JENNIFER H. HENDERSON, UNITED STATES BANKRUPTCY JUDGE.
The defendants move to dismiss this adversary proceeding (the "AP") or, alternatively, to transfer venue of the AP (AP Doc. 13) (the "Motion"),
Plaintiff Veros Energy, LLC ("Veros") is a limited liability company organized under the laws of the state of Kansas. (See BK
On March 26, 2015, a boiler at the Plant exploded. (See BK Doc. 36; BK Doc. 60 at 4; BK Doc. 60, Ex. SOFA 8; AP Doc. 48 at 2.) Following the explosion, Veros ceased production at the Plant. (See BK Doc. 12 at 2; BK Doc. 13 at 2; BK Doc. 14 at 2; BK Doc. 60 at 10; BK Doc. 83, passim; BK Doc. 190 at 3.) Shortly thereafter (on April 6th) Veros filed a petition for relief under chapter 11 of the Bankruptcy Code
At the time of the explosion, Veros was insured by Lloyd's of London ("Lloyd's") surplus line insurance coverage (the "Insurance") effected through defendant GCube Insurance Services, Inc. ("GCube") on behalf of members of a Lloyd's syndicate (collectively, the "Underwriters"). (See BK Doc. 70 at 1-2; BK Doc. 70, Ex. A; BK Doc. 91, passim; AP Doc. 1, Ex. 1; AP Doc. 38; AP Doc. 48 at 2.) The certificate of insurance executed by GCube on June 5, 2004 (AP Doc. 1, Ex. 1) (the "Certificate") provided for an initial coverage term of May 22, 2014 to May 21, 2015. (See Certificate at 2.) A few weeks after the Petition date, GCube notified Veros that the Insurance would not be renewed as a consequence of Veros's bankruptcy filing. (See BK Doc. 70, Ex. B.) The nonrenewal notice purported to cancel the Insurance effective as of May 21, 2015 — 24 days after the date of the nonrenewal notice. (See id.)
On Veros's motion (BK Doc. 70),
A little less than two months after the Insurance expired, Veros filed a motion to sell substantially all of its assets, which the court granted, in part. (See BK Docs. 190, 258, 261, 262.) Simultaneous with Veros's closing of the court-approved sale (the "Sale"), the Owners consummated a sale of the Plant to the purchaser of Veros's assets. (See BK Doc. 296.) Several months after the Sale closing, Veros proposed a chapter 11 plan of liquidation (BK Doc. 451) (the "Plan") to administer the remaining assets of its bankruptcy estate (the "Estate"). (See Plan, passim.)
In the court-approved disclosure statement for the Plan (BK Doc. 450) (the "Disclosure Statement"), Veros disclosed that it had made demand on GCube for payment of property damage and business interruption claims under the Insurance contract and that Veros intended to "assert contractual liability and potential tort liability ... should such claims not be paid...." (See Disclosure Statement at 11-12.) The Disclosure Statement specified that Veros planned to bring an adversary proceeding before this court if it was unable to settle its Insurance claims. (See Disclosure Statement at 11.) The Disclosure Statement estimated the value of the Insurance claims at more than $11.8 million, while explaining to creditors that any recovery thereon was uncertain. (Id. at 11-12.)
No creditor or other party in interest objected to confirmation of the Plan, and the court entered an order confirming the Plan with certain modifications agreed to by Veros, the Official Committee of Unsecured Creditors, and the Office of the Bankruptcy Administrator (the "Confirmation Order"). (See BK Doc. 494.) GCube received notice of the hearing to consider the Sale, the Disclosure Statement, the hearing to consider approval of the Disclosure Statement, the Plan, the hearing to consider confirmation of the Plan, and the order confirming the Plan. (See BK Docs. 197, 397, 416, 455, 495.) To date, GCube has not appeared in the Bankruptcy Case. (See BK docket, passim.)
The Plan provides for the Estate to continue in existence post-confirmation, stating: "Given that [Veros's] assets are being liquidated and [Veros] will ultimately be dissolved, assets will not re-vest in a reorganized debtor, and [Veros's] assets will remain in the Estate and not re-vest upon confirmation." (Plan § 6.6.) The Plan further provides: "[a]ny settlement or compromise of claims or sales of Estate assets shall require Court approval pursuant to Bankruptcy Rule 9019"; "[a]ny of [Veros's] rights or cause[s] of action against any party ... shall remain assets of the ... Estate"; and "[t]he Court shall retain jurisdiction of this case ... [t]o enforce all causes of action which may exist on behalf of [Veros]" and "[t]o approve compromises and settlements of any claims or controversies... and to oversee the orderly liquidation of the Estate." (Id. §§ 6.6, 6.8, 7.6, 7.8.) "Court" is defined in the Plan as "the United States Bankruptcy Court for the Northern District of Alabama, Western Division, presiding over reorganization cases" (i.e., this court) "or if necessary the United States District Court for said district having original jurisdiction over said reorganization cases" (the "District Court"). (Id. at § 1.10.)
The Plan is a "self-liquidating" plan in that Veros, which is controlled by the Owners (not a trust or committee), is tasked with liquidating the Estate. (See Plan, passim; Confirmation Order at 5.) The Plan appoints a post-confirmation committee (comprised of the members of
Other than certain blender's tax credits, which are disputed by the Internal Revenue Service, the Insurance claims are the only known Estate assets that Veros has not liquidated. (See Disclosure Statement, passim; Plan, passim; Post-Confirmation Operating Reports, passim;
The Owners hold General Unsecured Claims totaling more than $16 million in the aggregate. (See Disclosure Statement at 27-28; BK Doc. 59 at 19, 26.) The Plan subordinates the Owners' General Unsecured Claims to the 50% Distribution. (See Plan Art. IV.) After the 50% Distribution is achieved, the Owners are entitled to share, pro rata, in additional disbursements to holders of General Unsecured Claims under the Plan. (See id.; Disclosure Statement at 8-9, 27-28.) Based on the size of their General Unsecured Claims, the Owners will receive more than 92% percent of each additional disbursement to holders of General Unsecured Claims. (See Disclosure Statement at 28.)
Veros's bankruptcy counsel and the Committee's counsel are retained on an hourly fee basis. (See BK Doc. 18 at 3, 5; BK Doc. 18, Ex. A at 4; BK Doc. 86 at 4; BK Doc. 104; BK Doc. 147.) Veros's counsel in the AP is retained on a contingency fee basis. (See BK Doc. 413 at 1-2; id. at 413, Ex. A; BK Doc. 478.) All professional fees paid from the Estate are subject to review and approval by the court under a reasonableness standard. (See BK Docs. 104, 147, 478; see also Plan Art. III.) To date, the court has approved (and the Estate has paid) post-confirmation professional fees and expenses totaling more than $29,500.00.
Approximately two months after Plan confirmation, Veros filed the AP, formally alleging its Insurance claims (collectively, the "Claims")
The court declined to stay proceedings on the Venue Filings pending adjudication of the Motion to Withdraw and held a final, evidentiary hearing on the Motion (the "Evidentiary Hearing"). (See AP Doc. 35.)
Pursuant to the scheduling order for the Evidentiary Hearing (AP Doc. 35) (the "Scheduling Order"), the parties filed a joint report to the court concerning the contract evidencing the Insurance (AP Doc. 38) (the "Insurance Report"), as well as a joint stipulation of undisputed facts and conclusions of law for purposes of proceedings on the Motion (AP Doc. 48) (the "Joint Stipulations"). Additional oral stipulations were made on the records of the Hearings (collectively, the "Oral Stipulations," and each an "Oral Stipulation"), and, without objection and pursuant to a further order, the Underwriters filed additional stipulations following the conclusion of the Evidentiary Hearing (the "Undue Prejudice Stipulation"). (See AP Docs. 65, 67.) The parties agreed that the Joint Stipulations and the Oral Stipulations were made for purposes of the Hearings only and shall not be deemed admissions for any reason other than proceedings on the Venue Filings. (See Joint Stipulations at 1; Oral Stipulations.)
The following exhibits were admitted on the record of the Evidentiary Hearing, without objection: movants' exhibit 1, the court's order regarding GCube's nonrenewal notice (BK Doc. 91); movants' exhibit 2, the Plan; movants' exhibit 3 (and respondent's exhibit 8), the Certificate; movants' exhibit 4, a demonstrative exhibit related to certain legal arguments made by the movants; respondent's exhibit 1, the declaration of B.R. McNaughton (pertaining to the convenience of the parties and
The parties report to the court that the Certificate "is a complete copy of the subject insurance policy, including its declaration page, certificate of insurance, terms and conditions, and all endorsements." (Insurance Report at 1.)
In the Motion the Underwriters seek to enforce a "jurisdiction" clause that appears on page six of the Certificate, under "Project 1" in the subsection titled "Choice Of Law & Jurisdiction." (See Motion, passim; Certificate at 6.) The provision states that "[a]ny disputes between the Insured and Underwriters arising under or in connection with this Insurance policy shall be subject to the exclusive jurisdiction of the courts of the State of New York." (Certificate at 6.) This clause is referred to herein as the "Jurisdiction Clause." The parties stipulate that the territory's courts selected by the Jurisdiction Clause are the New York state courts, not the federal courts situated in New York. (Joint Stipulations at 2.) The "Choice Of Law & Jurisdiction" section also states that "[t]he proper and exclusive law of this Insurance shall be the laws of the State of New York" (the "Choice of Law Clause"). (Certificate at 6.)
In the Response Veros relies on two other "jurisdiction" provisions in the Certificate. The first, appears on page eight of the Certificate, under "Certificate Provisions" in the subsection titled "Service of Suit" (the "First Service of Suit Clause"), and reads, in relevant part:
The second "jurisdiction" provision cited by Veros appears on page 17 of the Certificate, under the "General Conditions Applicable to All Sections of Coverage Under This Policy" (collectively, the "General Conditions") in the subsection titled "Service of Suit Clause (applicable to USA domiciled Insured's only)" (the "Second Service of Suit Clause," and together with the First Service of Suit Clause, the "Service of Suit Clauses"). The Second Service of Suit Clause is virtually identical to the First Service of Suit Clause, with the only potentially relevant distinction being that the Second Service of Suit Clause refers to the "Insured" not the "Assured."
There is one priority of provision clause in the Certificate (the "Priority of Provision Clause"), appearing in the General Conditions in the subsection titled "Conflict of Wordings." (Certificate, passim.) The Priority of Provision Clause reads: "The conditions contained in the Policy Schedule or in endorsements to the Policy to which this wording is attached shall supersede those of this wording, wherever the same may conflict." (Id. at 14.)
Though GCube is identified in the Certificate as the "Coverholder" and the "Correspondent," and is not listed as an Underwriter in the "Schedule of Underwriters" appearing on page 28 of the Certificate, the parties stipulate that GCube is an Underwriter, as that term is used in the Jurisdiction Clause and the Service of Suit Clauses. (Oral Stipulation; see also Certificate at 28-29.) Likewise, the parties stipulate that Veros is an "Assured" within the meaning of the First Service of Suit Clause. (Oral Stipulation.) The Certificate unambiguously identifies Veros as the "Insured" — the term used in the Second Service of Suit Clause. (Certificate at 2.)
In light of the parties' stipulation that the Jurisdiction Clause selects the New York state courts only, the Underwriters acknowledged that dismissal under the doctrine of forum non conveniens, not transfer of venue under 28 U.S.C. § 1404(a), is the appropriate mechanism for compelling compliance with the Jurisdiction Clause. (Oral Stipulation.) As such, the Underwriters cast their request to transfer venue of the AP to the SDNY as a "consensual" alternative to dismissal. (Oral Stipulations.)
There is no dispute that all of the Claims fall within the scope of both the Jurisdiction Clause and the Service of Suit Clauses.
The parties stipulate that the convenience of the parties and witnesses favors an Alabama forum over a New York forum; however, the parties do not agree that such private interest factors are relevant to the Motion. (Joint Stipulations at 3.)
The parties further stipulate that federal law governs the issue of whether a forum selection clause is "enforceable." (See Joint Stipulations at 2.)
GCube and Kiln, individually and on behalf of all Underwriters, stipulate that they will not "raise a statute of limitations defense against a suit filed in New York state court asserting the same claims currently pending in the bankruptcy court, provided suit is filed within 90 days after dismissal of [the AP]" or within such "reasonable additional time" as the court deems necessary. (See Undue Prejudice Stipulation at 2.)
This court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334(b), as the Claims in the AP are at least "related to" the Bankruptcy Case.
The Certificate and the Claims are property of the Estate. See 11 U.S.C. § 541.
Some courts interpret "related to" jurisdiction more narrowly in the post-confirmation context, granting jurisdiction only when there is a sufficiently "close nexus" to the debtor's plan. See, e.g., Binder v. Price Waterhouse & Co., LLP (In re Resorts Int'l, Inc.), 372 F.3d 154, 166-167 (3d Cir. 2004); Overton v. Chrysler Grp. LLC, No. 2:17-cv-01983, 2018 WL 847772, at *5 (N.D. Ala. Feb. 13, 2018) (Proctor, J.). Under this standard, courts hold that only proceedings to interpret, implement, consummate, execute, or administer a debtor's chapter 11 plan have the requisite "close nexus" for the exercise of post-confirmation jurisdiction. See Overton, 2018 WL 847772, at *5 (citing In re Resorts Int'l, 372 F.3d at 167).
Even the heightened "close nexus" standard, which the Eleventh Circuit has not adopted,
Although the parties do not dispute that this court (and the District Court) have subject matter jurisdiction to hear the Claims, the parties disagree as to whether the Claims are core or non-core under 28 U.S.C. § 157. Subject to constitutional limitations,
For purposes of this memorandum opinion, the court need not decide whether the Claims are core or non-core. In non-core proceedings, as well as in proceedings involving Stern claims (i.e., claims that are statutorily core but that the bankruptcy court lacks constitutional authority to finally adjudicate), a bankruptcy court may issue non-final orders. See e.g., O'Toole v. McTaggart (In re Trinsum Grp., Inc.), 467 B.R. 734, 739-40 (Bankr. S.D.N.Y. 2012) (Glenn, J.); see also Reliable Air, Inc. v. Jape (In re Reliable Air, Inc.), Nos. 05-85627, 07-6352, 2007 WL 7143407, at *2 (Bankr. N.D. Ga. Sept. 14, 2007) (Massey, J.); 10 COLLIER ON BANKRUPTCY ¶ 9033.02 (16th ed. 2018). An order denying a motion to dismiss is not a final order. See, e.g., Catlin v. United States, 324 U.S. 229, 236, 65 S.Ct. 631, 89 S.Ct. 911 (1945); Wallace v. Norman Indus., 467 F.2d 824, 826 (5th Cir. 1972); In re Trinsum Grp., 467 B.R. at 741-42. Similarly,
Relying on the Jurisdiction Clause, the Underwriters ask the court to dismiss the AP. When a forum selection clause selects a non-federal forum, the appropriate way to enforce the clause is through the doctrine of forum non conveniens. See Atl. Marine Const. Co., Inc. v. U.S. Dist. Ct. for the W. Dist. of Tex., 571 U.S. 49, 60, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013).
Under a traditional forum non conveniens analysis, the movant "must show that `(1) an adequate alternative forum is available, (2) the public and private factors weigh in favor of dismissal, and (3) the plaintiff can reinstate his suit in the alternative forum without undue inconvenience or prejudice.'" GDG Acquisitions LLC v. Gov't of Belize, 849 F.3d 1299, 1312 (11th Cir. 2017) (quoting Leon v. Millon Air, Inc., 251 F.3d 1305, 1311 (11th Cir. 2001)). Private interest factors include the "relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive." Atl. Marine, 571 U.S. at 63 n.6, 134 S.Ct. 568 (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241, n.6, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981)). Public-interest factors include "the administrative difficulties flowing from court congestion; the `local interest in having localized controversies decided at home'; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action ... and the unfairness of burdening citizens in an unrelated forum with jury duty." Piper Aircraft, 454 U.S. at 241, n.6, 102 S.Ct. 252 (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 S.Ct. 1055 (1947)); see also Atl. Marine, 571 U.S. at 63, n.6, 134 S.Ct. 568. "The Court must also give some weight to the plaintiffs' choice of forum." Atl. Marine, 571 U.S. at 63, n.6, 134 S.Ct. 568 (citing Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S.Ct. 544, 99 S.Ct. 789 (1955)). The reviewing court must weigh these factors and determine whether, on balance, dismissal "would serve the convenience of the parties and witnesses and otherwise promote the interest of justice." Atl. Marine, 571 U.S. at 62-63, 134 S.Ct. 568; see also GDG Acquisitions, 849 F.3d at 1312.
There is no dispute that the Underwriters have not made the requisite showing for dismissal for forum non conveniens under a traditional analysis. In fact, the Underwriters stipulate that all of the private interest factors weigh in favor of an Alabama forum (either this court or the District Court). (Joint Stipulations at 3.) To support their dismissal request, the Underwriters rely solely on the Jurisdiction Clause.
When there is a single (valid and enforceable
The Certificate contains at least three provisions pertaining to "jurisdiction." Veros asserts that each of the "jurisdiction" clauses is a forum selection clause; that the clauses conflict, rendering the Certificate ambiguous; and that such ambiguity must be resolved in its favor. For their part, the Underwriters do not acknowledge any ambiguity in the Certificate, arguing that the Service of Suit Clauses merely operate as consents to personal jurisdiction, not consents to litigate in a particular forum. For the reasons set forth below, the court concludes that the Service of Suit Clauses are properly characterized as forum selection clauses.
Neither Atlantic Marine nor GDC Acquisitions involved multiple forum selection clauses, and federal courts have taken varied analytical approaches when multiple forum selection clauses govern the same claims. See, e.g., Muzumdar v. Wellness Int'l Network, Ltd., 438 F.3d 759, 760-62 (7th Cir. 2006) (undertaking a contract interpretation analysis and finding a "non-exclusive jurisdiction" clause selecting a forum did not render a mandatory forum selection clause selecting the same forum permissive); Intelligent Discovery Mgmt., LLC v. Omnivere Holding Co., LLC, No. 1:15-cv-01134, 2016 WL 3876424, at *3 (D. Del. July 15, 2016) (Sleet, J.) (disregarding competing forum selection clauses in favor of a traditional analysis under 28 U.S.C. § 1404(a)
Considering the competing venue provisions in the Certificate, and the procedural posture of the litigation, the court holds that the forum non conveniens analysis is altered by the forum selection clauses, but not to the extent set forth in Atlantic Marine. The court will give effect to Veros's private interest waiver, but the court will not completely disregard Veros's chosen forum (and require Veros to show why enforcement of the Jurisdiction Clause is unwarranted) as the Service of Suit Clauses at least permit litigation in this forum given the procedural posture of the Claims. Under this analytical framework, and because the public interest factors weigh against dismissal, the Motion is due to be denied.
Moreover, the court concludes that, as a matter of contract interpretation, litigation of the Claims in an Alabama federal forum is permitted by the Certificate. The "jurisdiction" clauses in the Certificate are inconsistent and susceptible to more than one reasonable interpretation. Resolving the uncertainty by adopting the reasonable interpretation that most favors the insured (Veros), the Service of Suit Clauses preserved to the Underwriters only two means of enforcing the Jurisdiction Clause — transfer (provided transfer to the state court forum is procedurally available) and commencement of a suit in New York state court. As the AP cannot be transferred to New York state court, and the Underwriters have not commenced an action in New York state court nor sought relief from stay in the Bankruptcy Case to file an action in New York, dismissal is neither necessary nor appropriate under the terms of the Certificate.
"[C]ourts frequently classify forum selection clauses as either permissive or mandatory." Global Satellite Commc'n Co. v. Starmill U.K. Ltd., 378 F.3d 1269, 1272 (11th Cir. 2004). A "mandatory" or "full" forum selection clause "dictates an exclusive forum for litigation under the contract," while a permissive forum selection clause "authorizes jurisdiction in a designated forum but does not prohibit litigation elsewhere." Id. (quoting Snapper, Inc. v. Redan, 171 F.3d 1249, 1262 n.24 (11th Cir. 1999)); see also Signature Fin. LLC v. Neighbors Global Holdings, LLC, 281 F.Supp.3d 438, 447 (S.D.N.Y. 2017) (Rakoff, J.) (explaining that New York law recognizes "full" forum selection clauses as those that bind all parties to sue only in the for a specified in the contract, as well as "permissive venue" clauses that "provide a non-exclusive forum for dispute resolution by specifying, for example, that the parties agree to the venue and jurisdiction" of a particular territory's courts) (internal citation omitted).
The Eleventh Circuit also recognizes a third category of forum clauses — "hybrid provisions." See Ocwen Orlando Holdings Corp. v. Harvard Prop. Trust, LLC, 526 F.3d 1379, 1381 (11th Cir. 2008) (citing Snapper, 171 F.3d at 1262 n.24). These are provisions that are permissive as to the plaintiff's initial forum selection but mandatory as to the defendants once the forum is selected. See id. New York law similarly recognizes such hybrid provisions, characterizing them as "mandatory consent[s] to jurisdiction." See Signature Fin., 281 F.Supp.3d at 447 (explaining that, under New York law, a "mandatory consent to jurisdiction clause ... does not establish one possible forum for the resolution
There is no dispute that, considered in isolation, the Jurisdiction Clause is properly characterized as a mandatory forum selection clause. (See Venue Filings, passim.)
The parties disagree as to the whether the Service of Suit Clauses are properly characterized as forum selection clauses and, if so, what type. The Eleventh Circuit Court of Appeals has treated service of suit clauses as hybrid venue provisions that mandate litigation in the insured's choice of forum upon commencement of suit by the insured. See Russell Corp. v. Am. Home Assurance Co., 264 F.3d 1040, 1046-50 (11th Cir. 2001). The Underwriters maintain, however, that New York law should govern the "interpretation" and "classification" of the Service of Suit Clauses, arguing that New York courts construe service of suit clauses as consents to personal jurisdiction only. In support of this argument, the Underwriters cite two New York state court cases: Brooke Grp. Ltd. v. JCH Syndicate 488, 87 N.Y.2d 530, 640 N.Y.S.2d 479, 663 N.E.2d 635 (N.Y. 1996) and Price v. Brown Grp., Inc., 206 A.D.2d 195, 619 N.Y.S.2d 414 (1994).
In Brooke Group, the plaintiff insureds filed suit in New York state court premised on a Lloyd's service of suit clause. Holding that a service of suit clause is not a mandatory (or "full") forum selection clause, New York's highest court characterized the service of suit clause as a "consent to jurisdiction." 87 N.Y.2d at 534, 640 N.Y.S.2d 479, 663 N.E.2d 635. Nowhere does the word "personal" appear in the Brooke Group court's holding. While the Brooke Group court concluded that the subject consent to jurisdiction did not bar the syndicate underwriters from bringing a motion to dismiss for forum non conveniens, in so holding the Brooke Group court did not disregard the underwriters' consent to the New York forum. In fact, the Brooke Group court held that the subject service of suit clause should be given weight in the forum non conveniens analysis and affirmed the lower court's dismissal for forum non conveniens based on factors "unrelated to New York" (the insureds' chosen forum). Id. at 535, 640 N.Y.S.2d 479, 663 N.E.2d 635.
As the Eleventh Circuit noted in its discussion of Brooke Group in Russell, "private parties cannot bargain away the power of a federal court to order the dismissal or transfer of a case based upon forum non conveniens grounds" because a party "may not waive the public's interest." Russell, 264 F.3d at 1047-48 (internal quotation omitted). Implicit in Brooke Group — and explicit in Russell — is the recognition that a party may waive private interest challenges to a forum via a service of suit clause. Id.; Brooke Grp., 87 N.Y.2d at 534-35, 640 N.Y.S.2d 479, 663 N.E.2d 635. At most, Brooke Group stands for the
The Brooke Group case also is factually distinguishable. As other courts have observed, there is nothing in the Brooke Group decision to suggest that the subject service of suit clause required the syndicate underwriters to abide by the final decisions of the insured's chosen forum. See, e.g., Transit Cas. Co. in Receivership v. Certain Underwriters at Lloyd's of London, 963 S.W.2d 392, 401 (Mo. Ct. App. 1998). The Service of Suit Clauses do so provide. Moreover, in Brooke Group, the court was tasked with reconciling a service of suit clause with a competing, mandatory arbitration clause. 87 N.Y.2d at 533, 640 N.Y.S.2d 479, 663 N.E.2d 635. The court recognized an "apparent conflict" between the mandatory arbitration provision and the service of suit clause, and, thus, gave more limited effect to the service of suit clause than it might have done had the insureds not waived their right to a judicial forum. Id. at 533-34, 640 N.Y.S.2d 479, 663 N.E.2d 635; see Transit Cas. Co., 963 S.W.2d at 401. No party has alleged that Veros waived its rights to bring the Claims in a judicial forum, and the only arbitration provision in the Certificate appears in the General Conditions and is headed "Arbitration Clause (For All Territories Excluding USA)." (See Certificate at 13 (emphasis added).)
Price, an intermediate appellate decision that pre-dates Brooke Group, involved a motion by the insured to dismiss a declaratory judgment action commenced by the underwriters in New York state court. Subsequent to the filing of the New York action, the insured filed suit in Missouri and argued that, under the service of suit clause in the insurance contract, it had the exclusive right to select the forum for litigation. Finding that it would be unreasonable to require the underwriters to litigate in any jurisdiction selected by the insured, no matter how remote, the court held the service of suit clause did not give the insured the exclusive right to select the forum. 619 N.Y.S.2d at 418-19. The crux of the Price holding is that the subject service of suit clause did not "block an otherwise valid action brought by [the] insurer." Id. at 418. The Service of Suit Clauses in the Certificate expressly allow the Underwriters to commence suit in another United States court — stating that the clauses do not operate to waive such right. (See Certificate at 8, 17.) The Price court did not hold that the consent to "jurisdiction" in the subject service of suit clause was in personam only. Instead, as in Brooke Group, the consent to the insured's chosen forum was treated as permissive, not mandatory, or otherwise unenforceable. 619 N.Y.S.2d at 417-19.
As one federal court has observed, New York courts will not enforce "consent to jurisdiction clauses that force one party to submit to suit anywhere." See Signature Fin., 281 F.Supp.3d at 448 (citations and emphasis omitted). The same court also noted, however, that the mere fact that a mandatory consent is "floating" — in other words it allows the plaintiff to choose one of multiple for a — does not render it unenforceable as a matter of New York state law. See id. First, enforcement of the subject consents to jurisdiction is governed by federal law, not state law. Wylie, 706 Fed.Appx. at 580; see also Joint Stipulations at 2. As the Russell decision
Although the Service of Suit Clauses do not operate to waive the Underwriters' rights to remove or transfer or file a separate suit, the Service of Suit clauses do not reserve to the Underwriters the right to dismiss an action filed by Veros in its preferred forum. Thus, although the Underwriters' consent to venue in the Service of Suit Clauses is limited, it is not without effect. See Tri-Union Seafoods, LLC v. Starr Surplus Lines Ins. Co., 88 F.Supp.3d 1156, 1163-64 (S.D. Cal. 2015) (Anello, J.). As the Eleventh Circuit has observed, "it would border on the absurd to enforce only those forum selection clauses that operate to displace contractually the normal rules of venue and personal jurisdiction to the greatest extent, and not to enforce those that only minimally displace federal procedure." Snapper, 171 F.3d at 1262 n.24.
This court is not alone in characterizing service of suit clauses as consents to litigate in the insured's chosen forum. See Travelers Ins. Co. v. Keeling, 996 F.2d 1485, 1489-90 (2d Cir. 1993) (construing service of suit clause as forum selection clause pursuant to which insurer waived right of removal); Foster v. Chesapeake Ins. Co., 933 F.2d 1207, 1209 n.1, 1216-18 (3d Cir. 1991), cert. denied, 502 U.S. 908, 112 S.Ct. 302, 116 L.Ed.2d 245 (1991) (same); City of Rose City v. Nutmeg Ins. Co., 931 F.2d 13, 14-16 (5th Cir. 1991), cert. denied, 502 U.S. 908, 112 S.Ct. 301, 116 L.Ed.2d 244 (1991) (same); Sevigny v. British Aviation Ins. Co. Ltd., No. 15-cv-127, 2015 WL 3755204, at *2-3 (D. N.H. June 16, 2015) (DiClerico, J.); Mosing v. Zloop, Inc., No. H-15-136, 2015 WL 1841212, at *2 (S.D.Tex. Apr. 22, 2015) (Miller, J.); Tri-Union Seafoods, 88 F.Supp.3d at 1162-63; Hazelwood Logistics Ctr. LLC v. Illinois Union Ins. Co., No. 4:13-CV-2572, 2014 WL 805886, at *2 (E.D. Mo. Feb. 28, 2014) (Shaw, J.); Hanover Ins. Group v. Chartis Specialty Ins. Co., No. 12-40156, 2013 WL 4495659, at *3 (D. Mass. Aug. 19, 2013) (Hillman, J.); BEPCO, L.P. v. Santa Fe Minerals, Inc., No. 11-01332, 2011 WL 4499322, at *3-5 (W.D. La. Apr. 25, 2011) (Kirk, Maj. J.), appeal dismissed, 675 F.3d 466 (5th Cir. 2012); Fleming Bldg. Co., Inc. v. Columbia Cas. Co., 751 F.Supp.2d 1218, 1219-21 (N.D. Okla. 2010) (Frizzell, J.); Dinallo v. Dunav Ins. Co., 672 F.Supp.2d 368, 370-71 (S.D.N.Y. 2009) (Cote, J.), aff'd, 402 Fed. Appx. 595 (2d Cir. 2010); Oxford Realty Grp., LLC v. Axis Reinsurance Co., No. 08-CV-6303, 2009 WL 1324028, at *4-5 (D. N.J. May 12, 2009) (Martini, J.); Sestech Envtl. LP v. Westchester Surplus Lines Ins. Co., No. 1:08CV2417, 2009 WL 233620, at *1-2 (N.D. Ohio Jan. 30, 2009) (O'Malley, J.); Am. States Ins. Co. v. Century Sur. Co., No. C08-1163Z, 2008 WL
The Eleventh Circuit rejects the notion that a forum selection clause is "per se unenforceable" merely because it is permissive. See Snapper, 171 F.3d at 1262 n.24. Most often, challenges to permissive forum selection clauses arise in the context of motions to dismiss or transfer brought to compel the plaintiff to litigate in a permitted forum (i.e., the defendant, not the plaintiff, is seeking to enforce a permissive forum selection clause). See, e.g., Citro Fla., Inc. v. Citrovale, S.A., 760 F.2d 1231, 1231-32 (11th Cir. 1985) (per curiam); see also Cardoso v. Coelho, 596 Fed.Appx. 884, 885-86 (11th Cir. 2015) (per curiam); PNC Bank, N.A. v. GVTG, LLC, 592 Fed.Appx. 775, 778-79 (11th Cir. 2014).The holdings in such cases do not support dismissal or transfer of an action when the plaintiff files litigation in a permitted forum. See Snapper, 171 F.3d at 1262 n.24. Accordingly, even if the Service of Suit Clauses are properly characterized as "permissive" forum selection clauses, they are entitled to weight in a federal forum non conveniens analysis.
Both Brooke Group (applying New York law) and Russell (applying federal common law) support the conclusion that service of suit clauses operate to waive private interest challenges to the insured's chosen forum. Although the Service of Suit Clauses each include a sentence limiting the effect of this waiver — reserving to the Underwriters the right to raise such private interest challenges in support of a motion to transfer
The Supreme Court and Eleventh Circuit do not address how the presence of multiple forum selection clauses alters the forum non conveniens analysis. See generally Samuels, 2014 WL 4441943, at *4 (noting that Atlantic Marine involved "only one unambiguous forum selection clause"). Some federal courts will attempt to reconcile competing forum provisions before assessing whether dismissal or (transfer) is warranted. See, e.g., Muzumdar, 438 F.3d at 760-62. Other courts view the appropriate inquiry as whether the presence of multiple forum selection clauses governing the parties' claims alters the forum non conveniens analysis. See Samuels, 2014 WL 4441943, at *4-5. Following the latter approach, the court will undertake to fashion a forum non conveniens analysis that takes into account the parties' respective venue consents.
In the AP each party is as much a party denying enforcement of a forum selection clause as it is a party seeking to enforce a forum selection clause. While Veros broadly waived its right to raise private interest factors in opposition to the Motion (via the Jurisdiction Clause), the court cannot (and should not) ignore that the Underwriters likewise waived their right to raise private interest factors in support of the Motion (via the Service of Suit Clauses). Accordingly, the court will disregard any private interest factors in its analysis.
The court will not, however, relieve the movants of their burden to show that the forum non conveniens analysis is otherwise satisfied. The Underwriters consented to litigate in Veros's chosen forum and did not reserve the right to dismiss the AP. Veros should not be required to show unusual circumstances to litigate in a consensual venue. Likewise, had the Underwriters commenced their own suit in New York state court, they should not be required to show unusual circumstances to continue in that forum.
Turning to the question of whether, disregarding private interest factors, the Underwriters have met their burden, the court concludes they have not. There is no dispute that the state courts of New York are an adequate and available forum. See Tazoe v. Airbus S.A.S., 631 F.3d 1321, 1330-31 (11th Cir. 2011) (quoting Piper Aircraft, 454 U.S. at 254 and n.22, 102 S.Ct. 252) (explaining a forum is "available" when the defendant is amenable to process in the forum and that a forum is "inadequate" if the remedy provided by the forum is so "unsatisfactory that it is no remedy at all"). Furthermore, the Undue Prejudice Stipulation removes any impediment to reinstating litigation in the New York state courts. See id. at 1335; see also Grp. CG Builders & Contractors, 534 Fed. Appx. 826, 830 (11th Cir. 2013). The Underwriters fail to show, however, that the public interest factors weigh in favor of dismissal. Although the Underwriters summarily allege that "all public interest factors... weigh in favor" of litigating in a New York forum, the only public interest factor that the Underwriters specifically identify is familiarity of the forum with the law that will govern the case. Veros counters that this is a local controversy and has no nexus to New York and also points to the public interests implicated by the Bankruptcy Case.
The factual findings and stipulations set forth above support Veros's assertion that Alabama has a local interest in the case and that, but for the Jurisdiction and Choice of Law Clauses, the litigation is entirely unrelated to New York. Although, to date, no party has demanded a jury trial in the AP, the Underwriters have alluded
Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 91 S.Ct. 1055 (1947) (superseded on other grounds by 28 U.S.C. § 1404). Given the Plant explosion and subsequent shut down, Alabama residents have a compelling interest in having the Claims litigated in this state, particularly if the Underwriters intend to demand a jury trial.
Veros's bankruptcy filing also implicates public interest factors favoring an Alabama federal forum. The Claims are property of the Estate and are being liquidated for the benefit of creditors. The Owners will not receive any distribution in respect of their equity interests unless and until holders of General Unsecured Claims receive 100 percent of the total allowed amount of such claims (which appears highly unlikely given that the alleged value of the Claims and other Estate assets total less than the allowed amount of the Owners' General Unsecured Claims). Although it is notable that the Owners' General Unsecured Claims were only subordinated to other General Unsecured Claims until the 50% Distribution was achieved (and also that the Owners will be entitled to receive a significant portion of any further Plan disbursements to holders of General Unsecured Claims), this does not diminish the interests of Veros's other creditors in seeing the value of the Claims maximized. Indeed maximizing the value of the Claims is of prime significance to the non-insider holders of General Unsecured Claims, given their fractional disbursements. Based on the Plan and Disclosure statement — neither of which were objected to by GCube — Veros's non-insider creditors had a reasonable expectation that the Claims would be litigated in an Alabama federal forum. The Estate has very limited funds on hand. If Veros is required to litigate in New York, the Post-Confirmation Committee (effectively) will be deprived of the opportunity to perform its duties under the Plan. Irrespective of whether such factors render the Jurisdiction Clause unenforceable as a matter of federal public policy, they are appropriately considered as public interest factors that weigh against dismissal in a federal forum non conveniens analysis. See Bavaria Yachts USA, LLLP v. Bavaria Yachtbau GmbH (In re Bavaria Yachts USA, LLLP), 575 B.R. 540, 560-63 (Bankr. N.D. Ga. 2017) (Sacca, J.).
Ultimately, the sole public interest factor cited by GCube in support of the Motion — the familiarity of the New York courts with New York law — is outweighed by the above-outlined public interest factors. Federal bankruptcy courts and district courts routinely interpret and apply state law. The parties have not suggested that the Claims involve novel state law issues. Since the court concludes that the Underwriters bear the burden of showing that dismissal is in the interests of justice, and the public interest factors weigh against dismissal, the Motion is due to be denied.
Employing contract interpretation analysis does not change the result. As the above discussion highlights, the Service of Suit Clauses and the Jurisdiction Clause conflict. The Jurisdiction Clause "mandates New York as the exclusive jurisdiction, while the [Service of Suit Clauses] state[] the [Underwriters] will submit to the jurisdiction of any competent court and accept its final decision." See Rembrandt Enters., Inc. v. Illinois Union Ins. Co., 129 F.Supp.3d 782, 786 (D. Minn. 2015) (Kyle, J.).
Other courts have recognized this apparent conflict. See id.; Tri-Union Seafoods, 88 F.Supp.3d at 1163-64 ("[T]he forum selection clause provides for New York as the designated forum, whereas the Service of Suit Endorsement unambiguously permits Plaintiff, as the policy holder, to choose the forum to bring suit. Thus, when read separately and in isolation, the two provisions appear to conflict."); Hazelwood Logistics, 2014 WL 805886, at *2. In the aforementioned cases, the courts relied on priority of provision clauses to give greater effect to the service of suit clauses. See Rembrandt Enters., 129 F.Supp.3d at 786; Tri-Union Seafoods, 88 F.Supp.3d at 1164-65; Hazelwood Logistics, 2014 WL 805886, at *2.
The Priority of Provision Clause does not resolve the instant conflict. First, the Certificate does not include a clearly delineated "Policy Schedule," nor are any portions of the Certificate labeled "endorsements." (See Certificate, passim.) As such, it is not clear that the Jurisdiction Clause or the First Service of Suit Clause is located in a portion of the Certificate that is given priority over the General Conditions. Second, only the Second Service of Suit Clause appears in the General Conditions, not the first. (See Certificate at 13-18.) Thus, even if the Second Service of Suit Clause might be superseded in some respects by virtue of the fact that it is part of the General Conditions, the Priority of Provision Clause does not reconcile the conflict between the Jurisdiction Clause and the First Service of Suit Clause.
Because the Priority of Provision Clause does not aid in reconciling the competing "jurisdiction" clauses, the court looks to general principles of contract interpretation.
To the extent that there are two reasonable interpretations of the Insurance's forum selection clauses, the court must construe the contract provisions against the drafter and select the interpretation more favorable to the non-drafting party. See Global Satellite Commc'n Co., 378 F.3d at 1274 ("The phrase is simply ambiguous, it lends itself to several possible reasonable interpretations, and rather than strain to find that one should prevail over another, we must simply construe it against ... the drafter."); Majer v. Schmidt, 169 A.D.2d 501, 505, 564 N.Y.S.2d 722 (N.Y. App. Div. 1999) ("Contrary to [the defendant's] assertions, the forum selection clause ... did not designate Zurich, Switzerland, as the sole proper venue of the underlying action, but, rather, contained ambiguous language, which must be construed against the drafter... and in favor of the [plaintiff's] selected forum").
Applying the above-referenced principles, the court agrees with the Underwriters that the Service of Suit Clauses do not foreclose enforcement of the Jurisdiction Clause. However, the court disagrees with the Underwriters that dismissal is an available mechanism for enforcement of the Jurisdiction Clause, as the Service of Suit Clauses do not reserve to the Underwriters the contractual right to dismiss an action filed in court of competent jurisdiction in the United States. In other words, the Service of Suit Clauses alter the effect of the Jurisdiction Clause in two significant (but limited) ways. First the Service of Suit Clauses authorize Veros to commence litigation in a forum other than New York (provided its claims fall within the scope of the Service of Suit Clauses). Second, the Service of Suit Clauses operate to waive the Underwriters' private interest challenges to Veros's chosen forum when (1) the litigation cannot be transferred to the state court forum selected by the Jurisdiction Clause, and (2) the Underwriters elect not to (or are otherwise foreclosed from) commencing their own action in said state court forum.
Notably, the Jurisdiction Clause likewise limits the effect of the Service of Suit Clauses. The Certificate provisions that pertain to the Underwriters' rights of removal, transfer, and commencement of a suit in "any" court of competent jurisdiction are not complete reservations of rights. The Service of Suit Clauses merely say that nothing in the Service of Suit Clauses should be construed as waiving such rights. (See Certificate at 8, 17.) Because the Jurisdiction Clause selects the New York state courts only, (if enforceable) it necessarily restricts the Underwriters from removing to a federal forum, transferring litigation from one federal forum to another, and commencing suit in a federal forum or state court forum outside of New York. Read together, the clauses leave one option to the Underwriters if they elect to proceed in New York state court — the Underwriters must file suit in a New York state court.
This interpretation gives effect to all of the "jurisdiction" clauses, by recognizing that the Service of Suit Clauses do not foreclose the Underwriters from compelling litigation in New York state court, without nullifying the limited territorial consent memorialized in the Service of Suit Clauses. To the extent there are alternate, reasonable interpretations of the provisions, the court adopts the foregoing interpretation as more favorable to the insured.
The Dornoch case cited by the Underwriters in support of their alternative interpretation is distinguishable. 666 F.Supp.2d at 366. In Dornoch, the underwriters filed a declaratory judgment action in the SDNY. The insured moved to dismiss the underwriters' action (or to transfer the action) on the basis that the insured had previously filed suit in federal court in Virginia. To support its motion to dismiss or transfer, the insured pointed to a service of suit clause in the parties' agreement, which provided that the underwriters consented "to the jurisdiction of a Court of competent jurisdiction within the United States." Id. at 370. The plaintiff underwriters defended, relying on a mandatory venue provision in the contract.
First, the contractual language in Dornoch differs from that of the Certificate. The "mandatory" provision at issue in Dornoch specifically stated that "any action relating to any dispute under this Policy shall only be brought in" the state and federal courts in New York. The Jurisdiction Clause, on the other hand, refers to "jurisdiction" (like the Service of Suit Clauses), stating "disputes ... shall be
Second, Dornoch did not involve a determination as to whether the insured's first filed suit was subject to dismissal. As noted above, the court does not construe the Service of Suit clauses as waiving the right of the Underwriters to file suit in New York state court (the contractually selected forum), and the Service of Suit Clauses would not require dismissal of any such suit.
The arbitration cases cited by the Underwriters also do not compel a different result. Courts that have declined to find a conflict between arbitration clauses and service of suit clauses typically hold that enforcement of a mandatory arbitration provision does not leave the service of suit clause without meaning, as the service of suit clause makes certain that the insured will have recourse to a United States federal or state court to enforce any arbitration award entered in its favor. See, e.g., McDermott Int'l, Inc. v. Lloyd's Underwriters of London, 944 F.2d 1199, 1205 (5th Cir. 1991), reh'g denied, 947 F.2d 1489 (5th Cir. 1991). The courts emphasize that such a ruling gives effect both to the insured's waiver of a judicial forum for deciding disputes (evidenced by the arbitration provision) and the underwriters' consent to jurisdiction in a judicial forum when they have refused to pay amounts claimed due under the policy (evidenced by the service of suit clause). See, e.g., McDermott Int'l, 944 F.2d at 1204-06, 1208. Here, of course, Veros did not waive its right to adjudicate its claims in a judicial forum, and there is no need to preserve a United States judicial forum to enforce the decision of another United States judicial forum. Further, the courts are not unanimous in holding that service of suit provisions do not conflict with arbitration provisions. See, e.g., Transit Cas. Co., 963 S.W.2d at 397-99; Thiokol Corp. v. Certain Underwriters at Lloyd's, London, No. 1:96-CV-28, 1997 WL 33798359, at *3-5 (D. Utah May 6, 1997) (Benson, J.) (applying principles of contract interpretation to resolve a conflict between a service of suit provision and an arbitration provision to hold that the more specific service of suit provision gave the insured an explicit right to bypass the more general arbitration provision).
Ultimately, when reconciled with the Service of Suit Clauses, the Jurisdiction Clause does not apply to the Claims in their present procedural posture. Accordingly, the Motion is due to be denied — regardless of whether the Jurisdiction Clause is valid, enforceable, or entitled to near determinative weight in a forum non conveniens analysis. Because the Plan continued the Estate in effect post-confirmation, the Underwriters are stayed, by operation of 11 U.S.C. § 362, from commencing an action in New York state court to obtain a declaration that they are not liable on the Claims. See 11 U.S.C. §§ 362(a)(1), (a)(3), (c)(1), (c)(2).
For the reasons set forth herein, the request to dismiss the AP is due to be denied.
