On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civ. No. 95-00866) Honorable Gustave Diamond, District Judge
Before: Roth, Stapleton, and Greenberg,
The opinion of the court was delivered by: Greenberg, Circuit Judge
This matter comes on before this court on appeal from a summary judgment entered for the defendants and from orders denying motions to remand this insurance policy coverage case to the state court in which it had been initiated. This litigation, though not reaching trial, has been protracted and has followed complex underlying proceedings in other consolidated cases. Though, as will be seen, we summarily will resolve the substantive issue before us which we find not to be difficult, we nevertheless set forth the background of the case in some detail.
Appellants USX Corporation and Bessemer and Lake Erie Railroad Company ("B&LE"), its subsidiary at the times material to this action (together herein usually called "USX"), have sought indemnification from the approximately 50 appellees ("insurers") under umbrella liability insurance policies the insurers issued to USX.*fn1
These policies were developed for a program which USX initiated in the 1970s when, in consultation with its domestic insurance broker, Marsh & McLennan, it determined to obtain insurance for catastrophic liabilities. Ultimately USX obtained liability insurance in furtherance of this program covering seven periods from May 12, 1977, to April 1, 1983. From May 12, 1977, through December 1, 1979, the programs included between four and six layers of insurance providing $128.1 million to $151 million of coverage for liability imposed in excess of a $50 million selfinsured retention. From December 1, 1979, to April 1, 1983, the programs involved between six and seven layers of insurance providing between $275 million and $325 million of coverage in excess of a $25 million self-insured retention. The multi-layered umbrella policies included broad comprehensive coverage based on London umbrella insurance policies and provided:
Underwriters hereby agree, subject to the limitations, terms and conditions hereinafter mentioned, to indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability:
(a) imposed upon the Assured by law... for damages on account of:
(iii) Advertising Liability, caused by or arising out of each occurrence happening anywhere in the world.
Joint App. at 133.*fn2 The term "Personal Injuries" was defined as:
bodily injury... mental injury, mental anguish, shock, sickness, disease, disability, false arrest, false imprisonment, wrongful eviction, detention, malicious prosecution, discrimination, humiliation; also libel, slander or defamation of character or invasion of rights of privacy, except that which arises out of any advertising activities.
Joint App. at 135. The policies, however, excluded coverage for liability arising out of discrimination based on race, creed, color or national origin. "Advertising liability" included:
1) Libel, slander or defamation;
2) Any infringement of copyright or of title or of slogan;
3) Piracy or unfair competition or idea misappropriation under an implied contract;
4) Any invasion of right of privacy;
committed or alleged to have been committed in any advertisement, publicity article, broadcast or telecast and arising out of the Named Assured's advertising activities.
Joint App. at 135-36. The term "occurrence" was defined as:
an accident, or a happening, or an event, or a continuous or repeated exposure to conditions, which unexpectedly and unintentionally results in a personal injury, property damage or advertising liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.
In 1982, B&LE pleaded nolo contendere to an indictment in the United States District Court for the District of Columbia for a violation of the Sherman Antitrust Act, 15 U.S.C. § 1, for participating in a conspiracy in restraint of trade. The district court convicted and sentenced B&LE and on appeal the court of appeals affirmed. United States v. Bessemer & Lake Erie R.R. Co., 717 F.2d 593 (D.C. Cir. 1983). The criminal case was followed by massive civil litigation in which numerous entities involved in the lower Lake Erie iron ore transportation market (including five steel companies, three dock companies and three trucking companies) filed ten separate civil suits in various United States district courts against several railroads (including B&LE) which operated docks to receive iron ore and from which to transport the ore to inland steel mill locations. The complaints alleged that the railroads had agreed to restrain trade by denying or preventing the introduction of selfunloading vessels and by preventing non-railroad-owned docks and trucking firms from participating in the transportation of iron ore from the upper Great Lakes and Eastern Canada to discharge ports on the lower Great Lakes and the Detroit River.
The ten civil cases were consolidated and transferred to the United States District Court for the Eastern District of Pennsylvania in April 1984 and became known as MDL 587, the In re Lower Lake Erie Iron Ore Antitrust Litigation. The court tried MDL 587 in two phases, a liability phase followed by a damage phase. The jury in the liability phase rendered verdicts determining that B&LE had participated with the other railroads in a conspiracy to restrain trade in nine of the ten cases in violation of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2, and Ohio law. In eight of the cases, the jury awarded substantial damages for losses the MDL plaintiffs suffered, and thereafter the court entered final judgments reflecting trebled damages under the federal antitrust laws and double damages under Ohio law. According to USX, the district court entered final judgments totaling $638.5 million against B&LE which ultimately satisfied them by paying over $592 million. The cases against the defendants other than B&LE were settled or dismissed before or during the trial leaving it as the sole defendant. B&LE appealed to this court but on May 27, 1993, we affirmed the district court's judgment against it. In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1146 (3d Cir. 1993). B&LE filed a petition for certiorari but the Supreme Court denied it and thus the underlying litigation is over.
In particular certain of the facts related to the conspiracy are as follows. The railroads owned docks which used "huletts" or heavy cranes to unload ore from standard freighters ("bulkers") to railroad cars to be transported to inland steel mills. As technology advanced self-unloaders were developed that eliminated the need for huletts and made the railroads' unloading equipment obsolete. Furthermore, use of self-unloaders would have permitted unloading of ore at private docks the railroads did not own and would have made it possible for ore to be shipped inland in trucks rather than on railroad cars.
In the appeal in the civil antitrust suit we explained that the railroads accomplished the restraint of trade and delayed the introduction of self-unloaders:
[b]y charging the same rate for unloading a selfunloader as for unloading a bulker, by refusing to approve commodity line haul rates from private docks which would have handled self-unloaders, and by concertedly refusing to make dock property available for use by private docks....
In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d at 1168. The railroads charged tariffs that assessed the same dock handling service charges for self-unloading vessels as for conventional vessels, even though they provided much greater services for the conventional vessels. Moreover, the railroads charged certain shippers and competitors transportation rates from railroad-owned docks to steel mills that were much lower than the transportation rates available from private docks to the steel mills. Certain railroads also refused to sell or lease property for use as private iron ore docks.
The policies did not include the usual provisions providing for the insurers to defend the insured for claims within the policies, and in fact, the insurers did not defend B&LE in the In re Lower Lake Erie Litigation. USX, however, did seek indemnity from the insurers after the judgment against B&LE was entered. The insurers refused this demand and consequently on March 31, 1995, USX filed a coverage action in the Court of Common Pleas of Allegheny County, Pennsylvania, naming most of the insurers who had participated in its catastrophic liability insurance program from May 12, 1977, to April 1, 1983, as defendants. ICAROM plc ("ICAROM"), one of the named defendants and the successor to the Insurance Corporation of Ireland ("ICI"), removed that action to the United States District Court for the Western District of Pennsylvania on the grounds that it was an "agency or instrumentality of a foreign state" within the meaning of 28 U.S.C. § 1603 ("section 1603"), a provision of the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602 et seq. ("FSIA"), and thus could remove the action pursuant to 28 U.S.C. § 1441(d) ("section 1441(d)") which provides that a foreign state may remove a state court action to the district court. Section 1441(d) compliments 28 U.S.C. § 1330(a) which gives district courts jurisdiction over actions against foreign states as defined in section 1603(a). An "agency or instrumentality of a foreign state" is itself a foreign state within sections 1441(d) and 1603.
On May 18, 1995, USX voluntarily dismissed its first Common Pleas Court action without prejudice and initiated the current action in the same court by filing a complaint identical to its original complaint except that it excluded as defendants any entity that was an "agency or instrumentality of a foreign state" within the meaning of section 1603 and did not include ICAROM. Br. of Appellants at 6; Joint App. at 372. Three of the named insurers then filed separate third-party complaints joining ICAROM as a third-party defendant, asserting claims for contribution against it.
ICAROM reacted by again filing a notice of removal pursuant to section 1441(d), claiming that it was an agency or instrumentality of a foreign state within the meaning of section 1603. USX countered by filing a motion to remand the action to the state court on the ground that ICAROM was not an agency or instrumentality of a foreign state. By an order dated July 18, 1995, the district court stayed all proceedings, including discovery, pending disposition of the jurisdictional issue that USX raised by its motion to remand. The district court subsequently denied the motion to remand as well as USX's related motion to engage in jurisdictional ...