Berkley Assurance Company v. MacDonald-Miller Facility Solutions

CourtDistrict Court, S.D. New York
DecidedDecember 16, 2019
Docket1:19-cv-07627
StatusUnknown

This text of Berkley Assurance Company v. MacDonald-Miller Facility Solutions (Berkley Assurance Company v. MacDonald-Miller Facility Solutions) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Berkley Assurance Company v. MacDonald-Miller Facility Solutions, (S.D.N.Y. 2019).

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

BERKLEY ASSURANCE COMPANY, Plaintiff, 19-CV-7627 (JPO) -v- OPINION AND ORDER MACDONALD-MILLER FACILITY SOLUTIONS, INC. et al., Defendants.

J. PAUL OETKEN, District Judge: This case involves an insurance coverage dispute that is the subject of two competing lawsuits for declaratory relief in two different federal district courts. Because this action was filed before the other action, and because no special circumstances counsel against applying the well-established presumption that only the first-filed action should proceed to the merits, the Court concludes that this action shall receive priority over the later-filed action. I. Background The following facts are taken from the operative complaint. (See Dkt. No. 9 (“Compl.”).) Sixth & Lenora Apartments, LLC owns Via6 Apartments, a property located in Seattle, Washington. (Compl. ¶ 14.) In 2017, Sixth & Lenora Apartments filed suit in Washington state court against various entities, alleging that the plumbing system installed at Via6 Apartments was defective. (Compl. ¶ 15.) In an amended complaint, Sixth & Lenora Apartments asserted claims against Defendant MacDonald-Miller Facility Solutions, Inc., alleging that MacDonald- Miller was retained to install, design, operate, and maintain the plumbing system and did so negligently. (Compl. ¶ 17.) MacDonald-Miller is covered by a primary commercial general-liability policy issued by Defendants Liberty Mutual Fire Insurance Company and Liberty Insurance Corporation (collectively, Liberty). (Compl. ¶ 18.) Accordingly, Liberty has provided counsel to defend MacDonald-Miller in the underlying state-court action. (Compl. ¶ 19.) MacDonald-Miller also holds a professional-liability policy issued by Plaintiff Berkley Assurance Company. (Compl. ¶¶ 8, 10.) The policy contains a choice-of-law provision: “All

matters arising from or relating to this Policy, including without limitation questions relating to the validity, interpretation, performance, and enforcement of this Policy . . . shall be determined in accordance with the law and practice of the State of New York (notwithstanding New York’s conflicts of law rules).” (Compl. ¶ 13.) The policy also contains a forum-selection clause: “It is agreed that, in the event of any dispute arising from or related to this Policy . . . [MacDonald- Miller] and [Berkley] will submit to the jurisdiction of any court (State or Federal) in New York and will comply with all the requirements necessary to give such court jurisdiction.” (Compl. ¶ 13.) Berkley has issued several letters to MacDonald-Miller advising that it has no duty to defend MacDonald-Miller in the underlying state-court action. (Compl. ¶ 20.) On August 15,

2019, Berkley brought this action, seeking a declaratory judgment that it has no duty to defend MacDonald-Miller in the state-court action. (Compl. ¶¶ 27–34.) Berkley also seeks a declaratory judgment that New York law governs the scope of Berkley’s obligations. (Compl. ¶¶ 21–26.) On September 3, 2019, MacDonald-Miller filed suit against Berkley and Liberty in the United States District Court for the Western District of Washington. See Complaint, MacDonald-Miller Facility Solutions, Inc. v. Berkley Assurance Co., No. 19-CV-1404 (W.D. Wash. Sept. 3, 2019), ECF No. 1. MacDonald-Miller seeks, among other things, a declaration that Berkley is obligated to defend MacDonald-Miller in the underlying state-court action. See id. ¶¶ 28–29. In response, Berkley moved in this Court for a preliminary injunction preventing MacDonald-Miller from further prosecuting the Washington declaratory judgment action. (Dkt.

No. 26.) Oral argument on the motion was heard on November 18, 2019. Separately, MacDonald-Miller has moved in this Court to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(2) and 12(b)(6). (Dkt. No. 35.) II. Legal Standard To obtain a preliminary injunction, a plaintiff must establish “(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.” Christian Louboutin S.A. v. Yves Saint Laurent Am. Holdings, Inc., 696 F.3d 206, 215 (2d Cir.2012). III. Discussion Berkley moves to enjoin MacDonald-Miller from further prosecuting the action

proceeding in federal court in Washington. MacDonald-Miller moves to dismiss for lack of personal jurisdiction and for failure to state a claim. A. Choice of Law The parties first dispute whether New York or Washington law governs. (See Dkt. No. 37-2 at 10–14; Dkt. No. 36 at 10–15.) Although Berkley’s policy contains a choice-of-law provision that selects New York law, MacDonald-Miller argues that the provision does not apply. (Dkt. No. 36 at 13–14.) This Court sits in New York and therefore applies New York’s choice-of-law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). “When making a choice of law determination in a contract case, New York courts will normally apply the law of the jurisdiction having the greatest interest in the litigation, as measured by that jurisdiction’s contacts with the litigation.” In re Gaston & Snow, 243 F.3d 599, 607–08 (2d Cir. 2001). But under New York law, “[i]n the case of certain contracts covering high-value transactions” — i.e., transactions

covering at least $250,000 — “a choice of law clause selecting New York law will be honored regardless of the contacts between the state and the transaction.” Usach v. Tikhman, No. 11-CV- 954, 2011 WL 6106542, at *5 (S.D.N.Y. Dec. 7, 2011) (citing N.Y. Gen. Oblig. Law § 5-1401(1)).1 MacDonald-Miller does not dispute that the insurance policy in this case clears the monetary threshold established by section 5-1401(1). (See Dkt. No. 36 at 13–14; Dkt. No. 47 at 8.) Thus, under section 5-1401(1), New York substantive law governs. In response, MacDonald-Miller first argues that New York applies a “center of gravity” or “grouping of contacts” test for choice of law in contract cases like this one. (Dkt. No. 47 at 3– 4.) That argument, however, simply ignores the effect of section 5-1401(1), which directs the courts to abjure a contacts analysis in cases that meet the monetary threshold. See, e.g.,

Ministers & Missionaries Ben. Bd. v. Snow, 780 F.3d 150, 153 (2d Cir. 2015) (“[Section 5- 1401(1)] expressly permits parties in contracts concerning amounts greater than $250,000 to

1 Section 5-1401(1) provides: The parties to any contract, agreement or undertaking, contingent or otherwise, in consideration of, or relating to any obligation arising out of a transaction covering in the aggregate not less than two hundred fifty thousand dollars, including a transaction otherwise covered by subsection (a) of section 1-301 of the uniform commercial code, may agree that the law of this state shall govern their rights and duties in whole or in part, whether or not such contract, agreement or undertaking bears a reasonable relation to this state. N.Y. Gen. Oblig. Law § 5-1401(1). select New York law as the governing law.”). In such cases, the ordinary “center of gravity” analysis is irrelevant because New York law governs “whether or not [the] contract . . . bears a reasonable relation to [New York].” Gen. Oblig. § 5-1401(1). MacDonald-Miller also argues that the policy’s choice-of-law clause is void under

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Berkley Assurance Company v. MacDonald-Miller Facility Solutions, Counsel Stack Legal Research, https://law.counselstack.com/opinion/berkley-assurance-company-v-macdonald-miller-facility-solutions-nysd-2019.