Lloyd's scores victory over US Names in fraud battle

Lloyd's of London, represented by US firm Fried Frank Harris Shriver & Jacobson, has won two significant victories in its battle with rebel US Names who are determined to sue the London re-insurance market for fraud in the US.

The Ninth Circuit Court of Appeals in San Francisco – which previously had been the only appeals court to support litigating Names on this issue – has decided to rehear its earlier decision.

A panel of three judges originally ruled by two votes to one to allow the Richards group of Names, which comprises several hundred, to litigate in the US.

Lloyd's claims that the contracts it has with Names prevents them suing in any place but the UK. The court will now hear the Richards case again en bank, which means that a panel of 11 judges will preside.

“This decision by the ninth circuit indicates that they did have some concern about the original panel's decision,” said Bob Mullen, Fried Frank Harris Shriver & Jacobson's London partner.

But their decision could still go either way, he stressed. They may want to strengthen the original panel's arguments, he said, to make them better stand up to any appeal by Lloyd's.

The other Lloyd's victory came at the end of last month, the Fifth Circuit Court of Appeals in New Orleans ruled that two other groups of Names, Leslie and Haynsworth, advised by Chicago firm McDermott Will & Emery, were not entitled to litigate in the US.

Two earlier separate district court hearings had reached conflicting conclusions, both of which had been appealed in the higher court.

Mullen said that in making their decision the appeal judges looked at the Richards decision in California and expressly rejected its findings.

However, both the Leslie and Haynsworth Names are likely to seek leave to appeal the Texas courts' decision to the Supreme Court in Washington.

Last June the Washington Supreme Court refused to allow another group, the Allen Names, to appeal the same issue from the Baltimore appeal courts (reported in The Lawyer 1 July).

The balance of court decisions on this issue across the US seems to be swinging towards Lloyd's. The New Orleans court is the sixth US court of appeal to find in favour of Lloyds.