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INternational Insurance Co. v. Caja Nacional de Ahorro y Seguro

June 07, 2002

INTERNATIONAL INSURANCE COMPANY, PLAINTIFF-APPELLEE,
v.
CAJA NACIONAL DE AHORRO Y SEGURO, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 00 C 6703--John W. Darrah, Judge.

Before Manion, Kanne, and Williams, Circuit Judges.

The opinion of the court was delivered by: Manion, Circuit Judge.

ARGUED JANUARY 25, 2002

After a default award was entered against defendant Caja Nacional de Ahorro y Seguro ("Caja") in arbitration proceedings, International Insurance Company ("IIC") filed a petition in federal district court seeking to confirm the award. After Caja filed an answer and affirmative defenses, IIC moved for an order requiring Caja to post pre-judgment security. Caja responded that it was immune from posting such security under the Foreign Sovereign Immunities Act ("FSIA"). The district court held that the FSIA did not preclude it from requiring Caja to post pre-judgment security, ordered it to do so, and struck Caja's answer and affirmative defenses. When Caja did not post security or file a new answer, the district court entered a default judgment against it. Caja appeals, and we affirm.

I.

In 1979, plaintiff International Insurance Company, an American insurance company, purchased reinsurance from the defendant, Caja Nacional de Ahorro y Seguro, an insurance and reinsurance company headquartered in Argentina, pursuant to two reinsurance contracts. Caja subsequently failed to pay IIC over $2 million in indemnity obligations, and on April 10, 2000, IIC initiated an arbitration proceeding as required by each contract's arbitration clause. Caja failed to respond to IIC's arbitration demand or to appear at the arbitration proceeding. As a result, on October 17, 2000, the arbitration panel entered a final default award against Caja for approximately $4.7 million. *fn1 Each contract contained an identical provision, Article XXI, which provided that "judgment may be entered upon the award of the Arbitrators in any court having jurisdiction." Accordingly, on October 27, 2000, IIC filed a petition for confirmation of the arbitration award in federal district court. Caja filed an answer and affirmative defenses in response to IIC's petition. *fn2 IIC then moved for an order requiring Caja to post pre-judgment security based on the Illinois Insurance Code, which requires unauthorized foreign companies, before filing any pleadings, to "deposit . . . cash or securities or . . . a bond with good and sufficient sureties . . . sufficient to secure the payment of any final judgment which may be rendered . . . ." 215 ILCS 5/123(5). IIC argued that if Caja failed to do so prior to filing its answer, the court should strike its answer. *fn3 Caja responded that, as an instrumentality of a foreign government, it is not required to post pre-judgment security pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C. § 1600 et seq.

The district court held that the FSIA did not preclude it from requiring Caja to post pre-judgment security. The court reasoned that under the FSIA a foreign state's immunity is "subject to existing international agreements to which the United States is a party at the time of enactment of this Act." 28 U.S.C. § 1609. The court concluded that Argentina is a party to such an "existing" agreement--the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the "New York Convention" and codified by 9 U.S.C. § 201 et seq.). As a result, the court found the FSIA's immunity provisions inapplicable. Specifically, the New York Convention authorizes the courts of each participating country to require other signatory countries to provide "suitable security" upon seeking to set aside or suspend an award rendered within its jurisdiction. See 9 U.S.C. § 201, art. VI. *fn4 The district court further concluded that Caja's affirmative defenses constituted an application to set aside the arbitral award (a conclusion that is not challenged on appeal) and therefore held that the insurer was not immune from posting pre-judgment security under Illinois law. The district court then ordered Caja to post security in the amount of the default judgment and struck its answer and affirmative defenses. *fn5 See International Ins. Co. v. Caja Nacional de Ahorro y Seguro, No. 00C6703, 2001 WL 322005 (N.D.Ill. Apr. 2, 2001).

Caja did not post security or file a new answer, but instead, on April 23, 2001, appealed the district court's order to this court. IIC moved to dismiss the appeal for lack of appellate jurisdiction, *fn6 and on July 3, 2001, in an unpublished order, we granted IIC's motion, citing Matter of Carlson, 224 F.3d 716, 718 (7th Cir. 2000) (finding that order requiring security, as opposed to denial of security, is not ordinarily immediately appealable). On April 23, 2001, while Caja's appeal was still pending, IIC moved for a default judgment on its petition to confirm the arbitration award since Caja had not posted security and filed a new answer. Caja objected, arguing that it did not wilfully disobey the court's order to post security, but rather had filed a meritorious timely appeal (and that posting security would render the appeal moot). The district court construed this objection as a request to stay the litigation pending appeal, but since Caja failed to file the proper motion or the necessary supersedeas bond under Fed. R. Civ. P. 62(d), *fn7 the court denied its request. On July 6, 2001, the district court granted IIC's motion for default judgment and confirmed the arbitration award in the amount of $4,702,428.12. Caja appeals from that final judgment, and we affirm.

II.

A. Subject Matter Jurisdiction

Before addressing the merits of this appeal, we must confirm that we have jurisdiction over this case. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1988). The Federal Arbitration Act ("FAA"), which governs the "enforcement, validity, and interpretation of arbitration clauses in commercial contracts in both state and federal courts," Jain v. De Mere, 51 F.3d 686, 688 (7th Cir. 1995), and which permits suits to confirm arbitration awards, see 9 U.S.C. § 9, does not provide an independent basis for federal question jurisdiction. See Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 25 n. 32 (1983).

The parties maintain, however, that independent federal question jurisdiction exists. In its initial petition for confirmation of the arbitral award, IIC claimed that the district court had jurisdiction pursuant to the Inter-American Convention on International Commercial Arbitration (known popularly as the "Panama Convention"), codified at 9 U.S.C. § 301 et seq. The Panama Convention grants United States district courts original jurisdiction over proceedings falling thereunder. See 9 U.S.C. § 302 (incorporating 9 U.S.C. § 203). On appeal, in its brief, Caja claims that the district court had jurisdiction under the FSIA, 28 U.S.C. §§ 1602-1611, because it qualifies as a foreign state under the statute. See 28 U.S.C. § 1603. IIC, curiously, found Caja's jurisdictional statement to be "complete and correct." In any event, this court is not bound by the parties' representations regarding the source of our jurisdiction, and we have an independent duty to ensure that it exists. See ITOFCA, Inc. v. MegaTrans Logistics, Inc., 235 F.3d 360, 363 (7th Cir. 2000).

We conclude that the Panama Convention provides us with independent federal question jurisdiction under 28 U.S.C. § 1331, which grants district courts original jurisdiction over civil actions "arising under the Constitution, laws, or treaties of the United States." As previously noted, the Panama Convention was codified into federal law at 9 U.S.C. § 301 et seq. *fn8 An action or proceeding "falling under the [Panama] Convention shall be deemed to arise under the laws and treaties of the United States [and] [t]he district courts of the United States . . . shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy." See 9 U.S.C. § 203 (incorporated by reference into the Panama Convention by 9 U.S.C. § 302). *fn9 The action brought by IIC against Caja falls within the ambit of the Convention because the suit involves a dispute arising from a commercial arbitration agreement between two businesses domiciled in countries that are signatories to the Convention. See 9 U.S.C. § 202 (incorporated by reference into the Panama Convention by 9 U.S.C. § 302). Therefore, we have federal question jurisdiction. *fn10

While Caja does not challenge our subject matter jurisdiction, it does assert that it is an instrumentality of Argentina, *fn11 thus making it immune from the jurisdiction of American courts under the FSIA. See 28 U.S.C. § 1604 (granting foreign states immunity from the jurisdiction of the courts of the United States). However, even if Caja is a foreign instrumentality, we would still have subject matter jurisdiction because the FSIA contains several exceptions under which a foreign state or instrumentality may be subject to such jurisdiction. See 27 U.S.C. §§ 1604-1607. See also Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434 (1989) (noting that the FSIA is the "sole basis for obtaining jurisdiction over a foreign state in our courts."). These exceptions "allow the court to obtain subject matter jurisdiction over the case and provide the minimum contacts with the United States required by due process before a court can acquire personal jurisdiction." Alberti v. Empresa Nicaraguense de la Carne, 705 ...


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