Milmar Food Grp. II, LLC v. Applied Underwriters, Inc.

29 Neb.App. 714

958 N.W.2d 920

MILMAR FOOD GROUP II, LLC, et al., appellees,

v.APPLIED UNDERWRITERS, INC., et al., appellants.

No. A-20-042.

Court of Appeals of Nebraska.

Filed April 6, 2021.

Jeffrey A. Silver, Omaha, for appellants.

Kristopher J. Covi, of McGrath, North, Mullin & Kratz, P.C., L.L.O., Omaha, for appellees.

Bishop, Arterburn, and Welch, Judges.

Bishop, Judge.

INTRODUCTION

Milmar Food Group II, LLC; Milmar Food Group, LLC; and Milmar LLC (collectively Milmar) filed an action in the district court for Douglas County against Applied Underwriters, Inc.; Applied Underwriters Captive Risk Assurance Company, Inc.; Applied Risk Services, Inc.; Applied Risk Services of New York, Inc.; North American Casualty Company; Continental Indemnity Company; and California Insurance Company (collectively Applied), alleging nine claims based on a workers’ compensation reinsurance participation agreement (RPA) that Milmar asserts violated New York insurance law. The Douglas County District Court, sua sponte, dismissed Milmar's action without prejudice, citing the doctrine of forum non conveniens. We reverse, and remand with directions to stay the present action pending Milmar's attempt to refile its action in New York.

BACKGROUND

NEW YORK LAWSUIT

Milmar initially filed a lawsuit against Applied in New York. See Milmar Food Group II, LLC v. Applied Underwriters, Inc. , 61 Misc. 3d 812, 85 N.Y.S.3d 347 (2018). As stated in the New York court's opinion:

[P]laintiffs (collectively, Milmar) are affiliated New York companies, engaged in the production and distribution of food products, which are required by New York law to provide workers’ compensation insurance for their employees. Defendants provide products and services in connection with workers’ compensation insurance coverage. Beginning in 2013, Milmar was covered under a workers’ compensation program (the EquityComp Program) created, patented and implemented by defendants.

There are essentially three components to this Program:

1. Standard workers’ compensation insurance policies issued to Milmar by defendants Continental Indemnity Company (Continental) and California Insurance Company (California), with rates and forms approved by New York's Department of Financial Services or its predecessor, the New York Insurance Department;

2. A reinsurance agreement (the Reinsurance Treaty) between defendant Applied Underwriters Captive Risk Assurance Company, Inc. (AUCRA) and affiliates of defendant Applied Underwriters, Inc. (AU), including Continental and California; and

3. A Reinsurance Participation Agreement (RPA) between AUCRA and Milmar.

Milmar commenced this action, complaining that the RPA is illegal and fraudulent, and seeking, inter alia, a declaratory judgment that the RPA is void and unenforceable under the New York Insurance Law, equitable rescission of the RPA and money damages for sums paid under the RPA in excess of premiums due under the Continental and California insurance policies.

Defendants move, inter alia, (1) to dismiss Milmar's claims against AUCRA on the ground that the RPA designates the courts of Nebraska as the exclusive forum for resolving "any matter concerning this Agreement that is not subject to the dispute resolution provisions of Paragraph 13 hereof," and (2) to dismiss Milmar's claims against all remaining defendants on the ground that AUCRA is a necessary party who cannot be joined in this New York action.

Milmar Food Group II, LLC v. Applied Underwriters, Inc. , 61 Misc. 3d at 815-16, 85 N.Y.S.3d at 350-51 (emphasis in original).

The New York court ultimately determined that the RPA's Nebraska forum selection clause was enforceable. It also determined that the forum selection clause should not be set aside. The court stated:

Milmar has not shown that trial in Nebraska would be so gravely difficult that it would, for all practical purposes, be deprived of its day in court. Applying a forum non conveniens analysis in accord with what it takes to be Nebraska law, Milmar claims only that Nebraska is not a reasonably convenient place for the trial of this action. Under New York law, however, "where a party to a contract has agreed to submit to the jurisdiction of a court, that party is precluded from attacking the court's jurisdiction on forum non conveniens grounds." ( Honeywell Intl. Inc. v ARC Energy Servs., Inc. , [152 A.D.3d 444, 55 N.Y.S.3d 658, 658 (N.Y. App. Div. 2017) ]; Sterling Natl. Bank v. Eastern Shipping Worldwide, Inc. , [35 A.D.3d 222, 223, 826 N.Y.S.2d 235, 238 (N.Y. App. Div. 2006) ]).

In view of the foregoing, Milmar has failed to carry its heavy burden under New York law of showing that the RPA's Nebraska forum selection clause should be set aside.

Milmar Food Group II, LLC v. Applied Underwriters, Inc. , 61 Misc. 3d 812, 821-22, 85 N.Y.S.3d 347, 355 (2018).

Accordingly, the New York court dismissed Milmar's claims against defendant Applied Underwriters Captive Risk Assurance Company (AUCRA) without prejudice and Milmar was "granted leave to recommence its action against AUCRA in the courts of the State of Nebraska." Id. at 832, 85 N.Y.S.3d at 362.

The New York court further found that AUCRA was a necessary party to all claims asserted by Milmar, and it therefore ordered that Milmar's claims against defendants Applied Underwriters, Applied Risk Services, Applied Risk Services of New York, North American Casualty Company, Continental Indemnity Company, and California Insurance Company were dismissed without prejudice for nonjoinder of defendant AUCRA due to the aforesaid Nebraska forum selection clause. The court noted

in particular that Milmar has an effective remedy in Nebraska because all named defendants except Applied Risk Services of New York, Inc.—a peripheral defendant against whom no specific allegations are made in the complaint—are Nebraska corporations, or have their principal place of business in Nebraska, and are therefore subject to general jurisdiction in the courts of Nebraska.

Id. at 833, 85 N.Y.S.3d at 362.

NEBRASKA LAWSUIT

On March 3, 2019, Milmar filed a complaint against Applied in the district court for Douglas County. Milmar alleged nine claims against Applied based on the RPA, which Milmar asserts violated New York insurance law. Specifically, Milmar's "Demand[s] for Relief" were (1) "Declaratory Judgment That the RPA Is Void and Unenforceable Under New York Insurance Law § 2347," (2) "Declaratory Judgment That the RPA Is Void and Unenforceable Under New York Insurance Law as an Unlawful Reinsurance Agreement," (3) "Violation of New York Insurance Law § 4226 for Misrepresentations By Insurers," (4) "Equitable Rescission of the RPA," (5) "Fraudulent Business Practices Under Gen. Bus[.] Law § 349," (6) "Common Law Fraud," (7) "Negligent and/or Improper Claims Handling," (8) "Violation of the Nebraska Consumer Protection Act," and (9) "Violation of the Nebraska Uniform Deceptive Trade Practices Act." Milmar sought declaratory relief and damages.

On April 29, 2019, Applied filed a motion to dismiss Milmar's complaint pursuant to Neb. Ct. R. Pldg. § 6-1112(b)(6) "for the reason that [Milmar's] Complaint fails to state a claim upon which relief can be granted."

A hearing was held on Applied's motion to dismiss on June 11, 2019; however, a record was not made in connection with that hearing, and we therefore do not have a bill of exceptions from that hearing.

On December 26, 2019, the district court entered its order. The district court, sua sponte, invoked the doctrine of forum non conveniens to dismiss the case without prejudice. The court stated:

Although Nebraska courts have jurisdiction over the parties, resolution of the claims in this case involves analysis of whether the [RPA] is void under New York regulations relating to New York workers’ compensation insurance. Resolution of these issues impacts the availability of this type of [RPA] for workers’ compensation insurance holders in New York. These issues are complex and would be "best administered by the individual state's agencies or courts." ... Additionally, the judicial system's interest in obtaining the most efficient resolution of this controversy lies in having this case tried in the New York courts.... New York courts have greater expertise and interest in the matters involved in this case, including their own workers’ compensation insurance laws and regulations. Additionally, this Court takes judicial notice of the filing of other similar cases in its docket and determines these cases would consume significant judicial resources of the State of Nebraska.

The court found that its analysis of the issue was distinct from that of the New York court which

declined to set aside the forum selection clause, [but] did not analyze the clause under the doctrine of forum non conveniens as codified in [Neb. Rev. Stat.] § 25-538 [(Reissue 2016)]. Rather, the New York court's analysis reached only the issues of whether the Nebraska Choice of Forum Act, constitutional due process, or fraud nullified the forum selection clause.

The district court determined, sua sponte, that "the forum selection clause should be set aside under the doctrine of forum non conveniens and this action should be dismissed without prejudice and [Milmar is] given leave to file in the courts of the State of New York." Accordingly, "the Court does not reach the merits of [Applied's] arguments relating to its 12(b)(6) Motion to Dismiss."

Applied appeals.

ASSIGNMENT OF ERROR

Applied assigns, summarized, that the district court erred when it dismissed the complaint sua sponte on forum non conveniens grounds.

STANDARD OF REVIEW

Whether a suit should be entertained or dismissed under the rule of forum non conveniens depends largely upon the facts of the particular case and rests in the discretion of the trial court. Christian v. Smith , 276 Neb. 867, 759 N.W.2d 447 (2008).

ANALYSIS

The doctrine of forum non conveniens (literally, "an unsuitable court") provides that a state will not exercise jurisdiction...