F I L E D

United States Court of Appeals

Tenth Circuit

AUG 28 1998

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

DAVISTER CORPORATION,

Plaintiff-Appellant,

v.

UNITED REPUBLIC LIFE

INSURANCE COMPANY and ROBERT

E. WILCOX, Utah Insurance

Commissioner and Liquidator of United

Republic Life Insurance Company,

Defendants-Appellees.

No. 96-4063

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH

(D.C. No. 95-CV-1007)

Mark R. Gaylord (Charles P. Sampson and Bruce T. Jones with him on the briefs) of

Suitter Axland, Salt Lake City, Utah, for Plaintiff-Appellant.

John P. Harrington (Valerie A. Longmire with him on the brief) of Ray, Quinney &

Nebeker, Salt Lake City, Utah, for Defendants-Appellees.

Before PORFILIO, LUCERO, and MURPHY, Circuit Judges.

PORFILIO, Circuit Judge.
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This case considers whether the district court erred by abstaining from enforcing

arbitration of a dispute between Davister Corporation and the Liquidator of United

Republic Life Insurance Company (United), an insurance company domiciled in Utah and

currently under liquidation in insolvency proceedings in Utah state court. We believe this

question must be resolved under the McCarran-Ferguson Act, not under other doctrines of

abstention. So focused, we hold the district court correctly refused to compel arbitration. 

We therefore affirm its judgment.

The facts of this matter are relatively simple. Prior to insolvency, United had

entered into a transaction with Davister in which it agreed to transfer some of its stock to

Davister in exchange for 100% of the stock of R. G. Acquisition Corporation (RGA). As

part of that agreement, United was to obtain certain real property interests in Waco,

Texas, that were the principal assets of RGA. Subsequently, the Commissioner of the

Utah Insurance Department notified United this and other similar transactions were

improper and must cease. Moreover, the Commissioner advised United the transaction

involving the stock of RGA “must be reversed” because United had not obtained required

authorization from the commission to exchange its stock for the stock of RGA.

Before the reversal was accomplished, however, the Commissioner filed an action

in Utah state court to seize control of the company. He also filed an action in Texas state

court to gain control of the Waco real property interests. Davister intervened in the Texas

action seeking rescission of its transaction with United, claiming the Utah
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Commissioner’s order to reverse caused a failure of consideration in its agreement with

United. Davister also sought a judgment establishing its right to the Texas property

interests.

Meanwhile, in the Utah state court action, the Commissioner obtained an order

liquidating United and appointing him the Liquidator. Contemporaneously, the state

court issued an order staying all claims against United. See Utah Code Ann. § 31A-27-

317 (“The filing of a petition for liquidation of a domestic insurer or of an alien insurer

domiciled in this state stays all actions and all proceedings against the insurer ....”). That

stay was honored by the Texas court which also stayed all of Davister’s claims pending in

that forum, although the court permitted the continuation of the balance of the Texas

action. 

Davister then filed this case against United and the Commissioner (Defendants) in

the United States District Court for the District of Utah to compel arbitration of the

dispute over the Texas real property interests in accordance with the agreements between

Davister and United. In addition, Davister sought a stay of the entire Texas action and the

Utah liquidation. After a hearing on the merits, the federal district court abstained from

compelling arbitration and refused to grant the stay requested by Davister. Davister then

brought this appeal.

On appeal, Davister argues clear national policy and the Federal Arbitration Act

mandate arbitration in place of state litigation when the parties have contracted to submit
1The Court’s analysis produced what we have come to call a three-part test for the

determination of whether the McCarran-Ferguson Act should be applied: (1) does the

federal statute at issue “specifically relate to the business of insurance”; (2) was the state

(continued...)

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disputes to arbitration, citing Southland Corp. v. Keating, 465 U.S. 1 (1984), and Moses

H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983). Davister contends

once a federal court determines a dispute exists between the parties which they have

agreed to arbitrate, it must stay all other proceedings and compel arbitration. Houlihan v.

Offerman & Co., 31 F.3d 692, 695 (8th Cir. 1994). Defendants respond that abstention

was proper on grounds of comity, but if not on that basis, certainly under the McCarranFerguson Act. Defendants rely upon 15 U.S.C. § 1012 which states: “No Act of Congress

shall be construed to invalidate, impair, or supersede any law enacted by any State for the

purpose of regulating the business of insurance,” contending it trumps the federal policy

favoring arbitration. Defendants also urge their position is supported by United States v.

Fabe, 508 U.S. 491 (1993).

In Fabe, the Court was called upon to determine whether in an Ohio statutory

procedure for the liquidation of an insolvent insurance company the United States was

entitled to assert a priority claim granted it under a federal statute. “In order to resolve

this case, we must decide whether a state statute establishing the priority of creditors’

claims in a proceeding to liquidate an insolvent insurance company is a law enacted ‘for

the purpose of regulating the business of insurance,’ within the meaning of § 2(b) of the

McCarran-Ferguson Act, 15 U.S.C. § 1012(b).” Fabe, 508 U.S. at 493.

1
1

(...continued)

statute enacted “for the purpose of regulating the business of insurance”; (3) would

application of the federal statute “impair, interfere, or supercede” the state statute? Fabe,

508 U.S. at 500-01. Part (1) of the test is not an issue in this case because the Federal

Arbitration Act does not specifically relate to the business of insurance.

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The United States maintained the Ohio liquidation act could not have been enacted

for the purpose of regulating the business of insurance because it merely determined the

order in which claims of creditors would be paid. It also contended the statute did not

deal with the insurer-insured relationship because it pertained only to resolution of

conflicts between policyholders and other creditors of the insolvent insurance company.

The government grounded its argument on two cases, Union Labor Life Ins. Co.

v. Pireno, 458 U.S. 119 (1982), and S.E.C. v. National Sec., Inc., 393 U.S. 453 (1969). 

Pireno held there are three factors to be considered in determining what constitutes the

business of insurance: 1) does the practice have the effect of transferring or spreading a

policyholder’s risk; 2) is the practice integral to the relationship of the insurer and the

insured; 3) is the practice limited to entities within the insurance industry? Pireno, 458

U.S. at 129. National Sec. held: “Statutes aimed at protecting or regulating [the]

relationship [between insured and insurer], directly or indirectly are laws regulating the

‘business of insurance.’” National Sec., 393 U.S. at 460. 

The Court was unconvinced. Considering Pireno together with Group Life &

Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979), both of which held McCarranFerguson inapplicable to “ancillary activities” within the insurance industry, see Fabe,
2Contrary to the position advanced in the dissent, we do not view Fabe to permit

all actions arising under a state insurance liquidation statute to “automatically fall under

the purview of the McCarran-Ferguson Act.” As we have noted, a carefully constructed

three-part test must be satisfied before the Act can apply. This examination must be

implemented on a case-by-case basis, and the result will be dictated by the precise statutes

involved in each case.

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508 U.S. at 503, the Court concluded the business of insurance was most importantly

involved with the “performance of an insurance contract.” Id. at 503-05. The Court then

explained:

 The broad category of laws enacted “for the purpose of regulating the business

of insurance” consists of laws that possess the “end, intention, or aim” of

adjusting, managing, or controlling the business of insurance. This category

necessarily encompasses more than just the “business of insurance.” ... [W]e

believe that the actual performance of an insurance contract is an essential part of

the “business of insurance.” Because the Ohio statute is “aimed at protecting or

regulating” the performance of an insurance contract, it follows that it is a law

“enacted for the purpose of regulating the business of insurance” within the

meaning of the first clause of § 2(b) [15 U.S.C. § 1012(b)].

Id. at 505 (citations omitted).

Although the government maintained the Ohio liquidation statute was a

bankruptcy law and not an insurance statute, the Court disagreed. “The primary purpose

of a statute that distributes the insolvent insurer’s assets to policyholders in preference to

other creditors is identical to the primary purpose of the insurance company itself: the

payment of claims made against policies.” Id. at 505-06.2

Because Fabe dealt only with competing claims for priority of distribution in a

liquidation setting, it does not completely inform our decision. We are called upon to go
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beyond that point to decide whether rights created under the Federal Arbitration Act must

give way to a state court blanket stay in the liquidation setting. Our quest leads us to

Munich American Reinsurance Co. v. Crawford, 141 F.2d 585 (5th Cir. 1998). 

In that case, the Fifth Circuit was called upon to decide “whether state laws

governing insurance company delinquency proceedings reverse pre-empt the [Federal

Arbitration Act] under the McCarran-Ferguson Act.” Munich, 141 F.3d at 587. The

court held they did.

At issue in Munich was whether claims asserted by two reinsurers to certain policy

proceeds arising out of reinsurance agreements between an insolvent Oklahoma insurance

company and the claimants must be resolved by arbitration. The Oklahoma Insurance

Commissioner, who was the liquidator of the insolvent company and holder of the

proceeds, refused to submit to arbitration.

The claimants filed an action in federal district court to compel arbitration under

the Federal Arbitration Act, and the district court granted relief. The Fifth Circuit

reversed the judgment, stating:

[T]he specific provisions of the statute at issue here–vesting exclusive

original jurisdiction of delinquency proceedings in the Oklahoma state court

and authorizing the court to enjoin any action interfering with the

delinquency proceedings–are laws enacted clearly for the purpose of

regulating the business of insurance. These provisions give the state court

the power to decide all issues relating to disposition of an insolvent

insurance company’s assets, including whether any given property is part of

the insolvent estate in the first place.
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Id. at 592-93 (emphasis added); see also Murff v. Professional Med. Ins. Co., 97 F.3d

289, 291 (8th Cir.1996) (“We conclude that the Missouri statute purporting to stay all

actions against an insolvent insurer is ‘a law regulating the business of insurance.’ It

protects policyholders because it preserves the assets of the insolvent insurer’s estate,

thereby enhancing the ability of an insolvent insurance company to perform its

contractual obligations.”).

The court continued, quoting from Grimes v. Crown Life Ins. Co., 857 F.2d 699,

705 (10th Cir. 1988), “Oklahoma has not only adopted a comprehensive scheme to

oversee liquidation of insolvent insurers, it has provided a particular court ... to oversee

liquidation proceedings.” Munich, 141 F.3d at 593. This, the Fifth Circuit noted, is “a

special relationship [which] contributes markedly to the orderly liquidation or

rehabilitation of the insurance company and the adjudication of claims against it.” Id.

Moreover, giving the state court ultimate control over all issues relating to the insolvent

insurance company is “aimed at protecting the relationship between the insurance

company and its policyholders.” Id.

Dispatching the reinsurers’ argument that the state law which consolidated

disposition of all claims, including those of creditors other than policyholders, was not a

law enacted for the purpose of regulating the business of insurance, the court turned to

Fabe. The Fifth Circuit reminded that Fabe decided the Ohio law dealing with

insolvency preferences for administrative expenses was “reasonably necessary” to the
3The dissent overreads Munich. The court did not in any way adopt a “per se rule

of reverse preemption of federal enforcement of all arbitration agreements against an

insurance company in insolvency proceedings.” To the contrary, the Fifth Circuit

carefully conducted the three-part Fabe test and concluded the Oklahoma law vesting

exclusive jurisdiction in the state court and providing for a blanket stay of all other

proceedings was “clearly for the purpose of regulating the business of insurance.” 

Munich, 141 F.3d at 592-93. Nothing contained within the court’s reasoning or inferable

therefrom suggests the adoption of a per se test. More importantly, we purpose no such

result ourselves.

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goal of protecting policyholders, hence, that law was enacted for the purpose of

regulating the business of insurance. Munich, 141 F.3d at 593 (quoting Fabe, 508 U.S.

at 509). The court applied the same reasoning to the Oklahoma liquidation proceedings

in state court, holding that although some of the benefits from the liquidation could

devolve upon non-policy holding creditors, none of those which inure to the benefit of

policyholders “are insignificant or attenuated,” and are “indistinguishable from the Ohio

provision giving a preference to administrative expenses in Fabe.” Thus, the court

concluded, “these provisions were enacted for the purpose of regulating the business of

insurance.” Id. at 594.3

We hold the same result applies here. The Utah statute consolidating all claims

against a liquidating insurer, by its nature and express terms, was enacted to protect

policyholders. See Utah Code Ann. § 31A-27-101(2). By offering benefits to other

creditors, that ultimate purpose is neither diminished nor denigrated. Adding to the stated
4

“The filing of a petition for liquidation of a domestic insurer or of an alien insurer

domiciled in this state stays all actions and all proceedings against the insurer in Utah or

elsewhere ....” Utah Code. Ann. § 31A-27-317(a) (emphasis added).

5The dissent takes the position that the “facts before us are not related to the

business of insurance as defined in Fabe,” citing in support Garcia v. Island Program

Designer, Inc., 4 F.3d 57, 62 (1st Cir. 1993). Garcia, in fact makes the point we adopt. 

The federal statute in Garcia gave the United States a priority in the state liquidation

proceeding. The law under which the liquidation was conducted would have deprived the

federal government from participating in the proceeds of liquidation until after all other

claims had been satisfied. Id. at 61. Clearly, the Commonwealth statute prescribing the

order in which claims were to be liquidated had nothing to do with the regulation of the

business of insurance. Indeed, that statute would have applicability in any form of debt

liquidation proceeding and it is not in any way peculiar to the business of insurance. In

contrast, application of the federal statute here (having nothing to do with regulating the

(continued...)

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statutory purpose is the statutory blanket stay against all proceedings against the insolvent

insurance company.4

The stay makes clear it is the policy of the State of Utah to consolidate in one

forum all matters attendant to the liquidation of a domiciled insurance company. That

policy guarantees that the entire process is more than a simple liquidation of debt. 

Indeed, all decisions in Utah affecting the ultimate benefits to be accorded policyholders

of a liquidated insurance company are circumscribed in one proceeding. Because the stay

prevents conflicting rulings on claims, the unequal treatment of claimants, and the

unnecessary and wasteful dissipation of the remaining funds of the insolvent insurer, the

stay manifests a purpose of protecting policyholders. Munich, 141 F.3d at 593. We think

it evident the Utah statute meets the test of having been enacted for the purpose of

regulating the business of insurance.5
5

(...continued)

insurance business) would remove a dispute over a potentially significant piece of the

liquidation proceeding (having by definition everything to do with regulating the

insurance business) from the state court whose jurisdiction is exclusive and submit it for

resolution by a non-judicial forum. That process would thoroughly denigrate Utah Code

Ann. § 31A-27-101(2), the state law enacted for the protection of policyholders. Garcia

is simply inapposite.

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That decision leaves us with only the third part of the Fabe test, that is, whether,

under the McCarran-Ferguson Act, the Federal Arbitration Act “invalidate[s], impair[s],

or supercede[s]” § 31A-27-317(a). Again, we believe the answer is obvious. Allowing a

putative creditor to pluck from the entire liquidation proceeding one discrete issue and

force arbitration contrary to the blanket stay entered by the Utah state court would

certainly impair the progress of the orderly resolution of all matters involving the

insolvent company. Unquestionably, that result would directly impact the policyholders

because it deals with a purported asset of the insurance company that could be

apportioned to them. Recognition of that consequence makes apparent the conflict

between the terms of the FAA and the Utah law. Neither Fabe nor any other authority

holds that the applicability of the McCarran-Ferguson Act is dependant upon the

existence of a Utah law “mandating against arbitration” as the dissent contends. With all

due respect, that approach turns the Fabe test inside out. The issue is not whether Utah

prohibits arbitration, but whether enforcing arbitration invalidates, impairs, or supercedes

the enforcement of the state process designed to protect the interests of policyholders. 

We agree wholeheartedly with the Fifth Circuit that “[r]egardless of the nature of the
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reinsurers' action, ordering it resolved in a forum other than the receivership court

nevertheless conflicts with [state] law giving the state court the power to enjoin any

action interfering with the delinquency proceedings.” Munich, 141 F.3d at 595. 

Indeed, as the district court in this case cogently observed:

I am just curious if we have ... a state judge overseeing the liquidation, and

you have ... a stay order entered by him, and you’re seeking some kind of

relief in reference to either assets or claims of another kind against the

company that is in receivership, ordinarily wouldn’t you be over there in

front of that state court judge saying, look, here is a problem, tell this

receiver that you’re overseeing to do something?

The district court, of course, was right. 

Our resolution does not leave Davister without a remedy. Indeed, it can bring this

matter before the liquidation court, and if arbitration is the best way to resolve the

conflict, it can be ordered by that court under its own aegis. Moreover, if the stay is

unfairly limiting Davister’s pursuit of its rights in Texas, the Utah court can certainly

grant relief from that stay as well. A federal court need not interfere in the process.

AFFIRMED.
96-4063, Davister v. United Republic Life Insurance Co.

LUCERO, Circuit Judge, dissenting.

Because I believe that the issue presented before us is governed by United

States v. Fabe, 508 U.S. 491 (1993), and because my reading of that carefully

limited opinion delivered by a divided Supreme Court precludes both the

approach and result reached by the majority opinion, I respectfully dissent.

Unlike the majority, I do not understand Fabe to permit a conclusion that

all actions arising under a state insurance liquidation statute automatically fall

under the purview of the McCarran-Ferguson Act merely because of the operation

of the state statute. Fabe’s holding is much more nuanced – requiring a close

inquiry into whether the operation of each provision of the statute implicates the

“business of insurance.” 

In Fabe, after reviewing relevant precedent, the Court concluded that a state

statute “regulate[s] the business of insurance only to the extent that it protect[s]

policyholders.” Id. at 509 n.8. I recognize that the interests of policyholders are

indirectly implicated by any claims on the assets of insolvent insurers by potential

creditors. Emphasizing the “narrowness of our actual holding,” id., however, the

Fabe Court cautioned against defining all such indirect connections as pertaining

to the “business of insurance” under McCarran-Ferguson. “This argument,

however, goes too far: ‘But in that sense, every business decision made by an

insurance company has some impact on its reliability ... and its status as a reliable
1 See L.P.R.A. tit. 26 (Insurance), ch. 40 (Rehabilitation and Liquidation).

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insurer.’ Royal Drug rejected the notion that such indirect effects are sufficient

for a state law to avoid pre-emption under the McCarran-Ferguson Act.” Id. at

508-09 (quoting Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205,

216-17 (1979)). 

The facts before us are not related to the business of insurance as defined in

Fabe. I disagree with the majority’s adoption of Munich Amer. Reins. Co. v.

Crawford, 141 F.3d 585 (5th Cir. 1998) to the extent that Munich imposes a per

se rule of reverse preemption of federal enforcement of all arbitration agreements

against an insurance company in insolvency proceedings. Fabe requires the

examination of individual provisions of an insurance liquidation statute to

determine which of those provisions specifically protect policyholders. See Fabe,

508 U.S. at 508-10 (finding reverse preemption of federal priority statute with

respect to policyholders, but not with respect to other creditors); see also Garcia

v. Island Program Designer, Inc., 4 F.3d 57, 62 (1st Cir. 1993) (Breyer, C.J.)

(finding no reverse-preemption of filing-deadline provision of Puerto Rico

insurance insolvency statute1 because provision “cannot be said to directly

‘regulate[] policyholders,’ for it is neither directed at, nor necessary for, the

protection of policyholders, as the [Fabe] Court required. The provision helps

policyholders only to the extent that (and in the same way as) it helps all
- 3 -

creditors.”). Like the provision at issue in Garcia, a blanket stay of all arbitration

proceedings is of general benefit to all creditors and not specifically for the

benefit of policyholders.

Nor is Munich clearly apposite on its facts to the situation before us. The

Munich court considered the enforceability of arbitration clauses in reinsurance

contracts which covered losses on claims paid under an insurance policy by the

insolvent insurer, contracts which arguably relate with some directness to

protecting policyholders. The precise question before the district court below,

however, was whether to compel specific performance of the arbitration clause in

a stock purchase agreement forming part of a real estate deal. Davister is neither

a policyholder of United Republic nor an insurer of United Republic’s policies. 

The contract to be interpreted is a real estate contract. Though an insurance

company, albeit now insolvent, is a party, the contract has no connection to

policyholders or their policies. The deliberately narrow holding of Fabe

forecloses a scope of reverse preemption so broad that it could encompass the

arbitration of such a contract. 

Furthermore, this is not a case where the enforcement of the federal right

would conflict with a specific provision of a state law precluding arbitration in

insurance cases or insurance liquidation proceedings. Cf. Stephens v. American

Int’l Ins. Co. , 66 F.3d 41, 44 (2d Cir. 1995) (concluding that specific anti-
- 4 -

arbitration provision in Kentucky insurance liquidation law precludes compelling

arbitration under federal law); Mutual Reins. Bureau v. Great Plains Mut. Ins.

Co., 969 F.2d 931, 933-34 (10th Cir. 1992) (holding that Kansas arbitration

statute specifically exempting “contracts of insurance” was protected from FAA

preemption by McCarran-Ferguson Act). Utah has no state law, either within or

outside of its insurance liquidation scheme, mandating against arbitration in the

insurance context. Thus, it is by no means clear that enforcement of the FAA

would “invalidate, impair, or supersede” the Utah liquidation statute.

I am mindful that “the statutory question the majority considers with care

is difficult.” Fabe , 508 U.S. at 510 (Kennedy, J., dissenting). To bring this

dispute within the reach of McCarran-Ferguson reverse pre-emption would

swallow the very fine distinction set forth by Fabe ’s majority, potentially

precluding federal jurisdiction over any dispute involving an insolvent insurance

company. Because I believe that the majority’s result is neither contemplated by

nor consistent with Fabe , nor required by McCarran-Ferguson, I would conclude

that the federal court has jurisdiction over this dispute and would reach the

question of whether the district court below properly abstained from exercising

that jurisdiction.