in the light most favorable to the plaintiff. Id.
In considering Lloyds motion to dismiss for failure to state a claim under Fed. P. Civ. P (12)(b)(6), this Court must accept as true the facts alleged in the complaint, Bolt Elec., Inc. v. City [*26] of New York, 53 F.3d 465 (2d Cir. 1995), drawing all reasonable inferences in favor of the plaintiff. See Freedom Holdings, Inc. v. Spitzer, 357 F.3d 205, 216 (2d Cir. 2004). However, conclusory allegations and legal conclusions disguised as facts will not suffice to prevent a motion to dismiss. See De Jesus v. Sears, Roebuck & Co. 87 F.3d 65, 69 (2d Cir. 1996). Dismissal will be appropriate if the plaintiff has failed provide the grounds upon which [his) claim rests through factual allegations sufficient to raise a right to relief above the speculative level. ATSI Commons Inc. v. Shaar Fund, Ltd. 493 F. 3d 87, 98 (2d Cir. 2007) (internal quotation marks omitted).
C. English Judgments
In the context of either of these cross-motions we may consider the various the decisions of the English courts s well as English statutes, either by means of judicial notice, see Lady Nelson Ltd. v. Creole Petrol Corp. 286 F.2d 684, 686 (2d Cir. 1961) (taking judicial notice of an English statute), or because these statutes and decisions were incorporated by reference in Tropps complaint. Lee Intl Audiotext Network Inc. v. Am. Tel & Tel Co., 62 F.3d 69, 72 (2d Cir. 1995) (per curiam) (The complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference) (quotations omitted); San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Co. 75 F.3d 801, 809 [*27] (2d Cir. 1996); see also Fed. R. Civ. P. 10(c) (A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.). Further, even where a document is not incorporated by reference, this Court may nevertheless consider it where the complaint relies heavily upon its terms and effect, which renders the document integral to the complaint. Intl Audiotext, 62 F.3d at 72; Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002).
II. The Choice Clause and Forum Selection
The first question presented by these motions is whether Tropp may pursue claims for relief against Lloyds in this forum. In the Choice Clause of his General Undertaking, Tropp irrevocably agree[d] that the courts of England shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature arising out of or relating to the Members membership of, and/ox underwriting of insurance business at, Lloyds.[FN78]
Forum selection and choice of law clauses are presumptively valid where the underlying transaction is fundamentally international in character. See M/S Bremen v Zanata Off-Shore
FN77 For the sake of completeneaa, we also note that for the purposes of Lloyds motion to dismiss under Fed. R. Civ. P. 12(b) (3) for improper venue, we may also consider any documents outside the pleadings that are relevant to the question of venue. New Moon Shipping Co. Ltd v. MAN B&W Diesel AG 121 F.3d 24, 30 (2d Cir. 1997).
FN78 See Tropp Decl. Ex. B [General Undertaking) at ¶ 2.2.
[*28] Co., 407 U.S. 1 (1972); Roby, 996 F.2d 1362-63 (nothing that forum selection and choice of law clauses eliminate uncertainty in international commerce and insure that the parties are not unexpectedly subjected to hostile forums and laws). This presumption of validity may be overcome, however, by a clear showing that the clauses are unreasonable under the circumstances. The Bremen, 407 U.S. at 10. The Supreme Court has construed this exception narrowly: forum selection and choice of law clauses area unreasonable (1) if their incorporation into the agreement was the result of fraud or overreaching; (2) if the complaining party will for all practical purposes be deprived of his day in court, due to the grave inconvenience or unfairness of the selected forum; (3) if the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or (4) if the clauses contravene a strong public policy of the forum state. See The Bremen, 407 U.S. at 10,15, 18; Roby, 996 F.2d at 1363. Thus, the burden is on Tropp to make a prima facie showing that one of these factors renders the forum selection clause unreasonable. We note that not only one but two Second Circuit panels have held that the Choice Clause in the General Undertaking is enforceable against American Names. See Roby v. Corp. of Lloyds, 996 F.2d 1553, 1363 (2d Cir. 1996) (affirming the district courts dismissal of Securities Act, Securites Exchange Act, and RICO claims brought by Names against Lloyds on the basis of improper venue pursuant to the Choice Clause); Stamm v. Barclays Bank of [*29] N.Y., 153 F.3d 30, 32-33 (2d Cir. 1998) (reaffirming Roby and holding that the Choice Clauses are enforceable). Moreover, all seven other federal circuits to reach this have likewise held that the Choice Clause is not unreasonable.[FN79]
Applying this test, and following the Roby and Stamm courts, we easily dispose of the first two factors. First, Tropp does not contend that he was fraudulently induced into agreeing to the Choice Clause. Second, Tropp cannot argue that is it too inconvenient for him to litigate in England, as he has already done so extensively.
Tropp rests heavily on the third factor, that the Choice Clause will in effect deny him any remedy.[FN80] As construed by the Second Circuit, the inquiry under the third factor is whether the designated forum is inherently unfair or biased, or denies all remedies whatsoever: It is not enough that the foreign law or procedure merely be different or less favorable than that of the United States. Instead, the question is whether the application of the foreign law presents a danger that the [ ] Names will be deprived of any remedy or treated unfairly. Roby, 996 F.2d at
FN79 See Lipcon v. Underwriters at Lloyds, 148 F.3d 1285 (11th Cir. 1998); Richards v. Lloyds of London, 135 P.3d 1289 (9th Cir, 1998) (en banc); Haynsworth v. Corp. of Lloyds, 121 P.3d 556 (5th Cir. 1997); Allen v. Lloyds of London, 94 F.3d 923 (4th Cir. 1996); Shell v. R.W. Sturge Ltd., 55 F.3d 1227 (6th Cir. 1995); Bonny v. Socy of Lloyds, 3 F.3d 156 (7th Cir. 1993); Riley v. Kingsley Underwriting Agencies Ltd., 969 F.2d. 953 (10th Cir. 1992).
FN80 See Tropp Reply Memorandum of Law at 4-5.
[*30] 1363 (emphasis in the original) (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254-55 (1981)).
The fourth factor, whether the choice clause contravenes a strong public policy of the forum state,[FN81] is closely related to the third factor because Tropp argues that the application of English law would contravene New Yorks strong public policy of permitting claims to be heard on their merits.[FN82]
Indeed, Tropp is correct insofar as, under either the third or fourth factors, the availability of adequate remedies in England was central to the holdings in Roby and Stamm. Roby held that, We are satisfied that the Names have several adequate remedies in England to vindicate their substantive rights 996 F.3d at 1364-65, and cautioned, [W]e believe that if the Roby Names were able to show that available remedies in England are insufficient
FN81 Under this factor, the Names in both Roby and Stamm had argued that the Choice Clauses were unenforceable because they served as a prospective waiver of the protections of the federal securities laws, and pursuant to section 14 of the Securities Act of 1933, 15 U.S.C. § 77n, and section 29(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 7ecc(a), such waivers are void and unenforceable. Indeed, the SEC submitted a brief in Stamm urging that Choice Clauses should be found to be unenforceable. However, the court in Stamm clarified that the relevant inquiry as to whether the Choice Clauses indeed waived the protections of the securities laws was the availability of adequate remedies for fraud in England. 153 F.3d at 33. Thus, apparently, Tropp does not raise any argument that the Choice Clause amounts to a waiver of the securities laws, and instead concentrates his argument on the availability of remedies, or lack thereof of, in England.
FN82 Tropp Memorandum of Law at 20-21. Tropp makes this argument in the context of the Recognition Act, but we consider it here. The other public policy argument that Tropp makes in the context of the Recognition Act – that the Equitas Contract violates New York contract principles because it was signed by AUA9 on behalf of the Names – is less relevant here, as it goes more to whether the judgment itself, as opposed to the Choice Clause, contravenes New York public policy.
we would not hesitate to condemn the [Choice Clauses] as against public policy.] Id. In the same vein, Stamm acknowledges that the availability of remedies in England was the central holding in Roby: our holding in Roby primarily rested upon the adequacy of English law to deter fraud and misrepresentation, to encourage full disclosure, and to provide plaintiffs remedies in the event of a fraud. English law remains adequate to discourage fraud and misrepresentation, and to provide Plaintiff with a remedy should a fraud be proven. Stamm, 153 F.3d at 33.
In his effort to distinguish what otherwise be binding precedent, Tropp argues that the analysis of earlier American courts rested on mistaken premises, since these courts did not have before them, and could not have anticipated, the decisions of the English courts dismissing Tropps counterclaims on the basis of Lloyds Immunity. According to Tropps reading of precedent, previous American courts had only been confronted with Lloyds cases in which American Names had not exhausted their remedies, and these courts upheld the validity of the Choice Clause because they understood that the Names would still be able to pursue remedies for fraud or mount defenses by means of counterclaim. But the
FN83 As Tropp writes, All Federal circuits have relied on what they understood to be US defendants voluntary waiver of their rights to pre-judgment UK due process in defense, but no US court has ever had before it a record which could have shown it the unavailability for post-judgment UK remedies in counterclaim as well. Tropp Memorandum of Law at 5 (emphasis in the original).
[*32] decisions of the English courts in Tropps case, he argues, particularly the application of Lloyds Immunity, show that English law leaves Names without any remedy. Thus, because he exhausted remedies, Tropp argues that his record is the first complete record before an American court showing a total denial of due process, i.e., that there were no remedies available for fraud, and there was no available forum in England wherein he could present the merits of his claims.[FN84]
Tropp acknowledges that the English courts, while rejecting his claims against Lloyds, stated that he could pursue separate claims against his Memberts Agent or Managing Agents. Thus a key element of Tropps argument here is his contention that any legal claims he might have had against Members Agents or Managing Agents were not realizable in practice because, as part of R & R, Lloyds granted itself the right to take the proceeds of any such actions brought by Names against these Agents. According to Tropp, when Lloyds takes the proceeds of these suits, it crosscollateralizes the money and holds the money for seventy years to off-set Names potential future liabilities. Tropp then points
FN84 Tropp thus urges that Lloyds pulled off a "bait and switch "When confronted with claims of lack of due process, Lloyds, in those other [American] cases, pointed to all the remedies that it claimed existed in the UK that gave the hundreds of defendants ample opportunity to have their claims heard, but, in plaintiffs case, Lloyds successfully took the position in the UK that those alternative remedies did not exist, even though it had assured US courts in those other cases that those same remedies were available to members. Tropps Memorandum of Law at 2.
FN85 See Oral. Arg. Tr., Dec. 7, 2007, 30:7-l5.
[*33] out, again, that the previous American decisions such as Roby had assumed that suits against Members Agents and Managing Agents were an alternative avenue open to the Names to pursue remedies in England. See, e.g., Roby, 996 F.2d at 1365-66.
Tropps arguments, however, do not withstand scrutiny. A close reading of Tropps litigation in England shows that he was not denied any raemedy, rather he simply was not victorious on the merits of his claims. When he presented his counterclaims, the court struck them not because relief was never available, but rather because Tropps particular claims of fraud were not sufficiently well-plead to avoid the bar on negligence suits interposed by Lloyds Immunity. In short, Tropps evidence of fraud was found to be insufficient.
It is true that Lloyds Immunity is a curtailment of possible remedies for the Names, but all legal systems employ certain doctrines that narrow the kinds of claims that can be bought, or prevent certain claims from being addressed on the merits. For example, statutes of limitations present time-bars, privileges such as the attorney-client privilege may deprive a plaintiff from procuring crucial evidence, and immunities for public and quasi-public bodies such as absolute immunity for prosecutors prevent certain suits ab initio. Moreover, the particular immunity at play in this case has been part of English law since 1982. Thus, at the time Roby and Stamm were decided, and certainly Ahshenden as discussed more extensively below, it was well-understood by [*34] previous American courts that Lloyds would enjoy immunity for suits other than for fraud.
We note further, although the point is not dispositive to our holding, that Tropps protestations about the3 inability to sue his Members Agent or Managing Agents appear to be vastly overstated (even understanding the facts in the light most favorable to Tropp).[FN86] It is undisputed that the proceeds of suits against agents accrue to Lloyds in the first instance, but Lloyds maintains that the proceeds are only held to cover the individual Names outstanding liabilities, should there be any, much like a security interest.[FN87] Thus, the proceeds of any suit Tropp brought against his agents suits would not be commingled with other Names proceeds, they would be used to offset Tropps individual underwriting liabilities, and to the extent Tropp recovered any excess, he could collect in cash. Although Tropp disagrees with this understanding, it is the sworn testimony of Lloyds in this
FN86 For Troppe argument, see Tropp Memorandum of Law at 17-18.
FN87 Demery Decl. ¶ 35.
[*35] case,[FN88] it isd the understanding of all previous American courts,[FN89] and, pivotally, it is the understanding of the House of Lords itself, which decided that Lloyds could retain such proceeds. As the House of Lords noted in the seminal case, The 1995 amendments [which permit Lloyds to take the proceeds of suits against agents] do not impose any new liability7 on Names. They do not require Names to pay more than they were already obliged to pay. They simply provide for additional security for pre-existing obligatinos. Socy of Lloyds v. Robinson, [] 1 W.L.R. 756, 767 (House of Lords, 1999).
Thus, Tropp had available to him the same panoply at remedies as the previous Names in EQby and Stan The fact that he unsuccessfully exhausted his remedies does not mean that no remedies existed in the first place. We must bear in mind that the presence of procedural and/or substantive law in England that is less favorable to Tropp than laws in the United States does not by itself render the Choice Clause that he signed unreasonable. See
FN90 See Demery Decl. ¶ 35. Also, at oral argument, counsel for Lloyds described what happened to proceeds of suits against Members Agents and Managing Agents; What would have happened, and what happened in a number of cases where Lloyd, s Names did sue their agents was that the recoveries or settlements would be placed into a premiums trust fund which held all their reserves for all, their underwriting. Because the recovery was related to under-writing, it became an underwriting asset and therefore would effectively reduce the amount that he still owed [if] there was an excess, he would have gotten that money. Oral hrg. Tr. Dec. 7, 2007, 27:25 – 25:24.
FN91 See, e.g. Roby, 996 F.2d at 1365 ([T]he contractual obligations imposing certain fiduciary and similar duties on Members and Managing Agents [lead us to] believe that the available remedies and potential damages recoveries suffice to deter deception of American investors).
[*36] Roby, 996 F.2d at 1363 (It is not enough that the foreign law or procedure merely be different or less favorable than that of the United States.).
Accordingly, as Tropp has failed to persuade us that any of the four Bremen factors render the Choice Clause unenforceable, we hbold that Tropp is prohibited by the Choice Clause from seeking remedies against Lloyds in this forum.
III. Enforcement of the Judgment Under New Yorks Recognition Act
In the alternative, or because in any event Lloyds would be required to bring a separate suit in this jurisdiction to enforce its judgment against Tropp, we hold that Tropps complaint fails to state a claim on which relief may be granted. Tropps legal claims as to the enforceability of the English judgment are no different from those of Names in previous cases, wherein New York courts have enforced similar judgments. See Socy of Lloyds v. Edelman, 2005 WL 639412 (S.D.N.Y. Mar. 21, 2005); Socy of Lloyds v. Grace, 278 A.D.2d 169, 718 N.Y.S. 327 (1st Dept 2000).
The Recognition Act provides, in relevant part, that foreign country judgments that are final, conclusive and enforceable where rendered are enforceable in New York. N.Y. C.P.L.R. §§ 5303; see CIBC Mellon Trust Co. v. Mora Hotel Corp. N.V., 100 N.Y. 2d 215, 221 (2003). The general rule of enforceability is subject to two exceptions, first if the judgment "was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law, N.Y. C.P.L.R. § 5304(a) (1), or second if the foreign court did not have personal jurisdiction over the defendant. N.Y. C.P.L.R. § 5304(a) (2).
In addition to these exceptions, the Recognition Act also provides courts with limited discretion to refuse to recognize a foreign country judgment if, inter alia, the judgment was obtained by fraud or "the cause of action on which the judgment is based is repugnant to the public policy of [New York]. N.Y. C.P.L.R. § 5304(b) (3)-(4). Both this Court, in Edelman, 2005 WL 639412, and the Appellate Division, in Grace, 718 N.Y.S.2d 327, have held that Lloyds judgments against American Names arising from Names refusal to pay their outstanding underwriting lasses and Equitas Additional Premium are enforceable under the New York Recognition Act.
FN90 The parties are in agreement that the Recognition Act is controlling. Tropp Memorandum of Law at 3; Lloyds Memorandum of Law at 11.
[*38] Additionally, many sister courts have similarly held,[FN91] either under versions of the Recognition Act, (which are substantially similar to New Yorks],[FN92] or under general common law principles.
Here, Tropp urges that the English judgment is unenforceable because (1) the English system denies Names due process; (2) the discretionary factors counsel against recognition; or (3) if the Recognition Act does not bar enforcement of the English judgment, then the Recognition Act is unconstitutional as applied. We consider each of these arguments in turn.
A. The English System Provides Due Process
Tropps first argument as to why the English judgment should not be enforced under the Recognition Act is that the English system does not provide procedures compatible with due process of law. Tropp points to his litigation record, and the fact that at first he was only permitted to present his defenses against Lloyd' s in a separate action, which he did, with the result that he was defeated by Lloyds Immunity. He believes that this litigation history, along with his allegation that Lloyds would hold and comingle any proceeds of suits he brought against his Members Agent
FN92 For a partial list, see note 3, supra.
FN93 Turner, 303 F.3d 325; Ashenden, 233 F.3d 473. We note that New Yorks enactment of the Recognition Act was specifically intended to be read in the same way as other states enactments. See N.Y. C.P.L.R. § 5308 (This article shall he so construed as to effectuate its general purpose to make uniform the law of those states which enact these provisions.).
[*39] or Managing Agent, shows that the procedures in Names cases are not compatible with due process.[FN93]
This argument is not sustainable. As many courts have already discussed, the proper inquiry under the Recognition Act is whether the judgment in question was obtained from a system that affords due process of law, not whether a particular case was correctly decided. See, e.g., Ashenden, 233 F.3d at 476 (We have italicized the word [system] that defeats the defendants arguments . The statute, with its reference to system, does not support a retail approach.) The reason for the system-level analysis, or wholesale approach, as Judge Posner noted in enforcing a Lloyds judgment in Ashenden is that analyzing individual judgments would in effect give judgment debtors an appeal on the merits, and would be inconsistent with providing a streamlined, expeditious method for collecting money judgments rendered by courts in other jurisdictions. Ashenden, 233 F.3d at 477.
Nevertheless, Tropp attempts to re-define the terms of the Recognition Act by arguing that the Names cases are a special sub-system of English law. Such an argument is unsupported by the plain terms of the statute and by the relevant case-law.[FN94]
FN93 Tropp Reply Memorandum of Law at 2. As Tropp writes, the UK courts failure to make available any remedy prevented consideration of [Tropps] evidence [and] fails to provide minimum due process.
FN94 Tropps lone source of authority for contending that Names cases should be deemed a separate sub-system of English law is his citation to a United States Supreme Court case, Parisi v. Davidson, 405 U.S. 34, 42. (l970), which held that a military serviceman could bring a habeas petition in federal court to obtain discharge from the armed forces, even though the military and civilian
[*40] Applying the Recognition Acts system approach, we follow Ashenden, Edelman, Grace, and all other decisions that have uniformly held that it borders on the risible to argue that the Engloish system, from which ours explicitly derives, does not afford due process. Ashenden, 233 F.3d at 476.[FN95] See also British Midland Airways Ltd. v. International Travel, Inc., 497 F.2d 869, 871 (9th Cir. 1974) (United States courts which have inherited major portions of their judicial traditions and procedure from the United Kingdom are hardly in a position to call the Queens Bench a kangaroo court.); Roby, 996 F. 2d at 1363 (United States courts consistently have found [English courts] to be neutral and just forums); Edelman, 2005 WL 639412 at *3 (It is incontrovertible that the English judicial system provides impartial tribunals and procedures compatible with the requirements of due process of law. (internal citations omitted); CIBC, 100 N.Y.2d at 222 (it is beyond dispute that the English judicial system affords litigants due process); Grace, 278 A.ID,2d at 169, 718 N.Y.S.2d at 328; Porisini v. Petricca, 90 A.D.2d 949, 456 N.Y.S.2d 890 (4th Dept 1982).
courts were distinct systems of justice in the United States. The case had nothing to do with the Recognition Act, however. Clearly, the word system may have different meanings in different contexts.
FN95 As Judge Posner noted in Ashenden whether England has a civilized court system that provides due process is neither a question of fact, nor a question f law, and federal courts in addressing this question may consult any relevant material. 233 F.3d at 477.
[*41] Not only does the English system as a whole provide due process, there is no evidence that it denied due process in Tropps particular case. As discussed above, Tropps arguments turn on his assertion that there were no available remedies in England. He then leans heavily on dicta from Judge Posners opinion in Ashenden, wherein Judge Posner contemplated that if English law denied the Names any opportunity whatsoever to challenge the Equitas Additional Premium, that would amount to a denial of due process:
If Parliament passed a law that the Equitas premium was whatever Lloyds Council said it was, this would not be a denial of a procedural right of any of the names, but rather a revision of the substantive terms of the names relation to Lloyds. But if Parliament went further and precluded the names from challenging in court the applicability of the new law to them, that would be a curtailment of their procedural rights, and doubtless a deprivation of their property without due process of law.
Ashenden, 233 F.3d at 478. Tropp argues that Judge Posners latter scenario is precisely what happened to him. However, it is not, at six separate stages in the proceedings (including his notion to dismissi, the English system afforded Tropp an opportunity to be heard, and he submitted extensive briefings which were meticulously considered by judges. In turn, the judges issued 59 single-spaced pages of opinions (comprising some 178 separately numbered paragraphs). The fact that Tropp did not prevail in any [*42] of these hearings does not mean that the English system lacks due process.
Each of the decisions in Tropps litigation was on the merits. In the first set of proceedings, when Lloyds sued Tropp to collect, the English court upheld certain expedited collection procedures. Many such procedures are familiar to American law, for instance 28 U.S.C. § 1346 provides that a taxpayer cannot bring suit to dispute a federal tax in federal district court until after he or she has paid the disputed tax. Flora v. United States, 362 U.S. 145, 177 (1960) ([Section] 1346(a)(1), correctly construed, requires full payment of the assessment before an income tax refund suit can be maintained in a Federal District Court.) See also Ashenden, 233 F.3d at 479 (noting that pay now, sue later is similar to the federal law system that requires a firm withdrawing from a multi-employer pension plan to pay the plan administrators assessment first and reserve objections for a subsequent suit, 29 U.S.C. §§ 1399(c)(2) and 1401(d)).
In the second set of proceedigs, when Tropp presented his counterclaims, the English courts held that Tropps evidence was insufficient to state a claim of fraud on the part of Lloyds. The courts based their decisions on the fact that Tropp was not suing his individual Members Agent or Managing Agents, but Llolyds, the regulator of the market, and that Lloyds in its regulatory capacity has a well-established statutory immunity that protects it from suits for negligence. Not only are statutory immunities a [*43] very familiar concept in American law, especially with respect to bodies charged with certain public functions,[FN96] but moreover the presence of statutory immunities has nothing to do with due process, since, as Judge Posner pointed out in Ashenden, due process under the Recognition Act is concerned only with procedural due process, not substantiave due process. 233 F.3d at 480 ([T]he cases that deal with international due process talk only of procedural rights. The only substantive basis that the [Recognition Act] recognizes for not enforcing a foreign judgment is that the cause of action on which the judgment is based is repugnant to public policy ).
Further, we note that even at the time that Judge Posner crafted his Ashenden hypothetical on what would constitute a complete denial of due process, he was aware that certain Names had presented their arguments on counterclaims and had not succeeded. In fact, Judge Posners Ashenden decision described the procedure by which Names were required to bring their defenses as counterclaims, cited to Socy of Lloyds v. Jaffray, 2000 WL 1629463[, Transcript] (Queens Bench Division (Comm. Court), Nov. 3, 2000) (Creswell, J.), and noted that Some have now done so, and lost. Ashenden 233 F.3d at 478. Jaffray was a consolidated litigation to bring all claims for fraud against Lloyds in one
FN96 See, e.g., U.S. Const. amend. XI (state sovereign immunity); Kalina v. Fletcher, 522 U.S. 118 (1997) (prosecutorial immunity); Pierson v Ray, 386 U.S. 547, 554 (1967) (judicial immunity).
[*44] proceeding. Approximately 200 non-accepting Names (a number of whom were U.S. Names) brought counterclaims against Lloyds arguing that Lloyds had made fraudulent misrepresentations to them about, among other things, the efficacy of its regulation. Following 64 days of trial, the Queens Bench rendered judgment in favor of Lloyds, largely on the grounds that there was not enough evidence of actual actual fraud on the part of Lloyds.
Tropp argues that Jaffray is inapposite on a number of fronts, namely, that he did not join that litigation, that the Jaffray Names asserted claims of fraud from the 1980s only whereas Tropps claims fo fraud arose from 1995-96, and that in Tropps case the court construed Lloyds immunity in a new and unprecedented way.[FN97] But none of these arguments alter the basic fact that the English courts found Tropps evidence of fraud on the part of Lloyds to be unavailing. Nor does it change the ability of Tropp to pursue actions against his Members Agent or his Managing Agent, as previously discussed.
In sum, nothing within the constellation of claims presented in Tropps complaint, even if true, could lead to the conclusion that the English system lacks procedures compatible with due process of law.
FN37 Tropp also asserts a number of other, less significant differences between his counterclaims and the Jaff ray litigation, such as the tact that the Jaff ray Names claimed that Lloyds failures arose from omission, whereas tropp asserted positive wrongful acts; and the Jaff ray Names sought recission of their contracts with Lloyds whereas Tropp only sought enforcement and an accounting.
[*45] B. The Recognition Acts Discretionary Factors
Tropp next argues that several of the discretionary factors related to the Recognition Act counsel against any potential enforcement. It is clear that these are not relevant.
First, Tropp claims that the judgment against him was obtained by fraud, as set forth in C.P.L.R. § 5304(b)(3). Even assuming, arguendo, that Tropps complaint states a claim that Lloyds perpetrated a fraud on him, such a claim is patently insufficient under the terms of the statute. As this Court noted in Edelman, 2005 WL 639412 at *5, The proper inquiry [under the Recognition Act] is not whether the underlying relationship that gives rise to the plaintiffs claims is tinged with fraud, but whether the foreign judgment itself was obtained by fraud. (citing Ackermann v. Levine, 788 F.2d 830, 841 (2d Cit. 1986); Koehier v Bank of Bermuda Ltd., No. M18302 (CSH), 2004 WL 444101, at *15-16 (S.D.N.Y. Mar. 10, 2004); Fairchild, Arabatzis & Smith, Inc. v. Prometco (Produce & Metals) Co., 470 F.Supp. 610, 615 (S.D.N.Y. 1979)). Quite simply, Tropp has not stated a nonfrivolous claim that Lloyds worked any kind of fraud on the English courts.
The second discretionary factor Tropp invokes is that the cause of action sued on violates the public policy of the state of New York.[FN98] C.P.L.R. § 5304(b)(4). But, as both Grace and Edelman
FN98 Tropp Memorandum of Law, at 18-19.
[*46] have pointed out, the cause of action underlying Lloyds judgments against the Names is simple breach of contract,[FN99] and causes of action for breach of contract do not violate the public policy of New York. See Grace, 718 N.Y.S.2d at 328 (English judgments against Names do not violate any public policy of New York or the United States; Edelman, 2005 [WL] 639412 at *5-6 (holding under New York law that the English judgmetns are enforceable and consistent with public policy.) Similarly, numerous other courts have held that Lloyds judgments do not violate the public policies of respective states. See Turner, 303 F.3d at 333 (holding that Lloyds action to collect the Equitas Premium is not contrary to Texas public policy); Ashenden, 233 F.3d at 478-70 (Illinois public policy); Mullin, 255 F.Supp.2d at 474-78 (Pennsylvania public policy); Siemon-Netto, 457 F.3d at 99-100 (District of Columbia public policy), Reinhart 402 E.3d at 995 (New Mexico public policy).
Tropp is correct that the cause of action in Lloyds case against him was not a run of the mill, or plain vanilla contract claim.[FN100] As discussed above, Lloyds appointed a substitute agent, AUA9, who signed the Equitas Contract on behalf of all Names. This was done pursuant to a Byelaw that had been in existence at the
FN99 Tropp admits that the cause of action sued on was breach of contract, but argues that the contract was imposed on him unilaterally almost nine years after he signed the General Undertaking, and that Byelaws of Lloyds have the force of statute in England. Tropp Memorandum of Law, at 18-20.
FN100 Tropp Memorandum of Law, at 18-20.
[*47] time that Tropp joined Lloyds and agreed to be bound by all Lloyds current or future Byelaws.[FN101] Regardless of whether such a scheme would be acceptable under New York contract law, we cannot say that the English courts decision to bind the Names under these circumstances is repugnant to the public policy of New York. See Siemon-Netto, 457 F.3d at 94 (It was no doubt risky for the [Names] to agree to be bound by future Byelaws in this way. But the General Undertaking was no contract of adhesion); Reinhart, 402 F.3d at 996-97 (noting that the Names were highly sophisticated investor[s] who had to pass a means test.).
Thus, none of the discretionary factors in C.P.L.R. § 5304(b) render the English judgment against Tropp unenforceable under the Recogntion Act.
C. The Recognition Act is Not Unconstitutional as Applied
Tropps last argument — that if the Recognition Act does not bar enforcement of the English judgment, then the Recognition Act as applied to his case is unconstitutional under the Due Process Clause of the Fifth Amendment – is also meritiess.
Tropp cites Bachchan v India Abroad Publications Inc., 154 Misc.2d 228, 585 N.Y.S..2d 661 (Sup. Ct. 1992) for the proposition that an English courts reversal of the burden of proof in a way
FN101 Tropps duly executed General Undertaking contained a clause that specified that he would be bound by any future Bye laws promulgated by the Lloyds Council. See Tropp Decl. Ex. B [General Undertaking] at ¶ 1.
[*48] that runs afoul of a constitutional protection may render a foreign judgment unenforceable under the United States Constitution.[FN102] In Bachchan, a New York court refused to recognize an English libel award because English libel law places the burden of proof on the media to prove the truth of their statements. But the decision in Bachchan was based on significant, substantive differences between English and New York libel law. As many courts in Lloyds cases have already noted, the substantive differences between English and United States contract law, by contrast, are minimal, and do not catty nearly the same public policy implications as the differences between American and English libel law. See, e.g., Siemon-Netto 457 F.3d 94, 101-02 (D.C. Cir. 2005) rejecting the argument that American courts' refusal to recognize English libel law judgments is persuasive authority in Lloyds cases, where judgments were based on breach of contract). Accordingly, we reject the argument that the Recognition Act as applied to Tropp is unconstitutional.
FN101 See Tropps Memorandum of Law at 22-23. Tropp also attempts to argue that the Equitas Contract was a contract of adhesion because it was signed on his behalf by a substitute agent and therefore is not enforceable here under D.H. Overmyer v. Frick Co. 405 U.S. 174, 180 (1972) and Fuentes v. Shevin, 407 U.S. 67 (1972). See Tropp Memorandum of Law at 22-23 & n. 6. Yet, Lloyds is not seeking to enforce that contract here, but rather an English judgment. The standard for doing so does not require that we find the Equitas Contract itself co be binding under domestic contract law.
[*50] Topps travails with Lloyds have been epic, and have resulted in enormous losses that Tropp never could have foreseen when he joined Lloyds in 1987. Nevertheless, Tropps current legal claims against Lloyds are not sustainable. Tropp signed a contract wherein he agreed to be bound by all of Lloyds past, present or future Byelaws, and he further agreed to pursue claims against Lloyds only in England. When he pursued them there, he lost, but only after presenting his arguments in five different fora.
Thus, Tropps motion for partial summary judgment is denied, and Lloyds motion to dismiss is granted pursuant to Fed. R. Civ. P. 12(b)(3) for improper venue, or, in the alternative, pursuant to Fed. R. Civ. P. 12(b) (6) for failure to state a claim. Tropps complaint is dismissed in its entirety, and the Clerk of the Court is directed to close this case.
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