Opinion
3:01-CV-2589-M
April 12, 2002
MEMORANDUM OPINION AND ORDER
Before the Court is the Defendant's Motion to Transfer Venue, filed February 6, 2002. Although the Plaintiff's choice of forum is generally given significant weight, this is lessened where the forum is not the Plaintiff's principal place of business or place of incorporation. The alleged acts giving rise to Defendant's affirmative defenses, and its witnesses on the coverage issues for this action, are centered in Oklahoma, and those witnesses will be convenienced by a transfer. In contrast, Plaintiff's witnesses will be inconvenienced by travel regardless of whether the forum is located in Texas or Oklahoma. As discussed below, principally for these reasons, this Court grants Defendant's Motion to Transfer Venue to the Western District of Oklahoma.
FACTUAL PREDICATE AND ISSUE
On December 6, 2001, Plaintiff, Transcontinental Insurance Company ("Transcontinental") filed this declaratory judgment action against Defendant Coreslab Structures (Oklahoma) Inc. ("Coreslab"), seeking a declaration that it has no duty to defend or indemnify Coreslab in an underlying lawsuit.
On February 17, 1999, in Coppell, Texas, Thomas Andrew Milan, an employee of Coreslab, was killed when a brace which supported a concrete slab on a construction site failed. Transcontinental was the insurer of Coreslab on a general liability policy at the time of the incident. In July 1999, Milan's spouse and minor children (the "Milan plaintiffs") brought a wrongful death and survivor action in Oklahoma state court against Coreslab, and certain entities related to the manufacturing of the brace. This action was dismissed based on the finding that, under Oklahoma law, the Milan plaintiffs could only proceed in the Oklahoma Worker's Compensation Court. The Milan plaintiffs subsequently brought suit in Texas on the same claims.
Coreslab now requests that the Court transfer this case to the Western District of Oklahoma to prevent an "unnecessary waste of time, energy, and expense, as well as to protect the litigants, witnesses and public against unnecessary inconvenience and expense." Def.'s Mot. at 6.
ANALYSIS
Motions to transfer venue are governed by 28 U.S.C. § 1404(a). Coreslab bears the burden of demonstrating to the Court that it should transfer the case and the decision rests within the sound discretion of the Court. Section 1404 imposes a two-part test. First, the transferee district must be one where the case could have been originally brought, and second, the transfer must be in the interest of justice and serve the convenience of the parties and witnesses.
28 U.S.C. § 1404(a) reads:
For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.
Peteet v. Dow Chem. Co., 868 F.2d 1428, 1436 (5th Cir. 1989).
Sunbelt Corp. v. Noble, Denton Assoc., Inc., 5 F.3d 28, 31-33 (3d Cir. 1993); Shutte v. Armco Steel Corp., 431 F.2d 22, 24 (3d Cir.), cert. denied, 401 U.S. 910 (1971).
A court may not transfer a case unless the plaintiff could have sued all of the defendants in the transferee court:
[A] transfer is authorized by [ 28 U.S.C. § 1404(a)] only if the plaintiff had an `unqualified right' to bring the action in the transferee forum at the time of the commencement of the action; i.e., venue must have been proper in the transferee district and the transferee court must have had power to command jurisdiction over all of the defendants.
Shutte, 431 F.2d at 24.
Here, Coreslab is incorporated in Oklahoma and has its principal place of business in Oklahoma City, Oklahoma. Transcontinental could thus have sued it in Oklahoma.
In determining whether a transfer is warranted, the Court considers the following factors:
the availability and convenience of the witnesses and parties; the location of counsel; the location of pertinent books and records; the cost of obtaining attendance of witnesses and other trial expenses; the place of the alleged wrong; the possibility of delay and prejudice if the transfer is granted; and the plaintiff's choice of forum. (1) Convenience and Cost Issues, and Place of the Alleged Wrong
Chretien v. Home Depot U.S.A., Inc., 169 F. Supp.2d 670, 672 (S.D. Tex. 2001).
Coreslab argues that Texas has little, if any, connection to the dispute before the Court. However, a substantial part of the events giving rise to the underlying lawsuit occurred in Texas. The Milan plaintiffs in the Texas action claim that Coreslab was grossly negligent in failing to properly install the bracing on the concrete slab, in not warning Milan of a defective and unreasonably dangerous condition, in not maintaining a safe premises, in failing to properly supervise Milan, and in not taking proper safety precautions when it knew or should have known of a dangerous condition. Whether Coreslab was grossly negligent matters to a determination of Transcontinental's duty to indemnify under the policy. The witnesses on these indemnity issues, including Coreslab employees, will already be witnesses in the Texas state court action and cannot be said to be inconvenienced by a second appearance in Texas for this case.
This "inconvenience" is lessened by Transcontinental's statement that none of the witnesses to the accident are necessary to the coverage aspects of this case. See Pl's Resp. at 5 n. 1.
However, this does not end the Court's analysis. The locus of the underlying claim is not dispositive on the transfer issue. Coreslab has raised the affirmative defenses of waiver, estoppel, and ratification, contending that transcontinental is barred from claiming it has no duty to defend or indemnify Coreslab. Proof for each defense will originate from acts or omissions by transcontinental in Oklahoma. All of the written and oral communications between Coreslab, its counsel, and transcontinental concerning Coreslab's coverage and Transcontimental's alleged duty to defend, under everything ranging from no reservation of rights to a full reservation, were connected to a Coreslab representative in Oklahoma. The two Coreslab representatives with whom transcontinental dealt concerning coverage for the claims asserted in the Oklahoma lawsuit reside in Oklahoma — Mark McPhail (the coverage counsel for Coreslab) and David Hellyer (Coreslab's executive vice president and general manager). Both of these witnesses argue that Transcontinental's agreement to defend Coreslab in the Oklahoma suit, and its continued assurances that there existed no disputed coverage issues, other than that of excess liability, destroy Transcontinental's ability to now deny defense or indemnity coverage. The Court thus believes transcontinental has overstated the significance of the locale of the underlying lawsuit, especially given that the Milan plaintiffs only filed in Texas after being dismissed from their original forum choice in Oklahoma. The convenience of the witnesses is often regarded as the most important factor to be considered in deciding whether to transfer venue. Here, although transcontinental will be inconvenienced regardless of the setting for this suit, Coreslab will be convenienced by a transfer to Oklahoma.
transcontinental correctly notes that its reservations of rights letters were sent to Oklahoma from Transcontinental's Tennessee office. This does not alter the convenience gained by Coreslab in transferring the venue to Oklahoma. Some inconvenience will greet the Tennessee representative, whether the forum is in Texas or Oklahoma. However, the Coreslab representatives will inevitably be convenienced by a transfer.
It is not uncommon for an insurance coverage contract dispute to be located in a different forum from that of the underlying claim. See, e.g., Nobel Ins. Co. v. Acme Truck Line, Inc., No. 99-2950, 2000 WL 298908, *3 (N.D. Tex. March 21, 2000) (denying defendant's motion to transfer venue to the site of the underlying accident in an insurance coverage dispute case); AVEMCO Ins. Co. v. GSV Holding Corp., 1997 WL 566149, *6 (S.D.N.Y. September 11, 1997) (transferring venue to New Jersey even though the underlying accident occurred in New York because "the pivotal issue in this declaratory judgment action is the interpretation of an insurance policy between defendants" and that centers on telephone conversations in New Jersey); Evangelical Lutheran Church of America v. Atlantic Mutual Ins. Co., 973 F. Supp. 820, 823 (N.D. Ill. 1997) (although the place where the sexual misconduct occurred was Texas, the important event underlying the declaratory judgment action, the decision to deny coverage, was made at the corporate offices in New York); AFA Enterprises, Inc. v. American States Ins. Co., 842 F. Supp. 902, 909 (S.D.W.Va. 1994) (transferring venue to Pennsylvania even though the underlying accident occurred in West Virginia because "the material facts of this litigation surround plaintiffs' purchase of insurance from defendant and a previous insurer"); Home Ins. Co. v. Liberty Mutual Ins., 678 F. Supp. 1066, 1071 (S.D.N.Y. 1988) (place of accident giving rise to coverage dispute was unrelated to the sole issue to be determined — the parties' understanding of the policy provisions).
Gundle Lining Construction Corp. v. Fireman's Fund Ins. Co., 844 F. Supp. 1163, 1165 (S.D. Tex. 1996); Fletcher v. Southern Pacific Transportation Co., 648 F. Supp. 1400, 1401-02 (E.D. Tex. 1986).
In the case before the Court, issues relate more to the interpretation of the insurance contract than to any underlying "wrong." Further, although transcontinental remains convinced that Texas law will apply to both the claims raised in the underlying lawsuit and the interpretation issues raised in this lawsuit, thus lending support to the logic of a Texas court familiar with Texas law handling the case, the choice of law issue is not one to be cursorily dismissed. Simply because the Milan plaintiffs were dismissed from Oklahoma only to refile in Texas under a Texas statute does not mean that Texas substantive law will apply to the worker's compensation exclusion issues such that they can take advantage of Texas's exception to worker's compensation exclusivity. Texas courts employ a complex choice of law analysis to determine which state has the "most significant relationship" to an asserted claim. It is that state's substantive law that will apply. Moreover, although transcontinental maintains that the general liability policy is governed by Texas law and that certain policy documents were mailed to Coreslab in Texas, a choice of law clause is not included in the policy, and further analysis on the interpretation issue is necessary. Coreslab also presents several "waiver" cases applying Oklahoma law where the alleged acts or omissions giving rise to the alleged waiver occurred in Oklahoma. Thus, the Court does not feel constrained by the potential for Texas law applying to retain the case. (b) Location of Counsel and of Pertinent Books and Records
Gutierrez v. Collins, 583 S.W.2d 312, 318 (Tex. 1979) (adopting the RESTATEMENT (SECOND) OF CONFLICT OF LAWS §§ 6, 145). Notably, Oklahoma has likewise adopted the RESTATEMENT (SECOND) OF CONFLICT OF LAWS. See Bohannan v. Allstate Ins. Co., 820 P.2d 787, 796 (Okla. 1991); Dean Witter Reynolds, Inc. v. Shear, 796 P.2d 296. 299 (Okla. 1990).
Restatement § 188 controls the law governing contract issues in the absence of an effective choice by the parties. Contacts taken into account include: the place of contracting, the place of negotiation of the contract, the place of performance, the location of the subject matter of the contract, and the place of incorporation and principal place of business of the parties. Here, although the Policy does appear to have been mailed to a post office box in Texas, the issue is more complicated than transcontinental represents it to be. Coreslab is a wholly-owned subsidiary of Coreslab Holdings. U.S., Inc., a Nevada corporation. Since Coreslab Holdings does not have a physical address, and the controller lives in Texas, his mailing address was used to ensure that the parent company received the Policy for Coreslab, incorporated and principally residing in Oklahoma. Coreslab's Policy covers an Oklahoma insured, which is licensed to transact business in Oklahoma, and the written and oral coverage negotiations occurred largely in Oklahoma, where Coreslab and its coverage counsel have their primary offices. These contacts raise doubt as to the application of Texas law to a policy for an Oklahoma insured. See, e.g., W.R. Grace Co. v. Continental Cas. Co., 896 F.2d 865, 873 (5th Cir. 1990) (applying New York, rather than Texas law, because "New York ha[d] a strong and overriding interest" in the outcome of a coverage dispute where the insured resided and conducted business in New York).
Gay Taylor, Inc. v. St. Paul Fire Marine Ins. Co., 550 F. Supp. 710 (W.D. Okla. 1981); Zahn v. General Ins. Co., 611 F.2d 645 (Okla. 1980).
If Texas substantive law does apply to the underlying suit, thus allowing the suit to proceed based on Texas' worker's compensation exclusivity exception, then the public policy question of whether an entity liable for grossly negligent conduct can shift this liability to an insurance company is an important question. If the Texas state court imposes punitive damages against Coreslab, whether these damages can be paid for by an insurance company is a question of Texas public policy; likewise, whether these damages can, under Oklahoma law, be paid for by an insurance company is a question of Oklahoma public policy. On this point, Transcontinental's argument is well taken. American Home Assurance Co. v. Safway Steel Products Co., Inc., 743 S.W.2d 693, 697 (Tex.App. — Austin 1988, writ denied). However, as discussed in American Home, section 6 of the RESTATEMENT (SECOND) ON CONFLICT OF LAWS, guards against the application of a foreign state's substantive law in such a situation, regardless of the locus of the forum court. Thus, the forum of the coverage suit is not controlling on the question of what state's substantive law applies to the public policy question anymore than the location of the forum is dispositive on the question of what state's substantive law applies to the interpretation of the insurance policy. It is only relevant to the extent section 6 of the RESTATEMENT (SECOND) ON CONFLICT OF LAWS considers the relevant policies of the forum and the ease and convenience of the forum in applying its own law to a given situation.
Coreslab's Oklahoma attorneys accepted service of process in Oklahoma on behalf of Coreslab, and subsequently mailed a copy to its executive vice president and manager in Oklahoma, who sent a copy of the summons to transcontinental by facsimile. Transcontinental assigned the law firm of Pierce, Couch, Hendrickson, Baysinger, and Green in Oklahoma City to defend Coreslab. Allegedly based on Transcontinental's "vague reservation of rights," Coreslab retained the Oklahoma law firm of Spradling, Alpern, Friot Gum, L.L.P. (now Spradling, Alpern Gum, L.L.P.) to represent it on the coverage issues. Oklahoma counsel represented Coreslab during the entire course of the Oklahoma lawsuit (over a year). When the Milan plaintiffs filed suit in Texas, transcontinental agreed to defend the suit under a complete reservation of rights. Defense counsel was hired in Dallas to handle this suit. Both parties have hired local counsel to represent them in the coverage suit filed in Texas. Coreslab thus currently retains Texas counsel; however, its Oklahoma counsel, which represented it at the time the alleged facts giving rise to its affirmative defenses occurred, are relied on heavily by Coreslab.
It is unclear from the briefing where the relevant books and documents are located. Presumably, Coreslab's records are at its main office and with its coverage counsel in Oklahoma; Transcontinental's records are at its main office in Illinois; and the records from the Oklahoma suit are with the insurance defense counsel in Oklahoma.
(c) Possibility of Delay and Prejudice, and Transcontinental's Choice of Forum
A transfer will not cause delay. No discovery has been conducted. Further, given that, for over a year, transcontinental has been communicating with Coreslab in Oklahoma regarding coverage issues related to this case, its familiarity with Coreslab's management structure and representatives in Oklahoma is evident.
The Court feels compelled to respond to Coreslab's contention that the transfer will reduce the amount of delay the parties may encounter. Coreslab states that:
[T]he parties are likely to benefit from a transfer due [sic] to the less congested docket in the Western District of Oklahoma. During the twelve month period ending September 30, 2000, the median time interval from filing to completion of cases in the Northern District of Texas was seventeen months, with ten percent of the slowest trials taking more than thirty-eight months. For the same period, the median interval in the Western District of Oklahoma was only eleven months, with ten percent of the slowest trials taking more than twenty-one months. Moreover, in the same period each judge in the Northern District of Texas received 508 new cases, while each judge in the Western District of Oklahoma received only 373 new cases. Clearly, the docket in the Western District of Oklahoma is much less congested than in the Northern District of Texas.
Def's Mot. at 10 (citations omitted) (emphasis added). The statistics cited by Coreslab reflect district-wide calculations. These may have some value from a district versus district comparison, but do not account for the case management style or caseload of a particular division or judge. These district-wide averages are generally used within the courts for informational purposes only. This Court issues a scheduling order, with a firm trial date in each case. Further, while it is true that this District does carry a heavier caseload than that seen in the Western District of Oklahoma, this Court had an average of 243 cases pending since September 30, 2001, which is lower than the average for the Western District of Oklahoma. The Court also notes that there was a 9.1% decrease in the number of cases pending and an 18.7% decrease in cases filed in the Northern District of Texas from September 2000 to September 2001. In contrast, there was a 6.7% increase in the number of cases pending and a 12.6% decrease in the number of cases filed in the Western District of Oklahoma for the same period.
Transcontinental's choice of forum is generally given substantial weight. However, where, as here, the forum is not the plaintiffs place of residence, the choice of forum is given less weight and greater scrutiny. While Coreslab overstates the "insignificance" of the underlying occurrence in Texas, Oklahoma has more interest than Texas in an insurance dispute between an Oklahoma insured and an Illinois insurer.
Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255-56 (1981); Henderson v. ATT Corp., 918 F. Supp. 1059, 1068 (S.D. Tex. 1996); Americas Ins. Co. v. Engicon, Inc., 894 F. Supp. 1068, 1075 (S.D. Tex. 1995).
CONCLUSION
Travel for Transcontinental's witnesses is inevitable, regardless of where the forum is located. A transfer to Oklahoma, the insured's principal place of business and place of incorporation, the situs of alleged representations largely forming the basis for Coreslab's affirmative defenses of estoppel, waiver, and ratification, and the locale of principal Coreslab witnesses on coverage issues central to this lawsuit, serves the best interests of the parties.
SO ORDERED.