enlarge that jurisdiction; and the Act . . . authorizing this Court to prescribe rules of procedure in civil actions gave it no authority to modify, abridge or enlarge the substantive rights of litigants or to enlarge or diminish the jurisdiction of federal courts.
United States v. Sherwood, 312 U.S. 584, 589-590, 85 L. Ed. 1058, 61 S. Ct. 767, (1941). The syndicates submit that if Rule 17(b) were construed to create a legal entity, the court would be performing a legislative rather than a judicial function. That argument has merit.
The plaintiffs acknowledge that if the issue of legal existence is a substantive proposition, Rule 17(b) could not control it. The plaintiffs, however, take the position, without citing any authority, that the question of legal existence is procedural, not substantive. While the authority on the point is slim -- perhaps because the answer to the question is obvious --, it favors the syndicates' position. For example, in his discussion of the subject in Busby v. Electric Utilities Employees Union, 323 U.S. 72, 76-77, 89 L. Ed. 78, 65 S. Ct. 142, (1944) (concurring), Justice Frankfurter distinguishes between "suability" and "status" and characterizes "suability" as a "procedural matter" and "determination of status" as a "substantive issue." Id.
C. Plaintiffs' miscellaneous contentions
In a number of cases in the United States, syndicates have been sued and been treated as legal entities, and some syndicates have themselves sued or asserted counterclaims. Plaintiffs argue that such actions and determinations contradict the syndicates' claim of nonexistence. However, in none of the cases referred to was the question of the syndicates' legal existence ever raised, nor is there any assertion that any syndicate which is a defendant here was a party to the earlier litigation. The issue of legal existence arose, if at all, only indirectly, in the context of determining what kind of entity a syndicate was for purposes of determining diversity jurisdiction. See International Insurance Co. v. Certain Underwriters at Lloyd's London, 1991 U.S. Dist. LEXIS 12937 (N.D. Ill. 1991) and Graham v. Lloyd's of London, 371 S.E.2d 801, 296 S.C. 249 (S.C. App. 1988).
The plaintiffs also suggest that the syndicates must have legal existence because they own property interests in the $ 9 billion Lloyd's American Trust Fund ("LATF") held by Citibank, N.A., in New York. Even assuming for the moment that the syndicates have an ownership in the funds, plaintiffs have not shown that such ownership would alone confer legal existence upon the syndicates under English, New York or federal law.
Moreover, there is sufficient undisputed material before the Court in the form of affidavits submitted by both sides to support a conclusion that at best the nature of the syndicates' interest is not that of an owner or beneficiary but that of a nominee or fund manager. The record is incomplete on this point, but at best what has been presented even by the plaintiffs leaves considerable doubt whether the syndicates own property interests in the LATF. For example, in a post-argument motion filed by the plaintiffs under Fed. R. Civ. P. 56(f) for further discovery on the subject, a supporting barrister's affidavit states: "I would emphasize that there is no money in the LATF that is not Names' money." The direct beneficiaries of the fund appear to be the policy holders, to the extent of their justified insurance claims; the Names having a reversionary interest in any funds left in the LATF after payout of claims.
* * *
In sum: English law controls, and under English law the syndicates have no legal existence. The result is the same under New York or federal law. Accordingly, the motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) is granted. It is unnecessary to determine whether the complaint is defective also under Fed. R. Civ. P. 12(b)(1).
The complaint is dismissed as to the Syndicate Defendants.
It is so ordered.
Dated: June 12, 1992
New York, New York
Morris E. Lasker