Southland Oil Co. v. Mississippi Insurance Guaranty Ass'n

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT May 30, 2006
Charles R. Fulbruge III
Clerk
No. 05-60282
SOUTHLAND OIL CO., A Mississippi Corporation,
Plaintiff-Appellee,
versus
MISSISSIPPI INSURANCE GUARANTY ASSOCIATION; Et al.,
Defendants,
ALLIANCE INSURANCE COMPANY, A Kansas Corporation; CONTINENTAL
CASUALTY COMPANY, An Illinois Corporation; FIDELITY & CASUALTY
COMPANY OF NEW YORK, A New Hampshire Corporation; HOUSTON GENERAL
INSURANCE COMPANY, A Texas Corporation; INTERNATIONAL INSURANCE
COMPANY, An Illinois Corporation; CENTURY INDEMNITY COMPANY;
LEXINGTON INSURANCE COMPANY, A Delaware Corporation; NATIONAL
UNION FIRE INSURANCE COMPANY OF PITTSBURGH PA, A Pennsylvania
Corporation,
Defendants-Appellants.
Appeals from the United States District Court
for the Southern District of Mississippi
(2:03-CV-507)
Before KING, BARKSDALE, and PRADO, Circuit Judges.
PER CURIAM:*
Primarily at issue is the post-removal remand to state court
granted Southland Oil Company, pursuant to a service-of-suit clause
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
in the policies issued by some of the defendant insurers. AFFIRMED.
I.
Southland, a Mississippi resident, manufactures asphalt, among
other products. It filed this action in 2003 in Mississippi state
court against its insurers for failure to pay claims under general
comprehensive, umbrella, and excess liability policies, seeking a
declaration they are obligated to pay costs arising out of alleged
environmental damage at one of Southland’s Mississippi refineries.
Southland claimed anticipatory breach of contract against all
insurers; against four, it also claimed breach of contract (Breach
Defendants). Six defendants, none of whom are Breach Defendants,
had service-of-suit clauses in their policies (Service-of-Suit
Defendants).
Defendants removed this action to federal court, maintaining
Southland fraudulently joined the Mississippi Insurance Guaranty
Association (MIGA) to prevent diversity jurisdiction. Southland
moved to remand, claiming: (1) joinder was proper; and (2) removal
was barred by the service-of-suit clause.
Relying on City of Rose City v. Nutmeg Insurance Company, 931
F.2d 13 (5th Cir.), cert. denied, 502 U.S. 908 (1991), the district
court held: that clause prevented removal for the Service-of-Suit
Defendants; and, because unanimity was defeated, the action had to
be remanded to state court. As it noted, this mooted the diversity
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issue. Southland Oil Co. v. Miss. Ins. Guar. Ass’n, No. 2:03-507-
KS-JMR, at *4 (S.D. Miss. 2 A.K. Marsh. 2005).
II.
Appellants claim: remand premised on the service-of-suit
clause was improper; and diversity jurisdiction exists. We hold
the Service-of-Suit Defendants waived their right to removal.
Consistent with the district court’s lack-of-unanimity holding,
Appellants do not dispute remand of the action would be required.
See § 1446(a); Doe v. Kerwood, D.O., 969 F.2d 165, 167-68 (5th Cir.
1992) (requiring unanimity of co-defendants to remove); Tri-Cities
Newspapers, Inc. v. Tri-Cities Printing Pressmen & Assistants’
Local 349, Int’l Printing Pressmen & Assistants’ Union of N. Am.,
427 F.2d 325, 326-27 (5th Cir. 1970). (Because the service-of-suit
clause prevents removal, we need not reach the diversity issue.)
A.
Jurisdiction is conceded by the parties. Nevertheless, our
jurisdiction must be verified sua sponte. E.g., Ross v. Marshall,
426 F.3d 745, 751 (5th Cir. 2005). Generally, remand orders are
not reviewable. 28 U.S.C. § 1447(d); see also McDermott Int’l,
Inc. v. Lloyds Underwriters of London, 944 F.2d 1199 (5th Cir.
1991). Where the district court remands pursuant to a contract
provision (including a service-of-suit clause), however, review is
permitted. McDermott, 944 F.2d at 1201.
B.
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A remand order is reviewed de novo. See City of New Orleans
v. Mun. Admin. Servs., Inc., 376 F.3d 501, 503 (5th Cir. 2004),
cert. denied, 543 U.S. 1187 (2005). The same standard of review
applies to interpretation of an insurance policy, a question of
law. Allstate Ins. Co. v. Disability Servs. of the Sw. Inc., 400
F.3d 260, 263 (5th Cir. 2005).
The service-of-suit clause states:
It is agreed that in the event of the failure
of Underwriters ... hereon to pay any amount
claimed to be due hereunder, Underwriters ...
, at the request of the Insured ... , will
submit to the jurisdiction of any Court of
competent jurisdiction within the United
States and will comply with all requirements
necessary to give such Court jurisdiction and
all matters arising hereunder shall be
determined in accordance with the law and
practice of such Court.
(Emphasis added.)
Appellants contend the district court failed to accord the
clause its unambiguous meaning. For it to be applicable, they claim
two conditions precedent must be met: (1) an amount is due under
the terms of the policy; and (2) the insurer has failed to pay it.
Thus, because Southland has only claimed anticipatory breach of
contract against the Service-of-Suit Defendants, it has only sought
prospective relief from them; and, no judgment against them having
been obtained, the first condition precedent has not been
satisfied.
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In the alternative, Appellants claim: because the service-of-
suit clause does not “clearly and unequivocally” waive the Service-
of-Suit Defendants’ right to select a forum, as required by our
precedent, the clause merely “represent[s] [their] willingness to
accede to the jurisdiction of an American court”. Relying on
McDermott, Appellants insist submitting to a court’s jurisdiction
does not constitute a waiver of a removal right.
Southland counters: a service-of-suit clause is a forum-
selection clause, permitting it to select the forum; as a result,
when it filed this action in state court, the Service-of-Suit
Defendants were obligated to litigate there; and, because they
waived their removal right, this action was properly remanded. For
support, Southland cites Nutmeg, 931 F.2d at 15 (upholding remand
order pursuant to a service-of-suit clause), and Waters v.
Browning-Ferris Indus., Inc., 252 F.3d 796 (5th Cir. 2001) (same).
“For a contractual clause to prevent a party from exercising
its right to removal, the clause must give a ‘clear and
unequivocal’ waiver of that right.” City of New Orleans, 376 F.3d
at 504 (citing McDermott, 944 F.2d at 1204). Such a waiver,
however, need not contain “explicit words, such as ‘waiver of right
of removal’”. Waters, 252 F.3d at 797 (citing Gen. Phoenix Corp.
v. Malyon, 88 F. Supp. 502, 503 (S.D.N.Y. 1949)). It is more than
well settled that any ambiguity in an insurance policy is to be
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construed against its drafter — the insurer. E.g., Nutmeg, 931
F.2d at 15.
The clause at issue is identical to the one in Nutmeg. “On
its face the endorsement is unambiguous. It plainly requires that
the insurer submit to the jurisdiction of any court of the
policyholder’s choosing.” Id. (emphasis added). Furthermore, the
clause at issue states the insurers “will comply with all
requirements necessary to give such Court jurisdiction”. (Emphasis
added.) Although this language “does not specifically mention
[removal, ... it] makes clear that the policyholder shall enjoy the
right to choose the forum in which any dispute will be heard”. Id.
There is no merit to Appellants’ contention that, to invoke
the clause, Southland must first secure a judgment. That
interpretation is not supported by the clause’s plain language.
All that is required to trigger it is the insurers’ “failure ... to
pay any amount claimed to be due”. (Emphasis added.) In other
words, an amount claimed is not equivalent to an amount owed,
secured by a judgment.
Southland made such an assertion in its state-court complaint,
asserting the insurers owe amounts due under the policy for any
costs, including any damages, arising out of operations at the
Mississippi refinery. According to the complaint, these putative
damages exceed the policy limits.
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Similarly, there is no merit to the contention that the clause
merely submits the Service-of-Suit Defendants to the personal
jurisdiction of any court within the United States. Our precedent
is clear: a service-of-suit clause has been given that
construction only where the insurer is a foreign entity. See
McDermott, 944 F.2d at 1206-07; see also In re Delta Am. Re Ins.
Co., 900 F.2d 890 (6th Cir.) (holding a similar policy provision
was merely a promise to submit to the personal jurisdiction of a
court in the United States where the reinsurer was a foreign
entity), cert. denied, 498 U.S. 890 (1990). In discussing why
Nutmeg rejected such a construction, McDermott noted:
[T]he court found [defendant] Nutmeg’s
interpretation of the service-of-suit clause —
that it only concedes personal jurisdiction
... — wholly untenable because ... Nutmeg is a
domestic corporation with its principal place
of business in the United States. Faced with
no alternative meaning for the service-of-suit
clause, language strongly implying waiver of
removal rights, and the policy drafter
principle, the court naturally held that
Nutmeg waived its removal rights.
McDermott, 944 F.2d at 1206-07 (internal citation omitted). Thus,
Nutmeg was held not controlling in McDermott because the insurer in
that action was organized under the laws of another country. Id.
In the instant action, all of the insurers are domestic
corporations that have sold policies to Southland, a Mississippi
resident. Thus, “there [is] no question that [the Service-of-Suit
Defendants] would have to submit to the jurisdiction of some court
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in the United States”. Nutmeg, 931 F.2d at 15. In other words,
Appellants’ construction of the clause renders it superfluous.
Consistent with the policy interpretation by Nutmeg,
it seems quite likely that [the Service-of-
Suit Defendants] ha[ve] minimum contacts with
[Mississippi] .... It would have made no
sense for a policyholder to bargain with
[them] for a clause requiring only that [they]
would submit to the jurisdiction of some court
in the United States. Indeed, it is clear
from the language of the clause at issue ...
that [the Service-of-Suit Defendants] did not
promise only to submit to the jurisdiction of
“some Court ... within the United States,” but
rather promised to submit to the jurisdiction
of “any Court ... within the United States.”
Id. at 15-16 (emphasis in original).
We will “not interpret a policy to leave specific provisions
without meaning or effect”. S. Farm Bureau Life Ins. Co. v. Moore,
993 F.2d 98, 103 (5th Cir. 1993). Because any other interpretation
would render the clause meaningless, “[w]e are persuaded that this
clause gives to the policyholder ... the right to select the forum,
foreclosing [the Service-of-Suit Defendants’] right to remove this
action to federal court”. Nutmeg, 931 F.2d at 16.
III.
For the foregoing reasons, the remand order is
AFFIRMED.
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