National Casualty Company v. Burns & Wilcox Limited

Background

National Casualty Company alleged one breach-of-contract claim against Burns & Wilcox Limited and Burns & Wilcox Insurance Services. National Casualty is an Ohio corporation with its principal place of business in Arizona. Burns & Wilcox Limited is a Michigan corporation with its principal place of business in Michigan. Burns & Wilcox Insurance Services is a California corporation with its principal place of business in Michigan.

In 1982, National Casualty and Burns & Wilcox Limited entered a General Agency Agreement. The agreement authorized Burns & Wilcox Limited to handle certain insurance activities for National Casualty in exchange for commissions. It required compliance with underwriting guidelines issued by National Casualty, referrals of risks for review before coverage was bound, periodic reports and accountings, and indemnification in specified circumstances. The agreement identified National Casualty as located in Scottsdale, Arizona, and provided that Arizona law governed the agreement. The record did not establish where the agreement was negotiated or executed.

The parties disputed when and how Burns & Wilcox Insurance Services became involved. National Casualty maintained that the company was added to the agreement as an agent. Burns & Wilcox Insurance Services argued that it was only an authorized agent and was not a party to the agreement. In 2015, the company’s San Francisco office issued a National Casualty automobile policy to two Alabama residents. After an accident in Alabama killed two people, National Casualty paid policy benefits and resolved related lawsuits through a confidential settlement. National Casualty demanded indemnification from both defendants, and both rejected the demands.

Personal Jurisdiction

The defendants moved to dismiss for lack of personal jurisdiction, meaning they argued that the Arizona court lacked power over them. National Casualty waived any argument for general jurisdiction, which would allow Arizona to hear any claim against the defendants. The court therefore considered only specific jurisdiction, which applies when the lawsuit is connected to the defendant’s contacts with the forum state.

For Burns & Wilcox Limited, the court applied the Ninth Circuit’s three-part test: the defendant must have purposefully conducted activities in Arizona, the claim must arise from or relate to those activities, and exercising jurisdiction must be reasonable. The court held that the long-term agreement, its Arizona choice-of-law provision, National Casualty’s supervision from Arizona, and Burns & Wilcox Limited’s required communications to Arizona established purposeful availment. The court also found a sufficient connection between those contacts and National Casualty’s claim because the alleged breaches involved failure to follow Arizona-issued underwriting guidelines and failure to provide indemnification.

The court recognized that the jurisdiction question was close, in part because there was no evidence about where the agreement was negotiated or executed. After balancing the relevant reasonableness factors, however, the court concluded that Burns & Wilcox Limited had not shown a compelling reason that exercising jurisdiction would be unreasonable.

For Burns & Wilcox Insurance Services, the court resolved disputed facts in National Casualty’s favor because National Casualty needed only to make a preliminary showing at the motion-to-dismiss stage. Two “Branch Office ABC Exhibits” indicated that Burns & Wilcox Insurance Services had been incorporated into the agreement, subject to its requirements, and could receive commissions. The court held that this evidence established a preliminary jurisdictional showing. It therefore found that the agreement could serve as a jurisdictional contact for Burns & Wilcox Insurance Services and that specific jurisdiction over that defendant was also appropriate.

Venue and Disposition

The defendants alternatively argued that venue in Arizona was improper and requested dismissal or transfer. For a breach-of-contract claim, the court considered where the agreement was negotiated or executed, where performance occurred, and where events leading to the alleged breach took place. It stated that where the plaintiff felt the effects of the alleged breach was not material to venue.

National Casualty offered no evidence showing where the contract was negotiated, drafted, or executed. The court found that the material events occurred elsewhere: Burns & Wilcox Insurance Services issued the insurance policy from San Francisco, and the defendants’ representatives in California and Michigan rejected National Casualty’s indemnification demands. The court therefore held that National Casualty had not shown that venue was proper in Arizona.

The court chose transfer rather than dismissal because the parties agreed that the Northern District of California was a proper venue, the defendants were willing to transfer the case, and transfer would save time and expense. The order states that the defendants’ motions were granted in part and denied in part: the motions to dismiss for lack of personal jurisdiction were denied, the motions to transfer for improper venue were granted, and the case was transferred to the Northern District of California. The court did not decide whether the defendants breached the agreement.