Summary
finding that a second-filed action was reactive when defendants could have filed suit long before plaintiffs
Summary of this case from CVR Ref. v. XL Specialty Ins. Co.Opinion
C.A. No. N14C-12-210 MMJ CCLD
08-26-2015
CHEMTURA CORPORATION, Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S, et al., Defendants.
Helen K. Michael, Esq. (Argued), Gregory M. Jacobs, Esq., Tyechia L. White, Esq. Kilpatrick Townsend & Stockton LLP, David J. Baldwin, Esq., Janine L. Hochberg, Esq., Potter Anderson & Corroon LLP, Attorneys for Plaintiff Chemtura Corporation Stephen T. Roberts, Esq. (Argued), Thomas J. Quinn, Esq., Alexander Mueller, Esq., Mendes & Mount, LLP, John S. Spadaro, Esq., John Sheehan Spadaro, LLC, Attorneys for Defendants Certain Underwriters at Lloyd's London and Various London Market Insurance Companies
Upon Defendants' Motion to Dismiss DENIED Upon Defendants' Alternative Motion to Stay this Action for Forum Non Conveniens DENIED OPINION Helen K. Michael, Esq. (Argued), Gregory M. Jacobs, Esq., Tyechia L. White, Esq. Kilpatrick Townsend & Stockton LLP, David J. Baldwin, Esq., Janine L. Hochberg, Esq., Potter Anderson & Corroon LLP, Attorneys for Plaintiff Chemtura Corporation Stephen T. Roberts, Esq. (Argued), Thomas J. Quinn, Esq., Alexander Mueller, Esq., Mendes & Mount, LLP, John S. Spadaro, Esq., John Sheehan Spadaro, LLC, Attorneys for Defendants Certain Underwriters at Lloyd's London and Various London Market Insurance Companies JOHNSTON, J.
PROCEDURAL AND FACTUAL CONTEXT
The genesis of this dispute is environmental contamination allegedly caused by plaintiff Chemtura Corporation's predecessor, Uniroyal Chemical Company. Chemtura seeks coverage for losses caused by Uniroyal's operations at two specific sites-Arkansas and Ohio. Chemtura is seeking declarations that defendants have breached their contracts and should be obligated to pay damages for refusing to cover losses.
Other sites not part of this case include New Jersey, South Carolina, Mississippi, Connecticut, Italy and Mexico.
Defendants fall into two groups: Certain Underwriters at Lloyd's London ("Underwriters") and Certain London Market Insurance Companies ("Companies"). Each Underwriter and Company subscribed a percentage of the limits of policies that provided insurance for specified risks to Uniroyal.
Defendants shall be referred to as "Insurers."
The obligations of Insurers have been the subject of approximately twenty years of litigation. Insurers and Chemtura have been in settlement discussions for several years in an attempt to resolve coverage for liability. Settlement was reached for claims arising in states other than Arkansas and Ohio. The parties entered into a Tolling Agreement in 2010 regarding the Arkansas and Ohio site coverage disputes.
On December 22, 2014, Chemtura provided the thirty-day termination notice required by the Tolling Agreement with Companies. The same day, this action was filed in Delaware against Underwriters. The Tolling Agreement with Underwriters did not contain a thirty-day notice provision.
On January 8, 2015, the Prothonotary issued a summons enabling Chemtura to commence service of process under Superior Court Civil Rule 4. Chemtura employed three methods of service: through Delaware's long-arm statute; sheriff's service on the Delaware Insurance Commissioner; and in accordance with the insurance policies' service-of-suit clause.
On January 12, 2015, counsel for Insurers received correspondence from counsel for Chemtura enclosing a Summons and Complaint.
On January 15, 2015, Underwriters filed an action in New York State Supreme Court relating to policies from 1952 to 1986. The New York action seeks a declaratory judgment that Underwriters have no duty to indemnify Chemtura for the environmental claims. The New York action also requests relief with respect to claims made by factory workers against Chemtura for bodily injuries arising from exposure to diacetyl (a food flavoring), as well as losses arising from the investigation and remediation of sites other than Arkansas and Ohio.
On January 22, 2015, thirty days after notice of termination of the Tolling Agreement, Chemtura filed an Amended Complaint in Delaware. Companies were added as defendants. Chemtura again used three means to obtain service of process.
Also in January 22, 2015, Companies filed an action against Chemtura in New York. The Companies and Underwriters actions are essentially identical. On January 23, 2015, Chemtura's registered agent in Connecticut was served with both the Underwriters and Companies complaints.
Insurers have moved to dismiss, or alternatively to stay, this case on the grounds of forum non conveniens. Chemtura filed separate forum non conveniens motions to dismiss the New York actions. The New York State Supreme Court graciously has agreed to hold in abeyance any forum ruling in the cases pending in that Court, until October 8, 2015.
STANDARD OF REVIEW
Improper Venue
Superior Court Civil Rule 12(b)(3) governs a motion to dismiss or stay due to improper venue. The Court should "give effect to the terms of private agreements to resolve disputes in a designated judicial forum out of respect for the parties' contractual designation." "The Court can 'grant a dismissal motion before the commencement of discovery on the basis of affidavits and documentary evidence if the plaintiff cannot make out a prima facie case in support of its position.'" However, the Court usually must allow the plaintiff to take discovery where the plaintiff "advances a non-frivolous legal argument that would defeat the motion if the facts turn out to be as it alleges." "In reviewing a motion to dismiss, the court must assume as true all the facts pled in the complaint and view those facts and all reasonable inferences drawn from them in the light most favorable to the plaintiff."
Loveman v. Nusmile, Inc., 2009 WL 847655, at *2 (Del. Super.).
HealthTrio, Inc. v. Margules, 2007 WL 544156, at *2 (Del. Super.) (citing Simon v. Navellier Series Fund, 2000 WL 1597890, at *3-*7 (Del. Ch.)).
Id.
Loveman, 2009 WL 847655, at *2 (citing Anglo Am. Sec. Fund, L.P. v. S.R. Global Int'l Fund, L.P., 829 A.2d 143, 148-49 (Del. Ch. 2003)).
Forum non Conveniens
At issue in this case is the standard of review applicable to dismiss this action or to grant a stay based on forum non conveniens. The Court must first address the timing of the Delaware actions and the New York actions to determine which standard is applicable. "A motion to stay or dismiss on grounds of forum non conveniens is addressed to the sound discretion of the Court." The doctrine of forum non conveniens is not a vehicle for the Court to determine which forum would be most convenient for the parties. The Court "cannot perfunctorily apply McWane or forum non conveniens if either doctrine is to accomplish the purposes for which they were crafted by the Delaware Supreme Court." When applying either doctrine, the Court "always must consider judicial economy and principles of comity."
Tex. Instruments Inc. v. Cyrix Corp., 1994 WL 96983, at *2 (Del. Ch.) (citing Williams Gas Supply Co. v. Apache Corp., 594 A.2d 34, 37 (Del. 1991)).
In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d 106, 117 (Del. Ch. 2009).
Rosen v. Wind River Sys., Inc., 2009 WL 1856460, at *3 (Del. Ch.).
Id.; See Carvel v. Andreas Holdings Corp., 698 A.2d 375, 378 (Del. Ch. 1995); Adirondack GP, Inc., v. Am. Power Corp., 1996 WL 684376, at *6 (Del. Ch.).
"Where one of two 'competing' actions is filed before the other, the so-called McWane standard controls and the first-filed action generally is entitled to preference." "Where two or more actions are contemporaneously filed, the Court 'examines a motion to stay under the traditional forum non conveniens framework without regard to a McWane-type preference of one action over the other.'"
BP Oil Supply Co. v. ConocoPhillips Co., 2010 WL 702382, at *2 (Del. Super.); see McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng'g Co., 263 A.2d 281, 283 (Del. 1970).
Id.
If the Court finds that the actions were filed contemporaneously, the movant seeking dismissal has the burden to prove that litigating in Delaware would cause overwhelming hardship. Where a stay of litigation likely would have substantially the same effect as a dismissal, the overwhelming hardship standard applies.
BP Oil Supply Co., 2010 WL 702382, at *2.
In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d at 117.
"To justify a stay, the movant need only demonstrate that the preponderance of applicable forum factors 'tips in favor' of litigating in the non-Delaware forum." "In balancing all of the relevant factors, the focus of the analysis should be which forum would be the more 'easy, expeditious, and inexpensive' in which to litigate."
Id.
Royal Indem. Co. v. Gen. Motors Corp., 2005 WL 1952933, at *7 (Del. Super.) (citing HFTP Invs., L.L.C. v. ARIAD Pharms., Inc., 752 A.2d 115, 122 (Del. Ch. 1999)).
"Delaware courts examine six factors, known as the Cryo-Maid factors, when determining whether to dismiss or stay an action on forum non conveniens grounds." The Court will consider: (1) whether Delaware law governs the case; (2) the relative ease of access to proof; (3) the availability of compulsory process for witnesses; (4) the pendency or nonpendency of a similar action or actions in another jurisdiction; (5) the possibility of a view of the premises; and (6) all other practical considerations that would make the trial easy, expeditious, and inexpensive.
Certain Underwriters at Lloyds Severally Subscribing Policy No. DP359504 v. Tyson Foods, Inc., 2008 WL 660485, at *3 (Del. Super.).
Gen. Foods Corp. v. Cryo-Maid, Inc., 198 A.2d 681, 684 (Del. 1964); Parvin v. Kaufmann, 236 A.2d 425, 427 (Del. 1967).
ANALYSIS
Contentions of the Parties
Insurers
Insurers argue that Chemtura has engaged in a "race to the courthouse" for the purpose of forum shopping, in an attempt to preempt any action by Underwriters and Companies in their forum of choice. Insurers assert that Chemtura intentionally filed shortly before the Christmas holidays, and waited until January 8, 2015 to attempt service, to delay giving Underwriters actual notice of the action. Thus, the first-filed Delaware action is not entitled to deference. Further, the New York actions are broader that the Delaware action.
Insurers contend that there is a complete lack of nexus to Delaware. Relevant witnesses are located in New York, Connecticut, New Jersey and Pennsylvania, and compulsory process is not likely available in Delaware. New York is the place of negotiation, brokering and placement of the relevant insurance policies. During the relevant time period, Uniroyal had its principal place of business in New York. Uniroyal was a New Jersey corporation. Chemtura maintained offices in Connecticut and Pennsylvania. Insurers claim that Chemtura is not the natural plaintiff in the context of this lawsuit. Finally, because of prior litigation, there is the risk of inconsistent rulings.
Chemtura
Chemtura counters that the relevant insurance policies include a service-of-suit clause. The clause provides that Chemtura has the right to choose the forum for litigating any coverage dispute. The Delaware action is first-filed, and Insurers cannot meet the overwhelming hardship standard justifying dismissal of this action. Chemtura states that any delay in service was not for the purpose of tactical advantage. Chemtura filed a detailed Affidavit outlining its efforts to serve process as quickly as possible.
Chemtura disputes the lack of Delaware nexus. Chemtura is a Delaware corporation. Additionally, the location of witnesses should not pose a hardship. Live witness testimony may not be necessary as the disputes are largely legal. The states in which Defendants assert potential witnesses reside are all in close proximity to Delaware. However, transatlantic travel may be required for witnesses for Underwriters and Companies.
Chemtura asserts that in the absence of a conflict with the law of states having the most significant relationship to the coverage dispute, Delaware law will apply. Finally, New York has no present connection to the dispute. Neither Chemtura nor any Insurer has ever resided in New York. Even if live testimony is necessary, compulsory process is equally available for litigation sited in New York or Delaware.
First-Filed Delaware Action Entitled to Deference
It is undisputed that this Delaware Action was filed on December 22, 2014. The first New York case was filed on January 15, 2015. The Court is wholly unpersuaded by Insurers' contention-that Chemtura intentionally manipulated the time of filing, or effecting service of process, to delay actual notice to Insurers, for the purpose of tactical advantage.
Chemtura is the natural plaintiff in this action. When coverage is denied, or the insurer has failed to pay for losses after a substantial amount of time, the insured is the natural plaintiff. An action by the insurer, filed in anticipation of a claim for damages by the insured, generally would not be entitled to first-filed deference.
Playtex, Inc. v. Colom. Cas. Co., 1989 WL 40913, at *4 (Del. Super.).
Nat'l Union Fire Ins. Co. of Pitts., Pa. v. Turner Constr. Co., 2914 WL 793898, at *3 (Del. Super.).
The disputes among the parties have been unresolved for some time. The Court finds that the New York action filed on January 15, 2015 was reactive. The Tolling Agreement with Underwriters did not contain a thirty-day termination notice provision. Underwriters could have filed suit long before Chemtura brought this Delaware case. In the absence of special circumstances, a second-filed reactive action will not divest a plaintiff from its choice of forum, even when the second action is filed within a time frame that could be viewed as contemporaneous.
Dura Pharm., Inc. v. Scandipharm, Inc., 713 A.2d 925, 929 (Del. Ch. 1998).
Under the circumstances presented by the competing Delaware and New York actions, the Court finds that the actions were not filed contemporaneously. Even if the Court were to conclude that the suits were contemporaneously filed, Insurers have failed to demonstrate that litigating in Delaware would cause the overwhelming hardship that would justify dismissal of this action.
See BP Oil Supply Co., 2919 WL 792382, at *2.
The next step is to consider whether a stay is warranted. The Court must consider the following six factors.
Gen. Foods Corp., 198 A.2d at 694.
Applicable Law
The choice of law issue has not yet been determined. Arguments have been made that the law of Arkansas or Ohio might apply. It is premature to consider whether the law of any other jurisdiction would conflict with Delaware law. Even if New York law would apply, that reason alone should not mandate stay or dismissal of the Delaware action. Delaware courts regularly apply the law of other jurisdictions.
In re Asbestos Litig., 929 A.2d 373, 386 (Del. Super. 2006) ("Delaware courts regularly interpret and apply the laws of other states and have consistently held that the 'need to apply another state's law will not be a substantial deterrent to conducting litigation in this state.'").
Therefore, this factor is neutral at this stage of the proceedings.
Relative Ease of Access of Proof
and
Availability of Compulsory Process for Witnesses
Several jurisdictions appear to have an interest in this case filed in Delaware. The sites at issue are located in Arkansas and Ohio. Although it is likely that live testimony will not be necessary at trial, potential deponents are located in New York, Connecticut, New Jersey and Pennsylvania. The Court notes, however, that three of these locations are no more geographically convenient to New York than to Delaware. Compulsory process is as readily available in Delaware as it is in New York. Where litigants are entities with substantial resources, the burden created by witnesses and evidence located outside Delaware is "substantially attenuated."
Id. at 384.
Therefore, the Court finds that these factors also are neutral.
Pendency of a Similar Action in Another Jurisdiction
The Court finds that the pending actions in New York would provide an adequate forum for resolution of this dispute.
Possibility of a View of the Premises
No party has suggested that a view of the premises actually will be necessary.
Other Practical Considerations
When plaintiffs choose to sue in a jurisdiction that has no connection to the litigation, "our trial courts should be extremely cautious not to intrude on the legitimate interests of other sovereign states." Each state is "entitled to conduct its own cost-benefit analysis" to balance legitimate state interests in fostering commercial activity and compensating those claiming losses.
Bell Helicopter Textron, Inc. v. Arteaga, 113 A.3d 1045, 1051-52 (Del. 2014).
Id.
Insurers argue that New York is the most appropriate forum. Insurers reason that New York was: (1) the principal place of business of Uniroyal; (2) the location where certain policies were brokered; (3) the place where decisions were made by Uniroyal regarding its overall insurance program; and (4) the place from which at least one insurer issued policies.
The Court finds this argument unpersuasive. None of these circumstances has a more than tenuous relationship to the disputes at issue in this case. There has been no argument that New York is the central repository for documents or the primary location for live witnesses. Instead, the witnesses and relevant evidence appear to be situated in numerous states, and outside of the United States.
See E.I. du Pont de Nemours & Co. v. Admiral Ins. Co., 577 A.2d 305, 308 (Del. Super. 1989) (Where defendants are located outside of the United States, "regardless of where this litigation is conducted significant expenses will be incurred by all parties.").
Further, the Court finds no reason to stay this action in order to permit discovery on forum issues. The six factors considered are fairly obvious and not subject to credibility determinations.
Service-of-Suit Clause
The following has been presented to the Court as a representative service-of-suit clause contained in Insurers' policies:
It is agreed that in the event of the failure of [the Insurers] hereon to pay any amount claimed to be due hereunder, [the Insurers] hereon, at the request of the Insured (or reinsured), will submit to the jurisdiction of any Court of competent jurisdiction within the United States and will comply with all requirements necessary to give such Court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such Court.
It is further agreed that service of process in such suit may
be made upon [Mendes & Mount], and that in any suit instituted against any one of them upon this contract, [the Insurers] will abide by the final decision of such Court or of any Appellate Court in the event of an appeal.
This service-of-suit clause specifically states that the Insurers agree to submit to the jurisdiction chosen by the insured. The provision entitles the insured to select the forum for coverage litigation. Forum selection clauses are presumptively valid and should be specifically enforced, absent extraordinary circumstances. The insured may not be able to prevent the insurer from bringing an action in a jurisdiction of the insurer's choice. Nevertheless, the insured's first-filed action triggers the forum selection component of the service-of-suit clause.
Monsanto Co. v. Aetna Cas. & Sur. Co., 1990 WL 9496, at *4 (Del. Super.).
M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972); Ingres Corp. v. CA, Inc., 8 A.3d 1143, 1146 (Del. 2010).
Nat'l Union Fire Ins. Co. of Pitts., Pa. v. Crosstex Energy Servs., L.P., 2013 WL 6598736, at * 5-8 (Del. Super.). --------
CONCLUSION
This Delaware action is entitled to plaintiff's choice of forum as the first-filed case. Defendants' subsequently-filed New York actions are reactive. Even if the New York actions were deemed to have been contemporaneously-filed under the circumstances of this case, Insurers have failed to meet the "overwhelming hardship" standard necessary to justify dismissal of the Delaware case.
Having considered the six Cryo-Maid, factors, the Court finds that neither dismissal nor stay is warranted on forum non conveniens grounds.
THEREFORE, Defendants' Motion to Dismiss and Alternative Motion to Stay this Action for Forum Non Conveniens are hereby DENIED.
IT IS SO ORDERED.
/s/ Mary M . Johnston
The Honorable Mary M. Johnston