Pine Top Receivables of Illinois, LLC v. Banco De Seguros Del Estado
771 F.3d 980
7th Cir.2014Background
- Pine Top Receivables acquired receivables from the liquidator of Pine Top Insurance and sued Banco de Seguros del Estado (an instrumentality of Uruguay) for > $2.3M alleged under reinsurance treaties.
- Pine Top moved to strike Banco’s answer on the ground that Illinois law (215 ILCS 5/123(5)) requires unauthorized insurers to post pre-answer security; district court denied the motion.
- Banco asserted the Foreign Sovereign Immunities Act (FSIA) bars imposing prejudgment security on a foreign state instrumentality; district court agreed and found no waiver by Banco.
- Pine Top alternatively sought to compel arbitration under reinsurance treaties; the district court denied arbitration, holding Pine Top had not acquired the right to demand arbitration in the Purchase Agreement.
- Pine Top appealed two interlocutory orders: denial of motion to strike (collateral-order appeal) and denial of arbitration (appeal under FAA §16); the Seventh Circuit affirmed both orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Illinois pre-answer security is an “attachment” barred by FSIA §1609 | Prejudgment security is a jurisdictional device, not an attachment; thus §1609 doesn’t apply | FSIA’s attachment prohibition covers means that secure satisfaction of judgment (not just historical jurisdictional "attachments") | The security requirement is an “attachment” under FSIA and is barred absent an exception |
| Whether Banco waived FSIA immunity (28 U.S.C. §1610(d)) | Contract reserves clauses and transacting business in Illinois amount to waiver | No explicit waiver in contract; reserves differ from court-ordered security; transacting business isn’t an explicit waiver | No explicit waiver; §1610(d) requires clear, unambiguous pre-judgment-attachment waiver |
| Whether McCarran-Ferguson makes FSIA inapplicable to insurance (so state law governs) | McCarran-Ferguson precludes federal statute from impairing state insurance regulation, so FSIA should not displace Illinois security rule | FSIA governs foreign-state immunity; Pine Top failed to preserve McCarran-Ferguson argument below | Argument forfeited in district court; appellate court declines to decide on merits |
| Whether denial of motion to compel arbitration under the Panama Convention is immediately appealable under 9 U.S.C. §16 | Chapter 3 (Panama Convention) incorporates chapter 1 procedures via §307, so §16(a)(1)(B) applies | §16 refers to chapters 1 and 2 only; it does not explicitly reference chapter 3 | §307 permits residual application of chapter 1 procedures; §16(a)(1)(B) authorizes interlocutory appeal of denial to compel arbitration |
| Whether Purchase Agreement transferred the right to demand arbitration | Assignment language gives Pine Top “full authority” to enforce debts, which includes the arbitration right | Agreement transfers debts but not the policies or reciprocal contractual rights; arbitration clauses are creatures of the underlying policies and were not clearly assigned | The Purchase Agreement does not reasonably transfer the right to demand arbitration; arbitration denial affirmed |
Key Cases Cited
- Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (Sup. Ct. 1949) (collateral-order doctrine permitting immediate appeal of certain interlocutory orders)
- S&S Machinery Co. v. Masinexportimport, 706 F.2d 411 (2d Cir. 1983) (FSIA protection extends to injunctions and other devices that effectively attach property)
- Stephens v. National Distillers & Chemical Corp., 69 F.3d 1226 (2d Cir. 1995) (state pre-answer security requirement is equivalent to attachment for FSIA purposes)
- Argentina v. NML Capital, Ltd., 134 S. Ct. 2250 (Sup. Ct. 2014) (FSIA defenses must rest on statutory text)
- Mutual Marine Office, Inc. v. Banco de Seguros del Estado, 344 F.3d 255 (2d Cir. 2003) (contractual language may constitute explicit waiver of attachment immunity in arbitration context)
- Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271 (Sup. Ct. 1988) (background on FAA appellate-review regime)
- Jain v. de Méré, 51 F.3d 686 (7th Cir. 1995) (portion of FAA §4 may be applied via incorporation by chapter 2 when not in conflict)
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (Sup. Ct. 2009) (Supreme Court rejected overly restrictive readings of FAA §16)