Bancroft Life & Casualty ICC, Ltd. v. Davnic Ventures, L.P.
Filing
25
MEMORANDUM AND ORDER granting 16 MOTION to Dismiss the Counterclaims. (Signed by Judge Ewing Werlein, Jr) Parties notified.(kcarr, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
BANCROFT LIFE & CASUALTY
ICC, LTD.,
§
§
§
Plaintiff and Counterclaim §
Defendant,
§
§
v.
§
§
DAVNIC VENTURES, L.P.,
§
§
Defendant and Counterclaim §
Plaintiff,
§
CIVIL ACTION NO. H-12-2015
MEMORANDUM AND ORDER
Pending is Counterclaim-Defendant Bancroft Life & Casualty
ICC, Ltd.’s Motion to Dismiss the Counterclaims (Document No. 16).
After having reviewed the motion, response, reply, and applicable
law, the Court concludes that the motion should be granted.
I.
Background
Plaintiff and Counter-Defendant Bancroft Life & Casualty ICC,
Ltd. (“Bancroft”) is an insurance company based in St. Lucia.1
Beginning in December 2006, Defendant and Counter-Plaintiff Davnic
Ventures, L.P. (“Davnic”) bought Bancroft’s insurance product,
“Premium Lite,” to cover the risk of business losses.2
1
Document No. 13 ¶ 14.
2
Id. ¶¶ 1, 18.
In late
2006 and early 2007, Davnic sent $200,000 in insurance premiums to
Bancroft’s third party administrator.3 Bancroft allegedly gives to
its insureds the opportunity to borrow back 70% of their premiums
in the form of loans.
$70,000,
and
in
In December 2006, Bancroft loaned to Davnic
April,
2007,
Bancroft
loaned
to
Davnic
an
additional $70,000; and Davnic executed its promissory notes to
Bancroft for each such loan.4
Bancroft sued Davnic claiming breach
of contract, and other similar claims relating to Davnic’s default
on
the
two
promissory
notes.5
Davnic
counterclaimed
against
Bancroft, alleging claims arising out of or related to Davnic’s
participation in Bancroft’s insurance product(s) and Certificates
of Insurance issued by Bancroft to Davnic, to wit: breach of
contract for failure to pay an insurance claim and failure to
return unused premium; conversion; fraudulent inducement; breach of
fiduciary duty; unjust enrichment; request for an accounting; and
rescission based on Bancroft’s failure to provide coverage for
covered business losses in August 2009.6
Bancroft now moves to dismiss the counterclaims based upon a
proviso in the insurance policy that establishes St. Lucia as the
exclusive venue for actions under the insurance policy.
3
Document No. 18 at 4.
4
Document No. 13 at 16; Document No. 18 at 4.
5
Document No. 1 (Orig. Cmplt.).
6
See Document No. 18.
2
II.
A.
Motion to Dismiss for Improper Venue
Legal Standard
Rule 12(b)(3), which establishes a defense of improper venue,
may be used to seek dismissal based on a forum selection clause.
See FED. R. CIV . P. 12(b)(3); Lim v. Offshore Specialty Fabricators,
Inc., 404 F.3d 898, 902 (5th Cir. 2005).7
Federal law governs the
determination of the enforceability of a forum selection clause for
diversity cases in federal court.
F.3d 956, 962 (5th Cir. 1997).
Haynsworth v. The Corp., 121
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., 92 S. Ct. 1907, 1913 (1972)
(internal quotation marks and citations omitted).
Unreasonableness potentially exists where (1) the
incorporation of the forum selection clause into the
agreement was the product of fraud or overreaching; (2)
the party seeking to escape enforcement ‘will for all
practical purposes be deprived of his day in court’
because of the grave inconvenience or unfairness of the
selected forum; (3) the fundamental unfairness of the
chosen law will deprive the plaintiff of a remedy;
or (4) enforcement of the forum selection clause would
contravene a strong public policy of the forum state.
7
See also Noble Drilling Servs., Inc. v. Certex USA, Inc.,
620 F.3d 469, 472 n.3 (5th Cir. 2010) (noting that the Fifth
Circuit “has not previously definitively decided whether Rule
12(b)(1) or Rule 12(b)(3) is the proper rule for motions to dismiss
based on an arbitration or forum-selection clause” but declining to
address the issue because, as here, the parties did not address
it).
3
Haynsworth, 121 F.3d at 963 (citations omitted).
“The party
resisting enforcement [of the forum selection clause] on these
grounds bears a ‘heavy burden of proof.’” Id. (quoting The Bremen,
92 S. Ct. at 1917); accord Afram Carriers, Inc. v. Moeykens, 145
F.3d
298,
301
(5th
Cir.
1998)
(“The
burden
of
proving
unreasonableness is a heavy one, carried only by a showing that the
clause results from fraud or overreaching, that it violates a
strong public policy, or that enforcement of the clause deprives
the [resisting party] of his day in court.” (quotation marks and
citations omitted) (emphasis in original)).
B.
Discussion
Davnic objects to the Court’s enforcement of the Saint Lucia
forum selection clause for three reasons: (1) it never agreed to
the clause; (2) Bancroft waived the clause when it brought the suit
on the Notes in this Court; and (3) the Saint Lucia clause is
unreasonable.8
1.
Agreement to the Clause
“The Court first must determine whether Defendant agreed to
the clause before considering whether it is enforceable.”
Valero
Mktg. & Supply Co. v. Baldwin Contracting Co., Inc., Civ. A. No. H09-2957, 2010 WL 1068105, at *2 (S.D. Tex. Mar. 19, 2010) (emphasis
8
Document No. 18 at 2-3.
4
in
original).
When
Davnic
bought
the
insurance
policy
from
Bancroft, the Group Master Policy contained a provision that “[a]ny
action at law or in equity must be brought only in the Courts of
Saint Lucia, West Indies, and the law of Saint Lucia, West Indies
shall be controlling law for all legal equitable, or administrative
purposes or proceedings.”9
The Group Master Policy was amended in
2008 but retained the same provision.10
The application completed
and signed in December 2006 by Davnic’s principal, David Johnson,
states that:
The Insurer is licensed under the provisions of the
Insurance Act of Saint Lucia to provide general
insurance. The insurance cannot be directly purchased in
the United States and group coverage is only made
available through participating associations to their
membership. The benefits of this coverage may only be
enforced within the jurisdiction and under the laws of
Saint Lucia.
Document No. 13, ex. J at 7 (emphasis added). Davnic’s application
further states that:
Applicant acknowledges that the Insurer is licensed and
admitted in Saint Lucia. The coverage cannot be offered
in the United States. The benefits of this coverage may
only be enforced within the jurisdiction and under the
laws of Saint Lucia.
9
Document No. 16, ex. A at 3; ex. A-1 at 9.
10
Id., ex. A at 3; ex. A-2 at 9. The clause was later amended
in the 2010 Group Master Policy. Because Davnic’s claims are based
upon conduct occurring in 2009, at the latest, the 2010 Policy is
not applicable under the facts of this case. Id., ex. A at 4.
5
Id., ex. J. at 14 (emphasis added).
The pages containing these
provisions are both initialed by Johnson.
Davnic submitted its
application, and Bancroft approved it and issued a Certificate of
Insurance dated December 31, 2006.11
Each Certificate, issued
annually for each new coverage year, confirmed coverage under a
Group Policy which could be viewed pursuant to instructions on the
Certificate, and stated that “the Group Policy sets forth the terms
and conditions of the insurance provided.”12
Each Certificate
contains at the top of the front page Bancroft’s name and address
in “Castries, Saint Lucia, West Indies.”
Davnic’s
submission
of
the
application
with
the
express
language set out above demonstrates that Davnic not only received
notice that the Policy could be enforced only in Saint Lucia but
that Davnic accepted such.
Moreover, as this Court held in a
similar case involving Bancroft and other of its insureds, by
virtue of the Certificate, Davnic received constructive notice of
the terms of the Group Policy that governed their agreement with
Bancroft.
See Bancroft Life & Cas. ICC, Ltd. v. FFD Res. III, LLC,
Civ. A. No. H-11-2382, 2012 WL 2368302, at *2 (S.D. Tex. June 21,
2012); see also TIG Ins. Co. v. Sedgwick James of Washington, 184
F. Supp. 2d 591, 598 (S.D. Tex. 2001) (Atlas, J.) (where the
certificate of insurance referenced the policy, “the holder of a
11
Document No. 13, ex. A.
12
Id.; Document No. 16, exs. A at 5 & A-4.
6
certificate of insurance should obtain the insurance policy to
ascertain his coverage,” rejecting plaintiffs’ argument that they
never received the policy and therefore could rely solely on the
certificate of insurance).13
There is no showing that Davnic ever objected to being bound
by the Group Policy referenced in and made effective by the
issuance of each year’s new Certificate.
“Any act inconsistent
with an intent to avoid a contract has the effect of ratifying the
contract.”
Mo. Pac. R. Co. v. Lely Dev. Corp., 86 S.W.3d 787, 792
(Tex. App.-–Austin 2002, pet. dism’d). In fact, Davnic admits that
it relied on the policy to make two previous claims, which Bancroft
paid “in accordance with the Insurance program.”14
See Lely, 86
S.W.3d at 792 (“Ratification may be inferred by a party’s course of
conduct
and
need
not
be
shown
by
express
word
or
deed.”).
Moreover, Davnic’s counterclaims in this suit seek benefits under
the 2009 Group Policy.15
Seeking benefits under this policy estops
Counter-Plaintiffs from claiming that they are not bound by the
policy’s venue clause.
See Hellenic Inv. Fund, Inc. v. Det Norske
Veritas, 464 F.3d 514, 517-18 (5th Cir. 2006) (“Direct-benefit
13
Davnic asserts in its counterclaim that it requested a copy
of the Group Master Policy on numerous occasions. Document No. 13
at 17.
However, Davnic does not aver, much less produce any
evidence, that it took any of the steps specified in the
Certificate of Insurance actually to view the Policy.
14
Document No. 13 at 11.
15
Document No. 13 at 12.
7
estoppel ‘involve[s] non-signatories who, during the life of the
contract, have embraced the contract despite their non-signatory
status
but
then
during
litigation,
attempt
to
repudiate
the
arbitration clause in the contract.’” (quoting E.I. DuPont de
Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S.,
269 F.3d 187, 200 (3d Cir. 2001))); In re Kellogg Brown & Root,
Inc., 166 S.W.3d 732, 739 (Tex. 2005) (“Under ‘direct benefits
estoppel,’ a non-signatory plaintiff seeking the benefits of a
contract is estopped from simultaneously attempting to avoid the
contract’s
burdens,
such
as
the
obligation
to
arbitrate
disputes.”).
Davnic received actual and constructive notice that the Group
Policy could be enforced only in Saint Lucia under Saint Lucia law;
moreover,
by
accepting
performance
in
the
past
and
seeking
performance under its counterclaims here, Davnic is estopped from
claiming that it did not agree to the forum selection clause
contained in the Group Policy.
2.
No Waiver
Davnic contends that Bancroft waived the Saint Lucia forum
selection clause when it filed the instant action to collect on the
Notes in this Court.
“Waiver is generally understood to be the
intentional relinquishment of a known existing legal right.”
N.
Am. Specialty Ins. Co. v. Debis Fin. Servs., Inc., 513 F.3d 466,
8
470 (5th Cir. 2007) (quotation marks and citation omitted).
“For
waiver to occur, there must be an existing right, knowledge of its
existence, and either an actual intention to relinquish that right
or conduct so inconsistent with the intent to enforce the right as
to induce a reasonable belief that it has been relinquished.”
Id.
The Notes and Security Agreements expressly provide that they are
governed by Texas law.16
As this Court previously held under
virtually identical facts, Bancroft’s filing of this suit on the
promissory notes in Texas did not waive its right to enforce the
forum selection clause in claims regarding the insurance policy.
Bancroft Life & Cas. ICC, Ltd. v. FFD Res. III, LLC, Civ. A. No. H11-2382, 2012 WL 5032111, at *2 (S.D. Tex. Oct. 17, 2012).
Nor is
there merit to Davnic’s argument that its claims to enforce the
benefits of the insurance policy are compulsory counterclaims and
therefore must be brought in this Court. Assuming without deciding
that Davnic’s Policy claims fall within the ambit of Rule 13(a)
because they “arise[] out of the transaction or occurrence that is
the subject matter of the opposing party’s claim,” FED . R. CIV . P.
13(a)(1)(A), the Court may not ignore the forum-selection clause.
See e.g., Publicis Commc’n v. True N. Comm’cns Inc., 132 F.3d 363,
365-66
(7th
Cir.
1997)
(Easterbrook,
J.)
(holding
that
counterclaims subject to a forum selection clause must be brought
in the specified forum and are not susceptible to preclusion for
16
Document No. 1, exs. 1 ¶ 11, 2 ¶ 7.03, 3 ¶ 11, 4 ¶ 7.03.
9
not being brought as compulsory counterclaims).
In other words,
the forum selection clause precludes Bancroft from later claiming
that Davnic may not assert their insurance claims in Saint Lucia.
See id. at 366 (“If the parties promise to litigate a dispute only
in a particular forum, a party to the contract cannot seek to bar
the litigation in that forum because the claim was not presented in
some other forum.”).
Davnic has made no showing that courts in
Saint Lucia, which is an independent member state of the British
Commonwealth and recognizes Queen Elizabeth II as head of state,
and which has a judicial system that applies English common law,
with final appeal to the Privy Council in London, would not respect
the foregoing principle.
3.
Forum Selection Clause Is Not Unreasonable
Finally, Davnic argues that the forum selection clause is
unreasonable
because:
(1)
it
is
the
product
of
fraud
or
overreaching; (2) a jury trial is not available in Saint Lucia and
thus Davnic will be deprived of its day in court; and (3) enforcing
the forum selection clause would be against Texas public policy.
First, Davnic asserts that “[t]he alleged St. Lucia forum
selection clause is the result of fraud and overreaching because,
as Bancroft admits, it unilaterally changed the clause with no
input from or notice to its insured Davnic.”17
17
Document No. 18 at 13.
10
Under the facts of
this
case,
however,
Davnic
received
notice
from
the
time
it
completed its application that the Group Master Policy could only
be enforced in Saint Lucia, and the language of the forum selection
clause did not change at all from December 2006 to August 2009,
when Davnic filed its last request for coverage.
Davnic also knew
from the Certificate of Insurance that in order to read the
entirety of the Group Policy referenced in each annual Certificate
of Insurance, they would need to do so in the British Virgin
Islands.
These are sophisticated parties--Bancroft, a foreign
insurance company steering clear of American law and selling
products not obtainable in the United States, and Davnic, an entity
that warranted in its application that the “[a]pplicant . . . is a
sophisticated person with a substantial net worth in excess of USD
$1,000,000.”18
See, e.g., The Bremen, 92 S. Ct. at 1914 (finding
that the forum selection clause was “made in an arm’s-length
negotiation by experienced and sophisticated businessmen” and that
“it should be honored by the parties and enforced by the courts”).
Davnic’s second argument is that litigating in Saint Lucia
would deprive Davnic of its day in court.
This is not persuasive.
“The Supreme Court has . . . instructed American courts to enforce
[forum-selection] clauses in the interests of international comity
and out of deference to the integrity and proficiency of foreign
courts.”
18
Mitsui & Co. (USA), Inc. v. Mira M/V, 111 F.3d 33, 35
Document No. 13, ex. J at 8.
11
(5th Cir. 1997) (citing Mitsubishi Motors Corp. v. Soler ChryslerPlymouth, Inc., 105 S. Ct. 3346, 3355 (1985)).
Moreover, the
necessity of traveling to a remote forum does not preclude the
enforcement of a forum selection clause.
See Pugh v. Arrow
Electronics, Inc., 304 F. Supp. 2d 890, 895 (N.D. Tex. 2003)
(Solis, J.) (citing Carron v. Holland, 51 F. Supp. 2d 322, 326
(E.D.N.Y. 1999)).
Similarly unavailing is Davnic’s argument that the lack of a
provision for a jury trial makes enforcement of the forum selection
clause unjust in this case.
See, e.g., Interamerican Trade Corp.
v. Companhia Fabricadora de Pecas, 973 F.2d 487 (6th Cir. 1992)
(enforcing a Brazil forum selection clause because plaintiff would
not be deprived of his day in court even though he would have no
right to a jury trial in Brazil); Alt. Delivery Solutions, Inc. v.
R.R. Donnelley & Sons Co., No. Civ. SA05CA0172-XR, 2005 WL 1862631,
at *12-13 (W.D. Tex. July 8, 2005) (Rodriguez, J.) (holding a forum
selection clause enforceable even though a Mexico forum would not
allow the case to be tried by a jury).
In Alternative Delivery
Solutions, the court explained:
To invalidate all forum selection clauses that designate
forums that do not provide for a jury trial would
implicate many of the comity concerns raised by the
Supreme Court in The Bremen and other cases concerning
international agreements. Further, Plaintiff’s argument
that being deprived of its right to jury trial will “for
all practical purposes . . . prevent [plaintiff] from
having its day in court” is wholly unconvincing, for such
12
a conclusion would presumptively invalidate all bench
trials and arbitration clauses.
2005 WL 1862631, at *12.
Other Circuits have held that a lack of
jury trials does not render a forum inadequate. See, e.g., Rivera
v. Centro Medico de Turabo, Inc., 575 F.3d 10, 23–24 (1st Cir.
2009); Interamerican Trade Corp., 973 F.2d at 489 (6th Cir. 1992);
Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 768
(9th Cir. 1991); In re Union Carbide Corp. Gas Plant Disaster at
Bhopal, India in Dec., 1984, 809 F.2d 195, 199 (2d Cir. 1987) cert.
denied, 108 S. Ct. 199 (1987).
Moreover, the Fifth Circuit has
observed that the Supreme Court has “roundly rejected the notion
that a forum selection clause can be circumvented by a party’s
asserting the unavailability of American remedies.”
Haynsworth,
121 F.3d at 967 (citing Scherk v. Alberto-Culver Co., 94 S. Ct.
2449, 2456-57 (1974)).
Finally, Davnic’s argument that enforcing the forum selection
clause would be contrary to Texas public policy, as expressed in
the Texas Insurance Code, lacks merit.
Davnic expressly agreed to
litigate insurance matters in a non-Texas forum and that the
insurance they were buying could not be obtained in the United
States; hence Davnic’s refuge in the Texas Insurance Code is
ineffectual.
The Fifth Circuit in Haynsworth stated:
It defies reason to suggest that a plaintiff may
circumvent forum selection and arbitration clauses merely
by stating claims under laws not recognized by the forum
13
selected in the agreement. A plaintiff simply would have
to allege violations of his country’s tort law or his
country’s statutory law or his country’s property law in
order to render nugatory any forum selection clause that
implicitly or explicitly required the application of the
law of another jurisdiction.
121 F.3d at 969 (quoting Roby v. Corp. of Lloyd’s, 996 F.2d 1353,
1360 (2d Cir. 1993) (emphasis in original)).
In sum, Davnic has
not “advanced a sound rationale to overcome the presumption that
federal
courts
‘must
enforce
international transactions.’”
forum
selection
clauses
in
Hellenic Inv. Fund, 464 F.3d at 520
(quoting Haynsworth, 121 F.3d at 962).
Therefore, Davnic has
failed to meet its heavy burden of persuasion to show that the
Saint Lucia forum selection clause is unreasonable under the
circumstances shown here.
For the foregoing reasons, Davnic’s counterclaims must be
dismissed for improper venue because they arise from or relate to
the
insurance
contract
containing
a
choice
of
forum
clause
designating Saint Lucia as the exclusive forum for resolution of
claims under this contract.
III.
Order
Accordingly, for the foregoing reasons, it is
ORDERED that Counterclaim-Defendant Bancroft Life & Casualty
ICC, Ltd.’s Motion to Dismiss the Counterclaims (Document No. 16)
14
is GRANTED, and Davnic Ventures, L.P.’s (“Davnic”) counterclaims
are all DISMISSED without prejudice for improper venue.
The Clerk shall notify all parties and provide them with a
signed copy of this Order.
SIGNED at Houston, Texas, on this 25th day of March, 2013.
____________________________________
EWING WERLEIN, JR.
UNITED STATES DISTRICT JUDGE
15
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