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Tri-Union Seafoods, LLC v. Starr Surplus Lines Ins. Co.

United States District Court, S.D. California

February 5, 2015

TRI-UNION SEAFOODS, LLC, Plaintiff,
v.
STARR SURPLUS LINES INSURANCE COMPANY, Defendant

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[Copyrighted Material Omitted]

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For Tri-Union Seafoods, LLC, Plaintiff: Hani Ganji, LEAD ATTORNEY, Hanson Bridgett LLP, San Francisco, CA.

For Starr Surplus Lines Insurance Company, Defendant: John R Clifford, Patrick W. Berry, LEAD ATTORNEYS, Wilson Elser Moskowitz Edelman & Dicker LLP, San Diego, CA; Joseph F. Bermudez, LEAD ATTORNEY, PRO HAC VICE, Wilson Elser Moskowitz Edelman & Dicker LLP, San Diego, CA.

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ORDER DENYING DEFENDANT'S MOTION TO DISMISS, OR IN THE ALTERNATIVE, MOTION TO TRANSFER

[Doc. No. 4]

Hon. Michael M. Anello, United States District Judge.

Defendant Starr Surplus Lines Insurance Company (" Starr" or " Defendant" ) moves to dismiss this action pursuant to Federal Rule of Civil Procedure 12(b)(6), or in the alternative, to transfer the action to the Southern District of New York pursuant to 28 U.S.C. § 1404. Plaintiff Tri-Union Seafoods, LLC, doing business as Chicken of the Sea International (" Tri-Union" or " Plaintiff" ), filed an opposition, to which Defendant replied. See Doc. Nos. 9, 11. The Court found this matter suitable for determination on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the reasons set forth below, the Court DENIES Defendant's motion in its entirety.

Background

This action concerns an insurance dispute under Product Contamination Insurance Policy No. SLSLCRM8202551 (the " Policy" ) issued by Defendant to Plaintiff for the period of November 15, 2011 to November 15, 2012.[1] Plaintiff is a San Diego-based company that makes and markets canned seafood and other value-added seafood products. The events giving rise to this dispute occurred on May 25, 2012, when the Food and Drug Administration (" FDA" ) issued a nationwide update regarding Korean molluscan shellfish, which purportedly caused Plaintiff to recall all of its oyster products sourced from the Korean shellfish shippers.

Plaintiff timely tendered its claim under the Policy for its loss resulting from the recall, which Defendant denied. On September 26, 2014, Plaintiff filed this action in the Southern District of California, alleging Defendant improperly denied coverage of Plaintiff's insurance claim. See Doc. No. 1 (" Compl." ). Plaintiff's complaint alleges claims for declaratory relief, breach of contract, breach of implied covenant of good faith and fair dealing, and unfair business practices in violation of California Business and Professions Code section 17200, et seq.

Defendant now moves to dismiss under Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, to transfer this action under 28 U.S.C. § 1404 on the grounds that the Policy contains a valid, enforceable choice of law and forum provision, requiring any dispute under the Policy to be litigated in New York and under New York law. Defendant further contends that Plaintiff has failed to state a claim for coverage under any provision of the Policy.

Discussion[2]

Defendant's argument appears to be three-fold. First, Defendant asserts

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that pursuant to the Policy's " Choice of Law and Forum" provision, the contractually chosen forum to litigate this action is New York, and therefore the Court should dismiss this action or transfer it to the Southern District of New York. Second, Defendant argues that because the same provision expressly provides that New York law governs any claims or disputes arising under the Policy, Plaintiff's claims under California law fail as a matter of law. Finally, Defendant contends that Plaintiff has failed to state a claim for which relief can be granted.

In response, Plaintiff asserts that the Service of Suit Endorsement to the Policy modifies and supercedes the Policy's forum-selection clause. Plaintiff further contends that the Policy's choice-of-law clause is unenforceable, and therefore California law applies. Finally, Plaintiff avers that the complaint sufficiently alleges all four causes of action.

The Court addresses each argument in turn.

A. Forum

At the outset, Defendant seeks to dismiss or transfer this action to the Southern District of New York under 28 U.S.C. § 1404(a) on the grounds that the Policy's forum selection clause requires the parties to litigate any dispute in New York. Plaintiff, however, asserts that because the Service of Suit Endorsement modifies and supercedes the Policy's forum-selection clause, the Policy contractually permits Plaintiff to file its complaint in this Court.

1. Legal Standard

In Atlantic Marine Construction Company, Inc. v. United States District Court for the Western District of Texas, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013), the United States Supreme Court clarified that a party may seek to enforce a forum selection clause through a motion to transfer under 28 U.S.C. § 1404(a).[3] Section 1404(a) provides that " [f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). The purpose of § 1404(a) is to " prevent the waste of time, energy, and money to protect litigants, witnesses and the public against unnecessary inconvenience and expense." Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964) (internal citations and quotation marks omitted). 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. 2000).

To support a motion for transfer of venue, the moving party must establish " that venue is proper in the transferor district; that the transferee district is one where the action might have originally been brought; and that transfer will serve the convenience of the parties and witnesses and will promote the interests of justice." Vu v. Ortho-- McNeil Pharm., Inc., 602 F.Supp.2d 1151, 1155--56 (N.D. Cal. 2009)

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( quoting Goodyear Tire & Rubber Co. v. McDonnell Douglas Corp., 820 F.Supp. 503, 506 (C.D. Cal. 1992)). Once venue is determined to be proper in both districts, " [t]he Court must consider public factors relating to 'the interest of justice' and private factors relating to 'the convenience of the parties and witnesses.'" Decker Coal Co. v. Commonw. Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). Such factors include: (1) plaintiff's choice of forum; (2) convenience of the parties and witnesses; (3) ease of access to the evidence; (4) familiarity of each forum with the applicable law; (5) feasibility of consolidation with other claims; (6) any local interest in the controversy; and (7) the relative court congestion and time of trial in each forum. Vu, 602 F.Supp.2d at 1156.

In Atlantic Marine, the Supreme Court set forth that " [t]he presence of a valid forum-selection clause requires district courts to adjust their usual § 1404(a) analysis in three ways." Id. at 581. First, " the plaintiff's choice of forum merits no weight . . . Rather, as the party defying the forum-selection clause, the plaintiff bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted." Id. at 581--82. Second, " a court evaluating a defendant's § 1404(a) motion to transfer based on a forum-selection clause should not consider arguments about the parties' private interests" but instead may only consider arguments regarding public-interest factors. Id. at 582. Finally, " when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules--a factor that in some circumstances may affect public-interest considerations." Id. The Court reasoned that " [n]ot only would it be inequitable to allow the plaintiff to fasten its choice of substantive law to the venue transfer, but it would also encourage gamesmanship." Id. at 583. A precursor to this analysis, however, is a contractually valid forum-selection clause. See id. at 581 n.5.

2. Analysis

Defendant seeks to enforce the Policy's forum selection clause, which it contends requires the parties to litigate any dispute in New York. According to Defendant, the Service of Suit Endorsement has no impact on the Policy's original forum-selection clause, and therefore this Court should transfer this action to the agreed-upon forum of the Southern District of New York. Plaintiff argues that the Service of Suit Endorsement modifies and supercedes the Policy's forum-selection clause, thereby permitting Plaintiff to file its complaint in this Court. Thus, the interpretation and interplay of the Policy's " Choice of Forum" clause and the Service of Suit Endorsement is at issue.

It is well settled that in interpreting contracts, courts look first to the plain and ordinary meaning of the agreement. See, e.g., Perez-Encinas v. AmerUs Life Ins. Co., 468 F.Supp.2d 1127, 1133 (N.D. Cal. 2006) (applying California law); Minerals Technologies, Inc. v. Omya AG, 406 F.Supp.2d 335, 337 (S.D.N.Y. 2005) (" Language whose meaning is otherwise plain is not ambiguous merely because the parties urge different interpretations in the litigation." ) (internal citation omitted). A contract is ambiguous where, upon examining the contract as a whole, it is capable of two or more reasonable meanings. See Scholastic, Inc. v. Harris, 259 F.3d 73, 82 (2d Cir. 2001); Perez-Encinas, 468 F.Supp.2d at 1133. Importantly, however, " [i]f contractual language is clear and explicit, it governs." Bank of the W. v. Superior Court, 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992). The Court therefore looks to the language of

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the agreement to determine whether it is unambiguous.

Here, the Policy contains two relevant provisions. First, section 5.10 of the original Policy provides in relevant part:

Choice of Law and Forum
The construction, validity, and performance of this Policy will be governed by the laws of the State of New York. The Insurer and the Insured hereby expressly agree that all claims and disputes will be litigated in the Supreme Court of the State of New York in and for the County of New York or in the U.S. District Court for the Southern District of New York.

See Policy at 15, § 5.10. When read in isolation, this provision unambiguously designates New York as the parties' chosen forum to litigate disputes.

In addition, the Policy contains a Service of Suit Endorsement, which took effect on November 15, 2011 and provides in relevant part:

This endorsement modifies the insurance coverage form(s) that have been purchased by you and evidenced as such on the Declarations page. Please read the endorsement and respective policy(ies) carefully.
As used in this Endorsement, the " Company" refers to Starr Surplus Lines Insurance Company.
This applies in California.
It is agreed that in the event of our failure to pay any amount claimed to be due hereunder, we, at your request, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this condition constitutes or should be understood to constitute a waiver of our rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. It is further agreed that service of process in such suit may be made upon General Counsel, Legal Department, Starr Surplus Lines Insurance Company, 399 Park Avenue, New York, N.Y. 10022 or his or her representative, and that in any suit instituted against upon this contract, we will abide by the final decision of such court or of any appellate court in the event of an appeal.
. . .
All other terms and conditions of this Policy remain unchanged.

See Doc. No. 1-2 at 24 (" the Endorsement" ).

When interpreting almost identical language in other service of suit provisions, federal courts have consistently found such language unambiguously permits the insured to choose which forum to bring suit. See, e.g., Dinallo v. Dunav Ins. Co., 672 F.Supp.2d 368, 370 (S.D.N.Y. 2009) aff'd, 402 F.App'x 595 (2d Cir. 2010); Perini Corp. v. Orion Ins. Co., 331 F.Supp. 453, 454 (E.D. Cal. 1971). For example, in City of Rose City v. Nutmeg Insurance Company, 931 F.2d 13, 15 (5th Cir. 1991), the Fifth Circuit reasoned that where the insurer agreed to " submit to the jurisdiction of any court," to " comply with all requirements necessary to give such court jurisdiction," and to " abide by the final decision of such court," such language " plainly requires that the insurer submit to the jurisdiction of any court of the policyholder's choosing." Id. at 15. More recently, district courts in the Ninth and Second Circuits have reached the same conclusion based on similar reasoning. See, e.g., Dinall ...


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