FIN ASSOCIATES, LP et al v. HUDSON SPECIALTY INSURANCE COMPANY
Filing
26
OPINION. Signed by Judge Susan D. Wigenton on 8/18/2016. (JB, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Case: 2:15-cv-02245-SDW-SCM
FIN ASSOCIATES, LP; SB MILLTOWN
ASSOCIATES,
LP;
LAWRENCE
S.
BERGER;
ROUTE
88
OFFICE
ASSOCIATES, LTD.; SB BUILDING
ASSOCIATES, LP; and ROUTE 18
CENTRAL PLAZA, LLC,
OPINION
Plaintiffs,
August 18, 2016
v.
HUDSON
SPECIALTY
INSURANCE
COMPANY,
Defendant.
WIGENTON, District Judge.
Before this Court is Defendant Hudson Specialty Insurance Company’s (“Hudson” or
“Defendant”) Motion to Dismiss the Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6), or
to Compel Arbitration. Jurisdiction is proper pursuant to 28 U.S.C. §§ 1332. 1 Venue is proper
pursuant to 28 U.S.C. § 1391.
For the reasons stated herein, the Motion to Compel Arbitration is GRANTED. The
Motion to Dismiss is DENIED as MOOT.
1
On December 15, 2015, this Court granted Defendant’s first motion to dismiss the complaint without prejudice,
noting that Plaintiffs failed to properly address the issue of subject matter jurisdiction regarding the diversity of the
individual members of Plaintiffs’ partnerships and limited liability companies. (See Dkt. Nos. 16-17.); see Swiger v.
Allegheny Energy, Inc., 540 F.3d 179, 182 (3d Cir. 2008); Zambellini Fireworks Mfg. Co. v. Wood, 592 F.3d 412,
418 (3d Cir. 2010). Plaintiffs subsequently amended their Complaint and now properly aver complete diversity of
citizenship, which Defendant does not contest. (See Am. Compl. ¶¶ 1-7.)
1
BACKGROUND
Hudson, a property and casualty insurance company, issued an insurance policy
(“Policy”) to US Land Resources (“USLR”), a developer with insurable interest in over twenty
different properties, including one with an estimated value of $9.2 million. (Eapen Cert., Ex. A
at HUD000438, HUD000439.) Although the Policy lists USLR as the only “named insured,”
Plaintiffs Fin Associates, LP (“Fin Associates”), SB Milltown Associates, LP (“SB Milltown”),
Lawrence S. Berger, Esq. (“Berger”), Route 88 Office Associates, Ltd. (“Route 88”), SB
Building Associates, LP (“SB Building”), and Plaintiff Route 18 Central Plaza, LLC (“Route
18”), (collectively, “Plaintiffs”), allege they are all covered under the Policy as “additional
insureds.” 2 (Am. Compl. ¶ 7; Pl.’s Opp. 2.)
The Policy contains the following choice-of-law provision:
Law and Jurisdiction
This Policy shall be interpreted solely according to the law of the State
of New York without regard to the choice of law provisions of New York
. . . The Law and Jurisdiction clause is written in a form bargained for,
reviewed, and accepted by the Parties.
(Eapen Cert., Ex. A at HUD000430.)
The Policy also includes the following “Arbitration Clause Endorsement”: “any dispute
or disagreement as to the interpretation of the terms and conditions of this policy or the
development, adjustment and/or payment of any claim shall be submitted to the decision of a
Joint Arbitrator that the Insured and Company shall appoint jointly. (Id. at HUD000430.)
On March 30, 2015, Plaintiffs filed their Complaint, alleging: (1) violation of the New
Jersey Consumer Fraud Act, N.J.S.A. 56:8-2, et seq (Count One), (2) breach of contract (Count
2
The Policy identifies Plaintiffs as “mortgagees/ additional interest.” (See Eapen Cert., Ex. A at HUD000439.)
Additionally, Plaintiffs claim that they all “share common ownership” and are “managed by a common entity.”
(Am. Compl. ¶¶ 12-15.)
2
Two) and (3) breach of the duty of good faith and fair dealing (Count Three). Plaintiffs’ claims
stem from Hudson’s purported failure to pay and/or adjust insurance claims that arose from roof
and other property damage caused by Hurricane Sandy, which struck New Jersey on October 29,
2012. (See Compl. ¶¶ 16-17, 21-24.) Plaintiffs contend that Hudson failed to adjust their claims
“in an improper and unconscionable effort to try and gain leverage over USLR in the claim that
ultimately resulted in the [unrelated] RAIT Lawsuit.” 3 (Id. at ¶¶ 22-24.)
Hudson filed a Motion to Dismiss Plaintiff’s Complaint on May 29, 2015. (Dkt. No. 7.)
On July 20, 2015, Plaintiffs filed opposition, and Defendant filed its reply on July 27, 2016.
(Dkt. Nos. 12-13.) Following the hearing on December 15, 2015, this Court granted Defendant’s
Motion to Dismiss without prejudice. (Dkt. No. 17.)
On January 13, 2016, Plaintiffs filed their First Amended Complaint. (Dkt. No. 18.) On
February 9, 2016, Defendant filed the instant Motion to Dismiss Plaintiffs’ Amended Complaint
or to Compel Arbitration. (Dkt. No. 22.) Plaintiffs filed opposition on February 22, 2016 and
Defendant filed its reply on February 29, 2016. (Dkt. Nos. 23, 24.)
LEGAL STANDARD
Motion to Dismiss
In considering a Rule 12(b)(6) motion to dismiss, the court accepts as true all of the facts
in the complaint and draws all reasonable inferences in favor of the plaintiff. Phillips v. Cnty. of
Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). Dismissal is inappropriate even where “it appears
unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits.” Id. The
facts alleged, however, must be “more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
3
On July 2, 2013, RAIT Partnership, LP (“RAIT”), a lender to Route 18, filed a lawsuit in the Superior Court of
New Jersey, Middlesex County asserting claims against Defendant for failure to include RAIT as a payee. (Am.
Compl. ¶ 19.)
3
(2007). The allegations in the complaint “must be enough to raise a right to relief above the
speculative level.” Id. Accordingly, a complaint will survive a motion to dismiss if it provides a
sufficient factual basis such that it states a facially plausible claim for relief. Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009).
When it is apparent, based on “the face of a complaint, and documents relied upon in the
complaint,” that certain of a party's claims “are subject to an enforceable arbitration clause, a
motion to compel arbitration should be considered under a Rule 12(b)(6) standard without
discovery's delay.” Guidotti v. Legal Helpers Debt Resolution, LLC, 716 F.3d 764, 772 (3d Cir.
2013). Where, as here, all the relevant documents are before the Court, the motion to dismiss
standard is appropriate because Plaintiffs have not responded to the motion to compel arbitration
with additional facts that require discovery or the burden shifting of a summary judgment
standard. See Alder Run Land, LP v. Ne. Nat. Energy LLC, 622 F. App'x 164, 166 (3d Cir.
2015).
DISCUSSION
Federal Arbitration Act, 9 U.S.C. §§ 1 et seq (“FAA”)
With its enactment of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq.,
Congress “expressed a strong federal policy in favor of resolving disputes through arbitration.”
Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 522 (3d Cir.
2009). Even so, “[a]rbitration is strictly a matter of contract. If a party has not agreed to
arbitrate, the courts have no authority to mandate that he do so.” Bel–Ray Co., Inc. v. Chemrite
(Pty) Ltd., 181 F.3d 435, 444 (3d Cir. 1999). Thus, in deciding whether a party may be
compelled to arbitrate under the FAA, the Court considers (1) whether there is a valid agreement
to arbitrate between the parties and, if so, (2) whether the dispute falls within the scope of that
valid agreement. Flintkote Co. v. Aviva PLC, 769 F.3d 215, 219-20 (3d Cir. 2014). The party
4
resisting arbitration may then invalidate the clause based on generally applicable contract
defenses. Harris v. Green Tree Fin. Corp., 183 F.3d 173, 179 (3d Cir. 1999).
Agreement to Arbitrate
In an action based on diversity, a federal court typically applies the choice-of-law rules of
the jurisdiction in which it sits. Hammersmith v. TIG Ins. Co., 480 F.3d 220, 226 (3d Cir. 2007).
Therefore, New Jersey choice-of-law rules apply. In New Jersey, courts generally enforce the
choice-of-law and forum selection clauses set forth in the applicable contract. See Kalman Floor
Co. v. Jos. L. Muscarelle, Inc., 196 N.J. Super. 16, 21 (App. Div. 1984). Because the contract at
issue expressly states that the Policy will be governed by “the choice of law provisions of New
York,” involves property outside of New Jersey, 4 and was executed by sophisticated parties,
New York law applies. See Walters v. American Home Assur., 2011 WL 4409170 (D.N.J. Sept.
21, 2001.); see also Param Petroleum Corp. v. Commerce and Industry Ins. Co., 296 N.J. Super.
164, 686 A.2d 377 (App. Div. 1997).
New York courts have consistently recognized a strong public policy in favor of
arbitration. See Stark v. Molod Spitz DeSantis & Stark P.C., 9 N.Y.3d 59, 66 (N.Y. 2007). A
court will not inquire beyond the language of a clear arbitration provision to assess the
reasonable expectations of the parties. Tsadilas v. Providian Nat'l Bank, 13 A.D.3d 190, 190-91
(N.Y. App. Div. 1st Dep't 2004). Indeed, New York courts will not invalidate an arbitration
provision due to inequality in bargaining power or lack of mutuality of remedy. See Sablosky,
supra, 73 N.Y.2d at 137 (discussing mutuality of remedy). Further, an arbitration clause does
not need to advise a plaintiff that they are waiving their right to pursue a case in a judicial forum.
See Williams v. Progressive Northeastern Ins. Co., 41 A.D.3d 1244, 1245 (N.Y. App. Div. 4th
Dep't 2007).
4
The Policy lists properties outside of New Jersey. (See Eapen Cert., Ex. A at HUD000439.)
5
Here, the Policy clearly mandates arbitration: “Arbitration Clause Endorsement”: “any
dispute or disagreement as to the interpretation of the terms and conditions of this policy or
the development, adjustment and/or payment of any claim shall be submitted to the decision of
a Joint Arbitrator that the Insured and Company shall appoint jointly. (Eapen Cert., Ex. A at
HUD000430.) Moreover, this matter involves sophisticated entities. Here, the named insured,
USLR, is a sophisticated commercial entity with insurable interest in over twenty different
properties, including one with an estimated value of $9.2 million. (Id., Ex. A at HUD000429.)
Because all of Plaintiffs’ claims arise out of Hudson’s alleged failure to adjust and/or pay
insurance claims, their claims fall within the scope of the arbitration clause.
As such,
Defendant’s Motion to Compel Arbitration is granted.
CONCLUSION
For the reasons set forth above, Defendants’ Motion to Compel Arbitration is
GRANTED. The Motion to Dismiss is DENIED as MOOT. An appropriate order follows.
s/ Susan D. Wigenton, U.S.D.J.
Orig:
cc:
Clerk
Parties
Magistrate Judge Steven C. Mannion, U.S.M.J.
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?