Hvide Marine Intern. v. Employers Ins. of Wausau, 88 CIV 1523 (LBS).

Citation724 F. Supp. 180
Decision Date27 October 1989
Docket NumberNo. 88 CIV 1523 (LBS).,88 CIV 1523 (LBS).
PartiesHVIDE MARINE INTERNATIONAL, INC., Hvide Shipping Incorporated and Seabulk Transmarine II, Inc., Plaintiffs, v. EMPLOYERS INSURANCE OF WAUSAU, Individually and as Representative of Those Certain Underwriters Subscribing to Certificate No. 14880 and Certificate No. 14482, London & Hull Maritime Insurance Co. Ltd., Sedgwick Marine Ltd., Fred S. James & Co., Inc. and Fred S. James & Co. of New York, Inc., Defendants.
CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

Hill, Betts & Nash, New York City, John F. Keating, Jr., John J. Tomaselli, of counsel, for plaintiffs.

Cleary, Gottlieb, Steen & Hamilton, Sedgwick Marine Ltd., New York City, George Weisz, Jill E. Fisch, of counsel, for defendants.

OPINION

SAND, District Judge.

Plaintiffs Hvide Marine International, Inc., Hvide Shipping Incorporated and Seabulk Transmarine II, Inc. (collectively "Hvide") seek reimbursement for attorneys fees they incurred while defending a separate lawsuit in Louisiana concerning the sinking of a ship, the Oxy Producer. The Oxy Producer, a catamaran integrated tugbarge, was designed by J.J. Henry Company, Inc. and built by Avondale Shipyards, Inc. to specification for Occidental Petroleum. Hvide both supervised the construction of the vessel and employed the crew which was operating the vessel when it sank. The Oxy Producer was insured under certain hull policies for loss or damage to the hull and machinery with respect to covered perils, including the negligent operation and management of the vessel by the crew.

Sedgwick Group plc, a subsidiary of Transamerica Corporation, is an international insurance broker with over 250 subsidiaries with offices worldwide. Sedgwick Marine, Ltd. ("Sedgwick Marine"), an indirect wholly owned subsidiary of Sedgwick Group plc, is a Lloyd's registered British insurance broker engaged in the business of broking international retail marine insurance outside North America. Its clients are primarily large multinational marine and oil companies. Fred S. James & Co., Inc. and Fred S. James & Co. of New York, Inc., other subsidiaries of Sedgwick Group plc, are retail insurance brokers which operate in North America. The Hvide business was initially solicited by the Fred S. James network of related companies, which later referred a portion of the business to its sister subsidiary Sedgwick Marine. Ultimately, Sedgwick Marine placed all the increased value insurance and 72 percent of the hull and machinery risk with the London underwriters, and the balance was underwritten by the American underwriters, including Employers Insurance of Wausau.

On September 20, 1981, the Oxy Producer sank in heavy weather off of the Azores. After the numerous insurance underwriters compensated the owners of the ship for the loss in February 1982, the insurance underwriters as subrogees brought suit in Louisiana against the builder of the ship, the architect and designer of the ship, and Hvide. In that suit, Hvide's co-defendants asserted cross-claims against Hvide, alleging that the loss was caused by Hvide's negligence in the management and operation of the Oxy Producer. Hvide defended itself against the cross-claim, and the trial court dismissed that claim. On March 4, 1988, Hvide filed a complaint in the Southern District of New York claiming that it is entitled to reimbursement for the costs it incurred as a defendant in the Louisiana lawsuit.

Defendants London Market Underwriters,1 Fred S. James & Co., Inc., Fred S. James & Co. of New York, Inc., and Sedgwick Marine have filed separate motions to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6). Those motions are currently sub judice. In this opinion, this Court considers Sedgwick Marine's motion to dismiss the amended complaint under Fed.R.Civ.P. 12(b)(2), for lack of personal jurisdiction. After oral argument on July 14, 1988 on Sedgwick Marine's original Rule 12(b)(2) motion, this Court granted plaintiffs leave to conduct jurisdictional discovery. At the conclusion of plaintiffs' discovery almost one year later, defendant Sedgwick Marine renewed its motion under Rule 12(b)(2). Based on the oral argument on August 9, 1989 and the supplemental materials submitted in connection with that proceeding, this Court grants Sedgwick Marine's motion to dismiss for lack of personal jurisdiction.

The burden of ultimately establishing personal jurisdiction over a defendant is upon the plaintiff. Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981). If the jurisdictional issue is decided initially on the pleadings before discovery, the plaintiff must only provide evidence of a prima facie case for jurisdiction. On the other hand, if the plaintiffs are given the opportunity to conduct jurisdictional discovery, the stricter preponderance of the evidence standard applies. Volkswagenwerk Aktiengesellschaft v. Beech Aircraft, 751 F.2d 117, 120 (2d Cir.1984). Despite plaintiffs' arguments to the contrary,2 this Court finds that plaintiffs have been afforded adequate opportunities for discovery relevant to the jurisdictional issue. Consequently, the burden of proof by a preponderance of the evidence rests in this case with the plaintiffs.

Personal jurisdiction in a diversity case is determined by the law of the state in which the district court sits. Arrowsmith v. United Press Int'l, 320 F.2d 219 (2d Cir. 1963). Hvide presents three arguments to support its assertion of jurisdiction under New York Civil Practice Law and Rules ("CPLR") §§ 301 and 302. First, Hvide argues that the trip to New York by Anthony Stephens, a Sedgwick Marine employee, satisfies the transaction of business requirement of New York's CPLR § 302(a)(1). Second, CPLR § 301 permits the assertion of jurisdiction over defendants who are "doing business" generally in New York, and Hvide asserts that Sedgwick Marine is doing business in New York directly and through its agents. Third, Hvide argues that even if Sedgwick Marine is not doing business in New York, jurisdiction is nonetheless proper since Sedgwick Marine's sister subsidiaries do business in New York and the close relationships among the numerous Sedgwick subsidiaries permit a court to pierce the corporate veil for jurisdictional purposes. This Court rejects each of these three arguments.

First, Hvide argues that this Court can assert personal jurisdiction over Sedgwick Marine under CPLR § 302(a)(1) which provides that "a court may exercise personal jurisdiction over any non-domiciliary ... who in person or through an agent ... transacts any business within the state...." The application of section 302(a) is a "two-step test ... requiring not only that defendant `transact business' in New York, but also that the cause of action `arise' from the in-state transaction." Central Gulf Lines, Inc. v. Cooper/T Smith, Stevedoring, 664 F.Supp. 127, 131 (S.D.N. Y.1987). That second step requires that "there must be a `substantial relationship' between those in-state activities and the transaction out of which the cause of action arose." Alexander & Alexander, Inc. v. Donald F. Muldoon & Co., 685 F.Supp. 346 (S.D.N.Y.1988) (quoting McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 645, 419 N.E.2d 321, 323 (1981)). New York law requires "some `purposeful activities' within the State" and "the existence of an articulable nexus between the business transacted and the cause of action sued upon." McGowan v. Smith, 52 N.Y.2d at 271, 272, 437 N.Y.S.2d at 644, 645, 419 N.E.2d at 322, 323.

Therefore, the issue presented is whether the single visit to New York on September 29, 1981 by Mr. Anthony Stephens, the director in charge of Sedgwick Marine's claims department, relates to the substantive causes of action asserted against Sedgwick Marine. Hvide argues that their claims arise out of a breach of a single contract which required Sedgwick Marine, the retail insurance broker, both to place the hull insurance policies in the worldwide insurance market and to assist its client, Hvide, with any collections on losses incurred in the future. Although it is undisputed that this contract was negotiated in England and the alleged breaches occurred in England, Hvide asserts that the single visit to New York constitutes performance of the original contract and permits the assertion of jurisdiction for all causes of action relating to that contract.

Even if we agree with Hvide that its contract with Sedgwick Marine required Sedgwick Marine as broker to assist in the processing of claims long after the insurance policies had been placed and the commissions earned, the New York contact in this case does not satisfy the "substantial relationship" standard. The contract in this case does not on its face contemplate performance in New York; assistance with claims for future losses could ultimately take place in any location. The only New York contact here is the September 29th meeting which was convened by an American broker after the loss occurred to discuss future claims processing and procedures to be followed in dealing with the underwriters. In Hvide's Amended Complaint, counts two, three and four allege failure by the brokers to procure proper insurance for the Oxy vessels, and count nine alleges failure to obtain reimbursement of Hvide's legal expenses from the various underwriters. There is not a sufficient nexus between the single, incidental and unanticipated meeting in New York concerning the processing of claims and Hvide's causes of action based on Sedgwick Marine's role in broking the insurance policies.

In McKee Electric Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 283 N.Y.S.2d 34, 229 N.E.2d 604 (1967), a suit for breach of a distributorship contract, the New York Court of Appeals held that a brief meeting by two high level employees of the defendant who came to New York to help ease frictions between the plaintiff and plaintiff's customers does not satisfy the jurisdictional...

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