Filed: Mar. 23, 2005
Latest Update: Feb. 21, 2020
Summary: UNITED STATES COURT OF APPEALS TENTH CIRCUIT SOCIETY OF LLOYD’S, Plaintiff-Appellee, v. No. 02-2301 RICHARD A. REINHART, Defendant-Appellant. SOCIETY OF LLOYD’S, Plaintiff-Appellee, v. No. 03-4065 GRANT R. CALDWELL, DAVID L. GILLETTE, JAMES R. KRUSE, EDWARD W. MUIR, and KENT B. PETERSEN, Defendants-Appellants. SOCIETY OF LLOYD’S Plaintiff-Appellee, v. No. 03-4082 STEPHEN M. HARMSEN; KELLY C. HARMSEN, Defendants-Appellants. SOCIETY OF LLOYD’S Plaintiff-Appellee, v. Nos. 03-4094, 03-4183 and 04-
Summary: UNITED STATES COURT OF APPEALS TENTH CIRCUIT SOCIETY OF LLOYD’S, Plaintiff-Appellee, v. No. 02-2301 RICHARD A. REINHART, Defendant-Appellant. SOCIETY OF LLOYD’S, Plaintiff-Appellee, v. No. 03-4065 GRANT R. CALDWELL, DAVID L. GILLETTE, JAMES R. KRUSE, EDWARD W. MUIR, and KENT B. PETERSEN, Defendants-Appellants. SOCIETY OF LLOYD’S Plaintiff-Appellee, v. No. 03-4082 STEPHEN M. HARMSEN; KELLY C. HARMSEN, Defendants-Appellants. SOCIETY OF LLOYD’S Plaintiff-Appellee, v. Nos. 03-4094, 03-4183 and 04-4..
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UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
SOCIETY OF LLOYD’S,
Plaintiff-Appellee,
v. No. 02-2301
RICHARD A. REINHART,
Defendant-Appellant.
SOCIETY OF LLOYD’S,
Plaintiff-Appellee,
v. No. 03-4065
GRANT R. CALDWELL, DAVID L.
GILLETTE, JAMES R. KRUSE,
EDWARD W. MUIR, and KENT B.
PETERSEN,
Defendants-Appellants.
SOCIETY OF LLOYD’S
Plaintiff-Appellee,
v. No. 03-4082
STEPHEN M. HARMSEN; KELLY C.
HARMSEN,
Defendants-Appellants.
SOCIETY OF LLOYD’S
Plaintiff-Appellee,
v. Nos. 03-4094, 03-4183 and 04-4142
WALLACE R. BENNETT,
Defendant-Appellant.
ORDER
Filed May 6, 2005
Before SEYMOUR, HENRY, and LUCERO, Circuit Judges.
The opinion filed March 23, 2005, failed to include case number 04-4142,
Society of Lloyd’s v. Bennett. An amended opinion is attached hereto, adding that
case number to the caption. This order shall stand as and for the amended
mandate of the court.
Entered for the Court
PATRICK FISHER, Clerk of Court
by:
Amy Frazier
Deputy Clerk
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F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAR 23 2005
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
SOCIETY OF LLOYD’S,
Plaintiff-Appellee,
v. No. 02-2301
RICHARD A. REINHART,
Defendant-Appellant.
SOCIETY OF LLOYD’S,
Plaintiff-Appellee,
v. No. 03-4065
GRANT R. CALDWELL, DAVID L.
GILLETTE, JAMES R. KRUSE,
EDWARD W. MUIR, and KENT B.
PETERSEN,
Defendants-Appellants.
SOCIETY OF LLOYD’S
Plaintiff-Appellee,
v. No. 03-4082
STEPHEN M. HARMSEN; KELLY C.
HARMSEN,
Defendants-Appellants.
SOCIETY OF LLOYD’S
Plaintiff-Appellee,
v. Nos. 03-4094, 03-4183 and 04-4142
WALLACE R. BENNETT,
Defendant-Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICTS OF NEW MEXICO AND UTAH
(D.C. NOS. 02-264 LFG/WWD-ACE, 2:02-CV-204-TC)
George R. McFall (Patrick J. Rogers, Modrall, Sperling, Roehl, Harris & Sisk,
P.A., Albuquerque, New Mexico and Theodore W. Grippo, Jr., Lindenbaum
Coffman Kurlander Brisky and Grippo, Ltd., Chicago, Illinois, with him on the
briefs), Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, New Mexico
for Defendant-Appellant in Case Number 02-2301.
Barry D. Williams (Rikki L. Quintana with him on the brief) Krehbiel,
Bannerman & Williams, P.A., Albuquerque, New Mexico, for Plaintiff-Appellee
in Case Number 02-2301.
Matthew L. Lalli (Alan L. Sullivan and Troy L. Booher, Snell & Wilmer, L.L.P.,
Salt Lake City, Utah, and Theodore W. Grippo, Jr., Lindenbaum Coffman
Kurlander Brisky and Grippo, Ltd., Chicago, Illinois, with him on the briefs)
Snell & Wilmer, L.L.P., Salt Lake City, Utah, for Defendants-Appellants in Case
Number 03-4065.
Steven A. Wuthrich, Montpelier, Idaho, for Defendants-Appellants in 03-4082.
Wallace R. Bennett, Defendant-Appellant, filed briefs pro se in Case Numbers 03-
4094 and 03-4183.
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Michael N. Zundel (James A. Boevers and Thomas R. Barton with him on the
briefs) Prince, Yeates & Geldzahler, Salt Lake City, Utah, for Plaintiff-Appellee
in 03-4065, 03-4082, 03-4094 and 03-4183.
Before SEYMOUR , HENRY , and LUCERO, Circuit Judges.
HENRY, Circuit Judge.
This consolidated appeal involves the Plaintiff-Appellee Lloyd’s of
London’s request for the court’s recognition and enforcement of money judgments
issued by the High Court of Justice, Queen’s Bench Division, London, England,
in its favor against each of the defendants. Lloyd’s obtained money judgments in
England against each of the six New Mexicans (the “New Mexico Names”) and
the nine Utahns (the “Utah Names”) (collectively, the “Names”) in connection
with underwriting obligations. Lloyd’s then brought actions in the United States
District Court for the Districts of New Mexico and Utah seeking recognition of
these judgments as final and enforceable, entitled to full faith and credit in New
Mexico and Utah, respectively. Each federal district court granted summary
judgment in favor of Lloyd’s. Of the Utah Names, one defendant reached a
settlement with Lloyd’s, leaving eight in this litigation. Five of the six New
Mexico Names reached settlements with Lloyd’s. We have consolidated these
cases for disposition on appeal.
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On appeal, the New Mexico Name raises several arguments. First, he
argues that the English judgment deprived him of due process under New
Mexico’s Uniform Foreign Money-Judgment Recognition Act. Second, the New
Mexico Name maintains that the English judgment stemmed from an action that is
repugnant to New Mexico’s public policy as the judgment: (a) violates New
Mexico’s securities laws; (b) is based on unconscionable contracts; (c) stems from
adhesion contracts; (d) comprises unlawful cognovit notes, (e) is based on illusory
contacts; and (f) violates the New Mexico Unfair Practices Act.
The Utah Names offer similar arguments. They contend that the district
court cannot enforce the English judgments under Utah law, because the English
system of jurisprudence is incompatible with American standards of due process,
and that they did not receive an opportunity for a full and fair trial. The
defendants also maintain that the English judgments conflict with Utah public
policy. One Utah Name questions whether diversity jurisdiction exists, and also
challenges the enforcement of the English judgments as violative of Utah
securities laws. Two Utah Names also contend that the district court’s approval
of the English post-judgment interest of eight percent per annum was incorrect.
We hold that the Utah and New Mexico Names received due process under
the English system of jurisprudence and that, in the thirty-two days of hearing
before English trial and appellate courts, they received an opportunity for a full
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and fair trial. As to the New Mexico Name, specifically, the English legal
proceedings provided ample due process pursuant to New Mexico’s Uniform
Foreign Money-Judgment Recognition Act. We also hold that the Lloyd’s
judgments are not repugnant to New Mexico’s public policy.
As to the Utah Names, we hold that the English proceedings satisfied
Utah’s due process requirements and the English judgments do not conflict with
Utah’s public policy. We also affirm the district court’s denial of a motion for
discovery and a motion to certify questions of law to the Utah Supreme Court.
We hold that the parties in this case are diverse, and that enforcement of the
English judgments does not violate Utah’s securities laws. Finally, we reverse the
district court’s determination that Lloyd’s English judgments should accrue
interest at the English post-judgment interest rate.
I. BACKGROUND
Numerous courts have summarized the basic facts applicable to the
underlying litigation, and these facts are not in dispute. See Soc’y of Lloyd’s v.
Ashenden , 233 F.3d 473 (7th Cir. 2000); Haynsworth v. The Corp. ,
121 F.3d 956
(5th Cir. 1997); Allen v. Lloyd’s of London ,
94 F.3d 923 (4th Cir. 1996); Soc’y
of Lloyd’s v. Webb ,
156 F. Supp. 2d 632 (N.D. Tex. 2001). We shall summarize
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the pertinent facts here, borrowing heavily from the detailed and well-reasoned
Webb decision.
Lloyd’s is not an insurer, but rather is the regulator of an insurance market
located in London. Through Parliamentary Acts, specifically the Lloyd’s Acts of
1871-1982, Parliament created Lloyd’s and authorized it to regulate the English
insurance market. Individual and corporate members of Lloyd’s known as
“Names” underwrite insurance. The New Mexico defendants and Utah defendants
became Names in the Lloyd’s market between the late 1970’s and late 1980’s.
The Names underwrite insurance by forming groups known as syndicates.
Names are passive investors in the sophisticated scheme, but along with potential
profits they may incur substantial personal and direct liability with respect to a
portion of a syndicate’s risk in the Lloyd’s market. The liability of each Name is
several rather than joint. As a condition of becoming members of Lloyd’s, Names
enter into agreements governing their membership in Lloyd’s and their
underwriting in the Lloyd’s market. At issue here is the General Undertaking
Agreement, which obligated the New Mexico and Utah Names, and all other
Names, to comply with the Parliamentary Acts under which Lloyd’s was created
and to submit any dispute arising out of their memberships or underwriting at
Lloyd’s to the English courts for resolution pursuant to English law. Each Name
“irrevocably agree[d] that the courts of England [had] exclusive jurisdiction to
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settle any dispute” arising out of the underwriting of insurance business, and
agreed that such “[p]roceedings brought in the English courts [were] conclusive
and binding upon any party and may be enforced in the courts of any other
jurisdiction.” Case No. 02-2301, Aplts’ App. vol. I, at 43 (General Undertaking
Agreement).
By the early 1980’s, which is about the time that Lloyd’s solicited the Utah
and New Mexico Names,
Lloyds knew that it had problems with rising asbestos and toxic tort
claims. The syndicates’ reserves were inadequate to handle these rising
claims and a committee known as the Asbestos Working Party was
formed to gather information about the breadth of the problem. The
problem was described as “the largest phenomenon that has ever hit the
casualty insurance industry” and “the most significant legal and loss
cost issue in the history of the industry.” Information about these
claims was not published in the marketplace, was omitted from the audit
instructions, and was not published in Lloyds financial statements for
the year . Although a letter was prepared that provided the necessary
disclosures to the Names, it was merely placed in a file and never
distributed to the intended Names. Simultaneously, Lloyds was
campaigning in Parliament for passage of the Lloyds Act of 1982 which
granted Lloyds and its governing body extraordinary bylaw-making
powers and immunity. In exchange, Lloyds committed to providing
better quality information to prospective Names. This promise was not
fulfilled and Lloyds admitted to Parliament that it had not kept its
promise. “The Council of Lloyds very much regrets that the undertaking
to implement the recommendations . . . within 2 years of the Royal
Assent has not been kept.”
Webb , 156 F. Supp. 2d at 635 (emphasis supplied) (internal citations omitted).
According to former Name and lead plaintiff in the fraud action against
Lloyd’s, Sir Peter Jaffray, “[t]he only way they could keep going was to suppress
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the asbestos information, cook the books to ensure they were still showing profits
and go after new investors.” Case No. 02-2301, Aplts’ App. vol. I, at 84
(Combined Mem. in Opp. to Summ. Judgment and in Support of Motion in Alt.
for Discovery under Rule 56(c), Ex. 1 at 3 ( Lloyd’s of London 1688 – ?, T IME
Feb. 21, 2002)). Further,
[d]uring the five years that Lloyds failed to improve information
disseminated to prospective Names, approximately 10,000 new Names
had joined Lloyds, most of whom were U.S. investors.
Webb , 156 F. Supp. 2d at 635. The New Mexico and Utah Names contend that
the Lloyd’s representative emphasized Lloyd’s long history of profitability, its
exclusive and selective members, its program of annual audits, and that the risk of
“unlimited liability” had been of little consequence in Lloyd’s three-hundred-year
history. See Case No. 02-2301, Aplts’ App. vol. I, at 276-320 (Mem. in Opp. to
Summ. Judgment, exs. 3 - 8 (Affids. from Utah Names)).
For the years of account 1988 through 1992, Lloyds suffered losses
in excess of £8 billion (these were reported in 1991-1995). Once the
Names’ inquiries into the cause for the losses began, they concluded
that Lloyds had been guilty of serious negligence and/or fraud. . . .
The Names eventually filed suits in numerous cities across the
United States claiming fraud against Lloyds in connection with their
recruitment as investors, their placement on high-risk syndicates and
their continuing to underwrite at Lloyds. In each of the cases Lloyds moved to
dismiss based on a forum selection (the forum being in England) and choice of
law (the law being English) clauses contained in the General Undertaking ( i.e. , a
contract) that the Names had signed. In each of the cases filed, the courts of
appeals enforced the forum selection and choice of law clauses.
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Webb , 156 F. Supp. 2d at 635-36 (internal citations omitted).
Apparently, the New Mexico Name and several Utah Names were parties to
one of these suits, Richards v. Lloyd’s of London, 135 F.3d 1289 (9th Cir. 1998).
The Richards complaint indicates that all but Utah Names Stephen and Kelly
Harmsen and were plaintiffs. See Case Nos. 03-4064, -4082, -4094, -4193,
Aple’s Supl. App. vol. I, doc. 3 at 43-49.
The Richards litigation addressed and rejected the Names’ contention that
“their disputes with Lloyd’s should be litigated in the United States despite
contract clauses binding the parties to proceed in England under English law.”
Richards, 135 F.3d at 1292. The Ninth Circuit held that to invalidate the choice
of law provisions in the Lloyd’s General Undertaking Agreement would result in
an “unbounded” reach of the United States securities laws, and would hamper
international commerce.
Id. at 1293. Moreover, the court stated that “[t]he
Names have recourse against [Lloyd’s] for fraud, breach of fiduciary duty, or
negligent misrepresentation.”
Id. at 1296. 1
1
To the extent that Lloyds raises res judicata and collateral estoppel as
affirmative defenses with respect to Mr. Bennett’s arguments against the
enforcement of the choices of law and forum, these matters are addressed in
Richards, as discussed in § II(C)(4)(b), infra, and we hold such claims are
precluded. Although Richards also discussed the policies of the anti-waiver
provisions of the federal securities laws and referenced various state securities
laws, Richards was limited to the choices of law and forum proceedings. To the
extent the Names challenge the choices of law and forum under the state
(continued...)
-9-
We reached a similar conclusion in Riley v. Kingsley Underwriting
Agencies, Ltd., 969 F.2d 953, 958 (10th Cir. 1992). We rejected the plaintiff
Name’s contentions and held that
English law does not preclude [the Name] from pursuing an action for
fraud and we agree with the Defendants that the Lloyd’s Act does not
grant statutory immunity for such claims. We have been shown nothing
to suggest that an English court would not be fair, and in fact, our
courts have long recognized that the courts of England are fair and
neutral forums.
Id. (internal citations omitted). As such, trial proceeded in England. Following
trial,
the English courts found Lloyds guilty of negligence with respect to
their Names and awarded the Names damages totaling £1 billion.
Pursuant to the Lloyds’ Act of 1982, however, the Lloyds' Council
enacted a by-law that caused the funds awarded to the Names to be
frozen. The Lloyds’ Council placed Lloyds as trustee of the trust funds.
The appellate court of England upheld Lloyds’ right to freeze the funds
and appoint Lloyds as trustee under the Lloyds Act of 1982.
Because the losses were widely spread throughout the various
syndicates, Lloyds developed a reorganization program in 1995-96
called Reconstruction and Renewal (“R & R”). This was a mandatory
plan of reinsurance of all years of account prior to 1993 into one
reinsurance company called Equitas Reinsurance Ltd. The available
syndicate assets were £9.9 billion; yet the premium needed for the
reinsurance (by December 31, 1995) was £14.7 billion. . . .
Webb , 156 F. Supp. 2d at 636 (internal citations omitted).
(...continued)
1
securities laws, these too are precluded. See infra § II(B)(2)(a).
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In implementing the reorganization plan, Lloyd’s required each Name to
become a party to the Equitas reinsurance contract through an appointed,
substituted agent, who signed the contract on behalf of the Name. The Equitas
contract contained a “pay now, sue later” clause that precluded Names from
asserting claims they might have against Lloyd’s or others as a set-off or
counterclaim to their Equitas Premium. The Equitas contract also contained a
“conclusive evidence” clause, which provided that, in the absence of manifest
error, Lloyd’s determination of a Name’s Equitas premium was conclusive:
The Equitas premium was mandatory and each Name was required to
pay Equitas the amount shown on his statement. If, however, the
Name signed the settlement agreement included in the R & R
package, the Name would be awarded a credit, which would result in
a reduction in the amount he paid in.
Id.
The New Mexico and Utah Names were Names who neither signed the
settlement agreement nor paid the assessment. When they did not pay, Lloyd’s
used its by-law powers from the Lloyd’s Act of 1982 to appoint a Substitute
Agent. This Substitute Agent was instructed to sign the Equitas contract on
behalf of the Names who refused to sign the Equitas settlement. Next, Lloyd’s
began suing these non-settling Names. Lloyd’s paid Equitas the premium
allegedly owed by the non-settling Names and received an assignment for the
premium in exchange. In late 1996, Lloyd’s then sued the New Mexico and Utah
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Names (and all remaining non-settling Names) for the amounts paid on their
behalf.
Lloyd’s served a writ of summons on each of the New Mexico and Utah
Names, notifying them of the commencement of the English action against them.
Each of the Names filed an Acknowledgment of Service of Writ of Summons
through their solicitors of record. Through the filing of the Acknowledgment,
each Name appeared in the English Court and notified Lloyd’s of his or her intent
to contest the claim. Although other Names actively defended in the English
litigation, the New Mexico and Utah Names did not submit a notice of intention
to defend, nor did they contest Lloyd’s claims.
Those Names who did defend presented common objections and defenses.
They alleged that Lloyd’s lacked the regulatory authority to pursue certain aspects
of the reorganization program, that they were entitled to rescind based on fraud in
the inducement of their underwriting at Lloyd’s, that they were entitled to litigate
these claims of fraud, and that they were not bound by the Equitas reinsurance
contract’s “pay now, sue later” and “conclusive evidence” clauses. The English
court found in favor of Lloyd’s and entered judgment against each of the
defendants. See Webb, 156 F. Supp. 2d at 636 (citing English cases).
Specifically, the court found that the “pay now, sue later” clause was
enforceable and the Names could not assert a fraud claim as a set-off to the
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Equitas premium due. At the trial level, several hearings were held regarding the
premium amounts and the trial court concluded that Lloyd’s produced sufficient
documents justifying the premiums it claimed. Subsequently, each Name had the
opportunity to present evidence that the calculation of the premium was “manifest
error” pursuant to the Equitas contract. The court ruled against the Names with
respect to the “manifest error” claims. See Webb, 156 F. Supp. 2d at 636.
The English court did find, however, that Lloyd’s could be sued for fraud
damages and that the Names were free to pursue separate fraud claims against
Lloyd’s. Approximately two-hundred non-settling Names brought a fraud case in
England against Lloyd’s titled The Society of Lloyds v. Jaffray. The Honorable
Justice Cresswell of the High Court of Justice of England and Wales issued a
635-page decision in the Jaffray litigation in November 2000 dismissing sample
Names’ claims for deceit and fraudulent misrepresentation after a trial spanning
nineteen weeks. See 2000 WL 1629463 (Q.B. 3 Nov. 3, 2000), aff’d, Ct. App.
Civ. Div. 26 July 2002.
In October 1999, while the Jaffray case was pending, the court issued an
order requiring any Names wishing to bring a fraud claim against Lloyd’s to join
the Jaffray action. Lloyd’s sent a copy of a statement regarding the terms of the
Order to every Name who had not accepted Lloyd’s Reconstruction and Renewal
settlement offer, including each of the New Mexico and Utah Names. See Case
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No. 03-4002, vol. V, doc. 95 at 3. Neither the Utah Names nor the New Mexico
Name gave notice that they reserved the right to advance such allegations or
otherwise become parties to the Jaffray litigation.
The English judgments against the Names were affirmed on appeal. All
appeals from the entry of the English judgments have been exhausted. Following
these rulings, the English Court entered individual judgments in favor of Lloyd’s
against each of the New Mexico and Utah Names. 2 On March 8, 2002 Lloyd’s
filed this action to collect on the judgments.
II. DISCUSSION
The Names raise two overarching arguments regarding the errors of the
New Mexico and Utah district courts: (1) the courts erred when they determined
that the English proceedings provided due process to the Names; and (2) the
courts erred when they found that the English cause of action did not violate the
public policy of either New Mexico or Utah. They also challenge the district
2
As of March 7, 2002 the U.S. dollar amounts for the principal portions
of the judgments were, in the aggregate, as follows:
Utah Names: $1,757,549.31
New Mexico Name: $ 262,124.54
See Case Nos. 03-4065, -4082, -4094, -4183, Aple’s Supl. App. vol. I, doc. 1, at
15-18 (Complaint filed Mar. 8, 2002); Case No. 02-2301, Aplts’ App. vol. I, at 16
(Complaint filed Mar. 8, 2002).
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courts’ denial of other motions, and two Utah Names challenge the calculation of
post-judgment interest.
At the outset, we note that the Names’ two principal arguments have been
raised unsuccessfully in various federal and state courts, by defendants from
several states. 3
Although we affirm the grant of summary judgment to Lloyd’s for
largely the same reasons as our sister circuits, our analyses of the defenses
brought by the New Mexico and Utah Names are slightly different because of the
defenses the Names assert. Furthermore, Utah, unlike the states whose law was
applied by each court that has addressed the issue, has not adopted the Uniform
3
See e.g.; Soc’y of Lloyd’s v. Turner, 303 F.3d 325 (5th Cir. 2002)
(affirming summary judgment for Lloyd’s, under Uniform Foreign Country
Money-Judgment Recognition Act, on grounds that English courts provide due
process and enforcement of English judgment is not repugnant to Texas public
policy) ; Ashenden,
233 F.3d 473 (7th Cir. 2000) (affirming summary judgment for
Lloyd’s under Illinois Uniform Foreign Money-Judgment Recognition Act,
explaining that existence of due process in English courts is a “question . . . not
open to doubt”) ; Soc’y of Lloyd’s v. Mullin,
255 F. Supp. 2d 468, 476, 477 (E.D.
Pa. 2003) (granting summary judgment for Lloyd’s under Pennsylvania’s Uniform
Foreign Money Judgment Act, noting that “recognition of the English Judgment
would not so offend Pennsylvania’s notions of due process grounds,” and that
defendant’s argument “fails to meet the high threshold for nonrecognition on
public policy grounds”), aff’d, 96 Fed. Appx. 100 (3d Cir. May 5, 2004); Soc’y of
Lloyd’s v. Grace ,
718 N.Y.S.2d 327, 328 (N.Y. App. Div. 2000) (affirming
summary judgment for Lloyd’s, explaining that “since the underlying English
judgments are procedurally sound and do not violate any public policy of New
York or the United States, they are entitled to comity”); Soc’y of Lloyd’s v. Baker,
673 A.2d 1336, 1338 (Me. 1996) (affirming summary judgment for Lloyd’s and
stating that the “application [of doctrine of comity] is a question of law that may
be resolved by the court on a motion for a summary judgment”) (citations
omitted).
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Foreign Money-Judgment Recognition Act. Although the decisions of the other
courts are highly persuasive, we must detour slightly as we apply Utah’s comity
analysis to the assertions of the Utah Names. Although we empathize with the
losses that the New Mexico Name and Utah Names have incurred, and we
appreciate the sincerity of their arguments, and we find many of Lloyd’s acts to
be distinctly distasteful, the agreements the Names signed and the applicable law
require that we must affirm the thorough and well-reasoned orders of the district
courts, with one slight exception.
A. Standard of Review
We review the district court’s grant or denial of summary judgment de
novo, applying the standard applied by the district court pursuant to Federal Rule
of Civil Procedure 56(c). Qwest Corp. v. City of Santa Fe, New Mexico, 380 F.3d
1258, 1264 (10th Cir. 2004). “Summary judgment is appropriate if ‘there is no
genuine issue as to any material fact and [ ] the moving party is entitled to
judgment as a matter of law.’ We view the evidence in a light most favorable to
the non-moving party.”
Id. (quoting F ED . R. C IV . P. 56(c)).
B. New Mexico Law
The New Mexico Name contends that the district court erred when it failed
to consider the procedures the English courts actually employed, and instead
relied on the general proposition that the English courts are fair and neutral. The
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New Mexico Name also asserts that the enforcement of the English judgments
violates New Mexico public policy. Applying New Mexico law, we hold that the
district court appropriately assessed the English judicial system and no violation
of due process or New Mexico public policy occurred.
1. Due Process concerns were met.
The New Mexico Name claims the district court failed to appreciate how its
enforcement of the English judgment deprived him of his due process rights.
While the Full Faith and Credit Clause applies to the recognition and enforcement
of judgments among sister states, it does not apply to judgments rendered in
foreign countries. Allstate Ins. Co. v. Hague, 449 U.S. 302, 322 n.4 (1981)
(Stevens, J., concurring in the judgment) (“The Full Faith and Credit Clause, of
course, was inapplicable . . . because the law of a foreign nation, rather than of a
sister State, was at issue. . . .”). The parties cite no federal statute applicable to
the enforcement of foreign court money judgments in U.S. courts, nor any
applicable treaty. Instead, the recognition and enforcement of foreign judgments
are governed by state law. See Transport Wiking Trader Schiffarhtsgesellschaft
MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala ,
989 F.2d 572,
582 (2d Cir. 1993) (“We note that . . . the recognition of foreign judgments is
governed by state law.”); see R ESTATEMENT (T HIRD ) OF THE F OREIGN R ELATIONS
L AW OF THE U NITED S TATES § 481 cmt. a (1987).
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New Mexico has adopted the Uniform Foreign Money-Judgment
Recognition Act. See N.M. S TAT . A NN . §§ 39-4B-1 to 39-4B-9 (1978). Pursuant
to the Act, “[a] foreign judgment is not conclusive” if
the judgment was rendered under a system that does not provide
impartial tribunals or procedures compatible with the requirements of
due process of law;
and it “need not be recognized if:”
(1) the defendant in the proceedings in the foreign court did not
receive notice of the proceedings in sufficient time to enable him to
defend;
(2) the judgment was obtained by fraud;
(3) the cause of action on which the judgment is based is repugnant
to the public policy of this state . . . .
N. M. S TAT . A NN . § 39-4B-5 (emphasis supplied).
The New Mexico Name contends that the New Mexico district court
conflated the widely recognized general fairness of the English system , with this
particular judgment , which, in his view, conflicts with his constitutional due
process rights. Specifically, the New Mexico Name objects to (1) the English
Courts’ enforcement of the “pay-now, sue-later” clause, which prohibited him
from raising certain defenses and counterclaims during the English action; (2) the
“conclusive evidence” clause, because it renders the amount of the assessment
determined by Lloyd’s conclusive absent manifest error, and thereby fails to meet
due process requirements; and (3) the fact that the cumulative effect of both these
clauses is that the New Mexico Name could not receive a pre-deprivation hearing,
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could not obtain discovery as to the amount of Lloyd’s claim, and could not
challenge Lloyd’s calculation of the amount due.
As to whether the contested clauses, taken separately or together, amounted
to a forfeit of the Name’s due process rights, “[t]he question is not whether
Lloyd’s accorded due process to the names, but whether the English courts did. . .
. Stated differently, the courts held that the names had waived their procedural
rights in advance . . . .” Ashenden , 233 F.3d at 479 (emphasis supplied). Waiver
of procedural rights in advance is clearly permitted, see e.g., D.H. Overmyer Co.
v. Frick Co. , 405 U.S. 174, 185 (1972) (“The due process rights to notice and
hearing prior to a civil judgment are subject to waiver.”). Moreover, given the
New Mexico Name’s “utter failure to participate in any stage of any of the
English proceedings, ‘we not only look with skepticism, but we flatly reject the
due process complaint of a party who was given, and . . . waived, the opportunity
of making the adequate presentation in the English Court.’” Turner , 303 F.3d at
331 n.20 (quoting British Midland Airways Ltd. v. Int’l Travel Inc. ,
497 F.2d 869,
871 (9th Cir. 1974) (internal quotation marks omitted)).
Although the New Mexico Name would prefer to have us focus on this
particular judgment , rather than the English system , at this stage of these matters,
we are not permitted to do so. See N.M. S TAT . A NN . § 39-4B-5 (indicating that to
determine “conclusive[ness]” of a “foreign judgment,” a court examines the
-19-
foreign country’s “system” and whether it maintains “procedures compatible with
the requirements of due process of law”). The procedures the English courts
afford need not be identical to ours, they must only be compatible in that they do
not offend the notion of basic fairness. See Turner , 303 F.3d at 331 (“the courts
of England are fair and neutral forums”) (footnoted citation omitted); Hilton v.
Guyot , 159 U.S. 113, 205 (1895) (“[W]e are not prepared to hold that the fact that
the [foreign] procedure . . . differed from that of our own courts is, of itself, a
sufficient ground for impeaching the foreign judgment.”); U NIFORM
F OREIGN -M ONEY J UDGMENTS R ECOGNITION A CT § 4 cmt. (“[A] mere difference in
the procedural system is not a sufficient basis for non-recognition. A case of
serious injustice must be involved.”);1 R ESTATEMENT (T HIRD ) OF F OREIGN
R ELATIONS § 482 cmt. b (1987) (“A court asked to recognize or enforce the
judgment of a foreign court must satisfy itself of the essential fairness of the
judicial system under which the judgment was rendered.”).
And when we look to the basic fairness of the system, the answer is clear:
“[O]ur courts have long recognized that the courts of England are fair and neutral
forums.” Riley , 969 F.2d at 958 (collecting cases); see also Haynsworth, 121
F.3d at 967 (“This is particularly so in the case of England, a forum that
American courts repeatedly have recognized to be fair and impartial.”). The
-20-
Seventh Circuit similarly lauded the English system’s regard for due process in its
highly persuasive opinion involving nearly identical claims:
Any suggestion that [the English] system of courts does not provide
impartial tribunals or procedures compatible with the requirements of
due process of law borders on the risible. [T]he courts of England are
fair and neutral forums. The origins of our concept of due process of
law are English . . . . and the English courts . . . are highly regarded for
impartiality, professionalism, and scrupulous regard for procedural
rights.
Ashenden , 233 F.3d at 476 (internal citations and quotations omitted).
We agree with the Seventh Circuit’s reasoning and hold that given the
structure of the English system, which is substantially similar to our own, the
New Mexico Name’s suggestion that the English court system does not provide
tribunals compatible with due process is untenable. See also Webb , 156 F. Supp.
2d. at 640.
2. New Mexico’s Public Policies were not violated.
The New Mexico Name also challenges the enforcement of the English
judgments as a violation of New Mexico’s public policy. First, he argues that
Lloyd’s violated the New Mexico Securities Act through its solicitation of
unregistered securities and by making fraudulent representations. Second, he
asserts that the Equitas contract is both procedurally and substantively
unconscionable. Third, the New Mexico Name contends that the Equitas contract
amounts to a contract of adhesion. Fourth, he asserts the Equitas contract is a
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“cognovit note,” which both violates New Mexico public policy and New Mexico
law. Fifth, he maintains that the Equitas contract is illusory. Finally, he contends
the New Mexico Unfair Practices Act bars recognition of the Equitas contract.
Even if we assume the shaky premises of these assertions to be true (that
Lloyd’s made material misrepresentations and those misrepresentations would
allow rescission under New Mexico law), we reject each of these claims for one
overriding reason: English law as applied here does not violate New Mexico’s
public policy. As we iterate throughout the opinion, “[t]he view that every
foreign forum’s remedies must duplicate those available under American law
would render all forum selection clauses worthless. . . .” Haynsworth , 121 F.3d at
969; see also Riley , 969 F.2d at 958.
Furthermore, we reiterate that we must focus on the “cause of action” and
the “claim for relief” underlying the English Judgment, not the differences in the
bodies of law, because slight differences between England’s and New Mexico’s
laws do not trigger the public policy exception. N.M. S TAT . A NN § 39-4B-5(b)(3);
see Turner , 303 F.3d at 332-33. Neither a breach of contract action nor a claim
for money damages is repugnant to New Mexico public policy.
a. The State Agreement trumps the New Mexico Securities Act.
The New Mexico Name emphasizes that the New Mexico Securities Act
embodies a public policy to protect New Mexico, and New Mexicans, and that the
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contract on which Lloyd’s sued violated the state securities act. He relies heavily
upon the declaration of Michael J. Vargon, Deputy Director of the Securities
Division in the New Mexico Department of Regulation and Licensing. In an
affidavit, Mr. Vargon states that after receiving various complaints from New
Mexicans regarding Lloyd’s solicitations to become Names, the Division
concluded that the interest in the Names program was an investment contract and
therefore a security, subject to the New Mexico Securities Act. Lloyd’s failed to
register these securities, and furthermore, “the information available to the
Division strongly suggest[ed] fraud and misrepresentation in the inducement and
continuing misrepresentation made to Names . . . .” Case No. 02-2301, Aplts’
App. vol. I, at 325.
In response, Lloyd’s points to the July 1996 State Agreement between
Lloyd’s and participating state securities regulators, including the Acting Director
of the New Mexico Securities Division. The State Agreement recognizes that
“certain State Securities Regulators have asserted the activities of Lloyd’s . . . fall
within the scope of their regulatory jurisdiction” and that “the activities of
Lloyd’s may have violated laws subject to their enforcement authority.” Id. vol.
II, at 747. The State Agreement also indicates that “Lloyd’s denies it has violated
any U.S. laws and denies it is subject to the jurisdiction of the States Securities
Regulators with regard to the issues raised.”
Id.
-23-
The State Agreement appears to have been a necessary precursor to the
enactment of the Reconstruction and Renewal plan. Under the State Agreement,
Lloyd’s promised to allocate credits to qualified State Names, in exchange for
which the State Securities Regulators agreed to take steps necessary to terminate
all proceedings and investigations pending against Lloyd’s. In addition, the State
Securities Regulators agreed not to “assist any private person or entity who seeks
to pursue any action against Lloyd’s . . . .”
Id. vol. II, at 757. Because the Acting
Director of the New Mexico Securities Division is a signatory to the State
Agreement, and Mr. Vargon’s declaration conflicts with the State Agreement, we
reject the New Mexico Name’s assertions based upon it. Furthermore, the New
Mexico Name offers no explanation for this anomaly.
Moreover, as explained above, the New Mexico Name agreed in the
General Undertaking Agreement that English law, not New Mexico law, would
govern any disputes between Lloyd’s and him. The choice of law and choice of
forum clause are not at issue in this litigation, and to enforce the New Mexico
securities laws in this context would be inappropriate. See Riley, 969 F.2d at 958
(approving forum selection clause of General Undertaking Agreement); Richards ,
135 F.3d at 1292 (holding the same as to the majority of the defendant Names in
this case).
-24-
b. The English Judgments were not based on an unconscionable
contract.
Next, the New Mexico Name invites us to examine the underlying
contractual dispute through his contention that the Equitas contract is both
procedurally and substantively unconscionable under New Mexico law.
Procedural unconscionability is determined “by examining the circumstances
surrounding the contract formation, including the particular party’s ability to
understand the terms of the contact and the relative bargaining power of the
parties.” Guthmann v. LaVida Llena, 709 P.2d 675, 679 (N.M. 1985). “Factors to
be considered include the use of sharp practices or high pressure tactics and the
relative education, sophistication or wealth of the parties, as well as the relative
scarcity of the subject matter of the contract.”
Id.
The New Mexico Name is a highly sophisticated investor who had to pass a
“means” test and was required to post large sums of money as security for the
unlimited liability that he knowingly undertook. Unquestionably Lloyd’s
presented no high pressure tactics: each Name was afforded the opportunity to
read the General Undertaking Agreement in its entirety, and to fully understand
the implications of its terms . See
id. at 680. The Equitas contract was not a new
investment decision; it was the implementation of specific provisions to address
the unlimited liability undertaken by all Names, pursuant to the General
-25-
Undertaking Agreement’s broad powers. There is no basis for concluding that
there was any procedural unconscionability in the contracts on which the
judgments were based.
The New Mexico Name’s arguments regarding substantive
unconscionability are equally unavailing. “Substantive unconscionability is
concerned with contract terms that are illegal, contrary to public policy, or grossly
unfair.” Id. at 679. When terms are unreasonably favorable to one party a
contract may be held to be substantively unconscionable.
Id. at 680. “The terms
are to be considered in the light of the general commercial background and the
commercial needs of the particular trade or case.”
Id. (internal quotation marks
omitted). Here, despite the apparently massive losses Lloyd’s was absorbing, the
terms of the General Undertaking Agreement were not so grossly unfair to the
Names when the Agreement was formed. Approximately ninety-five percent of
the Names accepted the subsequent Equitas contract, and forty-seven U.S. states
signed the State Agreement to facilitate the Reconstruction and Renewal plan.
Under these circumstances, we cannot say these were terms that “no man in his
senses and not under delusion would make on the one hand, and . . . no honest
and fair man would accept on the other.”
Id. (internal quotation marks omitted).
c. The English Judgments were not based on an adhesion contract .
-26-
The New Mexico Supreme Court’s Guthmann holding also undergirds our
rejection of the New Mexico Name’s contention that the Equitas contract is an
adhesion contract that violates New Mexico’s public policy.
Three elements must be satisfied before an adhesion contract may be
found. First, the agreement must occur in the form of a standardized
contract prepared or adopted by one party for the acceptance of the
other. Second, the party proffering the standardized contract must
enjoy a superior bargaining position because the weaker party virtually
cannot avoid doing business under the particular contract terms.
Finally, the contract must be offered to the weaker party on a
take-it-or-leave-it basis, without opportunity for bargaining.
Id. at 678 (internal citations omitted). Here, the second and third elements are not
met: the New Mexico Name was not in a weaker bargaining position nor did
Lloyd’s compel his investment.
d. The English Judgments were not based on a “cognovit note.”
Next, the New Mexico Name contends that the General Undertaking
Agreement and Equitas contract amount to a cognovit note, which is an ancient
legal device “signed by a defendant in an action actually commenced confessing
the plaintiff’s demand to be just, and empowering the plaintiff to sign judgment
against him in default of his paying the plaintiff the sum due to him within the
time mentioned in the cognovit.” B LACK ’ S L AW D ICTIONARY (8th ed. 2004); see
Overmyer , 405 U.S. at 176. Thus the debtor agrees in advance to the entry of a
judgment against him without notice or hearing. New Mexico public policy and
New Mexico law prohibit cognovits and condemn judgments obtained through
-27-
cognovits, enforcing them only where a defendant “voluntarily, knowingly and
intelligently” waives his or her rights. As established above, the New Mexico
Name did “voluntarily, knowingly and intelligently” waive his rights, in addition
to receiving notice and being provided an opportunity to defend prior to the entry
of the judgments. We have rejected the perceived lack of due process argument
above, and consequently, this argument is foreclosed.
e. The English Judgments were not based on illusory contracts .
Next, the New Mexico Name maintains that Lloyd’s judgments are
repugnant to New Mexico’s public policy because they are based on illusory
contracts. Specifically, he contends that the General Undertaking Agreement and
the Equitas contract lack consideration. The General Undertaking Agreement was
part of the overall investment agreement between the Names and Lloyd’s. The
Agreement certainly placed obligations upon Lloyd’s: when underwriting or
investment profits were made, Lloyd’s had to distribute to each Name his or her
proper share. Likewise, the Equitas contract was supported by consideration: this
reinsurance contract helped Lloyd’s survive and protected the Names from
unlimited personal liability. The complaints about how Lloyd’s may have met, or
failed to meet, its obligations are another matter, which have also been considered
by the English courts and in the Jaffray litigation.
f. The New Mexico Unfair Practices Act does not apply.
-28-
Finally, the New Mexico Name contends that the enforcement of the
English judgment violates New Mexico’s public policy because the contracts
violated the New Mexico Unfair Practice Act, N.M. Stat. Ann. § 57-12-1 et seq.
The Unfair Practice Act defines an unconscionable trade practice as any act or
practice in connection with the sale for offering for sale of any goods or services
that takes advantage of the lack of knowledge, ability, experience, or capacity of a
person to a grossly unfair degree or results in a gross disparity between the value
received by a person and the price paid. See id. § 57-12-2(E). Neither party
addresses whether the New Mexico Unfair Practice Act encompasses an action
involving the interests of the New Mexico Name in underwriting insurance. See,
e.g., Russell v. Dean Witter Reynolds, Inc. ,
510 A.2d 972, 977-78 (Conn. 1986)
(“[Connecticut Unfair Trade Practice Act] does not apply to deceptive practices in
the purchase and sale of securities” because “Connecticut has long separated
regulation of the purchase and sale of securities from the regulation of unfair
trade practices in other industries.”); Simpson v. Grimes,
849 So. 2d 740, 745-746
(La. Ct. App. 2003) (“Although the plaintiffs allege unfair trade practices
pursuant to [the Louisiana Unfair Trade Practices Act], this type of action under
the . . . Unfair Trade Practices Act has been found inapplicable to cases involving
securities.”).
-29-
To the extent the New Mexico Name asserts that Lloyd’s took unreasonable
advantage of him through its misrepresentation regarding asbestos claims, the
English courts have considered and rejected such claims. As above, we cannot
allow the New Mexico Name to relitigate the underlying cause of action under
New Mexico law, despite his attempt to frame the action as violating New Mexico
public policy.
C. Utah Law
Turning to the defenses of the Utah Names, we hold that these defenses fail
for similar reasons. The Utah Names first assert that the district court improperly
analyzed Utah’s principles of comity when it determined that the process
underlying the English judgments comported with constitutional norms of due
process and of Utah public policy. Specifically, the Utah Names contend they did
not have a full and fair trial in England, because they were bound by unlawful
contracts, prohibited from asserting affirmative defenses, and prohibited from
discovering or presenting evidence to refute the existence of the amount of
liability. Utah Names Stephen and Kelly Harmsen raise the related argument that
Lloyd’s made material misrepresentations when it induced them to become Names
in the Lloyd’s market by failing to disclose information about potential asbestos
and toxic tort liability. As a result, neither the forum selection clause nor the
-30-
“pay-now, sue-later” clause should be held enforceable as matters of public policy.
The Utah Names also argue that they were entitled to discovery, and that
the district court should have certified certain questions of law to the Utah
Supreme Court. Utah Name Wallace Bennett contends that the district court
lacked diversity jurisdiction, and that the enforcement of the judgment violates
Utah’s securities laws. Finally, Utah Names Stephen and Kelly Harmsen also
challenge the district court’s imposition of eight percent per annum post-judgment
interest. With the exception of the post-judgment interest argument, we reject
each of the Utah Names’ contentions.
1. Principles of comity apply in this case.
Unlike New Mexico, Utah has not adopted the Uniform Foreign-Money
Judgment Recognition Act. The Utah Supreme Court has indicated that a foreign
country judgment can be enforced in Utah courts “under principles of comity.”
Mori v. Mori , 931 P.2d 854, 856 (Utah 1997) (citing Hilton ,
159 U.S. 113).
Under the Supreme Court’s holding in Hilton , the principles of comity require
recognition of a foreign judgment if
(1) there has been opportunity for a full and fair trial abroad before a
court of competent jurisdiction,
(2) conducting the trial upon regular proceedings, after due citation or
voluntary appearance of the defendant,
(3) under a system of jurisprudence likely to secure an impartial
administration of justice between the citizens of its own country and
those of other countries,
-31-
(4) there is nothing to show either prejudice in the court, or in the
system of laws under which it was sitting, or fraud in procuring the
judgment, or
(5) no other special reason exists indicating why the comity of this
nation should not allow it full effect.
Hilton, 159 U.S. at 202 (emphasis added).
According to the Utah Names, and in seeming contrast to Hilton , Utah’s
comity requires an analysis of the fairness of the English judgment , not merely of
the English judicial system . The judgment here was based upon the Utah Names’
signing the General Undertaking, which is a standardized contract between
Lloyd’s and the individual Names. According to the Utah Names, their assent to
the General Undertaking resulted in their unknowing waiver of future due process
rights in the Equitas contract.
Utah law provides that questions regarding the validity of a foreign
judgment “should be tested by the law of the jurisdiction where the judgment was
rendered.” Rocky Mtn. Claim Staking v. Frandsen , 884 P.2d 1299, 1300-01
(Utah. Ct. App. 1994). We have no choice under Hilton and Rocky Mountain but
to examine the entirety of the foreign judicial system , and not the particularity of
individual judgments. See also 1 R ESTATEMENT (T HIRD ) OF F OREIGN R ELATIONS
§ 482 cmt. b (1987) (“A court asked to recognize or enforce the judgment of a
foreign court must satisfy itself of the essential fairness of the judicial system
under which the judgment was rendered.”). Like all the other circuits that have
-32-
examined the question, we have already determined that the English judicial
system is procedurally above reproach. See, e.g. Ashenden , 233 F.3d at 478
(“Even if the [defendants’] approach is valid–and we want to emphasize our
belief that it is not–it cannot possibly avail the defendants here unless they are
right that the approach requires subjecting the foreign proceeding to the specifics
of the American doctrine of due process.”); see also Hilton, 159 U.S. at 205
(“[W]e are not prepared to hold that the fact that the [foreign] procedure . . .
differed from that of our own courts is, of itself, a sufficient ground for
impeaching the foreign judgment.”).
Here, for the sake of completeness, the district court looked to the
underlying decisions rendered by the English courts that have considered and
rejected each of the Utah Names’ challenges to the “pay-now, sue-later” and
“conclusive evidence” clauses. Case No. 02-2301, Aple’s Supl. App. at 230
(Utah Dist. Ct. Order filed Nov. 12, 2002). The “pay-now, sue-later” provision
left the Names free to pursue claims of fraud against Lloyd’s in a separate
proceeding, which many Names pursued unsuccessfully in the Jaffray litigation.
See id. (citing Soc’y of Lloyd’s v. Wilkinson & Others, at 17, 21 (Q.B. 23 Apr.
1997), aff’d, Soc’y of Lloyd’s v. Lyon, Leighs & Wilkinson (C.A. 31 July 1997)
(Case Nos. 03-4065, -4082, -4094, -4183, Aple’s Supl. App. vol. III, doc. 4, ex. J,
at 682)).
-33-
The district court observed that the English courts held that the “conclusive
evidence” clause was “not an unusual type of clause and [was] in principle
appropriate to [the] contract.” Case No. 02-2301, Aple’s Supl. App. at 230
(quoting Soc’y of Lloyd’s v. Fraser & Others, at 27 (C.A. 31 July 1998) (Case
Nos. 03-4065, -4082, -4094, -4183, Aple’s Supl. App. vol. III, doc. 4, ex. J, at
707)). Furthermore, the English courts “considered and rejected the argument
that the Names should not be bound by the Equitas contract.” Case No. 02-2301,
Aple’s Supl. App. at 230 (citing Soc’y of Lloyd’s v. Fitzgerald, Leigh and Others,
(Q.B. 20 Feb. 1997), aff'd, Soc’y of Lloyd’s v. Lyon, Leighs & Wilkinson (C.A. 31
July 1997) (Case Nos. 03-4065, -4082, -4094, -4183, Aple’s Supp, App. vol. III,
doc. 4, ex. J, at 622)).
We must reject the Utah Names’ contentions that they were bound by
unlawful contracts, that they were prohibited from asserting affirmative defenses,
and that they were prohibited from discovering or presenting evidence to refute
the existence of amount or liability. We therefore agree with the district court
that the Utah Names were given a full and fair opportunity to litigate their claims
before the English courts.
Similarly, we must reject the defenses mounted by the Harmsens. The
English court considered and rejected the allegations involving material
-34-
misrepresentations made by Lloyd’s in connection with the solicitation of
investment by potential Names.
2. The District Court did not Abuse its Discretion when it Denied
Discovery.
The Utah Names sought discovery regarding (1) information about the basis
for the amount of the alleged liability set forth in the English judgments; (2)
information relating to Lloyd’s appointment of the substitute agent and other
details regarding the formation of the Equitas contract; and (3) information
concerning Lloyd’s contractual intent in entering into the General Undertaking
Agreement.
Discovery rulings are generally within the sound discretion of the trial
court, and we review only for abuse of discretion. GWN Petroleum Corp. v.
OK-Tex Oil & Gas, Inc., 998 F.2d 853, 858 (10th Cir. 1993). The discovery
sought by the Utah Names was unnecessary to the district court’s grant of
summary judgment in favor of Lloyd’s. To have granted the discovery would
have resulted in a relitigation of the underlying General Undertaking Agreement
and Equitas contract, both of which have been considered and litigated before the
English courts. After reviewing the record, we find no abuse of discretion
regarding the rulings on these motions.
3. Certification of Questions of State Law
-35-
The Utah Names suggest that (1) the district court erred when it refused to
certify certain questions to the Utah Supreme Court and (2) we should sua sponte
certify the questions of whether the English court met the “open courts provision”
of the Utah Constitution. We reject each contention and hold that the district
court did not abuse its discretion.
a. District court’s denial of the motion was not an abuse of
discretion.
We review the district court’s decision not to certify questions of state law
for abuse of discretion. Armijo v. Ex Cam, Inc., 843 F.2d 406, 407 (10th Cir.
1988). Utah’s open courts provision requires:
All courts shall be open, and every person, for an injury done to him in
his person, property or reputation, shall have remedy by due course of
law, which shall be administered without denial or unnecessary delay;
and no person shall be barred from prosecuting or defending before any
tribunal in this State, by himself or counsel, any civil cause to which he
is a party.
U TAH C ONST . art. I, § 11.
In general, open courts provisions in Utah serve two principal purposes:
“First, they were intended to help establish an independent foundation for the
judiciary as an institution . . . . Second, open courts or remedies clauses were
intended to grant individuals rights to a judicial remedy . . . .” Laney v. Fairview
City, 57 P.3d 1007, 1016 (Utah 2002). The Names attempt to invoke the open
-36-
courts provisions in connection with their alleged waiver of their at the time-
unknown due process rights.
While certification is appropriate “where the legal question at issue is novel
and the applicable state law is unsettled,” Allstate Ins. Co. v. Brown, 920 F.2d
664, 667 (10th Cir. 1990), it is never compelled. See Lehman Bros. v. Schein,
416
U.S. 386, 390-91 (1974). “[U]nder the diversity statutes the federal courts have
the duty to decide questions of state law even if difficult or uncertain.” Copier v.
Smith & Wesson Corp.,
138 F.3d 833, 838 (10th Cir. 1998) (citing Meredith v.
Winter Haven,
320 U.S. 228, 235 (1943)). There is little caselaw suggesting that
English law or any foreign law somehow abrogates the Utah Constitution. We
have established there is no due process violation and that the Names waived their
procedural rights in advance. See
Overmyer, 405 U.S. at 185. The district court
did not abuse its discretion when it rejected the Utah Names’ motion to certify.
b. Sua sponte certification is unnecessary here.
We next consider whether we should certify this question to the Utah
Supreme Court directly. Utah Rule of Appellate Procedure 41(a) states:
The Utah Supreme Court may answer a question of Utah law certified
to it by a court of the United States when requested to do so by such
certifying court acting in accordance with the provisions of this rule if
the state of the law of Utah applicable to a proceeding before the
certifying court is uncertain.
-37-
Thus, there is a procedural mechanism for certification to the state court that we
may consider using. However, we note that a necessary but not controlling
component is the difficulty in determining the local law. Cf. Lehman Bros., 416
U.S. 390 (“[T]he mere difficulty in ascertaining local law is no excuse for
remitting the parties to a state tribunal for the start of another lawsuit.”). Lehman
Brothers further noted that “[w]e do not suggest that where there is doubt as to
local law and where the certification procedure is available, resort to it is
obligatory.”
Id. at 390-91.
While no Utah court has rendered a decision on the precise issue in
question, our analysis above establishes that there is no unusual difficulty in
deciding the state law question or a likelihood that Lloyd’s theory of liability
would be adopted by the Utah courts. Thus, given the above conclusions,
certification is unnecessary.
4. Outstanding Issues Presented by Utah Name Mr. Bennett
Mr. Bennett maintains there is not complete diversity between the parties,
and he challenges the district court’s enforcement of the English judgments as a
violation of Utah securities law. He also raises defenses we have previously
rejected. We address each defense briefly.
-38-
a. Diversity jurisdiction is present.
Mr. Bennett contends that Lloyd’s is not a corporation, but is rather more
like an association, which adopts the citizenship of each of its syndicate
investment members. “Lloyd’s and Equitas are merely agents for the syndicates,
collecting cash calls from syndicate investor Names to pay off the liabilities
arising from syndicate insurance policies.” Bennett Rep. Br. at 5. Under this
interpretation, “Lloyd’s attempt to claim federal diversity jurisdiction is a sham”
and there is no federal subject matter jurisdiction. Id.
We must reject Mr. Bennett’s assertions. Early on, Lloyd’s may have been
a form of an unincorporated association, but under the Lloyd’s Act of 1871, the
company was incorporated. Although we agree that Lloyd’s is not a corporation
within the traditional sense of the word, see Ashenden v. Lloyd’s of London,
934
F. Supp. 992, 998-99 (N.D. Ill.1996), there is no challenge to or question
regarding Lloyd’s place of incorporation (it is duly incorporated under the laws of
England). Similarly it maintains its principal place of business in London,
England. These facts are unchallenged, and comprise the weightiest part of our
inquiry. See
id. (noting that the most important consideration is Supreme Court
precedent “indicating that the citizenship of business entities must be determined
by the simple fact of legal incorporation or the lack thereof, rather than the nature
or attributes of the entity in question.”). We thus hold that the jurisdiction is
-39-
proper pursuant to 28 U.S.C. § 1332(a)(2). Equitas Reinsurance, Limited (the
assignor of Lloyd’s underlying claims against the Names) is also a duly
incorporated English company formed under the laws of England, and Mr.
Bennett’s similar allegations against Equitas must also fail.
b. The Utah Securities Act offers Mr. Bennett no relief.
Mr. Bennett points to the Utah Securities Acts’ “anti-waiver” provision as a
bar to the enforcement of the English judgments. The anti-waiver provision
declares that “a condition, stipulation or provision binding a person acquiring a
security to waive compliance with the chapter or rule hereunder is void.” U TAH
C ODE A NN . § 61-22(9).
We note that the anti-waiver provisions of the Securities Acts of 1933 and
1934 are substantially the same as those found in the Utah statute. See 15 U.S.C.
§ 77n (1982) (“Any condition, stipulation, or provision binding any person
acquiring any security to waive compliance with any provision of this subchapter
or of the rules and regulations of the Commission shall be void.”); 15 U.S.C. §
78cc(a) (1982) (“Any condition, stipulation, or provision binding any person to
waive compliance with any provision of this chapter or of any rule or regulation
thereunder, or of any rule of an exchange required thereby shall be void.”).
The district court determined that our holding in Riley precluded
enforcement of state as well as federal securities statutes. See Riley, 969 F.2d at
-40-
956. In Riley, the plaintiff claimed that Lloyd’s engaged in the offer and sale of
unregistered securities and made untrue statements of material fact and material
omissions in connection with the sale of securities, violating both federal and
Colorado’s state securities laws. By enforcing the General Undertaking
Agreement’s forum selection clause requiring the application of English law, we
did not deprive Mr. Riley of his day in court, but rather instructed Mr. Riley to
“structure his case differently than if proceeding in federal district court.” Id. at
958. Thus, we cannot accept Mr. Bennett’s contentions and note that, as in the
Ninth Circuit’s decision in Richards (litigation to which Mr. Bennett was a party),
“[w]e disagree with the dramatic assertion that the available English remedies are
not adequate substitutes for the firm shields and finely honed swords provided by
American securities law.”
Richards, 135 F.3d at 1296.
c. Mr. Bennett’s remaining defenses are unavailing.
Mr. Bennett’s remaining claims duplicate the Utah Names’ arguments, or
are without merit. For example, he challenges whether the General Undertaking
Agreement can be binding upon him. He suggests that Lloyd’s engaged in
breaches of fiduciary duty, concealment and material misrepresentations because
the General Undertaking does not warn a committing investor that he or she might
later be made subject to an entirely different undertaking. Mr. Bennett also
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contends that the district court erred in its application of Hilton. For the reasons
given above, we reject all of Mr. Bennett’s defenses.
5. Post-Judgment Interest
Finally, Utah Names Stephen and Kelly Harmsen challenge the district
court’s application of an eight percent per annum post-judgment interest rate.
They argue that once the federal district court enforced the judgments, the then-
applicable interest rate of 1.16% was applicable.
We review de novo the district court’s interpretation and application of 28
U.S.C. § 1961. O’Tool v. Genmar Holdings, Inc., 387 F.3d 1188, 1207 (10th Cir.
2004).
Interest shall be allowed on any money judgment in a civil case
recovered in a district court. . . . Such interest shall be calculated from
the date of the entry of the judgment at a rate equal to the weekly
average 1-year constant maturity Treasury yield, as published by the
Board of Governors of the Federal Reserve System, for the calendar
week preceding.
28 U.S.C. § 1961(a). “This section shall not be construed to affect the interest on
any judgment of any court not specified in this section.” Id. § 1961(c)(4).
The district court reasoned that the English court is not a court specified by
§ 1961, and because the Names agreed that English law would govern the
litigation, the post-judgment interest rate should be determined by English law,
which would be 8%. Lloyd’s argues that because the Names agreed to be bound
by English law, English post-judgment interest applies. Furthermore, Lloyd’s
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rejects the Harmsens’ suggestion that the English judgments merge into the U.S.
judgments.
We disagree with such reasoning. First, we acknowledge that parties may
contract to, and agree upon, a post-judgment interest at a rate other than that
specified in § 1961. See Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96, 101
(2d Cir. 2004) (“We agree that parties may by contract set a post-judgment rate at
which interest shall be payable.”). However, agreeing to be bound by English law
does not amount to agreeing to a particular post-judgment interest rate. The
general rule under federal and Utah law is that “when a valid and final judgment
for the payment of money is rendered, the original claim is extinguished, and a
new cause of action on the judgment is substituted for it. In such a case, the
original claim loses its character and identity and is merged in the judgment.” See
Carte Blanche (Singapore) PTE., Ltd. v. Carte Blanche Int’l, Ltd.,
888 F.2d 260,
269 (2d Cir. 1989); Yergensen v. Ford,
402 P.2d 696, 697 (Utah 1965). “If
parties want to override the general rule on merger and specify a post-judgment
interest rate, they must express such intent through clear, unambiguous and
unequivocal language.” Westinghouse Credit
Corp., 371 F.3d at 102 (internal
quotation omitted). Such language is not present in the agreements before us.
Second, the policies behind § 1961(a) support the application of the U.S.
interest rate. “The purpose of postjudgment interest is to compensate the
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successful plaintiff for being deprived of compensation for the loss from the time
between the ascertainment of the [judgment] and the payment by the defendant.”
Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 835-36 (1990)
(quotations and alterations omitted). It preserves the value of the award as
originally decided, affording neither party a benefit.
[T]he universal application of Section 1961 to all types of claims makes
for logical uniformity. Once a claim is reduced to judgment, the
original claim is extinguished and merged into the judgment; and a new
claim, called a judgment debt, arises. See R ESTATEMENT OF J UDGMENTS
§ 47 (1942). A single rule should govern interest on any such debt, the
nature of the original claim having become irrelevant under the doctrine
of merger.
Kotsopoulos v. Asturia Shipping Co., S.A., 467 F.2d 91, 95 (2d Cir. 1972).
Thus, the federal rate reflects the economic conditions at the time the
district court rendered its judgment, and, despite the disparity between the rates,
we must apply § 1961(a), so interest accrues under the federal rate from the time
the federal district court entered an order enforcing the judgment. See Carte
Blanche, 888 F.2d at 268 (noting the provisions of § 1961(a) are mandatory).
We note that the application of § 1961 also fosters stability and certainty in
international commercial transactions. Moreover, it provides “make whole” relief
without overcompensating Lloyd’s. Lloyd’s derives various benefits from
utilizing the federal court system to procure the execution and enforcement of its
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judgments. In return, Lloyd’s is subject to the federal formula for determining an
equitable post-judgment interest.
Finally, as to the district court’s concerns with the limitations provided in §
1961(c)(4), we agree that the U.S. post-judgment interest rate applies to the
district court’s judgments, but not to the English court’s judgments. The U.S.
post-judgment rate should apply as of the date of the entry of the judgment in the
U.S. district court.
Here, the eight percent figure appears to have been calculated in 1993, five
years before the entry of the English judgment. See Case Nos. 03-4065, -4082, -
4064, -4183, Aple’s Supl. App. vol. IV, at 995-96 (Section 17 of the Judgments
Act of 1838 as amended by Statutory Instrument 1993 564 (L.2) and provision of
the Civil Procedure Rule 1998). The federal rate is calculated on a more current
weekly basis, and better reflects the value of the award once entered in the United
States.
Therefore, on remand, we instruct the Utah district court to clarify that the
English post-judgment rate applies to the Harmsens’ judgments from the entry of
the English judgment (March 11, 1998) until the entry of the U.S. judgment
enforcing the English judgment (November 2002) and that the federal rate,
calculated pursuant to § 1961, applies thereafter.
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III. CONCLUSION
There is no question that the New Mexico and Utah Names suffered
substantial losses after investing in what had been, for three centuries, a well-
regarded institution. There is also no question that Lloyd’s was not forthcoming
with all the information regarding its substantial financial losses. However, the
English courts thoroughly and fairly considered and examined the plight of the
Names before entering judgments against them. We must respect the ample
process afforded by the English system of justice.
We affirm the New Mexico and Utah district courts’ grants of summary
judgment to Lloyd’s. We reverse and remand with respect to the post-judgment
interest as applied to the Harmsens’ judgment, with instructions to recalculate the
post-judgment interest in accordance with this opinion.
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