Baxter International v. AXA Versicherung
Filing
65
Enter MEMORANDUM Opinion and Order. Signed by the Honorable Elaine E. Bucklo on 11/7/2012. Mailed notice (jdh)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BAXTER INTERNATIONAL INC.,
Plaintiff,
v.
AXA VERSICHERUNG AG,
Defendant.
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No. 11 C 9131
MEMORANDUM OPINION AND ORDER
Plaintiff Baxter International Inc. (“Baxter”) has sued
defendant AXA Versicherung AG (“AXA”) for declaratory relief and
breach of contract.
This dispute arises from underlying claims
against Baxter in what the parties refer to as the “Second
Generation Litigation,” a series of multi-district, international
lawsuits against Baxter concerning allegedly contaminated blood
products.
Baxter seeks coverage under an insurance policy for
defense and settlement expenses related to the underlying Second
Generation Litigation.
AXA moves to dismiss the complaint on the
basis of a forum selection clause or, alternatively, the forum
non conveniens doctrine.
For the following reasons, AXA’s motion
is denied.1
Baxter is an Illinois-based company incorporated in Delware.
In 1996, Baxter acquired the Austria-based, Swiss company Immuno
Group (“Immuno”).
1
At the time of the acquisition, Immuno was
Plaintiff’s motion to file a sur-response is granted.
insured by the German insurer Colonia Versicherung AG (“Colonia”)
and Baxter’s subsidiary, Baxter AG, Vienna, was named as an
additional policy holder on Immuno’s policy (“Immuno policy”).
The parties also added an endorsement stating that Baxter would
be an additional insured on the Immuno policy with respect to
claims arising out of products distributed by Immuno prior to the
Baxter acquisition.
In 1997, Colonia was acquired and changed
its name to AXA Versicherung AG.
At all times, the Immuno policy
has contained a choice of law provision and a forum selection
clause stating: “German law applies to any disputes arising from
this insurance policy.
The place of jurisdiction is Cologne.”2
Defendant argues that the complaint should be dismissed on
account of this forum selection clause or, alternatively, based
on the forum non conveniens doctrine.3
In determining whether plaintiff is bound by the forum
selection clause here, I must answer two questions: (1) is the
forum selection clause valid and mandatory; and (2) if so, is it
enforceable.
Generally, in determining whether a forum selection
clause in a contract is valid, the law of the jurisdiction
specified in a choice of law provision will govern.
Abbott
Laboratories v. Takeda Pharm. Co., Ltd., 476 F.3d 421, 423 (7th
2
The Immuno policy was written in German, and the translation
quoted here was attached to the complaint by plaintiff. The
parties dispute some aspects of the translation, but where
relevant these are discussed below.
3
The issue of personal jurisdiction, also raised in
defendant’s motion, has not yet been briefed.
2
Cir. 2007) (“Simplicity argues for determining the validity and
meaning of a forum selection clause, in a case in which interests
other than those of the parties will not be significantly
affected by the choice of which law is to control, by reference
to the law of the jurisdiction whose law governs the rest of the
contract in which the clause appears.”); see also Rock Energy Coop. v. Village of Rockton, 614 F.3d 745, 750 (7th Cir. 2010)
(applying the law specified by the parties as governing their
memorandum of understanding to a clear forum selection clause).
Plaintiff’s argument that Abbott also requires consideration
of federal procedural law in determining the meaning and
enforceability of the forum selection clause is unpersuasive.
In
a later decision, the Seventh Circuit characterized Abbott as
holding “that the validity of a forum-selection clause depends on
the law of the jurisdiction whose rules will govern the rest of
the dispute.”
IFC Credit Corp. v. United Bus. & Indus. Federal
Cred. Union, 512 F.3d 989, 991 (7th Cir. 2008).
That the Seventh
Circuit in Abbott discussed federal law as a point of comparison
with the law of the jurisdiction specified in the contract’s
choice of law provision does not alter the ultimate holding of
that case.
Here, the determinative body of law for analyzing the
forum selection clause is specified in a choice of law provision,
the validity of which is not challenged.
3
Therefore, under
binding Seventh Circuit precedent, I must look to German law in
analyzing the issues presented by defendant’s motion.
According to defendant, even though the choice of law clause
identifies “German law” as the applicable body of law governing
disputes arising from the insurance policy, for all practical
purposes this means that I must apply the law of the European
Union (“EU”) governing jurisdictional matters.
Specifically,
defendant identifies Council Regulation 44/2001, 2000 O.J. (L 12)
6 (EC) (herinafter “Brussels I Regulation”), as the relevant body
of EU law.
Plaintiff argues that it would be anathema for a
district court in the U.S. to apply the Brussels I Regulation
because it is a body of procedural law that does not apply
outside of the EU.
Even if I accept the proposition that the
validity of a forum selection clause would be a procedural issue
in EU and/or German courts, I have already determined that
Seventh Circuit law requires that I look to the law of the
jurisdiction identified in the choice of law provision to
determine the validity and enforceability of the forum selection
clause in this case.
Whether the jurisdiction identified—here,
Germany—considers the validity and enforceability of a forum
selection clause to be a procedural or substantive issue does not
change the fact that the Seventh Circuit has already sent us to
Germany for purposes of determining whether the forum selection
clause is valid and enforceable.
Plaintiff concedes that the
4
Brussels I Regulation is the body of law governing jurisdiction
and forum selection clauses (or, jurisdiction clauses, as they
are referred to in the EU) in Germany, and I will look to its
rules in determining how EU/German law would interpret the forum
selection clause in the insurance policy at issue here.
The parties’ experts agree that under Article 23(1) of the
Brussels I Regulation there is a rebuttable presumption of
exclusivity for jurisdiction agreements.4
In other words, a
forum selection clause is mandatory unless there is evidence of
the parties’ contrary intent.
The parties’ experts spend some
energy on defending their competing translations of the relevant
language in the insurance policy: Plaintiff has translated the
forum selection clause as “The place of jurisdiction is Cologne,”
whereas defendant contends that the more accurate translation is
“The place of judicial jurisdiction shall be Cologne.”
However,
as Prof. Zekoll notes, the distinction is one without a
difference, as plaintiff has not presented any evidence showing
that its preferred translation would impact whether there is a
rebuttable presumption of exclusivity under Article 23(1) of the
Brussels I Regulation.
Instead, the thrust of plaintiff’s
argument is that it has overcome the presumption of exclusivity
because the jurisdiction clause did not conform to the
4
Plaintiff does not dispute the assessment of defendant’s
expert, Prof. Joachim Zekoll, that the jurisdiction clause meets
the other requirements of Article 23(1).
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requirements of the Brussels Convention, which was in force at
the time the original insurance policy was issued in 1990 and
also when plaintiff was added as an additional insured in 1996.
Plaintiff argues that because the agreement would not have been
valid at the time the parties executed the policy, it is not
valid now.
Plaintiff’s expert, Prof. Ronald Brand, states that
there is no case law interpreting Article 23 of the Brussels I
Regulation and plaintiff has introduced no other evidence showing
that any of the parties to the insurance policy agreed that the
jurisdiction clause was not to have exclusive effect.
By
contrast, in his rebuttal declaration, Prof. Zekoll cites to
competent evidence, including a decision of the Higher Regional
Appellate Court of Celle, Germany, showing that either party’s
translation would be captured by the presumption of exclusivity
in Article 23(1) and that the relevant inquiry is whether the
jurisdiction clause is valid and exclusive under the Brussels I
Regulation, regardless of when the insurance policy was issued.
I conclude plaintiff has failed to overcome the presumption of
exclusivity and the jurisdiction clause is valid and exclusive
under the relevant German/EU law.
I now turn to the question of whether the clause is
enforceable against plaintiff.
By way of background, Section 3
of Chapter II of the Brussels I Regulation (Articles 8-14) sets
forth the rules relating to where jurisdiction may be proper in
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matters relating to insurance.
The parties agree that Article 13
allows for jurisdiction agreements among parties to an insurance
contract only in limited circumstances and that the forum
selection clause in the insurance policy here only fits into the
situation described in Article 13(5).
Article 13(5) provides
that a jurisdiction agreement between parties to an insurance
contract will be valid if it “relates to a contract of insurance
in so far as it covers one or more of the risks set out in
Article 14.”
Brussels I Regulation, art. 13(5).
In relevant
part, Article 14 refers to “all ‘large risks’” and the parties
here assume that both the current policyholder, Immuno Management
AG, and the additional insured, Baxter, meet the financial
criteria for “large risks.”
See Brussels I Regulation, art.
14(5).
Though the forum selection clause here technically falls
under the situation defined in Article 13(5), plaintiff’s expert,
Prof. Brand, says the European Court of Justice’s (“ECJ”)
decision in Société Financière et Industrielle du Peloux v. Axa
Belgium, et al., Case C-112/03, E.C.R. I-3707 (2005) (hereinafter
“SFIP”), prevents its enforcement.
In SFIP, the ECJ considered
whether a jurisdiction clause that was valid under Article 12(3)
of the Brussels Convention, the predecessor to the Brussels I
Regulation, was enforceable against an insured other than the
policyholder.
Article 12(3) of the Brussels Convention allowed
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for a policyholder and an insurer to enter into a valid
jurisdiction agreement if both parties were residents of the same
EU state and agreed to bring disputes in the courts of that
state.
The Brussels I Regulation, which went into force during
the pendency of the SFIP litigation, contains a similar provision
in Article 13.
The difference between the Brussels Convention
and the Brussels I Regulation is that the Brussels I Regulation
introduced the “large risk” provision for the first time.
Plaintiff, and Prof. Brand, reason that because SFIP held that a
jurisdiction clause that was otherwise valid under Article 12 of
the Brussels Convention was not enforceable against an insured
who was not a party to the insurance policy, the forum selection
clause here, which appears to be otherwise valid under Article 13
of the Brussels I Regulation, is not enforceable against
plaintiff, a co-insured that was not originally a party to the
insurance policy.
Defendant does not dispute that the ECJ is the final
interpreter of the Brussels Convention and the Brussels I
Regulation, nor does defendant contend that the ECJ’s rulings are
not binding on EU member states, including Germany.
Instead,
based on the fact that the “large risk” provision did not exist
in the Brussels Convention, defendant argues that SFIP is
inapposite.
Defendant first contends that SFIP is inapplicable
merely because it interprets the Brussels Convention and not the
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Brussels I Regulation.
However, a comparison of Article 12 of
the Brussels Convention and Article 13 of the Brussels I
Regulation reveals that, with the exception of “large risk”
provision, the circumstances under which parties may enter into
jurisdiction agreements are identical.
There is therefore no
reason on the face of the Brussels I Regulation that would
invalidate the SFIP holding.
Further, as Prof. Brand points out,
the Brussels I Regulation had already come into force when the
SFIP decision was issued and the ECJ referenced the Brussels I
Regulation without limiting the applicability of its holding.
Relying heavily on the ECJ’s characterization of the
additional insured in that case as being the “economically
weakest party,” defendant also contends that because both the
policyholder and additional insured here are “large risks,”
plaintiff cannot be considered an economically weak party and is
not entitled to the protections afforded to insureds by the
Brussels I Regulation.
But the ECJ’s decision in SFIP did not
rely on a finding that the co-insured in that case was
economically weak.
Further, as plaintiff argues in its sur-
response, “large risk” insureds are still protected by the
Brussels I Regulation’s rules governing proper forum and are only
afforded greater freedom under the new regime to opt out of those
rules.
It remains that a “large risk” insured must affirmatively
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agree to a forum otherwise prohibited by the Brussels I
Regulation.
Defendant’s expert, Prof. Zekoll, admits that there is no
case law yet that addresses the applicability of the SFIP
decision to either the Brussels I Regulation or the “large risk”
exception contained therein but identifies two commentators who
hypothesize that “large risks” may present an exception to the
rule that a jurisdiction agreement is not binding on an insured
who was not a party to the insurance contract.
However, neither
defendant’s expert nor the commentator he discusses adequately
addresses two points raised by Prof. Brand: (1) the SFIP decision
reinforced the doctrine of separability, which provides that
forum selection clauses are separable from the rest of the
contract and that parties must separately consent to such
clauses; and (2) the SFIP decision strengthened protections for
insureds, even while giving “large risks” the ability to contract
around the default jurisdictional rules.
Considering these
points, I conclude that under the binding ECJ decision in SFIP,
an otherwise valid jurisdiction clause, even one that is valid
under the “large risk” provision, cannot be enforced against an
insured who was not a party to the insurance contract.
Therefore, the forum selection clause here is unenforceable
against plaintiff.
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Defendant argues that even if the forum selection clause is
unenforceable, I should still dismiss the case under the forum
non conveniens doctrine.
“The common law doctrine of forum non
conveniens allows a trial court to dismiss a suit over which it
would normally have jurisdiction if it best serves the
convenience of the parties and the ends of justice.”
Clerides v.
Boeing Co., 534 F.3d 623, 627-28 (7th Cir. 2008) (quoting In re
Bridgestone/Firestone, Inc., 420 F.3d 702, 703 (7th Cir. 2005)).
A court should only grant a motion to dismiss under forum non
conveniens if the plaintiff’s chosen forum is “oppressive and
vexatious to the defendant, out of all proportion to the
plaintiff’s convenience.”
In re Bridgestone/Firestone, Inc., 420
F.3d at 703 (internal quotation marks and citations omitted).
If
the party seeking dismissal is able to identify an adequate
alternative forum, a court must decide “to keep or dismiss the
case by weighing various private and public factors.”
704.
Id. at
Plaintiff does not dispute that the threshold inquiry is
satisfied, as Cologne, Germany would constitute an adequate and
available alternative forum.
Among the relevant private interest factors, defendant
claims that they favor Cologne because there are a number of
witnesses located in Germany.
According to defendant, these
include not only employees and former employees of AXA but also
employees and former employees of Immuno and Jauch & Hübener, the
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insurance broker that negotiated and issued the policy.
Plaintiff counters that its own witnesses are located in the U.S.
and that defendant has not supported its argument regarding the
number and types of witnesses that would need to be available
throughout the litigation.
Plaintiff also points out that the
attorneys who handled the underlying litigation, as well as the
relevant documents, are located in Illinois.
It is obvious that
litigating here would be inconvenient for defendant, just as
litigating in Germany would be inconvenient for plaintiff.
One
party will have witnesses who will need to travel no matter where
this case is litigated.
But defendant has not shown that the
inconvenience would prove oppressive or vexatious.
On balance,
then, the private factors weigh equally for both parties.
As for the public interest factors, defendant argues
primarily that because the Immuno policy is written in German and
because German law will be applied to this dispute, Cologne is
the favored forum.
Defendant also argues that the German court
system has a strong public interest in hearing this case, which
depends on German contract and insurance law.
However, the mere
fact that a court will have to apply foreign law, alone, is “not
sufficient to warrant dismissal when a balancing of all relevant
factors shows that the plaintiff’s chosen forum is appropriate.”
Piper Aircraft Co. v. Reyno, 454 U.S. 235, 260 n. 29 (1981).
Without more, defendant has failed to show that the public
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interest factors require dismissal of this case under the forum
non conveniens doctrine.
For the foregoing reasons, defendant’s motion to dismiss on
the grounds of the forum selection clause and the forum non
conveniens doctrine is denied.
ENTER ORDER:
____________________________
Elaine E. Bucklo
United States District Judge
Dated: November 7, 2012
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