American Insurance Marketing Corporation et al v. 5 Star Life Insurance Company
Filing
15
MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 7/26/13. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
AMERICAN INSURANCE MARKETING
CORPORATION, et al.
:
v.
:
Civil Action No. DKC 13-0560
:
5 STAR LIFE INSURANCE COMPANY
:
MEMORANDUM OPINION
Presently pending and ready for review in this breach of
contract case is the motion to dismiss for improper venue filed
by Defendant 5 Star Life Insurance Company (“5 Star”).
10).
(ECF No.
The issues have been fully briefed, and the court now
rules, no hearing being deemed necessary.
Local Rule 105.6.
For the following reasons, the motion to dismiss will be denied.
I.
Background
This breach of contract case arises out of a series of
relationships and events involving the sale of life insurance
policies to Native Americans who belong to the First Nations
Tribe.
According
to
the
complaint
(ECF
No.
2),
Plaintiff
American Insurance Marketing Corporation (“AIM”) is an insurance
brokerage
company
organized
under
Maryland
principal place of business in Maryland.
law
with
its
Plaintiff Brent J.
Spyksma is a general insurance agent and a resident of Iowa.
5
Star is a life insurance company that maintains its principal
place of business in Virginia.
The complaint alleges that, in February 2008, Spyksma and 5
Star entered into a Sales Representative Agreement (“the 2008 SR
Agreement”).1
to
procure
Pursuant to the 2008 SR Agreement, Spyksma agreed
insurance
applications
on
behalf
of
5
Star.
In
exchange, 5 Star agreed to pay Spyksma commissions, calculated
based on a percentage of premiums paid for policies that Spyksma
procured.
At some unspecified point in time, the ZWG Trust – an
irrevocable trust that holds assets for the benefit of the First
Nations Tribe – purportedly engaged the services of Spyksma and
AIM to procure life insurance policies for Tribe members.
AIM
and
and
Spyksma
then
approached
5
Star
about
underwriting
issuing the life insurance policies.
The complaint alleges that, “by letters dated May 10, 2012,
and May 17, 2012,” 5 Star agreed to underwrite applications for
up to 5,000 members of the First Nations Tribe.
Based on this
agreement, the ZWG Trust, Spyksma, and AIM began soliciting and
accepting life insurance applications from First Nations Tribe
members.
The complaint also asserts that “5 Star issued a Case
Information Worksheet for the Trust confirming that AIM was to
1
Although the 2008 SR Agreement is not attached to the
complaint,
Plaintiffs
submit
an
unauthenticated
copy
in
connection with 5 Star’s motion to dismiss. (ECF No. 12-2).
2
receive
85%
of
the
commissions
payable
associated
with
the
policies issued to the Trust and Spyksma was to receive 15%.”
(Id. ¶ 11).
5 Star ultimately issued 1,097 policies to members
of the First Nations Tribe, which were delivered on July 31 and
August 22, 2012.
Then, on September 26, 2012, 5 Star allegedly
rescinded all 1,097 of the policies, without justification, and
returned the premium payments.
Plaintiffs allege that 5 Star
has never paid them any commissions for the rescinded policies.
On December 10, 2012, AIM and Spyksma filed a complaint
against
5
Star
in
the
Circuit
Court
for
Calvert
Maryland, asserting three breach of contract claims.
2).
(ECF No.
On February 20, 2013, 5 Star removed the action to this
court.
is
County,
(ECF No. 1).
federal
diversity
The notice of removal asserts that there
jurisdiction
pursuant to 28 U.S.C. § 1332(a).2
over
Plaintiffs’
claims
The notice also states that
venue is proper pursuant to 28 U.S.C. § 1441(a) because the
Southern Division of the United States District Court for the
District of Maryland is the federal judicial district embracing
the
Circuit
Court
for
Calvert
County,
Plaintiffs originally filed suit).
2
Maryland
(i.e.,
where
(Id. ¶¶ 3-4).
In its notice of removal, 5 Star states that, in addition
to being a citizen of Virginia (as is alleged in the complaint),
it is also a citizen of Louisiana, the state under whose laws it
is incorporated. (ECF No. 2 ¶ 10).
3
One
week
later,
5
Star
filed
a
motion
to
improper venue pursuant to Fed.R.Civ.P. 12(b)(3).
dismiss
for
(ECF No. 10).
5 Star argues that this action must be dismissed because of a
mandatory forum selection clause contained in a contract entered
into between 5 Star and AIM on July 30, 2012 (“the 2012 Producer
Contract”).
The clause in question provides as follows:
18. CONSTRUCTION, MODIFICATION, AND VENUE
This contract shall be governed by and
construed in accordance with the laws of the
state of Virginia . . . Any suit arising out
of this contract shall be instituted in
Fairfax County, Virginia and tried under
Virginia law.
(ECF No. 10-3, at 3).
5 Star acknowledges that the complaint
does not mention the 2012 Producer Contract, but nonetheless
contends that it is the operative agreement and, indeed, the
only agreement that could possibly entitle AIM to commissions
from 5 Star.
(ECF No. 10-1, at 3-4, 9).
5 Star also asserts
that, although Spyksma is not a signatory to the 2012 Producer
Contract, he is still subject to its forum selection clause
because “he was very closely related to AIM” in placing the
policies with 5 Star.
(Id. at 8).
Finally, 5 Star argues that
it did not waive its right to rely on the forum selection clause
by removing this action to federal court.
In
validity
contained
their
opposition,
or
enforceability
in
the
2012
Plaintiffs
of
Producer
4
the
(Id. at 10).
do
forum
Contract.
not
question
the
selection
clause
(ECF
12-1).
No.
Rather,
Plaintiffs
contest
the
applicability
of
the
clause,
arguing that the 2012 Producer Contract is not the contract at
issue
here.
Plaintiffs
exhibits
purporting
policies
purchased
(1) “were
.
.
.
to
by
offer
show
a
that
members
issued
number
all
of
under
of
unauthenticated
1,097
the
life
First
[the
2008
insurance
Nations
SR
Tribe
Agreement]”;
(2) “listed [Mr. Spyksma] as the insurance agent”; and (3) had
an
effective
date
of
July
1,
2012
Producer Contract even existed.
7).
–
i.e.,
before
the
2012
(See ECF Nos. 12-4 through 12-
Thus, according to Plaintiffs, the 2008 SR Agreement is the
applicable contract, and venue is proper because that contract
does not contain a forum selection clause.
In its reply, 5 Star questions Plaintiffs’ position that
all 1,097 policies were issued under the 2008 SR Agreement and
through Spyksma, individually.
its
own
collection
of
(ECF No. 14).
unauthenticated
exhibits
5 Star submits
purporting
establish AIM’s extensive role in procuring the policies.
ECF Nos. 14-1 through 14-20).
to
(See
5 Star insists that, when all of
the events at issue are viewed together, this action “falls
within the ambit” of the 2012 Producer Contract and is subject
to its mandatory forum selection clause.
II.
Standard of Review
A motion to dismiss based on a contractual forum selection
clause is properly analyzed as a motion to dismiss for improper
5
venue pursuant to Fed.R.Civ.P. 12(b)(3).
Sucampo Pharms., Inc.
v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th
Cir. 2006)
(deciding that – as between Rule 12(b)(1), Rule 12(b)(3), and
Rule 12(b)(6) – Rule 12(b)(3) is the best procedural mechanism
for analyzing forum selection clauses).
motion,
evidence
outside
the
Unlike a Rule 12(b)(6)
pleadings
may
be
consider[ed]” in ruling on a Rule 12(b)(3) motion.
“freely
Id.
All
reasonable inferences must still be drawn in the light most
favorable to the plaintiff.
612
F.Supp.2d
660,
672
CoStar Realty Info., Inc. v. Field,
(D.Md.
2009).
Moreover,
where
no
evidentiary hearing is held, a plaintiff need only make “a prima
facie showing of proper venue in order to survive a motion to
dismiss.”
Aggarao v. MOL Ship Mgt. Co., Ltd., 675 F.3d 355, 366
(4th Cir. 2012) (citing Mitrano v. Hawes, 377 F.3d 402, 405 (4th
Cir. 2004)).
III. Analysis
Although the parties devote the bulk of their briefs to
discussing the events that led to this lawsuit, 5 Star’s motion
ultimately turns on an issue mentioned only in passing – namely,
that a defendant who has properly removed an action from state
to federal court pursuant to 28 U.S.C. § 1441(a) cannot seek
dismissal for improper venue pursuant to Rule 12(b)(3) based on
a contractual forum selection clause.
6
Ordinarily,
proper
venue
for
actions
filed
district courts is governed by 28 U.S.C. § 1391.3
improper
under
§ 1391,
the
district
court
in
federal
When venue is
must
dismiss
the
action or, “if it be in the interest of justice,” transfer the
action “to any district or division in which it could have been
brought.”
28 U.S.C. § 1406(a); see also Benton v. England, 222
F.Supp.2d
728,
731
(D.Md.
2002)
(explaining
that
where
a
plaintiff lays venue incorrectly, “it is within the discretion
3
Section 1391, the general venue statute, provides that a
civil action founded solely on diversity of citizenship may be
brought in:
(1) a judicial district in which any
defendant resides, if all defendants are
residents of the State in which the district
is located;
(2)
a
judicial
district
in
which
a
substantial part of the events or omissions
giving rise to the claim occurred, or a
substantial part of property that is the
subject of the action is situated; or
(3) if there is no district in which an
action may otherwise be brought as provided
in this section, any judicial district in
which any defendant is subject to the
court’s personal jurisdiction with respect
to such action.
28 U.S.C. § 1391(b). The “residency” of a natural person who is
a permanent United States resident is “the judicial district in
which that person is domiciled,” whereas the residence of an
entity that is named as a defendant includes “any judicial
district in which such defendant is subject to the court’s
personal jurisdiction with respect to the civil action in
question.” Id. § 1391(c)(1)-(2).
7
of
this
court,
pursuant
to
28
U.S.C.
§ 1406(a),
either
to
dismiss the claims or to transfer them if it would be in the
interest of justice to do so”).4
When
an
action
is
removed
from
state
court
to
federal
court, however, venue is governed exclusively by the federal
removal
statute,
28
U.S.C.
§ 1441(a).
As
explained
by
the
United States Supreme Court, “Section 1441(a) expressly provides
that the proper venue of a removed action is ‘the district court
of the United States for the district and division embracing the
place
where
such
action
is
pending.’”
Polizzi
v.
Cowles
Magazines, Inc., 345 U.S. 663, 666 (1953) (quoting 28 U.S.C.
§ 1441(a)); see also Hollis v. Fla. State Univ., 259 F.3d 1295,
1299 (11th Cir. 2001) (“by requiring removal to the district
court for the district in which the state action is pending,”
Section
1441(a)
district”).
“properly
fixes
the
federal
venue
in
that
Thus, 28 U.S.C. § 1391 “has no application” to
actions that are removed; rather, the only question that must be
answered to determine the propriety of venue is whether removal
was effectuated to the district court “for the district and
division
embracing
originally.
the
place”
where
the
suit
was
filed
Polizzi, 345 U.S. at 665-66 (because the action was
4
By contrast, where venue is proper, 28 U.S.C. § 1404(a)
permits a district court to transfer a civil action to any other
district where it might have been brought “[f]or the convenience
of the parties and witnesses” and “in the interests of justice.”
8
filed in the Circuit Court for Dade County, Florida, and was
removed to the United States District Court for the Southern
District of Florida – i.e., the district “embracing” Dade County
– venue was proper pursuant to § 1441(a) and there was no need
to address where the corporate defendant “resided” for purposes
of § 1391); see also Lynch v. Vanderhoef Builders, 228 F.Supp.2d
644, 645 (D.Md. 2002) (because “[t]here is no question that this
Court
embraces
the
Circuit
Court
of
Cecil
County,
Maryland,
. . . venue is proper pursuant to 28 U.S.C. § 1441(a)”); Hollis,
259 F.3d at 1300 (observing that § 1441(a) establishes federal
venue in the district where the state action was pending “as a
matter of law,” even if venue would be “improper under state law
when the action was originally filed”).
Because, under Polizzi, federal venue is proper when a case
has been removed to federal court in accordance with § 1441(a),
a defendant’s post-removal Rule 12(b)(3) motion to dismiss for
improper venue must be denied, including where the motion is
premised
on
Servs.,
Inc.
a
contractual
v.
forum
Tuckman-Barbee
selection
Constr.
Co.,
clause.
No.
See
MTB
RDB-12-2109,
2013 WL 1224484, at *4 & n.7 (D.Md. Mar. 26, 2013) (denying a
Rule 12(b)(3) motion based on a forum selection clause following
the defendant’s voluntary and proper removal); Three M. Enters.,
Inc. v. Tex. D.A.R. Enters., Inc., 368 F.Supp.2d 450, 456 (D.Md.
2005) (denying the defendant’s post-removal Rule 12(b)(3) motion
9
based on a forum selection clause because the Northern Division
of the District of Maryland “plainly embraces” the Circuit Court
for Baltimore County, Maryland, and thus “venue is proper in
this
Court
as
a
matter
of
law”)
(internal
quotation
marks
omitted); Dan Dill, Inc. v. Ashley Furniture Indus., Inc., No.
07-cv-111, 2008 WL 3287255, at *1-2 (W.D.N.C. Aug. 7, 2008)
(denying
the
defendant’s
post-removal
Rule
12(b)(3)
motion
premised on a forum selection clause “[b]ecause § 1441(a) only
allows one possible venue for removal”).5
5
For the same reason, post-removal motions to transfer
pursuant to § 1406(a) are also unavailing because that statute
contemplates transfer only where venue is improper.
Where the
defendant argues that a forum selection clause requires the
action to be brought in a different federal court, it may still
seek
a
post-removal
discretionary
transfer
pursuant
to
§ 1404(a). See Three M. Enters., 368 F.Supp.2d at 456 (denying
the defendant’s alternative request to transfer pursuant to
§ 1406(a) because “[i]f a district court is the appropriate
forum for venue purposes under Section 1441, then a subsequent
transfer to another federal district court must be based upon
Section 1404(a) rather than on Section 1406(a)”) (internal
quotation marks omitted) (alteration in original); Kerobo v. Sw.
Clean Fuels Corp., 285 F.3d 531, 534 (6th Cir. 2002) (reversing a
district court’s Rule 12(b)(3) dismissal of a properly removed
action and holding that, because venue was proper upon removal
per § 1441(a), the forum selection clause at issue could be
enforced only through a motion for a discretionary transfer of
venue pursuant to 28 U.S.C. § 1404(a)); Palmetto Bank v.
BankFirst, No. 08–cv–4072–GRA, 2009 WL 212417, at *1 (D.S.C.
Jan. 28, 2009) (“After a defendant removes a case, he may not
argue the venue is inappropriate [based on a forum selection
clause].
However, he may argue, and the court may address a
transfer pursuant to 28 U.S.C. § 1404(a).”). By contrast, where
(as here) a defendant contends that a contractual provision
requires the case to be litigated in a state court, there is no
basis for making an alternative request to transfer pursuant to
10
Some
defendant,
courts
after
question
removal,
whether
Polizzi
seeks
dismissal
contractual forum selection clause.
applies
where
pursuant
to
a
a
Most notably, the First
Circuit has observed that “a different issue is presented” when
a defendant challenges venue based on a contractual provision as
opposed to the requirements of § 1391, because “a valid forum
selection clause operates to render the venue improper, not only
under § 1391, but also under § 1441(a).”
Lambert v. Kysar, 983
F.2d 1110, 1113 n.2 (1st Cir. 1993) (emphasis added); see also,
e.g., Cross Roads R.V. Ctr., Inc. v. Textron Fin. Corp., 609
§ 1404(a), which does not permit transfer to a state court. In
such circumstances, the only action that a federal district
court may take is to deny the defendant’s Rule 12(b)(3) motion
to dismiss for improper venue.
See Kerobo, 285 F.3d at 534
(explaining that proper removal pursuant to § 1441(a) requires
denial of a Rule 12(b)(3) motion to dismiss); id. at 539-40
(Bertelsman, J., dissenting) (observing that the majority
opinion in Kerobo requires denial of a motion to dismiss even
where there is no related motion to transfer pending because
“the forum selection clause requires a forum in a foreign
country or state court” and transfer is not available).
Although this discrepancy may seem incongruous, it is
significant that, in considering whether to transfer pursuant to
§ 1404(a), “the existence of a valid forum selection clause is
not dispositive as the decision to transfer is within the
court’s discretion and must be based on an ‘individualized,
case-by-case
consideration
of
convenience
and
fairness.’”
Tuckman-Barbee, 2013 WL 1224484, at *5 (quoting Stewart Org. v.
Ricoh Corp., 487 U.S. 22, 29 (1988) and ultimately denying the
motion to transfer). Thus, a defendant who removes an action to
federal court pursuant to § 1441(a) will always run the risk of
losing its ability to enforce a contractual forum clause,
regardless of whether that clause designates a federal, state,
or foreign court as the proper forum.
11
F.Supp.2d 151, 152-53 (D.Mass. 2009) (relying on Lambert to hold
that,
despite
removing
the
action
pursuant
to
§
1441,
the
defendant could still seek dismissal based on a forum selection
clause); Assetworks, Inc. v. City of Cincinnati, No. 02-0351-FB,
2003 WL 25463096, at *5-*8 (W.D.Tex. Mar. 31, 2003) (holding
that, although venue was “arguably proper” pursuant to § 1441(a)
and Polizzi, it was appropriate under the circumstances of the
case
to
consider
the
defendant’s
post-removal
Rule
12(b)(3)
motion to dismiss based on a forum selection clause “that did
not provide for any federal court forum”); Tokio Marine & Fire
Ins.
Co.,
Ltd.
v.
Nippon
Express
U.S.A.
(Ill.),
Inc.,
118
F.Supp.2d 997, 999 (C.D.Cal. 2000) (distinguishing Polizzi and
its
progeny
as
not
involving
forum
selection
clauses
and
observing that “defendants often challenge venue based on forum
selection clauses even after removal”) (citing Spradlin v. Lear
Siegler Mgmt. Servs. Co., Inc., 926 F.2d 865, 868–69 (9th Cir.
1991)).6
6
The two cases relied on by 5 Star (see ECF No. 10-1, at
10) focus solely on whether the defendants had waived their
right to object to venue by not timely raising the forum
selection clause issue and did not specifically address the
effect that § 1441(a) has on venue.
See Kilgallen v. Network
Solutions, 99 F.Supp.2d 125, 129 (D.Mass. 2000) (holding that
the defendant was not required to raise its forum selection
clause defense in its notice of removal and entertaining the
defendant’s motion to dismiss for improper venue or, in the
alternative, to transfer); Torres v. SOH Distrib. Co., Inc., No.
10-cv-179, 2010 WL 1959248, at *3 n.3 (E.D.Va. May 13, 2010)
12
The United States Court of Appeals for the Fourth Circuit
has
not
squarely
Tuckman-Barbee,
addressed
2013
WL
this
1224484,
split
at
*4
of
&
authority.
n.7.
The
See
Fourth
Circuit has, however, held that a defendant’s attempt to enforce
a forum selection clause is properly treated as an improper
venue
defense
affecting
12(b)(1)
the
or
12(b)(6).
under
court’s
the
Rule
12(b)(3)
subject
merits
of
rather
matter
a
than
as
jurisdiction
plaintiff’s
See Sucampo, 471 F.3d at 548-50.
claim
an
issue
under
Rule
under
Rule
In light of the
Fourth Circuit’s view of forum selection clauses, and in the
absence of controlling precedent to the contrary,7 the approach
adopted by Judge Bennett in Three M. Enterprises and TuckmanBarbee will be used here.
As 5 Star acknowledges (see ECF No. 1 ¶ 4), the Southern
Division
of
the
District
of
Maryland
“embraces”
the
Circuit
Court for Calvert County, Maryland, meaning that venue is proper
(“quickly discard[ing]” the plaintiff’s argument that the
defendant had waived its right to enforce the forum selection
clause by removing to federal court with a single citation to
Kilgallen).
7
On at least one occasion, the Fourth Circuit has – in an
unpublished, per curiam opinion – affirmed a district court’s
Rule 12(b)(3) dismissal of a removed action based on a forum
selection clause, without discussing the effect that § 1441(a)
has on venue. See Tuckman-Barbee, 2013 WL 1224484, at *4 & n.7
(summarizing Baker v. Adidas Am., Inc., 335 F.App’x 356, 361 (4th
Cir. 2009)).
As Judge Bennett observed in Tuckman-Barbee, the
unpublished opinion in Adidas is not binding precedent.
13
as a matter of law pursuant to Section 1441(a) and Polizzi.
Accordingly,
5
Star’s
Rule
12(b)(3)
motion
to
dismiss
for
improper venue based on the forum selection clause in the 2012
Producer Contract must be denied.8
IV.
Conclusion
For
the
foregoing
reasons,
the
motion
to
dismiss
for
improper venue filed by Defendant 5 Star Life Insurance Company
will be denied.
A separate Order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
8
Because 5 Star has not requested transfer to another
federal district court (and, indeed, appears to contend that
transfer is not possible because venue would not be proper in
any federal district court pursuant to the 2012 Producer
Contract), the propriety of such a transfer need not, and will
not, be considered.
14
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