The opinion of the court was delivered by: Conti, District Judge.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS FOR LACK OF JURISDICTION
In this reinsurance dispute, plaintiff Majestic Insurance Company
("Plaintiff") seeks declaratory relief, attorney's fees, punitive
damages, and profit disgorgement from at least fifty individual insurance
company defendants that are members of the Institute of London
Underwriters ("ILU Defendants") and at least seventy-two underwriters
acting on behalf of Members of Lloyd's, London ("Lloyd's Defendants") for
breach of contract, contract reformation, breach of the covenant of good
faith and fair dealing, and unlawful business practices under California
Business and Professions Code Section 17200. Defendants now move for
dismissal on the grounds that this Court lacks subject matter
jurisdiction. For the reasons set forth herein, Defendants' motion is
This case delves into the intricacies and sometimes archaic
complexities of the London Marine Insurance Market (the "London
Market"). At its core, the case concerns reinsurance policies placed in
the London Market with insurance company members of the ILU, and
individual underwriter members of Lloyd's. Lloyd's of London, the
venerable institution associated world-wide with the insurance business,
is not actually an insurance company. Rather, it provides a market for
the buying and selling of insurance risk among its members.
Lloyd's members are anonymous underwriters commonly referred to as
"Names." These Names invest in a percentage of an insurance policy risk.
Each Name is exposed to unlimited liability, but only for the share of
the loss on a policy that the Name has written. In other words, the
liability of a given Name on any given policy is several, and not joint.
Lloyd's insurance policies are obtained through a broker, known as a
Lloyd's broker, who insures part of the risk with a lead underwriter of a
Syndicate. The broker then approaches other syndicates who are likely to
follow the lead underwriter's decisions until the desired participation
in the insurance has been completed. Thus, any single risk is insured by
multiple Syndicates. Since many Names from various Syndicates are
involved in each individual policy, the lead underwriter from one of the
Syndicates usually is designated as the representative for all the Names
and relevant Syndicates with respect to that Policy. It is often only
that Name which is disclosed on the actual insurance policy.
Plaintiff, a California corporation, alleges that it is a
predecessor-in-interest or successor-in-interest to Continental Maritime
Industries, Marine Terminals Corporation, Service Engineering
Corporation, and Redhorse Insurance Company, which are each insureds
under the contracts at issue here. Plaintiff wrote workers compensation
insurance under both the California compensation system and the United
States Longshore & Harbor Workers Compensation Act (the "Longshore
Act"). Between 1985 and 1992, Plaintiff purchased numerous reinsurance
policies in the London Market. These policies were specific loss excess
reinsurance policies, arranged in layers of excess of Plaintiffs
retention on a specific claim.
Plaintiff alleges that Defendants failed to comply with their
reinsurance obligations as required by the aforementioned policies.
Plaintiff filed the present action on October 31, 2000 seeking
declaratory relief, attorney's fees, punitive damages. and profit
disgorgement for claims including breach of contract, contract
reformation, breach of the covenant of good faith and fair dealing, and
unlawful business practices under California Business and Professions
Code Section 17200. Defendant filed a "Suggestion of Lack of Federal
Jurisdiction" seeking to dismiss the case on December 20, 2000.
Federal courts have limited subject matter jurisdiction. They are
restricted as to what cases they may adjudicate and they may exercise
jurisdiction only if it is specifically authorized. Article III, Section
2 of the Constitution authorizes federal court jurisdiction for suits
between citizens of different states. Jurisdiction based on this
circumstance is termed "diversity jurisdiction," and its requirements are
detailed in 28 U.S.C. § 1332. That provision states: "The district
courts shall have original jurisdiction of all civil actions where the
matter in controversy exceeds the sum or value of $75,000, exclusive of
interest and costs and is between (1) citizens of different States; (2)
citizens of a State and citizens or subjects of a foreign state."
28 U.S.C. § 1332.
The proper exercise of diversity jurisdiction requires satisfaction of
two elements. First, that the parties are diverse, or citizens of
different states. In order for the parties to fulfill this requirement
there must be "complete diversity." That is no plaintiff can be a citizen
of the same state as any of the defendants. Strawbridge v. Curtiss,
7 U.S. 267, 3 Cranch 267, 2 L.Ed. 435 (1806). Second, the amount in
controversy must exceed $75,000. 28 U.S.C. § 1332 (a). The party
seeking to establish diversity jurisdiction has the burden of proof with
respect to each of these elements. Kokkonen v. Guardian Life Insurance
Company of America, ...