ProSource Technologies, LLC v. Certain Underwriters at Lloyd's London Subscribing to Policies PGIARK04292-00 and PGIXS00178-00
ORDER granting in part and denying in part 10 Motion to Dismiss; granting 10 Motion to Transfer/Change Venue (Written Opinion) Signed by Senior Judge David S. Doty on 6/9/2017. (DLO)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 16-4356(DSD/LIB)
Prosource Technologies, LLC,
Certain Underwriters at
Lloyd’s London Subscribing to
Lauren E. Lonergan, Esq. and Briggs & Morgan, PA, 80 South 8th
Street, Suite 2200, Minneapolis, MN 55402, counsel for
Dan D. Kohane, Esq. and Hurwitz & Fine, P.C., 424 Main Street,
1300 Liberty Building, Buffalo, NY 14202 and Stacy A. Broman,
Esq. and Meagher & Geer, PLLP, 33 South 6th Street, Suite 4400,
Minneapolis, MN 55402, counsel for defendant.
This matter is before the court upon the motion to dismiss or
to transfer venue by defendant Certain Underwriters at Lloyd’s
London Subscribing to Policies PGIARK04292-11 and PGIXS00178-00
Based on a review of the file, record, and
proceedings herein, and for the following reasons, the court grants
the motion in part and transfers the case to the United States
District Court for the Northern District of New York.
ProSource Technologies, LLC’s settlement with non-party Housing
Trust Fund Corporation (HTFC). ProSource is a Minnesota consulting
Compl. ¶¶ 10, 15.
In April 2013, HTFC, a governmental
unit of the State of New York, hired ProSource to manage certain
recovery programs designed to assist New York citizens who were
victims of SuperStorm Sandy.
Id. ¶¶ 1, 17.
refused to pay ProSource over $20 million due under the contract
because of alleged billing errors.
Id. ¶ 18.
In November 2014,
ProSource sued HTFC in New York state court (Albany) alleging
breach of contract (Underlying Litigation).
Id. ¶ 19.
a counterclaim alleging billing errors and poor performance by
ProSource in October 2015.
Id. ¶ 20.
At the time of the Underlying Litigation, ProSouce was insured
by Underwriters under two relevant policies.
liability policy (Primary Policy), in effect from November 1, 2014,
to November 1, 2015, covers “DAMAGES that [ProSource is] legally
obligated to pay as a result of CLAIMS.”
Ex. 1, at 72.
Id. ¶ 22; Broman Decl.
Damages include “an actual or alleged WRONGFUL ACT
with respect to PROFESSIONAL SERVICES” provided by ProSource.
Compl. ¶ 22; Broman Decl. Ex. 1, at 72, 74.
With respect to
settlement of any claims, the policy states that Underwriters “will
not settle or compromise any CLAIM without YOUR consent” and that
ProSource “shall do nothing to prejudice [Underwriters’] rights
under this policy nor should [ProSource] admit liability or settle
any CLAIM without [Underwriters’] written consent.”
Broman Decl. Ex. 1, at 77.
Underwriters agreed to defend “any
CLAIM to which this insurance applies.”
Ex. 1, at 72.
Compl. ¶ 22;
Compl. ¶ 23; Broman Decl.
The Primary Policy contains a choice of law
provision, which provides that any dispute “over the meaning,
interpretation or operation of any term, condition, definition or
provision of this policy” will be governed by the “substantive law
of the State of New York ... regardless of the choice of law or
conflicts of law principles.”
Broman Decl. Ex. 1, at 80-81.
Underwriters also issued a Following Form Excess Policy (Excess
Policy) covering damages exceeding the Primary Policy limits.
Compl. ¶ 24.
On October 30, 2015, ProSource notified Underwriters of HTFC’s
counterclaim and requested coverage under the policies.
Underwriters agreed to defend ProSource and reserved its
ProSource, Underwriters failed to meaningfully participate in the
Underlying Litigation despite ProSource’s efforts to secure its
involvement. Id. ¶¶ 27-35. In late April 2016, ProSource and HTFC
Underwriters ignored ProSource’s initial request for guidance, but
later responded that it needed a written settlement proposal from
Id. ¶ 43.
HTFC was unwilling to do so for a variety of
Id. ¶ 44.
Despite numerous efforts by ProSource to
opportunity to secure a reasonable settlement, ProSource agreed to
settle the case without Underwriters’ involvement or approval. Id.
HTFC agreed to pay ProSource $12.5 million, which resulted
in an offset in HTFC’s favor of
refused to accept the settlement terms and threatened that it would
deem coverage forfeited if ProSource finalized the settlement. Id.
ProSouce finalized the settlement, thereby concluding the
On December 6, 2016, ProSource commenced this case against
Underwriters in Anoka County District Court alleging breach of the
duties to defend and indemnify and breach of the implied duty of
Underwriters timely removed and now moves to
dismiss or to transfer the case to the Northern District of New
Standard of Review
transfer.1 Section 1404(a) provides that “[f]or the convenience of
Underwriters moves to transfer under 28 U.S.C. § 1406,
which authorizes the court to dismiss or transfer a case brought in
the wrong venue or district.
In contrast, 28 U.S.C. § 1404(a)
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.”
Deciding whether to order a
transfer under § 1404(a) “require[s] a case-by-case evaluation of
the particular circumstances at hand and a consideration of all
Terra Int’l, Inc. v. Miss. Chem. Corp., 119
F.3d 688, 691 (8th Cir. 1997). The relevant factors generally fall
into three categories: (1) the convenience of the parties; (2) the
convenience of the witnesses; and (3) the interests of justice.
There is, however, “no exhaustive list of specific factors to
Convenience of the Parties and Witnesses
The merits of the case - coverage relating to ProSource’s
settlement with HTFC - turn on the nature and circumstances of the
claims and counterclaims in the Underlying Litigation and the
structure of the settlement.
ProSource commenced the Underlying
Litigation, which involved events that took place in and near
Albany New York in the wake of SuperStorm Sandy.
HTFC hired ProSource to administer federal relief funds on behalf
“permits, but does not require, transfer when a case is initially
filed in an appropriate venue but another court is a more
convenient forum for trial.” Wells Fargo Bank, N.A. v. First Cal.
Mortg. Co., No. 12-2192, 2013 WL 358977, at *2 (D. Minn. Jan. 30,
2013). Because there is no legitimate dispute that this court is
a proper venue for this case, the court will analyze transfer under
Compl. ¶¶ 15-17; Broman Decl. Ex. 2 ¶¶ 13-21.
did so by hiring and training over 400 employees, most of whom were
See Broman Decl. Ex. 2 ¶¶ 3-4, 22-25, 27-28, 30,
ProSource managed the project from offices in New York,
circumstances, the court is persuaded that resolution of this case
will require evidence and testimony from numerous New York based
third-party witnesses, many, if not all, of whom are likely outside
the court’s subpoena power.
Therefore, the convenience of the
witnesses will best be served by transferring the case to New York.
Any inconvenience to ProSource is de minimis given that it has
engaged in substantial business in New York relating to this case
and commenced the Underlying Litigation against HTFC in Albany.
Interests of Justice
The interests of justice typically involve considerations of
“(1) judicial economy, (2) the plaintiff’s choice of forum, (3) the
comparative costs to the parties of litigating in each forum,
(4) each party’s ability to enforce a judgment, (5) obstacles to a
fair trial, (6) conflict of law[s] issues, and (7) the advantages
of having a local court determine questions of local law.”
Int’l, Inc., 119 F.3d at 696. Other than the plaintiff’s choice of
forum, all factors are either neutral or support transfer.
ProSource first argues the interests of justice weigh in its
favor because Underwriters agreed to abide by its choice of forum
in the policies’ service of suit clause:
It is agreed that in the event of the failure of the
Underwriters hereon to pay any amount claimed to be due
hereunder, the Underwriters hereon, at the request of the
Insured (or Reinsured), will submit to the jurisdiction
of a Court of competent jurisdiction in the United
Broman Decl. Ex. 1, at 86.
But the clause also expressly states
that Underwriters did not waive the right “to seek a transfer of a
case to another Court as permitted by the laws of the United States
or of any State in the United States.”
The service of suit
clause thus does not mandate litigation in ProSource’s chosen
forum, nor does it preclude Underwriters from seeking a transfer to
another court of competent jurisdiction.
The court is also unpersuaded by ProSource’s argument that
transfer is inappropriate because the negotiation of the policies
and Underwriters’ denial of coverage may have occurred outside the
proposed transferee district. As already discussed, coverage turns
on the events involved in the Underlying Litigation, much of which
appears to have occurred in New York, including the Northern
The fact that some of the conduct at issue took place in
New York but outside the Northern District does not render the
proposed transferee district improper or inconvenient.
The court further notes that the parties agreed that New York
law would apply to disputes “over the meaning, interpretation or
operation of any term, condition, definition or provision of this
Broman Decl. Ex. 1, at 80-81.
This case involves
interpretation of the policies and duties that arise directly from
the insurance contract.
Therefore, New York law will likely apply
to the entirety of this case.
As a result, the relevant factors favor transfer to the
Northern District of New York.
The court will deny Underwriters’
motion to dismiss without prejudice so that it may be considered by
the transferee court.
Accordingly, based on the above, IT IS HEREBY ORDERED that:
Defendant’s motion to dismiss or transfer venue [ECF No.
10] is granted in part;
The case is transferred to the United States District
Court for the Northern District of New York; and
The motion to dismiss is denied without prejudice.
Dated: June 9, 2017
s/David S. Doty
David S. Doty, Judge
United States District Court
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