Court Opinion

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Opinions of the United
1997 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

7-23-1997

John Wyeth & Bros v. Cigna Intl Corp
Precedential or Non-Precedential:

Docket 96-1653

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Recommended Citation
"John Wyeth & Bros v. Cigna Intl Corp" (1997). 1997 Decisions. Paper 166.
http://digitalcommons.law.villanova.edu/thirdcircuit_1997/166

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iled July 23, 1997

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 96-1653

JOHN WYETH & BROTHER LIMITED,

Appellant

v.

CIGNA INTERNATIONAL CORPORATION,

Appellee

ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

(D.C. Civil No. 95-cv-05741)

Argued: February 28, 1997

Before: SCIRICA and ALITO, Circuit Judges, and LAY,
Senior Circuit Judge*

(Opinion Filed: July 23, 1997)

_________________________________________________________________
*The Honorable Donald P. Lay of the United States Court of Appeals for
the Eighth Circuit, sitting by designation.
Daniel J. Thomasch, Esq. (Argued)
Diana L. Weiss, Esq.
DONOVAN LEISURE NEWTON &
 IRVINE
30 Rockefeller Plaza
New York, New York 10112

Murray S. Levin, Esq.
PEPPER HAMILTON & SCHEETZ
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, Pennsylvania 19103

Attorneys for Appellant

Richard M. Jordan, Esq. (Argued)
Samuel J.B. Angell, Esq.
WHITE AND WILLIAMS
1800 One Liberty Place
Philadelphia, Pennsylvania 19103

Attorneys for Appellee

OPINION OF THE COURT

ALITO, Circuit Judge:

An English pharmaceutical company is fighting to keep
its lawsuit located in the United States. Its American
insurance company opponent counters that proper location
for the lawsuit is England, not the United States. The
English company, John Wyeth and Brother Limited
("Wyeth"), sued its American insurer, CIGNA International
Corporation ("CIGNA"), in federal district court in
Pennsylvania, seeking an adjudication of its rights under
certain policies relating to product liability claims in the
courts of the United Kingdom and the Republic of Ireland.
The district court granted summary judgment for CIGNA,
holding that a forum selection clause in a 1990 contract
between the parties vested exclusive jurisdiction in the
courts of England. Wyeth appealed, but we affirm.

                               2
I.

Wyeth manufactures and supplies pharmaceuticals in
the United Kingdom and Ireland. Since 1987, Wyeth has
defended itself in the courts of those countries against more
than 11,000 product liability claims that relate to its
manufacture and sale of benzodiazepine products. Most of
the claims concerned Ativan, a tranquilizer that allegedly
caused dependency and a number of other deleterious side-
effects. Other claims were based on Wyeth's manufacture
and sale of Normison and Loramet, which were prescribed
as hypnotics or sleeping pills.

Wyeth had different primary insurance coverage for three
different time periods. First, for product liability claims
from November 1, 1972 through October 31, 1977, Wyeth
had local insurance coverage in the United Kingdom and
Ireland through Guardian Royal Exchange Assurance,
Limited ("GRE") for indemnification and the payment of
defense costs. Second, for product liability claims in
connection with products manufactured and distributed in
the U.K. from November 1, 1977 through October 31, 1980,
Wyeth had coverage under three occurrence-based
insurance policies issued by CIGNA's predecessor, the
American Foreign Insurance Association ("AFIA").1 These
policies provided coverage for Wyeth's parent corporation,
the American Home Products Corporation ("AHPC"), a New
Jersey-based entity, and its U.K. subsidiaries, including
Wyeth. Third, for occurrences after November 1980, Wyeth
relied on self-insurance.

Wyeth asserts that, although CIGNA and GRE were
obligated to pay defense costs relating to claims covered by
their policies, as of July 1989, both companies had refused
to advance such payments "on the basis, inter alia, that
they had not yet determined which policies were triggered
by which claims in the underlying litigation." (Appellant's
Br. at 11). Accordingly, Wyeth and its parent, AHPC,
allegedly proposed that, as an interim measure, CIGNA and
GRE each pay one-third of these costs and that Wyeth pay
the remaining one-third. On January 11, 1990, AHPC,
Wyeth, CIGNA, and other parties entered into an agreement
_________________________________________________________________

1. CIGNA acquired AFIA in 1984.

                                  3
(the "1990 Agreement") to "allocat[e] the responsibility for
Defense costs with respect to Ativan-related injury claims
for the life of the Agreement." (App. 52). The 1990
Agreement stated that the parties had been unable to agree
as to which of the insurance policies applied to the
individual product liability claims and that "the parties
intend[ed] to adopt [the 1990 Agreement] by way of
compromise and accord, and without prejudice to or waiver
of their respective positions." (App. 52). Under the 1990
Agreement, CIGNA agreed "to pay [thirty three and one
third percent] . . . of defense costs incurred to date and
hereafter during the term of the Agreement." (App. 54).
Either party had the right to terminate the agreement after
giving 90 days notice. The 1990 Agreement contained a
"Reservation of Rights" clause which stated that:

The payment of thirty three and one third percent of
Defense costs pursuant to this Agreement does not
constitute evidence of, or an admission by either party
regarding, the appropriate apportioning of Defense
costs of the Carriers under the policies issued to the
Insured Companies.

(App. 55). Most important for purposes of this appeal, the
1990 Agreement contained a forum selection clause, which
provided:

This Agreement shall be governed by and construed in
accordance with English law, and the English Courts
shall have exclusive jurisdiction in relation to any
dispute arising under or out of or in relation to this
Agreement.

(App. 56).

As of January 11, 1990, defense cost obligations for
claims arising during the period from November 1, 1972,
through October 31, 1977, were the responsibility of GRE.
In late 1990, however, GRE exercised its contractual right
to tender the aggregate amount of the limits of its coverage.
This tender terminated GRE's responsibilities with respect
to Wyeth's defense of the benzodiazepine litigation.

Wyeth states that the GRE tender implicated, for thefirst
time, five AFIA insurance policies covering the 1972-77

                               4
policy years. These policies allegedly provided Wyeth with
excess coverage over and above other insurance coverage
Wyeth may have possessed. Hence, according to Wyeth,
once GRE tendered the limits of its claims, Wyeth had, for
the first time, a claim against CIGNA under the 1972-77
policies for costs incurred after October 5, 1990. CIGNA,
however, refused to pay Wyeth's costs to the extent they
exceeded the amount that CIGNA had agreed to pay
pursuant to the Agreement. CIGNA contends that Wyeth
sought retrospectively to reallocate past defense costs that
had been settled at 33.33% and to increase CIGNA's share
to more than 60%.2

In September 1995, Wyeth brought suit against CIGNA in
the Eastern District of Pennsylvania. The Complaint sought
a declaratory judgment that CIGNA was required to pay
"any and all unreimbursed defense costs incurred by
[Wyeth] in the defense of the benzodiazepine litigation, to
the extent such defense costs concern claims occurring
during the period from November 1, 1972 through October
31, 1980." (App. 18). In addition, the Complaint sought an
award of damages. Given that the Complaint asserted that
CIGNA had "refused to pay [Wyeth's] costs of defending the
benzodiazepine litigation to the extent such costs .. .
exceeded the amount of the payments made by [CIGNA] to
[Wyeth] pursuant to the [1990] Agreement," CIGNA
countered that the district court lacked jurisdiction over the
suit due to the foru