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NATIONAL UNION FIRE INSURANCE CO. v. BP AMOCO P.L.C.

January 28, 2004.

NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH, PA, and ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LTD., Plaintiff -V- BP AMOCO P.L.C., et al Defendants


The opinion of the court was delivered by: GERARD E. LYNCH, District Judge Page 2

OPINION AND ORDER

Plaintiffs National Union Fire Insurance Company of Pittsburgh, PA ("National Union"), and Associated Electric & Gas Insurance Services Ltd. ("AEGIS") seek a declaratory judgment either finding certain insurance contracts void ab initio, because defendants misrepresented their eligibility for coverage, or finding claims made under them not covered. Defendants removed this action from Supreme Court, New York County, pursuant to 28 U.S.C. § 1441 (a), and the Court denied plaintiffs' motion to remand. Nat'l Union Fire Ins. Co. v. BP Amoco P.L.C., 03 Civ. 0200, 2003 WL 1618534 (S.D.N.Y. Mar. 27, 2003) ("Nat'l Union I"). Defendants then moved to dismiss based on forum non conveniens, which the Court also denied. Nat'l Union Fire Ins. Co. v. BP Amoco P.L.C., No. 03 Civ. 0200, 2003 WL 21180421 (S.D.N.Y. May 20, 2003) ("Nat'l Union II"). Various subcategories of defendants now bring a number of motions to dismiss for lack of personal or subject matter jurisdiction pursuant to Rules 12(b)(2) and 12(b)(1), respectively, of the Federal Rules of Civil Procedure. For the reasons that follow, the motion of the self-styled "Wrongly Named Defendants" to dismiss for lack of subject matter jurisdiction will be granted and the other motions denied. Page 3

  BACKGROUND

  Nat'l Union II sets forth most of the relevant facts, see 2003 WL 21180421, at *1-*3, and they will be recited here only to the extent necessary to the disposition of this motion. In 1998, BP*fn1 devised an "Open Cover" insurance policy for itself, its subsidiaries, affiliates, joint-venture partners, and associated entities involved in oil and gas projects worldwide. Id. at *1. (Carcich. Aff, Ex. 2 at 2 ¶ 4.) The Open Cover allowed BP to "declare" certain projects that BP selected for coverage within a specified period of time.*fn2 Id. It covered, as "Principal Insureds," BP, its subsidiaries, affiliates, associates, and "interrelated companies of every tier," as well as, at BP's option but subject to the filing of the proper declaration, joint-venturers, project managers, and financiers. (Carcich Aff, Ex. 2 at 000116.) The Open Cover also gave BP the right to extend its coverage to contractors, architects, engineers, consultants, suppliers, agents, manufacturers, vendors, and licensors, again provided that BP named such entities in the underlying declarations at the time it made those declarations. (Id.) Under the Open Cover, BP declared about thirty projects worldwide. (Wrongly Named Ds. Br. 1.)

  BP enlisted "Aon Risk Services (`Aon'), an insurance broker with offices in London and the United States, to identify insurers willing to participate in the Open Cover and to coordinate project declaration and claims processing." Nat'l Union II, 2003 WL 21180421, at *1. BP gave Page 4 Aon information about the projects BP wanted to declare, and employees of Aon then solicited insurers to participate in the Open Cover. According to plaintiffs, "Aon solicited National Union in New York, and all negotiations for the National Union policy were conducted with National Union in New York, either in person, via e-mail, telefax or over the phone with National Union's New York office"; and "National Union's underwriters executed and issued the policy in New York and delivered the policy to Aon either by hand in New York or by mail from National Union's New York office to Aon in Chicago." (Ps. Br. in Opp. to P.J. Mots. 4.) Moreover, BP's employee William Siebenaler, who bears responsibility for administering the Open Cover, met with National Union representatives in New York on at least one occasion. (Siebenaler Aff. ¶ 5.)

  National Union and AEGIS, two of the fifteen insurers that comprise the international consortium that subscribed to the Open Cover (Foreign BP Ds. Br. 3), allege that certain projects declared by defendants — an assortment of BP subsidiaries, affiliates, joint-venturers, and entities unaffiliated with BP except through their alleged work on BP-affiliated oil and gas projects — do not qualify for coverage because of misrepresentations in certain declarations filed by BP. In the alternative, plaintiffs allege that certain claims, even if arising out of valid, covered projects, do not fall within the scope of the Open Cover policy. Nat'l Union II, 2003 WL 21 180421, at *2.

  For purposes of the present motions, defendants fall into three principal categories: (1) BP subsidiaries and affiliates ("the Foreign BP Defendants"), (2) non-BP joint-venturers or co-owners of projects declared for coverage by BP ("the Non-BP Defendants"), and (3) present and former BP entities and other business entities allegedly related to BP, but which claim no interest, either as participant or owner, in any declared project and do not claim to be insured by the Open Cover Page 5 ("the Wrongly Named Defendants").*fn3 The former two categories of defendants move to dismiss for lack of personal jurisdiction, arguing that New York's long-arm statute does not reach them, and in the alternative, that even if it does, to exercise personal jurisdiction over them under the circumstances would violate the Due Process Clause. The latter category of defendants move to dismiss for lack of subject matter jurisdiction, arguing that, as between them and plaintiffs, no case or controversy exists.

  DISCUSSION

 I. The Motions to Dismiss for Lack of Personal Jurisdiction

  A. Standard on a Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(2)

  On a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(2), the plaintiff bears the burden to establish jurisdiction. In re Magnetic Audiotape Antitrust Litigation, 334 F.3d 204, 206 (2d Cir. 2003). Where no jurisdictional discovery has been conducted, allegations of jurisdictional fact must be construed in the light most favorable to the plaintiff, CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986), and the motion must be denied if those allegations suffice as a matter of law. In re Magnetic Audiotape, 334 F.3d at 206; PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997) ("A plaintiff facing a Fed.R.Civ.P. 12(b)(2) motion to dismiss made before any discovery need only allege facts constituting a prima facie showing of personal jurisdiction[,]" and courts must "construe the pleadings and affidavits in plaintiff's favor at this Page 6 early stage."); see also Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996).

  B. Requirements to Exercise Personal Jurisdiction

  A federal court sitting in diversity may exercise jurisdiction over a foreign defendant if, first, the defendant is amenable to process under the law of the forum state, Omni Capital Int'l Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 105 (1987); Metro. Life Ins. Co., 84 F.3d at 567, and second, the exercise of personal jurisdiction comports with due process under International Shoe Co. v. Washington, 326 U.S. 310 (1945), and its progeny. See Arrowsmith v. United Press Int'l 320 F.2d 219, 223 (2d Cir. 1963) (en banc) ("[T]he amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits, with `federal law' entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee."); see also Clarendon Nat'l Ins. Co. v. Lan, 152 F. Supp.2d 506, 515 (S.D.N.Y. 2001).

  C. The Foreign BP Defendants' Motion

  The motion to dismiss for lack of personal jurisdiction of the Foreign BP Defendants sets forth the basic argument of which the other motions are minor variations: Because defendants did not directly negotiate, agree to, or execute the Open Cover with National Union, but only acquired an interest subsequently in certain projects or claims (allegedly) subject to its coverage, plaintiffs' causes of action do not "aris[e] from" business transactions by defendants within New York. See N.Y. C.P.L.R. § 302(a)(1); Agency Rent a Car Sys., Inc. v. Grand Rent a Car Corp., 98 F.3d 25, 29 (2d Cir. 1996). (Foreign BP Ds. Br. 13.) For similar reasons, defendants argue, the absence of sufficient contacts between them and the State of New York would make any assertion of personal Page 7 jurisdiction over them by a New York court inconsistent with the "`traditional notions of fair play and substantial justice'" that circumscribe the constitutional limits of personal jurisdiction under the Due Process Clause. Int'l Shoe, 326 U.S. at 316, quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940). (Foreign BP Ds. Br. 23-25.) Neither argument withstands analysis.

  1. New York's Long-Arm Jurisdiction Statute

  New York law authorizes both general and specific exercises of personal jurisdiction over foreign defendants. N.Y. C.P.L.R. §§ 301-302: see generally Metro. Life. Ins. Co., 84 F.3d at 567-68 (explaining distinction between general and specific jurisdiction) Plaintiffs do not argue that the Court may exercise general jurisdiction based on defendants' physical or legal presence in New York. They instead argue that specific personal jurisdiction exists under § 302(a), which authorizes New York courts to exercise jurisdiction over nondomiciliaries as to causes of action that arise from certain enumerated acts, whether performed personally or by agents. Those acts include transacting business in New York. Id. § 302(a)(1); see McGowan v. Smith, 52 N.Y.2d 268, 272 (1981) ("Essential to the maintenance of a suit against a nondomiciliary under [§ 302(a)(1)] is the existence of some articulable nexus between the business transacted and the cause of action sued upon.").

  A defendant transacts business in New York within the meaning of § 302(a)(1) when it "`purposefully avails itself of the privilege of conducting activities within [New York], thus invoking the benefits and protections of its laws.'" McKee Elec. Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382 (1967), quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958); see also CutCo Indus., 806 F.2d at 365. To determine whether a defendant has purposefully availed itself of the privilege of conducting activities in New York, courts examine several factors, no one of which is Page 8 dispositive. Agency Rent a Car Sys., 98 F.3d at 29 (canvassing factors relevant to the question whether a defendant has "transact[ed] business in New York" for purposes of § 302(a)(1)). Proof of a single transaction may suffice, provided it is purposeful. George Reiner & Co. v. Schwartz, 41 N.Y.2d 648, 651 0977): see also Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467 (1988) (emphasizing that N.Y. C.P.L.R. § 302 "is a `single act statute' and proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted").

  The Foreign BP Defendants describe themselves as "independently operated, indirect subsidiaries of the named insured and ultimate parent of all BP entitles, BP p. l.c." (Foreign BP Ds. Br. 1.) They assert that their "sole connection" to New York consists in, first, acquiring an interest in one or more of the projects allegedly insured by the Open Cover, and second, joining in certain claims submitted pursuant to that policy. (Id. 1-2.) National Union, a New York insurer, participates in the Open Cover and therefore received defendants' declarations and claims. This suit, in brief, is an effort by National Union and AEGIS to disavow them. The question, then, is whether defendants' contacts with New York State suffice to permit the Court to exercise personal jurisdiction over them pursuant to § 302(a)(1).

  Aon's acts in New York included soliciting and negotiating National Union's agreement to participate in the Open Cover; executing an insurance contract with National Union; declaring eligible projects for coverage; meeting with representatives of National Union to discuss disputed declarations; and submitting claims to National Union under the Open Cover. Without question, were Aon itself the insured, these acts would suffice to subject it to the personal jurisdiction of a Page 9 New York court as to a cause of action arising out of the Open Cover. Under Agency Rent a Car Sys., the Court should consider:
(i) whether the defendant has an on-going contractual relationship with a New York corporation; (ii) whether the contract was negotiated or executed in New York, and whether, after executing a contract with a New York business, the defendant has visited New York for the purpose of meeting with parties to the contract regarding the relationship; (iii) what the choice-of-law clause is in any such contract; and (iv) whether the contract requires [the defendant] to send notices and payments into the forum state or subjects them to supervision by the corporation in the forum state.
98 F.3d at 29 (internal citations omitted). While the Open Cover does not require, though it does (apparently) permit, the application of New York law,*fn4 in every other respect, Aon's negotiation, execution, and other acts in connection with the contract by which National Union subscribed to the Open Cover more than suffice under the above criteria to establish personal jurisdiction on a cause of action arising out of that contract. See, e.g., PDK Labs, 103 F.3d at 1109; Clarendon Nat'l Ins. Co., 152 F. Supp.2d at 516-17. Indeed, the negotiation and execution of the contract in New York may alone suffice to confer personal jurisdiction over Aon in an action arising out of that contract. See Iroquois Gas Corp. v. Collins, 248 N.Y.S.2d 494, 497 (N.Y.Sup.Ct. 1964), aff'd, ...

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