effect at the time of the Accident (the "Underlying Policy"). One of Economy's claims against Stonewall in the Texas Action was that the Underlying Policy provided coverage for an insured's losses arising out of liquor sales ("Liquor Coverage"). However, the District Court entered summary judgment against Economy on this point in June 1993. Trial on Economy's other claims against Stonewall, which were not brought pursuant to the Underlying Policy, was scheduled to begin on January 24, 1994. But Stonewall settled the Texas Action for $ 3,250,000, on January 5, 1994 (the "Settlement").
On February 28, 1994, Stonewall filed a claim with Constitution for the amount of the Settlement, pursuant to two facultative reinsurance certificates that Constitution had issued to Stonewall reinsuring the Underlying Policy (the "Reinsurance Contracts"). Constitution denied liability on Stonewall's claim on March 18, 1994, and instituted this action for a declaratory judgment. Constitution here alleges that the Reinsurance Contracts do not obligate Constitution to pay a claim by Stonewall that arises out of a settlement of claims against Stonewall that were not made pursuant to the Underlying Policy. Constitution further alleges that Stonewall entered into the Settlement, not out of concern that Stonewall would be held liable in the Texas Action pursuant to the Underlying Policy, but out of concern that Stonewall would be held liable on Economy's other claims against Stonewall. Constitution therefore concludes that the Reinsurance Contracts do not obligate Constitution to pay Stonewall's claim against it. Stonewall responds that it entered into the Settlement, in part, out of concern that it would be held liable in the Texas Action pursuant to the Underlying Policy -- either because the district court would reconsider its grant of summary judgment for Stonewall on the Liquor Liability point, or because the district court's grant of summary judgment on this point would be reversed on appeal. Stonewall, of course, concludes that the Reinsurance Contracts do obligate Constitution to pay Stonewall's claim against Constitution.
Stonewall has moved to dismiss for this action improper venue pursuant to Fed. R. Civ. Pro. 12(b)(3) or, alternatively, to transfer this action to the Northern District of Texas pursuant to 28 U.S.C. § 1404(a). The Court takes these matters up in turn.
Stonewall argues that venue is not proper in this District pursuant § 1391(a)(2) because the Underlying Policy was entered into in Texas, and the Accident and Settlement occurred in Texas. Constitution responds that venue is proper here under § 1391(a)(2) because the Reinsurance Contracts were negotiated by means of telephone calls and facsimile transmissions between New York and Texas; Constitution executed the Reinsurance Contracts in New York; and the Reinsurance Contracts were to be performed by Constitution in New York.
Section 1391(a)(2) provides that venue is proper in a diversity action, if the action is filed in a "judicial district where a substantial part of the events or omissions giving rise to the claim occurred. . . ." 28 U.S.C. § 1391(a)(2) (1991). The current formulation of § 1391(a)(2) is the result of an amendment effected by the Judicial Improvements Act of 1990, Pub. L. No. 101-650, Title III, § 311, 104 Stat. 5114 (1990), and supersedes a requirement that a diversity action be brought in the district where "the claim arose." 28 U.S.C.S. § 1391(a) (Supp. 1994). The amendment evinces Congress' intent that venue may be proper in more than one federal district in a given case. See Bates v. C & S Adjusters, Inc., 980 F.2d 865, 868 (2d Cir. 1992) (citing H.R. Rep. No. 734, 101st Cong., 2d Sess. 23, reprinted in 1990 U.S.C.C.A.N. 6860, 6869).
The standard set forth in § 1391(a)(2) "may be satisfied by a communication transmitted to or from the district in which the cause of action was filed, given a sufficient relationship between the communication and the cause of action." Sacody Technologies, Inc. v. Avant, Incorporated, 862 F. Supp. 1152, 1157 (S.D.N.Y. 1994) (Leisure, J.) (citing Bates, 980 F.2d at 867-68 (interpreting identical language of § 1391(b)(2), applicable in federal question cases: "We conclude that receipt [within the district] of a collection notice is a substantial part of the events giving rise to a claim under the Fair Debt Collection Practices Act."); Gruntal & Co., Inc. v. Kauachi, 1993 U.S. Dist. LEXIS 1216, No. 92 Civ. 2840, 1993 WL 33345, at *2 (S.D.N.Y. Feb. 5, 1993) (venue proper in diversity common-law fraud action based on telephone calls during which allegedly fraudulent representations were made, where one party to calls was within district during calls)); compare Friedman v. Revenue Management of New York, Inc., 38 F.3d 668, 672 (2d Cir. 1994) (affirming dismissal for improper venue under § 1392(b)(2) where "all the events alleged in [plaintiff's] complaint occurred in Illinois . . . [and] all relevant corporate assets, offices, books, and records are located in Illinois").
The Court finds that venue in this District is proper under § 1391(a)(2). The ultimate issue in this case is whether Constitution is obligated to pay a claim that Stonewall has filed pursuant to the Reinsurance Contracts. The Reinsurance Contracts were negotiated through telephone calls and facsimile transmissions between New York and Texas; Constitution executed the Reinsurance Contracts in New York; and Constitution denied liability on Stonewall's claim pursuant to the Reinsurance Contracts in New York. A substantial part of the events giving rise to this action plainly occurred in New York. See, e.g., Sacody Technologies, Inc. v. Avant, Incorporated, 862 F. Supp. 1152, 1157 (S.D.N.Y. 1994) (Leisure, J.) (venue proper in Southern District of New York in diversity action for breach of confidentiality agreement, where parties' "dealings . . . in relation to the Confidentiality Agreement took place over the phone and by correspondence and facsimile between [the parties] in Massachusetts and New York, respectively.") (citation omitted). Stonewall's motion to dismiss for improper venue is therefore denied.
Failing a dismissal for improper venue, Stonewall argues that this Court should transfer this action to the Northern District of Texas pursuant to 28 U.S.C. § 1404(a).
Stonewall argues that a transfer is warranted, because this case turns on the question of whether Stonewall settled the Texas Action, at least in part, out of a concern that it would be held liable pursuant to the Underlying Policy, and the sources of evidence relevant to this question are located in Texas or Alabama. Constitution responds that this case does not turn solely on Stonewall's reasons for entering into the Settlement. Rather, Constitution argues, another important question in the case is whether the Reinsurance Contracts obligate Constitution to pay a claim that arises out of a settlement of claims against Stonewall that were not made pursuant to the Underlying Policy. Important sources of evidence relevant to this question are located in New York, Constitution contends.
Section 1404(a) provides:
For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district where it might have been brought.
28 U.S.C. § 1404(a). "Motions for transfer lie within the sound discretion of the district court and are determined upon notions of convenience and fairness on a case-by-case basis." In re Cuyahoga Equipment Corp., 980 F.2d 110, 117 (2d Cir. 1992) (citation omitted). The factors that guide the district court's discretion in determining whether to transfer a case pursuant to § 1404(a) are: