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Lewis v. Liberty Mutual Insurance Co.

United States District Court, N.D. California

May 29, 2018

NICOLETTE LEWIS, et al., Plaintiffs,




         Plaintiff Nicolette Lewis was engulfed by flames and suffered severe burns when a fuel container for her family's outdoor fire bowl exploded during refueling. She and her family members, Alexis Lewis, Margrett Lewis, and Jeffrey Lewis, brought suit against the manufacturer, EcoSmart, Inc. (“EcoSmart”), and its parent company The Fire Company, Pty, Ltd (“TFC”), and were awarded damages in excess of $45 million. EcoSmart has since declared bankruptcy and plaintiffs now bring this action against EcoSmart and TFC's insurers, Liberty Mutual Insurance Company and Liberty International Underwriters (together, “Liberty Mutual”), seeking payment on their damages award. The insurance policy contains a mandatory forum selection clause granting exclusive jurisdiction to the Australian Courts, and so Liberty Mutual moves to dismiss on forum non conveniens grounds so that the case is litigated in Australia. Because the clause is valid and its enforcement is not unreasonable or unjust, I am constrained to GRANT Liberty Mutual's motion.


         On June 8, 2014, twin sisters Nicolette and Alexis Lewis were using the fire bowl at their home in Sonoma, California. Complaint (“Compl.”) [Dkt. No. 1-1] ¶ 6. Alexis was refueling the bowl with a one-gallon fuel container of e-NRG when the vapors from the container ignited and caused an explosive discharge of ethanol fuel and fire, engulfing Nicolette in flames and causing severe third degree burns to her face, neck, chest, arms, legs, and feet. Id. As their parents Jeffrey and Margrett Lewis rushed to her to attempt to put out the flames, they too suffered burn injuries. Id. ¶¶ 6, 8. Nicolette spent 30 days in the hospital with life threatening injuries and required multiple surgical procedures, laser treatments, and other medical care. Id. ¶ 7.

         The fuel container was manufactured by EcoSmart, a California corporation headquartered in California. Compl. ¶ 2. EcoSmart is a subsidiary of TFC, an Australian corporation. Defs.' RJN Ex. 3 at 2.[1] EcoSmart and TFC were insured by Liberty Mutual when the underlying incident occurred. See Compl. ¶ 11; Milliken Decl. Ex. 1 [Dkt. No. 11-1]; Nicholls Decl. Ex. 1 [Dkt. No. 12-1]. Liberty Mutual issued an insurance policy to EcoSmart and TFC covering negligence and product defects resulting in bodily injury with a coverage period of April 20, 2013 to April 30, 2014. Compl. ¶ 11. EcoSmart and TFC renewed that policy from April 30, 2014 to April 30, 2015, but coverage under the second policy period substantially reduced coverage limits. Id. Both policies contained a mandatory forum selection clause granting exclusive jurisdiction to the Australian Courts over all matters arising from or relating to the construction, operation, or interpretation of the policies. See Milliken Decl. Ex. 1, at § 8.6; Nicholls Decl. Ex. 1, at § 8.6.

         Plaintiffs brought suit against EcoSmart and TFC in the Sonoma County Superior Court alleging product defect, negligence, and negligent infliction of emotional distress. Compl. ¶ 10. Liberty Mutual declined to provide a defense and indemnification in that case, and EcoSmart filed for bankruptcy on November 8, 2015, as a result. Id. ¶¶ 12, 14. TFC ignored the litigation. Opp. at 4. On January 9, 2018, a judgment in excess of $45 million was entered against EcoSmart and in favor of plaintiffs. Compl. ¶ 15. Plaintiffs now bring suit against Liberty Mutual pursuant to California Insurance Code Section 11580(b)(2), seeking payment on their judgment against EcoSmart.


         Forum selection clauses are “presumptively valid, ” and “honored “absent some compelling and countervailing reason.” Murphy v. Schneider Nat'l Inc., 362 F.3d 1133, 1140 (9th Cir. 2003). “The party challenging the clause bears a heavy burden of proof and must clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or over-reaching.” Id. at 1140 (internal quotation marks and citation omitted). A forum selection clause may be unreasonable if: (1) “the inclusion of the clause in the agreement was the product of fraud or overreaching”; (2) “the party wishing to repudiate the clause would effectively be deprived of his day in court were the clause enforced”; or (3) “enforcement would contravene a strong public policy of the forum in which suit is brought.” Id.

         “[T]he appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens.” Atl. Marine Constr. Co. v. U.S. Dist. Ct., 571 U.S. 49, 60 (2013). When a motion to dismiss is based on a forum selection clause, rather than solely on the doctrine of forum non conveniens, the Supreme Court has held that a district court cannot consider the “private interest” factors, such as the plaintiff's choice of forum and the convenience of parties and witnesses. See Id. at 62-64. Instead, the court may only weigh the “public interest” factors, which “may include the administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; [and] the interest in having the trial of a diversity case in a forum that is at home with the law.” Id. at 62 n.6. “Once a district court determines that the appropriate forum is located in a foreign country, the court may dismiss the case.” Nibirutech Ltd v. Jang, 75 F.Supp.3d 1076, 1079 (N.D. Cal. Dec. 2, 2014).


         I. Plaintiffs Are Within the Scope of the Forum Selection Clause

         Plaintiffs contend that whether or not the forum selection clause is generally valid and enforceable, it may not be applied to them because they are not parties to the insurance policy and did not have the benefit of negotiating its terms, and thus should be entitled to their choice of forum. Liberty Mutual responds that because plaintiffs stand in the shoes of EcoSmart as third-party beneficiaries to the contract, they are subject to and bound by its terms.

         Federal law applies to the analysis of a forum selection clause's effect and scope. See Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 513 (9th Cir. 1988) (“[T]he federal procedural issues raised by forum selection clauses significantly outweigh the state interests, and the federal rule announced in The Bremen controls enforcement of forum clauses in diversity cases.”). The parties initially provided precedent concerning the general rule in the Ninth Circuit, which is that “the scope of a third-party beneficiary's rights is defined by the ...

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