The courtroom drama, in Richmond, Virginia, early yesterday morning, came as the final deadline looms for Lloyd's members to accept the market's Equitas package.
Names, as members are known, have until noon on Wednesday to accept the deal or face being excluded and pursued by Lloyd's for their debts.
This weekend, Lloyd's said the deadline would stand, regardless of the US decision. "Basically, we go ahead with the 28th August. People do have to be aware of the consequences of staying out," a Lloyd's spokeman warn- ed.
In his 11th-hour move, federal judge Robert Payne granted a preliminary injunction to US names that went far beyond their expectations.
In a 141-page decision, the judge ruled for the first time that Lloyd's was subject to US securities laws and ordered the market to provide full prospectus information, which it has so far declined, on Equitas.
He set Lloyd's a deadline of 23 September to comply, until when payments by any US names wishing to accept Equitas will be suspended in an "escrow fund".
The appeal will be heard early next week, and Lloyd's said it would pursue the case to the Supreme Court, if need be. So far Lloyd's has ridden a wave of court actions over pounds 8bn of losses suffered by its 33,500 names on catastrophe, pollution and asbestosis claims between 1987 and 1992.
UK names have won a series of actions against Lloyd's agents and auditors, which pushed the market into including a pounds 3.2bn settlement package in Equitas.
Only last month, it also thought it had bought off US state securities regulators by offering an extra pounds 40m to US names.
So far, too, the powerful federal Securities and Exchange Commission has sat on the fence, a stance US names last night said may have provoked the judge.
"Lloyd's is in violation of the Securities Exchange Act and ... in contravention of rules and regulations promulgated by the SEC," judge Payne said. His ruling came as Colorado's Attorney General also prepared to overrule the state's securities commission by taking action against Lloyd's under consumer protection laws.
The key New York prosecutor's office, however, said it had no plans to take action, despite Attorney General Dennis Vacco's intervention in Virginia, supporting US names' rights to sue in US rather than UK courts.
Lloyd's is hoping for up to pounds 320m in fresh money - pounds 66m from the US - from names, before it seeks final approval for Equitas from the Department of Trade and Industry after its ruling council meeting on Thursday. Yesterday, it said acceptances already exceeded expectations.
It intends to draw down on pounds 900m of names' funds at Lloyd's regardless, though pounds 100m of that belongs to US members and is now in doubt. As a contingency, it has already agreed a pounds 300m bank facility to the bridge any gap. A key part of the settlement, though, rests on getting enough of the 13,600 litigating names to stop court action.
This weekend, one US lawyer said the Virginia ruling might yet cause auditors, agents and broker with US activities to review their contributions to the deal.Reuse content