Society of Lloyd's v. Ashenden, James F.

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 99-3195, 99-4064, 00-1066, 00-1371,
00-1430 & 00-1702
The Society of Lloyd’s,
Plaintiff-Appellee,
v.
James Frederick Ashenden, et al.,
Defendants-Appellants.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
Nos. 98 C 5335, 99 C 2651--Harry D. Leinenweber, Judge.
Argued September 19, 2000--Decided November 27, 2000
Before Posner, Manion, and Kanne, Circuit Judges.
Posner, Circuit Judge. These are diversity suits
brought in the federal district court in Chicago
by Lloyd’s, a foreign corporation (see Haynsworth
v. The Corporation, 121 F.3d 956, 958 (5th Cir.
1997)), against American members ("names") of
insurance syndicates that Lloyd’s manages. 28
U.S.C. sec. 1332(a)(2). Lloyd’s wanted to use the
Illinois Uniform Foreign Money-Judgments
Recognition Act, 735 ILCS 5/12-618 to 626, to
collect money judgments, each for several hundred
thousand dollars, that it had obtained against
the defendants in an English court after the
names’ repeated efforts in earlier litigation to
knock out the forum-selection clause in their
contracts with Lloyd’s had failed. Bonny v.
Society of Lloyd’s, 3 F.3d 156 (7th Cir. 1993);
Lipcon v. Underwriters at Lloyd’s, 148 F.3d 1285(11th Cir. 1998); Richards v. Lloyd’s of London,
135 F.3d 1289 (9th Cir. 1998); Haynsworth v. The
Corporation, supra; Allen v. Lloyd’s of London,
94 F.3d 923 (4th Cir. 1996); Roby v. Corporation
of Lloyd’s, 996 F.2d 1353 (2d Cir. 1993).
Pursuant to this strategy, Lloyd’s filed the
judgments in the district court and then issued
"citations" pursuant to the Illinois procedure
for executing a judgment. The filing of the
judgments inaugurated this federal-court
proceeding to collect them; and state law, in
this case the Illinois citations statute, 735
ILCS 5/2-1402, supplies the procedure for
executing a federal-court judgment. Fed. R. Civ.
Pro. 69(a); Resolution Trust Corp. v. Ruggiero,
994 F.2d 1221, 1226 (7th Cir. 1993); 12 Charles
A. Wright, Arthur R. Miller & Richard L. Marcus,
Federal Practice and Procedure sec. 3012, p. 148
(1997). The statute allows the holder of a
judgment to depose the judgment debtor respecting
the existence, amount, and whereabouts of assets
that can be seized to satisfy the judgment; to
impose a lien on those assets; and to command the
debtor to turn over to the judgment creditor as
many of the seizable assets as may be necessary
to satisfy the judgment. See Bank of Aspen v. Fox
Cartage, Inc., 533 N.E.2d 1080, 1083 (Ill. 1989).
The defendants ignored the citations and instead
asked the district court not to recognize the
English judgments as being enforceable in
Illinois. They argued that those judgments had
denied them due process of law and therefore were
not enforceable under the foreign money-judgments
recognition act, which makes a judgment rendered
by a court outside the United States
unenforceable in Illinois if "the judgment was
rendered under a system which does not provide
impartial tribunals or procedures compatible with
the requirements of due process of law." 735 ILCS
5/12-621 (emphasis added); see also 5/12-620. The
district court rejected the argument and granted
summary judgment for Lloyd’s, declaring the
judgments enforceable and so the issuance of
citations proper.
We have italicized the word that defeats the
defendants’ argument. The judgments about which
they complain were rendered by the Queen’s Bench
Division of England’s High Court, which
corresponds to our federal district courts; they
were affirmed by the Court of Appeal, which
corresponds to the federal courts of appeals; and
the Appellate Committee of the House of Lords,
which corresponds to the U.S. Supreme Court,
denied the defendants’ petition for review. Any
suggestion that this 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." Riley v.
Kingsley Underwriting Agencies, Ltd., 969 F.2d
953, 958 (10th Cir. 1992); to same effect see
Haynsworth v. The Corporation, supra, 121 F.3d at
967; Roby v. Corporation of Lloyd’s, supra, 996
F.2d at 1363. The origins of our concept of due
process of law are English, Dent v. West
Virginia, 129 U.S. 114, 123 (1889); Hurtado v.
California, 110 U.S. 516, 528-32 (1884); Coniston
Corp. v. Village of Hoffman Estates, 844 F.2d
461, 465 (7th Cir 1988); Keith Jurow, "Untimely
Thoughts: A Reconsideration of the Origins of Due
Process of Law," 19 Am. J. Legal Hist. 265(1975), and the English courts, especially the
Supreme Court of Judicature (composed of the High
Court and the Court of Appeal) and the Appellate
Committee of the House of Lords, the tribunals
involved in the judgments challenged here, are
highly regarded for impartiality,
professionalism, and scrupulous regard for
procedural rights. The English judicial "system .
. . is the very fount from which our system
developed; a system which has procedures and
goals which closely parallel our own." In re
Hashim, 213 F.3d 1169, 1172 (9th Cir. 2000),
quoting Somportex Ltd. v. Philadelphia Chewing
Gum Corp., 318 F. Supp. 161, 166 (E.D. Pa. 1970),
aff’d, 453 F.2d 435 (3d Cir. 1971). "United
States courts which have inherited major portions
of their judicial traditions and procedure from
the United Kingdom are hardly in a position to
call the Queen’s Bench a kangaroo court." British
Midland Airways Ltd. v. International Travel,
Inc., 497 F.2d 869, 871 (9th Cir. 1974).
Not that the English concept of fair procedure
is identical to ours; but we cannot believe that
the Illinois statute is intended to bar the
enforcement of all judgments of any foreign legal
system that does not conform its procedural
doctrines to the latest twist and turn of our
courts regarding, for example, the circumstances
under which due process requires an opportunity
for a hearing in advance of the deprivation of a
substantive right rather than afterwards. See
Hilton v. Guyot, 159 U.S. 113, 205 (1895);
Ingersoll Milling Machine Co. v. Granger, 833
F.2d 680, 687-88 (7th Cir. 1987). It is a fair
guess that no foreign nation has decided to
incorporate our due process doctrines into its
own procedural law; and so we interpret "due
process" in the Illinois statute (which,
remember, is a uniform act, not one intended to
reflect the idiosyncratic jurisprudence of a
particular state) to refer to a concept of fair
procedure simple and basic enough to describe the
judicial processes of civilized nations, our
peers. The statute requires only that the foreign
procedure be "compatible with the requirements of
due process of law," and we have interpreted this
to mean that the foreign procedures are
"fundamentally fair" and do not offend against
"basic fairness." Id. at 687-88; see also Hilton
v Guyot, supra, 159 U.S. at 202-03; Wilson v.
Marchington, 127 F.3d 805, 811 (9th Cir. 1997);
Guinness PLC v. Ward, 955 F.2d 875, 900-01 (4th
Cir. 1992); Banco Minero v. Ross, 172 S.W. 711,
714-15 (Tex. 1915).
We’ll call this the "international concept of
due process" to distinguish it from the complex
concept that has emerged from American case law.
We note that it is even less demanding than the
test the courts use to determine whether to
enforce a foreign arbitral award under the New
York Convention, 9 U.S.C. sec. 201 et seq., whose
due process defense (that a party lacked "proper
notice of the appointment of the arbitrator or of
the arbitration proceedings or was otherwise
unable to present his case," Article V(1) (b), 9
U.S.C. sec. 201) has been interpreted to mean the
enforcing jurisdiction’s concept of due process,
albeit a rather minimal such concept. Iran
Aircraft Industries v. Avco Corp., 980 F.2d 141,
145-46 (2d Cir. 1992); see also Generica Ltd. v.
Pharmaceutical Basics, Inc., 125 F.3d 1123, 1129-
31 (7th Cir. 1997).
It is true that no evidence was presented in the
district court on whether England has a civilized
legal system, but that is because the question is
not open to doubt. We need not consider what kind
of evidence would suffice to show that a foreign
legal system "does not provide impartial
tribunals or procedures compatible with the
requirements of due process of law" if the
challenged judgment had been rendered by Cuba,
North Korea, Iran, Iraq, Congo, or some other
nation whose adherence to the rule of law and
commitment to the norm of due process are open to
serious question, see, e.g., Bank Melli Iran v.
Pahlavi, 58 F.3d 1406, 1411-12 (9th Cir. 1995);
Choi v. Kim, 50 F.3d 244, 249-50 (3d Cir. 1995);
Banco Minero v. Ross, supra, 172 S.W. at 715;
Bridgeway Corp. v. Citibank, 45 F. Supp. 2d 276,
286-89 (S.D.N.Y. 1999), as England’s are not. It
is anyway not a question of fact. It is not,
strictly speaking, a question of law either, but
it is a question about the law of a foreign
nation, and in answering such questions a federal
court is not limited to the consideration of
evidence that would be admissible under the
Federal Rules of Evidence; any relevant material
or source may be consulted. Fed. R. Civ. P. 44.1;
Pittway Corp. v. United States, 88 F.3d 501, 504
(7th Cir. 1996); 9 Charles A. Wright & Arthur R.
Miller, Federal Practice and Procedure sec. 2446
(1995).
Rather than trying to impugn the English legal
system en gross, the defendants argue that the
Illinois statute requires us to determine whether
the particular judgments that they are
challenging were issued in proceedings that
conform to the requirements of due process of law
as it has come to be understood in the case law
of Illinois and other American jurisdictions. The
statute, with its reference to "system," does not
support such a retail approach, which would
moreover be inconsistent with providing a
streamlined, expeditious method for collecting
money judgments rendered by courts in other
jurisdictions--which would in effect give the
judgment creditor a further appeal on the merits.
The process of collecting a judgment is not meant
to require a second lawsuit, see Bank of Aspen v.
Fox Cartage, Inc., supra, 533 N.E.2d at 1083;
Resolution Trust Corp. v. Ruggiero, supra, 994
F.2d at 1226, thus converting every successful
multinational suit for damages into two suits
(actually three, as we’ll see at the end of this
opinion). But that is the implication of the
defendants’ argument. They claim to be free to
object in the collection phase of the case to the
procedures employed at the merits phase, even
though they were free to challenge those
procedures at that phase and indeed did so.
Even if the retail 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. They are not right. Just as no judgments
of a foreign legal system would be enforceable in
Illinois if the system had to conform to the
specifics of the American doctrine of due
process, so very few foreign judgments would be
enforceable in Illinois if the proceeding in
which such a judgment was rendered had to conform
to those specifics. In a case decided by a
foreign court system that has not adopted every
jot and tittle of American due process (and no
foreign court system has, to our knowledge, done
that), it will be sheer accident that a
particular proceeding happened to conform in
every particular to our complex understanding of
due process. So even the retail approach, in
order to get within miles of being reasonable,
would have to content itself with requiring
foreign conformity to the international concept
of due process.
And now let us for the sake of completeness
apply that concept to the particulars of these
judgments.
A bit of background (much simplified): Lloyd’s,
contrary to popular understanding, is not an
insurer, but rather the overseer of the London
insurance market. The actual insurance is written
by syndicates of "names." The syndicates do not
have limited liability, and so the personal
assets of the names are at risk should an insured
obtain a judgment for more than the assets of the
syndicate that insured him. In the late 1980s and
early 1990s the Lloyd’s-supervised syndicates
incurred huge underwriting losses that threatened
to destroy the London insurance market. To ward
off this disaster the governing body of Lloyd’s,
a Council elected primarily by the managing
agents of the syndicates, created a company
called "Equitas" to reinsure the risks
underwritten by the syndicates. The reinsurance
would both protect the insureds against being
unable to collect the proceeds of their insurance
policies from the syndicates and protect the
names from unlimited personal liability for the
underwriting losses. To finance the new company,
Lloyd’s levied an assessment (the reinsurance
premium) against all the names. Lloyd’s offered a
discount on the assessment to induce the names to
go along with this plan voluntarily, and 95
percent of them did. The defendants are among
those who did not, and Lloyd’s sued them in the
High Court to collect the assessment. The suit
was based on the contract with Equitas, Lloyd’s
Council having (pursuant to a by-law that it had
adopted) appointed "substitute agents" for all
the names, and these agents having signed the
contract on behalf of the defendants as of the
other recusant names.
In the English court the defendants opposed
Lloyd’s suit on the basis of two clauses which
they contend would, if enforced, deny them due
process of law; and they renew the contention
here. The first clause, the "pay now sue later"
clause as the parties call it, forbids names, in
suits (such as the ones before us) by Lloyd’s to
collect the assessment, to set off against the
claim by Lloyd’s any claim the names might have
against Lloyd’s, such as a claim that the
contract had been induced by fraud. If they want
to press such a claim they have to file a
separate suit. (Some have now done so, and lost.
Society of Lloyd’s v. Jaffray, 2000 WL 1629463(Queen’s Bench Division Commercial Court Nov. 3,
2000).) The second clause, the "conclusive
evidence" clause, makes Lloyd’s determination of
the amount of the assessment "conclusive" "in the
absence of manifest error." The defendants claim
that the High Court refused to order Lloyd’s to
provide them with enough information about how
the assessment had been calculated to enable them
to prove manifest error.
Both clauses therefore curtail the names’
procedural rights. But due process is not a fixed
menu of procedural rights. How much process is
due depends on the circumstances. For the
principle, see Gilbert v. Homar, 520 U.S. 924,
930-31 (1997), and Mathews v. Eldridge, 424 U.S.
319, 335 (1976), and for applications see, e.g.,
United States v. All Assets & Equipment of West
Side Building Corp., 188 F.3d 440, 443-44 (7th
Cir. 1999); Caldwell v. Miller, 790 F.2d 589,
608-09 (7th Cir. 1986); United States v. Any &
All Radio Station Transmission Equipment, 218
F.3d 543, 550 (6th Cir. 2000). Faced with looming
disaster, Lloyd’s reasonably deemed it essential
to obtain adequate funding for Equitas. The only
potential source for such funding consisted of
the names themselves. If they were entitled to
set off any claims they might have against
Lloyd’s, the collection of the full assessment
would be deferred until those claims could be
adjudicated. The pay now sue later clause was
designed to enable Equitas to be fully funded
immediately. That would work to the benefit of
the names by giving them surer, earlier, and
fuller reinsurance. In exchange it was reasonable
to ask them to postpone the enforcement of any
claims they might have against Lloyd’s. Instead
Lloyd’s has had to prosecute these suits and many
like them to collect from the names. Were it not
for the pay now sue later clause, many other
names might have forced Lloyd’s into collection
litigation as well.
In these circumstances the clause did not
violate international due process or, we add
unnecessarily, domestic due process. It is the
same procedure used by federal law when a firm
withdraws from a multiemployer pension plan--the
firm is required to pay the plan administrator’s
assessment of the firm’s share of vested but
unfunded benefits and to reserve any objections
for a subsequent suit, Multiemployer Pension Plan
Amendments Act, 29 U.S.C. sec.sec. 1399(c)(2),
1401(d); Robbins v. Pepsi-Cola Metropolitan
Bottling Co., 800 F.2d 641, 642 (7th Cir. 1986)
(per curiam)--and this procedure ("pay now,
dispute later," id.) has survived due process
challenge, see, e.g., Debreceni v. Merchants
Terminal Corp., 889 F.2d 1, 3-4 (1st Cir. 1989).
Anyway the question is not whether Lloyd’s
accorded due process to the names, but whether
the English courts did. All they did was enforce
the clause, and they did so on the basis of an
interpretation of a provision of the original
contract between the names and Lloyd’s that
authorized Lloyd’s to take measures unilaterally
to prevent the society from failing. Stated
differently, the courts held that the names had
waived their procedural rights in advance, thus
bringing the case within the rule of D.H.
Overmyer Co. v. Frick Co., 405 U.S. 174 (1972).
That case upheld against a due process challenge
similar to that mounted by the names in this case
the enforcement of a cognovit note, by which a
debtor consents in advance to the creditor’s
obtaining a judgment against him on the note
without notice or hearing, and possibly even--to
make the analogy to the present case even closer-
-with the appearance on the debtor’s behalf, to
confess judgment, of an attorney designated by
the creditor. Id. at 176. The English courts’
interpretation of the original contract with the
names as authorizing the pay now sue later clause
could not be thought so unreasonable an
interpretation of that contract as to take the
case out from under Overmyer by demonstrating the
absence of a genuine waiver. And this is to
assume that reasonableness in contract
interpretation could ever be a component of due
process, which we greatly doubt, as we’re about
to explain.
The rationale for the conclusive-evidence
clause, and for the denial of full discovery
regarding the accuracy of the assessment, is
similar to the rationale for the pay now sue
later clause. If the names could resist ponying
up the assessment until its accuracy was
determined by the normal process of litigation,
with pretrial discovery followed by pretrial
motions and by trial, the funding of Equitas
would be delayed. But this clause does more than
postpone claims by the names; it extinguishes
them by shrinking the names’ entitlement to a
right to the rectification of only those errors
that leap out from the assessment figure itself
with no right to pretrial discovery to search out
possible errors in the actuarial or other
assumptions that generated the figure. This
extinction of rights could raise a question if
what we are calling international due process had
a substantive component. But the defendants do
not argue that it does. Though we cannot find a
case on the point, the cases that deal with
international due process talk only of procedural
rights. See, e.g., Wilson v. Marchington, supra,127 F.3d at 811. The only substantive basis that
the Uniform Foreign Money-Judgments Recognition
Act recognizes for not enforcing a foreign
judgment is that "the cause of action on which
the judgment is based is repugnant to the public
policy" of Illinois, 735 ILCS 5/12-621; see,
e.g., Ingersoll Milling Machine Co. v. Granger,
supra, 833 F.2d at 686-88; cf. Loucks v. Standard
Oil of New York, 120 N.E. 198, 201 (N.Y. 1918)
(Cardozo, J.), a claim the plaintiffs have
abandoned in this court.
If Parliament passed a law that the Equitas
premium was whatever Lloyd’s Council said it was,
this would not be a denial of a procedural right
of any of the names, but rather a revision of the
substantive terms of the names’ relation to
Lloyd’s. But if Parliament went further and
precluded the names from challenging in court the
applicability of the new law to them, that would
be a curtailment of their procedural rights, and
doubtless a deprivation of their property without
due process of law. But this is not what
happened. Lloyd’s appointed agents to negotiate a
contract binding the names that (they argue) was
disadvantageous to them. It was disadvantageous
in part because it reserved to Lloyd’s a very
broad discretion to fix the premium for the new
reinsurance. But a one-sided contract is a
substantive, not a procedural, offense. (Nor, to
recur for a moment to the pay now sue later
clause, is an unreasonable contractual
interpretation a procedural violation.) The names
were free both to challenge the clause and to
show if they could "manifest error" in the
assessment of their liability under it. They
could not show this, but only because manifest
error is hard to prove. It would have to be an
error that was obvious because of the
disproportion between the reinsurance premium
levied by Lloyd’s and the risk to which the
particular name would be exposed if he lacked
reinsurance. Their real objection to the
exclusive-evidence clause, moreover, is that it
curtails pretrial discovery, and the right to
pretrial discovery is not a part of the U.S.
concept of due process, e.g., Midway Motor Lodge
v. Innkeepers’ Telemanagement & Equipment Corp.,
54 F.3d 406, 408 (7th Cir. 1995); Silverman v.
CFTC, 549 F.2d 28, 33 (7th Cir. 1977); Alexander
v. Pathfinder, Inc., 189 F.3d 735, 741 (8th Cir.
1999), let alone of international due process.
See, e.g., Hague Convention, art. 23 (reprinted
at 28 U.S.C. sec. 1781); Panama Processes, S.A.
v. Cities Service Co., 500 F. Supp. 787, 800
(S.D.N.Y. 1980), aff’d, 650 F.2d 408 (2d Cir.
1981); Rio Tinto Zinc Corp. v. Westinghouse,
[1978] A.C. 547 (H.L.); Gary B. Born,
International Civil Litigation in United States
Courts 843-55 (1996).
And again the key question is not the fairness
of Lloyd’s measures but the fairness of the
English court in holding that Lloyd’s was
authorized by its contract with the names to
appoint agents to negotiate a contract that would
bind the names without the names’ consent. This
interpretation of the original contract, like the
interpretation authorizing Lloyd’s to adopt the
pay now sue later clause, is not so unreasonable
that it could be thought a denial of
international due process even if international
due process had a substantive component.
We conclude that the judgments are enforceable
under the foreign money-judgments statute, and we
turn now to the other issues presented by these
appeals. Several of the appellants were
defendants in a separate suit brought by Lloyd’s
against dissenting names that was reassigned to
the district judge (Judge Leinenweber) handling
the other suits because it was identical to those
suits. He granted judgment on the pleadings for
Lloyd’s in the separate suit. The defendants in
that suit argue that the grant was erroneous,
because Lloyd’s had submitted evidence in support
of the motion and Fed. R. Civ. P. 12(c) provides
that when this is done the motion for judgment on
the pleadings is automatically converted to a
motion for summary judgment and the defendants
argue that, so reconceived, the motion should not
have been granted until the defendants had a
chance to put in their own evidence. The issue is
moot. The suits are identical, and the defendants
have not advised us of any evidence that would
affect our determination that the judgments
obtained by Lloyd’s in England are enforceable
under English law.
The separate appeal by Collins is frivolous and
requires no discussion at all, and we proceed to
the last issue, a challenge to the citations
issued by Lloyd’s in aid of its judgments. Since
we are affirming the district court’s order
allowing Lloyd’s to collect its judgments and
hence to issue citations in aid of that
collection effort, the challenge to the already
issued citations may seem moot. But it is not,
because Lloyd’s may seek sanctions for contempt,
the defendants having refused to comply with the
citations. The issue of the validity of the
sanctions could be deferred to the contempt
proceeding, if any, but we think it best to try
to wind up this litigation by resolving the issue
now. It is not difficult to resolve. The
defendants’ argument is that in the case of a
foreign judgment, as distinct from a judgment
rendered by another jurisdiction within the
United States, citations may not be issued until
a court has entered an order recognizing (that
is, declaring enforceable) the judgment that the
citations are in aid of. We cannot see any legal
or practical basis for such a two-step, and it is
in tension with Ill. S. Ct. R. 277(a), which
states that citation proceedings "may be
commenced at any time with respect to a judgment
which is subject to enforcement." Proceedings are
"commenced" simply by an oral or written request
to the clerk to issue citations. Ill. S. Ct. R.
277(b). The clerk does not investigate to see
whether the judgment is truly enforceable. The
issue of the judgment’s enforceability is raised
by way of defense to compliance with, not
commencement of, the citations proceeding--which
is what happened here. There is no reason to make
the judgment creditor bring two separate
proceedings, one to enforce the judgment and the
other to collect it.
Any doubt on this score is dispelled by reading
in tandem the statutes governing enforcement of
foreign-state and foreign-nation judgments
respectively. The Illinois Enforcement of Foreign
Judgments Act, which governs the enforcement in
Illinois of judgments rendered in the courts of
other states of the United States, as distinct
from foreign nations, not only treats such
judgments the same as Illinois judgments, 735
ILCS 5/12-652(a), which means that no separate
step of "recognition" is necessary before they
can be enforced; the act also makes the foreign
judgment enforceable unless the judgment debtor
objects and invokes "procedures, defenses, and
proceedings for reopening, vacating, or staying"
the judgment. This clearly implies that separate
"recognition" proceedings are not required--an
interpretation confirmed in cases from other
jurisdictions that have adopted the Uniform
Enforcement of Foreign Judgments Act. Redondo
Construction Corp. v. United States, 157 F.3d
1060, 1065 (6th Cir. 1998); Burchett v. Roncari,
434 A.2d 941, 943 (Conn. 1980). The Uniform
Enforcement of Foreign Money-Judgments Act, which
governs judgments of courts outside the United
States, makes such judgments, if enforceable at
all, "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. Q.E.D.
Affirmed.