Collegiate Licensing Company v. American Casualty Co. of Reading, Pennsylvania et al

Filing 96

ORDER denying 37 Motion to Dismiss, denying 38 Motion to Transfer Case, denying 38 Motion to Stay, denying 51 Motion to Transfer Case, denying 51 Motion to Stay, denying 13 Motion to Dismiss, denying 15 Motion to Transfer Case, denying 15 Motion to Stay, denying 28 Motion to Dismiss, denying 29 Motion to Transfer Case, denying 29 Motion to Stay. Signed by Judge Thomas W. Thrash, Jr on 1/17/12. (dr)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
COLLEGIATE LICENSING
COMPANY,
Plaintiff,
v.

CIVIL ACTION FILE
NO. 1:11-CV-3432-TWT

AMERICAN CASUALTY CO. OF
READING, PENNSYLVANIA, et al.,
Defendants.

ORDER

This is a declaratory judgment action arising out of an insurance coverage
dispute. It is before the Court on American Casualty Co. of Reading, Pennsylvania
and Continental Casualty Co.’s Motion to Transfer [Doc. 15] and Renewed Motion
to Transfer [Doc. 38], Allied World National Assurance Company’s Motion to
Transfer [Doc. 51], Great Divide Insurance Co.’s Motion to Transfer [Doc. 29],
American Casualty and Continental Casualty’s Motion to Dismiss [Doc. 13] and
Renewed Motion to Dismiss [Doc. 37], and Great Divide Insurance Co.’s Motion to
Dismiss [Doc. 28].

For the reasons set forth below, the Court DENIES the

Defendants’ motions.

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

I. Background
This action arises from several lawsuits filed against the Collegiate Licensing
Company (“CLC”), EA Sports, Inc., and others (the “Underlying Actions”) [see Doc.
24, Exs. G-O & Q-S] by former collegiate athletes. Several of the Underlying Actions
have been filed in the Northern District of California. The plaintiffs in the Underlying
Actions reside throughout the country and claim that CLC violated their rights of
publicity.
Beginning in 2007, National Union Fire Insurance Company (“National
Union”) issued several commercial general liability and umbrella insurance policies
to EA Sports, Inc. [see Doc. 14-1]. Under these policies, CLC is an additional
insured. CLC is also a named insured under several policies issued by American
Casualty Co. of Reading, Pennsylvania (“American Casualty”), Continental Casualty
Co. (“Continental”), Great Divide Insurance Co. (“Great Divide”), Allied World
National Assurance Company (“Allied World”), Westchester Fire Insurance Co.
(“Westchester”), and Lexington Insurance Co. (“Lexington”). Allied World, Great
Divide, and Westchester delivered their insurance policies to CLC’s parent
corporation, IMG Worldwide, Inc. (“IMG”), in Ohio [see Doc. 24-3]. The insurance
brokers for these policies were based in Atlanta, Georgia. American Casualty and
Continental delivered their policies directly to CLC in Georgia [id.].

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-2-

Initially, National Union provided a partial defense to CLC in the Underlying
Actions.1 On October 4, 2011, however, National Union filed a declaratory judgment
action in the United States District Court for the Northern District of California
seeking a declaration “that it owes no duty to defend or indemnify CLC in connection
with the Underlying Actions” (the “California Coverage Action”). (Compl. ¶ 46.)
On October 10, 2011, CLC filed this Complaint against American Casualty,
Great Divide, Continental, Allied World, Westchester, and Lexington2 [Doc. 1]. The
Plaintiff seeks a declaration that the Defendants are obligated to defend and indemnify
CLC in connection with the Underlying Actions. The Complaint also seeks damages
for breach of contract. American Casualty and Continental have filed a Motion to
Dismiss [Doc. 13] and a Motion to Transfer [Doc. 15] along with a Renewed Motion
to Dismiss [Doc. 37] and a Renewed Motion to Transfer [Doc. 38]. Great Divide has
also filed a Motion to Dismiss [Doc. 28] and a Motion to Transfer [Doc. 29]. Finally,
Allied World has filed a Motion to Transfer [Doc. 51]. The Defendants argue that this
action should be dismissed because CLC has failed to join National Union.

1

CLC contends that National Union has not reimbursed CLC for the full cost
of its defense in the Underlying Actions.
2

Lexington has been dismissed without prejudice [see Doc. 83].

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-3-

Alternatively, the Defendants contend that the case should be transferred to the
Northern District of California.
II. Legal Standards
A.

Motion to Transfer Standard

“For the convenience of parties and witnesses, in the interest of justice, a
district court may transfer any civil action to any other district or division where it
might have been brought.” 28 U.S.C. § 1404(a). Traditionally, federal courts accord
a plaintiff's choice of forum considerable deference, only disturbing it when it is
clearly outweighed by other considerations. Robinson v. Giarmarco & Bill, P.C., 74
F.3d 253, 260 (11th Cir. 1996); In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989).
The three criteria for the Court to consider in ruling on a motion to transfer are: (1) the
convenience of the parties; (2) the convenience of witnesses; and (3) the interests of
justice. In weighing those criteria, and deciding whether to transfer an action to
another district, the district court is vested with broad discretion. England v. ITT
Thompson Industries, Inc., 856 F.2d 1518, 1520 (11th Cir. 1988).
B.

Motion to Dismiss Standard

The Court may dismiss an action under Rule 12(b)(7) where the plaintiff fails
to “join a party under Rule 19.” FED. R. CIV. P. 12(b)(7). Rule 19 involves a two-part
inquiry to determine whether it is proper to dismiss an action if interested parties

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-4-

cannot be joined. Burger King Corp. v. American Nat’l Bank & Trust Co., 119 F.R.D.
672, 674 (N.D. Ill. 1988). First the court should determine whether an absent entity
is a “necessary” party that must be joined to the action under Rule 19(a). Next, the
Court must decide whether the absent party is “indispensable” under Rule 19(b). If
the party is indispensable, the “case must be dismissed.” Burger King, 119 F.R.D. at
675.
III. Discussion
A.

Motions to Dismiss

The Defendants argue that this action should be dismissed under Rule 12(b)(7).
Specifically, the Defendants contend that National Union is an indispensable party.
“Rule 19 states a two-part test for determining whether a party is indispensable.”
Challenge Homes, Inc. v. Greater Naples Care Center, Inc., 669 F.2d 667, 669 (11th
Cir. 1982). “First, the court must ascertain under the standards of Rule 19(a) whether
the person in question is one who should be joined if feasible. If the person should be
joined but cannot be (because, for example, joinder would divest the court of
jurisdiction) then the court must inquire whether, applying the factors enumerated in
Rule 19(b), the litigation may continue.” Id. Under Rule 19(a):
A person who is subject to service of process and whose joinder will not
deprive the court of subject-matter jurisdiction must be joined as a party
if:

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-5-

(A) in that person's absence, the court cannot accord complete relief
among existing parties; or
(B) that person claims an interest relating to the subject of the action and
is so situated that disposing of the action in the person's absence may:
(i) as a practical matter impair or impede the person's ability to protect
the interest; or
(ii) leave an existing party subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent obligations because of the
interest.
Fed. R. Civ. P. 19(a)(1).3 “Whether a particular nonparty is necessary to an action is
heavily influenced by the facts and circumstances of each case.” Pinckney v. SLM
Financial Corp., 236 F.R.D. 587, 589 (N.D. Ga. 2005). “However, when making its
determination, the Court must consider whether complete relief can be granted with
the present parties, and whether the absent party has an interest in the disposition.”
Id.
First, the Defendants contend that the Court cannot afford complete relief in the
absence of National Union. Specifically, American Casualty, Great Divide and
Continental argue that they have only “excess” coverage obligations. Thus, their duty
to CLC is contingent upon National Union’s coverage obligations. Whether the
Defendants are excess insurers, however, depends on the “Other Insurance” provisions
in the policies before this Court. That determination does not rely on any policy

3

Although “the criteria set forth in Rule 19 are not to be applied mechanically,”
the factors “act[ ] as a guide to enlightened consideration of” substantive interests.
Schutten v. Shell Oil Co., 421 F.2d 869, 873 (5th Cir. 1970).
T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-6-

issued by National Union. Indeed, the Court need not decide the extent of National
Union’s obligations in order to determine whether the Defendants are obligated to
provide excess coverage. National Union is not a party to the Defendants’ policies.
National Union’s presence is therefore not required for the Court to determine whether
those policies provide excess, primary, or no coverage to CLC. For these reasons, the
Court can provide complete relief in the absence of National Union.
Next, the Defendants argue that they may be subject to inconsistent obligations
in the absence of National Union. Specifically, the Defendants stress that the National
Union policies include substantially similar language to the Defendants’ policies.
Despite such similarities, however, there is little danger of inconsistent results. The
National Union policies are separate contracts, issued by a separate entity under
separate circumstances. Further, as discussed below, the National Union policies will
likely be governed by a different state’s law. Despite similar language, the issues
presented in this action and the California Coverage Action are distinct. Thus, there
is little danger of a duplicative or inconsistent result.4 The Court is sure that the parties

4

The Defendants also argue that since their intervention in the California
Coverage Action, both this Court and the California court are tasked with construing
the Defendants’ policies. On January 4, 2012, however, the Court granted the
Plaintiff’s Motion for Permanent Injunction Against the Defendants’ Complaints in
Intervention [see Doc. 93]. Thus, the California court will no longer address the
Defendants’ policies.
T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-7-

will apprise it of rulings by the California District Court. For these reasons, National
Union is not a necessary party.
Even if National Union were a necessary party, however, dismissal would not
be appropriate. Rule 19(b) provides that:
[i]f a person who is required to be joined if feasible cannot be joined, the
court must determine whether, in equity and good conscience, the action
should proceed among the existing parties or should be dismissed. The
factors for the court to consider include:
(1) the extent to which a judgment rendered in the person's absence
might prejudice that person or the existing parties;
(2) the extent to which any prejudice could be lessened or avoided by:
(A) protective provisions in the judgment;
(B) shaping the relief; or
(C) other measures;
(3) whether a judgment rendered in the person's absence would be
adequate; and
(4) whether the plaintiff would have an adequate remedy if the action
were dismissed for nonjoinder.
Fed. R. Civ. P. 19(b). Notably, “[i]f a court determines that an absent person satisfies
the Rule 19(a) criteria, he must be joined if his joinder is feasible. Only if joinder is
not possible—i.e., the court lacks personal jurisdiction over him or joining him would
destroy the court's subject matter jurisdiction—does Rule 19(b) come into play.”
Burger King, 119 F.R.D. at 675 (citing 7 CHARLES ALAN WRIGHT, ARTHUR R.
MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE: CIVIL § 1607(3d

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-8-

ed. 2011) (emphasis added). Here, National Union can be joined under Rule 14.5 The
Defendants have failed to do so. Thus, CLC’s action should not be dismissed.
B.

Motions to Transfer

American Casualty, Continental, Great Divide, and Allied World have filed
Motions to Transfer the case to the Northern District of California. 28 U.S.C. § 1404
provides that “[f]or the convenience of parties and witnesses, in the interest of justice,
a district court may transfer any civil action to any other district or division where it
might have been brought.” 28 U.S.C. § 1404(a). “The question of whether to transfer
venue is a two-pronged inquiry.” Merswin v. Williams Cos., 1:08-CV-2177, 2009
WL 249340, at *5 (N.D. Ga. Jan. 30, 2009). “First, the alternative venue must be one
in which the action could originally have been brought by the plaintiff.” Id. Here,

5

Although there is no diversity between CLC and National Union, this Court
could exercise supplemental jurisdiction over National Union. See H.L. Peterson Co.
v. S.W. Applewhite, 383 F.2d 430, 433 (5th Cir. 1967) (“[u]nder Rule 14, the court
has ancillary jurisdiction over a third party defendant even absent diversity of
citizenship.”). Indeed, the Defendants do not argue that National Union could not be
joined as a party. Rather, the Defendants rely on Schutten v. Shell Oil Co., 421 F.2d
869 (5th Cir. 1970), for the proposition that Rule 19 is subject to pragmatic
considerations. Schutten, however, “stressed that the criteria set forth in Rule 19 are
not to be applied mechanically nor are they to be used to override compelling
substantive interests.” Id. at 873. Where an absent party can be joined, however, the
Court need not address the Rule 19(b) factors. See Burger King, 119 F.R.D. at 75
(noting that Rule 19(b) “indispensability” analysis is necessary only where absent
party cannot be joined). Indeed, in Schutten, the court noted that the absent party
could not be joined. Schutten, 421 F.2d at 874.
T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-9-

CLC does not dispute that it could have brought this action in the Northern District
of California under diversity jurisdiction. (See Pl.’s Br. in Opp’n to Defs.’ Mot. to
Transfer, at 10-11; Doc. 65.)
Second, the Court must balance the private and public factors, including “(1)
the convenience of the witnesses; (2) the location of relevant documents and the
relative ease of access to sources of proof; (3) the convenience of the parties; (4) the
locus of operative facts; (5) the availability of process to compel the attendance of
unwilling witnesses; (6) the relative means of the parties; (7) a forum's familiarity with
the governing law; (8) the weight accorded a plaintiff's choice of forum; and (9) trial
efficiency and the interests of justice, based on the totality of the circumstances.”
Manuel v. Convergys Corp., 430 F.3d 1132, 1135 n.1 (11th Cir. 2005). “The
plaintiff's choice of forum should not be disturbed unless it is clearly outweighed by
other considerations.” Robinson v. Giarmarco & Bill, P.C., 74 F.3d 253, 260 (11th
Cir. 1996) (quoting Howell v. Tanner, 650 F.2d 610, 616 (5th Cir. 1981)); SME
Racks, Inc. v. Sistemas Mecanicos Para Electronica, S.A., 382 F.3d 1097, 1100 (11th
Cir. 2004) (there is a “strong presumption against disturbing plaintiffs’ initial forum
choice.”).
“The most important factor under § 1404(a) is the convenience of witnesses,
and the moving party must make a specific showing of inconvenience to witnesses.”

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-10-

Electronic Transaction Network v. Katz, 734 F. Supp. 492, 501-502 (N.D. Ga. 1989).
The Defendants have made no such showing. Indeed, to the extent witnesses will be
required, many of them will be located in Georgia. The Plaintiff’s employees are
located in Georgia. The insurance brokers who issued CLC’s policies are located in
Georgia. Witnesses from IMG are located in Ohio. Indeed, none of the witnesses
relevant to CLC’s insurance policies are located in California. Nevertheless, the
Defendants argue that witnesses in the Underlying Actions are located in California.
Only one of the plaintiffs in the Underlying Actions, however, is a California resident
[see Doc. 24, Ex. Q]. Although the Underlying Actions are pending in California,
seven of the plaintiffs in the Underlying Actions were deposed in Georgia in
November 2011 [see Doc. 27-2]. Thus, the Defendants have not shown that
California is a more convenient forum for potential witnesses.
Similarly, many relevant documents in this case are located in Georgia. The
policies issued by American Casualty were delivered in Georgia. Although the Great
Divide and Allied World policies were delivered to IMG in Ohio, none of the policies
are located in California.

Although the Underlying Actions are occurring in

California, the Defendants have not identified any specific documents that are located
in California. Further, the Plaintiff is a Georgia corporation. Its parent, IMG, is an

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-11-

Ohio corporation. No Defendant is from California. Thus, the convenience of the
parties weighs against transfer.
The Defendants contend that the locus of operative facts lies in California.
Although the Underlying Actions are related to this lawsuit, the facts giving rise to
this coverage dispute occurred primarily in Georgia. Six of the policies issued by
Continental and American Casualty were issued in Georgia. The policies issued by
Allied World, Great Divide, and Westchester were issued to IMG in Ohio through
Atlanta-based brokers. Thus, all the insurance policies at issue in this case have
substantial connections to Georgia. None have connections to California. For this
reason, the locus of operative facts lies in Georgia, not California.
Factors five and six are neutral. There is no indication that service of process
will be more difficult in Georgia than California. Also, all the parties are established
companies with substantial means. Factor seven, however, weighs against transfer.
As a court sitting in diversity jurisdiction, this Court must apply Georgia’s choice-oflaw rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).
Georgia follows lex loci contractus. Boardman Petroleum, Inc. v. Federated Mut. Ins.
Co., 135 F.3d 750, 752 (11th Cir. 1998). Under lex loci contractus, contracts are
governed by the law of the place where they were made. Id. Further, “[u]nder
Georgia law, an insurance contract is ‘made’ where it is delivered.” Id. As discussed

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-12-

above, the American Casualty and Continental policies were delivered in Georgia.
The Great Divide, Allied World, and Westchester policies were delivered to IMG in
Ohio. None of the policies were delivered in California. Thus, either Georgia or Ohio
law will govern interpretation of the policies at issue in this case.
The Defendants, however, argue that California tort law will apply to determine
CLC’s liability for violations of the right of publicity in the Underlying Actions.
Regardless of the law applicable in the Underlying Actions,6 this Court must apply
Georgia and Ohio contract law to this coverage dispute. Thus, the forum’s familiarity
with the underlying law weighs against transfer to California.
Here, CLC brought this action in Georgia. Typically, there is a “strong
presumption against disturbing plaintiffs’ initial forum choice.” SME Racks, 382 F.3d
at 1100. The Defendants, however, contend that CLC’s choice of forum is not entitled
to deference because the California Coverage Action was filed first. The California
Coverage Action, however, involves different parties and different insurance
contracts. Although the National Union policies may share similarities with the
Defendants’ policies, the National Union policies are completely separate contracts

6

The California court has yet to determine the law that will apply to the claims
in the Underlying Actions. As discussed above, the plaintiffs in the Underlying
Actions reside all over the country. Only one plaintiff resides in California. Thus,
several states’ laws may apply.
T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-13-

between different parties. The policies issued by the Defendants were delivered in
either Georgia or Ohio. The National Union policies were issued to EA Sports and
cover CLC as an additional insured. Also, as discussed above, the policies at issue
here will be governed by Georgia or Ohio law. Thus, not only does the California
Coverage Action involve different policies between different parties, it will also apply
different contract law. For this reason, the California Coverage Action does not lessen
the presumption in favor of the Plaintiff’s choice of forum.
The Defendants also allege that CLC has engaged in forum shopping. The
“anticipatory filing exception” may negate the importance of the Plaintiff’s choice of
forum “where a declaratory judgment action is filed in anticipation of another suit and
is being used for forum shopping purposes.” Soroka v. Lee Technologies Servs., Inc.,
No. 06-CV-0710, 2006 WL 1734277, at *4 (N.D. Ga. June 19, 2006). When National
Union instigated the California Coverage Action, CLC filed suit against its direct
insurers in Georgia. CLC is a Georgia corporation headquartered in Georgia. Many
of the contracts at issue were made in Georgia and brokered by Georgia-based
insurance agents. Indeed, the anticipatory filing exception does not apply here at all.
Facing National Union’s potential withdrawal of its defense, CLC simply filed a
breach of contract action to enforce its rights under insurance policies issued by the
Defendants. The anticipatory filing exception would more aptly apply to a declaratory

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-14-

judgment action filed by the Defendants in anticipation of CLC’s claim for coverage.
For these reasons, CLC’s choice of forum is entitled to great weight. See id.
Finally, the Defendants argue that the efficient administration of justice requires
transfer to California. Specifically, the Defendants contend that the “most compelling
reason for transfer is that [the California Coverage Action and the Underlying
Actions] are pending in [California].” Martin v. South Carolina Bank, 811 F. Supp.
679, 685 (M.D. Ga. 1992); see also Soroka, 2006 WL 1734277, at *4 (“[T]he fact that
a substantially similar action is pending currently in the transferee court counsels in
favor of transfer because of the opportunity for consolidation and, thus, the
conservation of judicial resources.”).

The similarities between the California

Coverage Action and this dispute may result in some duplication of efforts. As
discussed above, however, the California Coverage Action will not address the same
issues being litigated here. Regardless of the outcome of the California Coverage
Action, this Court will interpret the Defendants’ policies under Georgia and Ohio law.
There is little danger of duplicative or inconsistent results because the Defendants’
policies are not being litigated in California. Reciprocally, the National Union
policies are not being litigated here. Thus, although transfer would prevent some
duplication of effort, this consideration cannot overcome the other factors weighing

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-15-

against transfer. For these reasons, the case should not be transferred to the Northern
District of California.
C.

Motions to Stay

The Defendants have moved to stay this action pending the resolution of the
Underlying Actions and the California Coverage Action. The Plaintiff opposes a stay
unless the California Coverage Action is also stayed. (See Pl.’s Br. in Opp’n to Defs.’
Mot. to Transfer, at 22-23; Doc. 65.) “The final stay determination is discretionary.”
Tomco Equip. Co. v. Southeastern Agri-Systems, Inc., 542 F. Supp. 2d 1303, 1307
(N.D. Ga. 2008). “Courts have the inherent power to control their own dockets,
including the power to stay proceedings.” Id. “When deciding whether to grant a
stay, courts generally consider the following factors: (1) whether a stay would unduly
prejudice or present a tactical disadvantage to the nonmovant; (2) whether a stay will
simplify the issues in the case; and (3) whether discovery is complete and a trial date
his been set.” Id. Here, as discussed above, this case presents issues separate from
the California Coverage Action. A stay will not significantly simplify the issues in
this case. Thus, there is no reason to grant a stay unless the California Coverage
Action is also stayed.

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-16-

IV. Conclusion
For the reasons set forth above, the Court DENIES American Casualty Co. of
Reading, Pennsylvania and Continental Casualty Co.’s Motion to Transfer [Doc. 15]
and Renewed Motion to Transfer [Doc. 38], Allied World National Assurance
Company’s Motion to Transfer [Doc. 51], Great Divide Insurance Co.’s Motion to
Transfer [Doc. 29], American Casualty and Continental Casualty’s Motion to Dismiss
[Doc. 13] and Renewed Motion to Dismiss [Doc. 37], and Great Divide Insurance
Co.’s Motion to Dismiss [Doc. 28].
SO ORDERED, this 17 day of January, 2012.

/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge

T:\ORDERS\11\Collegiate Licensing Company\mdtwt.wpd

-17-