786 F.3d 1039
D.C. Cir.2015Background
- Validus Reinsurance, Ltd. is a Bermuda corporation that buys and sells reinsurance and conducts no U.S. business.
- Validus paid the 2006 excise tax under § 4371 on nine wholly foreign retrocessions purchased from foreign retrocessionaires.
- The district court granted Summary Judgment for Validus, holding § 4371(3) applies only to first-level reinsurance, not retrocessions.
- The government contends § 4371(3) reaches retrocessions as a broad reading of ‘covering’ reinsurance contracts.
- The statute § 4371(3) taxes premiums on reinsurance that covers contracts taxable under paragraphs (1) or (2); § 4372 defines ‘policy of reinsurance’ and the term ‘covering.’
- On appeal, the court held the text is ambiguous as to wholly foreign retrocessions and applied the presumption against extraterritoriality to resolve the ambiguity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §4371(3) apply to wholly foreign retrocessions? | Government argues broad reading taxes all reinsurance covering U.S.-based risks. | Validus argues retrocessions are not within taxable coverage under the text and structure. | Ambiguous; not plainly applicable to wholly foreign retrocessions. |
| Should extraterritoriality presumption govern interpretation of §4371 in this context? | Government contends text supports extraterritorial reach for retrocessions. | Validus contends extraterritorial application is not compelled by text or history. | Presumption against extraterritoriality controls; tax does not apply to wholly foreign retrocessions. |
Key Cases Cited
- Robinson v. Shell Oil Co., 519 U.S. 337 (1997) (plainness/ambiguity of statutory language informed by context)
- EEOC v. Arabian Am. Oil Co. (Aramco), 499 U.S. 244 (1991) (presumption against extraterritoriality)
- Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010) (presumption against extraterritoriality; clear indication required)
- Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013) (generic terms do not rebut presumption against extraterritoriality)
- United States v. Menasche, 348 U.S. 528 (1955) (statutory interpretation should give effect to every clause where possible)
- United States v. Northumberland Ins. Co., 521 F. Supp. 70 (D.N.J. 1981) (extraterritorial reach considerations under §4371)
- American Bankers Ins. Co. of Florida v. United States (American Bankers II), 388 F.2d 304 (5th Cir. 1968) (contextual comparison on extraterritorial application)