Reliance Nat. Indem. v. Pinnacle Cas. Assur. Corp.

• Decision Date: 19 July 2001
• Docket Number: No. CIV. A. 01-D-827-N.,No. CIV. A. 00-D-1577-N.,CIV. A. 01-D-827-N.,CIV. A. 00-D-1577-N.
• Citation: 160 F.Supp.2d 1327
• Parties: RELIANCE NAT'L INDEM. CO., et al., Plaintiffs, v. PINNACLE CAS. ASSUR. CORP., et al., Defendants. John W. Goff, et al., Plaintiffs, v. Saul Steinberg, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

160 F.Supp.2d 1327

RELIANCE NAT'L INDEM. CO., et al., Plaintiffs, v. PINNACLE CAS. ASSUR. CORP., et al., Defendants.

John W. Goff, et al., Plaintiffs, v. Saul Steinberg, et al., Defendants.

No. CIV. A. 01-D-827-N.

No. CIV. A. 00-D-1577-N.

United States District Court, M.D. Alabama, Northern Division.

July 19, 2001.

Sterling G. Culpepper, Jr., W. Joseph McCorkle, Jr., Marc J. Ayres, Balch & Bingham, Montgomery, AL, Robert Lewin, Michele Jacobson, Claude G. Szyfer, Strook & Strook & Lavan, New York City, for The Reliance Group.

Thomas T. Gallion III, Jamie A. Johnston, Haskell, Slaughter, Young & Gallion, Montgomery, AL, John V. Fabiani, Brody, Fabiani & Cohen, New York City, for The Goff Group.

MEMORANDUM OPINION AND ORDER

DE MENT, District Judge.

This order addresses three motions: (1) Defendant Reliance Insurance Company's¹ Motion For Transfer Of Venue; (2) Defendant Saul Steinberg's² Motion To Dismiss For Lack Of Personal Jurisdiction; and (3) Defendant Reliance's Motion To Stay Pending Rehabilitation Proceedings. After careful consideration of the arguments of counsel, the relevant law, and the record as a whole, the court finds that the motion to transfer is due to be denied, and the motions to dismiss and to stay are due to be granted.

I. INTRODUCTION

Plaintiff John W. Goff is the president, sole owner, and sole director of Goff NBA, Inc., which operates insurance companies throughout the Southeast. Defendant Saul P. Steinberg is a New York citizen, who is chairman of the board of Reliance Group Holdings, Inc., and a director of Reliance Insurance Company. Reliance Group Holdings is a holding company for various Pennsylvania insurance companies that all merged into Reliance Insurance Company.

This lawsuit arises from the business relationship between the Goff and Steinberg companies. Defendants removed this case, and they also brought claims of their own, in a suit filed in the Southern District of New York that has been transferred here. Meanwhile, the Reliance companies have been placed in rehabilitation proceedings in Pennsylvania. The jurisdictional squabbles among the parties, which are or were litigating in three separate fora, are the subject of this opinion.

II. DISCUSSION

A. Reliance's Motion to Transfer

Defendant moves to transfer this case to the Southern District of New York, pursuant to 28 U.S.C. § 1404(a). The statute provides that, "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." Id.

Plaintiffs' Complaint raises tort claims based partly on injuries incurred from their administration of several insurance contracts in Alabama and North Carolina. Reliance's only significant argument in support of its motion is based on a contract between Reliance National Company and Goff-NBA, Inc. This contract has a forum selection clause, which speaks to litigation in New York state or federal court. The pertinent part of the contract states as follows:

13. Binding Effect: Choice of Law. This Agreement shall be binding upon and inure to the benefit of each party hereto and their respective successors and permitted assigns. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within New York. The parties agree to submit to the jurisdiction of the appropriate Federal or State courts located in the State of New York for the purpose of any suit, action or other proceeding brought in connection with this Agreement and, the parties hereby consent that service of process in any such suit, action or proceeding may be served in the manner as any notice may be given hereunder as set forth in [another provision]. Any and all disputes arising out of or in connection with this Agreement shall be resolved in the appropriate Federal or State court located in the State of New York.

The court finds that the forum selection clause does not mandate litigation in New York. Forum selection clauses are either mandatory or permissive. If the clause is permissive, then a party may bring suit either in the specified forum or someplace else. If the clause is mandatory, then all parties must litigate in that forum unless one of them can "clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

The contract between Plaintiffs and Defendant states that it will be governed by the laws of the State of New York. Because New York's laws do not contravene the federal policy permitting forum selection, nothing in the Erie doctrine prevents the court from looking to New York law when interpreting the contract's forum selection clause. See Alexander Proudfoot Co. World Hdg'rs v. Thayer, 877 F.2d 912, 918-19 (11th Cir.1989); Contraves v. McDonnell Douglas Corp., 889 F.Supp. 470, 471 n. 1 (M.D.Fla.1995). But see Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 513 (9th Cir.1988) ("because enforcement of a forum clause necessarily entails interpretation of the clause before it can be enforced, federal law also applies to interpretation of forum selection clauses.")

New York courts read forum selection clauses somewhat narrowly. In an opinion that has been widely cited with approval, former Judge Weinfeld found that a forum selection clause was permissive, even though it stated as follows:

This contract is to be construed pursuant to the Laws of the State of New York and the undersigned bidder agrees that only the New York courts shall have jurisdiction over this contract and any controversies arising out of this contract. The undersigned bidder also agrees to submit any controversies or problems arising out of this contract to the New York courts and the New York courts only.

See City of New York v. Pullman, Inc., 477 F.Supp. 438, 440 (S.D.N.Y.1979), aff'd, 662 F.2d 910 (2d Cir.1981).

According to Judge Weinfeld, "[a]n agreement conferring jurisdiction in one forum will not be interpreted as excluding jurisdiction elsewhere unless it contains specific language of exclusion, or it leaves it in the control of one party with power to force on its own terms the appropriate forum." Id. at 442 n. 11. Cf. AGR Fin'l, L.L.C. v. Ready Staffing, Inc., 99 F.Supp.2d 399, 403 (S.D.N.Y.2000); New York Marine & Gen. Ins. Co. v. M/V Admiralengracht, 1999 WL 253628 at *1 (S.D.N.Y.1999).

In this case, the forum selection clause does not designate the New York state and federal courts to the exclusion of other courts. Rather, the language is similar to that in John Boutari & Son v. Attiki Importers, 22 F.3d 51 (2d Cir.1994), where the Second Circuit held that a forum selection clause was merely permissive. The contract stated that "[a]ny dispute arising between the parties hereunder shall come within the jurisdiction of the competent Greek Courts, specifically of the Thessaloniki Courts." The Second Circuit noted that the parties' use of the word "shall" merely singled out Greece as one forum among many permitted to hear the case, rather than the sole forum chosen from the bunch. See id. at 52-53.

Reliance does not refer the court to any case by the New York Court of Appeals that has enforced a forum selection clause worded similarly to the one at bar. In any event, Reliance asks the court to transfer this case to the Southern District of New York, where, according to the Boutari court, Judge Weinfeld's rule "has been applied repeatedly." Id. at 53. Accordingly, the court finds that the forum selection clause relied on by Reliance does not foreclose litigation in Alabama. If merely provides that, if a case is brought in New York, then it shall be brought in the appropriate venue.

However, because Reliance's motion is not based exclusively on the agreement between the parties, the court shall look beyond the language of the contract and also consider any other relevant interests affected by transferring venue. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 108 S.Ct. 2239, 2244, 101 L.Ed.2d 22 (1988). Factors bearing on transfer include the relative ease to sources of proof, the convenience of witnesses and parties, and the plaintiffs' interest in their original choice of forum.

In this case, all such factors are either inconclusive or weigh against transfer. Many witnesses are in Alabama, which is Plaintiffs' choice of forum. Evidence is portable, and Alabama is not an inconvenient forum for Defendant, which has done business here on a continuous, systematic basis. Accordingly, the court finds that Reliance has not met its burden of showing that this case should be transferred.

B. Steinberg's Motion to Dismiss

The court now turns to Defendant Steinberg's motion to dismiss for lack of personal jurisdiction. This motion is due to be granted.

This case concerns Reliance's assumption of the assets and liabilities of certain self-insured worker's compensation funds in Alabama and North Carolina. In the late 1990s, Steinberg's companies agreed to reinsure the Alabama and North Carolina funds and to use Goff's companies as third-party administrators. Goff entered these contracts because he knew of Reliance's decent reputation, and he had been told that the Reliance companies were in sound financial health, despite some underwriting reports to the contrary.

Goff has submitted into evidence two mass e-mails that he received from "Reliance Group Holdings." The e-mails are dated October 21, 1999 and January 10, 2000. They are addressed to "All Reliance Employees" or to an "All Employees List," and they are signed by Steinberg in his capacity as chairman and CEO. The e-mails contain multiple statements that downplay Reliance's financial problems and state that the company is doing well.³ Goff says that he relied on...