Gateway Clippers Holdings LLC v. Main St. Am. Prot. Ins. Co.

GATEWAY CLIPPERS HOLDINGS LLC, et al., Plaintiffs, v. MAIN STREET AMERICA PROTECTION INSURANCE COMPANY, Defendant.

No. 4:20 CV 1541 JMB

United States District Court, E.D. Missouri, Eastern Division

September 14, 2021

MEMORANDUM AND ORDER

JOHN M. BODENHAUSEN UNITED STATES MAGISTRATE JUDGE

Currently before the Court is Defendant Main Street America Protection Insurance Company's ("Main Street") Motion to Dismiss under Rules 12(b)(2) and 12(b)(6) or Transfer Venue (ECF No. 20). Plaintiffs Gateway Clippers Holdings LLC Gateway Clippers Holdings LLC II, and Gateway Clippers Holdings LLC III ("Gateway Clippers") filed a Response (ECF No. 29) and Main Street filed a Reply (ECF No 35).

Gateway Clippers seek, through this action, to determine their rights under the Policy was issued by Main Street. Main Street asserts, and Gateway Clippers do not refute, that the Policy was issued in Florida and that the property insured is located in Florida. All matters are pending before the undersigned, with consent of the parties, pursuant to 28 U.S.C. § 636(c). The Court concludes that the pending motion may be resolved on the basis of the existing record. For the reasons outlined below, Main Street's motion to dismiss or, in the alternative, to transfer venue (ECF No 20) will be granted in part and denied without prejudice in part, and the instant cause of action will be transferred to the United States District Court for the Middle District of Florida for further proceedings.

I. Procedural and Factual Background

This matter centers on the COVID-19 pandemic and the loss of business income resulting from government-ordered shutdowns and similar concerns. Gateway Clippers sued Defendants Main Street and American Family Insurance Mutual Holding Company^[1] for business income breach of contract (Count I), breach of implied covenant of good faith and fair dealing applicable to business income (Count II), declaratory and injunctive relief applicable to business income (Count III), extra expense breach of contract (Count IV), breach of implied covenant of good faith and fair dealing applicable to extra expense (Count V), declaratory relief applicable to extra expense coverage (Count VI), civil authority breach of contract (Count VII), breach of implied covenant of good faith and fair dealing applicable to civil authority coverage (Count VIII), and declaratory relief applicable to civil authority coverage (Count IX) due to Defendants' failure to indemnify Gateway Clippers, the policyholders for actual business losses incurred when business operations were involuntarily suspended, interrupted, or curtailed ("business interruption" or "business income" coverage"). Gateway Clippers also seek declaratory and injunctive relief.

Gateway Clippers are Missouri limited liability corporations with a principal place of business in St. Louis, Missouri, where management decisions are made. (Complaint, ECF No. 1 at ¶ 21; ECF No. 29-2, Crow Decl. at ¶ 3) Gateway Clippers own and operate fifty-four^[2] franchised Great Clips hair salons in Florida. (Id. at ¶ 1) The employees at the St. Louis office manage the day-to-day business activities and transactions for Gateway Clippers as well as manage their respective areas for the Florida hair salons. (Crow Decl. at ¶¶ 4-5) All of Gateway Clippers' corporate records are maintained in a St. Louis offices, and all payments made to the Gateway Clippers' Florida hair salons are deposited in a Florida bank and thereafter transferred to a St. Louis corporate banking account. (Id. at ¶¶ 7-8) All of Gateway Clippers' invoices and employees are paid from the corporate office in Missouri. (Id. at ¶ 9) Gateway Clippers conduct their corporate accounting, maintain consolidated financial statements, and receive and recognize their income in Missouri. (Id. at ¶¶ 10-11)

Main Street is incorporated in Florida with its principal place of business in Jacksonville, Florida. (Id. at ¶ 21) Main Street does not have any employees or agents in Missouri, own any property in Missouri, or conduct business in Missouri. (ECF No. 21-1, Brennan Decl. at ¶ 10) Main Street has no offices in Missouri and does not store any insurance documents in Missouri. (Brennan Decl. at ¶¶ 9-10)

This insurance dispute arises out of the state and local orders mandating the closure of fifty-four hair salons Gateway Clippers owned and operated in Florida. (Complaint, ECF No. 1 at ¶¶ 21, 56) Gateway Clippers covered each of its Florida salons with a Main Street business insurance policy that Gateway Clippers purchased using an agent in Florida. (ECF No. 1-1 at ¶ 56; Brennan Decl. at ¶ 4) The policy at issue is Policy No. BPP1387S, effective February 28, 2020, to February 28, 2021 ("the Policy") (Id.) The Policy was issued in Florida, under the authority of Florida's Office of Insurance Regulation, pursuant to Main Street's certificate of authority in Florida. (Brennan Decl. at ¶ 3) A Gateway Clippers' employee made the decision in Missouri to accept the insurance policy with Main Street. (Crow Decl. at ¶ 11)

The Policy provided coverage for loss of business income and extra expenses in the event that business operations were suspended due to "direct physical loss of or damage to" the insured property. (Complaint, ECF No. 1 at ¶ 57) The Policy also covered loss of business income and extra expenses in the event that action by "civil authority," due to physical damage to other property, caused Gateway Clippers not to be able to operate its hair salons. (Id. at ¶¶ 57, 72) Furthermore, the Policy excluded from coverage "loss or damage caused by or resulting from any virus … capable of inducing physical distress, illness or disease." (Id. at ¶ 82) There is no dispute that the Policy was active and that Gateway Clippers had paid all required premiums for the Policy.

In March 2020, "something unexpected happened, a disaster that was the worst health crisis to hit the United States, an indeed the world, in over a century, a worldwide pandemic of a disease called COVID-19." (Id. at ¶ 6) On April 1, the Governor of Florida issued an order to all residents "to stay at home except for essential services. Services provided by hair salons were not deemed essential." (Id. at ¶¶ 8, 47) Likewise, the counties in Florida where Gateway Clippers' hair salons are located issued similar orders. (Id. at ¶¶ 9, 49-52) Based on these orders, Gateway Clippers' employees in Missouri decided to close all fifty-four salons in Florida between March 20 and 22, 2020; and the salons remained closed for nearly two months. (Id. at ¶¶ 10, 53; Crow Decl. at ¶ 13) Even after reopening, a decision made by Gateway Clippers' employees, the salons serviced fewer customers due to the need to socially distance. (Complaint at ¶¶ 10, 54; Crow Decl. at ¶ 13) Gateway Clippers' Missouri employees ordered masks, plexiglass dividers and capes, and Gateway Clippers' Florida employees ordered additional cleaning supplies. (Crow Decl. at ¶ 14)

On September 24, 2020, Gateway Clippers submitted a claim for loss of business income and extra expenses incurred as a result of the pandemic-related closures of their Florida salons. (Id. at ¶¶ 12, 14-17, 105; ECF No. 1-2) Gateway Clippers submitted the claim by email to a Main Street agent. (Id.) In a certified Reservation of Rights letter, dated October 1, 2020, Main Street indicated that it was investigating Gateway Clippers' claim, "including assessing whether your claim is covered under the Policy." (ECF No. 1-6) Main Street attached a questionnaire, requesting additional information to assist with the claim investigation. (Id.) Instead of completing the questionnaire, Gateway Clippers' counsel objected to responding to the questionnaire. (ECF No. 1-6) In a letter dated October 6, 2020, Main Street denied coverage for the losses caused by the COVID-19 pandemic, including loss of business income and extra expense. (ECF No. 1 at ¶¶ 15, 17; ECF No. 1-7)

II. Summary of Parties' Arguments

Main Street argues that this Court lacks personal jurisdiction over it. (ECF No. 21) In the alternative, Main Street argues that the Complaint should be dismissed for failure to state a claim under Rule 12(b)(6), or transferred to the Middle District of Florida pursuant to 28 U.S.C. § 1404(a).

In opposition, Gateway Clippers argue that Main Street is subject to personal jurisdiction in Missouri because Gateway Clippers accepted the insurance contract in Missouri, and Main Street insured a person and the risk of loss of business income in Missouri. (ECF No. 29-1) In addition, Gateway Clippers assert that they do not run their Florida operations from Florida but in Missouri, by employees in Missouri, who made significant decisions related to COVID-19, including the decision to close the hair salons and then reopen the hair salons with protective equipment.

III. Legal Standards

In a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), "the plaintiff bears the burden to show that jurisdiction exists." Fastpath, Inc. v. Arbela Techs. Corp., 760 F.3d 816, 820 (8th Cir. 2014). "To successfully survive a motion to dismiss challenging personal jurisdiction, a plaintiff must make a prima facie showing of personal jurisdiction over the challenging defendant." Id. To make a prima facie showing plaintiff must plead "sufficient facts to support a reasonable inference that the defendant[] can be subjected to jurisdiction within the state." K-V Pharm. Co. v. J. Uriach & CIA, S.A., 648 F.3d 588, 591-92 (8th Cir. 2011) (alteration in the original) (internal quotation marks omitted). "Although the evidentiary showing required at the prima facie stage in minimal, … the showing must be tested, not by the pleadings alone, but by affidavits and exhibits supporting or opposing the...