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
ORDER GRANTING DEFENDANT'S MOTION TO TRANSFER VENUE AND
TRANSFERRING ACTION TO THE DISTRICT OF MINNESOTA
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
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
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,
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
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
"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
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]
IT IS SO ORDERED.