TELA BIO, INC. et al v. FEDERAL INSURANCE COMPANY

Filing 27

OPINION filed. Signed by Judge Freda L. Wolfson on 10/25/2016. (mmh)

*NOT FOR PUBLICATION*
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
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Plaintiffs,
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v.
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FEDERAL INSURANCE COMPANY, :
an Indiana Corporation,
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Defendant.
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TELA BIO, INC., a Delaware
Corporation, ANTHONY KOBLISH,
an Individual, and MAARTEN
PERSENAIRE, an Individual,

Civ. Action No.: 16-866 (FLW)(DEA)
OPINION

WOLFSON, United States District Judge:
Plaintiffs Tela Bio, Inc. (“Tela Bio”), Anthony Koblish and Maarten Persenaire (the
“Individual Plaintiffs”) (collectively, “Plaintiffs”) bring this declaratory judgment action seeking
a declaration that Defendant Federal Insurance Company (“Defendant”) is obligated to defend Tela
Bio against claims asserted by a third-party corporation in a New Jersey state court action, pursuant
to an insurance policy issued by Defendant. Presently before the Court is Defendant’s motion to
transfer venue in this action to the Eastern District of Pennsylvania, or in the alternative, to dismiss
Plaintiffs’ complaint for failure to state a claim, as well as Plaintiffs’ motion for partial summary
judgment. For the reasons set forth below, Defendant’s motion to transfer venue to the Eastern
District of Pennsylvania is granted, and its motion to dismiss, as well as Plaintiffs’ motion for
partial summary judgment, are denied without prejudice. The parties may refile their respective
dispositive motions after the instant matter is transferred to the Eastern District of Pennsylvania.
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I.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Tela Bio is a Delaware corporation with its principal place of business in Malvern,

Pennsylvania, a suburb of Philadelphia. Pls.’ Compl. at ¶ 1. In 2012, the Individual Plaintiffs,
who are residents of Pennsylvania, formed Tela Bio, a regenerative medicine company that
develops and manufactures hernia repair products. Id. at ¶¶ 2, 10. After Tela Bio’s formation,
Defendant issued Tela Bio a Commercial General Liability Insurance Policy, Policy No. 3598-3251 PLH (the “Policy”), effective from January 18, 2013 through January 18, 2014. Id. at ¶ 8; Ex.
1. While Defendant is located in Warren, New Jersey, Tela Bio negotiated the terms of the Policy
with Aon Risk Services Central, Inc. (“Aon”), an insurance broker located in Philadelphia,
Pennsylvania. Id. at ¶ 12; Ex. 1. In pertinent part, the Policy provides coverage for personal injury,
which is defined as:
Personal injury means injury, other than bodily injury, property damage or
advertising injury, caused by an offense of:
***
D.

electric, oral, written or other publication of material that:
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libels or slanders a person or organization (which does not include
disparagement of foods, products, property or services); or

2.

violates a person’s right of privacy.

Id. at ¶ 9; Ex. 1. In March 2015, LifeCell Corporation (“LifeCell”), which is also a regenerative
medicine company that a specializes in hernia repair products, brought suit against Tela Bio in the
Superior Court of New Jersey (hereinafter, the “LifeCell Lawsuit”). 1 Id. at ¶¶ 10-11; Ex. 2. In
general, LifeCell alleges that Tela Bio poached approximately twenty former LifeCell employees
in an effort to develop and manufacture a competing hernia repair product. Id. at ¶¶ 6, 11; Ex. 2.

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LifeCell has its principal place of business in Somerville, New Jersey.
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In addition, LifeCell asserts that Tela Bio misappropriated LifeCell’s proprietary information and
trade secrets. Id.
In response to the LifeCell Lawsuit, Tela Bio provided Aon with written notice of the
pending action, pursuant to the terms of the Policy. Id. at ¶ 12; Ex. 1. Shortly thereafter, Tela Bio
also provided written notice to Defendant. Id. In those written notices, Plaintiffs requested that
Defendant defend Tela Bio in connection with the LifeCell Lawsuit. Id. at ¶ 12; Ex. 3. While
Defendant acknowledged receipt of the notices, before it could deny coverage, Tela Bio filed this
declaratory judgment action on February 17, 2016. Id. at ¶¶ 12-13. In their Complaint, Plaintiffs
assert that Defendant “is obligated under the Policy to defend Tela Bio against the claims made in
the LifeCell Suit,” and that Defendant must “reimburse Tela Bio for all attorneys’ fees and costs
incurred in the LifeCell Suit.” Id. at ¶¶ 37-38.
Specifically, Plaintiffs alleges that Defendant has a duty to defend because LifeCell asserts
allegations that could potentially implicate personal injury coverage for publication of libel or
slander, such as: (i) Tela Bio allegedly insinuated that LifeCell had a toxic work environment and
it lacked continued viability, see id. at ¶¶ 17-27; (ii) Tela Bio allegedly questioned LifeCell’s
ability to perform based on the loss of approximately twenty LifeCell employees, see id. at ¶¶ 2831; (iii) LifeCell alleges that Tela Bio will most likely misrepresent LifeCell’s intellectual property
rights to the detriment of LifeCell’s reputation, and that Tela Bio will most likely link its
substandard product to LifeCell’s hernia repair product, which is called Strattice, see id. at ¶¶ 3234; and (iv) Tela Bio allegedly represented that its product is superior to LifeCell’s hernia repair
product because Tela Bio markets its product as the “next generation Strattice,” see id. at ¶ 35.
On March 16, 2016, Plaintiffs moved for partial summary judgment. Shortly thereafter,
Defendant filed a motion to transfer venue to the Eastern District of Pennsylvania, or in the

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alternative, a motion to dismiss Plaintiffs’ complaint for failure to state a claim upon which relief
can be granted. Defendant then filed a brief in opposition to Plaintiffs’ motion for partial summary
judgment, and Plaintiffs likewise filed their brief in opposition to Defendant’s motions. Because
I find a transfer is appropriate, my Opinion here is confined to that issue.
II.

STANDARD OF REVIEW
Under 28 U.S.C. § 1404(a), even if the original venue is proper, a court may elect to transfer

an action to another venue where it might have been brought. See 28 U.S.C. § 1404(a) (“For the
convenience of parties and witnesses, in the interest of justice, a district court may transfer any
civil action to any other district... where it might have been brought.”). When deciding a motion
to transfer venue, “courts have not limited their consideration to the three enumerated factors in §
1404(a) (convenience of parties, convenience of witnesses, or interests of justice).” Jumara v.
State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995); see 28 U.S.C. § 1404(a). Instead, courts
have also considered “all relevant factors to determine whether on balance the litigation would
more conveniently proceed and the interests of justice be served by transfer to a different forum.”
Jumara, 55 F.3d at 879 (internal quotations and citation omitted). These factors fall into two
categories. The first category is private interests, which include:
[P]laintiff's forum preference as manifested in the original choice; the defendant's
preference; whether the claim arose elsewhere; the convenience of the parties as
indicated by their relative physical and financial condition; the convenience of the
witnesses -- but only to the extent that the witnesses may actually be unavailable
for trial in one of the fora; and the location of books and records (similarly limited
to the extent that the files could not be produced in the alternative forum).
Id. (citations omitted). The second category is public interests, which include:
[T]he enforceability of the judgment; practical considerations that could make the
trial easy, expeditious, or inexpensive; the relative administrative difficulty in the
two fora resulting from court congestion; the local interest in deciding local
controversies at home; the public policies of the fora; and the familiarity of the trial
judge with the applicable state law in diversity cases.
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Id. at 879-880 (citations omitted). Before reaching the interests, however, a court must determine
whether the requested venue is proper. See Clark v. Burger King Corp., 225 F. Supp. 2d 334, 337
(D.N.J. 2003) (“The first step in a court’s analysis of a transfer motion is to determine whether
venue would be proper in the transferee district.”). Finally, “[t]he moving party has the burden of
persuasion on a motion to transfer.” Tischio v. Bontex, Inc., 16 F. Supp. 2d 511, 520 (D.N.J.
1998).
III.

DISCUSSION
Defendant argues that Plaintiffs’ declaratory action should be transferred to the Eastern

District of Pennsylvania because Plaintiffs’ insurance coverage claim arose in that State. In
particular, Defendant contends that: (i) Tela Bio has its principal place of business in Pennsylvania;
(ii) the Individual Plaintiffs are residents of Pennsylvania; (iii) while Defendant has its principal
place of business in New Jersey, Plaintiffs and Aon negotiated the Policy in Pennsylvania; and (iv)
Plaintiffs executed the Policy in Pennsylvania. Moreover, Defendant contends that LifeCell does
not allege that Tela Bio committed wrongful acts in New Jersey. To the contrary, Defendant
maintains that, based on LifeCell’s allegations, Tela Bio or its representatives made libelous or
slanderous comments from Pennsylvania. Finally, Defendant argues that the Eastern District of
Pennsylvania has a local interest in deciding this dispute, since the insureds are residents of
Pennsylvania, and the issues would be decided under Pennsylvania law.
In opposition, Plaintiffs argue that the District of New Jersey is the appropriate forum,
because it is Plaintiffs’ chosen forum. Plaintiffs further argue that all of the central facts underlying
their insurance coverage claim occurred in New Jersey. For instance, Plaintiffs argue that LifeCell
alleges that Tela Bio made libelous and slanderous comments against LifeCell, a New Jersey
corporation. In addition, Plaintiffs contend that the LifeCell Lawsuit, as well as the related

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evidence, is located in New Jersey, and thus, the State of New Jersey has a great interest in
adjudicating the instant coverage action stemming from the underlying state court allegations that
Tela Bio caused direct harm to a New Jersey corporation and residents.
(i)

Propriety of Venue in Transferee District

First, the Court must consider whether this action could have been brought in the Eastern
District of Pennsylvania. In regard to a civil action based on diversity of citizenship, venue is
proper in “a judicial district in which a substantial part of the events or omissions giving rise to the
claim occurred.” 28 U.S.C. § 1391(a)(2); see Tischio, 16 F. Supp. 2d at 516. To determine the
judicial district in which a breach of an insurance contract occurred, a court should consider “the
location of the contract’s negotiation, execution and performance,” as well as the location of the
breach. Al-Ghena Int’l Corp. v. Radwan, 957 F. Supp. 2d 511, 523 (D.N.J. 2013); see Post v. St.
Paul Travelers Ins. Co., 691 F.3d 500, 516 (3d Cir. 2012) (stating that a breach of a duty to defend
an insured is a breach of the insurance contract); see also MIIX Ins. Co. v. Associated Women’s
Health Specialists, No. 07-1635, 2007 U.S. Dist. LEXIS 85274, at *17 (D.N.J. Nov. 19, 2007)
(stating that a court should consider where “the negotiation and formation of the contract
occurred,” including where the insured and insurance broker transacted business, as well as the
residence of the insured); Harleysville Ins. Co. v. Clark, No. 05-5566, 2006 U.S. Dist. LEXIS
97152, at *17 (D.N.J. July 21, 2006); On-Time Staffing, LLC v. Flexible Staffing Solutions, Inc.,
No. 06-3951, 2007 U.S. Dist. LEXIS 30773, at *17 (D.N.J. Apr. 25, 2007).
In the instant matter, the Individual Plaintiffs, who are the policyholders, reside in
Pennsylvania, and Tela Bio has its principal place of business in Pennsylvania. While the Policy
was issued by Defendant, which has a principal place of business in New Jersey, it is undisputed
that Plaintiffs negotiated the insurance contract with Aon in Pennsylvania, and it appears that

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Plaintiffs also executed that contract in Pennsylvania. Indeed, Plaintiffs sent a written notice of
the pending lawsuit to Aon in Pennsylvania, as directed by the Policy. Accordingly, I conclude
that the Eastern District of Pennsylvania is a proper venue because a substantial part of the events
giving rise to Plaintiffs’ insurance coverage dispute occurred in that District.
(ii)

Private Factors

Plaintiffs argue that their choice of forum should be entitled to great weight, since they
chose to file the instant action in the District of New Jersey. In general, “a plaintiff’s choice of a
proper forum is a paramount consideration in any determination of a transfer request, and that
choice should not be lightly disturbed.” Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir.
1970). However, the plaintiff’s “choice of forum is accorded less weight when the chosen forum
is not the plaintiff’s home forum.” LG Elecs., Inc. v. First Int’l Computers, Inc., 138 F. Supp. 2d
574, 589 (D.N.J. 2001); see NCR Credit Corp. v. Ye Seekers Horizon, Inc., 17 F. Supp. 2d 317,
321 (D.N.J. 1998) (stating that “a plaintiff’s choice of a foreign forum is generally accorded less
weight than the choice of a home forum.”); see Am. Tel. & Tel. Co. v. MCI Commc'n Corp., 736
F. Supp. 1294, 1306 (D.N.J. 1990). Because Plaintiffs decided to file the instant matter in a foreign
jurisdiction, their choice of forum is not entitled to substantial weight.
In addition, “courts give substantially less weight to a plaintiff’s forum choice when the
dispute at the heart of a lawsuit occurred almost entirely in another state.” Santi v. Nat’l Bus.
Records Mgmt., LLC, 722 F. Supp. 2d 602, 607 (D.N.J. 2010); see NCR Credit Corp., 17 F. Supp.
2d at 321 (“[W]hen the central facts of a lawsuit occur outside the chosen forum, plaintiff’s choice
of forum is accorded less weight.”); LG Elecs., Inc., 138 F. Supp. 2d at 590 (“Another important
factor weighing against plaintiff’s choice of forum is the location of the operative facts of the
litigation.”); see also Job Haines Home for the Aged v. Young, 936 F. Supp. 223, 228 (D.N.J.

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1996). As discussed supra, the operative facts of the instant insurance coverage dispute occurred
in Pennsylvania.
To reiterate, Plaintiffs’ claims against Defendant arose in Pennsylvania. See Jumara, 55
F.3d at 879 (stating that a court should consider “whether the claim arose elsewhere”). The
Plaintiffs, who are located in Pennsylvania, negotiated and executed the Policy in Pennsylvania
with a Philadelphia located broker, Aon. Thus, this factor strongly weighs in favor of transfer,
since Plaintiffs have no meaningful connection with the State of New Jersey with regards to the
insurance policy at issue. 2 See Peikin v. Kimmel & Silverman, PC, 576 F. Supp. 2d 654, 660
(D.N.J. 2008) (stating that transfer is appropriate when “New Jersey is neither Plaintiff’s home
forum, nor the forum in which the central facts of this lawsuit occurred.”).
Moreover, while the two venues are geographically close, the convenience of the parties
and the witnesses weigh in favor of transfer. With regard to the parties, the Eastern District of
Pennsylvania is more convenient than the present forum, particularly since Tela Bio has its
principal place of business in Malvern, Pennsylvania – a suburb of Philadelphia, and the Individual
Plaintiffs are residents of Pennsylvania. In addition, as to the coverage negotiated by the relevant
parties, witnesses from Tela Bio are located in Pennsylvania, as are Aon employees. 3 Thus, the
Eastern District of Pennsylvania is a more convenient location.
Relatedly, although its principal place of business is in this District, Defendant has
expressed a preference to litigate this matter in the Eastern District of Pennsylvania, which is a

2

As discussed, infra, the pendency of the LifeCell Lawsuit in this State does not weigh against
transfer.
3

I note that the parties have not yet identified any witnesses to be called at trial.
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factor that also militates in favor of transfer. See Jumara, 55 F.3d at 879 (stating that a court should
consider “the defendant's preference”).
The final private interest factor is the location of documents that would be necessary for
the trial. Here, Plaintiffs do not argue that any of the relevant documents are located in New Jersey.
Indeed, it appears that most of the record are located in Pennsylvania, i.e. the Policy and related
records. In addition, Aon likely possesses important documents and records, which might shed
light on the negotiation process between the parties. Thus, even though it appears that the pertinent
documents could be produced in the either forum, this factor weighs slightly in favor of transfer.
See Clark, 255 F. Supp. 2d at 339.
(iii)

Public Factors

As to the practical considerations, Plaintiffs contend that the District of New Jersey is the
proper venue because the LifeCell Lawsuit is pending in the New Jersey state court. Without a
doubt, “[i]t is in the interest of justice to permit suits involving the same parties and issues to
proceed before one court and not simultaneously before tribunals.” Clark, 255 F. Supp. 2d at 339
(quoting Job Haines Home for the Aged, 936 F. Supp. at 487). “To permit a situation in which
two cases involving precisely the same issues are simultaneously pending in different District
Courts leads to the wastefulness of time, energy and money that § 1404(a) was designed to
prevent.” Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 26 (1960). However, “the
pendency of another related litigation need not be given any weight if there is no realistic
possibility of consolidating the two cases.” United States Fire Ins. Co. v. Aldworth Co., No. 044963, 2005 U.S. Dist. LEXIS 12613, at *18 (D.N.J. Jun. 28, 2005).
Here, Plaintiffs’ argument is misplaced. The instant declaratory judgment action does not
involve the same parties as the LifeCell Lawsuit. While Tela Bio is a party to both lawsuits,

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LifeCell is not involved in the pending insurance coverage dispute. In addition, the instant matter
does not involve the same issues as the LifeCell Lawsuit. In the underlying lawsuit, LifeCell
asserts various causes of action against Tela Bio, such as a common law tortious interference
claims and a statutory claim for unfair competition. In this action, however, Plaintiffs allege that
Defendant was obligated to defend Plaintiffs in connection with the LifeCell Lawsuit, based on
contractual grounds, i.e. the language of the Policy. Tellingly, Plaintiffs decided to file the instant
action in federal court, not the state court where the underlying lawsuit is pending. Therefore,
because there is no possibility of consolidating the two pending cases, the parties are not the same,
and the issues are different, the location of where the LifeCell Lawsuit is pending should not be
given any weight. Thus, this factor is neutral.
Relatedly, Plaintiffs argue that New Jersey has a local interest in deciding local
controversies at home, especially since LifeCell alleges that Tela Bio caused direct harm to a New
Jersey corporation and residents. However, that is not the relevant inquiry. This is not a lawsuit
between Tela Bio and LifeCell. Rather, as discussed supra, New Jersey has little interest in
adjudicating the dispute in this case, since the central facts to Plaintiffs’ contractual claim for
coverage occurred in Pennsylvania, and this matter involves whether Tela Bio, not LifeCell, is
entitled to insurance coverage from Defendant. In other words, the effect of this lawsuit is upon
the Pennsylvania Plaintiffs, because it will determine whether Plaintiffs, or the Defendant insurer,
pays for the costs of defending the LifeCell Lawsuit or any potential verdict. It is of no moment
to LifeCell who is responsible for such costs or damages, and thus, LifeCell’s interests are not at
issue in the transfer balance inquiry. To the contrary, New Jersey has an interest in not adjudicating
this dispute because “[t]he burden of jury duty should not be placed on citizens with a remote
connection to the lawsuit.” National Property Investors VIII v. Shell Oil Co., 917 F. Supp. 324,

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330 (D.N.J. 1995); see Tischio, 16 F. Supp. 2d at 526 (“The burden of jury duty ought not to be
imposed upon the people of a community which have no relation to the litigation.”). Thus, this
factor weighs in favor of transfer.
In regard to the remaining public interest factors, the enforceability of the judgment is a
neutral factor because “a judgment rendered in either [the District of New Jersey] or the Eastern
district of Pennsylvania could easily be registered in another District.” Ferratex, Inc. v. U.S. Sewer
& Drain, Inc., 121 F. Supp. 3d 432, 442 (D.N.J. 2015). In addition, while the parties have not
provided argument as to the congestion of the two respective forums, it appears that this District
has similar congestion to the Eastern District of Pennsylvania. See Clark, 255 F. Supp. 2d at 339.
The final public interest factor is the familiarity of the trial judge with the applicable state law. At
this stage of the litigation, the parties disagree as to whether New Jersey or Pennsylvania law
applies in connection with Plaintiffs’ claims. However, this factor is also neutral because New
Jersey courts are “regularly called upon to apply Pennsylvania law,” Calkins v. Dollarland, Inc.,
117 F. Supp. 2d 421, 429 (D.N.J. 2000), as are Pennsylvania courts called upon to apply New
Jersey law.
Accordingly, after examining the Jumara factors, this Court determines that the interests of
justice would be better served by transferring this case to the Eastern District of Pennsylvania. See
28 U.S.C. 1404(a); Jumara, 55 F.3d at 879.
IV.

CONLUSION
For the foregoing reasons, Defendant’s motion to transfer venue to the Eastern District of

Pennsylvania is GRANTED, and the remaining motions of Defendant and Plaintiffs are DENIED
without prejudice. The parties may refile their respective dispositive motions after the instant
matter is transferred to the Eastern District of Pennsylvania.

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DATED: October 25, 2016

/s/ Freda L. Wolfson
The Honorable Freda L. Wolfson
United States District Judge

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