Deeba et al v. First Specialty Insurance Corporation et al
Filing
24
ORDER granting 2 Defendant First Specialty Insurance Corporation's Motion to Dismiss and dismissing this action without prejudice (as more fully set out). Signed by Honorable Vicki Miles-LaGrange on 9/29/2014. (ks)
IN THE UNITED STATES DISTRICT COURT FOR
THE WESTERN DISTRICT OF OKLAHOMA
MICHAEL E. DEEBA, Trustee for
MACCO PROPERTIES, INC. and
N.V. BROOKS APARTMENTS, LLC,
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
FIRST SPECIALTY INSURANCE
CORPORATION,
Defendant,
and
LIVING INVESTMENTS, LLC,
Plaintiff in Intervention,
v.
MICHAEL E. DEEBA, Trustee for
MACCO PROPERTIES, INC. and
N.V. BROOKS APARTMENTS, LLC;
and FIRST SPECIALTY INSURANCE
CORPORATION,
Defendants in Intervention.
Case No. CIV-14-00038-M
ORDER
Before the Court is Defendant First Specialty Insurance Corporation’s Motion to Dismiss
and Brief in Support, filed January 13, 2014. On September 2, 2014, plaintiff Michael E. Deeba1
and plaintiff in intervention, Living Investments, LLC, responded. Based on the parties’
submissions, the Court makes its determination.
1
Michael E. Deeba is the bankruptcy trustee for the entities Macco Properties, Inc.
(“Macco”) and N.V. Brooks Apartments, LLC (“Brooks Apartments”). Macco has a 99%
membership interest in Brooks Apartments.
I.
Background
The instant action arises out an alleged breach of contract and failure to act in good faith,
when defendant allegedly failed to fully pay for losses2 covered under an insurance policy issued
to General Properties Inc. (“General Properties”)3 and Macco for the period of April 23, 2011 to
April 23, 2012. On November 26, 2013, plaintiff filed the instant action in the District Court of
Cleveland County, State of Oklahoma. On January 10, 2014, defendant removed this action to
this Court on the basis of diversity jurisdiction.
Defendant now moves the Court to dismiss this action pursuant to Federal Rule of Civil
Procedure 12(b)(3) for improper venue. Defendant asserts that based on the forum selection
clause4 within the insurance policy, issued to Macco and General Properties, the courts of the
State of New York are the appropriate forum for disputes arising from the insurance policy.
Plaintiff contends that this case should be litigated in Oklahoma since the action relating to the
claim occurred in Oklahoma.
2
Plaintiff alleges in his Complaint that on or about April 12, 2012, Brooks Apartments
suffered a covered loss due to damage caused by a tornado in Norman, Oklahoma.
3
General Properties owns the remaining 1% interest of Brooks Apartments.
4
The forum selection clause within the insurance policy issued to Macco and General
Properties by defendant states:
Applicable Law; Court Jurisdiction
The laws of the State of New York, without regard to any conflict
of laws rules that would cause the application of the laws of any
other jurisdiction, shall govern the construction, effect, and
interpretation of this insurance agreement.
The parties irrevocably submit to the exclusive jurisdiction of the
Courts of the State of New York, and to the extent permitted by
law the parties expressly waive all rights to challenge or otherwise
limit such jurisdiction.
Def.’s Mot. to Dis. Ex. 1.A Property Insurance Policy Prepared for General Properties Inc. at 3.
2
II.
Standard for Dismissal
[W]hether venue is wrong or improper—is generally governed by
28 U.S.C. § 1391 (2006 ed., Supp. V). That provision states that
except as otherwise provided by law . . . this section shall govern
the venue of all civil actions brought in district courts of the United
States. § 1391(a)(1). It further provides that a civil action may be
brought in—(1) a judicial district in which any defendant resides,
if all defendants are residents of the State in which the district is
located; (2) a judicial district in which a substantial part of the
events or omissions giving rise to the claim occurred, or a
substantial part of property that is the subject of the action is
situated; or (3) if there is no district in which an action may
otherwise be brought as provided in this section, any judicial
district in which any defendant is subject to the court's personal
jurisdiction with respect to such action. § 1391(b). When venue is
challenged, the court must determine whether the case falls within
one of the three categories set out in § 1391(b). If it does, venue is
proper; if it does not, venue is improper, and the case must be
dismissed or transferred under § 1406(a). Whether the parties
entered into a contract containing a forum-selection clause has no
bearing on whether a case falls into one of the categories of cases
listed in § 1391(b). As a result, a case filed in a district that falls
within § 1391 may not be dismissed under § 1406(a) or Rule
12(b)(3).
Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court, ___ U.S. ___, 134 S. Ct 568, 577 (2013)
(internal quotations omitted). “Although a forum-selection clause does not render venue in a
court wrong or improper within the meaning of § 1406(a) or Rule 12(b)(3), the clause may be
enforced through a motion to transfer under § 1404(a).” Id. at 579. Further, “the appropriate way
to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of
forum non conveniens.” Id. at 580.
III.
Discussion
In the instant case, defendant moves the Court to dismiss this action pursuant to Federal
Rule of Civil Procedure 12(b)(3) for improper venue since the courts in the State of New York
have been designated the exclusive forum “for any disputes relating to the construction, effect, or
interpretation of the [insurance] policy.” Def.’s Mot. to Dis. at 2. The Court finds that
3
nonetheless, the Brooks Apartments were damaged by a tornado in Norman, Oklahoma, and
therefore, venue is proper, pursuant to 28 U.S.C. § 1391(b)(2). However, based on the recent
ruling by the Supreme Court in Atlantic Marine, the Court will construe defendant’s motion as a
motion to dismiss for forum non conveniens.
Forum selection clauses “are prima facie valid and should be enforced unless
enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances.” M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). See also Milk ‘N’ More, Inc. v. Beavert,
963 F.2d 1342, 1346 (10th Cir. 1992); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595
(1991). “[W]hen venue is specified, such as when the parties designate a particular county or
tribunal, and the designation is accompanied by mandatory or obligatory language, a forum
selection clause will be enforced as mandatory.” Am. Soda LLP v. U.S. Filter Wastewater Gp.,
Inc., 428 F.3d 921, 927 (10th Cir. 2005).
Defendant asserts that the forum selection clause is prima facie valid and as a result, this
action should be dismissed. Plaintiff contends “(1) that the purported forum selection clause in
the policy at issue does not actually unambiguously provide for mandatory forum in New York
and must be read against First Specialty; and (2) that even assuming the policy contained a New
York forum selection clause, the enforcement of such a clause here would be unreasonable,
unfair, and contrary to the ‘interest of justice’ factor which authority commands this court
examine.” Plf.’s Resp. at 4.
A.
Mandatory vs. Permissive Forum Selection Clause
“Mandatory forum selection clauses contain clear language showing that jurisdiction is
appropriate only in the designated forum.” Hancock v. Am. Tel. & Tel. Co., Inc., 804 F. Supp. 2d
1196, 1201 (W.D. Okla. 2011) (internal quotations omitted) (quoting K & V Scientific Co. v.
4
Bayerische Motoren Werke Aktiengesellschaft, 314 F.3d 494, 498 (10th Cir. 2002)). “Permissive
forum selection clauses, in contrast, . . . authorize jurisdiction in a designated forum, but do not
prohibit litigation elsewhere.” Id. (internal quotations omitted) (quoting Excell, Inc. v Sterling
Boiler & Mech., Inc., 106 F.3d 318, 321 (10th Cir. 1997)).
Having carefully reviewed the parties’ submissions, the Court finds that the forum
selection clause within the insurance policy issued by defendant to Macco and General
Properties is mandatory. Contrary to plaintiff’s assertion that defendant failed to draft a clear and
mandatory forum selection clause, the forum selection clause is clear and explicit as to the choice
of law governing “the construction, effect, and interpretation of [the] insurance agreement” and
as to the forum by providing that “The parties irrevocably submit to the exclusive jurisdiction of
the Courts of the State of New York . . . .” Def.’s Mot. to Dis. Ex. 1.A Property Insurance Policy
Prepared for General Properties Inc. at 3 (emphasis added).
Plaintiff also contends that defendant should have chosen words that are understandable
to an average reader. Macco however, is a sophisticated business entity and the Court finds that
the forum selection clause language at issue in this case is understandable to a business entity
such as Macco. See Bremen, 407 U.S. at 12 (“The choice of . . . forum was made in an arm'slength negotiation by experienced and sophisticated businessmen, and absent some compelling
and countervailing reason it should be honored by the parties and enforced by the courts.”).
B.
Enforcement of the Forum Selection Clause
“In a typical case not involving a forum-selection clause, a district court considering a §
1404(a) motion (or a forum non conveniens motion) must evaluate both the convenience of the
parties and various public-interest considerations.” Atlantic Marine, 134 S. Ct. at 581. “The
5
presence of a valid forum-selection clause requires district courts to adjust their usual [forum non
conveniens]5 analysis in three ways.” Id.
First, the plaintiff’s choice of forum merits no weight.
Rather, as the party defying the forum-selection clause, the
plaintiff bears the burden of establishing [that the dismissal or] . . .
transfer to the forum for which the parties bargained is
unwarranted.
*
*
*
*
*
Second, a court evaluating a defendant’s [motion to dismiss
for forum non conveniens] based on a forum-selection clause
should not consider arguments about the parties’ private interests.
When parties agree to a forum-selection clause, they waive the
right to challenge the preselected forum as inconvenient or less
convenient for themselves or their witnesses, or for their pursuit of
the litigation. A court accordingly must deem the private-interest
factors to weigh entirely in favor of the preselected forum. . . .
[W]hatever inconvenience the parties would suffer by being forced
to litigate in the contractual forum as they agreed to do was clearly
foreseeable at the time of contracting.
[A] district court may consider arguments about publicinterest factors only. . . . Because those factors will rarely defeat a
[motion to dismiss for forum non conveniens], the practical result
is that forum-selection clauses should control except in unusual
cases.
*
*
*
*
*
Third, 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.6
5
The Court in Atlantic Marine focused its analysis on enforcing a valid forum selection
clause through a § 1404(a) motion to transfer. However, the Court instructed district courts to
apply the same analysis when enforcing a valid forum selection clause through a motion to
dismiss for forum non conveniens. See Atlantic Marine, 134 S. Ct. at 584, fn. 8.
6
In the instant case, since the Court is construing defendant’s motion as a motion to
dismiss for forum non conveniens the third part of the analysis will not be considered.
6
Id. at 581-582 (internal citations and quotations omitted).
Plaintiff contends that the property damaged, the insured, and witnesses are all located in
Oklahoma. Additionally, plaintiff asserts that it will be pursuing punitive damages against
defendant for its “malicious and/or wantonly reckless bad faith conduct.” Plf. Resp. at 16. As a
result, plaintiff contends that “a New York jury is likely not going to be as attuned to the factors
relevant to a subjective evaluation of the treatment of an Oklahoma insured as an Oklahoma jury
would be.” Id. Lastly, plaintiff asserts that the Court should take into consideration the
remoteness of the New York forum to Oklahoma and the expense in litigating in New York
County, the fact that the forum selection clause was non-negotiated, and the fact that defendant is
owned by a multi-billion dollar international conglomerate, with more resources and litigation
tolerance than plaintiff. See Plf.’s Resp. at 18. Defendant asserts that plaintiff is capable of
litigating this matter in New York.7
Having carefully reviewed the parties’ submissions, the Court finds that plaintiff has not
demonstrated that litigating this matter in New York is unreasonable or unwarranted. The Court
specifically finds that the factors plaintiff asserts weigh against enforcing the forum selection
clause are all factors the Atlantic Marine Court instructed should not be considered. Further the
Court finds that it was foreseeable that an apartment complex could be potentially damaged by a
tornado in Oklahoma, so this is not the type of unusual case the Atlantic Marine Court mentioned
would defeat a motion to dismiss for forum non conveniens.8 Lastly, the Court finds that the
7
On or about September 13, 2013, defendant filed a Complaint for Declaratory Judgment
Order and Other Relief in the Supreme Court of the State of New York naming Macco and
General Properties as defendants. Def.’s Mot. to Dis. at 5. Plaintiff has retained counsel in the
New York action.
8
Plaintiff also contends that the forum selection clause at issue in this case “was buried
within a lengthy contract of adhesion.” Plf.’s Resp. at 4. If the plaintiff is contending that Macco
7
parties are already engaged in active litigation surrounding this dispute in New York.
Accordingly, the Court finds the forum selection clause should be enforced and this case should
be dismissed pursuant to the doctrine of forum non conveniens.
IV.
Conclusion
Accordingly, for the reasons set forth above, the Court GRANTS Defendant First
Specialty Insurance Corporation’s Motion to Dismiss and Brief in Support [docket no. 2] and
DISMISSES this action without prejudice.
IT IS SO ORDERED this 29th day of September, 2014.
and General Properties somehow missed the forum selection clause due to the length of the
insurance policy, the Court finds that the forum selection clause was not hidden or “buried” but
was located on the third page and listed under the section “Applicable Law: Court Jurisdiction”
of the insurance policy.
8
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?