Court Opinion

ID: 8996811
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:44:43.558617+00
Date Added: 2024-06-11T17:11:05.291481
License: Public Domain

JOHNSON, Senior Circuit Judge,
dissenting:
Prior to today, the particular issue in this case, whether personal jurisdiction over an *1560out-of-state insurance guaranty association is consistent with due process, had not yet been resolved by any United States Court of Appeals. As of today, the issue continues to await a correct resolution. In my opinion, the majority overrates the less-than-minimum contacts of LIGA and SCI-GA to Alabama and further exacerbates this error by misconstruing the traditional notions of fair play and substantial justice. Olivier clearly fell short of his burden of justifying the exercise of personal jurisdiction over these non-profit creatures of foreign state legislation. See Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 490 (5th Cir.1974) (the burden of proving personal jurisdiction is on the plaintiff).
1. Minimum Contacts
The majority finds sufficient minimum contacts in two acts taken by LIGA and SCIGA: (1) “guaranteeing insurance obligations within the state” of Alabama (emphasis added) and (2) “assuming the role of insurer.” There are three flaws in the majority’s finding. My first two objections relate to the majority’s characterizations of the enabling statutes. My final criticism of the majority’s finding of minimum contacts relates to its analytical focus.
First, the majority’s assertion that LIGA and SCIGA guarantee “insurance obligations within” Alabama constitutes an imprecise interpretation of the statutes at issue because it implies that the statutes focus, at least to some degree, on Alabama. In order for a claim to be “covered” under the statutes, either (1) the claimant or the insured must reside in the state which established the insurance guaranty association, or (2) the property giving rise to the claim must be permanently located in the state which established the insurance guaranty association. La.Rev.Stat.Ann. § 22:1379(3)(a) (West Supp.1991); S.C.Code Ann. § 38-31-20(6) (Law.Co-op.1990). Consequently, although it is technically true that LIGA and SCIGA guarantee insurance obligations within Alabama, they do so only because a covered claim could arise in any state, as long as one connection exists between the state which created the insurance guaranty association and either the plaintiff, the insured, or the property giving rise to the claim.1
Second, the majority's reliance on the provisions which mandate LIGA and SCI-GA’s assumption of the role of the insurer exalts form over substance. See La.Rev. StatAnn. § 22:1382(A)(2) (West Supp.1991) (“The association shall [b]e deemed the insurer to the extent of its obligation on the covered claim_”); S.C.Code Ann. § 38-31 — 60(b) (Law.Co-op.1990) (“The Association ... is considered the insurer to the extent of its obligation on the covered claims_”). These statutory provisions relate only to substantive insurance obligations; to interpret them as mandating that LIGA and SCIGA shall always be deemed or considered to be the insurer for purposes of personal jurisdiction attributes an unreasonably broad scope to these provisions.
Finally, the majority’s minimum contacts analysis reflects an undue focus on foreseeability. See ante at 1557. Foreseeability ought not to be the sole focus of the due process analysis. Rather, this Court must also find that LIGA and SCIGA “ ‘purposefully directed’ ” their activities at Alabama. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 2181, 85 L.Ed.2d 528 (1985). I.s., LIGA and SCI-GA must have “ ‘purposely derive[d] benefit’ ” from their Alabama contacts, id. at 473, 105 S.Ct. at 2183, or “manifestly ... availed [themselves] of the privilege of conducting business [in Alabama] shielded by ‘the benefits and protections’ of [Alabama] laws,” id. at 476, 105 S.Ct. at 2184. The contacts relied on by the majority clearly fail to establish such purposeful availment by LIGA and SCIGA. Rather, those contacts are “ ‘random, fortuitous,’ [and] ‘attenuated,’ ” id. at 475, 105 S.Ct. at 2183. (citations omitted), and, as such, they are insufficient to justify an exercise of person*1561al jurisdiction.2 Furthermore, fairly read, these provisions indicate an intent to bestow benefit upon only in-state claimants and insureds, thus negating any inference that LIGA and SCIGA purposefully subjected themselves to the benefits of Alabama law.
The remainder of the majority’s evaluation of minimum contacts further obfuscates the purposeful availment requirement. The majority asserts that, because both LIGA and SCIGA assessed dues against Midland and Midland insured a risk in Alabama, purposeful availment exists under the reasoning of McGee v. International Life Insur. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), involving a defendant who was a primary insurer, and four other cases involving defendants who were private guarantors. All of those cases, however, are clearly distinguishable from the one at bar. First, in all five cases, the defendant was aware that an occurrence of the insured risk or a default on the guaranteed note would have effects in the forum state. See McGee, 355 U.S. at 223, 78 S.Ct. at 201; National Can Corp. v. K Beverage Co., 674 F.2d 1134, 1137 (6th Cir.1982); Marathon Metallic Bldg. Co. v. Mountain Empire Constr. Co., 653 F.2d 921, 923 (5th Cir. Unit A Aug. 1981); Forsythe v. Overmyer, 576 F.2d 779, 781-83 (9th Cir.), cert. denied, 439 U.S. 864, 99 S.Ct. 188, 58 L.Ed.2d 174 (1978); Keelean v. Central Bank of the South, 544 So.2d 153,157 (Ala.1989). In the case sub judice, it was merely foreseeable rather than actually foreseen that, if Midland generated a covered claim, it could arise in Alabama. Moreover, in all but one of the majority’s cases, the court attributed a profit-motive to the establishment of contacts with the forum state by the defendant, a private person or entity. See McGee, 355 U.S. at 221-23, 78 S.Ct. at 200-01; National Can, 674 F.2d at 1137; Marathon Metallic, 653 F.2d at 923; Forsythe, 576 F.2d at 781-83.3 Unlike the cases relied on by the majority, the case at bar involves non-profit creatures of statute,4 formed solely to aid beneficiaries of policies issued by insolvent insurers,5 in which membership is compulsory for insurers who wish to do business in the state that created the insurance guaranty association,6 whose funds are derived solely from premiums written in the state which created the association,7 and whose *1562assessments against member insurers do not reflect an evaluation of risk, but rather are simply proportional to the particular member’s share of the total amount of premiums written in the state that created the association.8 Because the insured in this case, Merritt, was a South Carolina corporation, a portion of the premiums it paid to Midland went toward funding SCI-GA — i.e., SCIGA received funding directly related to the insurance policy that covered the Alabama tort which gave rise to the instant action. LIGA, however, received no additional funds as a result of the policy at issue in this case although it did benefit to the extent that Midland paid LIGA a portion of its premiums from Louisiana insureds, but those Louisiana insureds have absolutely no connection to this litigation. Neither SCIGA nor LIGA can be said to have purposefully availed themselves of the benefits of Alabama law merely by receiving money from Midland, who coincidentally insured the Alabama tort; this money in no way reflected an evaluation of the Alabama risks under the Merritt policy or an effort to profit from Midland’s insurance of risks in Alabama.
Moreover, the priority provisions of the guaranty statutes (which the majority ignores) also negate a finding of purposeful availment. These provisions specify, in cases where more than one guaranty association may be liable, from which association the claimant must seek recovery first. La.Rev.Stat.Ann. § 22:1386(B) (West Supp. 1991); S.C.Code Ann. § 38-31-100(2) (Law. Coop.1990).9 Olivier argued that these provisions clearly imply that LIGA and SCIGA anticipated being haled into foreign fora. The more likely explanation, however, posits that LIGA and SCIGA expected that the claimant would exhaust his remedy against the association that is required to be sued first in its state’s forum, then pursue a remedy against the next association in its state’s forum and so on. Rather than purposeful availment, the priority provisions indicate a desire on the part of LIGA and SCIGA to be sued only in their own fora.
I therefore believe that LIGA and SCIGA lack minimum contacts with Alabama.
2. Fair Play and Substantial Justice
Olivier would still be entitled to a reversal, notwithstanding his insufficient showing on the minimum contacts prong, if he had made an exceptionally strong showing that an exercise of personal jurisdiction over LIGA and SCIGA would be consistent with fair play and substantial justice. Sun Bank, N.A. v. E.F. Hutton & Co., 926 F.2d 1030, 1034-35 (11th Cir.1991). This he failed to do. Fair play and substantial justice connote five factors: (1) the burden on the defendant, (2) the forum state’s interest in adjudicating the dispute, (3) the plaintiff’s interest in obtaining convenient and effective relief, (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and (5) the shared interests of the several states in furthering fundamental substantive social policies. Burger King, 471 U.S. at 476-77, 105 S.Ct. at 2184-85.
In the case at bar, the first and fifth factors converge and weigh heavily against the majority’s holding. The majority asserts that any burden placed on the insurance guaranty associations and the social policy they serve may be alleviated by raising assessments or reducing coverage of claims. See ante at 1559.10 The majority further claims that Olivier’s interest (the third factor) and the fifth factor are intertwined such that a failure to find personal jurisdiction over LIGA and SCIGA will “frustrate the very purposes of the state insurance guaranty associations.” See ante at 1559. The majority underestimates the scope and magnitude of the effect its holding will have on insurance guaranty associations. As non-profit creatures of statute designed to benefit in-state *1563claimants and insureds, they will have to raise relatively substantial sums of money, in what may become a large number of cases, to hire attorneys in foreign jurisdictions and pay other costs of defense in foreign fora. The social goal of aiding claimants and insureds of insolvent insurers will be disserved, and perhaps even defeated, by forcing the guaranty associations to expend a large share of their resources defending in foreign fora rather than actually satisfying covered claims.
Returning to the plaintiffs interest in obtaining convenient and effective relief, the majority is unwilling to force Olivier to pursue his claims in Louisiana (his home state) and South Carolina. However, such litigation is not likely to be significantly more difficult or costly in those fora because the issues are primarily of a legal rather than a factual nature. Furthermore, unless SCIGA fails to satisfy all of Olivier’s allegedly covered claim, he will have to litigate in only one forum.11 Perhaps the majority means to adopt Olivier’s argument that, unless the court below has personal jurisdiction over appellees, he could be faced with a denial of coverage by each association in its own state courts. The fatal flaw in this argument is that it assumes that the court below will decide questions of Louisiana and South Carolina law contrary to the way the Louisiana and South Carolina courts would. Surely, Olivier cannot have a legitimate interest in a forum based on the possibility that it will decide questions of foreign law erroneously.12 Indeed, his only legitimate interest is in the efficiency of obtaining relief if it is due, not in obtaining a more favorable holding on the substantive law. Burger King, 471 U.S. at 477, 105 S.Ct. at 2184.
Harking back to the second factor, which the majority ignores, Alabama, the forum state, possesses only a relatively minor interest in supplying the forum for this case. The underlying tort occurred and was reduced to judgment in Alabama, but all the parties to the tort action and the garnishment action (with the exception of the Alabama Insurance Guaranty Association) hail from outside Alabama.
Finally, the interstate judicial system’s interest in obtaining the most efficient resolution of controversies might weigh in favor of a finding of personal jurisdiction in this case because judicial resources might be saved if Olivier were not faced with the possibility of having to seek garnishment against AIGA, LIGA, and SCIGA in three different fora to obtain complete satisfaction of his covered claim. However, this judicial efficiency argument squarely depends on Olivier’s being unable to satisfy in full his allegedly covered claim against SCIGA.13 This contingent interest in judicial efficiency cannot justify an exercise of personal jurisdiction in light of Olivier’s insufficient showing on the other requirements of due process in the realm of personal jurisdiction.
For the foregoing reasons, I dissent.

. Indeed, this portion of the majority's reasoning smacks of the "stream of commerce" theory of minimum contacts that was rejected by a plurality of the Supreme Court in Asahi Metal Indus. v. Superior Court, 480 U.S. 102, 108-13, 107 S.Ct. 1026, 1030-33, 94 L.Ed.2d 92 (1987).

. In its discussion of fair play and substantial justice, the majority evidently refers to those contacts again when it asserts that LIGA and SCIGA engaged in “economic activity” in Alabama which had "effects" in Alabama. See ante at 1559. LIGA and SCIGA engaged in no economic activity of any sort in Alabama. Further, the only effect that actions by LIGA and SCIGA may have had in Alabama is their own liability for the judgment obtained against Merritt in Alabama, and that is not an "effect” relevant to personal jurisdiction. The majority does not, and cannot, point to any sort of reliance induced or any other kind of effect in Alabama. LIGA and SCIGA simply have had no meaningful impact on Alabama.

. In the remaining case, Keelean, there was no finding regarding the defendants’ collective motive behind providing the guaranty even though such a motive may legitimately be attributed to every private guarantor. Instead, the Alabama Supreme Court rested its holding, that the exercise of personal jurisdiction did not violate due process, on a flawed interpretation of Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). The Keelean court held that Calder established an " ‘effects test’ ” under which the exercise of personal jurisdiction is proper where the defendants should have foreseen the possible effect in the forum state in the event of a default on the guaranteed note. 544 So.2d at 157. However, the so-called 'effects test’ described in Calder is much narrower and is applicable to neither Keelean nor the case at bar. The Calder court held that where defendants allegedly commit the intentional tort of libel, "expressly aimed at” a plaintiff in the forum state, knowing that the libelous material will have its greatest distribution in the forum state, the exercise of personal jurisdiction is justified. 465 U.S. at 789-90, 104 S.Ct. at 1486-88. Thus, the Keelean case is inapposite.

. La.Rev.Stat.Ann. § 22:1380(A) (West Supp. 1991); S.C.Code Ann. § 38-31-40 (Law.Co-op. 1990).

. La.Rev.Stat.Ann. § 22:1376 (West 1978); see S.C.Code Ann. §§ 38-31-60(b), 60(b) (Law.Coop. 1990).

. La.Rev.Stat.Ann. § 22:1380(A) (West Supp. 1991); S.C.Code Ann. § 38-31-40 (Law.Co-op. 1990).

. La.Rev.Stat.Ann. §§ 22:1379(b)(6), 1382(A)(3)(a)(i) (West Supp.1991); S.C.Code Ann. § 38-31-20(9), 38-31-60(c)(iii) (Law.Coop.1990).

. La.Rev.Stat.Ann. § 22:1382(A)(3)(a)(i) (West Supp.1991); S.C.Code Ann. § 38 — 31—60(c)(iii) (Law.Co-op.1990).

. The Louisiana and South Carolina provisions are identical.

.Note that the majority erroneously considered this factor under the rubric of minimum contacts rather than reasonableness.

.The priority provisions dictate that Olivier should seek coverage first from SCIGA because the insured, Merritt, was a South Carolina resident. See La.Stat.Ann. § 22:1386(B) (West Supp.1991); S.C.Code Ann. § 38-31-100(2) (Law.Co-op.1990).

. Cf. Burger King, 471 U.S. at 483 n. 26, 105 S.Ct. at 2188 n. 26 (any conflict between state social policies should be resolved by choice of law principles; such conflict will not render an exercise of personal jurisdiction unreasonable).

. See supra note 11.