Grisham v. Guarantee Trust Life Insurance Company

Filing 41

MEMORANDUM AND ORDER re: 28 MOTION to Sever and Transfer Third-Party Complaint Pursuant to 28 USC 1404(a) filed by Third Party Defendant Platinum Supplemental Insurance, Inc. IT IS HEREBY ORDERED that Platinum's Motion to Sever and Transfer (Doc. 28) is granted. IT IS FURTHER ORDERED that Guarantee Trust Life Insurance Company's Third-Party Complaint against Third-Party Defendant Platinum Supplemental Insurance, Inc. is severed from the instant action and transferred to t he United States District Court for the Northern District of Illinois, where it can be consolidated with the current pending action, Platinum Supplemental Insurance, Inc. v. Guarantee Trust Life Insurance Company, Case No. 1:17CV08872. IT IS FURTHER ORDERED that the stay of discovery previously imposed in this matter is lifted. IT IS FURTHER ORDERED that the parties shall file an Amended Joint Proposed Scheduling Plan no later than April 19, 2018. A scheduling conference will be set at a later date. Signed by Magistrate Judge Abbie Crites-Leoni on 4/5/18. (CSG)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
SOUTHEASTERN DIVISION
THOMAS W. GRISHAM,

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) Case No. 1:16 CV 283 ACL
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Plaintiff,
vs.
GUARANTEE TRUST LIFE
INSURANCE COMPANY,
Defendant.

MEMORANDUM AND ORDER
Pending before the Court is the motion of Third-Party Defendant Platinum Supplemental
Insurance, Inc., f/k/a Platinum Services, Inc. (“Platinum”) to sever and transfer the third-party
claim in this matter to the United States District Court for the Northern District of Illinois pursuant
to 28 U.S.C. § 1404(a). (Doc. 28.) Third-Party Plaintiff Guarantee Trust Life Insurance
Company (“GTL”) opposes the motion, which is fully briefed and ripe for review. For the
following reasons, the Court will grant Platinum’s Motion.
Procedural Background
Plaintiff Thomas W. Grisham filed this action on December 8, 2016, asserting breach of
contract, vexatious refusal to pay, and defamation claims against Defendant GTL related to an
insurance policy issued by GTL to Grisham. (Doc. 1.) In the Complaint, Grisham states that
GTL issued a First Diagnosis Cancer policy to him with an effective date of November 4, 2014
(“Policy”). Derek Mays, described by Grisham as an agent of GTL, solicited and completed
Grisham’s insurance application. Grisham asserts that he provided Mays with honest and
accurate responses to all questions asked of him. Specifically, he contends that he disclosed all
diagnostic testing he had undergone, and that Mays advised him to respond “no” to Question #3.
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Grisham alleges that he was diagnosed with mantel cell lymphoma on November 11, 2014, which
triggered benefits under the Policy. He claims that GTL wrongfully denied his claim for benefits
on March 2, 2015.
On October 18, 2017, GTL filed a Third-Party Complaint against Platinum, arguing that
GTL is entitled to contractual indemnification and contribution from Platinum for any of
Platinum’s and its agents’ actions contributing to the loss alleged in Grisham’s Complaint. (Doc.
23.) According to the Third-Party Complaint, GTL and Platinum entered into a development and
Exclusive Marketing Agreement on April 4, 2002 (“Contract”) and were parties to another
agreement dated November 5, 2009 (“SIM Agreement”). Both the Contract and SIM agreement
provided that GTL and Platinum would jointly develop various insurance products that would be
sold exclusively by Platinum and underwritten by GTL. The Contract limited Platinum’s
authority to make, alter, or discharge any insurance policy except as authorized by the Contract or
GTL. In the Contract, Platinum agreed that it was responsible for its, and its agents, compliance
with all local, state, and federal laws and regulations, and that Platinum and its agents would abide
by all rules, guidelines, and requirements established by GTL in conducting business under the
Contract. Platinum also agreed that it would comply with and cause its agents to comply with, all
of GTL’s company procedures and rules concerning advertising policies, marketing guidelines,
and GTL’s code of ethical market conduct. Further, the Contract stated that Platinum would hold
GTL and its agents harmless from any damages, liabilities, or claims relating to or arising from any
act or omission by Platinum and its agents regarding the Contract or any applicable law, rule, or
regulation. GTL alleged that Derek Mays was an agent of Platinum, and that Grisham claims
Mays instructed him to answer portions of the application incorrectly in violation of the Contract.
GTL contends that, if Grisham’s claims are true, the actions of Platinum and its agent are within
the terms of the indemnification and contribution provisions in the Contract between Platinum and
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GTL. GTL alleges that it is entitled to contractual indemnity and contribution from Platinum for
Platinum and its agents’ acts, including: making negligent misrepresentations concerning
Grisham’s answers to the insurance policy application; breaching the Contract with GTL by failing
to indemnify and contribute to the defense of this lawsuit; negligent supervising and monitoring its
agents in the marketing and selling of insurance policies that are underwritten by GTL; and
intentional actions or omissions in the solicitation and procurement of the insurance policy
application of Grisham.
Past Litigation between GTL and Platinum Relevant to Motion to Sever1
On December 11, 2017, Platinum filed the instant Motion to Sever and Transfer the
Third-Party Complaint. Platinum states that GTL and Platinum have litigated aspects of their
business relationship on two prior relevant occasions. See Platinum Supp. Ins. Co., Inc. v.
Guarantee Trust Life Ins. Co., Case No. 14-4767 (N.D. Ill); Guarantee Trust Life Ins. v. Platinum
Supp. Ins., Case No. 2015-CH-17997, Cook County, Illinois. Both prior cases resulted in
confidential settlement agreements. See Doc. 28-1 (“Settlement Agreement No. 1”); Doc. 28-2
(“Settlement Agreement No. 2”). Platinum argues that any claims GTL has arising out of
Platinum’s performance under any marketing agreement (including those claims alleged by
Grisham in the instant action), have been resolved in the settlement of the previous Cook County
lawsuit.
The Cook County lawsuit involved allegations that Platinum breached the Marketing
Agreement by not training or supervising its agents properly. The centerpiece of GTL’s Cook
County lawsuit was a separate lawsuit, the Casper Lawsuit. That suit was brought against GTL
and Platinum by a policy holder in Colorado. The suit alleges that a sales agent retained by

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The Court’s summary of the litigation history between the parties is taken from Platinum’s
Motion to Sever and Transfer, with any disputes noted. (Doc. 28.)
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Platinum misrepresented terms of an insurance policy being sold. The alleged misrepresentations
were the basis for the lawsuit filed against GTL and Platinum in Colorado state court. The case
ultimately resulted in a jury verdict against GTL. After the jury verdict, GTL sought damages
from Platinum for breach of the Marketing Agreement. Specifically, GTL alleged Platinum
failed to properly train and supervise its sales force. GTL identified as elements of its damages
the defense costs associated with defending the Casper Lawsuit and the potential damages
awarded therein.
On February 27, 2017, GTL and Platinum agreed to settle the Cook County lawsuit and
reduced the terms of the settlement to a written agreement (“Settlement Agreement No. 2”).
Settlement Agreement No. 2 contains a mandatory forum selection clause requiring any disputes
relating to the Cook County lawsuit settlement be litigated in the United States District Court for
the Northern District of Illinois. On March 31, 2017, Judge Thomas R. Allen entered an Order
dismissing the Cook County lawsuit stating “[t]he parties agree that all claims that were filed or
could have been filed in the Cook County litigation shall be deemed settled and resolved.” (Doc.
28-4 at p. 1.)
On October 18, 2017, GTL filed the third-party action in the instant case. (Doc. 23.)
GTL’s third-party action includes claims that Platinum failed to train or supervise its agents.
Platinum argues these claims are virtually identical to those brought and settled in the Cook
County lawsuit. As a result, Platinum filed a declaratory judgment action against GTL in the
United States District Court for the Northern District of Illinois (“Declaratory Judgment Action”).
Platinum requests that the Court sever the third-party claim in this Court, and transfer it to the
Northern District of Illinois, where it can be litigated in accordance with the terms of Settlement
Agreement No. 2.

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Discussion
As noted above, Platinum seeks to have this case transferred to the United States District
Court for the Northern District of Illinois pursuant to 28 U.S.C. § 1404(a). Section 1404(a)
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 or to any district or division to which all parties have consented.” 28 U.S.C. § 1404(a).
GTL makes the following arguments in opposition to Platinum’s Motion: (1) Platinum has
not met the burden for relief pursuant to 28 U.S.C. ' 1404(a); (2) the Motion defeats the purpose of
Rule 14; and (3) this case does not arise out of the settlement agreement being litigated in the
Northern District of Illinois. The undersigned will discuss these claims in turn.
I.

28 U.S.C. ' 1404(a) Analysis
Platinum argues that transfer of this case pursuant to 28 U.S.C. ' 1404(a) is appropriate

according to the parties’ agreement and the United States Supreme Court’s decision in Atlantic
Marine Const. Co. v. United States Dist. Court for the W. Dist. of Tex., 134 S.Ct. 568 (2013).
GTL, relying upon Terra Int’l Inc. v. Miss. Chem. Corp., 119 F.3d 688, 691 (8th Cir.
1997), contends that Platinum has not met its burden for relief. GTL claims that the following
facts support the denial of Platinum’s Motion: Grisham is a resident of Missouri, GTL and
Platinum both conducted business in Missouri, the witnesses are residents of Missouri, and the
Policy was procured in Missouri. GTL further argues that it favors judicial economy to have all
of the present claims litigated in the same case.2

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GTL also argues in this section that Platinum incorrectly refers to the instant action as an
“‘indemnity’ action only.” (Doc. 38 at 5.) Platinum in fact accurately refers to the third-party
action as seeking “contractual indemnity and contribution from Platinum for alleged breaches to
the Marketing Agreement, including failing to train or supervise its sales staff.” (Doc. 29 at 4.)
To the extent GTL argues that the Settlement Agreement does not apply to the third-party claim,
the undersigned will discuss this issue below.
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In determining whether to exercise its discretion to transfer an action pursuant to § 1404(a),
the Court ordinarily considers a myriad of factors related to the parties’ private interests, such as
convenience of the parties and witnesses, access to sources of proof and evidence, the availability
of compulsory process for attendance of unwilling witnesses, the cost of obtaining witness
attendance, the possibility of viewing relevant premises, and other practicalities related to ensuring
expedient and inexpensive trials. Atl. Marine Const. Co., Inc., 134 S.Ct. at 581-82. The Court
also considers various public-interest factors, such as administrative difficulties related to court
congestion, local interests in having localized controversies decided at home, and the interest of
having diversity cases determined by a court familiar with the applicable law. Id.; see Terra Int’l,
Inc., 119 F.3d at 691. Typically, the burden is upon the party seeking transfer to “make a clear
showing that the balance of interests weighs in favor of the proposed transfer, and unless that
balance is strongly in favor of the moving party, the plaintiff’s choice of forum should not be
disturbed.” Medicap Pharm., Inc. v. Faidley, 416 F. Supp.2d 678, 686 (S.D. Iowa 2006)
(citations omitted)).
This “typical” § 1404(a) analysis, however, does not apply in this case due to the presence
of a valid forum selection clause. The Supreme Court has instructed that “[w]hen the parties have
agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the
forum specified in that clause.” Atl. Marine Const. Co., 134 S.Ct. at 581. “[W]hen parties have
contracted in advance to litigate disputes in a particular forum, courts should not unnecessarily
disrupt the parties’ settled expectations.” Id. at 583. In a case not involving a forum-selection
clause, a district court must evaluate both the convenience of the parties and various public-interest
considerations. Id. at 581.
If there is a valid forum-selection clause, however, the district court must adjust its usual §
1404(a) analysis in a number of ways. “First, the plaintiff’s choice of forum merits no weight.”
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Id. Instead, as the party “defying” the clause, “the plaintiff bears the burden of establishing that
transfer to the forum for which the parties bargained is unwarranted.” Id. Second, a district
court “should not consider arguments about the parties’ private interests.” Id. at 582. Once
parties agree to a forum-selection clause, “they waive the right to challenge the preselected forum
as inconvenient,” and the district court may consider public-interest factors only. Id. What is
more, public-interest factors “will rarely defeat a transfer motion” with “the practical result ... that
forum-selection clauses should control except in unusual cases.” Id. A third difference, is that
“when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a
different forum, a § 1404(a) transfer of venue will not carry with it the original venue’s
choice-of-law rules—a factor that in some circumstances may affect public-interest
considerations.” Id. (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241, n.6 (1981)).
“[P]roper application of § 1404(a) requires that a forum-selection clause be given controlling
weight in all but the most exceptional cases.” Id. at 579 (internal citations omitted).
Additionally, “[t]he distinction between mandatory and permissive forum selection clauses
matters for the purposes of the § 1404 analysis.” Discovery Pier Land Holdings, LLC v.
Visioneering Envision.Design.Build, Inc., Case No. 4:14CV2073 (CEJ), 2015 WL 1526005, at *3
(Apr. 2, 2015). If the forum selection clause is mandatory, the Court must apply the Atlantic
Marine decision and adjust its usual § 1404(a) analysis by refusing to consider arguments about
the parties’ private interests in favor of public interest factors only. Atl. Marine Const. Co., Inc.,
134 S. Ct. at 582.
The forum selection clause at issue is contained in paragraphs two and 13 of Settlement
Agreement No. 2 (Doc. 38-1), which was filed under seal. As an initial matter, the Court finds
that the forum selection clause, providing that disputes “shall be resolved” by filing suit in the
Northern District of Illinois, id., at ¶ 13, is mandatory rather than permissive.
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GTL does not address the standard set forth in Atlantic Marine, nor does GTL argue that
the forum-selection clause in this case is invalid. Instead, GTL conducts the typical interest factor
analysis and cites Terra, which was decided prior to Atlantic Marine. Because a valid
forum-selection clause is present in this matter, the private interest factors discussed by GTL do
not control. Additionally, GTL is not aided by Terra, as the Eighth Circuit ultimately found that
the forum selection clause at issue applied and the district court did not err in transferring the case
to the agreed upon forum. Terra Intern., Inc., 119 F.3d at 697.
GTL agreed to the relevant forum selection clause on February 28, 2017. At that time,
GTL was aware of Grisham’s action, as it filed its Answer to Grisham’s Complaint on February 3,
2017. Pursuant to Atlantic Marine, the Court should enforce the forum selection clause and
transfer the case to the United States District Court for the Northern District of Illinois, unless GTL
satisfies its burden to show that this case presents extraordinary circumstances such that the forum
selection clause should not be enforced. Although GTL does not specifically argue that
extraordinary circumstances exist, GTL makes the following arguments in opposition to transfer:
transfer would defeat the purpose of Rule 14; and this case does not arise out of the settlement
agreement being litigated in the Northern District of Illinois. The Court will discuss these
arguments to determine whether they constitute extraordinary circumstances.
II.

Rule 14

Rule 14 allows a defending party to bring an action against a nonparty “who is or may be
liable to it for all or part of the claim against it.” Fed. R. Civ. P. 14(a)(1). GTL argues that
transfer of the third-party claim would defeat the purpose of Rule 14, which is to avoid
inconsistent results and unnecessary duplication of litigation.

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GTL’s claim lacks merit. Rule 14 specifically contemplates motions to sever and transfer,
as it provides that a party “may move to strike the third-party claim, to sever it, or to try it
separately.” Fed. R. Civ. P. 14(a)(4).
GTL cites no authority for the proposition that an impleaded party is precluded from filing
a motion to transfer under 28 U.S.C. ' 1404(a), or that the interests of Rule 14 outweigh the right to
transfer under 28 U.S.C. ' 1404(a). See Lyon Fin. Servs., Inc. v. Dutt, 2008 WL 5104686 at *2
(D. Minn. 2008) (“an impleaded defendant can move to transfer under 28 U.S.C. ' 1404(a).”).
Indeed, other courts considering this issue have rejected GTL’s argument and enforced
forum selection clauses invoked by third-party defendants against third-party plaintiffs.

See,

e.g., Pinkus v. Sirius XM Radio Inc., 255 F. Supp. 3d 747, 750-51 (N.D. Ill. 2017); Global Quality
Foods, Inc. v. Van Hoekelen Greenhouses, Inc., 2016 WL 4259126, *5 (N.D. Cal. Aug. 12, 2016);
Robrinzine v. Big Lots Stores, Inc., 2016 WL 3459733 (N.D. Ill. June 24, 2016). As noted by the
Northern District of Illinois, “[a]lthough judicial efficiency is important, the Supreme Court has
instructed that forum selection clauses should be enforced ‘in all but the most exceptional cases.’”
Pinkus, 255 F. Supp.3d at 751 (quoting Atl. Marine Const. Co., 134 S.Ct. at 581.)
GTL argues that Platinum is seeking to cause one trial against Platinum in the Northern
District of Illinois to determine whether Mr. Mays wronged Grisham, and another trial in the
Eastern District of Missouri to determine the same fact, in contravention of the purpose of Rule 14.
GTL’s characterization is inaccurate. If the third-party action is transferred, Grisham will
proceed to litigate his case in this Court, while GTL and Platinum will litigate the applicability of
the Settlement Agreement in the Northern District of Illinois.
Thus, the Court finds that Platinum’s status as an impleader in this action does not
demonstrate “extraordinary circumstances” precluding the enforcement of the forum selection
clause.
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III.

Applicability of Settlement Agreement

Finally, GTL argues that Platinum’s Motion should be denied because the third-party claim
in this case does not arise out of the settlement agreement being litigated in the Northern District of
Illinois. GTL contends that this action arises out of a tort that Platinum allegedly committed and
the breach of a marketing agreement. GTL states that Platinum is attempting to confuse the Court
as to which “agreement” the forum selection clause is referring, and the filing of the confidential
settlement agreement under seal is “problematic because Platinum is arguing that this court has no
business interpreting that agreement.” (Doc. 38 at 6-7.)
Platinum responds that the issue of whether the Third-Party Complaint arises out of the
Settlement Agreement is to be decided in the declaratory judgment action pending in the Northern
District of Illinois, the forum upon which GTL and Platinum contractually agreed to resolve
disputes regarding the Settlement Agreement. Platinum states that, before the merits of GTL’s
tort and contract claims can be decided, it must first be determined whether the Third-Party
Complaint is subject to the Settlement Agreement.
The Court agrees that the issue of whether the Third-Party Complaint is subject to the
Settlement Agreement is an issue to be decided by the Northern District of Illinois. The terms of
the Settlement Agreement require that any disputes related to the agreement be resolved in the
Northern District of Illinois. At the time GTL agreed to the forum selection clause, GTL was
aware of the instant action. Rather than filing a complaint in the Northern District of Illinois,
GTL chose to file the action in this Court. In order for this Court to determine whether Platinum’s
Motion to Sever and Transfer should be granted based on the forum selection clause, the Court
must review the contract. Platinum appropriately filed the relevant documents under seal for this
Court’s review for this limited purpose.

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The Court therefore finds that GTL fails to demonstrate that “extraordinary circumstances
unrelated to the convenience of the parties clearly disfavor a transfer.” Thus, Atlantic Marine
requires that this Court transfer GTL’s Third-Party Complaint to the Northern District of Illinois.
Accordingly,
IT IS HEREBY ORDERED that Platinum’s Motion to Sever and Transfer (Doc. 28)
is granted.
IT IS FURTHER ORDERED that Guarantee Trust Life Insurance Company’s
Third-Party Complaint against Third-Party Defendant Platinum Supplemental Insurance, Inc. is
severed from the instant action and transferred to the United States District Court for the Northern
District of Illinois, where it can be consolidated with the current pending action, Platinum
Supplemental Insurance, Inc. v. Guarantee Trust Life Insurance Company, Case No.
1:17CV08872.
IT IS FURTHER ORDERED that the stay of discovery previously imposed in this matter
is lifted.
IT IS FURTHER ORDERED that the parties shall file an Amended Joint Proposed
Scheduling Plan no later than April 19, 2018. A scheduling conference will be set at a later date.

Dated this 5th day of April, 2018.

______________________________________
ABBIE CRITES-LEONI
UNITED STATES MAGISTRATE JUDGE

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