UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Roger A. Sevigny, Insurance Commissioner of the State of New Hampshire, solely in his capacity as Liquidator of The Home Insurance Company

v. Civil No. 15-cv-127-JD Opinion No.

British Aviation Insurance Company Limited and The Marine Insurance Company Limited

O R D E R

Roger A. Sevigny, Insurance Commissioner of the State of

New Hampshire, brought suit in state court, in his capacity as

liquidator of the Home Insurance Company (“Liquidator”), to

collect reinsurance from British Aviation Insurance Company

Limited and The Marine Insurance Company Limited. The

defendants removed the case to this court, and the Liquidator

moves to remand. The defendants object to the motion to remand.

Discussion

The Liquidator contends that the case must be remanded to

state court because the defendants’ reinsurance contracts waive

the defendants’ right to remove through a provision titled,

“Service of Suit Clause (USA).” The Liquidator also asks the

court to order the defendants to pay costs and expenses incurred in seeking remand. The defendants object to the motion to

remand, arguing that the Service of Suit Clause does not waive

their right to remove.

The Liquidator appended a copy of a reinsurance policy to

its complaint as Exhibit A. The Service of Suit Clause

(“Clause”) in the policy provides as follows:

In the event of the failure of Underwriters hereon to pay any amount claimed to be due hereunder, Underwriters hereon, at the request of the Company [sic] will submit to the jurisdiction of any court of competent jurisdiction within the United States and will comply with all requirements necessary to give such court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such court.

Service of Process in such suit may be made upon

Mendes & Mount, 27, [sic] Williams Street, [sic] New York, N.Y. 10005.

And in any suit instituted against any one of them upon this contract, Underwriters will abide by the final decision of such Court or of any Appellate Court in the event of an appeal.

For purposes of the motion to remand, the defendants do not

dispute that the Clause has been triggered and applies in this

case to the Liquidator’s claims on behalf of The Home Insurance

Company.

A. Removal

“When plaintiffs file a civil action in state court over

which the federal courts would have had original jurisdiction

2 based on diversity of citizenship, the defendants may remove the

action to federal court.” Univ. Truck & Equip. Co., Inc. v.

Southworth-Milton, Inc.,

(1st Cir. 2014)

(citing

(a)). The plaintiff may then move to

remand the case to state court because of a defect, other than

subject matter jurisdiction, within thirty days of removal.

(c). To oppose a motion to remand, the defendants

bear the burden of showing that removal was proper. Inhabitants

of the Town of Fairfield v. Time Warner Cable Northeast LLC,

, at *1 (D. Me. Apr. 8, 2015); Hanover Ins. Gr.,

Inc. v. Chartis Speciality Ins. Co.,

, at *1 (D.

Mass. Aug. 19, 2013); Pacheco v. St. Luke’s Emergency Assocs.,

P.C.,

(D. Mass. 2012).

There is no dispute that this court has subject matter

jurisdiction based on the parties’ diversity of citizenship and

there is no dispute that the removal was timely. The issue is

whether under the Clause the defendants waived their right to

remove the case. The defendants argue that the Clause is a

permissive forum selection clause, which does not mandate

exclusive jurisdiction in New Hampshire state courts. The

Liquidator contends that the Clause, as a service of suit

provision, constitutes a waiver by the defendants of their right

to remove.

3 B. Service of Suit Clause

The parties agree that federal common law governs

enforcement of forum selection clauses, including the service of

suit clause at issue here.1 Despite that choice, the defendants

state that there may be a conflict among the federal circuit

courts, while the Liquidator supports the choice of federal

common law by showing that both Michigan and New Hampshire

enforce forum selection clauses under ordinary contract

principles. The appropriate inquiry, however, is whether the

applicable state law conflicts with federal common law, because

a conflict would require a determination of whether the

enforceability of the clause was procedural or substantive under

Erie R.R. Co. v. Tompkins,

(1938). See Huffington

v. T.C. Group, LLC,

(1st Cir. 2011); Rafael

Rodriguez Barril, Inc. v. Conbraco Indus., Inc.,

(1st Cir. 2010). New Hampshire follows the federal standard

provided in The Bremen v. Zapata Off-Shore Co.,

(1972). Hansa Consult of N. Am., LLC v. Hansaconsult

The defendants assert in a footnote that Michigan law should 1

be applied to construe the reinsurance contracts because the original insured, General Motors, is located in Michigan. They acknowledge, however, that no conflict exists between the contract law of Michigan and New Hampshire. The Liquidator cites cases to show that no conflict exists. For that reason, the law of the forum, New Hampshire, would apply. See Reicher v. Berkshire Life Ins. Co. of Am.,

(1st Cir. 2004); Aftokinito Props., Inc. v. Millbrook Ventures, LLC,

, at *3 (D.N.H. Aug. 9, 2010).

4 Ingenieurgesellschaft mbH,

(2011). Therefore,

an Erie analysis is unnecessary, and the Bremen standard will

govern the enforceability of the service of suit clause in this

case.

Under the federal standard, the court addresses a forum

selection clause by first determining whether the clause is

mandatory or permissive. Claudio-De Leon v. Sistema Univ. Ana

G. Mendez,

(1st Cir. 2014). A mandatory clause

includes language that “jurisdiction and venue are appropriate

exclusively in the designated forum” while a permissive clause

authorizes jurisdiction and venue in the stated form but does

not preclude litigation elsewhere. Rivera v. Centro Medico de

Turabo, Inc.,

(1st Cir. 2009) (internal

quotation marks omitted). If the clause is mandatory and if the

scope of the clause covers the claims at issue, the court then

considers whether the opposing party has provided a strong

showing that the clause is unreasonable under the four Bremen

grounds. Claudio-De Leon,

.

The Liquidator contends that the service of suit clause in

this case is mandatory, requiring litigation in the forum chosen

by the insured. For that reason, the Liquidator argues, the

Clause operates as a waiver of the right to removal. The

defendants argue that the clause is merely a consent to

5 jurisdiction and does not mandate litigation in any forum

exclusively.

1. Service of Suit Clause as Mandatory Forum Selection

Clause and Waiver

Although the First Circuit has not addressed the effect of

service of suit clauses on removal, generally “where an insurer

has removed a state court action brought by its insured and a

valid service of suit clause exists, the insurer’s right to

removal has been waived and remand is appropriate.” Hanover

Ins. Group,

, at *3. The service of suit clause

at issue here has been used in reinsurance contracts for many

years, and as a result, the language has been addressed in other

cases. Dinallo v. Dunav Ins. Co.,

(S.D.N.Y. 2009) (citing cases). The majority of courts that

have considered service of suit clauses with the same or similar

language have interpreted them to require that the insurer

litigate in the forum chosen by the insured, which constitutes a

mandatory forum selection clause and waiver of the right of

removal.2 See, e.g. Russell Corp. v. Am. Home Assur. Co.,

(11th Cir. 2001); Travelers Ins. Co. v.

2 The Eighth Circuit concluded that it lacked jurisdiction to consider an appeal of a remand order based on a similar service of suit clause. Transit Cas. Co. v. Certain Underwriters at Lloyd’s of London,

(8th Cir. 1997).

6 Keeling,

, 1490 (2d Cir. 1993); Foster v.

Chesapeake Ins. Co.,

(3d Cir. 1991); City of

Rose City v. Nutmeg Ins. Co.,

(5th Cir. 1991);

Mosing v. Zloop, Inc.,

, at *3 (S.D. Tex. Apr.

22, 2015); Tri-Union Seafoods, LLC v. Starr Surplus Lines Ins.

Co., --- F. Supp. 3d ---,

, at *4-*5 (S.D. Cal.

Feb. 5, 2015); Hazelwood Logistics Ctr. LLC v. Illinois Union

Ins. Co.,

, at *2 (E.D. Mo. Feb. 28, 2014);

Hanover Ins. Group,

, at *3; BEPCO, L.P. v. Santa

Fe Minerals, Inc.,

, at *3 (W.D. La. Apr. 25,

2011); Fleming Bldg. Co., Inc. v. Columbia Cas. Co.,

(N.D. Okla. 2010); Dinallo,

; Oxford Realty Group, LLC v. Axis Reinsurance Co.,

, at *5 (D.N.J. May 12, 2009); Sestech Env’l LP

v. Westchester Surplus Lines Ins. Co.,

, at *1-*2

(N.D. Ohio Jan. 30, 2009); Am. States Ins. Co. v. Century Sur.

Co.,

, at *2-*3 (W.D. Wash. Oct. 30, 2008).

The reasoning in the above cited cases is persuasive. In

the Clause, the defendants agreed to “submit to the jurisdiction

of any Court of competent jurisdiction,” and the Liquidator

chose the New Hampshire state court. The defendants also agreed

to “abide by the final decision of such Court,” which is the New

Hampshire state court. Based on the reasoning of the majority

of courts, by agreeing to proceed in New Hampshire state court

7 and to abide by the decision of that court, the defendants are

required to defend suit in the New Hampshire state court and

waived the right to remove the case to this court.

2. Contrary Authority

The defendants point to Autoridad de Energia Electrica de

P.R. v. Ericsson Inc.,

(1st Cir. 2000), along with

cases from other circuits, to show that the Clause did not waive

their right to remove this case. In Autoridad, the court

considered the effect of a forum selection clause on the

defendant’s right to remove the case from Puerto Rico

Commonwealth courts to federal court. The forum selection

clause at issue was: “This contract will be governed and

interpreted pursuant to the Laws of the Commonwealth of Puerto

Rico and the parties agree to submit to the jurisdiction of the

courts of the Commonwealth of Puerto Rico.”

. The

First Circuit concluded that the clause was “an affirmative

conferral of personal jurisdiction by consent, and not a

negative exclusion of jurisdiction in other courts,” and

reversed the district court’s remand order.

.

The defendants argue that the same analysis applies here.

Because the clauses are materially different, however, the

holding in Autoridad does not apply in this case.

8 In Autoridad, both parties mutually agreed to submit to the

jurisdiction of the Puerto Rico courts, conferring personal

jurisdiction as to both parties in Puerto Rico courts. Here,

the defendants agreed to submit to the jurisdiction of a court

chosen by the insured and to “comply with all requirements

necessary to give such court jurisdiction and all matters

arising hereunder shall be determined in accordance with the law

and practice of such court.” The defendants also agreed “to

abide by the final decision of such Court.”

The defendants agreed to let the insured choose the forum

for litigation and agreed to comply with that decision. As

such, the defendants made a different and more comprehensive

promise than the mutual forum selection provision in Autoridad,

and the defendants’ promise here precludes removal. See, e.g.,

Nutmeg Ins.,

; Tri-Union Seafoods,

,

at *4 (citing cases); Hanover Ins. Group,

, at *5

(citing cases). Therefore, the holding in Autoridad does not

control the outcome in this case.

The defendants also urge the court to follow McDermott

Int’l, Inc. v. Lloyds Underwriters of London,

(5th

Cir. 1991), and In re Delta Am. Re Ins. Co.,

(6th

Cir. 1990). Those cases, however, considered service of suit

clauses under different circumstances than apply here.

9 In McDermott, the Fifth Circuit reviewed the district

court’s decision to remand a case to state court, where the

policy included two different forum selection clauses. 944 F.2d

at 1206. Unlike the circumstances in Nutmeg Ins.,

, the policy in McDermott had a service of suit clause and an

arbitration clause. 944 F.2d at 1207. In addition, the

Convention Act governed the arbitration clause because the

parties were not all United States citizens. Id. at 1208. The

court concluded that, in light of the effect of the Convention

Act, waivers of the right to removal must be clear and

unequivocal. Id. at 1212-13; accord Ensco Int’l, Inc. v.

Certain Underwriters at Lloyd’s,

(5th Cir.

2009).

The McDermott standard, by its own terms, does not apply in

cases outside the Convention Act. See Southland Oil Co. v.

Miss. Ins. Guar. Ass’n,

(5th Cir. 2006).

Because this case does not involve the Convention Act or an

arbitration clause, the McDermott standard does not apply.

In Delta, the Kentucky insurance commissioner, as

liquidator of an insolvent insurance company, brought suit in

state court against the insurance company’s parent corporation

and its subsidiary and reinsurers.

. The

defendants removed the case to federal court, which was joined

by a foreign reinsurance company under the Foreign Sovereign

10 Immunity Act (“FSIA”).

The liquidator moved to remand on

the ground that the reinsurers had waived the right to remove

based on a forum selection clause in the reinsurance policies.

.

The district court granted the motion to remand, but the

Sixth Circuit reversed, holding that in cases under the FSIA,

which involve foreign states, “any claimed waiver of the right

of removal stemming from contractual language must be explicit.”

. Because this case does not involve the FSIA, the

standard used in Delta does not apply here. To the extent the

Sixth Circuit and district courts in the Sixth Circuit apply the

Delta standard in other contexts, this court is not persuaded to

veer away from the overwhelming majority of cases that have

interpreted language that is similar or identical to the Clause

as a waiver of the right of removal. See, e.g., Holloway v.

Scottsdale Ins. Co.,

, at *3 (E.D. Mich. June 18,

2014) (finding that cases interpreting the same clause language

as a waiver of the right to remove were “highly persuasive” but

denying the motion to remand due to Sixth Circuit precedent).

Because the service of suit clause in the defendants’

policy waived the defendants’ right to remove the case from the

New Hampshire state court where it was initiated, the case must

be remanded to that court.

11 C. Award of Costs and Expenses

The Liquidator asks the court to award costs and attorney’s

fees under § 1447(c). Section 1447(c) states that “[a]n order

remanding a case may require payment of just costs and any

actual expenses, including attorney fees, incurred as a result

of the removal.” “Absent unusual circumstances, courts may

award attorney’s fees under § 1447(c) only where the removing

party lacked an objectively reasonable basis for seeking

removal.” Martin v. Franklin Capital Corp.,

(2005).

The Liquidator argues that because the complaint cited the

Clause and the overwhelming majority of courts have held that

such a clause precludes removal, the defendants lacked an

objectively reasonable basis for removal. See Fleming Bldg.

Co., Inc. v. Columbia Cas. Co.,

, 1221 (D.

Colo. 2010) (“Given the decades-long history of the ‘submit to

service’ clause in insurance and reinsurance contracts, and the

overwhelming weight of authority that such provisions operate as

a waiver of the insurer’s right of removal, the court finds

. . . removal of the case was not ‘objectively reasonable.’”).

The defendants argue that because the First Circuit has not

addressed the effect of service of suit clauses on removal and

some authority does support their position, removal was not

objectively unreasonable. The defendants also note that they

12 are foreign entities so their effort to move to federal court

was not unreasonable or used as a litigation tactic.

Despite the outcome in Fleming, the court concludes in this

case that the removal was not objectively unreasonable.

Therefore, no award of costs and expenses is appropriate.

Conclusion

For the foregoing reasons, the plaintiff’s motion to remand

(document no. 9) is granted.

The case is remanded to Merrimack County Superior Court.

SO ORDERED.

__________________________ Joseph DiClerico, Jr. United States District Judge

June 16, 2015

cc: John P. Graceffa, Esq. J. Christopher Marshall, Esq. William N. Smart, Esq. Eric A. Smith, Esq.

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