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Vantage Commodities Financial Services I, LLC v. Assured Risk Transfer PCC, LLC

United States District Court, District of Columbia

August 6, 2018

VANTAGE COMMODITIES FINANCIAL SERVICES I, LLC, Plaintiff,
v.
ASSURED RISK TRANSFER PCC, LLC, et al., Defendants.

          MEMORANDUM OPINION

          TREVOR N. MCFADDEN, U.S.D.J.

         Vantage Commodities Financial Services I, LLC won a multi-million dollar arbitration award against Assured Risk Transfer PCC, LLC, or ART. Now Vantage wants the money. Although the arbitration award represents the proceeds of a credit insurance policy that ART sold to Vantage, ART says it cannot pay by itself because it counted on help from reinsurance companies. And the companies that reinsured ART's liability under the insurance policy have refused to help. So Vantage has sued ART and the reinsurance companies. It has also sued Willis Limited, Willis Re Inc., and Willis Towers Watson Management (Vermont), Ltd.-related companies that Vantage says offered ART their services in captive insurance management and as reinsurance brokers and intermediaries. The reinsurance companies and the Willis companies have filed Motions to Dismiss. Because Vantage failed to establish the Court's personal jurisdiction over the reinsurance companies, their Motions to Dismiss will be granted. And because Vantage did not state a contract claim but has stated several negligence claims against the Willis Defendants, their Motion to Dismiss will be granted in part and denied in part.

         I. BACKGROUND

         This case began with a series of related financial transactions. First, Vantage extended $44 million in credit to an energy company. Compl. ¶ 93. Second, ART insured Vantage against the risk that the energy company would default, up to $22 million. Id. ¶ 17. Third, the Willis companies helped ART reinsure 90% of its liability by brokering reinsurance contracts with several other companies, including the seven reinsurance companies that are defendants here.[1] Then the energy company defaulted and went bankrupt. Id. ¶¶ 82, 89.

         Vantage submitted proof of loss to ART to collect on its insurance policy, but ART denied the claim based on Vantage's purported failure to comply with a collateralization requirement in that policy. Id. ¶¶ 19, 94. So Vantage presented its claim to an arbitration panel, which determined that Vantage had met its collateralization obligations and that ART owed Vantage $22 million in damages, plus several million in interest and costs. Id. ¶¶ 20-21, 136. The Supreme Court of New York confirmed the award in the amount of $26, 288, 351.80 plus post-judgment interest that continues to accrue. Id. ¶ 22.

         Vantage has not received the funds. Id. ¶ 24. ART told Vantage that the only assets it has to pay the judgment are a $2.2 million letter of credit and its reinsurance policies. Id. ¶ 134. And the Reinsurer Defendants have refused to pay ART, claiming that ART and the Willis companies violated the terms of the reinsurance agreements by failing to provide them prompt notice of Vantage's loss. Id. ¶¶ 139-142. The Reinsurer Defendants have also rebuffed Vantage's efforts to collect, claiming that Vantage has no contractual right to demand payment directly from them. Id. ¶ 150.

         Vantage has now turned to federal court, filing a Complaint that names ART, the seven Reinsurer Defendants, and the three Willis companies as defendants.[2] Vantage asserts breach of contract claims against the Reinsurer Defendants and asks the Court for declaratory judgment establishing their contractual obligations. Id. ¶¶ 152-54, 162. It also asserts breach of contract and negligence claims against the Willis Defendants. Id. ¶¶ 163-187.[3] The Reinsurer Defendants have filed two Motions to Dismiss, and the Willis Defendants have filed one.

         II. ANALYSIS

         A. The Court Cannot Exercise Personal Jurisdiction Over the Reinsurer Defendants

         To hear a claim against a defendant, a court must have personal jurisdiction over that defendant. There are three requirements for a court to exercise personal jurisdiction. First, the state's long-arm statute must reach the defendant. GTE New Media Servs. Inc. v. BellSouth Corp., 199 F.3d 1343, 1347 (D.C. Cir. 2000). Second, the exercise of jurisdiction must comport with the constitutional requirements of due process. Id. Third, service of summons must take place to assert the court's jurisdiction. Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104 (1987). The plaintiff bears the burden of establishing a basis for personal jurisdiction. Crane v. New York Zoological Soc., 894 F.2d 454, 456 (D.C. Cir. 1990).

         1. The District of Columbia's Long-Arm Statute Reaches the Reinsurers

         The District of Columbia's long-arm statute authorizes courts to “exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person's . . . transacting any business in the District of Columbia.” D.C. Code § 13-423(a)(1). It also authorizes jurisdiction over persons defending against claims that arise from “contracting to insure or act as surety for or on any person, property, or risk, contract, obligation, or agreement located, executed, or to be performed within the District of Columbia at the time of contracting, unless the parties otherwise provide in writing.” D.C. Code § 13-423(a)(6). Vantage argues that I have jurisdiction over the Reinsurer Defendants under both these prongs of the long-arm. Pl.'s Opp. to Reinsurer Defs.' Mots. Dismiss 12-14.

         Under the insurance prong of the statute, Vantage correctly observes that the Reinsurer Defendants contracted to insure ART, a legal person located in the District of Columbia at the time of contracting. Id. at 13. The Reinsurer Defendants do not contest this. Instead, they claim they are beyond the reach of the long-arm statute because Vantage cannot assert rights under their contracts with ART and so can make no claim arising from those contracts. Memo. ISO Mot. Dismiss by Caisse Centrale De Réassurance, Hannover Ruckverishcerung AG, and Partner Reinsurance Europe PLC (First Reinsurer Defs.' Memo. ISO Mot. Dismiss) 14; Reply ISO First Reinsurer Defs.' Mot. Dismiss 5-6.[4] But this argument goes to the merits rather than to jurisdiction. And in any case, the long-arm's “arising from” requirement is satisfied “when the claim has a discernible relationship” to the District-related activity. I Mark Mktg. Servs., LLC v. Geoplast S.p.A., 753 F.Supp.2d 141, 157 (D.D.C. 2010). Here, Vantage's claim against the reinsurers has a clear relationship to the reinsurers' contracts with ART. It therefore arises from the Reinsurer Defendants' contracts to insure a person in the District and falls within the scope of the District's long-arm statute.[5]

         Alternatively, this Court has jurisdiction under the “transacting any business” prong of the statute for the reasons explained in the due process analysis below. See Thompson Hine, LLP v. Taieb, 734 F.3d 1187, 1189 (D.C. Cir. 2013) (holding that the “transacting any business” prong “provide[s] jurisdiction to the full extent allowed by the Due Process Clause”).

         2. The Exercise of Jurisdiction Comports with Due Process

         The Due Process Clause limits a court's jurisdiction to defendants who “have certain minimum contacts with [‘the territory of the forum,' which is to say, the geographic area under the court's authority, ] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Depending on the defendant's forum contacts, a court's personal jurisdiction over a defendant may be general, allowing the court to hear any claim against the defendant, or specific, allowing the court to hear claims against the defendant only if those claims arise from the defendant's forum contacts. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).

         A district court may exercise general jurisdiction over all claims against a corporate defendant if the corporation's “affiliations with the State are so continuous and systematic as to render [it] essentially at home” in the territory subject to the court's authority. Daimler AG v. Bauman, 571 U.S. 117, 761 (2014). Although the Supreme Court has not foreclosed the possibility of an “exceptional case, ” courts generally consider a corporation at home only in the place of its incorporation and in its principal place of business. See Id. & n.19. Vantage concedes that it does not know of any facts that would give me general jurisdiction over the Reinsurer Defendants. Pl.'s Opp. to Reinsurer Defs.' Mots. Dismiss 12 n.5. And by Vantage's own account, the Reinsurer Defendants are incorporated and have their principal places of business in Germany, Ireland, the United Kingdom, Switzerland, and France. Pl.'s Supp. Filing 4-7. So I do not have general personal jurisdiction over the reinsurers.[6]

         A district court that lacks general jurisdiction may still have specific jurisdiction over claims related to acts by which a defendant “purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958). Purposeful availment does not require that a defendant physically enter the forum state. Burger King, 471 U.S. at 476.[7] It simply “ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts or of the unilateral activity of another party or a third person.” Id. at 475 (internal citations omitted). For a commercial actor, it is enough that the defendant purposefully directed its efforts toward residents of the forum state or created continuing obligations to forum residents. Id. By tying jurisdiction to actions by the defendant that create a “substantial connection” with the forum state, the law ensures the foreseeability of a court's exercise of jurisdiction. Id. at 474-75.

         The Reinsurer Defendants are commercial actors who purposefully directed their activities at ART, a resident of the District of Columbia. See Compl. Ex. 4.[8] They did so by entering reinsurance contracts that created continuing obligations to ART. See Id. ¶ 52, 65-66. It appears that ART was domiciled in the District of Columbia when the Reinsurer Defendants contracted with it, when it paid premiums to the Reinsurer Defendants, and when it experienced the risk that the reinsurance plans covered. See Id. Ex. 4 (establishing the District of Columbia as ART's place of domicile); see also Compl. ¶ 122 (referencing premiums paid by ART to reinsurers). This establishes a substantial connection between the Reinsurer Defendants and the District of Columbia that does not result from random or fortuitous occurrences and that makes it reasonably foreseeable that a lawsuit related to the contracts would be brought in the District. See Burger King, 471 U.S. at 474-75; McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223 (1957).

         To be sure, as the Reinsurer Defendants point out, “merely entering into a contract with an out-of-state party does not constitute the kind of purposeful availment that subjects a defendant to the laws of the other party's home state.” Katopothis v. Windsor-Mount Joy Mut. Ins. Co., 211 F.Supp.3d 1, 22 (D.D.C. 2016). But “under some circumstances the terms of a contract may well create such a substantial connection between the non-resident and the forum that the contract alone could supply the necessary minimum contacts.” Thompson Hine, 734 F.3d at 1193. And a single insurance contract provides sufficient basis for personal jurisdiction when, as here, the insurance company purposefully enters a contract with, receives payments from, and insures a risk experienced by a forum resident. McGee, 355 U.S. at 223 (emphasizing the forum state's “manifest interest in providing effective means of redress for its residents when their insurers refuse to pay claims”); see also Travelers Health Assoc. v. Va. State Corp. Comm'n, 339 U.S. 643, 647 (1950) (“[A] state has a legitimate interest in all insurance policies protecting its residents against risks, an interest which the state can protect even though the state action may have repercussions beyond state lines.”); id. at 648 (noting the “great weight” accorded to a state's interest in enforcing its residents' insurance contracts). The reinsurance contracts fall under this rule because reinsurance is simply “insurance for insurance companies.” See Validus Reinsurance, Ltd. v. United States, 19 F.Supp.3d 225, 227 (D.D.C. 2014). Thus, I have specific jurisdiction over Vantage's claims against the Reinsurer Defendants.

         3. Vantage Has Not Asserted the Court's Jurisdiction Through Proper Service

         “Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied.” Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104 (1987). Vantage tried to serve the Reinsurer Defendants through their law firm, Mendes & Mount, which it argues was their authorized agent for service of process under Federal Rule of Civil Procedure 4(h)(1)(B). Pl.'s Opp. to Reinsurer Defs.' Mots. Dismiss 21-22.[9] This view finds some support in the reinsurance contracts, which authorize service on Mendes & Mount. Compl. Ex. 7 Art. XXVI; id. Ex. 8 Art. XXVI.[10]

         But the Reinsurer Defendants deny that Mendes & Mount is their authorized agent for service of process. First Reinsurer Defs.' Memo. ISO Mot. Dismiss 15-17; Second Reinsurer Defs.' Memo. ISO Mot. Dismiss 12-13. They claim that the service provision in the reinsurance contracts authorizes service only if ART sues the reinsurers to compel arbitration or to enforce an arbitral award. First Reinsurer Defs.' Memo. ISO Mot. Dismiss 17; Second Reinsurer Defs.' Memo. ISO Mot. Dismiss 13. And they are right that the contracts' service provision is not a general authorization of Mendes & Mount to receive service of process in all cases.[11] The clearest limitation on the service of suit provision is that it “shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes” under the contracts' arbitration clause. Compl. Ex. 7 Art. XXVI; id. Ex. 8 Art. XXVI.

         Thus, Vantage can only serve the Reinsurer Defendants through Mendes & Mount if it is entitled to rely on the service clause and can maintain its lawsuit without violating the arbitration clause of the reinsurance contracts.[12] The Reinsurer Defendants argue that any legal theory allowing Vantage to invoke the benefits of the reinsurance contracts would also require it to submit its claims to arbitration. First Reinsurer Defs.' Memo. ISO Mot. Dismiss 21-24; Second Reinsurer Defs.' Memo. ISO Mot. Dismiss 17-18. Vantage responds that it is not seeking the benefit of the reinsurance contracts but is instead seeking to enforce “a ...


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