Home Ins. Co. v. Thomas Industries, Inc.

• Decision Date: 22 March 1990
• Docket Number: No. 89-8228,89-8228
• Citation: 896 F.2d 1352
• Parties: HOME INSURANCE COMPANY, Home Indemnity Company, City Insurance Company, Plaintiffs-Appellants, v. THOMAS INDUSTRIES, INC., A Foreign Corporation, American Stevedoring Corporation, a foreign corporation, TLM, Inc., as putative successor in interest to American Stevedoring Corp., a foreign corporation, Thomas Holding Company, Inc., a foreign corporation, Earl James Thomas, individually and as officer and director of Thomas Industries, Inc., American Stevedoring Corp., TLM, Inc., and Thomas Holding Company, Inc., Lindsey James Thomas, individually and as officer and director of Thomas Industries, Inc., American Stevedoring Corp., TLM, Inc. and Thomas Holding Company, Inc., Kingsley Head Thomas, individually and as officer and director of Thomas Industries, Inc., American Stevedoring Corp., TLM, Inc., and Thomas Holding Company, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1352

896 F.2d 1352

HOME INSURANCE COMPANY, Home Indemnity Company, City Insurance Company, Plaintiffs-Appellants, v. THOMAS INDUSTRIES, INC., A Foreign Corporation, American Stevedoring Corporation, a foreign corporation, TLM, Inc as putative successor in interest to American Stevedoring Corp., a foreign corporation, Thomas Holding Company, Inc a foreign corporation, Earl James Thomas, individually and as officer and director of Thomas Industries, Inc., American Stevedoring Corp., TLM, Inc., and Thomas Holding Company Inc., Lindsey James Thomas, individually and as officer and director of Thomas Industries, Inc., American Stevedoring Corp., TLM, Inc. and Thomas Holding Company, Inc., Kingsley Head Thomas, individually and as officer and director of Thomas Industries, Inc., American Stevedoring Corp., TLM Inc., and Thomas Holding Company, Inc., Defendants-Appellees.

No. 89-8228.

United States Court of Appeals, Eleventh Circuit.

March 22, 1990.

David C. Marshall, Atlanta, Ga., Larry D. Thompson, William S. Duffey, Jr., Dwight J. Davis, Fred G. Codner, King & Spaulding, Atlanta, Ga., for plaintiffs-appellants.

J. Scott Jacobson, David Franklin Cooper, Holt, Ney, Zatcoff & Wasserman, Atlanta, Ga., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before KRAVITCH and JOHNSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.

KRAVITCH, Circuit Judge:

The Home Insurance Company appeals from the district court's dismissal of its action on the basis of improper venue and from the district court's denial of its motion to conduct additional discovery on the issue of venue. Because we find that the district court abused its discretion in dismissing the case for lack of venue, we reverse and remand.

BACKGROUND

This diversity action was filed by The Home Insurance Company, The Home Indemnity Company, and City Insurance Company (referred to collectively as "The Home") in the Northern District of Georgia. The case was filed against seven defendants, consisting of four corporations: Thomas Industries, Inc., American Stevedoring Corp. ("ASC"), TLM, Inc., and Thomas Holding Company, Inc. (referred to collectively as the "Thomas Companies") and three members of the Thomas family running those corporations: Earl James Thomas, Lindsey James Thomas, and The action arises out of earlier litigation between The Home and Kebo Limited, a company operated by the Thomases, in connection with an insurance agreement entered into by those parties in 1981. The insurance agreement related to the provision of workers' compensation for certain contract labor that ASC, a Thomas Company, provided to various stevedoring operations in the United States. ¹ The agreement provided that The Home would not be ultimately liable for workers' compensation claims asserted under the policy that it issued. Instead, although The Home would issue payment checks to workers' compensation claimants, it would be reimbursed for all payments made. Kebo Limited was the offshore reinsurance company set up by the Thomases in Bermuda for the sole purpose of making reimbursements to The Home. The insurance agreement between The Home and Kebo was embodied in three contracts: a Reinsurance Agreement, a Security Agreement, and a Claim Management Agreement (referred to collectively as the "Reinsurance Agreement"). ²

Kingsley Head Thomas (referred to collectively as "the Thomases").

In 1985, the arrangement between Kebo and The Home fell apart. The Home apparently sought an increase in the amount of the letter of credit maintained by Kebo. The Thomases resisted the increase and The Home notified the Thomases that it would not renew the policy upon its expiration. The Thomases, through Kebo, then ceased making reimbursements to The Home and suspended Kebo's business operations. In September 1985, Kebo filed suit against The Home in federal district court in Florida, alleging that The Home had mishandled and improperly paid claims for which Kebo became liable under the Reinsurance Agreement. The Home counterclaimed, seeking damages resulting from the Thomases' refusal to reimburse The Home for payments already made to claimants and for anticipated insurance payments for future workers' compensations claims. During the lawsuit, Kebo's Board of Directors voted to liquidate Kebo pursuant to the 1981 Bermuda Companies Act. Judgment in favor of The Home was entered in the amount of $567,711.14. The judgment has not been satisfied. The Home alleges that this is because Kebo's assets were squandered by the Thomases and the Thomas Companies.

In the instant suit, The Home seeks to pierce Kebo's corporate veil in order to hold the Thomases and the defendant companies that they own and control responsible for squandering Kebo's assets and otherwise defrauding The Home. To this end, The Home filed a four count complaint in the Northern District of Georgia ("Northern District") in August of 1988. Count I is a breach of contract claim, seeking to hold the defendants liable for damages resulting from Kebo's breach of contract. Count II seeks to pierce the corporate veil of Kebo in order to hold defendants liable for all damages suffered by The Home. Count III is a claim seeking punitive damages for fraud and conspiracy by the defendants designed to render Kebo judgment proof. Count IV alleges stubborn litigiousness for which The Home seeks costs of litigation and attorney's fees.

In September 1988, the defendants moved to dismiss the complaint on the ground that venue in the Northern District of Georgia was improper. In December 1988, the district court granted that motion, finding that venue was not proper under DeLong Equipment Co. v. Washington Mills Abrasive, 840 F.2d 843, 855 (11th Cir.1988) because the weight of the contacts relating to The Home's claims did not rest most heavily in the Northern District. The district court declined to transfer the action to a district in which it might have been brought.

The Home then moved the court to alter or amend the judgment by denying the

defendants' motion to dismiss for improper venue or, in the alternative, to permit a time period for discovery during which The Home could develop further evidence of contacts in the Northern District. The district court denied this motion, noting that The Home had already had adequate opportunity for discovery prior to the issuance of the court's December order.

DISCUSSION

A. Standard of Review

This court reviews the dismissal of a lawsuit for improper venue under the standard of abuse of discretion. Dynes v. Army Air Force Exchange Serv., 720 F.2d 1495, 1499 (11th Cir.1983); Roofing & Sheet Metal Services, Inc. v. La Quinta Motor Inns, Inc., 689 F.2d 982 (11th Cir.1982); Stephens v. Entre Computer Centers, Inc., 696 F.Supp. 636 (N.D.Ga.1988). In this case, our review is affected by the fact that the district court did not hold an evidentiary hearing before dismissing The Home's complaint. When a complaint is dismissed on the basis of improper venue without an evidentiary hearing, "the plaintiff must present only a prima facie showing of venue...." DeLong Equip. Co., 840 F.2d at 845 (11th Cir.1988). Further, "[t]he facts as alleged in the complaint are taken as true to the extent they are uncontroverted by defendants' affidavits." Id. When affidavits conflict, the court is inclined to give greater weight to the plaintiff's version of the jurisdictional facts and to construe such facts in the light most favorable to the plaintiff. Id. The district court's denial of The Home's motion for additional discovery likewise is reviewable for abuse of discretion.

B. The DeLong Test

In cases where federal jurisdiction is founded on diversity, the question of venue is governed by 28 U.S.C. Sec. 1391(a). Under that statute, venue is proper in the Northern District if that is where all of the plaintiffs reside, all of the defendants reside, or where the "claim arose." ³ In the instant case, The Home claims that venue is proper in the Northern District because that is where the claim arose. The parties agree that the appropriate test for determining where a "claim arose" for purposes of venue is the "weight of the contacts" test set out in DeLong Equipment Co. v. Washington Mills Abrasive, 840 F.2d 843, 855 (11th Cir.1988). In DeLong, this court made clear that venue should be established "in the district where the contacts weigh most heavily." Id. at 855. We further stated that "[o]nce it is determined that the weight of the contacts rests most heavily in a particular district, the court then must look to see whether venue is established over each defendant. Evidence that a particular defendant has performed a substantial or significant act related to the claim in the district where contacts weigh most heavily suffices to establish venue over that defendant." Id. (citations omitted).

C. Application of DeLong to the Instant Suit

1. Holding of the district court

Determining the nature of the present suit is essential to answering the question of where proper venue lies. The district court viewed the action as one arising from a breach of contract, noting that it was primarily one to enforce The Home's Florida judgment. Thus, when applying the DeLong test, the district court concentrated on actions relating to the execution of the contract between The Home and Kebo. The court stated that, "[w]hile some negotiations for the agreements took place in Georgia, the agreements were executed in New York and Bermuda. When a claim arises from a contract, the place of execution of a contract, rather than the place of negotiations, controls where the claim arises for venue purposes under section 1391(a)." The Home Insurance Company v. Thomas Industries, 1:88-cv-1730-RCF, slip op. at 2 (N.D.Ga. Dec. 7, 1988) (footnote omitted).

The court also noted that it could consider the place of performance of the contract in determining where the claim...