Berkley Assurance Company v. MacDonald-Miller Facility Solutions

Background

Sixth & Lenora Apartments, LLC sued various entities in Washington state court, alleging that the plumbing system installed at Via6 Apartments was defective. The amended complaint asserted that MacDonald-Miller Facility Solutions, Inc. had been retained to install, design, operate, and maintain the plumbing system and had acted negligently.

Liberty Mutual Fire Insurance Company and Liberty Insurance Corporation provided MacDonald-Miller’s primary commercial general-liability coverage and supplied its defense in the underlying state-court case. MacDonald-Miller also had a professional-liability policy issued by Berkley Assurance Company. Berkley notified MacDonald-Miller that it believed it had no duty to defend the state-court action.

Berkley filed this action on August 15, 2019, seeking declarations that it had no duty to defend MacDonald-Miller and that New York law governed its obligations. On September 3, 2019, MacDonald-Miller filed a related declaratory-judgment action against Berkley and Liberty in the Western District of Washington, seeking, among other things, a declaration that Berkley was required to defend it.

Berkley moved for a preliminary injunction to stop MacDonald-Miller from continuing the Washington action. MacDonald-Miller moved to dismiss this case for lack of personal jurisdiction and for failure to state a claim.

Choice of Law

The policy stated that matters arising from or relating to it would be governed by New York law and included a provision stating that Berkley and MacDonald-Miller would submit to the jurisdiction of any state or federal court in New York.

Because the case was in a New York federal court, the court applied New York’s choice-of-law rules. Under New York General Obligations Law § 5-1401(1), parties to certain contracts involving at least $250,000 may select New York law even without a significant connection to New York. MacDonald-Miller did not dispute that the policy met that monetary threshold. The court therefore enforced the choice-of-law provision and held that New York substantive law governed.

MacDonald-Miller argued that Washington law invalidated the choice-of-law provision. The court rejected that argument because New York’s choice-of-law rules, rather than Washington’s, controlled the validity of the provision.

First-Filed Rule and Preliminary Injunction

The court determined that the two federal actions were duplicative and that only one should proceed to the merits. Under the first-filed rule, the first lawsuit generally receives priority. The court found that this case was filed first and that neither recognized exception—the balance-of-convenience exception or the special-circumstances exception—applied.

The court gave controlling weight to the policy’s New York forum-selection provision when considering convenience. It held that the provision was valid under New York law because the policy met the $1 million threshold in New York General Obligations Law § 5-1402(1). The court also concluded that the provision was permissive rather than mandatory: it allowed the parties to submit disputes to New York courts but did not require them to litigate there or deprive Washington courts of jurisdiction.

The court rejected MacDonald-Miller’s argument that Berkley had filed an improper anticipatory declaratory-judgment action. MacDonald-Miller had sent Berkley’s counsel an email giving Berkley 30 minutes to match Liberty’s coverage or face the consequences of Washington coverage law, but the email did not state a firm intention to file a lawsuit, identify a filing date, or specify a forum. The court also rejected the argument that forum shopping was a special circumstance because the parties had previously agreed to jurisdiction in New York.

Although the first-filed rule allowed the court to stop the later-filed Washington action, the court concluded that an injunction was unnecessary. It expected the Washington court to stay its own proceedings and therefore held that this action would receive priority without an injunction. Berkley’s motion for a preliminary injunction was denied. The opinion states that the denial was without prejudice to renewal if an injunction later became necessary to preserve this case’s priority.

Motions to Dismiss

The court denied MacDonald-Miller’s motion under Federal Rule of Civil Procedure 12(b)(2), which challenges personal jurisdiction. It held that MacDonald-Miller had consented to personal jurisdiction through the forum-selection provision.

The court also denied MacDonald-Miller’s motion under Rule 12(b)(6), which challenges whether the complaint states a legally sufficient claim. MacDonald-Miller argued that Washington law barred Berkley’s action, but the court rejected that argument for the reasons discussed in its choice-of-law and forum-selection analysis.

Disposition

The court denied Berkley’s motion for a preliminary injunction, denied MacDonald-Miller’s motion to dismiss for lack of personal jurisdiction, and denied MacDonald-Miller’s motion to dismiss for failure to state a claim. The court held that this case had priority over the Washington action but did not decide whether Berkley ultimately had a duty to defend MacDonald-Miller.