Court Opinion

ID: 33783
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:08:55+00
Date Added: 2024-06-11T16:50:09.273627
License: Public Domain

United States Court of Appeals
                                                               Fifth Circuit
                                                            F I L E D
                     REVISED JANUARY 6, 2004
              IN THE UNITED STATES COURT OF APPEALS        December 29, 2003
                      FOR THE FIFTH CIRCUIT
                                                        Charles R. Fulbruge III
                                                                Clerk
                          No. 03-10185

THOMAS ROKEBY CONYNGHAN CORFIELD, ET AL.,

                                   Plaintiff-Appellee,

versus

DALLAS GLEN HILLS LP,

                                   Defendant-Appellant.

                      --------------------
          Appeal from the United States District Court
               for the Northern District of Texas
                      USDC No. 02-CV-01781
                      --------------------

Before GARWOOD and JONES, Circuit Judges, and ZAINEY, District
Judge*

ZAINEY, District Judge:

     In this declaratory judgment action, Plaintiff Liberty

Corporate Capital, Ltd. (“Liberty”) appeals from the district

court’s grant of Defendant Dallas Glen Hills LP’s (“DGH”) motion

to dismiss for lack of subject matter jurisdiction.    The appeal

presents an issue of first impression in our circuit regarding

how the citizenship of a Lloyd’s of London underwriter suing on

its own behalf is to be determined for diversity purposes.       The

district court concluded that the citizenship of every

underwriter subscribing to a Lloyd’s policy must be considered

     *
       District Judge of the Eastern District of Louisiana,
sitting by designation.
                            No. 03-10185
                                 -2-

when determining whether complete diversity exists.     We disagree

and therefore conclude that the district court erred in

dismissing the action.    Accordingly, we REVERSE and REMAND.

                  FACTUAL AND PROCEDURAL BACKGROUND

     In August 2000, DGH claimed an insured commercial property

loss on Lloyd’s of London policy CRCTX99-1128 (“the Policy”).

Liberty, acting through its wholly-owned subsidiary Liberty

Syndicate 190 (“Syndicate 190") assigned an adjuster to inspect

the property.    Liberty determined that the policy provided no

coverage for the claim.    The Policy has a $500,000.00 limit of

which Liberty insured 32.79 percent of the risk.1

     Thomas Rokeby Conynghan Corfield (“Corfield”), a British

subject and “active” underwriter for Syndicate 190, filed a

declaratory judgment action on his own behalf and as the

representative of Certain Underwriters at Lloyd’s, London

subscribing to the Policy seeking a declaration of the parties’

rights and obligations under the Policy.    Corfield alleged that

jurisdiction was based upon diversity of citizenship pursuant to

28 U.S.C. § 1332.2    However, Corfield’s complaint failed to

     1
       Liberty subscribed to a   percentage of risk greater than
that assumed by any other Name   subscribing to the Policy. Thus,
Liberty controls all decisions   with regard to claims made under
the Policy and the prosecution   or defense of lawsuits.
     2
         28 U.S.C. § 1332 provides in pertinent part:

          The district courts shall have original jurisdiction
     of all civil actions where the matter in controversy
     exceeds the sum of or value of $75,000, exclusive of
     interest or costs, and is between--
                             No. 03-10185
                                  -3-

allege DGH’s citizenship.    Corfield alleged only that DGH was a

Texas limited partnership.

     The district court issued an order noting that Corfield had

failed to properly allege DGH’s citizenship because the complaint

did not allege the citizenship of each of DGH’s partners.3

Moreover, the district court questioned whether Corfield had

properly pleaded his own citizenship given that he had brought

suit both on his own behalf and as the representative of the

other underwriters on the Policy.    Noting that the Seventh

Circuit considers the citizenship of every underwriter

subscribing to a Lloyd’s policy for diversity purposes, Indiana

Gas Co. v. Home Insurance Co., 141 F.3d 314, 319 (7th Cir. 1998),

the district court ordered Corfield to either plead his

citizenship in accordance with the Seventh Circuit’s approach or

submit a memorandum brief explaining why Corfield’s British

citizenship alone should control.

     In response to the district court’s order, Liberty replaced

Corfield as the named plaintiff and filed an amended complaint.

     . . .
          (2) citizens of a State and citizens or subjects of
     a foreign state;
          (3)   citizens of different States an in which
     citizens or subjects of a foreign state are additional
     parties . . . .

28 U.S.C. § 1332(a)(2), (3).
     3
       Because DGH is a limited partnership, it assumes the
citizenship of each of its partners. See Carden v. Arkoma
Assocs., 494 U.S. 185, 110 S. Ct. 1015, 108 L. Ed. 2d 157 (1990).
                             No. 03-10185
                                  -4-

Liberty, the lead underwriter on the Policy, is a British

corporation incorporated, domiciled, and with its principal place

of business in the United Kingdom.    As with Corfield, Liberty

alleged British citizenship and sought relief on its own behalf

and as the representative of all other underwriters subscribing

to the Policy.   Recognizing that the amended complaint did

nothing to allay the jurisdictional concerns raised by the

district court, Liberty amended its complaint a second time.      In

the second amended complaint Liberty sought relief on its own

behalf and as the lead underwriter of those underwriters

subscribing to the Policy.    Again, however, Liberty failed to

affirmatively allege DGH’s citizenship, instead alleging that

none of DGH’s partners were British citizens.

     The district court entered a second order, this time

threatening to dismiss the action without prejudice unless

Liberty amended its complaint to properly allege DGH’s

citizenship.   The district court agreed to defer consideration of

Liberty’s citizenship given the split in authority concerning how

the citizenship of a Lloyd’s underwriter is to be determined and

given that DGH had not yet moved to dismiss the case.    Liberty

amended its complaint once more to allege that all of DGH’s

partners were believed to be citizens of Texas, and that no

partner was a citizen of the United Kingdom.

     DGH moved to dismiss the case pursuant to Federal Rule of

Civil Procedure 12(b)(1) for lack of subject matter jurisdiction.
                            No. 03-10185
                                 -5-

DGH argued that for diversity purposes the district court must

consider the citizenship of every underwriter subscribing to a

Lloyd’s policy when determining if complete diversity is

satisfied.   DGH also asserted that at least one underwriter on

the Policy was a citizen of Texas as was at least one of DGH’s

partners.    Thus, DGH argued that complete diversity was lacking.

     Hoping to avoid dismissal, Liberty amended its complaint

once more.   This time Liberty alleged claims only on its own

behalf as the lead underwriter on the Policy.    Liberty deleted

all allegations that it was suing in any type of representative

capacity on behalf of the other underwriters.   Liberty also

alleged that all of DGH’s partners were either citizens of Texas,

Delaware, and New York.   The district court nevertheless

concluded that the citizenship of each underwriter subscribing to

the Policy must be considered for purposes of determining whether

complete diversity is satisfied.   Because DGH contended that at

least one underwriter was a citizen of Texas, the district court

concluded that the parties were not completely diverse.     The

district court therefore granted DGH’s motion to dismiss for lack

of subject matter jurisdiction. Liberty timely appealed.

                             DISCUSSION

A.   Standard of Review

     We review questions of law de novo.    Wilkerson v. United

States of America, 67 F.3d 112, 115 (5th Cir. 1995) (citing

Estate of Moore v. Comm’r, 53 F.3d 712, 714 (5th cir. 1995)).
                            No. 03-10185
                                 -6-

The district court’s dismissal for lack of subject matter

jurisdiction turned solely on the legal question of how to

determine the citizenship for a Lloyd’s of London underwriter who

sues only on its own behalf.    We therefore review the district

court’s dismissal for lack of subject matter jurisdiction de

novo.    Beall v. United States of America, 336 F.3d 419, 421 (5th

Cir. 2003).

B.   Principles of Jurisdiction

     The federal diversity statute provides that the district

courts have original jurisdiction over all civil actions where

the matter in controversy exceeds $75,000 and is between citizens

of a state and citizens or subjects of a foreign state.    28

U.S.C. § 1332(a)(2).    It is well-established that the diversity

statute requires "complete diversity" of citizenship:    A district

court cannot exercise diversity jurisdiction if one of the

plaintiffs shares the same state citizenship as any one of the

defendants.    Whalen v. Carter, 954 F.2d 1087, 1094 (5th Cir.

1992) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.

Ed. 435 (1806); Mas v. Perry, 489 F.2d 1396, 1398-99 (5th Cir.

1974).

     The “citizens” upon whose diversity a plaintiff grounds

jurisdiction must be real and substantial parties to the

controversy.    Navarro Savings Assoc. v. Lee, 446 U.S. 458, 460,

100 S. Ct. 1779, 1781-82, 64 L. Ed. 2d 425 (1980) (citing McNutt

v. Bland, 2 How. 9, 15, 11 L. Ed. 159 (1844); Marshall v.
                            No. 03-10185
                                 -7-

Baltimore & Ohio R. Co., 16 How. 314, 328-29, 14 L. Ed. 953

(1854); Coal Co. v. Blatchford, 11 Wall. 172, 177, 20 L. Ed. 179

(1871)).   Thus, a federal court must disregard nominal or formal

parties and rest jurisdiction only upon the citizenship of real

parties to the controversy.    Id. at 461, 100 S. Ct. at 1782.

     The sole issue presented in this case is whether complete

diversity requires that the court consider the citizenship of

every underwriter subscribing to a Lloyd’s of London policy when

the lead underwriter sues only on its own behalf.   The issue is

one of first impression in this circuit and several of our sister

circuits have reached different conclusions.   However, before

addressing the complex jurisdictional issues raised in this case,

a basic understanding of the organizational structure of Lloyd’s

of London and the unique characteristics of a typical Lloyd’s

insurance policy is necessary.

C.   Lloyd’s of London

     Lloyds of London is not an insurance company but rather a

self-regulating entity which operates and controls an insurance

market.    John M. Sylvester & Roberta D. Anderson, Is It Still

Possible To Litigate Against Lloyd’s in Federal Court?, 34 Tort &

Ins. L.J. 1065, 1068 (1999).   The Lloyd’s entity provides a

market for the buying and selling of insurance risk among its

members who collectively make up Lloyd’s.    Certain Interested

Underwriters at Lloyd’s, London v. Layne, 26 F.3d 39, 41 (6th

Cir. 1994) (citing Clifford Chance, Doing Business in the United
                            No. 03-10185
                                 -8-

Kingdom, §§ 46.02, 46-6 to 46-8 (Barbara Ford, A.D.M. Forte, &

Herbert Wallace eds. 1990); Eileen M. Dacey, The Structures of

the Lloyd’s Market, in Lloyd’s, the ILU, and the London Insurance

Market 1990, at 33, 49-0 (PLI Commercial Law & Practice Course

Handbook Series No. 555, 1990)).   Thus, a policyholder insures at

Lloyd’s but not with Lloyd’s.    Lee R. Russ & Thomas F. Segalla,

Couch on Insurance §39:47 (3d ed. 1995) (citing Bickelhaupt, D.,

General Insurance 775 (1983, 11th ed.)).

     The members or investors who collectively make up Lloyd’s

are called “Names” and they are the individuals and corporations

who finance the insurance market and ultimately insure risks.

Sylvester & Anderson, supra, at 1068.      Names are underwriters of

Lloyd’s insurance and they invest in a percentage of the policy

risk in the hope of making return on their investment.      Squibb,
160 F.3d at 929.    Lloyd’s requires Names to pay a membership fee,

keep certain deposits at Lloyd’s, and possess a certain degree of

financial wealth.    Chemical Leaman Tank Liners, Inc. v. Aetna

Cas. & Surety Co., 177 F.3d 210, 221 (3d Cir. 1999).     Each Name

is exposed to unlimited personal liability for his proportionate

share of the loss on a particular policy that the Name has

subscribed to as an underwriter.    Squibb, 160 F.3d at 929.

Typically hundreds of Names will subscribe to a single policy,

and the liability among the Names is several, not joint.       Id.

     Most Names or investors do not actively participate in the

insurance market on a day to day basis.      Layne, 29 F.3d at 42.
                              No. 03-10185
                                   -9-

Rather, the business of insuring risk at Lloyd’s is carried on by

groups of Names called “Syndicates.”      Id. at 41-42.    In order to

increase the efficiency of underwriting risks, a group of Names

will, for a given operating year, form a “Syndicate” which will

in turn subscribe to policies on behalf of all Names in the

Syndicate.     Squibb, 160 F.3d at 929; Chemical Leaman, 177 F.3d at

221.    A typical Lloyd’s policy has multiple Syndicates which

collectively are responsible for 100 percent of the coverage

provided by a policy.    Sylvester & Anderson, supra, at 1068.       The

Syndicates themselves have been said to have no independent legal

identity.    Id.   Thus, a Syndicate is a creature of administrative

convenience through which individual investors can subscribe to a

Lloyd’s policy.    A Syndicate bears no liability for the risk on a

Lloyd’s policy.    Rather, all liability is born by the individual

Names who belong to the various Syndicates that have subscribed

to a policy.

       Each Syndicate appoints a managing agent who is responsible

for the underwriting and management of each Name’s investments.

Chemical Leaman, 177 F.3d at 221.     The managing agent receives

this authority through contracts with each Name.         Id.   The

managing agent, which is typically a legal entity, appoints one

of its employees to serve as the “active” underwriter for the

Syndicate.     Id. at 222.   The active underwriter selects the risks

that the Names in the syndicate will underwrite and has the

authority to bind all Names in the Syndicate.      Id.     The active
                           No. 03-10185
                               -10-

underwriter has the authority to buy and sell insurance risks on

behalf of all Names in the syndicate, and to bind the Syndicate

members in these transactions.   Layne, 26 F.3d at 42.

     In practice, since many Names through their respective

Syndicates are liable on a Lloyd’s policy, the active underwriter

from one of the underwriting Syndicates is designated as the

representative of all the Names on the policy.     Squibb, 160 F.3d

at 929.   This single underwriter, called the “lead” underwriter

on the policy, is usually the only Name disclosed on the policy

with all other Names remaining anonymous.    Id.   The lead

underwriter is typically the first to subscribe to the policy and

typically assumes the greatest amount of risk.     The Lloyd’s

corporate entity maintains records on the identity and last known

residence of Names insuring risk in the Lloyd’s market.       That

information is kept strictly confidential.

     In sum, while an insured receives a Lloyd’s “policy” of

insurance, what he has in fact received are numerous contractual

commitments from each Name who has agreed to subscribe to the

risk.   The Names are jointly and severally obligated to the

insured for the percentage of the risk each has agreed to assume.

The insured does not have to sue each Name individually however

to collect on their individual promises because the typical

Lloyd’s policy contains a clause providing that “any [Name] can

appear as representative of all [Names].”    Id.   Thus, when

litigation ensues over a Lloyd’s policy, the only named Lloyd’s
                             No. 03-10185
                                 -11-

party appearing in the litigation is usually the lead underwriter

on the policy.   Id.   The standard Lloyd’s policy states “that in

any suit instituted against any one of [the Names] upon this

contract, [all the Names] will abide by the final decision of

such Court or of any Appellate Court in the event of an appeal.”4

Id.   Thus, each Name is contractually bound on an individual

basis to the insured to adhere to any adverse judgment reached in

the suit notwithstanding that only one Name participates in the

litigation as a named party.    Thus, a Syndicate, being only a

grouping of Names, has no contractual relationship with the

insured.

      In the instant case, Syndicate 190 is a single-Name

Syndicate with Liberty as its sole Name and underwriting member.

Liberty is the lead underwriter on the Policy and insures 32.79

percent of the risk which is more than the risk insured by any

other Name on the Policy.5    Liberty is a British corporation with

its principal place of business in the United Kingdom.    Thus, if

only Liberty’s citizenship is relevant for jurisdictional

purposes, then the parties are completely diverse because DGH is

a citizen of Texas, Delaware, and New York.    If, however, the

      4
       The policy at issue in this litigation is not part of the
record. However, Liberty submitted an affidavit in response to
DGH’s motion to dismiss. In its affidavit, Liberty asserts that
DGH’s policy contains the standard Lloyd’s language and
provisions regarding the Names’ willingness to be bound by a
judgment against any other Name.
      5
       Liberty’s potential liability on the Policy is at least
$163,950.00.
                           No. 03-10185
                               -12-

citizenship of every Name subscribing to the Policy is relevant

for jurisdictional purposes, then the district court’s dismissal

was proper as Liberty has not alleged the citizenship of all

Names subscribing to the policy, and at least one Name is

believed to be a citizen of Texas.

D.   Law and Analysis

     Several of our sister circuit courts have addressed the

Lloyd’s citizenship conundrum and have reached differing results

based upon differing reasoning.    In Certain Interested

Underwriters at Lloyd's, London v. Layne, 26 F.3d 39 (6th Cir.

1994), Lloyd's had brought a declaratory judgment action seeking

to deny coverage under a policy.   Defendants were Tennessee

citizens and the plaintiff Lloyd’s underwriters were citizens of

Great Britain.   Defendants, who sought to vacate an adverse

judgment, argued that the plaintiff-underwriters were really

agents or representatives of the subscribing Syndicates.    Thus,

Defendants argued that the court should have looked to the

citizenship of the subscribing Syndicates in order to determine

whether the parties were completely diverse.   Analogizing a

Lloyd's Syndicate to an unincorporated association, defendants

argued that a Lloyd's Syndicate has the citizenship of every Name

in the Syndicate.

     The Sixth Circuit began its analysis with the "real party to

the controversy test."   Id. at 42 (citing Carden, 494 U.S. at 187

n.1; Wright, Federal Practice & Proc. § 1556 (2d ed. 1990)).
                           No. 03-10185
                               -13-

Under this test, if one of the "nondiverse" parties is not a real

party in interest, and is purely a formal or nominal party, his

presence may be ignored when determining jurisdiction.     Id.

(citing Salem Trust Co. v. Manuf. Fin. Co., 264 U.S. 182 (1924)).

Noting that Federal Rule of Civil Procedure 17(a) requires that

every action be prosecuted in the name of the "real party in

interest," the court   stated that the "real party in interest

analysis turns upon whether the substantive law creating the

right being sued upon affords the party bringing the suit a

substantive right to relief.     Id. at 43 (citing Swanson v.

Bixler, 750 F.2d 810, 813 (10th Cir. 1984); American Nat'l Bank &

Trust Co. v. Weyerhaeuser Co., 692 F.2d 455, 459-60 (7th Cir.

1982); Wright, supra, § 1544 at 340).     The Sixth Circuit, citing

Erie Railroad v. Tompkins, 304 U.S. 64 (1938), concluded that

Tennessee law should apply to determine whether the plaintiff-

underwriters had a substantive right to relief.     Id.

      Applying Tennessee law, the Sixth Circuit concluded that the

plaintiff-underwriters were liable on the contract because they

had functioned as agents for undisclosed principals (the

Syndicates).   Because under Tennessee law an agent for an

undisclosed principal is personally liable on a contract, the

underwriters were found to be real parties in interest.      Id. at

43.   Further, under Tennessee law, once the agent is sued, the

principal is no longer liable.    Thus, once the agent

(underwriter) became the party sued, the principal (Syndicates)
                            No. 03-10185
                                -14-

had no further interest in the case.     Id.   Given that the

Syndicates had no interest in the case after the underwriter was

sued, they were not real parties to the controversy and their

citizenship could be ignored.    Id.   Accordingly, the court looked

only to the citizenship of the plaintiff-underwriters when

determining whether complete diversity existed.

     Four years later, the Seventh Circuit decided Indiana Gas

Co. v. Home Insurance Co., 141 F.3d 314 (7th Cir. 1998).        Indiana

Gas sued its insurers for indemnity on environmental cleanup

costs.   While the case was on appeal, the parties informed the

court that at least one subscribing Name on the Lloyd’s policy

was a citizen of Indiana--the same state of citizenship as the

plaintiff Indiana Gas.   The Seventh Circuit focused its analysis

on the Syndicates as the appropriate entities to either sue or be

sued on a Lloyd’s policy.   Concluding that a Syndicate had all

the characteristics of a limited partnership, the court concluded

that a Syndicate has the citizenship of every Name belonging to

the Syndicate just as a partnership has the citizenship of every

partner.   Id. at 317.   The court noted that this rule applied to

partnerships regardless of whether partners were named in the

lawsuit.   Id. at 317.   The Seventh Circuit interpreted Carden v.

Arkoma Associates, 494 U.S. 185 (1990), as articulating a general

rule that every association other than a corporation must be

treated like a partnership for citizenship purposes.      Id.    Thus,

according to the Seventh Circuit, the Syndicates must be treated
                           No. 03-10185
                               -15-

as entities and the citizenship of every subscribing Name must be

considered when determining a Syndicate’s citizenship.      Just as a

plaintiff cannot ignore non-diverse partners to save

jurisdiction, a plaintiff cannot ignore or dismiss non-diverse

Names in a Syndicate.   Id. at 317.

     In reaching its conclusion, the Seventh Circuit rejected

every aspect of Layne, concluding that the Sixth Circuit had

failed to factor in that liability vel non on a contract does not

control the citizenship inquiry.      Id. at 319.   For instance,

limited partners cannot be sued and are not liable for a

partnership’s acts yet their citizenship cannot be ignored.         Id.

According to Indiana Gas, the underwriting Syndicates must be

treated like partnerships when determining citizenship.       Id.

Thus, pursuant to Carden, the citizenship of every Name on the

policy must be considered when determining whether diversity is

complete.

     Later that same year, the Second Circuit decided E.R. Squibb

& Sons, Inc. v. Accident & Casualty Insurance Co., 160 F.3d 925

(2d Cir. 1998) ("Squibb I").   In Squibb I, a coverage dispute

against Lloyd's had been pending in the district court for nearly

sixteen years and had culminated in a jury verdict favorable to

Squibb.   When the case finally hit the appellate court, the

Second Circuit sua sponte questioned whether diversity was

complete because the lead underwriter had been sued as a

representative of all underwriters who had subscribed to the
                            No. 03-10185
                                -16-

policy.   Id. at 928.   The Second Circuit rejected the Layne

court's analysis and agreed with Indiana Gas in so far as the

Seventh Circuit had concluded that a lead underwriter sued in a

representative capacity must reflect the citizenship of every

Name subscribing to the policy.     Id. at 939-40.    After all,

“federal courts must look to the individuals being represented

rather than their collective representative to determine whether

diversity of citizenship exists.”     Squibb I, 160 F.3d at 931

(citing Northern Trust Co. v. Bunge Corp., 899 F.2d 591, 594 (7th

Cir. 1990)).   Because the underwriter was sued as representative,

and because the record failed to reflect the citizenship of all

Names, subject matter jurisdiction was questionable.

     However, the Second Circuit went beyond Indiana Gas and

surmised that the jurisdictional problems surrounding Lloyd’s

grew only out of the lead underwriter’s decision to sue in a

representative capacity.   In other words, the Squibb I court

postulated that where the lead underwriter sues or is sued only

in his individual capacity, the existence of jurisdiction depends

solely on the lead underwriter’s citizenship.        Id. at 936.   It

would not depend on the status of the other Names who, though

members of the Syndicates at risk, would not be direct parties to

the litigation.   Id.   The Second Circuit rejected the notion that

the non-party Names’ citizenship would have to be considered

simply because they too would be bound by whatever judgment is

rendered against the only Name sued.     Id.   The Second Circuit
                            No. 03-10185
                                -17-

reasoned that a federal court does not lose jurisdiction simply

because a non-diverse non-party is contractually bound to

indemnify the diverse parties.    Id.   As long as the party being

sued is a real party to the controversy, the fact that the case

will determine the rights of non-diverse litigants through

collateral estoppel or preclusion does not affect jurisdiction.

Id.   Because the lead underwriter is severally liable on the

policy, he is a real party to the controversy.     Id. at 937.

Thus, where he appears in the litigation solely on an individual

basis, only his citizenship need be considered.     Id.

      The Squibb I court also found that the Supreme Court’s

Carden decision was not an impediment.     Because Carden applies

only to formal entities created under state law, it does not

apply in a Lloyd’s context where no formal entity is a party to

the suit.   Id. at 937.   The Squibb I court was unconvinced that

Syndicates are formal entities because “[t]he contractual

provision that obligates a Name to abide by the judgment rendered

against any other Name runs vertically between the insured and

each Name, not horizontally from Name to Name.”    Thus, a Lloyds

policy taken as a whole is really “a series of independent

bilateral contracts from insurer to insured.”     Id.    The Names are

bound in contract to the insured and not to each other and a

Syndicate bears no liability.    See id.   Therefore, taken as a

whole, a Syndicate does not constitute an entity.       Id.   Rather

than render its decision, the Second Circuit concluded that the
                               No. 03-10185
                                   -18-

case should be remanded to the district court for a determination

in the first instance of whether British law and the policy in

dispute would allow a suit to proceed against a Name individually

and whether the non-party names could be dismissed as dispensable

parties.       Id. at 936-37, 940.

     On remand, the district court concluded that British law and

the contracts at issue would permit the suit to proceed against a

Name in his individual capacity.      E.R. Squibb & Sons, Inc. v.

Accident & Cas. Ins. Co., No. 82 Civ. 7327JSM, 1999 WL 350857, at

*5 (S.D.N.Y. June 2, 1999), aff’d, 241 F.3d 154 (2d Cir. 2001).

The court went on to conclude that the other Names were

dispensable parties under Rule 19(b) because all Names were

contractually bound by the policies and by the rules of Lloyd’s

to abide by any judgment rendered against the lead underwriter.

Id. at *13.      Thus, dismissing the representative claims against

the lead underwriter would have no practical effect on any other

Name.    Id.    Because the citizenship of the lone underwriter was

diverse from every other opposing party, diversity jurisdiction

was met.6      The Second Circuit ultimately affirmed.   E.R. Squibb &

Sons, Inc. v. Lloyd’s & Cos., 241 F.3d 154 (2d Cir. 2001)

(“Squibb II”).

     Between Squibb I and Squibb II, the Third Circuit decided

     6
       The court also noted that the claim against the individual
Name met the amount in controversy requirement. See Squibb, 1999
WL 350857, at *5.
                               No. 03-10185
                                   -19-

Chemical Leaman Tank Lines, Inc. v. Aetna Casualty & Surety Co.,

and held that the citizenship of the underwriter sued on the

policy is the only citizenship relevant for diversity purposes.
177 F.3d at 223.   The insured had sued “Certain Underwriters at

Lloyd’s, London subscribing to Insurance Policies [specifically

enumerated].”    Id. at 216.    The parties later stipulated to an

amended complaint in which one of the individual underwriters “on

behalf of himself and all other Underwriters at Lloyd’s, London,

subscribing to [specifically enumerated policies]” substituted

for “Certain Underwriters.”      The parties also stipulated that any

final judgment for or against the sole party underwriter would be

binding on those underwriters subscribing to the enumerated

policies.7   Prior to the entry of final judgment, the parties

brought to the court’s attention a decision rendered by another

court in the same district in which the district court held that

the citizenship of all underwriters on a Lloyd’s policy had to be

taken into account in determining diversity jurisdiction,

Lowsley-Williams v. North River Ins. Co., 884 F. Supp. 166

(D.N.J. 1995).   No party, however, challenged jurisdiction and

the court proceeded to enter final judgment.

     On appeal, the Third Circuit, without reference to any other

circuit court decision, held that the citizenship of the

     7
       The Third Circuit did not mention the contractual
provision typically contained in a Lloyd’s policy in which each
Name agrees to abide by a judgment rendered against any other
Name.
                               No. 03-10185
                                   -20-

underwriter sued on the policy was the only citizenship relevant

for diversity purposes. 177 F.3d at 223.   Although the amended

complaint alleged that the underwriter was there individually as

well as in a representative capacity, the Third Circuit concluded

that the claim was really only one against the named underwriter

individually.    Id. at 222.    The court reasoned that the plaintiff

had not brought suit against the underwriter as an agent of the

other underwriters or against the Syndicates of which they were

members or against the underwriter as agent for his Syndicate.

Id. at 222 & n.14.     The court also noted that the Names shared no

common liability, each being liable only for the share of the

risk each had assumed.      Id. at 222.   Moreover, the district court

had not certified a defendant class of underwriters, which

according to the Third Circuit, would have been the only way that

the underwriter could have truly been sued in a representative

capacity.    See id.   Thus, the claim against the underwriter was

one against him individually.      And because each Name was liable

only for his share of the risk, and because joint and several

obligors are not necessary defendants under Rule 19(a), plaintiff

was entitled to sue less than all of the Names.       Id. at 223 n.16.

     Further, the Third Circuit concluded that the parties’

stipulation that the judgment against the named underwriter would

bind all others did nothing to affect jurisdiction because the

stipulation did not place any of those other underwriters before

the court.    Id. at 223.   Moreover, the named underwriter was not
                             No. 03-10185
                                 -21-

a party sued only to manufacture jurisdiction because the named

underwriter was a Name who had subscribed to the policy thereby

giving the plaintiff a valid claim against him.       See id. n.16.

Because the named underwriter was the only underwriter named in

the complaint, only his citizenship was relevant to the exercise

of diversity jurisdiction.    Id. at 223.

     In the current posture of the instant case, Liberty is suing

only in its individual capacity as lead underwriter on the

Policy.   Thus, Liberty’s case is presented to us in the exact

procedural posture suggested by the Second Circuit in Squibb I

and ultimately approved by the Second Circuit in Squibb II.         We

find the Second Circuit’s approach to be based upon sound

reasoning.

     At the outset, Liberty is without question a real and

substantial party to the controversy.       Aetna Cas. & Surety Co. v.

Iso-Tex, Inc., 75 F.3d 216, 218 (5th Cir. 1996) (citing Navarro

Savings Ass’n, 446 U.S. at 460, 100 S. Ct. at 1781). Liberty is a

subscribing Name on the Policy and is therefore directly bound

via contract to DGH, the insured.    Liberty’s personal stake in

the outcome is approximately $163,950.00.      Therefore, this is not

the situation where an agent with no personal stake in the

controversy attempts to sue on behalf of his non-diverse

principal in order to create diversity.      Chemical Leaman, 177
F.3d at 223 n.16; see Navarro Savings, 446 U.S. at 465, 100 S.
                           No. 03-10185
                               -22-

Ct. at 1784.   Liberty faces actual liability for the risk it

assumed and therefore is a real party to the controversy.8

     Moreover, pretermitting the Lloyd’s issue, the district

court would have diversity jurisdiction over Liberty’s individual

claim against DGH.   Liberty is a British citizen and DGH is a

citizen of Texas, Delaware, and New York.    Thus, Liberty and DGH

are completely diverse in citizenship.    Further, Liberty’s

potential liability on the Policy is $163,950.00, a sum well in

excess of the jurisdictional amount.

     Given that Liberty is a real party to the controversy and

that the district court would have jurisdiction over Liberty’s

individual claim, the next logical question is whether a Name on

a Lloyd’s policy can be sued individually by an insured.9      In

Indiana Gas, the Seventh Circuit answered that question in the

negative but we find no legal support for such a conclusion--a

conclusion reached without discussion, analysis, or citation to

     8
       It is unclear from the record whether Corfield, the
original plaintiff, was a real party to the controversy.
Although Corfield is referred to as the active underwriter for
Syndicate 190, Liberty is the sole Name in Syndicate 190. Thus,
Corfield might very well have had no personal stake in the
litigation.
     Given that this matter is before us solely on the diversity
jurisdiction issue, this Court expresses no opinion as to whether
Liberty’s declaratory judgment action presents a justiciable
controversy between the parties.
     9
       Neither party briefed whether an insured can sue a Name
individually. As previously noted, this is a declaratory
judgment action brought by Liberty against the insured. Thus
although the Court’s analysis is often structured in terms of an
insured suing on a Lloyd’s policy, all principles should apply
equally to a declaratory judgment action brought by the insurer
against the insured. Neither party has suggested otherwise.
                           No. 03-10185
                               -23-

legal authority.   As the district court in Squibb observed, “[i]t

would be a strange law indeed that would hold that an individual,

who had so clearly bound himself individually by contract, could

not be sued individually to enforce that contractual obligation.”

Squibb, 1999 WL 350857, at *5.   Indeed, the very essence of a

Lloyd’s policy is that it is a collection of individual contracts

running between the insured and each Name.   Moreover, the

estoppel provision contained in every Lloyd’s policy, i.e., that

each Name will abide by a judgment rendered against any other

Name, would not be necessary if litigation were always required

to proceed against an underwriter in a representative capacity.

     The severability of each Name’s liability to the insured

lends further support to the conclusion that a Name can be sued

individually.   As discussed above, a Lloyd’s policy is actually a

collection of many bilateral contracts running between the

insured and each Name.   The Names contract directly with the

insured and each Name contracts independently of any other Name.

Because each Name’s liability is several, Liberty’s obligation to

DGH is independent of any other Name’s obligation to the insured.

Simple logic allows for no other conclusion but that an insured

can sue a Name individually.

     Having determined that an insured can sue a Name

individually, it does not follow that the citizenship of the

remaining Names on the Policy who are not parties to the case and

are not before the court is relevant to determining whether the
                           No. 03-10185
                               -24-

parties are completely diverse.   The fact that the Names’

contracts with the insured and the rules of Lloyd’s are

structured such that the other Names are affected by the judgment

against a single Name does not bring those other parties before

the court or make them relevant for the citizenship

determination.   Squibb I, 160 F.3d at 936-37; Plains Growers,

Inc. v. Ickes-Braun Glasshouses, Inc., 474 F.2d 250, 252 (5th

Cir. 1973) (“The citizenship of one who has an interest in the

lawsuit but who has not been made a party to the lawsuit . . .

cannot be used . . . to defeat diversity jurisdiction.”);

Chemical Leaman, 177 F.3d at 223.   The fact that other parties

are bound by a judgment against one obligor or forced to

indemnify an obligor is insufficient to bring their citizenship

into consideration when they are not parties to the suit.    Squibb

I, 160 F.3d at 936 (citing Wheeler v. City of Denver, 229 U.S.
342, 33 S. Ct. 842, 57 L. Ed. 1219 (1913)).10

     We reached a similar result in Aetna Casualty & Surety Co.

v. Iso-Tex, Inc., 75 F.3d 216 (5th Cir. 1996).   In Aetna

Casualty, Aetna was one of many members of an unincorporated

     10
       The “real party to the controversy” test does not require
a federal court to consider the citizenship of non-parties who
have an interest in the litigation or might be affected by the
judgment. The “real party to the controversy” test requires
consideration of the citizenship of non-parties when a party
already before the court is found to be a non-stake holder/agent
suing only on behalf of another. See Navarro Savings, 446 U.S.
458, 100 S. Ct. 1779.; see also Carden, 494 U.S. at 188 n.1, 110
S. Ct. 1018 n.1 (rejecting application of the real party to the
controversy test for determining the citizenship of a limited
partnership).
                            No. 03-10185
                                -25-

insurance association that insured the risk st issue.     Aetna

brought a declaratory judgment action against the insured “as a

member of [the association] . . . for itself and all other

members of such association.”    Id. at 218.   While Aetna was

diverse from the all defendants, other members of the association

were not of diverse citizenship.    We held that complete diversity

was satisfied because neither the association nor the other

members were parties to the suit.     Id.   We found Aetna’s status

as a representative to be no impediment to jurisdiction because

Aetna’s position was analogous to that of a class representative

under Federal Rule of Civil Procedure 23.2.     Under Rule 23.2 the

citizenship of unnamed class members is disregarded.      Id. (citing

Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356, 364-66, 41 S.

Ct. 338, 341-42, 65 L. Ed. 673 (1921); Calagaz v. Calhoon, 309
F.2d 248 (5th Cir. 1962)).11    Because Aetna was potentially

liable for its share of the risk, it was a “real and substantial”

party to the controversy.   Because Aetna was diverse from all

defendants, the Court had jurisdiction over Aetna’s claim without

regard to the citizenship of any non-parties.

     The Supreme Court’s decision in Carden v. Arkoma Associates

does not require a contrary result.    In Carden, the Supreme Court

held that the citizenship of every partner in a limited

partnership must be considered for diversity purposes.     494 U.S.
11
       Of course in the instant case, Liberty is suing only on
behalf of itself having dropped all allegations that it intends
to sue as a representative of the other subscribing Names.
                            No. 03-10185
                                -26-

at 195-96, 110 S. Ct. at 1021.   In so holding, the Supreme Court

clarified that every artificial entity, other than a corporation,

takes its citizenship from all of the members comprising the

entity.   Id.   DGH argues that Carden compels the conclusion that

every Name in a Syndicate must be considered because a Syndicate

is an artificial entity.   Assuming arguendo that a Syndicate is

an artificial entity, a conclusion in and of itself open to

debate, see Squibb I, 160 F.3d at 929; Chemical Leaman, 177 F.3d

at 221, the citizenship of the Syndicates is of no relevance

because they play no role in litigation over a Lloyd’s policy.

It is well-settled that Syndicates are not liable on Lloyd’s

policies--only individual Names are liable even though they

subscribe to risks via Syndicates.   The insured has no

contractual relationship with a Syndicate because Syndicates do

not insure risks.   Thus, an insured has no claim against a

Syndicate for coverage under a Lloyd’s policy.   While Carden

might apply if the citizenship of the Syndicates were relevant,

it does not apply to make the citizenship of the other non-party

Names, who are not members of an entity currently before the

court, relevant to diversity jurisdiction.

     DGH’s reliance on Royal Insurance Co. v. Quinn-L Capital

Corp., 3 F.3d 877 (5th Cir 1993), is likewise misplaced.    In

Royal we held that the citizenship of an attorney in fact through

whom a group of underwriters acts to issue insurance is

irrelevant for jurisdictional purposes.    Id. at 882-83.   The
                           No. 03-10185
                               -27-

plaintiff was a Lloyd’s-type plan organized under Texas law.

Under Texas law such plans are unincorporated associations.

Because the association itself was a party to the suit, we

naturally concluded that the citizenship of each underwriter had

to be considered for diversity purposes.   Id. at 883.     The

citizenship of the association’s attorney-in-fact was irrelevant

because he was not a member of the association.   Given that Royal

dealt with the citizenship of an association as a party, Royal

has no bearing on whether the citizenship of all Names on a

Lloyd’s of London policy must be considered when an underwriter

is sued individually.

     In sum, the district court had subject matter jurisdiction

over this claim because DGH is alleged to be a citizen of Texas,

Delaware, and New York, and Liberty is alleged to be a citizen of

the United Kingdom.   Liberty’s 32.79 percent of risk is

approximately $163,950.00, an amount well in excess of the

jurisdictional amount.   The other subscribing Names are not

parties before the Court and their citizenship need not be

considered when determining whether the parties are completely

diverse.   Thus, the district court erred in dismissing the action

for lack of subject matter jurisdiction.

REVERSED AND REMANDED.