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noting that if a forum selection clause is both valid and applicable, "it is not necessary to analyze jurisdiction under New York's long-arm statute or federal constitutional requirements of due process"
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11 Civ. 6804 (PAE)
02-17-2012
AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY ASSOCIATION, INC., Plaintiff, v. THE AMERICAN BOAT COMPANY, LLC, Defendant.
OPINION & ORDER
:
Defendant The American Boat Company ("American Boat") moves to dismiss this action, claiming a lack of personal jurisdiction and improper venue. For the following reasons, the Court holds that it has personal jurisdiction over American Boat, and that this Court is a proper venue for this dispute, based on a governing forum selection clause. The motion to dismiss is, therefore, denied. I. Background
The Court's account of the facts of this case is drawn from the Complaint, the attached exhibits, and documents incorporated by reference. See DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (in considering a motion to dismiss, "a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint"). Except where specifically referenced, no further citation to these sources will be made.
A. The Rules of "The Club"
This is an admiralty and maritime action. Plaintiff American Steamship Owners Mutual Protection and Indemnity Association, also known as The American Club ("The Club"), seeks a declaration of its rights and obligations to American Boat, under an insurance policy issued by The Club.
The Club is a mutual insurance company. It furnishes protection and indemnity insurance coverage to shipowners and charterers. The Club issues a Certificate of Entry to each insured; the Certificate of Entry outlines the terms of that insured's policy. Policies issued by The Club are also governed by The Club's By-Laws and Rules ("the Rules").
A copy of the Rules is attached to the Complaint as Exhibit B.
At all relevant times, non-party American Tugs, Inc. ("American Tugs") was a shipowner insured by The Club as a Member. The Certificate of Entry issued to American Tugs for the coverage period beginning February 20, 2009 and ending February 20, 2010 ("the Certificate") states at its outset that the Certificate is "subject to the By-Laws and Rules of the [Club]."
A copy of the Certificate is attached to the Complaint as Exhibit A.
Under the heading "Special Terms & Conditions," the Certificate lists the defendant American Boat as an "additional assured" under American Tugs' policy. The Certificate goes on to delineate American Boat's responsibility with respect to coverage of additional assureds with the following "misdirected arrow clause":
Notwithstanding the fact that Companies listed above are hereby named as Additional Assureds in this Certificate of Entry, the cover of [The Club] will only extend insofar as they may be found liable to pay in the first instance for loss or damage which is properly the responsibility of American Tugs, Inc., and nothing herein contained shall be construed as extending cover in respect of any amount which would not have been recoverable from [The Club] by American Tugs, Inc. had the claim in respect of such loss or damage been made or enforced against him. Once [The Club] has made indemnification under such cover it shall not be under any further liability and shall not make any further payment to any person or company whatsoever, including American Tugs, Inc., in respect of that loss or damage.American Boat did not pay a premium to The Club to be listed as an additional assured. Nor did American Tugs pay an increased premium in order to add American Boat.
Section 1.1 of The Club's Rules explains that "each and every provision of . . . these Rules . . . are applicable to all Protection and Indemnity insurances" issued by The Club. Section 1.2, which covers interpretation of terms used in the Rules, identifies a "Member" as "an owner, operator or charterer of a vessel insured by [The Club] who according to the By-Laws and these Rules is entitled to membership of the Association, provided that, where the context requires or allows, the term Member shall, in these Rules, include a Joint Member, Co-assured and Affiliate."
Section 1.47 of the Rules, entitled "Disputes," is central to this motion. It is a forum selection clause, which, by its terms, applies to any dispute "between a Member and [The Club] . . . concerning the construction of these Rules, or the insurance afforded by [The Club] under these Rules, or any amount due from [The Club] to the Member . . . ." Section 1.47 continues: "Any such suit against [The Club] and/or its agents shall be brought in the United States District Court for the Southern District of New York."
In July 2009, the Alejandro, one of American Tugs' vessels covered by the Certificate, was undergoing extensive renovation at an American Boat facility in Illinois. Employees of American Tugs and of American Boat were working on the Alejandro. On July 6, 2009, one such employee, welder Eduard Perez-Mossetty, allegedly sustained injuries while conducting work on the Alejandro. Perez-Mossetty has since sued American Tugs and American Boat in a personal injury action currently pending in Illinois state court. Also currently pending, in federal court in the Southern District of Illinois, is a limitation of liability suit brought by American Tugs.
Following the filing of Perez-Mossetty's suit, American Boat requested that American Tugs or its insurers, including The Club, defend and indemnify it in the personal injury action. The Club denied American Boat's request.
B. The Club's Lawsuit Seeking Declaratory Relief
On September 28, 2011, The Club filed the Complaint in this action in this District. It sought a declaration that The Club was not obligated to defend American Boat for the injuries allegedly suffered by Perez-Mossetty. The Club cited the forum selection clause as a basis for jurisdiction and venue. On November 11, 2011, American Boat filed its motion to dismiss for lack of personal jurisdiction and improper venue. This motion was fully briefed on January 6, 2012. The Court heard oral argument on this motion on February 10, 2012.
II. Applicable Legal Standards
On a motion pursuant to Federal Rule of Civil Procedure 12(b)(2) to dismiss for lack of personal jurisdiction, the "plaintiff carries the burden of demonstrating that jurisdiction exists." Penachio v. Benedict, No. 10-5079-cv, 2012 WL 10971, at *1 (2d Cir. Jan. 4, 2012) (summ. order) (slip op.), citing Robinson v. Overseas Military Sale Corp., 21 F.3d 502, 507 (2d Cir. 1994). Where there has been no evidentiary hearing on a Rule 12(b)(2) motion, "'the plaintiff need make only a prima facie showing of jurisdiction.'" Penachio, 2012 WL 10971, at *1 (quoting Marine Midland Bank, M.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981)).
The plaintiff here, The Club, argues that personal jurisdiction and venue are achieved through the forum selection clause in the Rules. "Parties can consent to personal jurisdiction through forum-selection clauses in contractual agreements." D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 103 (2d Cir. 2006) (citing Nat'l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-16 (1964)). When a forum selection clause is found valid and enforceable, "it is not necessary to analyze jurisdiction under New York's long-arm statute or federal constitutional requirements of due process." Export-Import Bank of the U.S. v. Hi-Films S.A. de C.V., No. 09-cv-3573, 2010 WL 3743826, at *4 (S.D.N.Y. Sept. 24, 2010).
A party seeking to enforce a forum selection clause must demonstrate that: "(1) the clause was reasonably communicated to the party resisting enforcement; (2) the clause was mandatory and not merely permissive; and (3) the claims and parties involved in the suit are subject to the forum selection clause." Tropp v. Corporation of Lloyd's, 385 F. App'x 36, 37 (2d Cir. 2010). If all three claims are met, the forum selection clause is presumed enforceable, unless the party opposing enforcement can rebut the presumption by "making a sufficiently strong showing that 'enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching.'" Phillips v. Audio Active Ltd., 494 F.3d 378, 383-84 (2d Cir. 2007) (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)).
III. Analysis
American Boat does not claim either that the forum selection clause was not reasonably communicated to it, or that the clause is permissive rather than mandatory. The first two prongs of the governing standard are, therefore, satisfied. Nor does American Boat argue, let alone demonstrate through a sufficiently strong showing, that the clause is unreasonable or unjust, or that it was achieved through fraud or overreaching. Rather, American Boat argues that the forum selection clause does not, textually, apply to this lawsuit, because (1) American Boat is not a "Member" of The Club, and the clause applies only to suits by Members, and (2) this lawsuit was brought by The Club, whereas the clause applies only to suits against The Club. For the following reasons, the Court finds neither argument persuasive, and holds that the forum selection clause applies here, establishing both personal jurisdiction and proper venue.
A. American Boat's Argument with Respect to Suits Involving "Members"
The forum selection clause states that it applies to suits "between a Member and [The Club]." The Rules define the term "Member" to include "a Joint Member, Co-assured and Affiliate." The Rules do not state that a "Member" includes an "additional assured" (as American Boat is designated on the Certificate) or, for that matter, that it does not. American Boat thus argues that the forum selection clause does not apply to it. However, when the Rules and the Certificate are considered in totality, it is apparent that the forum selection clause applies to this dispute.
Of paramount importance, American Boat may claim coverage from The Club only if it is treated, for purposes of this litigation, as a Member. If American Boat were not subject to the rights and restrictions applicable to a "Member" under the Rules, then not only is the forum selection clause inapplicable to it, but so too are the provisions of the Rules that, potentially, extend coverage to it for liability or the cost of legal defense. Rule 2, titled "Risks and Losses Covered," provides that "[e]ach Member of [The Club] shall be indemnified in connection with each vessel entered in [The Club] for Protection and Indemnity Insurance." (Emphasis added.) And Rule 2.18 provides for coverage of "[l]iability for costs, charges and expenses reasonably incurred and paid by the Member in connection with any liability insured under this Rule" (Emphasis added.) There is no other part of the Rules that affords coverage to persons or entities other than Members.
Under basic principles of construction, if the term "Member" is construed to exclude American Boat as an "additional assured" for purposes of the forum selection clause, as American Boat proposes, then the same term in the Rules should be construed in like fashion in other clauses, including those supplying a right to coverage. See MBIA Inc. v. Fed. Ins. Co., 652 F.3d 152, 165 (2d Cir. 2011) ("we must read a contract as a whole and construe terms in context") (internal citation and quotation marks omitted); Analect LLC v. Fifth Third Bancorp, 380 F. App'x 54, 57 (2d Cir. 2010) (summ. order) ("A written contract will be read as a whole, . . . every part will be interpreted with reference to the whole[,] and if possible it will be so interpreted as to give effect to its general purpose.") (internal citation and quotation marks omitted); Hillside Metro Assoc., LLC v. JP Morgan Chase Bank, No. 10-cv-1772, 2011 WL 5008368, at *9 (E.D.N.Y. Oct. 20, 2011) (in interpreting a contract, court must "consider the contract as a whole . . . and attempt to harmonize all of its terms"); Metz v. U.S. Life Ins. Co., No. 09-cv-10250, 2010 WL 3703810, at *3 (S.D.N.Y. Sept. 21, 2010) (under New York law, a contract "should be read as a whole, and every part will be interpreted with reference to the whole") (internal citation and quotation marks omitted); 17A Am. Jur. 2d Contracts § 375 (2012); 43 Am. Jur. 2d Insurance § 299 (2012). At oral argument, American Boat stated that it is seeking coverage from The Club for the Perez-Mossetty incident and believes that it is covered under the Rules. But American Boat cannot have it both ways. For American Boat's underlying claims to coverage to be colorable, the term "Member" must be read to encompass it not only for purposes of coverage, but for the purposes of the forum selection clause, too.
This reading is, further, consistent with a line of decisions, largely arising in the context of insurance coverage disputes, in which courts have held non-signatories to be estopped from disclaiming obligations under a contract while enjoying benefits flowing directly from that same contract. Under this "direct benefits theory" of estoppel, a party which is a non-signatory to a contract, but which nonetheless receives a direct benefit from that contract, is estopped from seeking exclusion from provisions of the contract.
For example, in American Bureau of Shipping v. Tencara Shipyard S.P.A., the Second Circuit held that the owners of a yacht were subject to an arbitration clause which appeared in an agreement between the vessel and a third party, because "the Owners received several direct benefits" from the contractual relationship. 170 F.3d 349, 353 (2d Cir. 1999). The owners' enjoyment of such benefits estopped them from arguing that the arbitration clause did not apply to them. See Aguas Lenders Recovery Grp. v. Suez, S.A., 585 F.3d 696, 701 (2d Cir. 2009) ("the fact a party is a non-signatory to an agreement is insufficient, standing alone, to preclude enforcement of a forum selection clause"); MAG Portfolio Consultant, GMBH v. Merlin Biomed Grp. LLC, 268 F.3d 58, 61 (2d Cir. 2001) ("where a company knowingly accepted the benefits of an agreement with an arbitration clause, even without signing the agreement, that company may be bound by the arbitration clause") (internal citation and quotation marks omitted); see also Holland Am. Line Inc. v. Wartsila N. Am., Inc., 485 F.3d 450, 456 (9th Cir. 2007) (forum selection clause may be applied to a non-signatory because the contract in which the clause appeared governed transactions involving non-signatories); Marano Enters. of Kan. v. Z-Teca Restaurants, L.P., 254 F.3d 753, 757-58 (8th Cir. 2001) (non-signatories bound by forum selection clause because they brought suit under the contract containing the clause, and because they were "closely related" to the dispute arising out of the contract).
Here, American Boat similarly seeks to benefit from the contract, by claiming entitlement to payment of its legal defense costs and, potentially, its legal obligations to Perez-Mossetty, from The Club, based on its having been listed on the Certificate (which itself incorporates the Rules) as an additional assured. Under the direct benefits theory of estoppel, American Boat is, therefore, estopped from arguing that it is a non-Member and hence not subject to the forum selection clause.
Seeking to distinguish this line of cases, American Boat argues that in the direct benefits cases, the parties held bound were simply non-signatories to the contract at issue, whereas here the plain language of The Club's Rules assertedly excludes additional assureds such as American Boat from classification as a Member. This argument is unconvincing. First, as noted, this same argument would preclude insurance coverage for American Boat. Second, the language of the Rules is silent as to the status of "additional assureds"—it does not, as American Boat posits, exclude "additional assureds" from treatment as Members. And, third, it does not follow, simply because American Boat is referenced in the contract at issue whereas the parties in other direct benefits cases were not so referenced, that the logic of the direct benefits estoppel line of cases does not apply. That logic does apply. It is, in fact, the insurer-insured relationship that opens the door for American Boat to assert entitlement to defense and indemnification in the first place, as the misdirected arrow clause makes clear: American Boat is covered by The Club only "insofar as [it] may be found liable to pay in the first instance for loss or damage which is properly the responsibility of American Tugs, Inc."
As a final, independent basis for its conclusion, the Court notes that, closely analyzed, other aspects of the Certificate and the Rules reinforce the conclusion that the forum selection clause applies to American Boat. As noted, the Rules define a "Member" to include, inter alia, a "Co-assured." The term "Co-assured" is defined as "[a]ny person who is insured in accordance with the terms of Rule 1.3.8 to 1.3.11." Subsection 1.3.10, in turn, reads as follows:
The cover afforded to all other categories of Co-assureds . . . shall only extend insofar as such Co-assured may be found liable to pay in the first instance for loss or damage which is properly the responsibility of the Member, and nothing herein contained shall be construed as extending cover in respect of any amount which would not have been recoverable from [The Club] by the Member had the claim in respect of such loss or damage been made or enforced against him.(Emphasis added.)
Significantly, this language is substantively identical to that in the "misdirected arrow clause" in American Tugs' Certificate, which delineates the coverage supplied to American Boat:
Notwithstanding the fact that Companies listed above are hereby named as Additional Assureds in this Certificate of Entry, the cover of [The Club] will only extend insofar as they may be found liable to pay in the first instance for loss or damage which is properly the responsibility of American Tugs, Inc., and nothing herein contained shall be construed as extending cover in respect of any amount which would not have been recoverable from [The Club] by American Tugs, Inc. had the claim in respect of such loss or damage been made or enforced against him. Once [The Club] has made indemnification under such cover it shall not be under any further liability and shall not make any further payment to any person or company whatsoever, including American Tugs, Inc., in respect of that loss or damage.(Emphasis added). Whatever the reason for the identification on the Certificate of American Boat as an "additional assured" rather than a "Co-assured," in substance, if not form, American Boat is, effectively, a co-assured under the Rules. And co-assureds are explicitly classified as "Members," and thus covered, under the Rules, by the forum selection clause.
B. American Boat's Argument with Respect to Suits "Against" The Club
Seizing on the fact that the forum selection clause, by its terms, applies to suits "against" The Club, American Boat argues that this lawsuit, a declaratory judgment action brought against it by The Club, falls outside the scope of the clause. This argument is unpersuasive. American Boat, along with American Tugs, faces potential liability in Perez-Mossetty's underlying personal injury action. American Boat has already made a demand that American Tugs and its insurers underwrite its defense in that action, and, presumably, indemnify it in the event it is held liable. Given The Club's declination of this demand, a suit between it and American Boat as to whether The Club has a duty to defend (and possibly indemnify) American Boat is, realistically, a matter of when, and not if.
Under these circumstances, whether the lawsuit raising this issue was initiated by American Boat as a coverage action or by The Club as a declaratory judgment action should not be determinative. Regardless of the posture, the substance of such lawsuits would be identical. And the contrary holding—under which The Club would lose the benefit of the forum selection clause if it initiated suit—would have the unfortunate effect of discouraging The Club from promptly seeking judicial resolution of such controversies.
Separately, the Court notes that, as a textual matter, the language of the forum selection clause is not quite as clear-cut as American Boat suggests. The forum selection clause does not, for example, state that it applies only to cases in which The Club is a defendant. The clause applies instead to cases "against" The Club or its agents. Merely because a lawsuit was initiated by The Club to achieve closure as to claims that have been brought against it does not necessarily mean that the suit was not "against" The Club. --------
This result is strongly supported by the decision in Farrell Lines, Inc. v. Columbus Cello-Poly Corp., 32 F. Supp. 2d 118 (S.D.N.Y. 1997). There, the applicable forum selection clause also designated a forum specifically for suits "against the Carrier." Like American Boat, the defendants in Farrell Lines had made a claim for coverage—they argued that the Carrier's liability was broader than the Carrier conceded. The Court, however, found the forum selection clause applicable to a suit by the Carrier in which the Carrier sought a declaration limiting its liability under a bill of lading.
CONCLUSION
For the foregoing reasons, this Court finds that the forum selection clause in The Club's Rules applies to this lawsuit, and, therefore, that there is personal jurisdiction over American Boat and that venue in the Southern District of New York is proper. Defendant's motion to dismiss is, accordingly, denied. The Clerk of Court is instructed to terminate the motion at docket entry number six.
In light of the pending personal injury action in Illinois state court and the pending limitation of liability suit in Illinois federal court, the Court wishes to hear, promptly, the parties' views on how the instant litigation should proceed. No later than February 28, 2012, each party shall address this issue, including how best to advance the interests of judicial economy, in a letter no longer than three pages. The parties are encouraged to meet and confer and, if possible, to present a joint proposal to the Court as to how to proceed.
SO ORDERED.
/s/_________
Paul A. Engelmayer
United States District Judge Dated: February 17, 2012
New York, New York