Opinion
Civil Action No: 00-3134, Section: "J"(1)
May 25, 2001
ORDER AND REASONS
Before the Court is defendants' Motion to Dismiss, or, Alternatively, to Transfer (Rec. Doc. 5). Plaintiff opposes the motion. The Court heard oral argument on the motion on Wednesday, May 25, 2001, after which it took the motion under advisement. Having considered the record, the memoranda and arguments of the parties, and applicable law, the Court finds that this matter should be transferred to the Eastern District of New Jersey, for the reasons which follow.
BACKGROUND
The casualty at the base of the claim occurred after plaintiff McDonough Marine Services ("McDonough") bareboat chartered two of its barges, Nos. 3564 and 3565, to ECDC Environmental, L.C. ("ECDC"), a/k/a SK Services East ("SKSE"). ECDC/SKSE used the barges for work in connection with a dredging contract with the United States Army Corps of Engineers ("USACE"), near the Arthur Kill Reach Maintenance Project in New Jersey, which it sub-contracted to Dutra Construction Company ("Dutra") While doing this work, the barges allegedly sustained severe damage.
A Louisiana company with its principal place of business in the Eastern District of Louisiana.
Apparently, Dutra is a California company, subject to at least specific personal jurisdiction in New York and New Jersey by virtue of its contract there, but not subject to personal jurisdiction in Louisiana.
Pursuant to the charter party, ECDC had obtained from defendant Royal Insurance ("Royal") $380,000 in hull insurance per barge with a PI limit of $10,000,000, and named McDonough as an additional assured. McDonough made a claim under the policy for total constructive loss of the barges in the amount of $850,000, plus salvage, sue and labor, and other costs. Royal has denied the claims and refused to pay under the policy.
Royal is incorporated in Illinois and has its principal place of business is North Carolina. It is authorized to issue insurance in Louisiana, lists a telephone number in the local phone book, and has sued and been sued in Louisiana.
In this matter, plaintiff has sued defendants for a declaratory judgment finding coverage under the hull policy underwritten by Royal, and that the damage to their barges renders them a constructive total loss. Plaintiff also seeks pre-judgment interest, applicable damages, fines and penalties under La. R.S. §§ 22:658 1220, attorneys' fees and costs. The action is specifically brought under Rule 9(h), and jurisdiction is premised on 28 U.S.C. 1333 and General Maritime Law.
Arguments of the Parties
Defendants have filed the instant Motion to Dismiss or Transfer for Forum Non Conveniens (Rec. Doc. 5), arguing that the action should be dismissed or transferred because all of the events relative to the claim (e.g., dredge operations, bareboat charter contract negotiations, negotiations, payment, issuance of the insurance policy, claims investigation, and survey) occurred in the Arthur Kill area of New York/New Jersey, and that Royal's marine insurance division is located in New York and all Royal employees familiar with the facts are based there, that plaintiff was not operating the barge at the time of the damage, and that there are no witnesses or evidence in Louisiana. As well, defendant points out that not all of the parties involved in the dredging operation are amenable to suit in Louisiana, and that some of these are already parties to litigation pending before the United States District Court for the Eastern District of New Jersey, in the action styled USA for the use and benefit of Dutra Group, etc. v. ECDC Environmental. L.C., Civil Action number 99-1188, in which McDonough has intervened as a third-party plaintiff. In this vein, defendants also point out that this Court's lack of personal jurisdiction over Dutra eviscerates the defendants' right under Federal Rule 14(c) to implead Dutra, an entity which defendants claim is liable for at least a portion of any amounts owed to plaintiff, if plaintiff prevails in its coverage claim. Defendant also argues that judicial efficiency is best served by consolidating the suits in one forum, since disposition of both will require proof regarding the same damages to the same barges (since plaintiff has sought declaratory judgment that the barge is totaled).
In contrast, plaintiff argues that some of its most critical witnesses are located in Louisiana, because it must show that the barges are a constructive total loss, which will be done by presenting witness testimony as to the cost of repair, and the best bids were provided by Louisiana-based contractors. With respect to the suggestion that the instant case could be transferred and consolidated with the pending New Jersey action, McDonough argues that to do so would be inappropriate, because the bases of its claim against Royal and its claims against ECDC and Dutra differ, since its claims against Royal are for coverage, while those against ECDC are brought under the charter party and those against Dutra sound in tort. McDonough further argues that transfer and consolidation would require it to participate in discovery and trial in which the majority of the evidence and argument would be unrelated to its insurance coverage claim against Royal, and that the New Jersey action has become so complex that delays (which McDonough should not have to suffer to prosecute its coverage claims) are inevitable. With respect to Royal's argument that its potential claim against Dutra requires Dutra's joinder in this suit (and that is not exactly what Royal has argued), plaintiff claims that Dutra's joinder is not required because the coverage issue can be adjudicated without reference to whether Royal can recover from another party. Finally, despite extensive briefing and McDonough's filing of an opposition and two supplemental oppositions, at oral argument, McDonough raised for the first time an argument that impleader of Dutra would be inappropriate because its main claim against Royal and Royal's potential claim against Dutra were not sufficiently related, one being a claim on a contract of insurance and the other a negligence claim, citing the Court to Standard Fire Ins. v. Boyce-Harvey Machinery, Inc., 202 F.2d 871 (5th Cir. 1953). Plaintiff argues: "After Royal pays McDonough, it can pursue subrogation against Dutra or others when and where it sees fit."
The New Jersey case was filed on behalf of Dutra alleging breach of contract by ECDC, based on the claim that ECDC/SKSE had failed to make payments to Dutra for work under the USACE contract. ECDC counter-claimed against Dutra, alleging negligence. McDonough and another barge line (Hughes) intervened in the New Jersey action as third-party plaintiffs, also alleging that Dutra was negligent. Subsequently, a company called Safety-Kleen, the successor to ECDC/SKSE, which had filed for bankruptcy in Delaware, filed an adversary proceeding in the Delaware bankruptcy court seeking, inter alia, a declaratory judgment that the claims of McDonough and Hughes, raised in the New Jersey intervention, are the property of the debtor's estate.
DISCUSSION
Change of venue in admiralty cases, like ordinary civil cases, is governed by § 1404(a). See Continental Grain Co. v. The F.B.L. 585, 364 U.S. 19, 26-27, 80 S.Ct. 1470, 1475 (1960). Under 1404(a), "For the convenience of parties, witnesses and in the interest of justice," courts may transfer an action "to any other district or division where it might have been brought." Section 1404(a) was enacted in 1948 and is derived from the old common law doctrine of forum non conveniens however, it is a revision, rather than a strict codification, of forum non conveniens. Norwood v. Kirkpatrick, 349 U.S. 29, 75 S.Ct. 544 (1955). Where common law forum non conveniens required dismissal of an action, and did not permit transfer, 1404(a) authorizes transfer to another court, on a lesser showing than that required for application offorum non conveniens. Id. Following the 1948 enactment of § 1404(a), it has replaced forum non conveniens unless the transfer sought is to another country, a state court, or when there is no alternative federal forum. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 253, 102 S.Ct. 252, 264 (1981); see also 5A Wright Miller, Federal Practice Procedure, § 1352 at 271 (West, 1990).
A district where a lawsuit "might have been brought" is one in which the court would have had subject matter jurisdiction, the defendants would have been subject to personal jurisdiction, and venue would have been proper. Hoffman v. Blaski, 363 U.S. 335, 80 S.Ct. 1084, 1089-190 (1960).
Nevertheless, pre-1948 case law discussing the application of forum non conveniens is instructive in outlining the factors to be considered by courts when ruling on a 1404(a) motion to transfer. 5A Wright Miller, § 1352 at 269, citing Norwood v. Kirkpatrick, 75 S.Ct. at 546. In the watershed case discussing the factors to be considered in ruling on forum non conveniens, the Supreme Court identified a set of "private interest" and "public interest" factors. The private interest factors include: [1] the "relative ease of access to sources of proof; [2] availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; (3] possibility of view of premises, if view would be appropriate to the action; and [4] all other practical problems that make trial of a case easy, expeditious and inexpensive."Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 843 (1947). The public interest factors to be considered are: [1] the administrative difficulties flowing from court congestion; [2) the "local interest in having localized controversies decided at home"; [3] the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; [4] the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and [5] the unfairness of burdening citizens in an unrelated forum with jury duty. Id., at 67 S.Ct. 843. As an additional public interest factor, courts consider judicial economy — that is, whether a transfer would avoid duplicative litigation and prevent waste of time and money.Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 809 (1964) "But unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." Gilbert, 67 S.Ct. at 843.
The burden of proof in a motion to transfer is on the moving party, who must show that "the convenience of parties and witnesses" and "interest of justice" require a transfer to another district. In re Air Crash Disaster Near New Orleans, 821 F.2d 1147 (5th Cir. 1987). As proof, the movant must provide affidavits containing admissible evidence (i.e., non-hearsay). Conclusory allegations are not sufficient — the moving party must identify the key witnesses to be called and present a generalized statement of what their testimony would include. Al Copeland Enterprises, Inc. v. Mowen, 1992 WL 30071 (E.D. La., Oct. 6, 1992); see also, Heller Financial, Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1293 (7th Cir. 1989). In addition, the movant must show that trial in the district where the suit was originally filed will result in a balance of inconvenience to the movant — not that a transfer would merely shift the inconvenience to the non-moving party. Lewis v. Magnolia Marine Transport, 1998 WL 19626, *2 (E.D. La., Jan. 16, 1998).
Also implicated in this case is Federal Rule 14(c). Rule 14(c) provides:
Admiralty and Maritime Claims. When a plaintiff asserts an admiralty or maritime claim within the meaning of Rule 9(h), the defendant or claimant, as a third-party plaintiff, may bring in a third-party defendant who may be wholly or partly liable, either to the plaintiff or to the third-party plaintiff, by way of remedy over, contribution, or otherwise on account of the same transaction, occurrence, or series of transactions or occurrences. In such a case the third-party plaintiff may also demand judgment against the third-party defendant in favor of the plaintiff, in which event the third-party defendant shall make any defenses to the claim of the plaintiff as well as to that of the third-party plaintiff in the manner provided in Rule 12 and the action shall proceed as if the plaintiff had commenced it against the third-party defendant as well as the third-party plaintiff.
In the first case to employ the admiralty impleader rule, the court granted the impleader motion emphasizing that "the right of a plaintiff to control the shape of his action and to be free from multiple appeals must be balanced against the possible detriment to defendant that might result from not being permitted to implead someone who is liable for a portion of plaintiff's claim." 6 Wright, Miller Kane, § 1465 at 481 (West, 1990), citing The Hudson, 15 F. 162 (D.C.N.Y. 1883).
[T]he factors noted by the court that might make impleader particularly desirable in admiralty actions were: the possibility of inconsistent results in separate actions, the alternative of conducting two actions involving substantially the same evidence, and the possibility of the third-party disappearing if jurisdiction and the necessary physical control over him were not immediately established.Id.
The requirement for Rule 14(c) impleader, that the liability of the third-party defendant must be "on account of the same transaction, occurrence, or series of transactions or occurrences," is a modernization of old Admiralty Rule 56, which required that the third-party claim "grow out of the same matter." 6 Wright, Miller Kane, § 1465 at 487 (West, 1990). It has been interpreted flexibly, though the third-party action must be cognizable in admiralty. Id. at 488. The decision whether to permit impleader lies within the discretion of the trial judge, to be made as he or she sees a case developing. See, e.g.,Cargill, Inc. v. Compacrnie General Transatlantipue, 235 F.2d 240, 242 (5th Cir. 1956). In Cargill, the Fifth Circuit remarked that the holding in The Hudson, which advocates a liberal approach to the allowance of impleader,
takes proper account of the legal capacity of United States District Judges who, in their daily grappling with today's complex litigation, successfully meet the challenge of assimilation of intricate, voluminous evidence in endless fields of law. To such a Judge, mixing a tort with a contract case, separating evidence for its application to one but not the other phase of an action, applying one basis of liability or measure of damages to one but a different standard to another, is hardly the sort of problem we should hold exceeds his competence if he determines to undertake it.Id. at 243.
Application of Law to Pacts of Case
As a threshold issue, the Court finds that to the extent defendants' motion seeks dismissal based on forum non conveniens, it should be denied, because the alternative forum is not in a foreign country or a state court. Piper Aircraft Co. v. Revno, 454 U.S. 235, 253, 102 S.Ct. 252, 264.
With respect to application of the factors for 1404(a) transfer, many of the factors are irrelevant in the case before he Court. Access to sources of proof (except for the witnesses themselves) has not been placed in issue, nor does there appear to be a need for the Court to view the premises (the barges), and surveys have already been done. There does not appear to be any particular "local interest" to this dispute or conflict of laws problems, and, because this is non-jury matter, there is no question of unduly imposing on jurors.
Of the remaining private factors, the parties' memoranda emphasize witness convenience — that is, the availability of compulsory process for attendance of unwilling witnesses, and the cost of obtaining attendance of willing witnesses — and the inability to implead Dutra under 14(c). The public factors emphasized are relative court congestion and judicial economy.
Defendant has listed the 14(c) problem in its analysis of the private interest factors, apparently considering it as falling under the factor described as "practical problems that make trial of a case easy, expeditious, and inexpensive," because it increases defendant's cost of litigation by requiring it to file two separate lawsuits. For this same reason, it may also be characterized as a public interest factor, because Federal Rule 14(c) serves to eliminate costly duplicative actions which undermine judicial economy. Thus, the Court considers this factor in its discussion of the public interest factor of judicial economy.
1. Private interest factors — witness convenience and accessibility
With respect to the witness convenience factor, McDonough claims it will be calling representatives of Louisiana-based contractors to testify to the cost of repairs to the barges, to establish that they were a total loss. Royal claims it will call New York-based marine surveyors to testify to the extent and cause of the alleged loss. (McDonough argues that the testimony of these witnesses, on-hire and damage surveyors, is not vital to the determination of coverage under the policy.) Royal also claims that "all of the witnesses with relevant knowledge of the events giving rise to plaintiff's claim are located in the New York area. None are located in Louisiana." Memo in Supp., 7. Royal further argues that these witnesses are not within the Court's subpoena power, and that even if they willingly travel to Louisiana for trial, it will cost more.
While McDonough acknowledges that it also received bids from East Coast contractors, they were $400,000 to $1,000,000 higher than the La. bids, and because of its duty to mitigate damages, McDonough must use the Louisiana estimates.
On this factor, the arguments of the parties seem to amount to a draw. It is probably reasonable that both should introduce survey reports; but of course, this may be done by report and/or deposition, so it doesn't necessarily require incurring travel costs. While McDonough maintains that its claim is purely one for coverage, in fact, it seeks money damages which place certain facts in issue that will require testimony of Royal's surveyors. Additionally, there is some case law that says the witness convenience factor applies only to fact witnesses, and the convenience of expert witnesses is not to be considered as part of the analysis. See, e.g., Promuto v. Waste Management. Inc., 44 F. Supp.2d 628, 639-40 (S.D.N.Y. 1999). With respect to Royal's claim that all of the necessary witnesses are in New York, first of all, that claim is too conclusory to provide a basis for the relief it requests; and second, to the extent that the unspecified witnesses are Royal employees, they are subject to the subpoena power of the Court as employees of a party. Finally, assuming the parties intend to call roughly equal numbers of Louisiana and New York witnesses, 50% of them would have to travel no matter which venue is chosen, and transferring the case to New Jersey would serve only to shift the cost from defendant to plaintiff, which is impermissible. Lewis v. Magnolia Marine Transport, 1998 WL 19626, *2 (E.D. La., Jan. 16, 1998.)
Accordingly, considering only the private interest factors relevant to this case, they appear to fall out evenly on each side. Given the presumption in favor of plaintiff's choice of forum, and the fact that the burden of proving the appropriateness of the transfer lies with defendant, a weighing of just the private interest factors should result in denying the defendants' motion to transfer.
2. Public interest factors — court congestion and judicial economy
With respect to the question of court congestion, the instant matter has been set for trial on December 10, 2001. The New Jersey action is set for trial on December 21, 2001. While McDonough argues that consolidation of this case with the New Jersey case would result in substantial delays (implying a continuance of the New Jersey trial date would be required), and that the complexity of the New Jersey action suggests that trial will not go forward on December 21, 2001, there is no hard evidence of that fact. Accordingly, absent more evidence that McDonough would suffer serious delays due to a transfer, this appears to be a non-issue.
Judicial economy presents a harder question. McDonough steadfastly maintains that its claim is purely one for coverage, and thus McDonough should not have to get involved with the elaborate discovery, etc. attendant to the full-blown negligence trial against Dutra, the entity which it charges is partially responsible for the damages it suffered. While this argument has some appeal, and in fact, a pure coverage claim could likely be resolved on the papers with no one being inconvenienced by travel, McDonough has placed damages in issue so that some of the proof required would likely overlap with the proof adduced in the negligence proceeding against Dutra. Moreover, there is no reason why McDonough should have to participate in every single deposition, involving witnesses that do not affect its coverage case. Further, the fact that McDonough has intervened as a plaintiff in the New Jersey negligence action means that it is probably already incurring expenses associated with that litigation, notwithstanding the fact that apparently the attorney for Hughes (another party involved in the New Jersey litigation with interests aligned with McDonough's) is undertaking a portion of representing the McDonough interests in that litigation.
Royal also makes a credible judicial economy argument based on Federal Rule 14(c), which permits defendants in a 9(h) admiralty claim to implead third parties which may be liable to the plaintiff of the third-party plaintiff on account of the same transaction or occurrence. Royal argues that Dutra is a viable third-party defendant, which may have caused some or all of the damages for which McDonough seeks coverage. However, because this Court does not have personal jurisdiction over Dutra, in the absence of a transfer, Royal will be denied its right to implead Dutra.
As discussed above, the Hudson court set forth three factors which if present, suggest that impleader is particularly desirable in an admiralty action. In this case, two of the Hudson factors — the possibility of inconsistent results and conducting two actions involving similar evidence — are present. If this Court is required to determine the amount of damages suffered by plaintiff in order to determine whether a constructive total loss occurred, there is a risk that the New Jersey court could find a different amount of damages incurred in the same casualty. Also, as discussed above, the damages issues in our case and the New Jersey case will require overlapping evidence. These facts suggest that impleader of Dutra may be appropriate and more efficient, and since Dutra cannot be impleaded in Louisiana, these facts cut in favor of transfer to achieve judicial economy. With respect to McDonough's argument that impleader is inappropriate because its claim against Royal is not sufficiently related to Royal's claim against Dutra, that decision will be for the transferee judge to make when and if a motion for leave to implead Dutra is filed. However, this Court observes that even if a transferee court were to decide that impleader was not appropriate, the parties would still be exposed to the risk of inconsistent damages awards and conducting two lawsuits with partially overlapping evidence. In sum, the only relevant public interest factor in this matter — judicial economy — weighs in favor of transfer.
Determination whether a 1404(a) transfer is appropriate is made "according to an individualized, case-by-case consideration of convenience and fairness." Jackson v. West Telemarketing Corp. Outbound, 245 F.3d 518, 522 (5th Cir. 2001) (internal quotations omitted). In this case, while consideration of the private interest factors is inconclusive, consideration of the applicable public factor — judicial economy — weighs heavily in favor of transfer. To not transfer this case would result in duplicative litigation going forward, in which the damages allegedly caused by Dutra to two McDonough barges were at issue in two suits; furthermore, all interested parties would be exposed to the possibility of inconsistent results as to the damages awards, whether or not Dutra is ultimately impleaded.
While it is true that deference is accorded to plaintiff's choice of forum, it is also true that plaintiff's right to control its action must be balanced against the harm a defendant would suffer by not being allowed to implead a party liable for part of the damages, and the disadvantages to the public caused by the inefficient use of judicial resources. Considering the totality of the circumstances of this case, the Court finds that the balancing of the interests involves indicates that transfer is the best course. Accordingly;
IT IS ORDERED that defendants' Motion to Transfer the instant case should be and is hereby GRANTED, and this matter should be TRANSFERRED to the Eastern District of New Jersey for possible consolidation with USA for the use and benefit of Dutra Group. etc. v. ECDC Environmental, L.C., Civil Action Number. 00-1188.