United States District Court, N.D. New York
April 28, 2004.
ORISKA INSURANCE COMPANY and U.S. MANAGEMENT, INC., Plaintiffs
THE POWER P.E.O., INC., et al., Defendants
The opinion of the court was delivered by: DAVID HURD, District Judge
MEMORANDUM-DECISION and ORDER
Plaintiff Oriska Insurance Company ("Oriska") issued a workers'
compensation insurance policy to plaintiff U.S. Management, Inc. ("U.S.
Management"), a labor contractor. A subsequent agreement between Oriska
and defendant The Power P.E.O., Inc. ("Power"), added Power as an
additional insured. Plaintiffs claim, under the Lanham Act, that Power
misrepresented to its clients that it could issue and bind workers'
compensation policies through its agreement with Oriska.
Defendants move for transfer of venue, pursuant to
28 U.S.C. § 1404(a), to the U.S. District Court, Central District of
California. Plaintiffs oppose. Oral arguments were heard on this matter on
March 22, 2004, in Utica, New York. Decision was reserved.
Oriska is an insurance company that is authorized to transact workers'
compensation business in the state of New York with its principal place
of business in Oriskany, New York. U.S. Management is a New York labor
contractor based out of Brooklyn, New York. On May 1, 2002, Oriska
provided U.S. Management with a workers' compensation policy as a labor
contractor. Power is incorporated in New York, Arizona, and California,
with offices in New York City. It operates as a professional employer
organization providing payroll, tax reporting, and other administrative
services to its clients, including workers' compensation coverage. The
remaining defendants, small businesses located mainly in California, claim to be covered under U.S. Management's
workers' compensation policy through Power.
On June 17, 2002, following discussions between Power and Oriska, Power
was added as an additional insured to the already existing workers'
compensation policy between Oriska and U.S. Management. The contractual
obligations created by adding Power included Oriska's duty to pay the
workers' compensation claims of the employees of Power's clients, such as
the employer-defendants, in California and elsewhere. After Power was
added to the policy, it forwarded all payroll information for all of its
clients in California and Arizona to Oriska and U.S. Management.
Additionally, each month Power remitted premiums and a detailed report on
their clients to Oriska. Requests for certificates of insurance were made
to Oriska and U.S. Management, and each certificate request indicated the
client's name and address. Initially, U.S. Management issued
approximately 80 certificates of workers' compensation insurance to
Power's clients in California and Arizona. Oriska then took the process
in house and issued approximately 200-400 certificates of insurance to
Power's clients in California and Arizona. Oriska claims that Power
issued additional primary certificates of insurance itself, without
Oriska's knowledge, after Oriska provided Power with written guidelines
explaining that only Oriska was to issue primary certificates of
insurance to Power and its clients.
The contract between Oriska and Power also selected Stuart Baron
("Baron"), a California licensed Third Party Administrator
("Administrator"), who was to provide claims adjusting and administrative
On April 1, 2003, the California Department of Insurance issued a Cease
and Desist Order against Oriska and Power ordering them to refrain from
marketing, selling, or collecting premiums on any new or renewal workers' compensation
policies. The order was issued because Oriska, although licensed to write
workers' compensation policies in New York, was not authorized to do so
in California. More specifically, Oriska's unlicensed practice in
California was a violation of California Labor Code § 3700, which
requires that every employer secure workers' compensation insurance from
an insurer duly authorized to write workers' compensation insurance in
On May 7, 2003, the California Department of Insurance clarified its
Cease and Desist Order by explaining in a letter to counsel for Power
that while the order prevented Oriska and Power from selling, marketing,
or collecting premiums for any new or renewal workers' compensation
policy, they were still obligated to pay all workers' compensation claims
that existed prior to the May 1, 2003, expiration of Oriska's policy with
Power. On December 23, 2003, Administrator Baron informed employers and
injured workers who were clients of Power and insured by Oriska that it
was unable to pay injured employee claims and would turn over the claims
to the State of California for administration by the Uninsured Employers
On January 13, 2004, Oriska and U.S. Management filed their amended
complaint in the Northern District of New York under § 43 of the
Lanham Act, 15 U.S.C. § 1125 (a), which makes it unlawful for any
person, in connection with goods or services, to use in commerce any
"false designation of origin, false or misleading description of fact, or
false representation of fact, which is likely to cause confusion . . . or
mistake." Plaintiffs claim that Power, as an additional insured on U.S.
Management's policy, intentionally misrepresented in commerce that it was
authorized to issue and bind workers' compensation insurance provided by
Oriska, collect premiums, issue certificates verifying insurance
coverage, and adjudicate and pay claims when it was not authorized to do so. As a
result of the misrepresentation by Power, plaintiffs claim insureds,
potential insureds, and their employees were mistakenly led to believe
they were insured by Oriska. Plaintiffs further allege that they never
delegated to Power authority to issue and bind workers' compensation
insurance provided by Oriska through the policy issued to U.S.
Management. As a remedy, plaintiffs seek a declaratory judgment that
Power did not have the authority to bind coverage on behalf of plaintiffs
and an order requiring defendants to pay claims arising from certificates
of insurance issued by them.
Defendants move for transfer of venue to the U.S. District Court,
Central District of California, where a lawsuit filed by Power alleging
breach of contract is pending. Defendants essentially claim that transfer
of venue should be granted because the vast majority of communications
regarding the policy between the parties took place in California, and
that ninety-five of the defendants are residents of California, therefore
the convenience of the witnesses would be best served if the case were
transferred to California.
Under 28 U.S.C. § 1404(a), "[for] 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." Lynch v. National Prescription Administrators, No. 03
Civ. 1303 (GBD), 2004 WL 385156, at * 1 (S.D.N.Y. March 1, 2004). In
deciding whether to transfer, courts have considered the private interest
factors, which include:
(1) the convenience of the witnesses; (2) the
location of relevant documents and relative ease
of access to sources of proof; (3) the convenience
of the parties; (4) the locus of operative facts;
(5) the availability of process to compel the
attendance of unwilling witnesses; (6) the
relative means of the parties; (7) the forum's
familiarity with the governing law; (8) the weight accorded the
plaintiffs choice of forum; and (9) trial
efficiency and the interests of justice, based on
the totality of the circumstances.
Id., at * 2; see Constitution Reinsurance Corp. v.
Stonewall Ins. Co., 872 F. Supp. 1247, 1250 (S.D. N.Y. 1995). The
plaintiffs choice of forum is controlling unless the balance of
convenience and justice weigh heavily in favor of defendant's proposed
forum. Lynch, 2004 WL 385156, at * 2. Additionally, the
defendant has the burden of making out a strong case for transfer.
Ford Motor Co. v. Ryan, 182 F.2d 329
, 330 (2d Cir. 1950),
cert. denied, 340 U.S. 851
, 71 S.Ct. 79
, 95 L.Ed. 624 (1950).
A. Convenience of the Witnesses
Convenience of the witnesses is considered the single most important
factor in the analysis of whether a transfer should be granted.
Lynch, 2004 WL 385156, at * 2; see Aerotel, Ltd. v. Sprint
Corp., 100 F. Supp.2d 189, 197 (S.D.N.Y. 2000). Defendants contend
that all of the ninety-five defendant small business owners are located
in California as well as the injured employees that were insured under
the Oriska policy. Defendants further contend that the Administrator,
Baron, is a witness in California and the representatives of the
California Department of Insurance are witnesses in California.
This action seeks a determination of the nature of the contractual
relationship between the parties, and whether defendants made material
misrepresentations, not the relationship between Power and the claimants
who did not receive their benefits. Defendants' emphasis on the
ninety-five small business owners and their employees is misplaced
considering the only proof they will offer is in the form of a
certificate of insurance, the validity of which the parties may
stipulate. It would not be necessary, however, to hail these ninety-five
defendants into court in New York, or California for that matter. Since Baron and the representatives from the California Department of
Insurance will not offer evidence as to the nature of the contractual
relationship between Oriska and Power, the actual physical presence of
these witnesses is not necessary, and their convenience in litigating in
New York is not a factor that weighs in favor of transfer.
B. Location of Documents
Defendants claim that the Administrator's voluminous records, as well
as the files of the clients and claimants, are located in California. The
location of documents factor, however, "is neutral in today's era of
photocopying, fax machines, and Federal Express." Lynch, 2004
WL 385156, at * 3: see Aerotel, Ltd., 100 F. Supp.2d at 197
n.2. As mentioned above, this is a contract action, and considering that
Oriska dealt directly with Power in the formation of their agreement,
many of the relevant discovery documents needed to determine the nature
of their relationship would be located in Oriska's Oriskany, New York,
office. Furthermore, it would be relatively easy to photocopy the
relevant documents that are located in California or elsewhere and
transport them to New York. Thus, this factor does not favor transfer.
C. Convenience of the Parties
Defendants again claim that the ninety-five defendant witnesses are
located in California and that, while Power is incorporated in New York,
it is merely a shell entity designed to facilitate Power's business in
California and Arizona. Both Oriska and U.S. Management are located in
New York. Since the ninety-five defendant argument is essentially moot,
as set forth above, the relevant consideration is the convenience of
Oriska, U.S. Management, and Power. As all three parties are New York
corporations, this factor does not weigh in favor of transfer. D. Locus of Operative Facts
"The location of the operative events is a primary factor in
determining a § 1404(a) motion to transfer." Lynch, 2004 WL
385156, at * 4. Defendants claim that prior to each certificate being
issued, the clients contracted with Power in California and gathered
documents and information there. Power then forwarded the information to
the Administrator in California and Oriska in New York. Defendants'
argument that California was the location where each certificate of
insurance was issued does not speak to the probative issue of the nature
of the parties' relationship. Both the contract negotiations and the
resulting agreement occurred in New York. Additionally, Baron traveled to
Oriska's office in Oriskany, New York, to discuss the nature of his
involvement in the agreement and agreed to be Administrator. Defendants
have not shown that this factor favors transfer to California.
E. Availability of Process
The availability of process to compel the attendance of unwilling
witnesses also favors the plaintiffs' choice of forum. Defendants contend
New York would probably not be able to compel the attendance of a single
defendant as none of the injured workers have ever set foot in New York.
The attendance of these witnesses is not necessary considering that the
injured workers and their employers may only offer evidence to the fact
that they had insurance policies not, however, evidence as to whether the
parties' contractual relationship provided for Power to issue
certificates of insurance. Therefore, the action is not subject to
transfer based on the availability of process.
F. Relative Means of the Parties
"Where a disparity exists between the means of the parties, a court may
consider the relative means of the parties in determining venue."
Lynch, 2004 WL 385156, at * 4; see Everest Capital Ltd. v. Everest Funds Mgmt., L.L.C.,
178 F. Supp.2d 459, 467 (S.D.N.Y. 2002). Although defendants do not address
this factor, there is no indication that there is any disparity between
the means of the parties that would favor transfer to California.
G. Forum's Familiarity with Governing Law
Contrary to defendants' argument that this case will principally turn
on whether Oriska was engaged in the business of insurance in California,
this case was brought under the Lanham Act and will turn on whether Power
was authorized to sell insurance by Oriska, and whether Power made
misrepresentations. As this is a federal statute, a federal court in New
York is as well equipped as one in any other state to determine the
outcome. Thus, this factor does not weigh in favor of transfer.
H. Plaintiff's Choice of Forum
The plaintiff's choice of forum is ordinarily entitled to considerable
weight unless there is little connection between the forum and the facts.
Lynch, 2004 WL 385156, at *5. Defendants contend that although
plaintiffs choice of forum is afforded considerable weight, it is not
dispositive. Since the balance of convenience weighs in favor of the
plaintiffs' choice of forum, as it has been determined that the locus of
operative facts was New York, the Northern District of New York will
defer to plaintiffs' choice.
I. Trial Efficiency and the Interests of Justice
"The interests of justice is a broad concept that requires the court to
consider the totality of the circumstances presented." Id., at
* 6. Defendants claim that plaintiffs are more financially capable of
handling out-of-state litigation than the injured workers in California,
and since California issued the Cease and Desist Order, California has a
greater interest in seeing justice served in their state. As noted above,
the injured workers will play no role in determining the contractual relationship between Oriska and Power,
and will therefore bear no cost of litigation whether in New York or
California. The Cease and Desist Order orders Oriska to stop selling
insurance in the state of California where it was not authorized. While
it is certainly in California's interest to see that entities violating
its laws cease to do so, that does not speak to the nature of the
relationship between the parties. Whether Oriska violated the California
Labor Code is not an issue here. Rather, what is at issue is whether
Power made misrepresentations pursuant to its contract with Oriska, which
was negotiated and entered into here in New York, involving New York
It is therefore, neither in the interests of justice nor trial
efficiency to transfer the case to California.
Defendants have failed to demonstrate that any of the factors weigh in
favor of transfer of this action to the Central District of California.
Accordingly, it is
1. Defendants' motion for transfer of venue is DENIED; and
2. Defendants shall file and serve answers and/or motions to the
amended complaint on or before May 14, 2004.
IT IS SO ORDERED.
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