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United States District Court, N.D. California

May 14, 2004.

GEO. F. MARTIN COMPANY, et al., Plaintiffs, v ROYAL INSURANCE COMPANY OF AMERICA, et al., Defendants

The opinion of the court was delivered by: SUSAN ILLSTON, District Judge

On May 14, 2004, this Court heard argument on defendants' motion to transfer venue. Having carefully considered the arguments of the parties and the papers submitted, the Court hereby GRANTS defendants' motion and transfers the case to the United States District Court for the District of Minnesota. Reasons for the Court's decision are set forth below.


  This lawsuit arises out of the parties' relationships to each other concerning events which occurred in Minnesota. Plaintiff Geo. M. Martin Company (Martin) manufactures corrugated stackers for use in the paper processing industry. Plaintiff Gary Forde (Forde) suffered an industrial injury in 1999 in Minnesota while using a Martin stacker, and Forde sued Martin in 2000 in Minnesota as a result (the underlying action). At the time of the injury, defendant Royal Insurance Company of America (Royal) was Martin's excess liability insurance carrier. In March 2002, "[b]efore trial, Forde entered what is known in Minnesota as a `Loy-Teigen' agreement, whereby he accepted the limits of Martin's primary insurance and agreed to limit his recovery at trial to the limits of Martin's excess coverage with Royal-515 million." Motion at 1, 3. Plaintiffs allege that "[a]s the case proceeded toward trial, Forde again offered to settle with Martin for an amount within Royal's policy limit, but Royal refused to settle." Oppo. at 2.

  After trial in Minnesota, the jury assessed Fordes' compensatory damages at $35 million. Id Royal paid its policy limit of $15 million in accord withe the Loy-Teigen agreement. Although "Forde had waived any damages in excess of Royal's policy limits, Martin voluntarily paid him another $5 million to avoid further litigation." Motion at 2.

  In the instant lawsuit, Forde and Martin allege that "Royal wrongfully failed to settle the underlying action within its $15 million excess policy limit." Motion at 2. Forde sues as an assignee of Martin's insurance claim. Id Despite the existence of the Loy-Teigen settlement agreement, Forde alleges that he is entitled to $19 million, while Martin alleges that it is entitled to $5 million. Id. Now before the Court is Royal's motion to transfer the action to the United States District Court for the District for Minnesota.


  "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil matter to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). The purpose of section 1404(a) is to "`prevent the waste of time, energy, and money' and `to protect litigants, witnesses and the public against unnecessary inconvenience and expense.'" VanDusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 809 (1964). citing Continental Grain Co. v. The FBL-585, 364 U.S. 19, 26-27, 80 So. Ct. 1470, 1474-75 (1960). A motion for transfer lies within the broad discretion of the district court, and must be determined on an individualized basis. See Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 20001 citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 2244 (1988).

  To support a motion for transfer, the moving party must establish: (1) that venue is proper in the transferor district; (2) that the transferee district is one where the action might have been brought; and (3) that the transfer will serve the convenience of the parties and witnesses and will promote the interests of justice. See Goodyear Tire & Rubber Co. v. McDonnell Douglas Corp., 820 F. Supp. 503, 506 (C.D. Cal. 1992). In determining the convenience of the parties and witnesses and the interests of justice, courts in this district have recently considered the following factors: (1) plaintiff's choice of forum, (2) convenience of the parties, (3) convenience of the witnesses, (4) ease of access to the evidence, (5) familiarity of each forum with the applicable law, (6) feasibility of consolidation of other claims, (7) any local interest in the controversy, and (8) the relative court congestion and time of trial in each forum.

 Williams v. Bowman. 157 F. Supp.2d 1103, 1106 (N.D. Cal. 2001). citing Queentex Enterprises, Inc. v. Sara Lee Corp., 2000 WL 246599 at *2 (N.D. Cal. 2000) (additional citation omitted).

  As the Williams court noted, this "list does not exhaust the possibilities." Id. See. e.g. Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986); Jones, 211 F.3d at 498-99. Like the Williams court, this Court finds that the Queentex test "comports with the text of section 1404(a) and Ninth Circuit precedent." Williams, at 1106.*fn1


  On a motion to transfer, the moving party must first demonstrate that venue is proper in both the transferor and transferee courts, as required by the first two components of the Goodyear test. Thereafter, the court uses the multi-factor determination set forth in Queentex to establish the third element of Goodyear: convenience to the parties and witnesses, and the interests of justice. No party contests the fact that this action could have been brought in Minnesota. As explained below, this Court finds that the balance of factors weighs in favor of transfer.

 1. Plaintiff's choice of forum

  Generally, a court affords a plaintiff's choice of forum "substantial weight." Williams. 157 F. Supp.2d at 1106 (citation omitted). However, a court will substantially reduce its deference to a plaintiff's choice of forum when the plaintiff does not reside in the venue or when the forum lacks a significant connection to the activities alleged in the complaint, Id. Finally, "[i]f there is any indication that plaintiff's choice of forum is the result of forum shopping, plaintiff's choice will be accorded little deference." Id.*fn2

  Plaintiff Martin's corporate headquarters are in this district, so it resides here. Plaintiff Martin purchased the insurance policy from Royal in California. Oppo. at 5.*fn3 Otherwise, as the Court discusses below, all the significant activities underlying this lawsuit transpired in Minnesota. Accordingly, this factor weighs in favor of transfer.

 2. Convenience of the parties

  Plaintiff Forde and his conservator, Mary Roberts, also a plaintiff, now live in Maiden Rock, Wisconsin, about an hour's drive from Minneapolis. Motion at 12. Plaintiff Martin's headquarters are in Emeryville, California. Martin Decl. ¶ 2. Defendants Royal Insurance Company and Royal Specialty Underwriting are incorporated and located in Illinois and Georgia, respectively. Motion at 3. Royal's "overall corporate headquarters for U.S. operations" are in Charlotte, North Carolina. Davidson Decl. ¶ 9. No Royal employee resides in California. Motion at 12. Although plaintiffs argue that Royal's "claims-handling decisions . . . took place at the corporate level, in Georgia," Oppo. at 1, "the local adjuster resides in Minnesota." Motion at 12. This factor, considered alone, does not weigh heavily in favor of either California or Minnesota.

 3. Convenience of the witnesses

  "One of the most important factors in determining whether to grant a motion to transfer venue is the convenience of the witnesses." Queentex, 2000 WL 246599 at * 5 (citation omitted). To show inconvenience, the moving party should provide specific information regarding the identity and location of witnesses, and the content and relevance of their testimony. Id. at *6. With regard to convenience, a court will give primary consideration to third party, as opposed to employee, witnesses. Id. Royal argues that "the vast majority of key witnesses are located in or near Minnesota." Motion at 8. As discussed below, the existence of the Loy-Teigen agreement regarding the underlying litigation will be central to the resolution of the instant suit. Each of the attorneys involved in the negotiation of this key agreement "resides in or near Minneapolis/' Motion at 9. Under Fed.R.Civ.Pro. 45(c)(3)(A)(ii), a non-party witness may be not be compelled to testify at trial if he or she lives more than 100 miles from the trial court. When possible, live testimony is preferable to depositions and transfer of this action would allow for live testimony of important witnesses.

  Royal also argues that witnesses concerning the parties' actions after trial, namely Royal employees and additional lawyers, are located nearer to Minnesota than California; some of them actually reside in Minnesota, while others reside in Illinois or Georgia. Plaintiffs argue that in either forum, the court will be unable to compel the testimony of some witnesses and that transfer merely shifts inconvenience from one forum to another. Oppo. at 7-8. As defendants point out, however, plaintiffs "have failed to identify even one non-party witness in the Northern District (or any other district) of California." Reply at 4-5 (emphasis in the original).

  As the Court explains below, the centrality of the Loy-Teigen agreement to the resolution of this dispute makes the lawyers involved in its negotiation important witnesses. The fact that these witnesses could be compelled to testify in Minnesota makes this factor weigh in favor of transfer.

 4. Ease of access to the evidence

  Plaintiffs argue that its evidence is in California and that relevant insurance documents belonging to Royal "can be easily copied and moved to California for trial." Oppo. at 8. Both parties argue that the ligation will proceed least expensively in the forum they favor, but this factor does not weigh heavily in favor of either party.

 5. Familiarity of each forum with the applicable law

  In March 2002, six months before trial of the underlying action, Forde entered into the partial settlement agreement known in Minnesota as a Loy-Teigen agreement. Motion at 3. Defendants argue that the Loy-Teigen "procedure is unknown in California, but common in Minnesota, and is the lynchpin on which determination of the entire case hinges." Id. This Court agrees. According to defendants, the practice of Loy-Teigen agreements originated in Wisconsin, and the Minnesota Supreme Court endorsed the practice in 1994 in Drake v. Ryan, 514 N.W.2d 785 (Minn. 1994). The terms of a Loy-Teigen agreement free the insured from personal liability and also "eliminate any possibility of the excess insurance insurer incurring bad faith liability for exposing the insured to liability in excess of its insurance coverage." Motion at 4; see also Drake, 514 N.W.2d at 790.

  The Loy-Teigen agreement executed in the underlying action anticipated that it "shall be governed and construed in accordance with principles and rules established in the cases of Loy v. Bunderson, 320 N.W.2d 175 (Wis. 1982), Teigen v. Jelco of Wisconsin, Inc., 367 N.W.2d 806 (Wis. 1985) and Drake v. Ryan, 514 N.W.2d 785 (Minn. 1994)." Davidson Decl. Ex. B.


The benefit [of the agreement] to Royal is that it is relieved of any bad faith excess exposure. In other words, Geo. M. Martin Company will have no basis fora claim forbad faith against Royal if the verdic exceeds the available insurance coverage because Geo. M. Martin Company cannot be liable under the Agreement for any amounts in excess of its insurance coverage.
Davidson Decl. Ex. C.

  On March 8, 2002, Judge Isabel Gomez of the Minnesota District Court approved the Loy-Teige agreement. Motion at 5. Before trial of the underlying action, Forde discovered that "Martin had withheld from discovery critical, damaging documents . . . show[ing] that Martin's stackers sold in Europe featured a laser guided safety curtain designed to prevent precisely the type of injury that Forde suffered." Motion at 6.*fn4 a discovery sanction, the judge in the underlying action "allowed the jury to hear of Martin's concealment the documents relating to its superior European products." Id.

  After the jury returned with a $35 million compensatory damages verdict and in anticipation of beginning of the punitive damages phase, Forde "asked the court to lift the $15 million Loy-Teigen cap 2 farther discovery sanction." Motion at 6. Judge Gomez declined to rule on the motion. Id. Martin settled Forde for $5 million in order to avoid a punitive damages phase, and Royal paid Forde $15 million under terms of the Loy-Teigen agreement. Id. In October, 2003, Forde "returned to the Minnesota court and as Judge Gomez to set aside the pretrial order that limited his recovery to Royal's policy limits." Id. On Febr 17, 2004, Judge Gomez denied Forde's motion. Davidson Decl. Ex. E.

  On November 10, 2003, Martin and Forde filed the instant suit in Superior Court, Alameda County, alleging breach of contract and breach of the duty of good faith and fair dealing. On December 30, 2003, Royal timely removed the action to this Court on diversity grounds.

  The Loy-Teigen agreement is absolutely central to the resolution of this dispute, since it governed the parties' relationships with each other in anticipation of the underlying litigation. The agreement was apparently intended to insulate Royal from bad faith liability, but Martin and Forde now sue Royal alleging bad faith. Any finding of bad faith against Royal would necessarily require rulings on the parties' Loy-Teigen agreement. A Minnesota court is much better suited than this court to analyze the Loy-Teigen agreement and its impact on the current lawsuit. Although this Court is unfamiliar with the Loy-Teigen practice, it "is common in Minnesota and is generally known to attorneys and state and federal judges throughout Minnesota who handle tort cases against insured defendants." Davidson Decl. ¶ 5. Plaintiffs concede the greater familiarity of Minnesota courts with Loy-Teigen agreements, but argue that "the effect of the agreement is not the central issue in this case." Oppo. at 5. This Court disagrees.*fn5

  Plaintiffs argue that "[t]his case turns on California law, not Minnesota law," since Royal's obligations to Martin, a California resident, arise out of an insurance policy purchased in California. Oppo. at 1 (brackets added). Plaintiffs argue that the insurance policy is the key agreement in an bad faith action, which is usually true. In the instant case, however, the Loy-Teigen agreement was intended to insulate Royal from a finding of bad faith and thus becomes central to resolution of this dispute. Interestingly, although plaintiffs argue that the "core issue in the [instant] litigation is whether Royal should have accepted the opportunities presented it to settle the [underlying] lawsuit sooner than it did," oppo. at 4, plaintiffs fail to specify in their opposition the timing of the alleged settlement offers (brackets added).*fn6

  This Court recognizes the possible involvement of California law with regard to Royal's obligations to its insured, Martin, and with regard to its duty to accept reasonable settlement offers within policy limits. See, e.g. State Farm Mut. Auto Ins. Co. v. Superior Court, 114 Cal.App.4th 434, 447-48 (2003); Hamilton v. Maryland Cas. Co., 27 Cal.4th 718, 724 (2002).*fn7

  Ultimately, this lawsuit stems from events which occurred in Minnesota. The centrality of the Loy-Teigen agreement, and its status as a creature of Minnesota law, weigh decisively in favor of transfer.

 6. Feasability of consolidation with other claims

  "Transfer is favored where it will allow consolidation with another pending action and conserve judicial resources." Queentex, at *7 (citation omitted). The issue of consolidation does not arise in the instant case, but the court recognizes plaintiffs' argument that "[t]he underlying litigation between Forde and Martin has settled, and there will be no appeal of the order refusing to set aside the Loy-Teigen agreement." Oppo. at 1 (italics in the original; brackets added); see also Ehrlich Decl. ¶ 4. The fact that this lawsuit will apparently not run parallel to litigation pending in state court in Minnesota does not negate Minnesota's closer nexus to the instant suit.

 7. Any local interest in the controversy

  Royal correctly argues that "Minnesota has a greater interest than California in determining whether Loy-Teigen agreements should be given their intended effect of protecting insureds and their insurers from `excess1 judgments." Motion at 11. This Court also recognizes California's "important interest in regulatory oversight of the companies that insure California residents." Oppo. at 1. Although plaintiffs argue that Minnesota has "no public-policy interest that is served by having this action tried there," Oppo. at 9, this Court disagrees and recognizes Minnesota's interests in the determination of the effect of a Loy-Teigen agreement on a subsequent bad faith action, since a finding of bad faith would alter the consequences of the Loy-Teigen agreement. 8. The relative court congestion and the time of trial in each forum

  "Relative court congestion is at best, a minor factor in the section 1404 calculus." Queentex, 2000 WL 246599, at *8. The parties have not mentioned this factor, so this Court declines to engage in such an analysis.


  Considering all the factors together, the relevant factors favor transfer. For the foregoing reasons, the Court GRANTS defendants' motion to transfer venue and hereby transfers the suit to the United States District Court for the District of Minnesota, [docket # 4]


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