United States District Court, D. Minnesota
E. Lonergan, Esq. and Briggs & Morgan, counsel for
Kohane, Esq. and Hurwitz & Fine, P.C., and Stacy A.
Broman, Esq. and Meagher & Geer, PLLP, counsel for
S. Doty, Judge United States District Court
matter is before the court upon the motion to dismiss or to
transfer venue by defendant Certain Underwriters at
Lloyd's London Subscribing to Policies PGIARK04292-11 and
PGIXS00178-00 (Underwriters). Based on a review of the file,
record, and proceedings herein, and for the following
reasons, the court grants the motion in part and transfers
the case to the United States District Court for the Northern
District of New York.
insurance coverage dispute arises out of plaintiff ProSource
Technologies, LLC's settlement with non-party Housing
Trust Fund Corporation (HTFC). ProSource is a Minnesota
consulting firm which specializes in disaster and emergency
management services. Compl. ¶¶ 10, 15. In April
2013, HTFC, a governmental unit of the State of New York,
hired ProSource to manage certain recovery programs designed
to assist New York citizens who were victims of SuperStorm
Sandy. Id. ¶¶ 1, 17. HTFC thereafter
refused to pay ProSource over $20 million due under the
contract because of alleged billing errors. Id.
¶ 18. In November 2014, ProSource sued HTFC in New York
state court (Albany) alleging breach of contract (Underlying
Litigation). Id. ¶ 19. HTFC filed a
counterclaim alleging billing errors and poor performance by
ProSource in October 2015. Id. ¶ 20.
time of the Underlying Litigation, ProSouce was insured by
Underwriters under two relevant policies. The professional
liability policy (Primary Policy), in effect from November 1,
2014, to November 1, 2015, covers “DAMAGES that
[ProSource is] legally obligated to pay as a result of
CLAIMS.” Id. ¶ 22; Broman Decl. Ex. 1, at
72. Damages include “an actual or alleged WRONGFUL ACT
with respect to PROFESSIONAL SERVICES” provided by
ProSource. Compl. ¶ 22; Broman Decl. Ex. 1, at 72, 74.
With respect to settlement of any claims, the policy states
that Underwriters “will not settle or compromise any
CLAIM without YOUR consent” and that ProSource
“shall do nothing to prejudice [Underwriters']
rights under this policy nor should [ProSource] admit
liability or settle any CLAIM without [Underwriters']
written consent.” Compl. ¶ 22; Broman Decl. Ex. 1,
at 77. Underwriters agreed to defend “any CLAIM to
which this insurance applies.” Compl. ¶ 23; Broman
Decl. Ex. 1, at 72. The Primary Policy contains a choice of
law provision, which provides that any dispute “over
the meaning, interpretation or operation of any term,
condition, definition or provision of this policy” will
be governed by the “substantive law of the State of New
York ... regardless of the choice of law or conflicts of law
principles.” Broman Decl. Ex. 1, at 80-81. Underwriters
also issued a Following Form Excess Policy (Excess Policy)
covering damages exceeding the Primary Policy limits. Compl.
October 30, 2015, ProSource notified Underwriters of
HTFC's counterclaim and requested coverage under the
policies. Compl. ¶ 25. Underwriters agreed to defend
ProSource and reserved its rights with respect to coverage.
Id. ¶ 26. According to ProSource, Underwriters
failed to meaningfully participate in the Underlying
Litigation despite ProSource's efforts to secure its
involvement. Id. ¶¶ 27-35. In late April
2016, ProSource and HTFC engaged in serious settlement
negotiations. Id. ¶ 42. Underwriters ignored
ProSource's initial request for guidance, but later
responded that it needed a written settlement proposal from
HTFC. Id. ¶ 43. HTFC was unwilling to do so for
a variety of reasons. Id. ¶ 44. Despite
numerous efforts by ProSource to meaningfully engage
Underwriters in the settlement process, Underwriters refused.
Id. ¶¶ 45-49. Rather than lose the
opportunity to secure a reasonable settlement, ProSource
agreed to settle the case without Underwriters'
involvement or approval. Id. ¶ 50. HTFC agreed
to pay ProSource $12.5 million, which resulted in an offset
in HTFC's favor of $11, 861, 467. Id.
Underwriters refused to accept the settlement terms and
threatened that it would deem coverage forfeited if ProSource
finalized the settlement. Id. ¶ 52. ProSouce
finalized the settlement, thereby concluding the Underlying
December 6, 2016, ProSource commenced this case against
Underwriters in Anoka County District Court alleging breach
of the duties to defend and indemnify and breach of the
implied duty of good faith and fair dealing. ProSource seeks
damages and declaratory relief. Underwriters timely removed
and now moves to dismiss or to transfer the case to the
Northern District of New York.
Standard of Review
court will first consider Underwriters' motion to
transfer. Section 1404(a) provides that “[f]or
the convenience of parties and witnesses, in the interest of
justice, a district court may transfer any civil action to
any other district or division where it might have been
brought.” Deciding whether to order a transfer under
§ 1404(a) “require[s] a case-by-case evaluation of
the particular circumstances at hand and a consideration of
all relevant factors.” Terra Int'l, Inc. v.
Miss. Chem. Corp., 119 F.3d 688, 691 (8th Cir. 1997).
The relevant factors generally fall into three categories:
(1) the convenience of the parties; (2) the convenience of
the witnesses; and (3) the interests of justice. Id.
There is, however, “no exhaustive list of specific
factors to consider.” Id.
Convenience of the Parties and Witnesses
merits of the case - coverage relating to ProSource's
settlement with HTFC - turn on the nature and circumstances
of the claims and counterclaims in the Underlying Litigation
and the structure of the settlement. ProSource commenced the
Underlying Litigation, which involved events that took place
in and near Albany New York in the wake of SuperStorm Sandy.
Specifically, HTFC hired ProSource to administer federal
relief funds on behalf of HTFC. Compl. ¶¶ 15-17;
Broman Decl. Ex. 2 ¶¶ 13-21. ProSource did so by
hiring and training over 400 employees, most of whom were New
York residents, and by hiring and overseeing New York
subcontractors. See Broman Decl. Ex. 2 ¶¶
3-4, 22-25, 27-28, 30, 41, 57. ProSource managed the project
from offices in New York, not its home office in Minnesota.
See id. Under these circumstances, the court is
persuaded that resolution of this case will require evidence
and testimony from numerous New York based third-party
witnesses, many, if not all, of whom are likely outside the
court's subpoena power. Therefore, ...