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noting that the locus of operative facts factor did not weigh in favor of or against transfer where "[a]lthough the agreements were negotiated primarily in Texas, some negotiations took place in New York, and any arbitration will take place in New York because the agreements provide for the application of New York law"
Summary of this case from Travelers Prop. Cas. Co. of Am. v. Ocean Reef Charters LLCOpinion
02 Civ. 6889 (RCC)
November 12, 2002
OPINION AND ORDER
Plaintiff Winterthur International Insurance Company ("Winterthur") filed the above-captioned action against Defendants Bank of Montreal (also "the Bank") and the Williams Companies, Inc., Williams Energy Services, and Williams Energy Marketing and Trading Company (collectively, "Williams parties") to compel their joinder in a pending arbitration with Defendant Gulf Liquids New River Project LLC ("Gulf Liquids"). Defendants Bank of Montreal and the Williams parties now move to transfer this case to the Southern District of Texas, where the Bank has filed a related declaratory judgment action against Winterthur. For the reasons set forth below, Defendants' motion is denied.
I. Background
In January and February 2001, Winterthur issued six different insurance policies to Gulf Liquids, providing owner's risk insurance to Gulf Liquids for certain construction projects in Louisiana and the performance obligations of the general contractors hired for the projects. In addition to Gulf Liquids, Bank of Montreal and the Williams parties are also listed under the title "Insured" as financiers and lenders to the projects, in each of the six policies. These policies were negotiated and delivered in Houston, Texas, with some negotiations taking place in New York City. Winterthur subsequently entered into additional agreements with Gulf Liquids with respect to the advancement of funds for certain claims. The agreements between the various parties provided for the arbitration of disputes to take place in New York, New York and for the application of New York law.
From the face of the insurance policies, it appears that only a Winterthur representative signed each policy. The court cannot identify a signature of any "insured"; however, neither the Bank nor the Williams parties deny that they are parties to the insurance policies. With respect to the advancement of funds agreements, neither the Williams parties nor the Bank appear on either of the agreements. None of the parties to this action claims that the Williams parties or the Bank are parties to these advancement of funds agreements, which are signed by representatives from Winterthur and Gulf Liquids.
The arbitration clause in each insurance policy provides: "The Insured and the Insurer each shall nominate an arbitrator within thirty days of the date upon which either gives the other written notice that it demands arbitration hereunder and the two arbitrators so named shall select an umpire before entering upon the arbitration." Although the remainder of the clause elaborates on the arbitration process, nothing in the policies states that each insured is entitled to its own arbitrator or that each dispute shall be resolved through a separate arbitration.
During the completion of the construction projects, a conflict arose between the general contractors and Gulf Liquids with respect to the obligations of the respective parties. Thereafter, litigation between Gulf Liquids and the project contractors ensued in Louisiana and Texas. Alleging that the contractors defaulted on their obligations, Gulf Liquids made claims to Winterthur under the various insurance policies. On June 6, 2002, Gulf Liquids served notice upon Winterthur, demanding arbitration of its claims pending under the insurance policies, alleging, inter alia, failure to pay claims under those policies in a good faith timely manner.
In response to Gulf Liquids' demand for arbitration, Winterthur served a notice of "Demands for Arbitration" on Gulf Liquids, Bank of Montreal, and the Williams parties on July 2, 2002. This notice demanded, inter alia, arbitration of the following issues: 1) claims relating to various insurance policies that Winterthur issued to Gulf Liquids and which named the Bank and the Williams parties as insureds; 2) claims relating to an agreement based on letters exchanged between Winterthur and Gulf Liquids with respect to an advancement of funds on certain debt services claims; and 3) claims relating to the Agreement Re Advance of Funds between Winterthur and Gulf Liquids. The Winterthur Demands designated an arbitrator pursuant to the arbitration clause contained in each insurance policy.
By letter of August 1, 2002, Bank of Montreal responded to the Winterthur Demands. In its letter, the Bank 1) nominated an arbitrator for each of the demands; 2) claimed that disputes arising out of each agreement should be arbitrated separately and apart from those arising out of every other agreement; 3) claimed that the Bank is entitled to its own separate arbitration and therefore should not be included as a party to the pending arbitration between Winterthur and Gulf Liquids; and 4) denied arbitral jurisdiction with respect to the agreements between Winterthur and Gulf Liquids relating to advancement of funds.
By letter of August 6, 2002, Winterthur replied to Bank of Montreal, stating that the Bank did not have the right to appoint an arbitrator or to separate proceedings, arguing that the Bank, the Williams parties, and Gulf Liquids were required to be joined as collective insureds under the insurance policies that formed the basis of some of Winterthur's demands for arbitration and that the Bank and the Williams parties were required to accept the arbitrator selected by Gulf Liquids in its arbitration demand against Winterthur on June 6, 2002.
On August 15, 2002, Bank of Montreal sought declaratory relief in the Southern District of Texas, seeking an order stating that 1) it is not required to arbitrate with respect to the advance funds agreements; 2) the Bank is entitled to its own arbitrator; and 3) the Bank is entitled to non-consolidated proceedings separate and apart from Winterthur's arbitration with any other party. On August 16, 2002, the Williams parties sought similar relief in the Northern District of Oklahoma.
On August 21, 2002, Winterthur filed its Verified Petition in the Supreme Court of the State of New York, seeking 1) to compel the Bank and the Williams parties to participate in the arbitration with Gulf Liquids; 2) an order that all disputes and claims arising under the policies be heard in the pending arbitration between Winterthur and Gulf Liquids; 3) a declaration that the Bank and the Williams parties are entitled collectively to appoint a total of one arbitrator; 4) a stay of the pending arbitration until the court decides whether to compel the Bank and the Williams parties to participate in that arbitration; and 5) a stay or enjoinder of the Bank and the Williams parties from prosecuting their declaratory judgment actions in Texas and Oklahoma. On August 29, 2002, the Bank removed Winterthur's action in New York state court to federal court.
On September 19, 2002, Defendants the Bank and the Williams parties filed a Joint Motion to Transfer to the Southern District of Texas, where the Bank's declaratory action is pending. A pretrial conference in the Bank's declaratory judgment action is scheduled for December 20, 2002. The Williams parties have stipulated that they will dismiss their claims in the Northern District of Oklahoma and refile them in the Southern District of Texas if this case is transferred to that forum.
II. Discussion
While the burden is generally on the moving party to establish that there should be a change of forum, where, as here, two courts have concurrent jurisdiction over an action involving the same parties and issues, the forum of the first-filed action has priority. See Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir. 1978), overruled on other grounds by Pirone v. MacMillan, Inc., 894 F.2d 579 (2d Cir. 1990). Exceptions to the "first-filed rule" apply when the balance of conveniences weighs in favor of the second action or when special circumstances justify giving priority to the second. See id.
Applying the "first-filed rule," there is a presumption in favor of the Texas forum because the Bank filed its declaratory judgment action in the Southern District of Texas prior to the filing of Winterthur's action before this Court. Plaintiff argues that the first-filed rule should not apply, however, because 1) the balance of conveniences weighs against transferring the case to Texas, and 2) Defendants filed their action in Texas in anticipation of Winterthur's suit to compel arbitration, which qualifies as a "special circumstances" exception to the first-filed rule.
In considering a departure from the first-filed rule based on a balance of conveniences, a court evaluates the same factors considered on a motion to transfer pursuant to 28 U.S.C. § 1404 (a). See Cummings Lockwood, P.C. v. Simses, 2001 WL 789313 at *6 (D. Conn. 2001);800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F. Supp. 128, 133 (S.D.N.Y. 1994). Those factors include "(1) the convenience of the witnesses; (2) the location of relevant documents and the relative ease of access to sources of proof; (3) the convenience of the parties; (4) the locus of operative facts; (5) the availability of process to compel attendance of unwilling witnesses; (6) the relative means of the parties; (7) a forum's familiarity with the governing law; (8) the weight accorded a plaintiff's choice of forum; and (9) trial efficiency and the interests of justice, based on the totality of the circumstances."William Gluckin Co. v. Int'l Playtex Corp., 407 F.2d 177, 178 (2d Cir. 1969); Cummings Lockwood, 2001 WL 789313 at *6. The balancing of these factors is left to the sound discretion of the district court.See William Gluckin Co., 407 F.2d at 178.
Convenience of Witnesses and Availability of Process to Compel Witnesses
Defendants' argument that this case should be transferred on account of convenience to the witnesses is unavailing. When a party claims that a case should be transferred based on convenience of the witnesses, it must clearly specify the key witnesses to be called and make a general statement of what their testimony will cover. See Factors, Etc., 579 F.2d at 218; NBA Properties, Inc. v. Salvino, Inc., 2000 WL 323257 at *6 (S.D.N.Y. 2000). Here, Defendants make general allusions to witnesses who would be beyond the power of this Court's compulsory process; however, they fail to name individuals or describe the content of their proposed testimony. Additionally, Defendants present no potentially unwilling witnesses in Texas that would require the Court to compel their attendance. Therefore, this factor does not weigh heavily in favor of either party.
Locus of Operative Facts, Means of Parties, and Location of Documents and Sources of Proof
The location of the relevant documents and sources of proof and the relative means of the parties weigh neither in favor of, nor against transfer. Although the agreements were negotiated primarily in Texas, some negotiations took place in New York, and any arbitration will take place in New York because the agreements provide for the application of New York law.
The relevant documents and sources of proof are located in both New York and Texas. Winterthur claims that its documents are maintained in New York, while the Bank claims that most of the documentation is located in Texas. See Fries Decl. ¶ 6; Memorandum of Law in Support of Respondents Bank of Montreal and the Williams parties' Joint Motion to Transfer 8. In any event, documents presently in the possession of the Bank and the Williams parties will be delivered to New York because the panel in the pending arbitration has ruled that Gulf Liquids must obtain documents from the Bank and the Williams parties for the pending arbitration. See Sugarman Aff. ¶ 34.
Defendants' argument that related litigation in Texas weighs in favor of a Texas forum is unconvincing. The litigation proceeding in Texas between Gulf Liquids and the project contractors involves the contractual obligations of the respective parties and has little connection with the arbitration terms at issue in this proceeding. The determinations made in that action may be relevant to the underlying arbitration itself; however, they are not relevant to the issues presently before this Court. Therefore, the Court finds that the litigation proceeding in Texas does not weigh in favor of transfer.
As for the means of the parties, all parties to this litigation are substantial companies and there is no indication that any party is financially incapable of litigating this matter in either Texas or New York. Cf. 800-Flowers, 860 F. Supp. at 135 ("Where a disparity exists between the means of the parties . . . the court may consider the relative means of the parties in determining where a case should proceed.")
Plaintiff's Choice of Forum
This Court accords little weight to Plaintiff's choice of forum because the Bank and the Williams parties filed their declaratory judgment actions in Texas and Oklahoma courts prior to Winterthur's action in this Court. See 800-Flowers, 860 F. Supp. at 135. As the original plaintiff, the Bank's choice of forum weighs in favor of transfer with respect to this factor. See id. The weight of the Bank's choice of forum is mitigated, however, by the fact that there was a minimal time difference between the filing of the two competing actions, and neither litigation has made substantial progress. See Cummings Lockwood, 2001 WL 789313 at *8. The parties filed their actions only five days apart, and neither the Texas nor Oklahoma actions have proceeded beyond the initial motions to dismiss, transfer or stay filed by Winterthur.
Forum's Familiarity with the Governing Law
Arbitration clauses in all of the agreements provide for the application of New York law, which weighs in favor of a New York forum.See Cummings Lockwood, 2001 WL 789313 at *7. Although the Bank and the Williams parties argue that they are not bound by the two advancement of funds agreements and are therefore not bound by the New York choice of law clause, they do not dispute that they are parties to the insurance policies, which also provide for the application of New York law.
Convenience of the Parties and Interests of Justice
The remaining factors — the convenience of the parties, trial efficiency and the interests of justice — weigh against transferring this case to Texas. As the Second Circuit has noted, transferring an action is "usually against the interests of justice when a petition to compel arbitration is brought in the same forum in which the parties have agreed to arbitrate." Maria Victoria Naviera, S.A. v. Cementos, S.A., 759 F.2d 1027, 1032 (2d Cir. 1985). Here, Winterthur seeks to compel arbitration in New York, the forum in which the parties have agreed to arbitrate. As stated above, the Bank and the Williams parties argue that they are not subject to arbitration under Winterthur's advance funds agreements nor the New York choice of law clauses in those agreements because they were not parties to those contracts. Neither the Bank nor the Williams parties dispute, however, that they are subject to arbitral jurisdiction in New York with respect to the insurance policies. Because Defendants have agreed to arbitrate in New York, they are deemed to have agreed that New York is a convenient forum not only for arbitration, but also for enforcement of the arbitration agreement, including a trial on the scope of that agreement. See Maria Victoria Naviera, 759 F.2d at 1032. Having so contractually agreed, they cannot now claim that New York is an inconvenient forum. Moreover, if this case were transferred to Texas, the parties would have to return to New York to proceed with the arbitration.
The Court also notes that the Bank and the Williams parties filed their declaratory judgment actions shortly after their receipt of Winterthur's "Demands for Arbitration." While such timing suggests that the Bank and the Williams parties may have filed their declaratory judgment actions in anticipation of the present action, the Court need not reach this issue because it finds that the balance of conveniences weighs against transfer regardless of whether the declaratory judgment actions were peremptorily filed.
For the reasons stated above, Defendants' motion to transfer this case to the Southern District of Texas is denied.