The Liquidator of Midland Insurance Company moved to remand to state court a lawsuit asserted against Dunav Re to recover for claims billed to Dunav Re by Midland under certain reinsurance treaties. See Dinallo, Superintendent of Insurance of the State of New York, in his capacity as Liquidator of Midland Ins. Co. v. Dunav Ins. Co., No. 09-Civ-5575 (2009). Dunav Re had removed the action to the U.S. District Court for the Southern District of New York based upon the existence of diversity jurisdiction.
The reinsurance treaties contained a Service of Suit clause which applied to reinsurers domiciled outside of the U.S., such as Dunav Re. That clause provided that, in the event of a dispute concerning Dunav Re’s alleged failure to pay an amount due under the treaties, Dunav Re would, at the request of Midland, submit to the jurisdiction of any court of competent jurisdiction within the U.S. and comply with all requirements necessary to give such court jurisdiction.
In granting the Liquidator’s motion to remand, the court held that the Service of Suit clause operated as a waiver of Dunav Re’s right to remove the action to federal court, since it required Dunav Re to submit to the jurisdiction of any court within the U.S. that Midland chose. The court noted that this provision has been consistently enforced in this manner by federal circuit courts, including the U.S. Court of Appeals for the Second Circuit. Further, the court found that the fact that the reinsurance treaties also contained arbitration clauses did not render the Service of Suit clause ineffective, since Dunav Re removed the lawsuit under the general removal statute pursuant to diversity jurisdiction. Id. at 8 (distinguishing case law in which a federal court found that the insertion of an arbitration clause into reinsurance contracts created an ambiguity upon which courts have relied to enforce a party’s ability to remove an action pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and its implementing statute, the Federal Arbitration Act).
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