of June 26, 2000
Nos. 99 -
3195, 99-4064, 00-1066, 00-1371, 00-1430 and 00-1702
|THE SOCIETY OF LLOYD'S,||) Appeal from the United States|
|) District Court for the Northern|
|) District of Illinois|
|) No: 98 C 5335|
|JAMES FREDERICK ASHENDEN||) Hon. Harry D. Leinenweber|
|and MARY JANE ASHENDEN,||) Judge Presiding|
|THE SOCIETY OF LLOYD'S,||) Appeals from the United States|
|) District Court for the Northern|
|) District of Illinois|
|) No: 99 C 2651|
|Eugene G. Callahan et al. (No. 99-4064)||) Hon. Harry D. Leinenweber|
|Henry D. Paschen, Jr. (No. 00-1066)||) Judge Presiding|
|Patrick Collins (No. 00-1371)||)|
|Eugene G. Callahan et al. (No. 00-1430)||)|
|Patrick Collins (No. 00-1702)||)|
CONSOLIDATED RESPONSE BRIEF OF THE SOCIETY OF LLOYD'S
Michael T. Hannafan
June 30, 2000
TABLE OF CONTENTS
|Table of Authorities||
|Statement of Issues||
|Relevant Illinois Statutes||
|Statement of the Case||
|Introduction to Consolidated Brief||
|Part 1 - The District Court Correctly Found That The English Judgments Are Enforceable (Appeal Nos. 99-3195, 99-4064, 00-1066, 00-1371)||
|Statement of Facts||
|I. The Society of Lloyd's||
|II. The Names Agreed to Be Bound by the Rules and Regulations of the Lloyd's Market||
|III. The Names Agreed to Have All Disputes with Lloyd's Decided in the English Courts Under English Law||
|IV. Reconstruction & Renewal and Equitas Provided Needed Reinsurance for the Names and Policyholders||
|A. The Crisis in the Market||
|B. Formation of the Lloyd's Reconstruction & Renewal Plan||
|C. Names Were Informed of the Reconstruction & Renewal's Terms||
|D. Implementation of R&R||
|V. The Names Challenged R&R and the Equitas Contract in the English Courts||
|A. The Names' First and Second Rounds of Defenses 14||
|1. The English Trial and Appellate Courts Upheld R&R and Found the Equitas Contract Enforceable||
|2. The English Courts Held That All Names Were Free to Pursue Their Alleged Fraud Claims||
|B. The Names' Third Round of Objections 18||
|1. The English Courts Rejected the Names' "Bad Faith" Defense||
|2. The Courts Heard the Names' Challenge to the Amounts ("Quantum") of the Equitas Premiums and Found Lloyd's Had Justified the Amounts||
|VI. The English Court Entered Judgments for the Equitas Premium Against the Names||
|VII. The Names Have Declined to File Any Fraud Claims or Join Other Names Who Are Suing Lloyd's in England||
|Summary of Argument||
|I. The English Judgments Are Enforceable||
|A. Standard of Review||
|B. Illinois Foreign Money-Judgment Recognition Act||
|C. The Names Have Waived Their Public Policy Objection||
|D. Whether the English Courts Provided Procedures Compatible With Due Process of Law is the Only Issue Presented for Review||
|E. Due Process Requires Notice and a Hearing||
|F. Recognition of the Judgments Does Not Require that English Procedures Be Identical with Ours||
|G. English Courts Provide Due Process||
|H. The English Judgments Against the Names Are Enforceable in Illinois||
|1. The Names Had a Hearing Where All Their Defenses to Enforcement of the Equitas Contract Were Heard and Decided||
|2. The English Courts Have Already Rejected the Names' Argument that the Equitas Contract Is An Impermissible Contract of Adhesion or "Elaborate Cognovit"||
|3. The Validity of the Pay-Now, Sue-Later Clause Was Litigated in England, and Its Enforcement Did Not Deprive the Names of Due Process||
|4. The Validity of the Conclusive Evidence Clause Was Litigated in England and The Courts Found Lloyd's Had Complied With It||
|I. The District Court Erred in Stating that the Ashendens Did Not Have 35 a "Meaningful Pre-Deprivation Hearing"||
|J. Under Its Own Approach, the District Court Also Correctly Found that the Ashendens Were Provided Due Process||
|1. R&R and Equitas Were Necessary to Save the Lloyd's Market, Obtain Reinsurance for the Names and Ensure Payment of Policyholder Claims||
|2. The Names Had an Opportunity to Challenge the Amount of the Premium and an Opportunity to Claim It As Part of Their Damages in a Fraud Case||
|Part 2 - The District Court Correctly Entered Judgment on the Pleadings in Berkos (Appeal Nos. 99-4064, 00-1066, 00-1371)||
|Statement of Facts||
|I. The Berkos Names Admitted That the Facts and Legal Issues of Their Case Were Identical to the Ashenden Case||
|II. The Berkos Names Also Admitted the Material Allegations in Lloyd's Filing of the English Judgments||
|III. The Names Never Served Any Discovery||
|Summary of Argument||
|I. Standard of Review||
|II. The District Court Correctly Relied Upon Only the Pleadings and Its Prior Ashenden Decision||
|III. There Was No Need for Discovery or to Convert the Motion to One for Summary Judgment||
|Part 3 - The District Court Correctly Found That Patrick Collins’ Counterclaim Should Have Been Brought in England (Appeal No. 00-1702)||
|Statement of Facts||
|I. Collins Admits That His Escrowed Funds in England Belong to Lloyd's||
|II. Collins Owes Two Separate Debts to Lloyd's For Which He Will Receive Credit for the Amount in Escrow||
|Summary of Argument||
|I. Collins Must Pursue His Counterclaim in England Under the Choice of Forum Clause in the General Undertaking||
|II. Collins' Counterclaim is Foreclosed by the English Courts's Decisions on Application of Litigation Proceeds||
|Part 4 - The District Court Correctly Denied the Motion to Strike the Citations 50to Discover Assets in Berkos (Appeal No. 00-1430)||
|Objection to Motion for Certification of State Law Question to Illinois Supreme Court||
|Statement of Facts||
|I. Lloyd's Served Citations to Discover Assets After the English Judgments Were Filed With the Court||
|II. The Citations Informed Each Name of the Filing, the English Judgment, Prohibition on Transfer of Assets and Availability of Exemptions||
|Summary of Argument||
|I. The English Judgments Were Enforceable When Filed With the District Court||
|II. The Citations Substantially Complied With the Illinois Statute and Did Not Prejudice the Names||
TABLE OF AUTHORITIES
|Allen v. Lloyd's of London, 94 F.3d 923, 931 (4th Cir. 1996)||
9, 28, 34, 38
|American National Bank v. Colby, 19 Ill. App. 3d 1051, 1052 (1st Dist. 1974)||
|Arab Monetary Fund v. Hashim, 2000 WL 684801 (9th Cir. 2000)||
|Arubuthnott v. Fagen and Feltrim Underwriting Agencies, Ltd., 3 Re LR 345 (H.L. 1991)||
|Ashenden, et al. v. Lloyd's of London, et al., 1996 WL 717464(N.D. Ill. 1996)||
8, 35, 49
|Ashenden v. Lloyd's, 934 F. Supp. 1992 (N.D. Ill. 1996)||
|Bonny v. The Society of Lloyd's, 3 F.3d 156, 158 (7th Cir. 1993)||
5, 6, 8, 9, 25, 35, 49
|British Midland Airways, Ltd. v. International Travel Inc., 497 F.2d 869 (9th Cir. 1974)||
|Canadian Imperial Bank of Commerce v. Saxony Carpet Co., 899 F. Supp.1248, 1252 (S.D.N.Y. 1995), aff'd. 104 F.3d 352 (2nd Cir. 1996)||
|Colonial Bank v. Worms, 550 F. Supp. 55, 58 (S.D.N.Y. 1982)||
|Deeny v. Gooda Walker, Ltd., Queen's Bench Division (Commercial Court), the "Times" 7 October 1994||
|Drinan v. A.J. Lindemann & Haverson Co., 238 F.2d 72, 74 (7th Cir. 1956)||
|El Ajou v. First National Bank of Chicago, 1993 WL 393051 (N.D. Ill., 1993)||
|Forseth v. Village of Sussex, 199 F.3d 363, 368 (7th Cir. 2000)||
|Hanlon v. Town of Milton, 186 F.3d 831, 835 (7th Cir. 1999)||
|Haynsworth v. Corporation of Lloyd's, 121 F. 3d 956, 969(5th Cir. 1997), cert. denied, 118 S. Ct. 1513 (1988)||
|Hilton v. Guyot, 159 U.S. 113, 202 (1895) aff'd. 453 F.2d 435, 440 (3d Cir. 1971), cert. denied 405 U.S. 1017 (1972)||
|Hugel v. Corporation of Lloyd's, 999 F.2d 206, 210 (7th Cir. 1993)||
|Hunt v. BP Exploration Co., 492 F. Supp. 885, 901||
|Ingersoll Milling Machine Co. v. Granger, 833 F.2d 680, 687 (7th Cir. 1987)||
27, 34, 33
|Kasper v. Saint Mary of Nazareth Hospital, 135 F.3d 1170, 1174 (7th Cir. 1997)||
|Laborers National Pension Fund v. ANB Investment Management and Trust Co.,26 F.Supp. 2d 1048, 1050 (N.D. Ill. 1998)||
|La Societe Anonyme Goro v. Conveyor Accessories, Inc., 286 Ill. App. 3d 867, 871 (2nd Dist. 1997)||
|Liberty Lobby, Inc. v. Dow Jones & Co., Inc., 838 F.2d 1287, 1300, n.8 (D.C. Cir. 1988)||
|Lipcons v. Underwriters at Lloyd's, London, 148 F.3d 1285 (11th Cir. 1998)||
|Lloyd's v. Grace, No. 604065/98, Supreme Court of the State of New York, County of New York||6, 17, 25, 38|
|Makula v. Mason, 172 F.3d 493, 497 (7th Cir. 1999)||51|
|Marchant v. Higgins  2 Lloyd's 31 (decided December 1995)||12|
|Matthews v. Eldridge, 424 U.S. 319 (1976)||35|
|Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)||26|
|Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449 (7th Cir. 1998)||44|
|Northwest Airlines, Inc. v. County of Kent, Michigan, 114 S. Ct. 855, 861-62 (1994)||26|
|Palmer v. Beverly Enterprises, 823 F.2d 1105, 1111 (7th Cir. 1987)||26|
|Pancotto v. Sociedade de Safaris de Mozambique, 422 F.Supp. 405, 408 (N.D. Ill. 1976)||45|
|Pilgrim v. Littlefield, 92 F.3d 413, 417 (6th Cir. 1996)||47|
|Richards v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998)||9, 17|
|Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 958 (10th Cir.), cert. denied, 506 U.S. 1021 (1992)||9|
|Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1365-66 (2d Cir.), cert. denied, 510 U.S. 945 (1993)||9|
|Searls v. Glasser, 54 F.3d 1061, 1068 (7th Cir. 1995)||43, 46|
|Sere v. Board of Trustees of Univ. of Illinois, 852 F.2d 285, 287-89 (7th Cir. 1988)||25|
|Shell v. R.W. Sturge Ltd., 55 F.3d 1227, 1231 (6th Cir. 1995)||9|
|Somportex Ltd. v. Philadelphia Chewing Gum Corp., 318 F. Supp. 161, 166 (E.D. Pa. 1970)||28|
|Stamm v. Barclays Bank of New York, 153 F.3d 30 (2nd Cir. 1998)||9|
|Sweat v. Peabody Coal Co., 94 F.3d 301, 304 (7th Cir. 1996)||24|
|The Society of Lloyd's v. Fraser & Others ("Fraser I") (Reproduced in Lloyd's Supplemental Appendix)||19, 20, 21, 29, 33, 34, 39, 44, 49, 50|
|The Society of Lloyd's v. Fraser & Others ("Fraser II") (Reproduced in Lloyd's Supplemental Appendix)||29, 44|
|The Society of Lloyd's v. Fraser & Others ("Fraser-App. Ct.") (Reproduced in Lloyd's Supplemental Appendix)||10, 12, 14, 15, 18, 19, 21, 29, 30, 33, 34, 39, 44, 49, 50|
|The Society of Lloyd's v. Dennis Hugh Fitzgerald Leighs & Others ("Leighs I") (Reproduced in Lloyd's Supplemental Appendix)||10, 11, 13, 14, 16, 17, 29, 30, 31,44|
|The Society of Lloyd's v. Leighs, Lyons & Wilkinson ("Leighs-App. Ct.") (Reproduced in Lloyd's Supplemental Appendix)||14, 15, 16, 29, 30, 32, 44|
|The Society of Lloyd's v. Robinson,  1 WLR 756,  1 All ER (Comm) 545 (House of Lords, March 25, 1999)||48, 50|
|The Society of Lloyd's v. David Walter Wilkinson and Others ("Leighs II ) (Reproduced in Lloyd's Supplemental Appendix)||11, 14, 15, 16, 17, 29, 31, 32, 33, 44,|
|Twohy v. First National Bank of Chicago, 758 F.2d 1185, 1193 (7th Cir. 1985)||45|
|Toronto Dominion Bank v. Hall, 367 F. Supp. 1009, 1016 (E.D. Ark. 1973)||27|
|United States v. James Daniel Good Real Property, 510 U.S. 43 (1993)||35|
|United States v. Wood, 925 F.2d 1580, 1582 (7th Cir. 1991)||45|
|Vrozos v. Sarantopoulos, 195 Ill. App. 3d 610 (1st Dist. 1990)||55|
|Waterman Steamship Corp. v. Gay Cottons, 414 F2d 724, 735 (9th Cir. 1969)||26|
|735 ILCS 5/12-618, et seq.||24|
|735 ILCS 5/12-619-620||25, 54|
|735 ILCS 5/12-621||25, 26, 51, 54|
|735 ILCS 5/12-650, et seq.||24, 55|
|735 ILCS 5/12-652(a)||54|
|735 ILCS 5/2-1402||56|
|110 S.H.A. 12-601, 603, 606||55, 56|
|Rule 4, F.R.C.P.||56|
|Rule 12(c), F.R.C.P.||44|
|Rule 44.1, F.R.C.P.||45|
|Rule 201, Federal Rules of Evidence||45|
|Rule 102, Illinois Supreme Court Rules||56|
|Rule 277, Illinois Supreme Court Rules||52|
|Section 1402, Illinois Code of Civil Procedure||56|
Appellants’ jurisdictional statements in Lloyd’s v. Ashenden, Lloyd’s v. Callahan, Lloyd’s v. Collins and Lloyd’s v. Paschen are correct and complete.*[ftnote 1]
STATEMENT OF ISSUES
1. Whether the District Court correctly decided in Ashenden and Berkos that the judgments entered against the Names by the English court, after notice and 25 days of judicial hearings where the Names were represented by counsel, were "rendered under a system that provides procedures compatible with the requirements of due process of law" and are, therefore, enforceable in Illinois.
2. Whether the District Court correctly granted judgment on the pleadings in Berkos where the Names admitted the material allegations in Lloyd’s "complaint", admitted that the English judgments against the Ashendens and them were entered in the same proceedings and admitted that their case and Ashenden involved the same issues which could be decided in a single proceeding.
3. Whether the District Court correctly decided that Patrick Collins’ counterclaim in Berkos should have been filed in England under his General Undertaking agreement with Lloyd's.
4. Whether the District Court correctly denied the Names’ motion in Berkos to strike citations to discover assets where they were served under a valid English judgment and where they substantially complied with Illinois law by advising the Names of their rights.
RELEVANT ILLINOIS STATUTES
Illinois’ Uniform Foreign Money-Judgments Recognition Act, 735 ILCS 5/12-618 et seq., and Uniform Enforcement of Foreign Judgments Act, 735 ILCS 5/12-650 et seq., are reproduced in Lloyd’s Supplemental Appendix as Exhibit J. The issues on appeal arise under Sections 12-620 and 12-621(a)(1) of the Recognition Act.
STATEMENT OF THE CASE
The Society of Lloyd’s ("Lloyd’s") filed these cases in order to enforce valid judgments it had obtained against all of the defendants in England on March 11, 1998. The defendants are underwriting members of Lloyd’s, called "Names," and the judgments were for reinsurance premiums which they owed in connection with their insurance underwriting activity at Lloyd’s. Pursuant to agreements between the Names and Lloyd's called General Undertakings, Lloyd’s claims for the premiums were litigated in England under English law.
Illinois law provides that upon the filing of a final and conclusive foreign judgment with an Illinois court, it is enforceable in the same manner as a judgment of a sister state. Illinois law also provides for certain objections to enforcement. The Names in both the Ashenden and Berkos cases opposed enforcement of the English judgments based on identical claims: (a) that English courts do not provide procedures "compatible with the requirements of due process of law" and (b) that the cause of action on which the judgments are based is repugnant to the "public policy" of Illinois.
In Ashenden, the Ashendens filed a motion for summary judgment asking the District Court to find the English judgments unenforceable on these grounds. Lloyd’s then filed a cross-motion for summary judgment. In a decision dated April 22, 1999, the District Court rejected the Ashendens’ objections and entered summary judgment for Lloyd’s, finding the English judgments against them enforceable. The Ashendens then asked the District Court to reconsider its judgment but it denied the motion on August 18, 1999.
The Berkos case was filed after the Ashenden decision. After the District Court’s April 22, 1999, judgment in Ashenden, the Names in Berkos asked that their case be reassigned to the District Court where Ashenden was still pending (on the motion to reconsider) because both it and Ashenden were related and "susceptible of disposition in a single proceeding." Lloyd's then filed a motion for judgment on the pleadings in Berkos, which was granted on October 29, 1999. The District Court held that the English judgments also were enforceable against the Berkos Names.
One of the Names in Berkos, Patrick Collins, filed a counterclaim against Lloyd’s. Collins alleged that he was entitled to certain credits against his English judgment. On Lloyd’s motion to dismiss for improper venue, the District Court dismissed Collins’ counterclaim on February 16, 2000, finding that it should have been brought in England pursuant to the General Undertaking.
Shortly after Lloyd’s filed Berkos, it also filed and served citations to discover assets upon the Berkos Names. The Names filed a motion to strike the citations but never asked the court to rule upon it. After the District Court granted judgment on the pleadings, Lloyd’s asked the court to deny the Names’ motion to strike the citations, which it did on January 14, 2000.
Since judgment in Berkos, Lloyd’s has taken enforcement actions against certain Names. In response to the judgment in Berkos, however, six of the Names filed for bankruptcy in the United States Bankruptcy Court for the Northern District of Illinois. In re Collins, No. 99 B 31891; In re Calvello, No. 99 B 35685; In re (Patricia) Danloe, No. 99 B 35704; In re Sills, No. 99 B 35684; In re Flesvig, No. 00 B 00225; In re Hart, No. 99 B 37881. On Lloyd’s motion, Judge Erwin Katz dismissed In re Collins on April 12, 2000, based on Mr. Collins’ "bad faith" filing of bankruptcy for the purpose of "frustrating Lloyd’s." After Lloyd’s filed a similar motion in In re Danloe and stated that it intended to do so in In re Hart, In re Sills and In re Flesvig, those Names voluntarily dismissed their bankruptcy filings. Lloyd’s intends to move to dismiss Mr. Calvello’s bankruptcy for bad faith as well. All these Names who filed for bankruptcy are participating in the appeal of the Berkos judgment.
INTRODUCTION TO CONSOLIDATED BRIEF
Pursuant to this Court’s order, Lloyd’s is submitting this consolidated brief in response to appellants’ three briefs in the Ashenden and Berkos cases. As stated above, four issues are raised by the appeals. Therefore, Lloyd’s has divided this brief into four parts with each part addressing a separate issue. For clarity and convenience, each part contains a separate statement of the relevant facts and argument.
THE DISTRICT COURT CORRECTLY
FOUND THAT THE ENGLISH JUDGMENTS
In Part 1, Lloyd’s explains why the District Court, in both the Ashenden and Berkos cases, correctly found that the March 11, 1998, English judgments against all of the Names were rendered under a system that provides procedures compatible with the requirements of due process of law and that the English judgments are, therefore, enforceable in Illinois pursuant to the Illinois Uniform Foreign Money-Judgments Recognition Act. Therefore, Lloyd’s cites to the record in both Ashenden and Berkos. Lloyd’s will specify if the citation is to the Berkos record, otherwise the citation is to the Ashenden summary judgment record. In Part 2, Lloyd’s explains why the District Court correctly entered judgment on the pleadings against the Names in Berkos.
STATEMENT OF FACTS
I. The Society of Lloyd’s
Lloyd's is not an insurer and does not insure risks. (The Society of Lloyd’s Statement of Uncontested Material Fact, p.1). Rather, pursuant to a succession of Parliamentary Acts (the Lloyd's Acts 1871-1982), Lloyd's is charged with the duty and authority to regulate an international insurance market located in London, England. (Id., p. 1) The only insurers in the Lloyd's market are underwriting members of Lloyd's who are known as Names. (Id., p.1) Groups of Names underwrite insurance policies through "syndicates, " which are managed by managing agents. Managing agents are insurance professionals (organized as corporations or partnerships) that manage a syndicate’s underwriting, collection of premiums, payment of claims and payment of profits to Names. Managing agents owe a contractual duty to the Names to manage the syndicate with reasonable care and skill. Bonny v. The Society of Lloyd's, 3 F.3d 156, 158 (7th Cir. 1993).
II. The Names Agreed to Be Bound by the Rules and Regulations of the Lloyd's Market
The Names in these cases became Names at various times between 1977 and 1988. (Movants’ Statement of Uncontested Material Fact, ¶¶ 13 - 14; Berkos’ Names’ Answers, ¶¶ 2 - 19). As a condition of their membership or continued membership in Lloyd’s, they signed General Undertakings in which they agreed to comply with the Lloyd's Acts and any regulations issued by Lloyd's in connection with their activities in the Lloyd's market. (Attached as exhibits to the Registration of Foreign Money Judgment in Ashenden and the Filing of Foreign Money Judgments by Judgment Creditor in Berkos). All Names were required to appear in England and be advised personally of the risks of underwriting at Lloyd's and to sign the General Undertaking. See, Lloyd’s v. Grace, No. 604065/98, Supreme Court of the State of New York, County of New York (Included in Lloyd’s Supplemental Appendix, "SA," as Exhibit H, p.3.) Names also had to demonstrate that they had sufficient capital to assume the underwriting risks involved. (Exhibit 8 to Ashendens’ Motion for Summary Judgment, p. 5).
Pursuant to the Lloyd’s Acts, the Names could participate in the Lloyd’s market only through an underwriting agent, with whom they would contract and to whom they would entrust management of their underwriting activity. (Movants’ Statement of Uncontested Material Fact, p. 5). See also, Bonny, 3 F.3d at 158. The Ashendens, for example, initially contracted with a member's agent (later directly with a managing agent) and "delegated to the Agent sole management and control of the Underwriting" and agreed that they "will not in any way interfere with the exercise of such management or control." (Ex. 22 to Ashendens’ Motion for Summary Judgment, pp. 39-40). Among the powers delegated to an agent was the sole authority to make arrangements for reinsurance of the syndicates’ policies which would then be paid for by the Names. (Ex. 22 to Ashendens’ Motion for Summary Judgment, p. 10, 15, 36; Lloyd’s Statement of Uncontested Material Fact, p. 2). In return for these exclusive powers, those agents owe a fiduciary duty to their Names. Bonny, 3 F.3d at 158.
Names also agreed that the Council of Lloyd’s could appoint substitute agents for them. (Ex. 22 to Ashendens' Motion for Summary Judgment, p. 13, 41). Lloyd's authority to appoint such an agent was specifically set forth in the Lloyd's Act 1982 Sch. 2, §18, and a byelaw implementing that provision was enacted in 1983. (Ex. 10 to Ashendens’ Motion for Summary Judgment, p. 57, 60) ("the Council may...make byelaws for empowering the Council to nominate and appoint an underwriting agent (in this paragraph referred to as the ‘substitute agent’) to act as agent or sub-agent for an underwriting member...where...it is essential for the proper regulation of the business of insurance at Lloyd’s") (SA Ex. A, pp. 6 - 7). These terms governed the Names' underwriting activity at Lloyd’s from the time they first became Names and they have never claimed that they did not understand and agree to these terms.
III. The Names Agreed to Have All Disputes with Lloyd’s Decided in the English Courts Under English Law
The Names agreed to choice of forum and law clauses in their General Undertakings. Section 2.1 of the General Undertaking provides that: "The rights and obligations of the parties arising out of or relating to the Member's membership. . . shall be governed by and construed in accordance with the laws of England." (Attached as Exhibits to the Registration of Foreign Money Judgments in Ashenden and the Filing of Foreign Money Judgments by Judgment Creditor in Berkos). Section 2.2 states as follows:
"2.2 Each party hereto irrevocably agrees 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 Member's membership of, and/or underwriting of insurance business at, Lloyd's and that accordingly any suit, action or proceeding (together in this Clause 2 referred to as "Proceedings") arising out of or relating to such matters shall be brought in such courts and, to this end, each party hereto irrevocably agrees to submit to the jurisdiction of the courts of England and irrevocably waives any objection which it may have now or hereafter to (a) any Proceedings being brought in any such court as is referred to in this Clause 2 and (b) any claim that any such Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any Proceedings brought in the English courts shall be conclusive and binding upon each party and may be enforced in the courts of any other jurisdiction."
In Ashenden, et al., v. Lloyd's of London et al., 1996 WL 717464 (N.D. Ill. 1996), these choice of forum and law agreements were held to be valid and enforceable. See also Ashenden v. Lloyd's, 934 F. Supp. l992 (N.D. Ill. 1996) (Motion to remand denied.) In that case, three of the same Names on this appeal -- the Ashendens and Patrick Collins -- plus many other Illinois Names, alleged that they had been fraudulently induced by Lloyd's and certain members' agents to become Names and participate in risky underwriting syndicates. They claimed violations of the Illinois securities laws, common law fraud and the Illinois consumer fraud act. Lloyd's moved to dismiss based on the forum selection clauses in the General Undertakings. The Names then argued that forcing them to pursue their claims in England under English law was unreasonable and contrary to Illinois' public policy. The district court disagreed: "The fundamental flaw with the plaintiffs' assertions is that the Seventh Circuit addressed and dismissed similar arguments while enforcing identical forum selection and choice of law clauses" in Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993). Ashenden, 1996 WL 717464 at 2.
In Bonny, this Court examined identical General Undertakings signed by various Names who were alleging violations of the federal securities laws. The Bonny court upheld the choice of law and forum agreements and found that "several remedies in England vindicate plaintiffs' substantive rights." Bonny, 3 F.3d at 161. See also, Hugel v. Corporation of Lloyd’s, 999 F.2d 206 (7th Cir. 1993). The Second, Fourth, Fifth, Sixth, Ninth, Tenth and Eleventh Circuits also have enforced these General Undertakings and found that remedies available under English law are adequate.*[ftnote 2] In all these cases, Lloyd’s Names were told to take their claims against Lloyd’s to England. However, none of the Names in these cases before this Court did so.
IV. Reconstruction & Renewal and Equitas Provided Needed Reinsurance for the Names and Policyholders
A. The Crisis in the Market
In the late 1980's and early 1990's, Names in the Lloyd’s market incurred aggregate underwriting losses of $12 billion. (Lloyd’s Statement of Uncontested Material Facts, p. 2). Many Names found that their syndicates were unable to purchase affordable or any reinsurance in order to close the syndicates at the end of the year of account. Consequently, the Names faced open-ended liabilities. (Id., pp. 2-3). At the same time there was a significant amount of litigation involving Lloyd’s market participants - primarily claims by Names against members' agents, managing agents and auditors, but also including claims by Lloyd’s against Names.*[ftnote 3] (Id., p. 3). These issues threatened the continued viability of the Lloyd’s insurance market and placed policyholders at risk of non-payment of valid insurance claims. (Id., Ex. A, p. 3). As the English courts found, the Lloyd’s market was in a "crisis" which "involved in essence a choice between market closure and run-off or continuation of the market on the basis of substantially the [Reconstruction & Renewal] scheme offered to Names." Society of Lloyd’s v. Fraser & Others, p. 7 ("Fraser-App. Ct."); Society of Lloyd’s v. Dennis Hugh Fitzgerald Leighs & Others, p.53 ("Leighs I") (SA Exhibits A and F) (Lloyd's Supplemental Appendix contains copies of six opinions issued in the English proceedings at issue here.)
Lloyd’s explored many alternative solutions to the crisis, including ceasing to conduct business. (Exhibit 21 to Ashendens’ Motion for Summary Judgment, p. 135). In order to ensure the survival of the market and payment of policyholder claims, Lloyd's, in consultation with many others, devised the Reconstruction and Renewal plan ("R&R"). If R&R was accepted by the Names generally, an insurance company called Equitas would be created to provide mandatory reinsurance for all pre-1993 year of account underwriting obligations of Names. (Id., p. 1). As was the case in all previous years, Names would be required to pay a premium for the reinsurance of their obligations. Equitas was to have capital of £14.7 billion provided by the premiums paid by Names and through contributions from other entities, including Lloyd’s. (Id., pp. 1, 31). R&R and Equitas were "developed in close consultation with the [United Kingdom] Department of Trade and Industry ("DTI") and the United States regulatory authorities," and "approval of DTI for Equitas to act as reinsurer was a specific requirement of" R&R. Leighs I, p. 33.
Representatives of Names were involved in forming the R&R plan through the Validation Steering Group, which included representatives from The Association of Lloyd’s Members, the Litigating Names Committee and the Lloyd’s Names Association Working Party. (Ex. 21 to Ashendens Motion for Summary Judgment, p. 139); Leighs I, p. 32. These Names' representatives retained an independent law firm, Slaughter & May, to determine if R&R was the best way to save the Lloyd’s market. Its report was published and sent to Names in April 1996,
and stated that we "are unable to conclude that any of the alternatives to R&R considered ... is preferable to R&R..." (Exhibit 21 to Ashendens’ Motion for Summary Judgment).
Because of the litigation engulfing the market, R&R also included a settlement offer to Names, which they could accept or reject. It included a mutual waiver of certain claims by and against Names, Lloyd’s and other market participants, and certain credits against Names’ underwriting debts, including their obligation to pay the Equitas reinsurance premium. (Ex. 21 to Ashendens’ Motion for Summary Judgment., p. 1); Leighs I, p. 4.
In June 1996, the final R&R plan was offered to the Names. The Settlement Offer Documents described R&R, the settlement offer and the Equitas reinsurance contract to which the Names would become parties. (Ex. 21 to Ashenden's Motion for Summary Judgment). Clause 5.5, the "pay-now, sue-later" provision of the Equitas contract, was described as follows:
The Reinsurance Contract contains a provision requiring payment of the Equitas premium without any set-off, counterclaim or other deduction, which is broadly equivalent to the pay now sue later provision in the current form of managing agent’s agreements. (Id., p. 147 and its Appendix 5, p.4).
In the Equitas contract, the clause read, in part, as follows:
Each Name shall be obliged to and shall pay his Names’ Premium in all respects free and clear from any set-off, counterclaim or other deduction on any account whatsoever.... (Leighs II, pp. 35-6, SA Exhibit B).
The validity and enforcement of such a "pay-now, sue-later" clause was already well established in English law. See e.g., Arbuthnott v. Fagen,  LRLR 135 (decided July 1993); Marchant v. Higgins  2 Lloyd’s 31 (decided December 1995) ("without some form of pay-now sue- later, Lloyd’s could not function."); Fraser-App. Ct., p. 24. As part of the standard agents’ agreement, Names already had agreed to such a clause anyway. (Lloyd’s Statement of Uncontested Material Facts, Ex. B, ¶40).*[ftnote 4]
The Names also were informed of the basis for the Equitas premium that would be charged for reinsurance of their underwriting obligations. In Finality Statements dated August 1996, the Names received detailed calculations setting forth their individual underwriting results, the settlement credits offered and the basis for the Equitas premium calculated by syndicate year of account. (Third Affidavit of Jonathan Nichols, SA Ex. G, ¶ 3). Before these August statements, the Names also had received preliminary statements concerning the basis of the premium. (Id).
D. Implementation of R & R
Pursuant to its statutory authority, Lloyd's’s implemented R&R and Equitas in September 1996. It appointed a substitute agent (Additional Underwriting Agencies [No. 9] Ltd., or "AUA9") which signed the Equitas reinsurance contract on behalf of all Names. This approach was adopted for several reasons, including: (i) creating a "firebreak" between the future market and past underwriting risks; (ii) avoiding the "free-riding" of Names who might not pay for reinsurance; and (iii) obtaining approval of DTI. Leighs I, p. 33-5. As the English courts recognized, it is never feasible or fair to allow individual Names within a syndicate to decide whether they wish to purchase reinsurance for their obligations under the syndicate’s policies: "Reinsurance, including the annual reinsurance to close, has always been on a syndicate basis and can only work if all Names on the relevant syndicate are bound into the reinsurance." Leighs I, p. 33. Accordingly, just as in all prior years, reinsurance for the Names’ underwriting obligations was obtained for all Names by an underwriting agent with the Names’ authority, but without the Names’ individual approval or direction.
Since September 3 , 1996, Equitas has provided reinsurance for all Names’ pre-1993 non-life underwriting obligations. Approximately 95% of Names accepted the settlement offer component of R&R and paid the Equitas premium. (Lloyd’s Statement of Uncontested Material Fact, p. 3). To date, the Names here have enjoyed a "free-ride": they declined the settlement offer and refused to pay their Equitas premiums, even though Equitas has been providing reinsurance benefits for them since September 1996.
V. The Names Challenged R&R and the Equitas Contract in the English Courts
Because the Names in these cases and a large number of other Names refused to pay the Equitas premium, Lloyd’s commenced collection proceedings against approximately 630 of them in the High Court of Justice in London, England, a majority in November 1996. Lloyd’s served writs of summons on Epstein Grower & Michael Freeman ("EGMF"), the solicitors appointed by the Names to represent them. The Names, through EGMF, then served Lloyd’s with individual Acknowledgments of Service of Writ of Summons indicating their appearance in the action, notifying Lloyd’s that they intended to contest the claims and that they had appointed EGMF to act as their solicitors. (Lloyd’s Statement of Uncontested Material Fact, Exhibit A, p. 5, and Exhibit B p. 7; Berkos Filing of Foreign Money Judgments, p. 6). Lloyd’s also served complaints, called "Points of Claim," on the Names. As the English Court of Appeal later observed, Lloyd’s claims involved a "number of allegations or steps" concerning implementation of R&R and enforcement of the Equitas contract and "the Names sought to attack each of these steps." Fraser-App. Ct., pp. 8-9.
Because the Names were asserting common objections and defenses, a "test" case involving three Names was selected to determine whether Lloyd’s was entitled to enforce the Equitas contract and collect the premiums. Leighs I, p. 2, 10-11. (Although a single case, the test case had three different captions during the proceedings in the English courts: The Society of Lloyd's v. Dennis Hugh Fitzgerald Leighs and Others ("Leighs I") and, later, The Society of Lloyd's v. David Walter Wilkinson and Others ("Leighs II") in the trial court and The Society of Lloyd’s v. Lyons, Leighs and Wilkinson ("Leighs-App. Ct.") on appeal.) The test case was assigned to Mr. Justice Colman and he divided the hearings into two parts. First, all "non-fraud" defenses were heard in December 1996 and January 1997. Second, the "fraud" defenses were heard in February 1997. Leighs I, p. 2. (Lloyd’s Statement of Uncontested Material Fact, Ex. B, pp. 7 - 9).
In the first part, the Names raised numerous "non-fraud" defenses which Mr. Justice Colman summarized in his judgment of February 20, 1997. Leighs I, pp. 12 - 24. These defenses included the following:
· That Lloyd's lacked the authority under the Lloyd's Acts 1871-1982 to mandate that each
Name become a party to the Equitas reinsurance contract
· That the Substitute Agent AUA9, which signed the Equitas contract on the Names' behalf, did not have authority to do so;
· That Lloyd’s did not have title to sue for the Equitas premium; and
·That R&R and Equitas were ultra vires.
In the second round of the proceedings, Mr. Justice Colman heard the Names’ "fraud" defenses which, as he stated in his judgment of April 23, 1997, raised "points of fundamental importance in the law of rescission of contracts for fraudulent misrepresentation and of the principles of set-off as between principal debtor and the assignee of a chose in action." Leighs II, p. 1. These defenses to payment of the Equitas premium included the following:
· That Names could rescind their membership of Lloyd's based on allegations of fraud in the inducement; and
· That Names could, despite the terms of Clause 5.5 of the Equitas reinsurance contract, assert a claim of fraud as a set-off to their obligation to pay the Equitas premium. Leighs II, pp. 2, 36-8.
For their rescission and set-off arguments, the Names relied upon the same allegations of fraudulent misrepresentation. Because Lloyd’s sought summary judgment, the court assumed for purposes of Lloyd’s application that the fraud allegations were true. Leighs-App. Ct., p. 10; Fraser-App. Ct., pp. 20-21.
1. The English Trial and Appellate Courts Upheld R&R and Found the Equitas Contract Enforceable
In his lengthy written opinions dated February 20, 1997, and April 23, 1997, Mr. JusticeColman considered all of the Names’ non-fraud and fraud defenses, respectively, and rejected each one as a matter of English substantive statutory and common law. He made the following findings:
· Implementation of R&R and Equitas was a valid exercise of Lloyd's statutory powers under the Lloyd's Acts 1871-1982. Leighs I, pp. 45-46, 51.
· Names could not withdraw the authority of their agents to enter the Equitas Reinsurance Contract and the Substitute Agent AUA9 validly signed the Equitas contract on their behalf. Leighs I, p. 31.
· The appointment of AUA9 as Substitute Agent was valid under the Lloyd’s Substitute Agent Byelaws. Leighs I pp. 50, 57.
· Names could not rescind their Lloyd's membership contracts even if their allegations of fraudulent inducement were proved. Leighs II, pp. 29-35.
· Pursuant to clause 5.5 of the Equitas Contract, the Names could not assert any claims for fraud as a set-off to payment of the Equitas premium. Leighs II, pp. 47, 49.
The Names appealed these rulings to the Court of Appeal, although they did not raise all the arguments on appeal that they asserted before Mr. Justice Colman. Leighs-App. Ct., p. 2. The Names advanced three principal arguments: (i) that R&R and Equitas were ultra vires and therefore AUA9 could not bind the Names; (ii) that the Names had rescinded their memberships in Lloyd’s based on Lloyd’s alleged fraudulent inducement; and (iii) that the Names could assert their fraud claims as a set-off to payment of the Equitas premium. Leighs-App. Ct., p. 5. After a two-day hearing in July 1997, the Court of Appeal, recognizing that it would be a "bitter blow," rejected the appeal and the Names’ defenses. Leighs-App. Ct., p. 28.
The Names then petitioned for leave to appeal to the House of Lords. In January 1998,the Judicial Committee of the House of Lords refused the petition. (Ex. B to Lloyd’s Statement of Uncontested Fact, p. 8). As a result of these extensive hearings and rulings, implementation of R&R and enforcement of the Equitas contract were upheld by the English courts. All of the Names are bound by these rulings. Leighs I, p. 2. (Ashendens’ Response to Lloyd’s Statement of Uncontested Material Fact, ¶ 17).
2. The English Courts Held That All Names Were Free to Pursue Their Alleged Fraud Claims
Although the English courts held that Names could not assert a fraud claim as a set-off to payment of the Equitas premium, they also held that the pay-now, sue-later clause did not limit Lloyd's liability in damages for the fraud claims, if proved, which the Names relied upon for both their rescission defense and set-off arguments. As a result, the Names were free to pursue their fraud claims against Lloyd's. As Mr. Justice Colman stated in his April 23, 1997 judgment:
[Clause 5.5's] effect is and only is to insulate, as a matter of procedure, claims for the premium from counterclaims or set-offs asserted by the reinsured. It neither excludes nor necessarily postpones such cross-claims. Nor does it make satisfaction of a claim for the premium a condition precedent to the pursuit to judgment of a cross-claim.
It is as open to a Name to claim and recover such damages in the face of clause 5.5 as it would be without it. All that he is prevented from doing is declining to satisfy the premium debt until his claim for damages has been determined and then setting off the damages against the premium due. In no sense can that be described as excluding or restricting the remedy by way of damages for fraudulent misrepresentation.
Leighs II p. 40, 46.*[ftnote 5] In other words, payment of the premium was not a condition to pursuing a fraud claim at any time but payment could not be delayed until after the fraud claim was resolved.
2. The Names’ Third Round of Objections
After the conclusion of the proceedings outlined above, which were intended to determine all the issues concerning the Names’ liability to pay the Equitas premiums, Lloyd’s sought summary judgment (Rule 0.14 judgment) against the Names for the Equitas premium amounts. (Ex. B to Lloyd’s Statement of Uncontested Material Fact, p. 8-9). The Names then raised additional defenses, however. Fraser-App. Ct., p. 2, 16. The Names also sought a determination of the proper construction of Clause 5.10 of the Equitas contract, the "conclusive evidence" clause, and whether Lloyd’s had complied with that clause. Fraser-App. Ct., p.3. These issues were heard by Mr. Justice Tuckey of the High Court of Justice in hearings between October 1997 and February 1998, in a case styled Lloyd’s v. Terence William Fraser & Others. Once the Names raised these additional issues, Mr. Justice Tuckey ordered that any Name who wished to "raise any other defense" should do so by November 28, 1997. Fraser-App. Ct., p. 16.
1. The English Courts Rejected the Names’ "Bad Faith" Defense
An additional defense asserted was that inclusion of the pay-now, sue-later clause in the Equitas contract was in "bad faith" by Lloyd’s and, therefore, it should not be enforced. Fraser-App. Ct., pp. 16-20. In his judgment of December 3, 1997, Mr. Justice Tuckey found that the belated assertion of this defense was an "abuse of process of the Court" because it should have been raised in the litigation before Mr. Justice Colman. Fraser-App. Ct. p. 17. He also rejected the Names’ other objections to enforcement of the Equitas contract. Fraser-App. Ct., p. 20.
The Names sought leave to appeal these rulings to the Court of Appeal. In its decision of July 31, 1998, Fraser-App. Ct., the Court of Appeal, refusing leave to appeal, also rejected the Names’ "bad faith" defense regarding the pay-now, sue-later clause. In doing so, it stated that "it would have been most surprising if the [R&R] scheme had not included a no set-off clause" and that English law "clearly establishes that such a clause is an essential and valid part of the proper operation and supervision of the market and that the clause is not protective of the alleged wrong-doer and does not affect the rights of the Name against him." Fraser-App. Ct., p. 24.
2. The Courts Heard the Names’ Challenge to the Amounts ("Quantum") of the Equitas Premiums and Found Lloyd’s Had Justified the Amounts
In the trial court, Mr. Justice Tuckey also held several hearings where evidence was presented by Lloyd’s and the Names to determine: (i) the scope of Lloyd’s obligation to justify the Equitas premiums under the conclusive evidence clause; (ii) whether Lloyd's had fulfilled those obligations; and (iii) whether there was "manifest error" in the calculation of any of the premiums. See, Fraser I; Fraser-App. Ct., pp. 20, 31-37. As the Court of Appeal later noted, if the Names’ arguments were accepted, it would "require the recalculation of the claims the Society [of Lloyd’s] was making." Fraser-App. Ct., p. 20.
During the proceedings, Mr. Justice Tuckey required Lloyd's to produce additional records concerning the calculation of the Equitas premiums being sought from each Name. As he stated at a hearing on January 22, 1998:
I indicated my provisional view [at the December 1997 hearing] that merely to produce what was described as a calculation based on what was in MSU’s [Member Services Unit] database without producing in some form or another what was actually in the database was not enough. The clause required the calculation and the underlying record which supported it. This is my final view on this point. (SA, Exhibit G, p. 2, and its Ex. JWEN9, p. 4).
Lloyd’s produced the information in the database for certain Names as samples. Lloyd’s also sent additional Finality Statements to the Names in December 1997 detailing their syndicates’ losses and the Equitas premium charged for each syndicate year of account. (SA Ex. G, ¶ 4). Previously, Lloyd’s had sent Finality Statements to the Names in August 1996, detailing the basis and calculation of their Equitas premium. (SA Ex. G). Mr. Justice Tuckey examined this new information, heard the Names’ arguments and found that Lloyd’s had produced sufficient information justifying the premiums claimed:
I am satisfied that Lloyd’s have now produced the records of MSU which the clause contemplates and which were identified in Mr. Bradley’s first affidavit but not produced for the hearing in December. The Finality Statement and the R&R NAS databases constitute those records. The information on them is of course in electronic form and if produced in that form would be meaningless but this information has now been accessed to the lowest level of detail contained in the database and produced in an intelligible form in the samples I have seen.
I find that the evidence which Lloyd’s have now produced constitutes sufficient compliance with Clause 5.10 of the contract so far as the samples produced are concerned. If evidence is produced in the same form for the rest of the Names the same result will follow. This leaves questions of manifest error to be decided at the hearing which I have provisionally fixed for 11th and 12th February.
(SA Ex. G, Ex. JWEN9, p.11). Lloyd’s then produced records in the same form for the remaining Names. Fraser I, p. 1.
After production of these records, each Name had an opportunity to present arguments regarding "manifest error" in the calculation of the premiums. The Names' solicitor submitted two additional affidavits in support of the Names’ arguments. In his opinion of March 4, 1998, Mr. Justice Tuckey addressed the issues raised by the Names, including what information could be
relied upon to show manifest error and whether the failure to give the Names credits for Combined Litigation Settlement Funds (CLSF), Personal Stop Loss recoveries (PSL) and their funds at Lloyd's (FAL) demonstrated manifest error. Fraser I, p. 1, 4-8. He ruled against the Names on these points.
Along with the appeal of the bad faith issue mentioned above, the Names sought leave to appeal Mr. Justice Tuckey's rulings on the conclusive evidence clause to the Court of Appeal. After five days of hearings in June 1998, the Court of Appeal refused leave to appeal. (Ex. B to Lloyd’s Statement of Uncontested Material Fact, p. 9). In its decision, the Court of Appeal found that the conclusive evidence clause was "appropriate to [the Equitas] contract." Fraser-App. Ct., p. 35. It also specifically upheld the lower court’s finding that Lloyd’s complied with the clause:
The calculations have been produced together with the figures upon which they are based derived from the records of CSU [the successor to MSU]. The exercise has been a highly complex one. It has necessitated the CSU in collecting and collating the figures from each syndicate of which the given Name was at any material time a member. The resultant calculations lead to the assessment of [the Equitas] reinsurance premium which the Name is required to pay under Clause 5. Fraser-App. Ct., pp. 35-36.
Finally, the Court of Appeal also held that the Names had not "succeeded in making out a case of manifest error" in calculation of the premiums. Fraser-App. Ct., p. 37. At the end of its lengthy opinion, in which it recounted the extensive litigation between Names and Lloyd’s, the Court of Appeal concluded that:
The making and outcome of these applications has been of the greatest importance to very many of the Names represented and unrepresented before us. The fact that they have been refused is something which they will find hard to accept. We trust that the explanations which we have given will, when read in conjunction with the judgment of the Court of Appeal last year and the judgments of Tuckey J since then, go some way towards explaining why they cannot any longer resist the entry of the judgments against them. Fraser-App. Ct., p. 41.
In total, the English courts held 25 days of hearings and issued opinions totaling hundreds of pages addressing the Names' objections and defenses to enforcement of the Equitas reinsurance
contract and payment of the premium. (Lloyd’s Sur-reply Brief in Support of Its Motion for Summary Judgment and in Opposition to Defendants’ Motion for Summary Judgment, Ex. A, p. 2).
VI. The English Court Entered Judgments for the Equitas Premium Against the Names
As a result of the proceedings outlined above, all issues about Lloyd’s right to recover the Equitas premium were determined in Lloyd’s favor. Summary judgment was entered against all the Names in these cases on March 11, 1998. The Names agree that these judgments are final, conclusive and fully enforceable against them in England. (Ashendens’ Response to Lloyd’s Statement of Uncontested Material Fact, ¶ 19 - 22); (Berkos Names’ Answers, ¶ 29).
VII. The Names Have Declined to File Any Fraud Claims or Join Other Names Who Are Suing Lloyd’s in England
Despite proclaiming that they can prove they were defrauded by Lloyd’s and despite being told by the English courts that they were free to pursue their purported fraud claims, the Names in these cases have declined to file any claim or join in a fraud case brought by over 200 other Names against Lloyd’s in England, styled The Society of Lloyd’s v. Jaffray. (Ex. B to Lloyd’s Statement of Uncontested Material Fact, pp. 9 - 11).*[ftnote 6] The Jaffray trial started in late February 2000 and witness cross-examination concluded June 26, 2000.
The Names in Jaffray are asserting the same allegations of fraudulent misrepresentations that the Names here claim they can make. (Id.) In Jaffray, the Names are also claiming extensive damages, including return of any Equitas premiums paid by them. (Id. and its Ex. JWEN3, §107.0.2). As Jaffray demonstrates, the fact that Names have not paid their Equitas premiums is no barrier to their pursuit of fraud claims because about three-fourths of the Names in Jaffray have not paid their Equitas premiums. (Lloyd’s Sur-reply Brief in Support of Its Motion for Summary Judgment and in Opposition to Defendants’ Motion for Summary Judgment, Ex. A,p. 2 - 3).
SUMMARY OF ARGUMENT
Before the Equitas premium judgments were entered against the Names in England, they received notice, retained counsel and defended Lloyd’s claims in multiple hearings. During the 25 days of hearings, the English courts exhaustively considered the Names’ defenses and objections to implementation of R&R and enforcement of the Equitas contract, including the "pay- now, sue later" and "conclusive evidence" clauses. As a matter of substantive English common law and statutory law, the English courts rejected the Names’ objections. Accordingly, R&R was upheld, the Equitas contract was found enforceable and the Names were held liable for their Equitas premiums.
The fact that the Names could not assert their alleged fraud claim as a set-off to payment of the Equitas premium did not deprive them of due process. The validity of that clause was fully litigated and it is undisputed that the Names were free to pursue their fraud claims. In effect, the English courts merely severed or bifurcated the Equitas premium issues from any fraud claim for damages.
The English courts’ rulings on the "conclusive evidence" clause also did not deprive them of due process. The validity of that clause also was fully litigated and the Names were provided the data supporting the premium calculations and had an opportunity to challenge the amounts of the premiums. Accordingly, their claim that the English courts do not "provide procedures compatible with due process" is baseless and simply an attempt to relitigate issues already addressed and carefully decided by the English courts. This Court should not act as a second tier English court of appeals.
I. The English Judgments Are Enforceable
A. Standard of Review
This Court reviews de novo the District Court’s granting of summary judgment in Ashenden and granting of judgment on the pleadings in Berkos. Forseth v. Village of Sussex, 199 F.3d 363 368 (7th Cir. 2000); Sweat v. Peabody Coal Co., 94 F.3d 301, 304 (7th Cir. 1996).
B. Illinois Foreign Money-Judgment Recognition Act
Because the Names refused to pay the English judgments, Lloyd’s sought to enforce them here pursuant to Illinois’ Foreign Money Judgments Recognition Act ("Recognition Act"), 735 ILCS 5/12-618 et seq., and Enforcement of Foreign Judgments Act, 735 ILCS 5/12-650 et seq. Under the Recognition Act, a judgment entered by a foreign court must be enforced in Illinois so long as:
(1) The foreign judgment "is final, conclusive, and enforceable where rendered";
(2) The foreign judgment grants recovery of a sum of money;
(3) The foreign judgment was rendered by a system with impartial tribunals and with procedures "compatible with the requirements of due process of law"; and
(4) The foreign court had personal jurisdiction over the defendant. See 735 ILCS 5/12-620, 5/12-621.
The Names do not dispute that the English judgments are final and enforceable in England, that the judgments grant a recovery of a sum of money and that the English Courts had personal jurisdiction over them. (¶29 of Berkos Answers; ¶22 of Ashenden Response to Lloyd’s Statement of Uncontested Material Facts).
In the District Court, the Names objected to enforcement under two sections of the Act, claiming that: (i) English courts do not provide due process; and (ii) the English judgments were based on causes of action that are repugnant to the public policy of Illinois. 735 ILCS 5/12-621(a)(1) and (b)(3).*[ftnote 7]
C. The Names Have Waived Their Public Policy Objection
On appeal, the Names do not pursue their argument that the English judgments violate Illinois' public policy. It is not identified as an issue and there is no mention of that objection in their opening briefs. Accordingly, it is waived. See Sere v. Board of Trustees of Univ. of Illinois, 852 F.2d 285, 287-89 (7th Cir. 1988); Kasper v. Saint Mary of Nazareth Hospital, 135 F.3d 1170, 1174 (7th Cir. 1997).*[ftnote 8]
Under the express terms of the Recognition Act, the only issue is whether the English courts provided procedures "compatible with the requirements of due process of law." 735 ILCS 5/12-621(a)(i). The issue is not limited, as the Names argue, to (i) whether there were "exigent circumstances" justifying an alleged postponement of a hearing; and (ii) whether there is an adequate "post-deprivation" hearing available to them. Nor is this Court bound by the approach of the District Court and its findings. It can affirm judgment in Lloyd's favor on any basis argued by Lloyd's below. See Northwest Airlines, Inc. v. County of Kent, Michigan, 114 S. Ct. 855, 861-62 (1994); Drinan v. A.J. Lindemann & Haverson Co., 238 F.2d 72, 74 (7th Cir. 1956); Palmer v. Beverly Enterprises, 823 F.2d 1105, 1111 (7th Cir. 1987); Waterman Steamship Corp. v. Gay Cottons, 414 F.2d 724, 735 (9th Cir. 1969). It is Lloyd’s position that this Court does not need to reach the issues of "exigent circumstances" or the scope of any "post-deprivation" hearings because the Names had notice and hearings where their defenses were heard before judgments were entered against them. Therefore, Lloyd's respectfully urges the Court to affirm the District Court’s judgment on that basis alone.
E. Due Process Requires Notice and a Hearing
As the Names agree, the hallmark of procedural due process is that the defendants receive notice and an opportunity to be heard. (Ashendens’ Brief, pp. 14, 17). See e.g., Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) ("fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated . . . to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections"); Colonial Bank v. Worms, 550 F. Supp. 55, 58 (S.D.N.Y. 1982) (finding no denial of due process where defendant had notice and an opportunity to be heard).
F. Recognition of the Judgments Does Not Require that English Procedures Be Identical with Ours
The due process requirement for enforcement of a foreign judgment "does not require that the procedures employed by the foreign tribunal be identical to those employed in American courts." Ingersoll Milling Machine Co. v. Granger, 833 F.2d 680, 687 (7th Cir. 1987). Obviously the Act could not require identical procedures or no foreign judgment would ever be recognized. Rather, a "case of serious injustice must be involved." Ingersoll, 833 F.2d at 687. See also Canadian Imperial Bank of Commerce v. Saxony Carpet Co., 899 F. Supp. 1248,1252 (S.D.N.Y. 1995) ("[M]ere divergence from American procedure does not render a foreign judgment unenforceable") (citations omitted); and El Ajou v. First National Bank of Chicago, 1993 WL 393051 (N.D. Ill., 1993). Nor does a difference between the substantive foreign law and local law justify not recognizing a foreign judgment:
Enforcement of a judgment of a foreign court based on the law of the foreign jurisdiction does not offend the public policy of the forum simply because the body of foreign law upon which the judgment is based is different from the law of the forum or because the foreign law is more favorable to the judgment creditor than the law of the forum would have been had the original suit been brought at the forum. The very idea of a law of conflicts of law presupposes differences in the laws of various jurisdictions and that different initial results may be obtained depending upon whether one body of law is applied or another.
Hunt v. BP Exploration Co., 492 F.Supp. 885, 901 (N.D.TX 1980) (quoting Toronto Dominion Bank v. Hall, 367 F. Supp. 1009, 1016 (E.D. Ark. 1973)).*[ftnote 9]
This principle of enforcing judgments rendered under different procedures and laws is especially applicable here because the Names agreed in their General Undertakings to the application of English law by the English courts. Moreover, the Names have never even claimed that the English courts disregarded or misapplied English law, or that a court here would have reached a different result. See Allen v. Lloyd's of London, 94 F.3d 923, 931 (4th Cir. 1996) ("Authorization to impose reinsurance through Equitas on the Names does not derive from their consent, but by virtue of a Lloyd's by-law passed in December 1995"), mandamus denied, 117 S. Ct. 2497 (1997); and Hugel v. Corporation of Lloyd's, 999 F.2d 206, 210 (7th Cir. 1993) ("[B]ecause the General Undertaking designates English law, the parties would be governed by the same law (including the Lloyd’s Act of 1982) whether they brought the suit in federal district court in Illinois or in England.").
G. English Courts Provide Due Process
England has consistently been recognized as a jurisdiction which provides due process. As one federal court stated:
"In affording the English judgment the effect that we have, we are of course, mindful that the system which rendered it is the very format from which our system developed; a system which has procedures and goals which closely parallel our own. Surely it could not be claimed that the English system is any other than one whose 'system of jurisprudence [is] likely to secure an impartial administration of justice between the citizens of its own country and those of other countries.'"
Somportex Ltd. v. Philadelphia Chewing Gum Corp., 318 F. Supp. 161, 166 (E.D. Pa. 1970) (quoting Hilton v. Guyot, 159 U.S. 113, 202 (1895)), aff'd. 453 F.2d 435, 440 (3d Cir. 1971), cert. denied, 405 U.S. 1017 (1972). See also Arab Monetary Fund v. Hashim, 2000 WL 684801 (9th Cir. 2000) and British Midland Airways, Ltd. v. International Travel Inc., 497 F.2d 869 (9th Cir.). Because England's procedures are akin to our own, any alleged procedural unfairness challenge must be "construed especially narrowly." Canadian Imperial Bank, 899 F. Supp. at 1252. The Names do not cite a single case holding that English courts do not provide due process, and counsel for Lloyd’s is unaware of any such authority.
H. The English Judgments Against the Names Are Enforceable in Illinois
While the Names couch their objection to enforcement in terms of an alleged lack of due process in English courts, they are really attempting to relitigate the English courts' decisions on the substantive issues of English contract and statutory law underlying the judgments. Effectively, the Names want this court to reverse the English courts' holdings that the Equitas contract, including the pay-now, sue-later and conclusive evidence clauses, is enforceable. The Names unquestionably had full and fair hearings on these issues, however. They are just unhappy with the result.
1. The Names Had a Hearing Where All Their Defenses to Enforcement of the Equitas Contract Were Heard and Decided
It cannot be disputed that the Names: (i) had notice of the English actions; (ii) hired counsel who represented them; and (iii) presented their objections to the enforcement of the Equitas contract. (Berkos Names’ Answers ¶¶22-25); (Ashendens’ Response to Lloyd’s Statement of Uncontested Fact, ¶¶ 19 - 22). It also is not disputed that the English trial court and appellate courts considered and rejected these objections after numerous hearings. See Leighs I, Leighs II, Leighs-App. Ct., Fraser I, Fraser II, Fraser-App. Ct.; (Ashendens’ Response to Lloyd’s Statement of Uncontested Fact, ¶¶ 14 - 18).
The Names’ characterization of the proceedings in the English courts in their brief is wrong. (See Ashenden Brief, p. 11). First, the English courts did not decide that "by virtue of the pay-now, sue-later clause" the Names did not have any non-fraud defenses to the validity and enforcement of the Equitas contract. (Brief, p. 11). Rather, the courts decided that under English statutory and common law the defenses failed. Leighs I, pp. 37 - 51, 56 -9; Leighs-App. Ct., pp. 4 - 16. Therefore, the courts did not base their rejection of these defenses purely on the pay-now, sue-later clause. Second, the English courts did in fact hear the Names’ defense to payment of the Equitas premiums based on their claim of fraud by Lloyd’s. Indeed, for the sake of argument, the courts assumed that the fraud had occurred. Thus the courts specifically considered the Names’ rescission defense, which was based on alleged fraudulent inducement, and decided that it, too, failed under English common law. Leighs-App. Ct., pp. 10 - 16. Again, this rescission defense did not fail because of the pay-now, sue-later clause. Third, as the extensive and detailed opinions by the English courts show, the objections or defenses that Names could present to enforcement of the Equitas contract were not limited in any way. See gen. Fraser-App. Ct., pp. 10 - 15. Significantly, the Names have not cited any ruling where the English courts barred the Names from presenting any particular defense.*[ftnote 10] As discussed above, the only preclusive effect the English courts gave the pay-now, sue-later clause was that Names could not assert a fraud claim as a set-off in order to delay payment of the Equitas premium. This in no way limited their defenses or objections to enforcement of the Equitas contract or to their liability for the premiums.
2. The English Courts Have Already Rejected the Names' Argument that the Equitas Contract Is An Impermissible Contract of Adhesion or "Elaborate Cognovit"
The Names’ argument here that the Equitas contract was a contract of adhesion or an invalid cognovit is another attempt to relitigate issues heard and decided by the English courts. The question of whether Lloyd's had the authority under the Lloyd's Acts 1871-1982 to mandate that each Name become a party to the Equitas reinsurance contract was raised in the English action as a substantive defense to the Names' obligation to pay the Equitas premium. Leighs I p. 5 ("[t]he fundamental issue between the parties to the proceedings [was] whether Lloyd's was entitled to impose the Equitas reinsurance contract on non-accepting names"). The English courts also considered the Names’ arguments as to why they should not be bound by the Equitas reinsurance contract -- including the claim that they never agreed to it -- and specifically rejected them. Leighs II at p. 27 ("In spite of the fact that he never accepted, indeed expressly rejected R&R, he became bound as a party to the Equitas contract, and liable to pay the Equitas premium as from 3rd September 1996."). Clearly, the Names' attack on the mandatory nature of the Equitas reinsurance contract, under the banner of "due process," is just a collateral attack on these substantive rulings.
Additionally, the Names' analogy to cognovit judgments is simply misplaced, as the District Court recognized, because the essence of a cognovit judgment is that the debtor has waived his right to receive notice of the proceedings and an opportunity to be heard. See, e.g. American National Bank v. Colby, 19 Ill. App. 3d 1051, 1052 (1st Dist. 1974.) That is not the case here. The Names do not dispute the fact that they had notice of the proceedings and an opportunity to be heard before the judgments were rendered.
3. The Validity of the Pay-Now, Sue-Later Clause Was Litigated in England, and Its Enforcement Did Not Deprive the Names of Due Process
In addition to whether the Equitas contract was enforceable, the specific issues of the validity of the pay-now, sue-later clause and whether it prevented Names from setting off their alleged claims for fraud against Lloyd’s claims for the Equitas premium (and thereby delay its payment) was litigated to judgment in the English courts. The same allegations of fraud presented here (by means of hearsay and speculation) were presented to the English court in an effort to override the clause. Leighs II at pp. 36-38 (setting forth Names' arguments as to why clause 5.5 did not preclude them from asserting fraud claims as a set-off to payment of the Equitas premium). Without ruling on the merits of these fraud claims -- and expressly recognizing the Names' right to pursue their fraud claims independently -- the English trial court held that the assertion of such claims as a set-off to payment of the premium debt under the Equitas reinsurance contract was impermissible as a matter of substantive law. Leighs II at p. 46. The Court of Appeal then also rejected the Names’ argument that it was inequitable for them to have to pay their Equitas premium to Lloyd's when they had outstanding fraud claims against Lloyd's because the Equitas premium was in consideration for reinsurance cover from Equitas. See Leighs-App. Ct. at pp. 22-23. Again, the Names’ attack on the validity and enforceability of the clause is simply a collateral attack on the English rulings. In short, the Names are asking this Court to sit as the House of Lords, overrule the English courts' carefully-considered decisions on English substantive law and implement the Federal Rules of Civil Procedure to boot.
Moreover, as Mr. Justice Colman made clear, the only effect of Clause 5.5 is to preclude a set-off. The Names were free to pursue their fraud claim before Lloyd’s sought payment of the Equitas premium, during the pendency of Lloyd’s claim or after Lloyd’s obtained judgment, so payment of the premium was not a condition to pursuing a claim. Leighs II, pp. 40, 46. The only reason judgment has now been entered against the Names for the Equitas premium before they have had a hearing on their claim for damages is that they have never filed any kind of claim for damages against Lloyd's in England.
4. The Validity of the Conclusive Evidence Clause Was Litigated In England and The Courts Found Lloyd’s Had Complied With It
The Names also contend that they were denied due process because of the conclusive evidence clause of the Equitas contract. They claim that because of it they were not able, and will not be able in the future, to challenge the amounts ("quantum") of the premiums Lloyd's claimed were due. The issues of the conclusive evidence’s clause’s validity and enforcement, however, also were litigated and lost by the Names in England. See, Fraser I and Fraser-App. Ct.. There, the Names argued that "they were entitled to inspect and check the accuracy of the records in the possession of MSU and the figures derived from them." Fraser-App. Ct. p. 36. The Court of Appeal found, however, that the clause is "not an unusual type of clause and is in principle appropriate to this contract." Fraser-App. Ct., p. 35. Both it and the trial court held that the clause was enforceable.
Additionally, while the English courts rejected the Names' request for some information because it "involved a contradiction of both the express wording and clear intention of Clause 5.10", Lloyd's did provide the Names with information and data underlying calculation of the premiums during the court proceedings. Fraser-App. Ct., p. 36. First, Lloyd’s sent Finality Statements to Names in 1996 detailing the basis for each Names' Equitas premium. (SA Ex. G, p.1 - 2). Second, at the Names' request, the English courts examined Lloyd’s obligations under the clause and required it to produce additional information, including records of MSU, in support of the premium amounts sought. Fraser I, p. 1; Fraser-App. Ct., pp. 35-36. After production of this information, the courts then heard all challenges to the premium amounts for "manifest error." Fraser I; Fraser-App. Ct., pp. 31-35. Every Name had a chance to make such a challenge. The Names simply did not make a case under English law:
It is understandable that those who already have a deep distrust and suspicion of the Society and its various agencies should be suspicious and ready to find fault with the figures which have been produced pursuant to clause 5.10. But such matters do not provide arguable defenses. The O.14 summonses having been properly supported by affidavits sworn on behalf of the Society, it was incumbent upon the Defendants to show by affidavit that there was some ground for giving leave to defend on quantum and ordering a trial of some issue of quantum. No issue has been raised which is sufficient to justify going behind the figures produced under clause 5.10 nor have the Applicants succeeded in making out a case of manifest error in those figures.
Fraser-App. Ct., p. 37.
In sum, the English courts found the conclusive evidence clause enforceable, made Lloyd's live up to it and gave the Names an opportunity to challenge the premium amounts. There is no basis for this Court to second-guess the English courts' rulings. See Ingersoll, 833 F.2d at 680 (Court rejected due process challenge to recognition of foreign judgment where judgment debtor claimed he was denied ability to cross-examine witnesses and obtain oral testimony); and Allen, 94 F.3d at 931 ("Neither British law nor the General Undertaking signed by each Name grants Names any role in the decision to form and capitalize Equitas.").
I. The District Court Erred in Stating That the Ashendens Did Not Have A "Meaningful Pre-deprivation Hearing"
While the District Court was correct in finding that the English courts provided due process, it erred by stating in its April 22, 1999, decision in Ashenden that the Names "were denied a meaningful pre-deprivation hearing" and erred in assuming that the Names could only have a hearing on their fraud claim after paying their Equitas premiums. (See, Memorandum Opinion and Order, pp. 14, 15, 17). As explained above, the English courts found that payment of the premium was not a condition to pursuit of a fraud claim. The English courts also heard all the Names' defenses to enforcement of the Equitas contract, including rescission based on fraud in the inducement, before judgment. The Names had a meaningful hearing, therefore, because if any of these defenses had been successful, they would not have had to pay the Equitas premium.
Because the Names had a full hearing on all their defenses to enforcement of the Equitas contract before judgment was entered, Matthews v. Eldridge, 424 U.S. 319 (1976), United States v. James Daniel Good Real Property, 510 U.S. 43 (1993), and similar cases cited by the Names are inapplicable. These cases involved the issue of whether notice and any hearing at all are required before a governmental taking of property, which is not the case here. Moreover, they are inapplicable because the erroneous deprivation of property risk of which the Names complain - having to pay the Equitas premium before their claim for damages is heard - is entirely of their own making. They could have sought a determination of their fraud claim before Lloyd’s even filed its claim, but declined. See Bonny and Ashenden, supra. Of course, the District Court, nevertheless, found that the English proceedings met the factors set forth in Matthews for determining whether due process requirements were satisfied. (See April 22, 1999, Memorandum Opinion, pp. 16-19).
When the Ashendens moved to alter or amend the April 22nd decision, Lloyd's disputed the Court's statement about the lack of a meaningful pre-deprivation hearing. (See Lloyd’s Brief In Opposition to Defendants’ Motion to Alter or Amend Judgment). In its subsequent decision on the Ashendens' motion, the District Court then acknowledged that there was support for Lloyd's argument that the Names actually had a "meaningful pre-deprivation hearing" by participating in the proceedings before Mr. Justice Tuckey, Mr. Justice Colman and the Court of Appeal [twice] before judgment was entered:
(See Transcript of Proceedings, August 18, 1999, p. 3. Included in Ashenden Joint Appendix).
The District Court nevertheless based its decision that the Names received due process on findings of exigent circumstances and the opportunity for Names to sue Lloyd's in England. (Id., 3-4). However, that is not the only basis for finding due process. Another is simply that because the Names litigated their defenses and objections for the Equitas premiums during several days of hearings before judgment was entered against them, they received due process.
J. Under Its Own Approach, the District Court Also Correctly Found That the Ashendens Were Provided Due Process
If this Court reaches the issues of "exigent circumstances" and availability of "post-deprivation" hearings, it nevertheless should affirm the District Court’s decision.
1. R&R and Equitas Were Necessary to Save the Lloyd’s Market, Obtain Reinsurance for the Names and Ensure Payment of Policyholder Claims
The District Court correctly stated in its decision that Lloyd’s was in "dire straits" before R&R and Equitas were implemented. (See Transcript of Proceedings, August 18, 1999, p. 4). It had ample support in the record for this conclusion. The English courts in their opinions recounted that Lloyd’s, the Names’ Validation Steering Group, the U.K. Department of Trade and Industry and U.S. regulatory authorities all found that the Lloyd’s market was in crisis before implementation of R&R and Equitas and required a timely and comprehensive response. (See Sec. IV(A) and (B) above in Statement of Facts). No contrary evidence was offered. Indeed, before the District Court, "the Ashendens [did] not even take issue as to the existence of exigent circumstances at the time the R&R program was adopted." (See Transcript of Proceedings, August 18, 1999, p. 4).*[ftnote 11]
The Names' argument that "exigent circumstances" had to have existed at the time Lloyd’s sued them, wrongly looks at the "situation ex-post rather than ex-ante," as the District Court recognized. It is the circumstances existing at the time R&R and Equitas were implemented to which their terms must respond. The English courts found that the pay-now, sue later and conclusive evidence clauses were necessary parts of R&R and the Equitas reinsurance contract because reinsurance could not succeed if individual Names could decide to separately litigate the amount of the premiums and set off other claims against the reinsurance premiums.*[ftnote 12]
The Names’ additional argument that the District Court should have taken testimony from an unspecified number of unknown Names about whether they in fact accepted R&R because of the clauses is another attempt to relitigate the decisions of the English Court. It is also unrealistic -- Lloyd's had tens of thousands of Names from 80 different countries. Allen v. Lloyd's, 94 F.3d 923, 927 (4th Cir. 1996). Moreover, any such testimony would not be probative of whether "exigent circumstances" existed at any time.
2. The Names Had An Opportunity to Challenge the Amount of the Premium and An Opportunity to Claim It As Part of Their Damages In A Fraud Case
Although the Names claim they do not have the opportunity for an adequate "post-deprivation" hearing in England, they have not even filed a case in England seeking such a hearing. Nor have they ever specified the issues on which they need a hearing. Instead, they ask this Court to conclude that they would be denied a hearing on unspecified issues if they ever requested one.
Additionally, while the Lloyd’s Acts - which the Names agreed would govern their relationship with Lloyd’s - limit Lloyd’s liability to some extent, Lloyd’s can be held liable for "bad faith." (Ex. 10 to Ashendens’ Motion for Summary Judgment, p. 54). The Ashendens, however, admit they have no basis for such a claim regarding the calculation of the Equitas premium, even in light of the production of the additional supporting information ordered by Mr. Justice Tuckey. (Memorandum in Support of Motion to Alter or Amend Judgment, p. 4; and Transcript of Proceedings, August 18, 1999, p. 5). The Names in Berkos evidently do not have a basis for such a claim either - not one of them has filed such a claim.
As demonstrated above, during the proceedings before Mr. Justice Tuckey, the Names did have a hearing on the calculation of the Equitas premiums before judgment. After additional detailed Finality Statements were sent to them at the English court's direction, and after production of the records of MSU/ CSU and its calculations, the Names had an opportunity to challenge the amounts for "manifest error." Fraser I; Fraser-App. Ct..
The fact that the Names had to meet the threshold of "manifest error" in any challenge to the amount of the Equitas reinsurance premium charged to them did not deprive them of any rights. Pursuant to Lloyd’s byelaws, to which they agreed to be bound, the Names were required to delegate the purchase of reinsurance to their underwriting agents. Allowing each Name to take additional discovery regarding how the Equitas premium was determined, therefore, would be contrary to the Equitas contract, to Lloyd's byelaws and to the practice of Lloyd's for hundreds of years.
Finally, as the Names in Jaffray are now doing, these Names could have claimed their entire Equitas premium as part of their damages in a fraud case against Lloyd’s. Recovery of the premium as damages obviously would moot any questions regarding its calculation. For unstated reasons, however, they have declined to file such a case in England.
COURT CORRECTLY ENTERED JUDGMENT ON THE PLEADINGS
In Part 2, Lloyd’s explains why judgment on the pleadings against the Names in the Berkos case(captioned Lloyd's v. Callahan, Lloyd’s v. Collins and Lloyd’s v. Paschen on appeal) was correct.
STATEMENT OF FACTS
I. The Berkos Names Admitted That the Facts and Legal Issues of Their Case Were Identical to the Ashenden Case
On May 3, 1999, the Berkos Names filed a motion for reassignment on relatedness grounds seeking to transfer their case to the Court which was then still hearing Ashenden. (See Ex. A to Lloyd's Motion for Reassignment in Ashenden.) At that time, the Ashendens’ motion to alter or amend the April 22nd judgment was pending. In their motion to reassign, the Berkos defendants admitted that their case was identical to the Ashenden case:
· "The cases (Ashenden and Berkos) involve substantially the same issues of fact and law, although there are certain variations attributable to certain of the defendants."
· "Both cases involve the question whether judgments rendered in favor of Lloyd's and against the defendants in English proceedings ought to be recognized and enforced in this court."
· "The judgments against the defendants rendered in the English proceedings were all predicated upon a single contract known as the 'Equitas Reinsurance Contract' under which all of the defendants' pre-1993 non-life liabilities as underwriting members of The Society of Lloyd's were reinsured by Equitas Reinsurance Limited, an English reinsurance company."
· "While defendants were members of different syndicates and had different
Members' Agents, and certain defendants have different varieties of offsetting claims, different histories at Lloyd's and different contractual structure, the common questions of law and fact relating to the recognizability of the English judgments under the Illinois Uniform Recognition of Foreign Money Judgments Act predominate."
· "The cases grow out of the same transaction or occurrence, the entry of summary judgment against the defendants by an English court in favor of Lloyd's and against the defendants."
· "The handling of both cases by the same judge is likely to result in a substantial saving of judicial time and effort. In the Ashenden case, the parties filed cross-motions for summary judgment, which were fully briefed before Judge Leinenweber. The briefing involved submission of hundreds of pages of legal memoranda and affidavits and thousands of pages of exhibits. Judge Leinenweber is thoroughly familiar with the issues which will predominate in this case."
· "The cases are susceptible of disposition in a single proceeding. Because of the predominance of the common questions of law and fact in the two cases, and because of the commonality of counsel in the two cases . . . the cases are susceptible of disposition in a single proceeding." (Ex. A to Lloyd's Motion to Reassign in Ashenden.)
Lloyd’s then also filed a motion to reassign, stating that "the two cases involve the same issues of fact and law because they both concern the enforcement of English judgments obtained by Lloyd’s pursuant to the same Equitas contract and English judicial proceedings." Lloyd’s also stated that it, too, believed the cases were "susceptible of disposition in a single proceeding." (See Lloyd's Motion for Reassignment in Ashenden, pp. 1-2). With all parties’ agreement, Berkos was then reassigned on May 19, 1999, to Judge Leinenweber.
II. The Berkos Names Also Admitted the Material Allegations in Lloyd’s Filing of the English Judgments
On June 18, 1999, the Berkos Names filed substantially identical answers and affirmative defenses. Among their admissions are the following:
· Each Name signed a General Undertaking. (Defs. Answers, ¶¶4-10, 12-19.)
· Lloyd's notified each Name of the filing of its claims in London's High Court of Justice by serving the Names' authorized solicitor with a writ of summons. (Id., ¶¶23-24.)
· Each Name submitted, through their London solicitor, acknowledgements of service of the writs of summons which indicated their intent to contest Lloyd's claims. (Id. at ¶25.)
· After "numerous judicial hearings", Lloyd's obtained Judgments in England on March 11, 1998, against the Names in various amounts. (Id. at ¶¶ 26, 28.)
· The Names exhausted their opportunities to pursue further appeals in the English courts. (Id. at ¶29.)
III. The Names Never Served Any Discovery
The Berkos Names never identified any factual differences between Ashenden and their case relating to the issue of enforcement of the English judgments entered on March 11, 1998. Nor did they serve any discovery to develop any differences. In their memorandum opposing judgment on the pleadings, the only objection which the Names proffered was that they wanted to obtain discovery and present additional evidence on the issues of "exigent circumstances" and the possibilities of a "post-deprivation" hearing. Yet, those issues already had been addressed in Ashenden. (The Berkos Names had the same counsel as the Ashendens.) No discovery was ever served on these issues either, and no motion for leave to take discovery was ever presented or offer of proof made. The Names never suggested they needed discovery or wanted to present evidence on any other issue.
SUMMARY OF ARGUMENT
The District Court properly granted judgment on the pleadings in Berkos. The Names' contention that Lloyd's relied in its motion upon facts outside the pleadings and the record is wrong. Lloyd's asked the District Court to rely solely upon the Names' admissions, the Ashenden decision and the English cases cited to the Court. More importantly, the District Court relied upon only the pleadings and its Ashenden decision, which were sufficient for entry of judgment on the pleadings. In view of the Names’ concession that their case was a carbon copyof the Ashenden case, their statements about wanting unspecified and immaterial discovery did not preclude the Court from entering judgment on the pleadings.
I. Standard of Review
This Court reviews the granting of judgment on the pleadings de novo. However, to the extent the Berkos Names' appeal from the District Court’s denial of discovery, this Court reviews the ruling for abuse of discretion. Searls v. Glasser, 64 F.3d 1061, 1068 (7th Cir. 1995).
II. The District Court Correctly Relied Upon Only the Pleadings and Its Prior Ashenden Decision
The pleadings in Berkos and its prior Ashenden rulings provided the District Court with a sufficient basis to grant judgment on the pleadings. When the court entered judgment, it had already issued two rulings in Ashenden addressing whether the English courts provided the Names with due process in the same English "test cases" that led to the judgments against both the Ashendens and the Berkos’ Names. Also, it had decided whether "exigent circumstances" existed and whether the Names had the opportunity for a "post-deprivation" hearing. When the Berkos Names then conceded that their case and Ashenden involved the same facts and law, that the judgments against them were entered pursuant to the same Equitas contract and judicial proceedings in England, and that their case could be decided in a single proceeding with Ashenden, the District Court properly took them at their word. As the District Court noted, the "defendants do not challenge Lloyd's assertion that the two cases [Ashenden and Berkos] are virtually identical." (See Transcript of October 29, 1999, Ruling, p. 2. Included in Joint Appendix to Names’ March 22, 2000, Brief).
The Names' assertion that judgment was improperly granted in reliance on sources outside the pleadings and record is belied by the District Court’s own decision. Moreover, contrary to the Names' argument, under the express terms of Rule 12(c), the issue is not what is presented to the Court, but instead what is relied upon by the court (or "not excluded by the court"). Rule 12(c) of the Federal Rules of Civil Procedure. The only items cited by the District Court are the Names’ motion for reassignment, the Names’ answers and the Ashenden decision. As the Court stated, the Names "admit all of the key factual allegations in their answers." (October 29, 1999, Ruling, p. 6). The court then properly found that "there are no genuine issues of material fact and the only issues to be decided are issues of law, thereby allowing this case to be resolved by a Rule 12(c) motion for judgment on the pleadings." (Id. at pp. 3-4.) The court never indicated its reliance upon any matter outside the pleadings.*[ftnote 13] Therefore, contrary to the Names' contention, the Court's decision did not contradict Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449 (7th Cir. 1998).
The Names' assertions that the Court improperly took notice of the English "test case" decisions submitted by the Names' counsel in Ashenden (i.e., Leighs I, Leighs II, Leighs-App. Ct., and Fraser I, Fraser II and Fraser-App. Ct.), and cited by Lloyd’s in its briefs, is likewise misleading. First, as noted above, the District Court did not expressly refer to any of those cases. Rather, the Court referred to its prior decision in Ashenden and the Names’ admissions. Second, to the extent that the District Court relied upon the English cases, Rule 44.1 of the Federal Rules of Civil Procedure or Rule 201 of the Federal Rules of Evidence allowed it to do so. Through their motion to reassign and answers, the Names told the District Court that the English judgments against them were entered pursuant to the same English decisions submitted to the Court in Ashenden. The District Court was therefore entitled to take judicial notice of its record of those decisions in granting judgment on the pleadings. See e.g., Liberty Lobby, Inc. v. Dow Jones & Co., Inc., 838 F.2d 1287, 1300, n.8 (D.C. Cir. 1988) (A district court is entitled to take judicial notice of its own records in another case on a motion for judgment on the pleadings). See also Twohy v. First National Bank of Chicago, 758 F2d 1185, 1193 (7th Cir. 1985); Pancotto v. Sociedade de Safaris de Mozambique, 422 F.Supp. 405, 408 (N.D. Ill. 1976). Third, even if these rules do not apply, the English cases were certainly incorporated into the pleadings by reference in the Names’ answers and the parties’ motions to reassign. Moreover, there has never been any dispute about these case decisions accurately reflecting the English court proceedings. The District Court, therefore, could properly take notice of these decisions. See United States v. Wood, 925 F.2d 1580, 1582 (7th Cir. 1991) (In entering judgment on the pleadings, court properly considered record of bankruptcy proceedings because it can consider documents incorporated by reference and matters of public record.). There was no need to proceed to a summary judgment motion merely to formally submit again the same English case decisions. The "point of reassignment," the Court explained, "is to avoid the duplication of effort associated with litigating the same case twice." (October 29, 1999 Ruling, p. 3).
III. There was No Need for Discovery or to Convert the Motion to One for Summary Judgment
The Names’ objection to judgment on the pleadings was based on their vague claims that they could prove that Clauses 5.5 and 5.10 of the Equitas contract were unlikely to have contributed to the success of Reconstruction & Renewal and that there was no further procedure available to them to challenge the calculation of the Equitas premium. The District Court properly found that this was not a reason to allow discovery or convert the motion to one for summary judgment.
First, the Names never made an offer of proof by affidavit or otherwise on these points. Accordingly, the District Court rightly saw the Names’ objection as "little more than an attempt to delay the proceedings" and any claim of error is waived. (October 29th Ruling, p. 6).
Second, because the Names never made an offer of proof and their admissions provided sufficient basis for judgment on the pleadings, the Names' appeal is reduced to a complaint that the court did not allow them to take discovery. The Names must show, therefore, that the District Court abused its discretion by denying discovery. See, e.g., Searls v. Glasser, 64 F.3d 1061, 1068 (7th Cir. 1995) ("Because the district court is far better situated to pass on discovery matters, we review its discovery decisions for an abuse of discretion. We will not reverse the court’s decision absent a clear showing that the denial of discovery resulted in actual and substantial prejudice to the complaining litigant."). Clearly, in light of the Names’ admissions and the failure of the Names to serve any discovery or identify "any specific factual issues which could be the subject of discovery," the District Court did not abuse its discretion. "[D]iscovery is not required where there is no evidence that discovery would have disclosed material issues of disputed facts.'" Pilgrim v. Littlefield, 92 F.3d 413, 417 (6th Cir. 1996) (Court granted judgment on pleadings).
Third, as the District Court observed, there was no factual dispute about the issues of exigent circumstances and the judicial processes open to Names in England. The Names never disputed that exigent circumstances existed (such as a crisis in the market) at the time R&R and Equitas were implemented and the English courts found that they were free to pursue their fraud or bad faith claims in a Jaffray-type action.
Finally, as Lloyd’s explained above, the issues on which the Names wanted discovery are irrelevant. The issue under the Recognition Act is whether the judicial process in England was "compatible with the requirements of due process of law." 735 ILCS 5/12-621(a)(1). Because the Names had notice and lengthy hearings where their defenses were heard before judgment, they had plenty of due process. Any additional discovery regarding exigent circumstances and post-deprivation hearing possibilities, therefore, would be unnecessary to the issue of enforcement of the judgments.
THE DISTRICT COURT CORRECTLY FOUND THAT PATRICK COLLINS’ COUNTERCLAIM SHOULD HAVE BEEN BROUGHT IN ENGLAND (Appeal No. 00-1702)
In Part 3, Lloyd’s explains why the District Court properly dismissed Patrick Collins’ counterclaim.
STATEMENT OF FACTS
I. Collins Admits That His Escrowed Funds in England Belong to Lloyd's
Collins' counterclaim states that he was awarded damages totaling about £170,000 as the result of legal actions in England by syndicate "Action Groups" against syndicate managing agents. (Countercl., ¶¶6-8.) (Of course, Collins does not claim that the English courts failed to provide due process in these cases). These damages were paid over to the Action Groups' solicitors who deposited the funds in escrow accounts. (Id. at ¶8.) As Collins admits, after "some seven years of complex litigation, the House of Lords, England's highest tribunal, ruled for Lloyd's" that the funds belonged to Lloyd's and had to be paid into the Lloyd's Premium Trust to be held under the terms of a Premium Trust Deed ("PTD Funds"). (Id. at ¶¶9-10.) See The Society of Lloyd's v. Robinson  1 WLR 756,  1 All ER (Comm) 545 (House of Lords, March 25, 1999) (Names' Supp. App., Tab 9). Collins complains, however, that Lloyd's has not given him a credit against his debts to Lloyd's in the amount which he was awarded. By his counterclaim, Collins seeks to apply those sums as a set-off to the English judgment sought to be enforced in this action.
II. Collins Owes Two Separate Debts to Lloyd's For Which He Will Receive Credit for the Amount In Escrow
It is undisputed that Collins owes two principal debts to Lloyd's. (See Nichols Affid., ¶¶1-3, attached to Lloyd's Reply Brief in Support of Motion to Dismiss Counterclaim). These debts are: (1) the Equitas reinsurance premium in the amount of £271,856 as reflected by the English judgment; and (2) a debt of £537,600 to Lloyd's Central Fund. (Id. at ¶¶2-5). The Central Fund is used to meet the debts of Names who have not met their liabilities so that all valid claims of insurance policyholders are satisfied. (Id. at ¶¶2-3.) As a result, the amount owed by Collins to the Central Fund "is in addition to, and separate from his distinct liability as a judgment debtor" under the English judgment for the Equitas reinsurance premium. (Id. at ¶4.).
Pursuant to the judgment of the House of Lords in The Society of Lloyd's v. Robinson, the escrowed funds will be applied against Collins' liabilities to Lloyd's according to the terms of the Premiums Trust Deed. (Nichols Affid., ¶6.) Accordingly, Collins will receive a credit to reduce his total liabilities to Lloyd's which have arisen as the result of his underwriting. (Id. at ¶7.) (Though not part of the record because it occurred while on appeal, in June, Collins' PTD funds were applied to his debts and his Equitas premium judgment debt was reduced by £27,511.88. The remaining PTD Funds will reduce his Central Fund debt and relevant interest.)
SUMMARY OF ARGUMENT
The District Court correctly dismissed Collins' counterclaim. Pursuant to Collins’ choice of forum agreement with Lloyd's, he is required to submit any dispute with Lloyd's to the courts of England.
I. Collins Must Pursue His Counterclaim in England Under the Choice of Forum Clause in the General Undertaking
The District Court properly dismissed Collins’ counterclaim under Federal Rule 12(b)(3) for "improper venue" because he must take his claim to England. Pursuant to the choice of forum clause in Collins' General Undertaking, the courts of England have exclusive jurisdiction of all disputes and controversies between him and Lloyd's. (Lloyd's Filing, ¶7 and Ex. E, ¶2.2; Collins Answer, ¶7.). As previously discussed, this choice of forum clause has been upheld by the District Court and this Court. Bonny v. Society of Lloyd's, 3 F.3d 156 (7th Cir. 1993) and Ashenden v. Society of Lloyd's of London, 1996 WL 717464 (N.D. Ill. 1996). Indeed, Collins himself was a co-plaintiff in Ashenden v. Society of Lloyd's of London, supra. Accordingly, if Collins wishes to dispute the allocation of the PTD funds by the Premiums Trust trustee as credits against his debts, he must seek relief from the courts in England.
II. Collins’ Counterclaim is Foreclosed by the English Courts' Decisions on Application of Litigation Proceeds
Collins' assertion that Illinois law imposes on Lloyd's a "separate affirmative obligation" to apply the PTD funds to the Equitas judgment is unsupported by the facts and the law. Pursuant to the Robinson decision, the PTD funds will be applied to Collins’ debts by the trustee under the terms of the Premium Trust Deed. In effect, Collins’ counterclaim asks the District Court to ignore the rulings in this case. In any event, Lloyd's, as trustee, will credit the PTD Funds against Collins' debts to Lloyd's, which includes his Central Fund Debt and the Equitas premium judgment. Any amount allocated to the Equitas judgment will, of course, reduce the amount Lloyd’s seeks to collect in this action. The English courts have determined, however, that the trustee of the Premium Trust Deed shall determine in its discretion the division of the funds.
COURT CORRECTLY DENIEDTHE MOTION TO STRIKE
In Part 4, Lloyd’s explains why the District Court correctly denied certain Berkos Names’ motion to strike the citations served upon them and why the issue should not be certified to the Illinois Supreme Court.
Objection to Motion for Certification of State Law Question to Illinois Supreme Court
The Names request that this Court certify the question of whether a judgment creditor may proceed to enforce a foreign judgment filed with an Illinois court before the Illinois court issues a ruling recognizing the judgment. This request should be denied. Circuit Rule 52(a) requires that the certified question be one "which will control the outcome of a case pending in the federal court." This Court has held that "certification is appropriate when the case concerns a matter of vital public concern, where the issue will likely recur in other cases, where resolution of the question to be certified is outcome determinative of the case, and where the state supreme court has yet to have an opportunity to illuminate a clear path on the issue." Hanlon v. Town of Milton, 186 F.3d 831, 835 (7th Cir. 1999). Likewise, Rule 20(a) of the Illinois Supreme Court Rules states that the certified question must be one which "may be determinative of the said cause."
This issue does not meet these standards. First, it is not one which will "control the outcome" of this appeal or be "determinative" of the Ashenden and Berkos cases. The question controlling the outcome of these cases is whether the English judicial procedures were "compatible with the requirements of due process of law." 735 ILCS 5/12-621(a)(1). The citation question clearly is not the main event on this appeal. Moreover, there were no enforcement proceedings pursuant to the citations before the District Court’s October 29th decision finding the English judgments enforceable.
Second, the Names concede that "the answer to this question can be derived from existingIllinois law." In fact, the District Court cited numerous Illinois decisions and statutes in support of its ruling. See, e.g., Makula v. Mason, 172 F.3d 493, 497 (7th Cir. 1999) (Court refused to certify question concerning citations because the fact that court needed to "probe below the surface... is hardly reason enough on its own to burden the Illinois Supreme Court with this issue.").
The Names' motion to certify is just another tactic to delay Lloyd's enforcement of valid judgments entered more than two years ago and should be denied. In the alternative, if this Court decides that certification is required, then Lloyd's respectfully requests that the remainder of the issues on appeal be decided in the ordinary course and that the Court sever the distinct citation question for subsequent consideration.
STATEMENT OF FACTS
I. Lloyd's Served Citations to Discover Assets After the English Judgments Were Filed With the Court
On April 22, 1999, Lloyd's filed with the District Court its Filing of Foreign Money Judgments by Judgment Creditor. The Filing set forth the facts that the judgments had been entered in England after notice and a hearing and were final and conclusive in England. Lloyd's also attached copies of the General Undertakings and English judgments. The next day, Lloyd's filed with the court and began serving Citations to Discover Assets on the Names. See Illinois Supreme Court Rule 277 and 735 ILCS 5/2-1402. By an Order dated April 30, 1999, the District Court then scheduled the citation hearings for May 18, 1999. On May 3, 1999, the Names filed a motion to strike Lloyd's citations on the grounds that they were premature and did not conform to Illinois statutory requirements. (Motion to Strike Plaintiff’s Citations to Discover Assets). On May 18th, the citations and motion to strike were entered and continued. (Minute Order of May 18, 1999). No Name appeared for the citation hearing or examination at that time.
No enforcement or collection efforts were made by Lloyd's from May 18th until after the Court issued its ruling on October 29, 1999, finding the judgments enforceable. The Names did not pay any money or transfer any assets to Lloyd's or, for that matter, respond to the citations at all. In fact, it appears they completely ignored the citations' liens. It was not until after the District Court entered judgment against the Names when Lloyd's sought a ruling that the citations were valid when served. (See, Lloyd’s Motion for a Ruling that the Citations Previously Served Upon Judgment Debtors Are Valid and Effective).
II. The Citations Informed Each Name of the Filing, the English Judgment, Prohibition on Transfer of Assets and Availability of Exemptions
Among other information, the Citations to Discover Assets informed each Name of the following:
SUMMARY OF ARGUMENT
Under Illinois law, the English judgments were enforceable when they were filed with the District Court. The citations to discover assets, therefore, were valid when served. In addition, the form and service of the citations substantially complied with Illinois law.
ARGUMENTI. The English Judgments Were Enforceable When Filed With the District Court
The District Court was correct in rejecting the Names' claim that the citations must be stricken because they were served before any judgment was entered by the District Court. The citations were issued pursuant to a valid English judgment capable of enforcement. Sections 619 and 620 of the Recognition Act provide that a foreign judgment which is final, conclusive and enforceable where rendered and which grants recovery of a sum of money is "enforceable in the same manner as the judgment of a sister state which is entitled to full faith and credit." 735 ILCS 5/12-620 and 12-619. The Illinois Enforcement of Foreign Judgments Act ("Enforcement Act"), which governs enforcement of sister states’ judgments, provides that:
A copy of any foreign judgment .... may be filed in the office of the circuit court clerk .... A judgment so filed has the same effect and is subject to the same procedures, defenses and proceedings for reopening, vacating or staying as a judgment of a circuit court for any county of this State and may be enforced or satisfied in like manner." (735 ILCS 5/12-652(a))
Accordingly, just as with sister state judgments, Lloyd’s could proceed with enforcement of the English judgments immediately upon filing them. It is incumbent upon the judgment-debtor to assert and prove a defense to enforcement. Absent an objection, however, a judgment-creditor can proceed to enforcement. See 735 ILCS 5/12-621. The only reason the District Court entered judgment here was because the Names asserted objections.
The Names agree that under the Enforcement Act a judgment-creditor can proceed immediately to enforcement upon filing a sister states’ judgment, but argue the same is not true for foreign country judgments under the Recognition Act. (See April 22, 2000 Brief, pp. 13-14: ". . . the Enforcement Act . . . now no longer requires the filing of an action, but only the filing of the judgment itself."). This attempt to distinguish the two statutes contradicts the plain language of the Recognition Act which states that foreign-country judgments are enforceable in the same manner as those of a sister state. See La Societe Anonyme Goro v. Conveyor Accessories, Inc., 286 Ill. App.3d 867, 871 (2nd Dist. 1997) ("We agree with the reasoning of the cases that have held that the Foreign Judgments Act and the Recognition Act are to be interpreted to complement each other rather than to be mutually exclusive and that they are to be enforceable in the same manner."). It also ignores the omission from the Recognition Act of any requirement that a judgment creditor file a petition for recognition. As the District Court stated, "nothing in the statute requires a judgment-creditor himself to petition the Court for recognition of the foreign judgment before commencing enforcement proceedings." (January 14, 2000 Ruling, p. 4.).
The Names’ mistaken argument that current Illinois law requires that a petition for recognition be granted before enforcement can proceed seems to be based upon Illinois’ previous version (before August 1992) of the Enforcement Act which expressly provided for verified petitions for registration. See 110 S.H.A. 12-603. (A copy of the previous version of the Enforcement Act is included in Lloyd’s Supplemental Appendix as Ex. I). Because the Enforcement and Recognition Acts are interpreted together, there was then a basis for an argument that a petition had to be filed under the Recognition Act as well, even though it did not mention that requirement within its own provisions. See e.g., Vrozos v. Sarantopoulos, 195 Ill. App.3d 610 (1st Dist. 1990). However, the requirement under the Enforcement Act of filing a petition and obtaining an Illinois judgment on it were eliminated when that Act was amended. See 735 ILCS 5/12-650 et seq. Accordingly, a petition or judgment is not needed under the current Recognition Act either.
Even when a petition was required under the old Enforcement Act, a judgment creditor could still "levy" and impose a lien upon the judgment debtor’s property before the Illinois court granted the petition. See 110 S.H.A. 601, 603, and 606. (SA Ex. I). For all these reasons, the citations were not served prematurely.
II. The Citations Substantially Complied With the Illinois Statute and Did Not Prejudice the Names
The District Court also correctly found that the citations' form and service sufficiently complied with Illinois law. The fact that the citations did not specify in detail the statutory exemptions did not prejudice the Names in any way. First, the citations advised them that exemptions are available. Second, no assets were taken from them and no citation hearing was held. Third, the Names immediately employed the Ashendens' counsel who obviously was aware of their rights to exemptions. Fourth, citations were not served on any third parties who were holding assets of the Names. Accordingly, there was no danger of exempt assets being surrendered by third parties. To completely strike the citations because they did not contain a more explicit itemization of exemptions would, therefore, elevate a technicality over substance. Illinois law requires only that the citations comply "substantially" with the form set forth in Section 1402 of the Illinois Code of Civil Procedure. 735 ILCS 5/2-1402. See also, Laborers National Pension Fund v. ANB Investment Management and Trust Co., 26 F. Supp. 2d 1048, 1050 (N.D. Ill. 1998).
Finally, the Names' argument that a failure to file proof of service invalidated the citations is easily rebutted by the fact that their counsel entered their appearance without making any such objection on May 3rd and May 18th. Additionally, Rule 102 of the Illinois Supreme Court Rules and Rule 4(l) of the Federal Rules of Civil Procedure provide that a failure to file proof of service does not affect the validity of service.
For all of the above reasons, The Society of Lloyd's requests that this Court affirm the granting of summary judgment in Ashenden and of judgment on the pleadings in Berkos and the dismissal of Patrick Collins' counterclaim. Additionally, it should affirm the District Court's denial of the Berkos' Names' motion to strike the citations to discover assets.
Attorneys for Appellee The Society of Lloyd's
Dated: June 30, 2000
Michael T. Hannafan
1. The appeals captioned Lloyd's v. Callahan, Lloyd's v. Collins and Lloyd's v. Paschen arise from the case captioned Lloyd's v. Berkos et al in the District Court.
2. See Haynsworth v. Corporation of Lloyd's, 121 F.3d 956, 969 (5th Cir. 1997) cert. denied, 118 S. Ct. 1513 (1988); Allen v. Lloyd's of London, 94 F.3d 923 (4th Cir. 1996); Shell v. R.W. Sturge Ltd., 55 F.3d 1227,1231 (6th Cir. 1995); Bonny v. Society of Lloyd's, 3 F.3d 156, 161 (7th Cir.1993), cert. denied, 510 U.S. 1113 (1994); Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1365-66 (2d Cir.), cert. denied, 510 U.S. 945 (1993); Riley v. Kingsley Underwriting Agaencies, Ltd., 969 F.2d 953, 958 (10th Cir.), cet. denied, 506 U.S. 1021 (1992); Stamm v. Barclays Bank of New York, 153 F.3d 30 (2nd Cir. 1998); Richards v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998); Lipcons v. Underwriters at Lloyd's, London, 148 F.3d 1285 (11th Cir. 1998).
3. English law allows for claims against both memer and managing agents for, among other things, fraud, breach of fiduciary duty, and negligent misrepresentation. See Richards v. Lloyd's of London, 135 F.3d 1289 (9th Cir. 1998). Some of these suits against underwriting agents were successful and resulted in awards of substantial damages. See e.g. Richards, supra citing Arubuthnott v. Fagen and Feltrim Underwriting Agencies, Ltd., 3 Re LR 345 (H.L. 1991); and Deeny v. Gooda Walker, Ltd., Queen's Bench Division (Commercial Court), The Times 7 October 1994.
4. In the subsequent litigation between Names and Lloyd's, described below, the Court of Appeal found that "Clause 5.5 was an obviously appropriate part of the Reinsurance Contract which was an essential part of that scheme. A no set-off clause is a standard type of clause. It is to be found in a number of types of contract and held to be effective. It is a standard clause found in Names' agreements with their agents in Lloyd's." (Frazer-App. Ct., p. 23).
5. Courts in the United States have also recognized that Names are free to pursue fraud claims in England. The Leighs II court "explicitly stated that [clause 5.5] did not exclude or restrict a remedy by way of damages for fraudulent misrepresentation." Lloyd's v. Grace, 1997 WL 607543, at 8, n.6; See also, Richards, 135 F.3d at 1296.
6. At the time Lloyd's filed its Statement of Uncontested Material Fact in Ashenden, approximately 160 Names were making claims in Jaffray. Since then, other Names have joined and now over 200 Names are making claims.
7. New York has a similar statute for enforcing foreign judgments. In Lloyd's v. Grace, (Supreme Court of New York, County of New York, No. 604065/98), English judgments against two Names were found enforceable despite similar due process and public policy objections. (SA Exhibit H).
8. Even if this argument is not waived, it is foreclosed, as found by the District Court, by this Court's decision in Bonny and Ashenden. (Memorandum Opinion and Order, April 22, 1999, pp. 21-2).
9. Based on this principle, the Hunt court rejected the judgment debtor's claim that the English judgment was unenforceable on public policy grounds because his fundamental right to contract was abrogated by the english court's judgment that he, contrary to contractual provisions, was personally liable on a contract. That argument was "little more than a quarrel with the substantive law of England." Hunt, 492 F. Supp. at 901.
10. The one possible exception is Mr. Justice Tuckey's abuse of process ruling in Fraser. See Sec. V(C) in Statment of "Facts. Mr. Justice Tuckey found that the Names should have raised the bad faith defense in the first two rounds of hearings.
11. The Grace court agreed with the District Court: "The integrity and viability of the entire Lloyd's market was placed in jeopardy." (SA Exhibit H, p. 11).
12. Again, the Grace court agreed with the English courts and the District Court: "Lloyd's had a valid reason for enacting and the English courts had a sufficient reason to uphold [Equitas], i.e., to ensure that the R&R Plan would be immediately implemented, so that Lloyd's could continue to function." (SA Exhibit H, p. 24).
13. Lloyd's made it clear in its reply brief in support of its motion for judgment on the pleadings that it was relying solely on the Berkos case and the Ashenden decision. (Lloyd's Reply Brief, pp. 1-2.)
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