Grant v. State Nat'l Ins. Co.

586 F.Supp.3d 503

Kenneth GRANT and Dockside and Beyond, LLC, Plaintiffs,

v.STATE NATIONAL INSURANCE COMPANY, INC., Defendant.

C/A No. 4:21-cv-01833-SAL

United States District Court, D. South Carolina, Florence Division.

Signed February 18, 2022

Albert Glen Bilbrey, Jr., John Hughes Cooper PC, Mt. Pleasant, SC; John Hughes Cooper and John Townsend Cooper, Cooper and Bilbrey PC, Mt. Pleasant, SC; William Stuart Duncan and Raymond Carl Fischer, Duncan Crosby & Maring LLC, Georgetown, SC, for Plaintiff.

Julius H Hines, Hines and Gilsenan LLC, North Charleston, SC, and James E. Mercante, Rubin, Fiorella, Friedman & Mercante, LLP, New York, NY, for Defendant.

OPINION & ORDER

Sherri A. Lydon, United States District Judge

This matter is before the court on Defendant State National Insurance Company, Inc.’s ("Defendant") Motion to Dismiss or, in the Alternative, Transfer Venue (the "Motion"). [ECF No. 4.] For the reasons set forth herein, the court denies the Motion to the extent it seeks dismissal of the case but grants the Motion to the extent it requests a transfer of venue.

BACKGROUND

This action is a marine insurance dispute. Plaintiffs Kenneth Grant ("Grant") and Dockside and Beyond, LLC ("Dockside") (together "Plaintiffs") seek damages from Defendant for breach of contract and bad faith related to Defendants’ alleged failure to timely pay the claim. [ECF No. 1-1, Compl.] By way of background, Plaintiffs allege that sometime between late May and early June 2019, a 2005 60’ Carver Yachts 56 Voyager named M/Y BROWN EYED GIRL (the "Vessel") sustained damage as the result of "lightning or some other electrical event." Id. at ¶¶ 7–9. The Vessel was insured by Defendant pursuant to a Tradewinds Yacht Insurance Policy, TWD00000921 (the "Policy"). Id. at ¶ 6; [ECF No. 4-1.] Following discovery of the damage, Plaintiffs filed a claim for damages, and Defendant assigned a claim number. Compl. at ¶¶ 10–11. Plaintiffs claim the Vessel was inspected and hauled out of the water before Defendant approved an estimate and a third-party began repairs. Id. at ¶¶ 12–16. Plaintiffs further submit that, despite the alleged completion of the repairs, problems persisted. Id. at ¶¶ 17–45. According to Plaintiffs, "the Vessel has not been repaired, the claim has not been paid, and the claim has not been denied." Id. at ¶ 46. Thus, Plaintiffs proceed with filing the present action.

On June 16, 2021, Defendant removed the case to this court on the basis of diversity jurisdiction. [ECF No. 1.] And on June 23, 2021, Defendant filed the Motion that is the subject of this order. [ECF No. 4.] Plaintiffs filed a response in opposition on July 13, 2021, and Defendant submitted a reply, rendering this matter ripe for resolution by the court. [ECF Nos. 8, 16.]

DISCUSSION

Defendant's Motion seeks alternative relief. First, Defendant argues Plaintiffs’ complaint must be dismissed due to their alleged failure to comply with a condition precedent in the policy, Grant's alleged lack of standing, and their alleged failure to join a "required party." [ECF No. 4 at 3–5.] Second, if the court is not inclined to the dismiss the case, Defendant argues it must be transferred to the Southern District of New York pursuant to the Policy's forum selection clause. Id. at 6–8. Plaintiffs oppose dismissal and transfer of the matter. [ECF No. 8.] The court will address the dismissal arguments before turning to the forum selection clause.

I. Dismissal Pursuant to Rules 12(b)(6) and (7).

The court easily disposes of Defendant's three dismissal arguments below.

A. Condition Precedent.

Defendant's condition precedent argument relies on two Policy provisions—§ 11(a)(2) and § 7(b). General Conditions § 11(a)(2) provides that "[n]o person ... has a right under this policy ... to sue us on this policy unless all of its provisions have been fully complied with." [ECF No. 4-1 at 9.]¹ Defendant contends that § 7(b)’s representation that the "parties agree to submit to the exclusive jurisdiction of the United States District Court for the Southern District of New York" is a § 11(a)(2) "provision" that must be "fully complied with" before Plaintiffs have the "right under this policy ... to sue[.]" Id. Because Plaintiffs filed suit in South Carolina state court, Defendant argues they "failed to comply with an express condition of the Policy," rendering the complaint insufficient to state a claim and subject to Rule 12(b)(6) dismissal. [ECF No. 4 at 5.] The argument, while perhaps creative, is unavailing.

At the outset, the court notes that Defendant fails to point to any cases concluding that a provision similar to § 7(b) qualifies as a condition precedent to suit under an analogous "right to sue" provision. The absence of applicable case law is telling. And the reason for the absence is readily apparent when you consider the nature of § 7(b).

Section 7(b) is a forum selection clause. It "implicate[s] the appropriate venue of a court." Albemarle Corp. v. AstraZeneca UK Ltd. , 628 F.3d 643, 650 (4th Cir. 2010) (emphasis added). When venue is "improper," a party may move to dismiss an action pursuant to Rule 12(b)(3), FRCP. Fed. R. Civ. P. 12(b)(3) (dismissal for "improper venue"); see also 28 U.S.C. § 1406(a). But as the United States Supreme Court noted, "venue is proper so long as the requirements of § 1391(b) are met, irrespective of any forum-selection clause[.]" Atl. Marine Const. Co., Inc. v. U.S. Dist. Ct. for W. Dist. of Tx. , 571 U.S. 49, 57, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013). Stated differently, a "forum-selection clause does not render venue in a court ‘wrong’ or ‘improper’ within the meaning of § 1406(a) or Rule 12(b)(3)." Id. at 59, 134 S.Ct. 568 (emphasis added). Thus, dismissal pursuant to a forum selection clause is not appropriate. Instead, the "mechanism for enforcement of forum-selection clauses that point to a particular federal district" is transfer pursuant to 28 U.S.C. § 1404(a).² Id.

Interestingly, if the court adopts Defendant's condition precedent argument and dismisses the case, Defendant will have made an end-run around the transfer-over-dismissal rule for forum selection clauses. On the most basic level, the court would be concluding that because Plaintiffs failed to file in the venue outlined in the forum selection clause, dismissal is proper. Such a result has been specifically admonished by the Supreme Court: "If a forum-selection clause rendered venue in all other federal courts ‘wrong,’ a defendant could always obtain automatic dismissal or transfer under § 1406(a) and would not have any reason to resort to § 1404(a)." Atlantic Marine , 571 U.S. at 59, 134 S.Ct. 568. This court declines Defendant's request to tiptoe around this established precedent and, essentially, allow dismissal when transfer is the appropriate remedy.

B. Grant's Standing to Sue.

Defendant next argues that Grant must be dismissed because he is neither a named insured nor a loss payee on the Policy. [ECF No. 4 at 5.] Plaintiffs counter that Grant has standing as (1) the owner of the Vessel and (2) pursuant to Definitions § 11(a)’s definition of "Insured person" because he was the operator of the Vessel. [ECF No. 8 at 14–17 (pointing to § 11(a)(2)).] While the court disagrees with Plaintiffs’ reliance on the definition of "Insured person," it agrees that dismissal is not appropriate at this early stage in the litigation.

Briefly, and as noted by Defendant in reply, Plaintiffs’ reliance on "Insured person" meaning "any person operating your covered yacht with your prior permission" appears misplaced. [ECF No. 4-1 at 5 (bold omitted).] Through this action, Plaintiffs are seeking coverage for damage to the Vessel pursuant to Coverage A – Yacht Equipment, not indemnity pursuant to Coverage B – Yacht Protection and Indemnity. Coverage A generally extends and refers to "you" and "yours," both terms defined by the Policy as the named insured. Id. at 8, Definitions § 36. There is no question that the named insured on the Policy is "Dockside And Beyond LLC." Id. at 1, Declarations Page; see also 3, Disappearing Deductible Endorsement; 6, Definitions § 18 (defining named insured as "the person or legal entity shown on declarations page" and their spouse or domestic partner). In contrast, Coverage B, which is not at issue here, refers to and references "insured persons." See id. at 16–18. The court, therefore, is not persuaded that Grant is afforded standing by way of his status as an "Insured person" for purposes of this lawsuit.

However, given that Grant is the sole member of the LLC-named insured and claims to be a part owner of the Vessel, the court is not willing to say that Defendant has met its burden to prove lack of standing at the Rule 12 dismissal stage. That is not to say that Grant has standing to pursue the claims. This court is not making a ruling either way. It simply was not provided sufficient law or analysis to rule in Defendant's favor on the issue.

C. Rule 19, FRCP Required Party.

Defendant's final dismissal argument is pursuant to Rules 19 and 12(b)(7), FRCP. Defendant argues that Plaintiffs failed to join the loss payee, Prince William Marine, Sales, Inc. ("Prince William"), as a party to the lawsuit. [ECF No. 4 at 5.] According to Defendant, Prince William is a required party pursuant to Rule 19(a)(1)(B)(i), FRCP and its absence renders the case subject to dismissal pursuant to Rule 12(b)(7), FRCP. Id. Plaintiffs argue in opposition that Defendant fails to present any evidence that Prince Williams has claimed an interest in the subject of the action as required by Rule 19, and that Grant's obligations to Prince William are separate and apart from this litigation and incongruent results are "unlikely." [ECF No. 8 at 21–22.] They further argue that even if Prince William is a required party, joinder—as opposed to dismissal—is the proper remedy. Id. The court agrees that Defendant has not met its burden pursuant to Rule 19(a)(1)(B), FRCP.

" Rule 12(b)(7) of the Federal Rules of...