Creekstone Juban I, LLC v. XL Insurance America, Inc.

DECISION & ORDER This action arises from an insurance dispute relating to a storm that occurred on August 13, 2016, in Livingston Parish, Louisiana. As a result of the storm, flooding inundated much of southern Louisiana, resulting in economic damages estimated to be in excess of $8.7 billion.¹ Plaintiff, Creekstone Juban I, LLC (“Creekstone”), is a Delaware limited liability company that owns real property known as Juban Crossing in Livingston Parish. The property is a mixed-use development consisting of “high-end,” multi-use facilities for retail sales, restaurants and a theatre. Creekstone is a single asset company that has no business other than Juban Crossing. The managing member of Creekstone is a Louisiana resident, and Creekstone’s principal business office is in Baton Rouge. See NYSCEF Doc 39. Defendant XL Insurance America, Inc., a Delaware corporation, issued a first-party property and casualty insurance policy to Creekstone on May 15, 2016, providing commercial property and business interruption coverage to various buildings located at Juban Crossing.² The policy provided sublimits of $50 million for flood per occurrence and annual aggregate, except a limit of $5 million for flood per occurrence and annual aggregate if the property was located in a “high hazard flood zone,” as defined by the policy, or a limit of $10 million for flood per occurrence and annual aggregate if the property was located in a “moderate flood zone.” See NYSCEF Doc. 22. The property at Juban Crossing sustained extensive damage as a result of the August 13, 2016 flood, during which flood waters reached heights in excess of four feet within the property. See NYSCEF Doc. 22. On September 15, 2016, Plaintiff submitted proof of its losses to Defendant in the amount of $15,648,212.44, with supporting documentation establishing that the property was situated in a “moderate flood zone.” After investigating the claim, XL Insurance determined that the property was situated in a “high hazard zone,” and therefore the policy limits for the loss were $5 million, with a $3.5 million deductible. On January 27, 2017, Plaintiff filed suit against XL Insurance in the 21st Judicial District Court, Parish of Livingston, State of Louisiana, alleging causes of action for bad faith and breach of the insurance policy. In response, XL Insurance filed a “Declinatory Exception of Improper Venue, Peremptory Exception of No Cause of Action, and Motion to Dismiss” based on a forum selection clause contained in the insurance policy. Paragraph 19, entitled “Service of Suit and Choice of Law,” provides: In the event that any disagreement arises between the “Insured” and the “Company” requiring judicial resolution, the “Insured” and the “Company” each agree that any suit shall be brought and heard in a court of competent jurisdiction within the State of New York. The “insured” and the “Company” further agree to comply voluntarily with all the requirements necessary to give such court jurisdiction. Any suit shall be barred (i) if commenced before the “insured” has given notice and permitted the “Company” reasonable opportunity for adjustment; or (ii) if commenced more than twenty-four (24) “months” after the inception of “damage” unless the “Company” agrees in writing after “damage” to extend that suit limitation period. […] The “Insured” and the “Company” further agree that New York law shall control the interpretation, application and meaning of this contract, whether in suit or otherwise. See NYSCF 36 at 19 (quotation marks in original). XL Insuarnce’s motion to dismiss was denied by the trial court, by judgment entered on August 11, 2017. See NYSCEF Doc. 38. It then filed a writ with the Louisiana Court of Appeal, First Circuit. In a split decision, a five-judge panel denied the writ on the grounds that the forum selection clause was unenforceable due to Louisiana Revised Statute 22:868, which prohibits any clause in an insurance contract that deprives the Louisiana courts of jurisdiction in any action against an insurer. The Court of Appeal explained that Section 22:868 “incorporates a public policy determination that no contract issued in Louisiana covering a Louisiana subject shall deny the Louisiana insured the benefit of a practical remedy in Louisiana courts, thus prohibiting a requirement that he litigate his claim in an inconvenient foreign forum or submit to its adjudication by some private tribunal.” Creekstone Juban I, LLC v. XL Ins. Am., Inc., 2018 La. App. LEXIS 623, 2017 1223 (La.App. 1 Cir. 04/09/18) (citation omitted); see La. Rev. Stat. §22:868 (A)(2) (2019) (providing that no insurance contract “delivered or issued for delivery in this state and covering subjects located, resident, or to be performed in this state…shall contain any condition, stipulation, or agreement…[d]epriving the courts of this state of the jurisdiction of action against the insurer). However, the Louisiana Supreme Court granted review and reversed the lower court’s decision, ruling that Louisiana Revised Statute 22:868(A)(2) did not prohibit the enforcement of the forum selection clause in the underlying insurance policy. Relying on Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 13, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), and its own precedent, the Louisiana Supreme Court ruled that a contractual choice of forum clauses is prima facie valid and enforceable in Louisiana, unless the resisting party can clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching…[or that] enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision”³ (internal quotation marks omitted). Creekstone/Juban I, LLC v. XL Ins. Am., Inc., 282 So. 3d 1042, 2019 La. LEXIS 1366, 2018-0748 (La. 05/08/19). The Court remanded the matter to the trial court “for further proceedings pursuant to La. Code Civ. P. art. 121.” Article 121 of the Louisiana Code of Civil Procedure provides, verbatim: “When an action is brought in a court of improper venue, the court may dismiss the action, or in the interest of justice transfer it to a court of proper venue.” Thus, on remand, Creekstone filed a “motion to transfer” to the Supreme Court, Bronx County,⁴ based on the Louisiana Supreme Court’s ruling. See NYSCEF doc. 40. XL Insurance opposed the motion, contending that the Louisiana code of civil procedure does not permit a Louisiana court to transfer a suit to a New York court, and therefore Creekstone’s action had to be dismissed without prejudice. According to XL Insurance, Creekstone’s only remedy was to refile its action in a New York court, at which time the New York court could determine if the suit had been filed in accordance with the CPLR. The trial court rejected XL Insurance’s arguments, and granted Creekstone’s motion to “transfer suit” to Bronx County. By judgment dated October 16, 2019, the trial court ordered the Clerk of Court of the Twenty-First Judicial District, Parish of Livingston, State of Louisiana, to prepare a certified copy of the entire suit record and thereafter transmit the certified copy of the suit record via certified mail or commercial carrier to the Chief Clerk of Court, Bronx County Supreme Court.⁵ XL Insurance again appealed, arguing that notwithstanding the forum selection clause set forth in the insurance contract designating New York as the agreed-upon forum, there is no mechanism in Louisiana law or jurisprudence that allows a Louisiana court to transfer a case to a court of another state. XL Insurance further noted that the Louisiana trial courts routinely dismiss cases pursuant to Louisiana Civil Code 121 when venue is proper in another state based on an agreed-upon forum selection clause. In a decision dated December 7, 2020, the Court of Appeal, First Circuit, affirmed the lower court’s decision to transfer the suit to Bronx County Supreme Court, noting that Section 121 affords the Louisiana courts discretion to dismiss the action or, if the interest of justice requires, transfer the matter to a court of proper venue. The court further noted that “the mechanisms of the appellate process have resulted in the passage of a significant amount of time such that Creekstone’s rights might be prejudicially affected if required to file anew in a court of another state” and stated that “in most instances, the court exercising its sound discretion has dismissed the action,” however “there is no clear prohibition against such a transfer in the language of LSA-C.C.P. art. 121.” Creekstone Juban I, LLC v. XL Ins. Am., Inc., 2020-0098 (La. App. 1 Cir. 12/7/20). The court also explained that the lower court judgment provided that a transmittal communication was to accompany a certified copy of the record, “asking that the suit record be docketed and filed with [the New York court] for future proceedings” and that the trial court “in no way attempted to direct the clerk of the New York court to adhere to Louisiana’s rules of procedure rather than New York’s applicable rules of procedure in the handling and filing of this matter.” Id. As far as this Court can ascertain, XL Insurance did not appeal the First Circuit’s decision to the Louisiana Supreme Court. On August 9, 2021, the Livingston Parish Clerk of Court transmitted a copy of the Louisiana pleading and documents filed to the Clerk of Court, Bronx County, “per signed Judgment” on October 16, 2019, and June 22, 2021. See NYSCEF Doc. 2. Counsel for each party subsequently submitted applications for admission pro hac vice, which were all granted. Aside from these motions, no other papers were filed for six months. On the motion before this Court, Creekstone now moves for leave to enter a default judgment against XL Insurance, pursuant to CPLR §3215, for failing to answer or otherwise appear, seeking $15,648,212.44 in damages. XL Insurance opposes the motion and cross-moves to dismiss this action on the grounds that (1) the action was improperly transferred to the New York State Court; and (2) this action is time-barred by virtue of the suit limitation clause contained in the underlying insurance policy. It is well-established that “[o]n a motion for leave to enter a default judgment pursuant to CPLR 3215, the movant is required to submit proof of service of the summons and complaint, proof of the facts constituting the claim, and proof of the defaulting party’s default in answering or appearing.” Clarke v. Liberty Mut. Fire Ins. Co., 150 A.D.3d 1192, 1194, 55 N.Y.S.3d 400 (2d Dep’t 2017). Here, the parties dispute whether service had to be effectuated de novo pursuant to the CPLR and whether Defendant was obligated to file an Answer. Of note, the parties do not address whether XL Insurance effectively answered Creekstone’s complaint (called a “Petition for Damages) in the Louisiana action.⁶ In any event, given the unusual facts and circumstances of this case, the appearance by counsel for XL Insurance in this action, XL Insurance’s opposition to the motion, and the amount of damages sought by Creekstone, a default judgment is plainly not warranted in this case. See Navarro v. A. Trenkman Estate, Inc., 279 A.D.2d 257, 257, 719 N.Y.S.2d 34 (1st Dep’t 2001) (acknowledging New York’s “strong public policy” that matters be decided on their merits, not by default). Accordingly, Creekstone’s motion is denied. As indicated above, XL Insurance also cross-moves to dismiss this action as improperly “transferred” to New York State Supreme Court, and legally deficient pursuant to CPLR §§3211(a)(1) and 3211(a)(7). In support of its motion, XL Insurance argues that (1) it is a long standing legal principle that one state court cannot transfer an action to another state court; (2) the Louisiana trial court had no power to transfer the case from Louisiana to New York; and (3) the Bronx County Supreme Court had no authority, under the CPLR or otherwise, to accept the transfer of Creekstone’s Louisiana action. In support of its argument that inter-state transfer of lawsuits is prohibited, XL Insurance cites one case from New York, and two cases from other jurisdictions. However, Suffolk Chiropractic Ctr. v. Geico Ins. Co., 656 N.Y.S.2d 107, 109 (Civ. Ct. Queens Co. 1997) did not involve an inter-state transfer, but instead transfer of a case from one county to another on the ground of forum non-conveniens. While the civil court noted that “[i]n the absence of authority to transfer an action from one state to another, the granting of a forum non conveniens motion leads to a dismissal of the case,” it held that the court had authority pursuant to CPLR §510(3) to transfer the venue of an action within the state from one county to another. Nevertheless, where a motion to dismiss is granted on the basis of forum non conveniens, as it was in Suffolk Chiropractic, dismissal is conditioned on the defendant’s stipulation to the waiver of jurisdictional and statute of limitations defenses in order to assure the availability of a forum for the action. Wild v. Univ. of Pennsylvania, 115 A.D.3d 944, 983 N.Y.S.2d 58 (2d Dep’t 2014). XL Insurance also cites Caldwell v. Raymark Ind. et al., 8710-4324 Keiter, 1992 WL 1071434 (Pa. Com. Pl. Oct. 6, 1992) (noting that “cases cannot be transferred between states”) and Rogers v. Rogers, 688 So. 2d 421, 422 (Fla. Dist. Ct. App. 1997) in support of its motion. In Rogers, the Florida court held that the trial court “had absolutely no authority to ‘transfer’ a probate proceeding to San Francisco, California” and “[t]he trial court’s resolution of the venue issue is so novel and bewildering that this court is stymied in its efforts to find any authority relating to the proposition of whether a Dade Circuit Court can, ipse dixit, crate up and move pending litigation across the country”). Here, however, the question before the Court is not whether the inter-state transfer order was proper under Louisiana law — an issue already decided by the courts of that state — but whether the Supreme Court, Bronx County, may “accept” transfer of the suit from Louisiana. On this point, the parties cite no case law, presumably because there is none. Nevertheless, New York courts are vested with inherent powers, neither derived from nor dependent upon express statutory authority, to carry out the adjudicative process. See generally Alvarez v. Snyder, 264 A.D.2d 27, 35, 702 N.Y.S.2d 5, 13 (1st Dep’t 2000) (noting that “[i]nherent power is a recognized adjunct to judicial power when a judge must discharge a responsibility, but lacks guidance from explicit legislative or decisional authority” and in such “gray area situations,” the exercise of inherent authority derives from common-law tradition as a means “to fill the gaps of express law and to respond to problems…that come up in carrying out their adjudicative duties…to fashion rules and create procedure so that the adjudicative process can function” (internal quotation marks and citation omitted). Here, in the exercise of its discretion, and in the interest of justice, the Court finds that it is not improper to “accept” transfer of this matter from 21st Judicial District Court in Livingston Parish. First, XL Insurance has expressly consented to the personal jurisdiction of this Court, notwithstanding the fact that it may lack sufficient minimum contacts. See, e.g., Oberon Sec., LLC v. Titanic Entertainment Holdings LLC, 198 A.D.3d 602, 603, 153 N.Y.S.3d 838 (1st Dep’t 2021) (where a defendant enters into an agreement containing a forum selection clause, it is not necessary to conduct a separate analysis of whether the exercise of personal jurisdiction over the defendant comports with constitutional requirements of due process). It further agreed that New York law would govern the interpretation and application of the contract. Second, in affirming the trial court’s decision to transfer the suit, the Louisiana Court of Appeal specifically recognized that “the mechanisms of the appellate process have resulted in the passage of a significant amount of time such that Creekstone’s rights might be prejudicially affected if required to file anew in a court of another states.” Creekstone Juban I, LLC v. XL Ins. Am., Inc., 2020-0098 (La. App. 1 Cir. 12/7/20). And finally, adjudication of this case in New York, as transferred by the Louisiana District Court, promotes the uniformity of judicial decisions and general principles of comity between the two jurisdictions. See, e.g., Boudreaux v. State of Louisiana, Dep’t of Transp., 49 A.D.3d 238, 241, 849 N.Y.S.2d 262, 264-65, aff’d sub nom. Boudreaux v. State, Dep’t of Transp., 11 N.Y.3d 321, 868 N.Y.S.2d 575 (2008) (noting that the doctrine of comity “is not a rule of law, but one of practice, convenience and expediency…to defer to the laws and policies of a sister state”) (internal quotation marks and citation omitted). XL Insurance also argues that this action is barred by the suit limitation provision set forth in the insurance contract. As noted above, that provision mandates that any action be filed within 24 months after the “inception of damages.” According to XL Insurance, Creekstone therefore had until August 13, 2018, to bring a legal action in New York, but “the first filing on NYSCEF is dated November 4, 2019 — nearly fifteen months after the Policy’s suit limitation deadline expired.” However, since the Louisiana courts permitted the suit to be transferred, in lieu of being dismissed, there was no need to commence a new lawsuit in New York. In view of this determination, the Court does not address the remaining arguments raised by the parties. Accordingly, for the foregoing reasons, it is hereby: ORDERED AND ADJUDGED that the motion filed by Plaintiff for leave to enter a default judgment against Defendant pursuant to CPLR §3215 is DENIED; and it is further ORDERED AND ADJUDGED that the motion filed by Defendant to dismiss this action is DENIED; and it is further ORDERED AND ADJUDGED that counsel for the parties shall appear for a conference on February 14, 2024, at 11:00 a.m. in Courtroom 624, Bronx County Supreme Court; and it is further ORDERED AND ADJUDGED that Defendant shall serve a copy of this Decision & Order with notice of entry within twenty days of Entry. Dated: January 17, 2024