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CHINA UNION LINES v. AMERICAN MARINE UNDERWRITERS

June 23, 1978

CHINA UNION LINES, LIMITED, and International Union Maritime Insurance Company Limited, Plaintiffs,
v.
AMERICAN MARINE UNDERWRITERS, INC., and Calvert Fire Insurance Co., Defendants and Third-Party Plaintiffs, and CANADIAN MARINE UNDERWRITERS LIMITED and CNA Assurance Company, Defendants, v. I. R. POSGATE and Other Underwriters at Lloyd's Subscribing to Reinsurance Contract "GLH No. 1039-61", Third-Party Defendants



The opinion of the court was delivered by: BRODERICK

MEMORANDUM ORDER

 VINCENT L. BRODERICK, U.S.D.J.

 Canadian Marine Underwriters Ltd. ("Canadian") and CNA Assurance Company Inc. ("the moving defendants"), seek an order dismissing plaintiffs' complaint on the grounds (1) that this court does not have personal jurisdiction over them; and (2) that service of process was improper and therefore void.

 Plaintiff China Union Lines, Limited ("China Union"), a Republic of China corporation, claims that the defendants have failed to honor an insurance policy covering a China Union Line vessel that was lost in a typhoon. Plaintiffs predicate subject matter jurisdiction in this district upon diversity of citizenship, 28 U.S.C. § 1332, and alternatively upon the admiralty jurisdiction provisions of 28 U.S.C. § 1333. The moving defendants do not contest the existence of subject matter jurisdiction.

 For the reasons set forth below, I find that the defendants have transacted business in New York within the meaning of N.Y. CPLR § 302(a)(1) and are therefore subject to the jurisdiction of this court; and that they have been duly served with process. I deny the motion to dismiss.

 Plaintiffs have the burden of showing that personal jurisdiction exists. However, it is proper to rely on affidavits to establish jurisdictional facts, Lynn v. Cohen, 359 F. Supp. 565, 566 (S.D.N.Y. 1973), and as the non-moving parties, plaintiffs are entitled to consideration of their pleadings and affidavits in the light most favorable to them. Oxford First Corp. v. PNC Liquidating Corp., 372 F. Supp. 191, 192-93 (E.D. Pa. 1974); Freeman v. Gordon & Breach Science Publishers, Inc., 398 F. Supp. 519, 520 (S.D.N.Y. 1975).

 I find, for purposes of disposition of this motion, that the following facts are not in dispute.

 In late 1974, China Union negotiated a new insurance plan with C. E. Heath, Ltd. ("Heath"), its London insurance broker. Heath contacted Alexander & Alexander ("Alexander"), New York insurance brokers, seeking to place part of the insurance through them. *fn1" Alexander placed 10 percent of the insurance with Calvert Fire Insurance Co. ("Calvert") through its agent American Marine Underwriters, Inc. ("American"). *fn2" Alexander later placed another 5 percent with CNA through its agent, Canadian. *fn3" Both CNA and Canadian are Canadian corporations based principally in Toronto, Ontario. Neither CNA nor Canadian has any offices in New York.

 The negotiations leading to the placement of the insurance with CNA began on January 13, 1975, when Charles H. Nutter, assistant vice president of Alexander, telephoned from New York to Peter P. Smith, executive vice president of Canadian, who was in Toronto. Nutter's call was prompted by suggestions from Joseph Fogarty, chairman of American, who encouraged Nutter to place a part of the China Union insurance with Canadian. At the time American owned some 49 percent of Canadian's stock. Nutter told Smith that American had agreed to cover a portion of the risk, and Smith orally agreed to take 5 percent for Canadian and CNA. *fn4"

 On January 28, 1975, Nutter forwarded a written binder agreement to Smith. The binder purported to memorialize the earlier oral agreement, and is dated "New York, N.Y., January 28, 1975." Taro Asnani, vice president of Canadian in charge of underwriting activities, signed the binder on behalf of CNA and Canadian and returned it by mail to Alexander in New York. According to the binder agreement itself, and in accordance with custom and practice in the insurance business, Canadian and CNA were to send the broker's commission and any payments which became due under the policy in satisfaction of claims to Alexander in New York.

 Three weeks after the binder was signed, the Union East, a China Union Line vessel, foundered in a typhoon near New Zealand. China Union claimed that the ship, a total loss, was covered by the January 28th binder. Canadian and CNA disclaimed liability.

 From late January through April, 1975, Nutter was in fairly constant telephonic and written communication with Asnani and Smith, first arranging for the execution of the insurance binder and later attempting to obtain satisfaction of the claim. *fn5" Thus all of these communications related to the alleged contract either in the negotiation stage or in the abortive performance stage. When it became clear that the moving defendants did not consider themselves bound, plaintiffs commenced this suit, against the moving defendants and against American and Calvert.

 Thereafter Canadian and CNA commenced an action against Alexander, Heath, and the plaintiffs in the Supreme Court of Ontario. There they seek $50,000 for breach of contract, $50,000 in punitive damages, and a declaration that the insurance binder at issue is void. On July 26, 1977, the Supreme Court of Ontario stayed all proceedings in its court pending determination of the instant motion. *fn6"

 The amenability of a foreign corporation to suit must be determined by reference to the law of the forum state. Arrowsmith v. United Press International, 320 F.2d 219, 223 (2d Cir. 1963). N.Y. CPLR § 302(a)(1) gives the court jurisdiction over any entity that transacts business in New York or that does so "through an ...


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