Allendale Mutual Insurance v. Bull Data Systems, Inc.

10 F.3d 425
CourtCourt of Appeals for the Seventh Circuit
DecidedNovember 9, 1993
DocketNo. 93-2389
StatusPublished
Cited by4 cases

This text of 10 F.3d 425 (Allendale Mutual Insurance v. Bull Data Systems, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Allendale Mutual Insurance v. Bull Data Systems, Inc., 10 F.3d 425 (7th Cir. 1993).

Opinion

POSNER, Chief Judge.

This appeal from the grant of a preliminary injunction in a $100 million dollar suit over insurance coverage raises difficult and important questions concerning the power of a federal district judge to enjoin a party before it from litigating a suit in a foreign country. There is also an esoteric jurisdictional question.

Groupe Bull is one of Europe’s largest manufacturers of computers and computer software. The parent company in the Groupe, Compagnie des Machines Bull (CMB), is a French corporation 90 percent of whose stock is owned by the French state. In 1989, CMB bought Zenith Data Systems (ZDS), the former microcomputer business of Zenith Electronics Corporation. In anticipation of this acquisition, CMB’s U.S. subsidiary, Bull Data Systems, Inc. (BDS), obtained from Allendale Mutual Insurance Company worldwide property insurance coverage for Groupe Bull. Allendale is a U.S. company and the insurance contract was negotiated and signed in the United States, having been obtained for BDS by an American broker, Alexander & Alexander.

After acquiring Zenith Data Systems, Groupe Bull decided to consolidate its European inventory of microcomputers in a leased warehouse in Seclin, France. BDS added the Seclin warehouse to the Allendale insurance policy as a specifically scheduled location. Later either it or Allendale decided it would be good to have an insurance policy governed by the French insurance code for the contents of the Seclin warehouse and of any other French locations at which Groupe Bull’s property was stored. So Allendale had Factory Mutual International (FMI), a British subsidiary of Allendale authorized to write French insurance policies, write a [427]*427French policy for the French locations; but it appears that all the negotiations for this policy were conducted between BDS and Al-lendale in the United States. The Allendale and FMI policies overlap, as the former provides worldwide coverage and was never rewritten to exclude French sites.

On June 15, 1991, a fire at the warehouse destroyed the huge inventory of microcomputers, valued by BDS (as we shall refer to the defendants collectively) at some $100 million. In August, BDS filed its claim of loss, under both policies, with Allendale and FMI. The next month, Allendale and FMI filed this lawsuit in the federal district court in Chicago. The suit asked for a declaration that the cause of the fire was arson committed by the insured, which was financially troubled, and hence that the damage from the fire was excluded from coverage; but that if this was wrong and the fire damage was covered, the insurer’s’ liability was limited to $48 million, the limit in FMI’s policy. BDS responded by filing its own suit in the district court, against Allendale and Alexander & Alexander (the broker) but not against FMI, and a suit in the Commercial Court of Lille, France, against FMI alone; under French law, that court may have exclusive jurisdiction over suits to enforce insurance policies governed by the French insurance code, although this is not entirely clear. Judge Ma-rovich consolidated the two U.S. suits (Allen-dale-FMI’s and BDS’s) and BDS filed counterclaims against Allendale, FMI, and Alexander & Alexander in the consolidated suit.

Meanwhile, in France, Allendale (and FMI — but we shall refer to the pair as “Al-lendale” except where their separate identities are relevant) had pressed for a criminal investigation of the fire. The matter had been assigned to an examining magistrate {juge d’instruction). Allendale asked the Commercial Court to stay its proceeding pending the completion of the criminal investigation, and that court agreed to do so, over BDS’s objection.

Discovery now began in the consolidated suit and proceeded on an expedited basis, generating hundreds of depositions and hundreds of thousands of documents. Most of the discovery requests were by Allendale and many of them were aimed at obtaining evidence of arson. In February 1993, with the district court suit moving rapidly toward trial, BDS unexpectedly filed a motion in the Commercial Court of Lille to lift the stay and proceed to trial in that court, even though the examining magistrate had not yet concluded her investigation. BDS argued that the investigation was on the verge of completion and that the examining magistrate would conclude that there had been no arson. The timing of the motion is still peculiar — if the end was so imminent, why not wait for it rather than speculate about it?' — and eight months later the investigation is still not over. Allendale asked Judge Marovich to issue a preliminary injunction against BDS’s litigating its case in the Commercial Court, the injunction to remain in effect until the consolidated suit in the district court eventuates in a final judgment. At that point,-Allendale intends to ask the judge, if it is a judgment favorable to Allendale, to make the injunction permanent. Apparently the motion to lift the stay remains pending before the Commercial Court of Lille and has not been acted upon.

Judge Marovich issued the preliminary injunction, precipitating this appeal. Before we consider its merits, we must satisfy ourselves that the district court had jurisdiction of the case. There is no problem with regard to the suit against the two Zenith entities. The Judicial Code, in 28 U.S.C. § 1330(a), confers federal jurisdiction over civil suits against foreign states as defined by the Foreign Sovereign Immunities Act, and the Act’s definition includes companies a majority of whose shares are owned by a foreign state. 28 U.S.C. § 1603(b)(2). But there is an exception for companies that are also citizens of a state of the United States, § 1603(b)(3), and BDS is a corporate citizen of Delaware and Illinois — so what is the basis for jurisdiction over it? The district court said diversity of citizenship, but this runs into the problem that one of the plaintiffs, FMI, is a foreign company, so that foreigners are on both sides of the litigation. We must consider whether this destroys the complete diversity of citizenship that is a prerequisite to maintaining a suit under the diversity [428]*428jurisdiction. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806); Fidelity & Deposit Co. v. City of Sheboygan Falls, 713 F.2d 1261, 1264-68 (7th Cir.1983). Many cases, such as Spearing v. National Iron Co., 770 F.2d 87, 90 (7th Cir.1985); Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 790 (2d Cir.1980), and IIT v. Vencap, Ltd., 519 F.2d 1001, 1015 (2d Cir.1975), state that the presence of foreign parties on both sides of a litigation indeed destroys complete diversity. Yet the statement is puzzling. The presence of citizens of different states on both sides of a lawsuit obviously does not destroy diversity; it is the precondition of diversity. So why should the presence of citizens of foreign states destroy diversity unless (as in Spearing) they are citizens of the same foreign state? The answer is found in the details of the statutory framework. The cases in which the statement appears are ones in which one side of the litigation had only

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10 F.3d 425, Counsel Stack Legal Research, https://law.counselstack.com/opinion/allendale-mutual-insurance-v-bull-data-systems-inc-ca7-1993.