Consolidated Insured Benefits v. Conseco Medical

• Decision Date: 21 December 2004
• Docket Number: No. C.A. 6:03-3211-20.,C.A. 6:03-3211-20.
• Citation: 370 F.Supp.2d 397
• Court: U.S. District Court — District of South Carolina
• Parties: CONSOLIDATED INSURED BENEFITS, INC., and Ronald F. English, Plaintiffs, v. CONSECO MEDICAL INSURANCE COMPANY, A Foreign Corporation, Defendant.

370 F.Supp.2d 397

CONSOLIDATED INSURED BENEFITS, INC., and Ronald F. English, Plaintiffs, v. CONSECO MEDICAL INSURANCE COMPANY, A Foreign Corporation, Defendant.

No. C.A. 6:03-3211-20.

United States District Court, D. South Carolina, Greenville Division.

December 21, 2004.

Robert Edward Hoskins, Foster and Foster, Greenville, SC, for Plaintiffs.

Robert C. Byrd, Jenny Anderson Horne, Parker Poe Adams and Bernstein, Charleston, SC, for Defendant.

ORDER

HERLONG, District Judge.

This matter is before the court on Conseco Medical Insurance Company's ("Conseco") motion to reconsider the court's February 23, 2004, order ("February Order"). In the February Order the court denied Conseco's motion to dismiss for improper venue or, in the alternative, to transfer the case to the United States District Court for the District of Indiana. For the reasons stated below, the court denies Conseco's motion to reconsider.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual History

Consolidated Insured Benefits, Inc. ("CIB") is a South Carolina corporation. CIB marketed and sold individual health insurance policies issued by Conseco and was appointed by Conseco as a Field Marketing Organization ("FMO").¹ (Compl.¶ 1.) Ronald F. English was the director of marketing for CIB. (Id. ¶ 2.) In 1999, Conseco replaced its existing FMO agreement with CIB with a new agreement. (Id. ¶ 13.) In the new agreement, CIB agreed to exclusively sell Conseco policies to avoid the termination of its FMO appointment. (Id. ¶¶ 11, 13.) The new agreement contained a forum selection clause and a choice of law provision.²

In 2000, CIB grew concerned about Conseco's financial status. (Id. ¶ 21.) Conseco reassured CIB that it was financially sound. (Id. ¶¶ 21, 23-24). However, on July 25, 2001, Conseco informed CIB and the other FMOs that it was going out of the health insurance business in sixteen states, including North and South Carolina. (Id. ¶¶ 21, 23-24, 26-27, 30.) Conseco informed its North Carolina policyholders (who comprised the majority of CIB's business) that it was working with Blue Cross Blue Shield of North Carolina ("Blue Cross") to obtain replacement coverage. (Compl.¶ 31.) Blue Cross then offered replacement coverage to all North Carolina Conseco policyholders, but because Blue Cross did not appoint CIB as the agent, CIB lost all commission income from Conseco North Carolina policies. (Id. ¶ 32.) CIB alleges this resulted in over Five Million Dollars in lost commission income. (Id. ¶ 33.) In its complaint, CIB alleges claims of fraud, negligent misrepresentation, and breach of fiduciary duty.

B. Relevant Procedural History

On November 24, 2003, Conseco moved to dismiss for improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure. In the alternative, Conseco asked the court to transfer the case to the District of Indiana pursuant to 28 U.S.C. § 1404(a).

In the February Order the court denied Conseco's motion to dismiss because it found the forum selection clause in the agreement "unreasonable," as enforcing the clause would contravene a "strong public policy of the forum state." Allen v. Lloyd's of London, 94 F.3d 923, 928 (4th Cir.1996); (Feb. Order at 3.) The court concluded that South Carolina has a strong policy disfavoring forum selection clauses, largely because of S.C.Code Ann. § 15-7-120(A), which permits a plaintiff to disregard an otherwise valid forum selection clause in choosing the forum for a lawsuit. S.C.Code Ann. § 15-7-120(A) provides:

Notwithstanding a provision in a contract requiring a cause of action arising under it to be brought in a location other than as provided in this title and the South Carolina Rules of Civil Procedure for a similar cause of action, the cause of action alternatively may be brought in the manner provided in this title and the South Carolina Rules of Civil Procedure for such causes of action.

The court also denied Conseco's motion to transfer the case to the District of Indiana under 28 U.S.C. § 1404(a). The court acknowledged that § 1404 was "intended to place discretion in the district court to adjudicate motions for transfer according to individualized, case-by-case consideration of convenience and fairness." Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988) (internal quotation omitted). The court weighed several factors in its analysis. Ultimately, the court concluded that the matter should remain in South Carolina, determining that South Carolina would be more convenient for the witnesses and that CIB's choice of South Carolina for the forum is entitled to deference.

The court also considered the forum selection clause and its effect on Conseco's motion to transfer. However, the court noted that even if the forum selection clause were enforceable, transfer pursuant to § 1404(a) would not be available because the forum selection clause designated a non-federal forum. See Salovaara v. Jackson Nat'l Life Ins. Co., 246 F.3d 289, 298 (3rd Cir.2001). On October 26, 2004, Conseco filed the instant motion asking the court to reconsider the February Order.

II. DISCUSSION OF THE LAW

Conseco raises three arguments in its motion to reconsider. First, Conseco argues that South Carolina has no public policy against out-of-state forum selection clauses. Second, Conseco argues that, because the United States District Court for the District of Georgia considered the identical forum selection clause in a recent case and transferred the case to the District of Indiana, this court should do the same. See Reginald Martin Agency, Inc. v. Conseco Med. Ins. Co., No. 1:03-3810-RWS, slip op. at 6, 8-9 (N.D.Ga. Sept. 10, 2004). Finally, Conseco argues that precedent in the United States Court of Appeals for the Fourth Circuit requires this court to enforce out-of-state forum selection clauses, regardless of the convenience of the parties and the witnesses.

A. Rule 60(b) Standard

As a preliminary matter, Rule 60(b) of the Federal Rules of Civil Procedure states, "On motion and upon such terms as are just, the court may relieve a party ... from a final judgment, order, or proceeding." Rule 60(b) lists six circumstances in which a court may relieve a party from the effect of an order. In its motion to reconsider, Conseco has not indicated which of these circumstances it is relying upon for relief.

The court will construe this motion as one brought under Rule 60(b)(6), which entitles the court to relieve a party from an order for "any other reason justifying relief from the operation of the judgment." Fed.R.Civ.P. 60(b)(6). However, the remedy under Rule 60(b)(6) is "only to be invoked upon a showing of exceptional circumstances." Nat'l Credit Union Admin. Bd. v. Gray, 1 F.3d 262, 266 (4th Cir.1993) (internal quotation omitted). Because Conseco is not entitled to 60(b)(6) relief, the court need not address whether Conseco has shown "exceptional circumstances" and met the other threshold conditions necessary for Rule 60(b) to apply. Id. at 264-66.

B. Improper Venue

Conseco's first argument concerns the court's denial of Conseco's motion to dismiss for improper venue. Conseco argues that there is no public policy in South Carolina against out-of-state forum selection clauses, relying on the United States District Court for the District of South Carolina's recent decision in Atlantic Floor Services, Inc. v. Wal-Mart Stores, Inc., 334 F.Supp.2d 875 (D.S.C.2004), to support its argument.

As noted in the February Order, the court in Insurance Products Marketing, Inc. v. Indianapolis Life Insurance Co. addressed the issue of whether South Carolina has a strong public policy against out-of-state forum selection clauses and concluded that it does. 176 F.Supp.2d 544, 550 (D.S.C.2001). Specifically, the court in Insurance Products found that, by enacting S.C.Code Ann. § 15-7-120, the "legislature of South Carolina did not agree with the federal courts' favorable view of forum selection clauses and desired to insulate South Carolina litigants from their effect." Id. Further, the South Carolina Court of Appeals has broadly interpreted the statute. See Johnson v. Paraplane Corp., 319 S.C. 247, 460 S.E.2d 398, 399-400 (1995), vacated on other grounds, 321 S.C. 316, 468 S.E.2d 620 (1996). After analyzing the statute, Insurance Products, and Johnson v. Paraplane, the court reaffirms its conclusion that South Carolina has a strong policy disfavoring forum selection clauses. While the legislators may not have declared the state policy in the text of the statute, the statute embodies South Carolina's policy against forum selection clauses through what it expressly allows. The statute permits a plaintiff, who would otherwise be bound to bring a case in the forum designated in a forum selection clause, to bring the case in South Carolina where possible under the South Carolina Rules of Civil Procedure.

In concluding that South Carolina has a policy against forum selection clauses, the court respectfully disagrees with the Atlantic Floor decision. The Atlantic Floor court relied principally on the fact that, "despite numerous opportunities, South Carolina's appellate courts have not suggested, much less declared, that forum selection clauses violate the public policy of the state." 334 F.Supp.2d at 879-80. The Atlantic Floor court cited three cases, St. John's Episcopal Mission Center v. South Carolina Department of Social Services, 276 S.C. 507, 280 S.E.2d 207 (1981), Security Credit Leasing Inc. v. Armaly, 339 S.C. 533, 529 S.E.2d 283 (S.C.Ct.App.2000), and Firestone Financial Corp. v. Owens, 309 S.C. 73, 419 S.E.2d 830 (1992), upon which Conseco also relies in its motion. (Def.'s Mem. Supp. Mot. Recons. at 6 n.4.) However, these cases are unpersuasive.

First, as Conseco and the court in Atlantic Floor both acknowledged, St. John's was decided before S.C.Code Ann. § 15-7-120(A) was adopted in 1990. See Atlantic Floor, 334 F.Supp.2d at 879, (Def.'s Mem. Supp....