Bragg Communities, LLC et al v. Illinois Union Insurance Company
ORDER denying 13 Motion to Dismiss. Counsel is reminded to read the order in its entirety for detailed information. Signed by Senior Judge James C. Fox on 11/17/2014. (Edwards, S.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
BRAGG COMMUNITIES, LLC; BRAGGPICERNE PARTNERS LLC; CORVIAS
MILITARY LIVING, LLC; and CORVIAS
MILITARY CONSTRUCTION, LLC,
ILLINOIS UNION INSURANCE
This matter comes before the court on a Motion to Dismiss or, in the Alternative, to
Transfer Venue [DE-13] brought by Defendant Illinois Union Insurance Company ("Illinois
Union"). For the reasons more fully stated herein, the motion is DENIED.
This case arises out of an alleged breach of an insurance contract. In the insurance
contract, Illinois Union agrees to insure the plaintiffs for certain "pollution conditions" that
might result from the plaintiffs' covered operations. See Complaint [DE-3-2] at 7-8; see also
Contractors Pollution Liability Insurance Policy [DE-3-2] at 18 (the "Contract"). The present
motion concerns whether this court should continue to hear this matter given a forum selection
clause in the Contract:
It is agreed that in the event of the failure of the Insurer to pay any amount
claimed to be due hereunder, the Insurer and the "insured" will submit to the
jurisdiction of the State ofNew York and will comply with all requirements
necessary to give such court jurisdiction. Nothing in this clause constitutes or
should be understood to constitute a waiver of the Insurer's right to remove an
action to a United States District Court.
Contract [DE-3-2] at 25 (the "Forum Selection Clause"). If this Forum Selection Clause is
mandatory, this court must dismiss or transfer the present action. On the other hand, if the clause
is merely permissive, the case will continue forward.
The Contract contains two other clauses particularly relevant to whether the disputed
clause is permissive or mandatory. The first clause states that "[t]he descriptions in the headings
and sub-headings of this Policy are inserted solely for convenience and do not constitute any part
of the terms or conditions hereof." ld. at 25. The second clause states, "If the insured requests,
the company will submit to the jurisdiction of any court of competent jurisdiction. The company
will accept the final decision of that court or any Appellate in the event of an appeal." ld. at 37
(the "Endorsement"). The Endorsement is prefaced by the statement "THIS ENDORSEMENT
CHANGES THE POLICY." ld.
Illinois Union argues that the Forum Selection Clause is mandatory and enforceable. The
STANDARD OF REVIEW
Illinois Union brings its Motion to Dismiss pursuant to Rule 12(b)(3) of the Federal Rules
of Civil Procedure. When a question of venue is covered by the federal rules, district courts must
apply federal law in determining the question. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22,
26-27 (1988); see also Albemarle Corp. v. AstraZeneca UK Ltd., 628 F.3d 643,650 (4th Cir.
201 0). Accordingly, this court must determine the nature and validity of the Forum Selection
Clause-the basis for Illinois Union's Motion to Dismiss-according to federal law.
"[A] motion to dismiss based on a forum-selection clause should be properly treated
under Rule 12(b)(3) as a motion to dismiss on the basis of improper venue." Aggarao v. MOL
Ship Mgmt. Co., Ltd., 675 F.3d 355, 365 n.9 (4th Cir. 2012) (citing Sucampo Pharms., Inc. v.
Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir. 2006)). "On a motion to dismiss under Rule
12(b)(3), the court is permitted to consider evidence outside the pleadings." Aggarao, 675 F.3d at
365-66. The court considers the facts in the light most favorable to the plaintiffs. !d. at 366.
The threshold question is whether the Forum Selection Clause is mandatory or
permissive. If the court finds that the clause is mandatory, the plaintiffs will be required to show
that the clause is "unreasonable under the circumstances" in order to avoid either dismissal of
this action or a transfer ofthe action to New York. See MIS Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 10 (1972); see also NC Contracting, Inc. v. Munlake Contractors, Inc., No.5: 11-CV766-FL, 2012 WL 5303295, at *3 (E.D.N.C. Oct. 25, 2012). In contrast, a permissive forum
selection clause "merely specifies a court empowered to hear the litigation, in effect waiving any
objection to personal jurisdiction [or] venue." S & D Coffee, Inc. v. GEl Autowrappers, 995 F.
Supp. 607,609 (M.D.N.C. 1997) (quoting Johnston Cnty., N.C. v. R.N. Rouse & Co., Inc., 331
N.C. 88, 93,414 S.E.2d 30, 33 (1992)). "Such a c[l]ause is 'permissive' since it allows the
parties to air any dispute in that court without requiring them to do so." S & D Coffee, 995 F.
Supp. at 609. Thus, a permissive clause would not require dismissal or transfer of the present
In determining whether a forum selection clause is mandatory, "federal courts have found
dispositive the particular language of the clause and whether it authorizes another forum as an
alternative to the forum of the litigation or whether it makes the designated forum exclusive."
Albemarle, 628 F.3d at 650-51. As a general maxim in considering forum selection clauses, "an
agreement conferring jurisdiction in one forum will not be interpreted as excluding jurisdiction
elsewhere unless it contains specific language of exclusion." JntraComm, Inc. v. Baja}, 492 F.3d
285, 290 (4th Cir. 2007) (emphasis in original). Thus, the language of the Forum Selection
Clause must clearly indicate the exclusivity of the forum. Indeed, even using the words "will" or
"shall," without more, will not establish a mandatory forum selection clause. See id.
("Although ... clauses, like the one in the instant case, [might] use the word 'shall,' the word's
meaning differs with context."); see also S & D Coffee, 995 F. Supp. at 609-10. Courts have
indicated two particular circumstances that create the required exclusivity. First, "[a] crucial
distinction between a mandatory clause and a permissive clause 'is whether the clause only
mentions jurisdiction or specifically refers to venue."' Gita Sports Ltd. v. SG Sensortechnik
GmbH & Co. KG, 560 F. Supp. 2d 432, 436 (W.D.N.C. 2008) (quoting S&D Coffee, 995 F.
Supp. at 609). Second, parties may indicate a mandatory forum selection clause by using words
such as "only," "exclusive," or "sole" in referring to a particular jurisdiction. See, e.g., NC
Contracting, 2012 WL 5303295, at *3 (emphasizing the parties' use ofthe word "only").
Here, the Forum Selection Clause "merely specifies [that New York courts are]
empowered to hear the litigation, in effect waiving any objection to personal jurisdiction in a
venue." S & D Coffee, 995 F. Supp. at 609. That is, the Forum Selection Clause contains no
language that excludes jurisdiction in other courts. See IntraComm, 492 F.3d at 290. It does not
refer to venue nor does it use words indicating exclusivity, such as "only, "exclusive, or "sole."
While Illinois Union argues that the heading for the clause implicates venue, the specific
language of the Contract precludes such a reading. See Contract [DE-3-2] at 25 ("The
descriptions in the headings and sub-headings of this Policy are inserted solely for convenience
and do not constitute any part ofthe terms or conditions hereof" (emphasis added)). Because the
Forum Selection Clause does not create exclusive jurisdiction in New York courts, it is a
permissive clause, not a mandatory one.
Illinois Union's arguments that the Forum Selection Clause is mandatory are further
undercut by the Endorsement, which states that, "[i]fthe insured requests, the company will
submit to the jurisdiction of any court of competent jurisdiction." Contract [DE-3-2] at 37
(emphasis added). Illinois Union argues that the Endorsement does not apply to the Forum
Selection Clause because the two clauses conflict. See Memorandum of Law in Support of
Motion to Dismiss or, in the Alternative, to Transfer Venue [DE-14] at 6. According to Illinois
Union, the Forum Selection Clause addresses both venue and jurisdiction while the Endorsement
addresses only the latter. !d. However, because the court finds that the Forum Selection Clause
does not address venue, there is no conflict. The Endorsement thus provides further support for
the plaintiffs' contention that the Forum Selection Clause is permissive.
The court finds that the Forum Selection Clause is permissive, not mandatory. 1 The
clause acts as a waiver to any objections to personal jurisdiction if suit were brought in or
transferred to aNew York court, but the clause does not exclude jurisdiction elsewhere.
Therefore, Illinois Union's Motion to Dismiss [DE-13] is DENIED.
This then_ day ofNovember, 2014.
Senior United States District Judge
Because the court finds that the Forum Selection Clause is permissive, the court does
not need to address whether it is enforceable as a mandatory clause.
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