Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00492/USCOURTS-caed-2_05-cv-00492-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

TIG INSURANCE COMPANY OF

MICHIGAN,

NO. CIV. S 05-0492 MCE GGH

Plaintiff,

v. MEMORANDUM AND ORDER

VISION SERVICE PLAN,

individually and dba ALTAIR

EYEWEAR, INC., ALTAIR EYEWEAR,

INC.,

Defendants.

----oo0oo----

In this action for declaratory relief and rescission,

Plaintiff TIG of Michigan (“TIG”) seeks a judicial determination

that there is no coverage available to Defendants Vision Service

Plan and its subsidiary, Altair Eyewear, Inc. (hereinafter

collectively referred to as “Defendants” or “VSP”) pursuant to a

Directors, Officers and Trustees Liability Policy issued by TIG

to VSP. According to TIG, VSP made certain misrepresentations

in connection with its application to TIG for insurance coverage

Case 2:05-cv-00492-MCE -GGH Document 18 Filed 08/31/05 Page 1 of 8
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All further references to “Rule” or “Rules” are to the 1

Federal Rules of Civil Procedure.

Because oral argument would not be of material assistance, 2

this matter was deemed suitable for decision without oral

argument. E.D. Local Rule 78-230(h).

The facts set forth in this section come directly from 3

TIG’s complaint unless otherwise noted.

2

that justify rescission of the policy. The jurisdiction of this

court is premised on diversity of citizenship pursuant to 28

U.S.C. § 1332. VSP now moves to dismiss TIG’s complaint on

grounds of improper venue in accordance with Federal Rule of

Civil Procedure 12(b)(3). For the reasons set forth below, 1

VSP’s Motion to Dismiss is denied.2

BACKGROUND3

Following application by VSP, TIG issued a Directors,

Officers and Trustees Liability Policy, No. 39250874 (“the

policy”) to VSP effective January 9, 2002. That policy provided

entity coverage for certain “wrongful acts”, as defined by the

policy to TIG and its subsidiaries, including Altair Eyewear,

Inc. (“Altair”). 

In August of 2002, Altair was sued for patent infringement. 

The defense of that lawsuit was tendered to TIG, who initially

accepted that tender but ultimately filed the instant action to

rescind its policy. According to the instant complaint, that

action was undertaken once TIG determined that VSP knew about the

patent infringement claims asserted against Altair yet failed to

disclose that information its its application.

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3

Through the present motion, VSP seeks to dismiss TIG’s

complaint on grounds that an alleged forum-selection clause

contained within the TIG policy allows VSP, and not TIG, to

select the forum for litigating any suit. The clause identified

by VSP, which is denominated by the policy as a “Service of Suit

Endorsement”, provides as follows:

We agree that if we fail to pay any amount claimed to be due

under the Policy we will, at your request, submit to the

jurisdiction of any court of competent jurisdiction in the

United States of America and we will do whatever is

necessary to give that Court jurisdiction, and all matters

arising under this policy will be determined in accordance

with the law and practice of that Court.

Policy, attached as Exhibit 2 to the Declaration of David E.

Wood, Service of Suit Endorsement (emphasis in original).

VSP claims that this clause allows it to elect where any

suit to determine rights under the policy is filed, irrespective

of whether such an action is commenced by VSP or by TIG. VSP has

consequently filed a motion to dismiss for improper venue given

that argument, and also has filed, subsequent to VSP’s instant

lawsuit, its own action in the Superior Court of the State of

California in and for the County of Sacramento. VSP identifies

Sacramento County as its choice of venue, and contends that TIG

must honor that choice even with respect to the filing of its own

lawsuit. (See Defendants’ Opening Points and Authorities, 2: 20-

26).

TIG, on the other hand, claims that the forum selection

clause applies only to an action commenced by VSP, and does not

require it to file suit against VSP in a venue selected by VSP.

//

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STANDARD

 Rule 12(b)(3) allows a party to move for dismissal on

grounds of improper venue. That rule governs a motion to

dismiss, like that presently before this Court, premised on

enforcement of a forum selection clause. Argueta v. Banco

Mexicano, S.A., 67 F.3d 320, 324 (9 Cir. 1996); see also th

Offshore Sportwear, Inc. v. Vuarnet Int’l, B.V., 114 F.3d 848,

851 (9 Cir. 1997) (“We treat dismissal based on a forum th

selection clause like a dismissal for improper venue under Rule

12(b)(3)”).

ANALYSIS

While the Ninth Circuit has yet to address the specific

Service of Suit Endorsement at issue in this case, which VSP

asserts allows them to choose venue in any proceeding regarding

the TIG policy, other courts have uniformly rejected VSP’s

interpretation in that regard. 

In Int’l Ins. Co. v. McDermott Inc., 956 F.2d 93 (5 Cir. th

1992), the Fifth Circuit analyzed a service of suit provision

nearly identical to that contained in the TIG policy at issue

herein. Like the clause in TIG’s policy, the language assessed

by the McDermott court stated that in the event of the failure to

pay benefits due under the policy, the insurer agreed to “submit

to the jurisdiction of any court of competent jurisdiction within

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the United States....” Id. at 95. In McDermott, like here, the

insured argued that this clause permitted it to mandate the venue

of any action concerning the policy, even if instituted by the

insurer. The Fifth Circuit, after describing the clause at issue

as “common in insurance policies”, reversed the district court’s

dismissal of the insurer’s action based on that contention,

pointing out that “when the action is first instituted by the

insurer, the Service of Suit clause simply has no application.” 

Id. at 95-96. McDermott rejected as “untenable” just what VSP

has done here, stating as follows:

“If McDermott’s position were to prevail, then the insured

could effectively block an otherwise valid federal action

simply by a later filing in state court. Indeed, under

McDermott’s absolute reading of the clause, McDermott might

not even be required to respond to a declaratory judgment or

other action filed against it by the insurer. McDermott

could simply choose another forum, file suit, and have the

insurer’s action stayed of dismissed. McDermott would thus

make the Service of Suit clause by which the insured could

deprive the insurer of its right to seek a declaratory

judgment or other redress from the courts. The Service of

Suit clause certainly was not so intended.”

Id. at 96.

This same conclusion has been mirrored in decisions

throughout the country interpreting whether an insurer’s

agreement to “submit” to the jurisdiction of any court, upon a

failure to pay benefits, equates with the carrier being bound by

the insured’s choice of forum where the carrier itself files an

action in declaratory relief to ascertain whether any policy

benefits are in fact payable. See, e.g., Northfield Ins. Co. v.

Odom Indus., Inc., 119 F. Supp. 2d 631, 634-35 (S.D. Miss. 2000);

Int’l Surplus Lines Ins. Co. v. Univ. of Wyoming Research Corp.

850 F. Supp. 1509, 1528 (D. Wyo. 1994) (“if the litigation is

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The Court rejects any inference to the contrary in Rokeby- 4

Johnson v. Kentucky Agr. Energy Corp., 108 A.D.2d 336 (N.Y.A.D.

1985),a decision which appears to have been overruled by Columbia

Cas. Co. v. Bristol-Myers Squibb Co., 215 A.D.2d 91 (N.Y.A.D.

1995) in any event. See Brooke Group Ltd. v. JCH Syndicate 488,

87 N.Y.2d 530, 534 (1996).

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initiated by the insurer, then the service of suit clause is

irrelevant”); Cinergy Corp. v. St. Paul Surplus Lines Ins. Co.

785 N.E.2d 586, 595-96 (Ind. Ct. App. 2003) (service of suit

clause does not preclude an insurer from filing an action to

adjudicate its rights under the contract or from prescribing the

forum for such an action).4

This Court finds the rationale employed by these decisions

persuasive with respect to its interpretation of the service of

suit clause contained within TIG’s policy. While the clause does

obligate TIG to submit to the insured’s choice of venue if the

insured sues to recover benefits allegedly due under the policy,

it does not preclude TIG from filing its own action to adjudicate

coverage in a venue of its choosing. VSP’s Motion to Dismiss on

grounds of improper venue is accordingly denied.

Significantly, although the Ninth Circuit has yet to

squarely address this issue, case law within the circuit

interpreting similar forum selection clauses supports the

conclusion that VSP’s motion lacks merit. As the court pointed

out in Koresko v. RealNetworks, Inc., 291 F. Supp. 2d 1157, 1161

(E.D. Cal. 2003), for example, language employed in such a clause

is enforceable only when it “clearly designates the forum chosen

as the exclusive forum”, as opposed to non-mandatory language

which “will not preclude suit elsewhere.”

The Ninth Circuit has enforced forum selection clauses which

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clearly set forth exclusive venue provisions. The interpretation

of such clauses are procedural issues to be decided under federal

law. Vogt-Nem, Inc. v. M/V Tramper, 263 F. Supp. 2d 1226, 1230

(N.D. Cal. 2002). In Murphy v. Schneider Nat’l, Inc., 362 F.3d

1133 (9 Cir. 2004), the Ninth Circuit approved as mandatory and th

enforceable a provision that all suits “shall be instituted

exclusively in the Circuit Court of Brown County, Wisconsin.” 

Id. at 1136 (emphasis added). Similarly, in Spradlin v. Lear

Siegler Mgmt. Services Co., 926 F.2d 865 (9 Cir. 1991), the th

enforceable language at issue called for Saudi Arabian courts to

have “sole jurisdiction over any dispute” arising out of the

employment agreement at issue in that case. Id. at 866 (emphasis

added).

In the present matter, no similarly limiting language is

present; TIG agrees to “submit” to the jurisdiction of the United

States courts but there is no provision obligating the exclusive

use of any given court, let alone any provision allowing VSP to

dictate where coverage actions instituted by VSP itself are

instituted. “To be mandatory, a (forum selection) clause must

contain language that clearly designates a forum as the exclusive

one.” Northern California District Counsel of Laborers v.

Pittsburgh-Des Moines Steel Co., 69 F.3d 1034, 1037 (9 Cir. th

1995). The absence of such mandatory language in the present

case means that TIG’s clause is permissive in nature, and

hence will not stop TIG from suing in a venue it has chosen.

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Despite VSP’s argument to the contrary, there appears to be 5

no basis for its argument that TIG should have provided advance

notice before filing the present action for declaratory relief,

and that TIG’s failure to do so amounts to gamesmanship

precluding it from choosing this Court as the forum for that

action.

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Koresko, 291 F. Supp. 2d at 1162.5

CONCLUSION

Based on the foregoing, Defendant VSP’s motion to dismiss is

hereby DENIED.

IT IS SO ORDERED.

DATED: August 31, 2005

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

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