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April 28, 2004.

THE POWER P.E.O., INC., et al., Defendants

The opinion of the court was delivered by: DAVID HURD, District Judge



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 services.

  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 California.

  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 Fund.

  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 ...

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