MOB Holdings, I, LLC v. Starr Surplus Insurance Company

Background

This first-party insurance dispute concerns a commercial property policy covering 16 properties in the New Orleans area. The properties were damaged during Hurricane Ida. The plaintiffs—eight limited liability companies—alleged that Starr failed to timely and adequately adjust their claims, respond to their proofs of loss, and pay amounts due under the policy. They brought breach-of-contract and bad-faith claims under Louisiana law.

The policy stated that any lawsuit against Starr to recover a claim “must be brought solely and exclusively” in a New York state court or in a federal district court located in New York. The plaintiffs filed this action in the Eastern District of Louisiana. Starr moved to transfer the case to the Southern District of New York under 28 U.S.C. § 1404(a), the federal law allowing a court to transfer a civil case for convenience and the interests of justice. Starr also separately moved to leave the court-ordered Streamlined Settlement Program for Hurricane Ida claims.

The Parties’ Arguments

The plaintiffs argued that Starr waived the forum-selection provision by waiting too long to invoke it, by participating in the settlement program, and by not alerting the plaintiffs earlier to the policy’s venue and choice-of-law provisions. They also argued that the policy did not show that both sides agreed to the forum-selection provision. Alternatively, they asked the court to delay ruling on the transfer motion until the settlement program was completed.

The court applied the rule that a mandatory and enforceable forum-selection clause receives a strong presumption of enforcement. Under the Supreme Court’s framework, the plaintiffs’ choice of forum receives no weight, the court generally does not consider private inconvenience factors, and only public-interest factors can justify refusing to transfer the case. Such factors include court congestion, the local interest in resolving a localized dispute, and the interest in having a diversity case decided in a forum familiar with the governing law.

Analysis

The court first held that the policy provision was mandatory because it clearly required lawsuits against Starr to be brought exclusively in New York. The court then held that the provision was enforceable. The plaintiffs did not argue that the provision was unreasonable because of fraud or overreaching, extreme inconvenience that would deprive them of their day in court, fundamentally unfair law, or a strong public policy of the forum state.

The court rejected the plaintiffs’ waiver argument. It found that Starr moved to transfer on the date its responsive pleading was due and later sought to leave the settlement program while the transfer motion was pending. The court concluded that this conduct was consistent with Starr’s intent to enforce the provision. The court did not decide whether federal or state law governed the waiver issue because the plaintiffs had not shown waiver even under the Louisiana law they addressed.

The court also rejected the argument that the policy did not reflect the plaintiffs’ agreement. It concluded that the provision was one of the policy’s terms and that the policy as a whole showed the parties’ agreement. Finally, the court held that the Louisiana location of the insured properties did not make this one of the exceptional cases in which public-interest considerations could override a valid forum-selection provision. The court therefore did not reach the underlying merits of the insurance-payment or bad-faith claims.

Disposition

Judge Brandon S. Long granted Starr Surplus Lines Insurance Company’s motion to transfer venue. The case was transferred to the United States District Court for the Southern District of New York under Section 1404(a) and the policy’s mandatory forum-selection provision. The court denied Starr’s motion to opt out of the Streamlined Settlement Program as moot.