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stating that the second favor weighs in favor of dismissal since the “state legislature carved out an applicable exception to in § 22:868(D)”
Summary of this case from Ness Healthcare NFP v. Starr Surplus Lines Ins. Co.Opinion
CIVIL ACTION NO. 21-876
2022-05-13
HOTEL MANAGEMENT OF NEW ORLEANS, LLC v. GENERAL STAR INDEMNITY CO. et al.
John William Houghtaling, II, Jennifer Perez, Gauthier Murphy Houghtaling LLC, Metairie, LA, John N. Ellison, Pro Hac Vice, Reed Smith LLP, Philadelphia, PA, Kip Allen Nesmith, Pro Hac Vice, Freese & Goss, PLLC, Birmingham, AL, Richard P. Lewis, Jr., Pro Hac Vice, Reed Smith LLP, New York, NY, Timothy A. Bearb, Pro Hac Vice, Matthews & Associates, Houston, TX, for Hotel Management of New Orleans, LLC. H. Minor Pipes, III, Catherine Fornias Giarrusso, Pipes Miles Beckman, LLC, New Orleans, LA, Benjamin C. Eggert, Pro Hac Vice, Joseph W. Gross, Pro Hac Vice, Wiley Rein LLP, Washington, DC, for General Star Indemnity Co. Jay Russell Sever, Katie Whitman Myers, Phelps Dunbar, LLP, New Orleans, LA, Alexander Matthew Bein, Pro Hac Vice, Carlton Fields, P.A., New York, NY, Heidi H. Raschke, Pro Hac Vice, Carlton Fields, PA, Tampa, FL, for Homeland Insurance Company of New York.
John William Houghtaling, II, Jennifer Perez, Gauthier Murphy Houghtaling LLC, Metairie, LA, John N. Ellison, Pro Hac Vice, Reed Smith LLP, Philadelphia, PA, Kip Allen Nesmith, Pro Hac Vice, Freese & Goss, PLLC, Birmingham, AL, Richard P. Lewis, Jr., Pro Hac Vice, Reed Smith LLP, New York, NY, Timothy A. Bearb, Pro Hac Vice, Matthews & Associates, Houston, TX, for Hotel Management of New Orleans, LLC.
H. Minor Pipes, III, Catherine Fornias Giarrusso, Pipes Miles Beckman, LLC, New Orleans, LA, Benjamin C. Eggert, Pro Hac Vice, Joseph W. Gross, Pro Hac Vice, Wiley Rein LLP, Washington, DC, for General Star Indemnity Co.
Jay Russell Sever, Katie Whitman Myers, Phelps Dunbar, LLP, New Orleans, LA, Alexander Matthew Bein, Pro Hac Vice, Carlton Fields, P.A., New York, NY, Heidi H. Raschke, Pro Hac Vice, Carlton Fields, PA, Tampa, FL, for Homeland Insurance Company of New York.
SECTION: H(2)
ORDER AND REASONS
JANE TRICHE MILAZZO, UNITED STATES DISTRICT JUDGE Before the Court is Defendant First Specialty Insurance Corp.’s Motion to Dismiss (Doc. 28). For the following reasons, this Motion is GRANTED .
BACKGROUND
This case arises out of a dispute over insurance coverage for losses allegedly sustained during the COVID-19 lockdown. Plaintiff Hotel Management of New Orleans, LLC operates a number of hotels in New Orleans, Louisiana. On November 4, 2019, Plaintiff purchased commercial property insurance policies from Defendant General Star Indemnity Co. ("General Star") and Defendant First Specialty Insurance Corp. ("First Specialty"). Plaintiff also contracted with Homeland Insurance Co. of New York ("Homeland Insurance") to obtain an excess property policy. All three of these policies covered Plaintiff's hotels and were in effect until November 4, 2020.
In March of 2020, Louisiana Governor John Bel Edwards and New Orleans Mayor Latoya Cantrell issued mandatory orders for non-essential businesses, including Plaintiff's, to close because of the pandemic. Plaintiff alleges that as a result of these orders, it suffered a substantial loss of business and incurred additional expenses. In March of 2021, Plaintiff filed suit against General Star, First Specialty, and Homeland Insurance in state court to obtain coverage under each policy for the losses incurred from the lockdown orders. Plaintiff brought a breach of contract claim based on Defendants’ denial of coverage. Plaintiff also sought the following declaratory judgments: (1) that the policies do not exclude coverage for pandemics, (2) that the COVID-related orders trigger the Civil Authority Coverage, and (3) that the policies also provide Business Income Coverage to Plaintiff for its losses. After Plaintiff filed suit, General Star removed the suit to this Court based on diversity jurisdiction.
See Proclamation Numbers 25 JBE 2020, 33 JBE 2020.
Now before the Court is First Specialty's Motion to Dismiss. First Specialty seeks dismissal of Plaintiff's claims in light of the forum selection clause from the policy issued to Plaintiff: "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." The Court heard oral argument on First Specialty's Motion on August 9, 2021. At that hearing, the Court asked counsel in attendance whether it would be prudent to stay this matter in light of a case with similar coverage issues pending before the Fifth Circuit, Q Clothier New Orleans, L.L.C. v. Twin City Fire Insurance Co. Counsel agreed, and the Court stayed the instant matter until the resolution of the appeal. Recently, the Fifth Circuit resolved the appeal, prompting this Court to lift the stay.
Doc. 1-3 at 30. First Specialty also argues that Plaintiff's claims should be dismissed for the same reasons as presented by General Star in its Motion to Dismiss. See Doc. 28 at 19–20. In a separate Order and Reasons, the Court agreed with General Star's arguments based on this circuit's interpretation of "direct physical loss" and granted its Motion to Dismiss. Here, because the Court finds dismissal appropriate pursuant to the forum selection clause, it cannot reach those arguments. Nevertheless, the Court notes that New York case law aligns with the Fifth Circuit's interpretation of "direct physical loss." See, e.g. , Food for Thought Caterers Corp. v. Sentinel Ins. Co. , 524 F. Supp. 3d 242 (S.D.N.Y. 2021).
29 F.4th 252 (5th Cir. 2022).
LEGAL STANDARD
In Atlantic Marine Construction Co. v. United States District for the Western District of Texas , the Supreme Court explained that "the appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens. " According to Atlantic Marine , "courts should evaluate a forum-selection clause pointing to a nonfederal forum in the same way that they evaluate a forum-selection clause pointing to a federal forum." "[A] a forum selection clause pointing to a particular federal district should be enforced through a motion to transfer under 28 U.S.C. § 1404." " Section 1404(a) is merely a codification of the doctrine of forum non conveniens for the subset of cases in which the transferee forum is within the federal court system."
571 U.S. 49, 60, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013).
Id. at 61, 134 S.Ct. 568.
Al Copeland Invs., LLC v. First Specialty Ins. Corp. , No. 16-16346, 2017 WL 2831689, at *5 (E.D. La. June 29, 2017) (citing Atl. Marine , 134 S. Ct. at 579 ), aff'd sub. nom. , Al Copeland Investments, L.L.C. v. First Specialty Ins. Corp. , 884 F.3d 540 (5th Cir. 2018).
Atl. Marine , 571 U.S. at 60, 134 S.Ct. 568.
Typically, a court applying the doctrine of forum non conveniens "must determine whether there is an adequate alternative forum and, if so, decide which forum is best-suited to the litigation by considering a variety of private- and public-interest factors and giving deference to the plaintiff's choice of forum." However, "[t]he presence of a valid forum-selection clause simplifies this analysis in two ways." "First, the plaintiff's choice of forum merits no weight" because, by contracting for a specific forum, "the plaintiff has effectively exercised its ‘venue privilege’ before a dispute arises." Second, the private-interest factors "weigh entirely in favor of the preselected forum," so that the "district court may consider arguments about public-interest factors only." Thus, "a valid forum-selection clause controls the forum non conveniens inquiry ‘[i]n all but the most unusual cases.’ "
Barnett v. DynCorp. Int'l, L.L.C. , 831 F.3d 296, 300 (5th Cir. 2016) (citing DTEX, LLC v. BBVA Bancomer, S.A. , 508 F.3d 785, 794–95 (5th Cir. 2007) ).
Id.
Atl. Marine , 571 U.S. at 63, 134 S.Ct. 568.
Id. at 64, 134 S.Ct. 568.
Barnett , 831 F.3d at 300 (alteration in original) (citing Atl. Marine , 134 S. Ct. at 583 ).
Antecedent to the forum non conveniens analysis is the question of whether the forum selection clause at issue is mandatory. "The Fifth Circuit recognizes a distinction between mandatory and permissive forum selection clauses." "A mandatory FSC [forum selection clause] affirmatively requires that litigation arising from the contract be carried out in a given forum." "By contrast, a permissive FSC is only a contractual waiver of personal-jurisdiction and venue objections if litigation is commenced in the specified forum." "Only mandatory clauses justify transfer or dismissal."
See Al Copeland Invs., LLC , 2017 WL 2831689, at *6.
Chep Container & Pooling Sols., Inc. v. Pepper Source, Ltd. , No. 20-01225, 2020 WL 12675645, at *4 (E.D. La. Dec. 17, 2020) (citing Weber v. PACT XPP Techs. , AG, 811 F.3d 758, 768 (5th Cir. 2016) ).
Weber , 811 F.3d at 768 (alteration added).
Id.
Id.
Courts must also consider the enforceability of the forum selection clause before analyzing forum non conveniens. "Under federal law, forum-selection clauses are presumed enforceable." This is a strong presumption that can only be overcome by a clear showing that the clause is unreasonable under one of the following circumstances:
See Al Copeland Invs., LLC , 2017 WL 2831689, at *6.
Ginter ex rel. Ballard v. Belcher, Prendergast & Laporte , 536 F.3d 439, 441 (5th Cir. 2008) (internal quotations omitted).
(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.
Haynsworth v. The Corporation , 121 F.3d 956, 963 (5th Cir. 1997) (citing Carnival Cruise Lines, Inc. v. Shute , 499 U.S. 585, 595, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991) ; M/S Bremen v. Zapata Off–Shore Co. , 407 U.S. 1, 12–13, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) ).
"The party resisting enforcement on these grounds bears a ‘heavy burden of proof.’ "
M/S Bremen , 407 U.S. at 17, 92 S.Ct. 1907.
LAW AND ANALYSIS
First Specialty argues that the forum selection clause in the policy of insurance issued to Plaintiff is mandatory and enforceable. First Specialty asks this Court to enforce the clause by dismissing—rather than transferring—Plaintiff's claims. Given that the clause in question specifically contemplates the state courts of New York as the proper forums, transfer to another federal court is not possible. Accordingly, this Court must determine whether dismissal is appropriate under the doctrine of forum non conveniens. This analysis first requires determining whether the forum selection clause is mandatory and enforceable.
See Doc. 1-3 at 30 ("The parties irrevocably submit to the exclusive jurisdiction of the Courts of the State of New York ....") (emphasis added); Dixon v. TSE Intern. Inc. , 330 F.3d 396, 398 (5th Cir. 2003) ("Federal district courts may be in Texas, but they are not of Texas.... By agreeing to litigate all relevant disputes solely in ‘the Courts of Texas,’ TSE waived its right to removal.").
I. Whether the Forum Selection Clause Is Mandatory
The parties do not dispute that the forum selection clause is mandatory. "An FSC is mandatory only if it contains clear language specifying that litigation must occur in the specified forum." Here, the clause states that "[t]he parties irrevocably submit to the exclusive jurisdiction of the Court 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. " This language clearly conveys that litigation must occur in state court in New York, and therefore the Court finds that the policy's forum selection clause is mandatory.
Weber , 811 F.3d at 768.
Doc. 1-3 at 30 (emphasis added).
II. Whether the Forum Selection Clause Is Enforceable
Federal law governs the enforceability of forum selection clauses in the Fifth Circuit. As discussed above, Plaintiff must overcome a strong presumption of enforceability by showing that the clause is unreasonable because
Barnett , 831 F.3d at 301 (citing Haynsworth , 121 F.3d at 962 ; Weber , 811 F.3d at 770 ).
(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.
Haynsworth , 121 F.3d at 963.
Here, Plaintiff argues that enforcement would be "manifestly unreasonable" for two reasons. First, Plaintiff contends that it would be "unduly expensive" and "patently unfair" to litigate its claims against the other insurers in this case in Louisiana while suing First Specialty in New York. Second, Plaintiff argues that Louisiana Revised Statutes § 22:868(A) evinces the state's public policy against forum selection clauses. This statute provides that no insurance contract issued in Louisiana can contain a provision "[d]epriving the courts of this state of the jurisdiction or venue of action against the insurer."
See Doc. 46 at 12–13.
Id. at 12.
Id.
La. Rev. Stat. § 22:868(A)(2).
Plaintiff's arguments do not carry the "heavy burden" required to overcome the strong presumption of enforceability of the parties’ forum selection clause. "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." Plaintiff selected New York as a forum and will not for all practical purposes be deprived of its day in court as a result. Further, § 22:868(D) states that "[t]he provisions of Subsection A of this Section shall not prohibit a forum or venue selection clause in a policy form that is not subject to approval by the Department of Insurance." Because, as even Plaintiff acknowledges, the policy at issue here is an instance of surplus lines insurance, which does not require approval by the Department of Insurance, § 22:868(D) applies. The prohibition on forum selection clauses in § 22:868(A) is inapplicable. Accordingly, the Court finds that the forum selection clause agreed upon by the parties is enforceable.
M/S Bremen , 407 U.S. at 17, 92 S.Ct. 1907.
Atl. Marine , 571 U.S. at 64, 134 S.Ct. 568.
See La. Rev. Stat. § 22:446(A).
III. Whether Dismissal Is Appropriate under Forum Non Conveniens
Given that the forum selection clause at issue is mandatory and enforceable, the Court must now determine whether the doctrine of forum non conveniens warrants dismissal of Plaintiff's claims against First Specialty. As stated above, the clause simplifies this analysis such that the Court can ignore Plaintiff's choice of forum and consider the public interest factors alone. The Fifth Circuit has enumerated these factors as follows:
See supra notes 9–11.
[(1)] administrative difficulties flowing from court congestion; [(2)] the local interest in having localized controversies decided at home; [(3)] the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; [(4)] the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and [(5)] the unfairness of burdening citizens in an unrelated forum with jury duty.
Barnett , 831 F.3d at 309 (alterations added) (quoting Weber , 811 F.3d at 776 ).
"These factors justify a refusal to enforce a forum-selection clause only in ‘truly exceptional cases.’ "
Id. (quoting Weber , 811 F.3d at 776 ).
Here, Plaintiff argues that some of these factors weigh against dismissal. With respect to the second factor, § 22:868 "demonstrates that Louisiana has articulated its particular interest in having disputes involving Louisiana policyholders determined by Louisiana courts," according to Plaintiff. As to the third factor, Plaintiff believes that this dispute will be "decided under Louisiana law," with which New York is less familiar. Finally, as for the fifth factor, dismissal entails burdening the citizens of New York with jury duty.
Doc. 46 at 14.
Id.
This Court is not convinced that these considerations render this case so exceptional that dismissal is not warranted. Whatever interest § 22:868(A) evinces is not relevant to this case because, as explained above, the state legislature carved out an applicable exception to that provision in § 22:868(D). For that reason, the second factor weighs in favor of dismissal.
With respect to the third factor, Plaintiff assumes without justification that a New York state court would apply Louisiana law. But the Supreme Court has rejected the rule "that the law of the court in which the plaintiff inappropriately filed suit should follow the case to the forum contractually selected by the parties." Thus, it is not clear that this third factor weighs against dismissal. Plaintiff has failed to carry its burden and thus the Court cannot disregard the parties’ agreement on public interest grounds. The first, second, and fourth factors weigh in favor of dismissal, whereas—at best—the third and fifth dictate otherwise. This is not a truly exceptional case, and therefore the Court finds that dismissal under forum non conveniens is appropriate.
Atl. Marine , 571 U.S. at 65, 134 S.Ct. 568.
CONCLUSION
For the foregoing reasons, Defendant First Specialty's Motion to Dismiss for Failure to State a Claim (Doc. 28) is GRANTED , and all of Plaintiff's claims against First Specialty are hereby DISMISSED WITHOUT PREJUDICE .
See Al Copeland Invs., LLC , 2017 WL 2831689, at *13 (dismissing case without prejudice on basis of identical forum selection clause).