Capital Bank & Trust Co. v. Associated Intern. Ins. Co., Civ. A. No. 83-1152-B.

• Decision Date: 03 January 1984
• Docket Number: Civ. A. No. 83-1152-B.
• Citation: 576 F. Supp. 1522
• Parties: CAPITAL BANK AND TRUST COMPANY v. ASSOCIATED INTERNATIONAL INSURANCE COMPANY.
• Court: U.S. District Court — Middle District of Louisiana

576 F. Supp. 1522

CAPITAL BANK AND TRUST COMPANY v. ASSOCIATED INTERNATIONAL INSURANCE COMPANY.

Civ. A. No. 83-1152-B.

United States District Court, M.D. Louisiana.

January 3, 1984.

Hervin A. Guidry, Victor L. Roy, III, Baton Rouge, La., for plaintiff.

Ernest L. O'Bannon, John C. Tollefson, New Orleans, La., for defendant.

POLOZOLA, District Judge:

This matter is before the Court on motion of the plaintiff, Capital Bank and Trust Company (Capital Bank), to remand this action which was removed from the Nineteenth Judicial District Court for the Parish of East Baton Rouge by the defendant, Associated International Insurance Company (Associated). No oral argument is required on this motion.

This suit arises out of a contract of insurance entered into between the defendant, Associated, and Nickel's Club and Cafe, Incorporated (Nickel's), a restaurant which formerly operated in Baton Rouge, Louisiana. On January 26, 1983, the building leased by Nickel's was totally destroyed by fire. Pursuant to its insurance contract, policy number FP 030051, Associated paid Nickel's and its mortgagee, Capital Bank, $650,000, which sum represented the policy limits for building coverage under the above-referenced policy. Although a formal demand and proof of loss were submitted, Associated refused to make any payment under the loss of gross earnings coverage of the policy, although the policy provided for up to $200,000 in loss of gross earnings coverage. On April 28, 1983, Nickel's assigned to Capital Bank all of its right, title, and interest in and to the proceeds from the insurance policy resulting from the fire which occurred on January 26, 1983.

On September 22, 1983, the plaintiff filed suit in the Nineteenth Judicial District Court against Associated, seeking judgment in the sum of $200,000. The defendant then removed this action to the United States District Court for the Middle District of Louisiana, on the basis of 28 U.S.C. § 1441(a) and 28 U.S.C. § 1332.

Capital Bank is a Louisiana banking association having its principal place of business in Louisiana. Associated is a foreign insurance company incorporated in the state of California and having its principal place of business in the state of California.

Capital Bank filed the pending motion to remand on November 4, 1983. It was properly noticed for hearing on November 18, 1983. Under the Local General Rules for the Middle District of Louisiana, specifically rule 5(B)(3), each party opposing a motion shall deliver a copy of his opposition to the Court no later than noon on the Monday preceding the day of the hearing. Defendant failed to file a timely opposition to plaintiff's motion to remand, although the defendant did file a memorandum in opposition to the plaintiff's motion two days late, on November 16, 1983. Failure to comply with local rule 5(B)(3) may be deemed sufficient cause for granting the motions by default. The Court has, however, elected to consider the issues and authorities presented in the defendant's memorandum in opposition to plaintiff's motion to remand.

The basis for plaintiff's motion to remand is a "Service of Suit" clause found on the last page of the insurance contract in question which provides:

It is agreed that in the event of the failure of the company to pay any amount claimed, to be due, the company at the request of the insured, will submit to the jurisdiction of any court of competent jurisdiction within the United States and will comply with all requirements necessary to give such court jurisdiction.

It is further agreed that service of process in such suit may be made upon the superintendent, commissioner or director of insurance or other officer specified for that purpose by statute, or as the true and lawful attorney for the company. Said officer is authorized to mail such process to the above designated person.

The plaintiff contends that this clause operates as a waiver by defendant to its right to remove this case to federal court. Plaintiff contends that it has chosen a competent forum in the Nineteenth Judicial District Court and that the defendant has agreed to submit to the jurisdiction of the court chosen by the plaintiff. The defendant contends that any such waiver of the right to remove most be clear and unequivocal, and, in the alternative, that construing this clause as a waiver of the right of removal before the filing of suit would result in a contractual ouster of federal jurisdiction, which is illegal and unenforceable.

The defendant is correct in stating that the waiver of the right of removal must be clear and unequivocal. Carpenter v. Illinois Central Gulf Railroad Co., 524 F.Supp. 249 (M.D.La.1981); Morgan Dallas Corporation v. Orleans Parish School Board, 302 F.Supp. 1208 (E.D.La.1969); 1A Moore, Federal Practice, ¶ 0.1579 at 152. Associated argues that it only agreed to submit to personal jurisdiction in any state of the plaintiff's choosing, reserving the right to remove the suit to a federal court. In the earliest case to consider the issue of removal under a service of suit clause, General Phoenix Corporation v. Malyon, 88 F.Supp. 502 (S.D.N.Y.1949), the court was faced with a substantially similar clause and with the same arguments presented here. The court rejected the argument that there had been no "clear and unequivocal" waiver of the right to remove, concluding: "the defendant may have intended the clause to be merely an agreement to submit to jurisdiction, ..., but it is somewhat of a strain to find such intention, whereas the simple verbiage of the clause supports the plaintiff's view." Id., at 503. This same conclusion was reached by the court in Euzzino v. London & Edinburgh Insurance Company, 228 F.Supp. 431 (N.D.Ill.1964). In Euzzino, the court analyzed the specific terms in the service of suit clause. The court noted the phrase "at the request of the Assured", and the requirement that the insured would comply "with all requirements necessary to give such Court jurisdiction." (emphasis in original). The court concluded that "such Court" was the court of competent jurisdiction chosen by the insured. "Unless all of these provisions are to be deemed mere surplusage, the conclusion is unavoidable that the policy accords to the assured the right to choose the court of competent jurisdiction in which disputes are to be determined." Id., at 433. Both of the phrases discussed in Euzzino are present in the service of suit clause in the Associated policy. Similarly, the term "at the request of the Assured" was found to have removed any doubt as to which party the contract gave the choice of forum in Oil Well Service Company v. Underwriters at Lloyd's of London, 302 F.Supp. 384 (C.D. Cal.1969).

The purpose of the service of suit clause is to allow a dissatisfied policy holder to compel the insurer to submit to the forum of the insured's choice to recover proceeds under the policy. By agreeing to "submit" to a state forum, the defendant insurer waives the right to defend in federal court. Perini v. Orion Insurance Company, 331 F.Supp. 453 (E.D.Cal.1971).

In connection with its argument that the insurance contract does not prevent removal, the defendant contends that the service of suit clause which is before the Court does not contain language to the effect that "all matters arising hereunder shall be determined in accordance with the law and practice of such court." The defendant notes that the service of suit clauses in Perini and General Phoenix Corporation did contain such language, and attempts to distinguish between those cases and the instant case. The defendant is correct in stating that the service of suit clauses in those cases are broader, but the argument that the narrower clause used by Associated keeps open the possibility of removal is without merit. The defendant has failed to make the distinction between a "choice of forum" clause and a "choice of law" clause. In Perini and General Phoenix, the service of suit clauses not only provide the plaintiff with his choice of forum, but also provide that the law, substantive and procedural, of that forum shall apply. The clause before this Court gives the plaintiff his choice of forum, but leaves it to the forum itself to apply its choice of law rules. Therefore, the chosen forum has the discretion to conclude that its interests in the action were not as great as another state's, and thus, the forum would be free to apply the substantive law of another state. In Perini and General Phoenix, the insurers gave the insureds the additional concession of being able to choose the substantive law to be...