American General Life Insurance Company v. Innovative Marketing Strategies, Inc.
Filing
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ORDER denying 5 Motion to Dismiss; denying 5 Motion to Transfer Case.(Signed by Judge Kenneth M. Hoyt) Parties notified.(dpalacios, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
AMERICAN GENERAL LIFE INSURANCE §
COMPANY,
§
§
Plaintiff,
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vs.
§
§
INNOVATIVE MARKETING STRATEGIES, §
INC.,
§
§
Defendant.
§
CIVIL ACTION NO. H-12-cv-01691
MEMORANDUM OPINION AND ORDER
I.
Before the Court is the defendant’s, Innovative Marketing Strategies, Inc. (“IMS”),
motion to dismiss the plaintiff’s, American General Life Insurance Company (“AGL”), suit for
lack of personal jurisdiction, or alternative, motion to transfer the case to the Central District of
California, pursuant to 28 U.S.C. § 1404(a). (Dkt. No. 5). AGL has filed a response to IMS’s
motion (Dkt. No. 10) and the matter is ripe for adjudication. The Court, having reviewed the
parties’ submissions, the pleadings and the applicable law, is of the opinion that IMS’s motion
should be DENIED.
II.
The relevant facts are, by and large, undisputed. AGL entered into an Independent
Marketing Organization Agreement (“IMO”) with IMS to “conduct business with respect to
AGL’s life insurance products by producing business”, i.e., sales of life insurance policies and by
recruiting other representatives to sell AGL life insurance products. It appears that, during the
course of the Agreement, IMS did not sell AGL life insurance policies, but was instrumental in
getting other representatives, such as DesignLife Insurance Services LLC, (“DesignLife”) to sell
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AGL policies. For its part, IMS earned an “override” commission based on the products sold by
its representatives. This dispute concerns 48 insurance policies sold by DesignLife that lapsed in
the first year due to non-payment of the premiums. DesignLife did not return the commissions
paid by AGL on the policies; hence, AGL obtained a default judgment against it. Although IMS
returned the “override” commissions paid to it by AGL, it denies that it is liable for Design
Life’s unrefunded commissions.
III.
IMS is a California corporation and AGL is a Texas corporation. As a result, IMS has
raised two threshold issues in its motion to dismiss or transfer. First, IMS asserts that AGL’s suit
should be dismissed for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2). IMS asserts
that it has not availed itself of the benefits and protections of the state of Texas through
minimum contacts; therefore, the exercise of personal jurisdiction over it would offend
traditional notions of fair play and substantial justice. In this regard, IMS cites to McFadin v.
Gerer, 587 F.3d 753, 759 (5th Cir. 2009). Second, IMS asserts that, alternatively, venue is
improper in the Southern District of Texas. Specifically, it argues that the suit should be
transferred to the Central District of California for the convenience of the parties and witnesses
and in the interest of justice and fair play. See 28 U.S.C. § 1404(a).
Because AGL’s suit could have been brought in California, venue is governed by 28
U.S.C. 1391, permitting the Court to transfer the case to a district where any defendant resides,
especially when a substantial part of the events giving rise to the dispute occurred in the
transferee district. In support of its transfer argument, IMS cites to In re Volkswagen of America,
Inc., 545 F.3d 304, 312 (5th Cir. 2008). AGL asserts that DesignLife operated under the
jurisdiction of IMS and was, in one respect, its agent. And, because DesignLife operated under
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the jurisdiction of IMS, it is liable for and obligated to refund to AGL, the unearned commissions
owed by DesignLife.
IV.
A.
Since IMS has challenged AGL’s claim of personal jurisdiction in Texas, AGL bears the
burden of establishing this Court’s jurisdiction over IMS. See Quick Technologies, Inc. V. Sage
Group PLC, 313 F.3d 338, 343 (5th Cir. 2003). In this regard, IMS must establish a prima facie
case for personal jurisdiction, and may do so by appropriate documents, affidavits and/or
discovery. Id. (citing Thompson v. Chrysler Motors Corp., 755 F.2d 1162, 1165 (5th Cir.
1985)); see also Fed. R. Civ. P. 4(h)(2). Assuming that IMS establishes a prima facie case, the
burden of persuasion shifts to AGL to establish a compelling case that other considerations
would render the exercise of jurisdiction unreasonable. See Safe Group PLC, 313 F.2d at 343;
see also Calianno v. Distinctive Brands, Inc., No. H-12-435, 2012 WL 1228088, at *2 (S.D. Tex.
Mar. 22, 2012) (citing Bullion v. Gillespie, 895 F.2d 213, 216 - 17 (5th Cir. 1990).
In the case at bar, AGL relies on the Texas long-arm statute as the basis for the Court’s
exercise of personal jurisdiction over IMS. See Tex. Civ. Prac. & Rem. Code § 17.042. Texas’
long-arm statute permits Texas courts to exercise jurisdiction over non-resident defendants that
“do business” in Texas. Doing business in Texas may be established by showing that: (a) the
defendant established minimum contacts with the state of Texas; and (b) the assertion of
jurisdiction does not offend traditional notions of fair play and substantial justice. See IRA
Resources, Inc. v. Griego, 221 S.W.3d 592, 596 (Tex. 2007)(internal citations omitted).
Minimum contacts require purposeful availment, whereby a defendant purposefully avails itself
of the privileges of conducting activities within Texas. Id.
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The evidence presented by AGL shows IMS entered into an IMO with AGL on January
1, 1999. Under the terms of the Agreement, IMS was permitted to sell insurance products to
AGL’s customers as a “writing agent” and/or recruit agents to operate under IMS’s jurisdiction.
With regard to the agents or representatives recruited, IMS generally submitted their applications
for appointment to AGL, assisted in processing the agent’s paperwork, assisted with submitting
customer insurance applications to AGL, communicated AGL’s expectations to IMS’s agents,
and agreed to indemnify and hold harmless AGL from any loss related to commissioned-based
liabilities of its agents.
The nature and extent of IMS’s relationship with AGL may be best characterized as an
ongoing interdependent relationship. IMS was responsible for assuring the performance and
quality of work that its agents produced in relation to AGL’s products. In doing so, IMS
conducted the business of AGL in AGL’s behalf and, in turn, received an “override”
commission.
Moreover, the nature and extent of the Agreement between IMS and AGL
contemplated a continuing and ongoing relationship. In this regard, IMS reached out to AGL
seeking to be appointed an agent of AGL, taking advantage of AGL’s nationwide organization.
See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 479 - 80 (1985).
IMS asserts that its contacts with AGL were minimal in that it occasionally forwarded
paperwork to Texas. This assertion fails to relieve IMS of exposure because the Agreement
between the parties, coupled with AGL’s Compliance Manual, envisioned that IMS would act as
AGL in relation to its representatives. For example, IMS was authorized to receive money in
behalf of AGL, make settlements and payments to AGL from time to time and under certain
circumstances. Finally, IMS agreed to choice of law provisions providing that Texas law
applies to any disputes between AGL and IMS. While agreeing to a choice of law provision
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does not waive IMS’s personal jurisdiction contention, it does speak to IMS’s awareness that
Texas law dictates the parties’ relationship. Based on the long-term interdependent relationship
between the parties, the Court concludes that IMS should have reasonably anticipated being
haled into a court of the plaintiff’s choosing. Burger King, 471 U.S. at 475.
The Court is also of the opinion that the exercise of jurisdiction over IMS does not offend
traditional notions of fair play and substantial justice. See Griego, 221 S.W.3d at 596. Nothing
in IMS’s pleadings suggests that litigation in California would provide a field of litigation more
balanced or convenient than Texas. Except for the trial of the case, the costs and convenience of
pretiral preparation is equally distributed between the two states. The Court is of the opinion that
the forum state’s interest in regulating and resolving controversies concerning its licensed
insurers outweighs IMS or the state of California’s interest in this matter. IMS has failed to
establish otherwise.
B.
In the alternative, IMS asserts that this case should be transferred to the Central District
of California. A motion to transfer venue from one district court to another is governed by 28
U.S.C. § 1404(a). Specifically, § 1404(a) gives a federal court discretion to “transfer any civil
action to any other district or division where it might have been brought” if to do so would be
convenient for the parties and witnesses and “in the interest of justice.” 28 U.S.C. § 1404(a).
“[T]he purpose of [this] section is to prevent the waste ‘of time, energy and money’ and ‘to
protect litigants, witnesses and the public against unnecessary inconvenience and expense . . . .’”
Van Dusen v. Barrack, 376 U.S. 612, 616 (1964) (quoting Cont’l Grain Co. v. Barge F.B.L.-585,
364 U.S. 19, 26 - 27 (1960)); see also Spiegelberg v. Collegiate Licensing Co., 402 F. Supp.2d
786, 789 (S.D. Tex. 2005). The movant, however, bears the burden of proving that a transfer is
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necessary. Spiegelberg, 402 F. Supp.2d at 789; see also Peteet v. Dow Chem. Co., 868 F.2d
1428, 1436 (5th Cir. 1989).
The first issue that a district court must consider in evaluating a motion under § 1404(a)
“is the question of whether the judicial district to which transfer is sought qualifies under the
applicable venue statutes as a judicial district where the civil action ‘might have been brought.’”
In re Horseshoe Entm’t, 337 F.3d 429, 433 (5th Cir.), cert. denied, 540 U.S. 1049, 124 S. Ct.
826, 157 L. Ed.2d 698 (2003); see also In re Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004).
Next, a district court must consider the issue of “the convenience of the parties and witnesses”
which “turns on a number of private and public interest factors, none of which are given
dispositive weight.” In re Volkswagen AG, 371 F.3d at 203 (citations omitted); see also Amini
Innovation Corp. Bank & Estate Liquidators, Inc., 512 F. Supp.2d 1029, 1043 (S.D. Tex. 2007).
The Court is of the opinion that IMS has established that a transfer to another forum is
not necessary or proper. Relying on AGL’s pleading, the Court determines that AGL has
satisfied its burden to show that Texas is a proper forum. IMS asserts only that venue should be
the Central District of California because it “is significantly more convenient” for the parties and
better serves the interest of justice. Beyond that argument, IMS fails to present facts that support
transfer. Noteworthy is the fact that documents unique to DesignLife are present in California
and do not impact convenience from IMS’s perspective. The taking of the depositions of
DesignLife’s officials appear to be more of an inconvenience for AGL than IMS. The relevant
personnel are residents of California. Hence, except for the depositions of AGL officials and a
potential trial in Texas, the costs and inconvenience to the parties are balanced, favoring IMS.
Therefore, whether the case remains in the forum state or is transferred to the state of California,
the costs associated with pretrial preparation is inconsequential from IMS’s perspective.
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Moreover, any discovery documents concerning AGL’s suit against DesignLife are already in
AGL’s possession and readily available to IMS. Therefore, discovery factors do not favor
transfer.
Nor does the costs associated with the presence of witnesses for trial favor transfer.
There is no proffer of a list of witnesses, whose testimony is relevant to the issues presented by
this suit, that are beyond the reach of the Court or IMS. As it relates to access to the evidence,
delay, prejudice, court congestion, local interest governing law and conflict of laws, the Court is
of the opinion that the evidence fails to favor a transfer. In fact, there is no substantial evidence
that these factors preponderate at all, particularly in the face of AGL’s choice of a proper forum.
Therefore, IMS’s motion for a transfer should be DENIED.
V.
Based on the foregoing analysis and discussion, the Court determines that IMS’s motion
to dismiss or, alternatively, to transfer this case should be, and is hereby, DENIED.
It is so ORDERED.
SIGNED at Houston, Texas this 26th day of September, 2012.
___________________________________
Kenneth M. Hoyt
United States District Judge
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