Opinion
CA No. 7:03-CV-222-R.
July 16, 2004
MEMORANDUM OPINION AND ORDER
Now before the Court are Defendant's Motions to Dismiss and/or Transfer Venue, filed December 23, 2003. For the reasons stated below, Defendant's motions are DENIED.
I. BACKGROUND
Plaintiffs Leon and Marlene Walker ("Plaintiffs" or "the Walkers") brought action in the 90th Judicial District Court in Young County, Texas, against Defendant Inter-Americas Insurance Corporation ("IAI") in response to the latter's failure to authorize payment for various medical expenses. The Walkers allege breach of contract; fraud; violations of section 4 of Texas Insurance Code article 21.21; violations of the Texas Deceptive Trade Practices Act section 17.46; unconscionable acts in violation of article 17.50 of the Texas Business and Commerce Code; and breach of the duty of good faith and fair dealing.The dispute appears before this Court following IAI's removal from state court. IAI removed based on its assertions that (1) the Employee Retirement Income Security Act provided for federal question jurisdiction according to 28 U.S.C. § 1331, and (2) the federal courts have subject matter jurisdiction over the dispute under 28 U.S.C. § 1441 because the amount in controversy exceeds $75,000 and the parties are citizens of different states.
The Walkers are residents of Graham, Texas. IAI is a Kansas corporation.
The Walkers, husband and wife, own a small trucking company where they reside in Young County, Texas. They are members of the Owner-Operator Independent Drivers Association ("OOIDA"), a Missouri trade association. In April 2002, the Walkers entered into a contract for health care insurance. This plan, known as the O.O.I.D.A. Member Medical Benefits Plan ("the Plan"), pooled the contributions of participants into a trust, from which payments for eligible medical claims were to be drawn. Shortly thereafter, Marlene Walker began to suffer from difficulties associated with adult onset asthma, sleep apnea, and other pulmonary conditions requiring considerable medical attention. Pursuant to the instructions in the Plan, she addressed all medical claims to IAI. Maintaining that her initial application failed to disclose a known history of pulmonary difficulties, IAI has repeatedly denied coverage of her medical claims. These denials are the subject of the Walkers' suit.
The relationship between OOIDA and IAI is governed by a February 1999 contract (the "Administration Agreement"), which assigned rights and responsibilities, including responsibilities to Plan policyholders such as the Walkers. The Walkers have brought action against only IAI, opting not to assert any claims against OOIDA. IAI moves to dismiss under Federal Rules of Civil Procedure 12(b)(7) for failure to join a party under Rule 19. Arguing 12(b)(3) improper venue, IAI also seeks dismissal or transfer pursuant to 28 U.S.C. § 1406. Finally, IAI requests transfer of venue under 28 U.S.C. § 1404.
II. ANALYSIS
A. Motion to Dismiss Standard 1. StandardWhen ruling on a motion to dismiss, the Court must accept all well-pleaded facts as true and view them in the light most favorable to the plaintiff. Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995). The Court should not dismiss a complaint unless it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief. Id.; John Doe v. Hillsboro Indep. Sch. Dist., 81 F.3d 1395, 1401 (5th Cir. 1996). However, when unsubstantiated allegations are controverted by affidavit or declaration, the affidavit or declaration trumps the allegation. In re Norplant Contraceptive Prods. Liab. Litig., 886 F.Supp. 586, 589 (E.D. Tex. 1995). "[T]he prima-facie-case requirement does not require the court to credit conclusory allegations, even if uncontroverted." Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 869 (5th Cir. 2001).
2. Agency
Prior to evaluating IAI's motions, the Court must resolve the threshold issue of whether IAI or OOIDA was the principal with whom the Walkers contracted. What the Walkers allege is unclear from their submissions. The First Amended Complaint states that "[a]t all times relevant to Plaintiff's causes of action, Defendant was an agent of Owner-Operators Independent Drivers Association, Inc." (First Amended Complaint, p. 3 at ¶ 7). Upon responding to IAI's motion to dismiss and/or transfer, however, they maintain that "there is conflicting evidence as to which is the principal and which is the agent." (Plaintiff's Response, p. 8 at ¶ 21). Yet within the same Response, the Walkers reaffirm the position taken in the First Amended Complaint, declaring that "Defendant Inter-Americas is . . . the agent of OOIDA regarding the insurance plan," (Plaintiff's Response, p. 4 at ¶ 8), and that "Defendant has admitted that it is the agent of OOIDA and the plan." (Plaintiff's Response, p. 7 at ¶ 20).
The terms of and responsibilities created by the Administration Agreement point to a principal-agent relationship running from OOIDA to IAI. Because conclusory factual allegations need not be credited, this Court finds that the Walkers contracted with OOIDA and that IAI was the agent and administrator for OOIDA.
In evaluating Defendant's motions, this Court must also address the Plaintiffs' breach of contract claim. Plaintiffs in their First Amended Complaint allege breach of contract, breach of the duty of good faith and fair dealing, and violations of Texas Insurance Code article 21.21. Given that Plaintiffs' complaint characterizes IAI as the agent of OOIDA, this Court can only assume that Plaintiffs bring their contract-based claims against Defendant under a third-party beneficiary theory. For the limited purposes of this motion, and without commenting on the efficacy of the relevant claims under this theory, this Court views the Walkers as potential third-party beneficiaries to the Administration Agreement between IAI and OOIDA.
B. IAI's 12(b)(7) Motion to Dismiss for Failure to Join OOIDA
IAI moves to dismiss under rule 12(b)(7), claiming that the Walkers have failed to join OOIDA as a necessary party. To protect the interested parties and avoid judicial waste, Rule 19 permits joinder of all materially interested parties to a single lawsuit. Joinder is warranted, or "necessary," if:
(1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject matter of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest. FED. R. CIV. P. 19(a).
If either of these conditions is met, the court must then determine whether joining the absent party is feasible. However, if joinder is not feasible because it would deprive the court of jurisdiction over the suit, the court must determine whether "the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable." FED. R. CIV. P. 19(b).
1. Joinder of OOIDA Is Not Necessary for the Noneconomic Tort or Statutory Claims
First, IAI contends that complete relief cannot be accorded among those already parties. If the Walkers prevail, IAI argues, the Trust Plan would have to pay the verdict even though OOIDA, the proprietor of the Trust, was not party to the judgment. But although the Trust Plan may be responsible for paying a judgment for economic damages on the contract, IAI remains potentially liable for tort and statutory violations. Rule 19 does not require joinder of joint tortfeasors, of principal and agent, or of persons against whom a defendant may have a claim for contribution. Nottingham v. General Am. Comm. Corp., 811 F.2d 873, 880 (5th Cir. 1987). Complete relief can be accorded among the Walkers and IAI.
The Administration Agreement between OOIDA and IAI provides: "In the event that IAI, its officers, directors, employees or affiliated companies or their officers, directors, or employees are made party to any judicial or administrative proceedings arising in whole, or in part out of any function performed by one or more of them under this Agreement, [OOIDA] shall indemnify them and hold them harmless for all judgments, settlements and costs (including attorney's fees) which they incur or pay in connection therewith, except that [OOIDA] shall not reimburse IAI any amounts of judgments or awards (including attorney's fees with respect thereto) which are deemed by the court rendering the judgment to have been the result of gross negligence, fraud, or criminal conduct on the part of IAI, its officers, directors or employees." (Appendix, p. 123).
Second, IAI contends that OOIDA's interests in defending the integrity of its Trust Plan and in performing its fiduciary role for the remaining Trust Plan participants will be impaired if it is not present to defend the Trust Plan and its assets. Again, to the extent that the Walkers' noneconomic tort and statutory actions proceed, IAI assets — not the Trust Plan assets — are at risk. Disposition of this action will not impair or impede OOIDA's interests.
Third, IAI argues that if it is not bound by the contract, then OOIDA's absence would "leave IAI at a `substantial risk of inconsistent obligations'" because "a jury could hold IAI responsible for damages that it otherwise is not obligated to pay if OOIDA where [sic] in the case." (Defendant's Motion, p. 8). This argument runs contrary to existing case law. The Walkers seek tort and statutory remedies for the conduct of IAI. Whether or not a jury might determine that OOIDA was a co-tortfeasor, IAI would remain jointly and severally liable for the Walkers' damages. A defendant "entitled to contribution or indemnity cannot be subjected to double or multiple obligations since his liability is several for the entire amount." James v. Valvoline, Inc., 159 F. Supp. 2d 544, 552 (S.D. Tex. 2001) (internal quotations omitted). That IAI "could be faced with a logically inconsistent verdict denying recovery in a later suit for contribution or indemnity does not change this result." Id. (internal quotations omitted). Disposition of this action will not leave IAI at risk of incurring multiple or inconsistent obligations.
The factors listed in Rule 19(a) do not support joinder of OOIDA on the Walkers' tort or statutory claims. Because joinder is not necessary, further analysis under Rule 19(b) is not required.
2. Joinder of OOIDA Is Not Necessary for the Breach of Contract Claim
Finally, IAI argues that OOIDA must be joined because OOIDA and the Walkers are contracting parties under the Plan, citing Tex. Utils. Co. v. Santa Fe Indus., Inc., 553 F. Supp. 106 (N.D. Tex. 1982). In Santa Fe, a plaintiff requested the cancellation of a contract it had entered into with someone not named as a defendant. However, the Walkers do not request relief from a contract entered into with someone not named as a defendant. To be sure, OOIDA would be a necessary party if the Walkers' breach of contract claim attempted to directly recover damages out of the Trust Plan funds due to a breach of the Plan. Dismissal of Plaintiffs' breach of contract claim would then be appropriate.
Joinder of OOIDA would invoke the forum-selection clause, which does not embrace federal courts. Therefore, if the Court understood the Walkers' claim as an action for breach of the Plan, then dismissal, rather than joinder and transfer, would be warranted.
The Walkers' submissions make clear that they wish to recover from IAI. Because they do not currently wish to sue OOIDA, and because they are "entitled to their choice of forum," Peteet v. Dow Chemical Co., 868 F.2d 1428, 1436 (5th Cir. 1989), the Walkers' action should not be interpreted to invoke the forum-selection clause in the Plan. Insofar as the Walkers request equitable enforcement of their rights as third-party beneficiaries to claims services from IAI, their breach of contract claim may proceed against IAI alone. OOIDA is not a necessary party.
Because the Court concludes that OOIDA should not be joined under 19(a), it is unnecessary to undertake analysis under 19(b). IAI's 12(b)(7) motion to dismiss fails.
C. IAI's § 1406 Motion to Dismiss or Transfer
Pursuant to § 1406(a), IAI argues venue is improper in this division or district. Specifically, IAI maintains that venue is proper only in Missouri because of the forum-selection clause in the contract between the Walkers and OOIDA. "The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406 (2004). A plaintiff, however, is generally entitled to choose his forum. See Peteet, 868 F.2d at 1436. In reviewing the enforceability of forum-selection clauses, "[t]he proper law to apply to such questions is federal, whether jurisdiction is based on diversity, a federal question, or some combination of the two." Haynsworth v. The Corporation, 121 F.3d 956, 962 (5th Cir. 1997); Pugh v. Arrow Elecs., Inc., 304 F.Supp. 2d 890, 893 (N.D. Tex. 2003).
When an objection to venue has been raised, a plaintiff has the burden of establishing that venue is proper in the judicial district in which the action has been brought. Advanced Dynamics Corp. v. Mitech Corp., 729 F. Supp. 519, 519 (N.D. Tex. 1990). Venue of removed actions is governed by § 1441. See Polizzi v. Cowles Magazines, Inc., 345 U.S. 663, 665, 73 S. Ct. 900, 97 L.Ed. 1331 (1953). This forum conforms to the requirements of § 1441 because the case was removed to the Northern District of Texas in Wichita Falls, the district and division embracing Young County, Texas, the place where the action was pending. See 28 U.S.C. § 1441. The parties do not dispute that venue is otherwise proper in this court.
Generally, forum-selection clauses, in the context of a motion to dismiss under § 1406, are prima facie valid and enforceable unless the plaintiff can demonstrate that enforcement would be unreasonable under the circumstances. See Pugh, 304 F. Supp. 2d at 893; see also Int'l Software Sys., Inc. v. Amplicon, 77 F.3d 112, 115 (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972)). However, because IAI relies on a forum-selection clause that governs only the relationship between OOIDA and the Walkers, analyzing the enforceability of the clause under the Bremen standard is unnecessary. The presumptive enforceability between the Walkers and OOIDA has no bearing on the dispute between the Walkers and IAI.
IAI contends that it may rely on the forum-selection clause in the contract between OOIDA and the Walkers even while claiming it is not party to the contract. IAI cites Ward Packaging, Inc. v. Schiffman, No. 4:02-CV-518-A, 2002 WL 31086077, at *2 (N.D. Tex. Sept. 13, 2002), in support: "Having been accused by plaintiff of being a party to the contracts, breaching them, and being liable in damages because of those breaches, defendant certainly is entitled to take defensive positions based on the terms and conditions of the contracts." This holding, it claims, permits IAI to use the forum-selection clause as a defense against the Walkers' claims.
IAI misinterprets Ward Packaging. There, when permitted to rely on the forum-selection clause, the Ward defendant had not argued that he was not party to the contract. The plaintiff's conjecture that the defendant would "at a future date" claim not to be party to the contract was insufficient to bar the defendant's use of the forum-selection clause. Id. By contrast, IAI has already argued that it is not party to the contract containing the forum-selection clause. No evidence suggests that IAI is party to the Plan. Thus, although such clauses are " prima facie valid," Bremen, 407 U.S. at 10, IAI sets forth no reason to extend such validity to someone not party to the contract in which the clause appears. IAI, having used the Plan as a shield, cannot now use it as a sword. The Walkers' choice of forum defeats IAI's motion to dismiss under § 1406.
Upon refusing to dismiss a case under § 1406, a court may nonetheless transfer "in the interest of justice." See 28 U.S.C. § 1406(a). But because the forum-selection clause is not applicable, transferring the action to Missouri based on the forum-selection clause would not serve the interest of justice. Defendant's motion to dismiss or transfer under § 1406 is denied.
D. IAI's § 1404 Motion to Transfer
IAI seeks transfer of the case to the Western District of Missouri under § 1404. "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." 28 U.S.C. § 1404(a) (2004). The party moving for change of venue bears the burden of proving that change of venue is warranted. Peteet, 868 F.2d at 1436. The proposed transferee forum must be a more convenient forum, not a forum likely to prove equally convenient or inconvenient as the transferor forum. Van Dusen v. Barrack, 376 U.S. 612, 646, 84 S. Ct. 805, 11 L. Ed. 2d 945 (1964). A court "should not transfer venue where the result will be merely to shift the expense and inconvenience from one party to the other." Enserch Int'l Exploration, Inc. v. Attock Oil Co., 656 F. Supp. 1162, 1167 (N.D. Tex. 1987). The decision to transfer a case is ultimately left to the discretion of the transferor court. See Jarvis Christian Coll. v. Exxon Corp., 845 F.2d 523, 528 (5th Cir. 1988).
In deciding whether to transfer, the Court is to consider the following private interest factors: the availability and convenience of witnesses and parties; the availability of process to compel the attendance of unwilling witnesses; the cost of obtaining attendance of witnesses; the relative ease of access to sources of proof; the place of the alleged wrong; the possibility of delay and prejudice if transfer is granted; and the plaintiff's choice of forum. See Von Graffenreid v. Craig, 246 F. Supp. 2d 553, 562 (N.D. Tex. 2003). In determining whether to transfer, the court should also consider the interest of justice, including: the pendency of related litigation in another forum; delays due to docket congestion; familiarity with the law that governs the action; and the local interest in having localized controversies resolved at home. Id. at 562-63. Only if the balance of these factors weighs strongly in favor of the defendant should the plaintiff's choice of forum be disturbed. See Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 506 (1947).
While the presence of a forum-selection clause is not dispositive, its presence should be a significant factor in a court's analysis. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S. Ct. 2239, 101 L. Ed. 2d. 22 (1988). The forum-selection clause in the Plan, however, bears little on this analysis because IAI, not a signatory to the Plan, cannot enforce the clause.
The first "private interest" factor, the availability and convenience of witnesses and parties, is perhaps the most important factor in determining whether or not to transfer a case under § 1404(a). Dupre v. Spanier Marine Corp., 810 F. Supp. 823, 825 (S.D. Tex. 1993). This factor fails to support a transfer of venue. The Walkers' choice of forum, normally entitled to substantial weight, is particularly significant because they are residents of the chosen forum. See Gulf Oil, 330 U.S. at 508; Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255-56, 102 S. Ct. 252, 70 L. Ed. 2d 419 (1981). To require the Walkers and the witnesses testifying on the Walkers' behalf to travel from Texas to Missouri would impose a heavy burden. The cost of obtaining attendance of witnesses, more prohibitive for the Walkers in Missouri than in Texas, also militates in favor of maintaining the action in this forum. Sources of proof, including items such as records from Marlene Walker's medical treatment in Texas, are more easily accessible from this forum than from Missouri. Moreover, IAI, residing in Kansas, faces either the burden of litigating in Missouri or the burden of litigating in Texas. With many sources of proof and witnesses based in Kansas, any marginal inconvenience or expense of Texas over Missouri is insufficient to warrant transfer.
The next factor, the place of the alleged wrong, fails to support a change of venue. That the wrong allegedly occurred in Kansas, where the Walkers allege that IAI refused Marlene Walker's medical claims, does not suggest that venue in Missouri would be more convenient. Additionally, if the case is transferred, the possibility of delay and prejudice to the Walkers is strong.
After considering the "interest of justice" factors, this Court is not persuaded that the Walkers' choice of forum should be disturbed. No litigation is pending in any other jurisdiction. Any docket congestion in Texas, juxtaposed against the Walkers' choice of forum, loses significance. This Court is more experienced with evaluating Texas law than the Western District of Missouri. Finally, Texas's interest in having controversies involving and affecting its citizens resolved in Texas is at least as important as Missouri's interest in having a controversy involving no Missouri citizens resolved in Missouri.
IAI has not fulfilled its burden of showing the transferee court to be a more convenient forum. Because transferring is neither more convenient nor in the interest of justice, IAI's § 1404 motion is denied.
III. CONCLUSION
For the foregoing reasons, Defendant's Motion to Dismiss for failure to join OOIDA is DENIED. Defendant's § 1406 Motion to Dismiss or Transfer is DENIED. Defendant's § 1404 Motion to Transfer is DENIED.
It is so ORDERED.