ED AND FRED, INC., Plaintiff-Appellee, v. PURITAN MARINE INSURANCE UNDERWRITERS CORP. et al., Defendants, Mid Atlantic Insurance Company, Ltd., Defendant-Appellant

United States Court of Appeals for the Fifth Circuit1975-01-17No. No. 73-3884

506 F.2d 757

Summary · law.co

Holding. The judgment is vacated and remanded because although diversity jurisdiction was lacking, federal admiralty jurisdiction supported the district court's authority to hear the case; however, the trial court must determine which law applies to the agency authority question and make appropriate findings of fact on remand.

Ed and Fred, a Netherlands Antilles corporation, sued Puritan Marine Insurance Underwriters and Mid-Atlantic Insurance Company, Ltd., a Bermuda corporation, to recover on a marine insurance policy for a sunken barge. The trial court found it had diversity jurisdiction and ruled that Mid-Atlantic was liable based on actual or apparent authority granted to its agent Puritan. Mid-Atlantic appealed, arguing lack of jurisdiction and that Puritan had no authority to bind it for the full hull value.

The appellate court concluded that complete diversity did not exist because the plaintiff was an alien and one defendant was also a foreign entity, which normally would defeat diversity jurisdiction under the relevant statute. However, the court found that federal admiralty jurisdiction attached because the suit involved a maritime insurance contract. The court could not determine from the trial record which substantive law—federal, Massachusetts, or Florida—the trial judge had applied in deciding the agency authority question. Accordingly, the judgment was vacated and the case returned for the trial court to clarify the applicable law and make necessary factual findings under the proper legal standard.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether complete diversity jurisdiction exists when both plaintiff and one defendant are foreign entities
Whether federal admiralty jurisdiction provides an alternative basis for jurisdiction in marine insurance disputes
Which law (federal, state, or other) applies to agency authority in marine insurance contracts

Procedural posture

Mid-Atlantic appealed from a judgment finding it liable on a marine insurance policy, challenging both jurisdiction and the trial court's determination that its agent Puritan had authority to commit it.

Authorities cited

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Opinion · public domain

majority opinion

GEE, Circuit Judge:

Ed and Fred brought suit to collect on a policy of marine insurance covering the barge PUTNAM, sunk in the Atlantic in 1972. The defendants were Puritan Marine Insurance Underwriters and Mid-Atlantic Insurance Company, Ltd. Puritan took a default judgment; Mid-Atlantic was found liable on the policy on the basis of actual or, in the alternative, apparent authority given the agent Puritan. Mid-Atlantic appeals, contending that Puritan lacked any authority to commit Mid-Atlantic for the full value of the hull.

Although the trial court found diversity, we do not. Plaintiff Ed and Fred is incorporated under the laws of the Netherlands Antilles, with its sole place of business there. Mid-Atlantic is incorporated in and operates its business from Bermuda. Puritan is a Massachusetts corporation with its principal place of business in Boston. With the parties thus aligned, we have an alien suing a citizen of a state and another alien.

If applied to suits brought by aliens, the rule of complete diversity would divest the district court of Section 1332 jurisdiction. No provision of the diversity statute prevents application of the rule. 28 U.S.C. § 1332(a)(2) provides federal jurisdiction when a citizen of a state is sued or sues a foreign state, or its citizens or subjects. 28 U.S.C. § 1332(a)(3) applies only in a suit between citizens of different states with aliens as additional parties. While the rule of complete diversity is not of constitutional dimensions, State Farm Fire and Cas. Co. v. Tashire, 386 U.S. 523, 530-531, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967), the established judicial construction of the general diversity statute requires complete diversity. There is no indication — legislative or judicial- — that a deviation from the rule applied in ordinary diversity cases would or ought obtain in a suit brought by an alien. Ex parte Edelstein, 30 F.2d 636, 638 (2d Cir.), cert. denied, 279 U.S. 851, 49 S.Ct. 347, 73 L.Ed. 994 (1929); Lavan Petroleum Co. v. Underwriters at Lloyds, 334 F.Supp. 1069, 1071 (S.D.N.Y.1971); Karakatsanis v. Conquestador Cia. Nav., S.A., 247 F.Supp. 423, 426 (S.D.N.Y. 1965); Tsitsinakis v. Simpson, Spence & Young, 90 F.Supp. 578 (S.D.N.Y.1950). Cf. Romero v. Int’l Terminal Operating Co., 358 U.S. 354, 381, 79 S.Ct. 468, 3 L.Ed.2d 368 (1959).

Nevertheless, jurisdiction lies. Ed and Fred are suing on a policy of marine insurance, a maritime contract within federal admiralty jurisdiction. Kossick v. United Fruit Co., 365 U.S. 731, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961); Ins. Co. v. Dunham, 78 U.S. (11 Wall.) 1, 20 L.Ed. 90 (1870). It is not always clear whether courts are to apply federal or state law in marine insurance cases, at least insofar as the substantive terms of the policy are concerned; however, this is an issue which the trial court should have determined. We are unable on this record to discern whether the trial judge applied federal, Massachusetts or Florida law. Therefore, a remand is appropriate to determine which law should be applied and to make any additional findings of fact necessary to satisfy the elements of applicable agency law. Kincaid Cotton Co., Inc. v. Kesey Bros., 504 F.2d 976 at 978 (5th Cir., 1974).

Vacated and remanded.

. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806).

. Contrast Kossick v. United Fruit Co., 365 U.S. 731, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961) with Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337 (1955). See also, Irwin v. Eagle Star Ins. Co., 455 F.2d 827, 829 (5th Cir.), cert. denied, 409 U.S. 852, 93 S.Ct. 118, 34 L.Ed.2d 95 (1972).

. Without foreclosing the possibility that federal law may be applicable, we note that our circuit has at times applied state law to determine the authority of agents and brokers in marine insurance cases, albeit without discussion. Wisconsin Barge Line, Inc. v. Coastal Marine Transp., Inc., 414 F.2d 872 (5th Cir. 1969); Fireman’s Fund Ins. Co. v. Wilburn Boat Co., 300 F.2d 631, 641 n. 4 (5th Cir.), cert. denied, 370 U.S. 925, 82 S.Ct. 1562, 8 L.Ed.2d 505 (1962). Cf. Cateora v. British Atlantic Assurance, Ltd., of Nassau, 282 F.Supp. 167, 171 (S.D.Tex. 1968).

. There has been no suggestion in this case that the law of the Netherlands Antilles or Bermuda might apply.