Milmar Food Group II v. Applied Underwriters , 29 Neb. Ct. App. 714 ( 2021 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
04/20/2021 12:08 AM CDT
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714Milmar Food Group II, LLC, et al., appellees,
v. Applied Underwriters, Inc.,
et al., appellants.
___ N.W.2d ___
Filed April 6, 2021. No. A-20-042.
1. Jurisdiction. Whether a suit should be entertained or dismissed under
the rule of forum non conveniens depends largely upon the facts of the
particular case and rests in the discretion of the trial court.
2. Jurisdiction: States. The doctrine of forum non conveniens (literally,
“an unsuitable court”) provides that a state will not exercise jurisdiction
if it is a seriously inconvenient forum for the trial of the action, provided
that a more appropriate forum is provided to the plaintiff.
3. Jurisdiction: Words and Phrases. The doctrine of forum non conve-
niens refers to the discretionary power of a court to decline jurisdiction
when the convenience of the parties and the ends of justice would be
better served if the action were brought and tried in another forum.
4. Jurisdiction: States. A plaintiff’s choice of a forum should not be over-
turned except for weighty reasons, and only when trial in the chosen
forum would establish oppressiveness and vexation to the defendant out
of all proportion to the plaintiff’s convenience, or when the forum is
inappropriate because of considerations affecting the court’s own admin-
istrative and legal problems.
5. Jurisdiction: States: Waiver. When parties agree to a forum selection
clause, they waive the right to challenge the preselected forum as incon-
venient or less convenient for themselves or their witnesses, or for their
pursuit of the litigation. In essence, they waive the right to challenge the
private interest factors. However, a trial court may consider arguments
about public interest factors. These public interest factors include the
administrative difficulties flowing from court congestion, the local inter-
est in having localized controversies decided at home, and the interest
in having the trial of a diversity case in a forum that is at home with
the law.
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714Appeal from the District Court for Douglas County: Duane
C. Dougherty, Judge. Reversed and remanded with directions.
Jeffrey A. Silver for appellants.
Kristopher J. Covi, of McGrath, North, Mullin & Kratz,
P.C., L.L.O., for appellees.
Bishop, Arterburn, and Welch, Judges.
Bishop, Judge.
INTRODUCTION
Milmar Food Group II, LLC; Milmar Food Group, LLC; and
Milmar LLC (collectively Milmar) filed an action in the district
court for Douglas County against Applied Underwriters, Inc.;
Applied Underwriters Captive Risk Assurance Company, Inc.;
Applied Risk Services, Inc.; Applied Risk Services of New
York, Inc.; North American Casualty Company; Continental
Indemnity Company; and California Insurance Company (col-
lectively Applied), alleging nine claims based on a workers’
compensation reinsurance participation agreement (RPA) that
Milmar asserts violated New York insurance law. The Douglas
County District Court, sua sponte, dismissed Milmar’s action
without prejudice, citing the doctrine of forum non conve-
niens. We reverse, and remand with directions to stay the
present action pending Milmar’s attempt to refile its action in
New York.
BACKGROUND
New York Lawsuit
Milmar initially filed a lawsuit against Applied in New York.
See Milmar Food Group II, LLC v. Applied Underwriters, Inc.,
61 Misc. 3d 812, 85 N.Y.S.3d 347 (2018). As stated in the New
York court’s opinion:
[P]laintiffs (collectively, Milmar) are affiliated New York
companies, engaged in the production and distribution
of food products, which are required by New York law
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714to provide workers’ compensation insurance for their
employees. Defendants provide products and services in
connection with workers’ compensation insurance cover-
age. Beginning in 2013, Milmar was covered under a work-
ers’ compensation program (the EquityComp Program)
created, patented and implemented by defendants.
There are essentially three components to this Program:
1. Standard workers’ compensation insurance policies
issued to Milmar by defendants Continental Indemnity
Company (Continental) and California Insurance
Company (California), with rates and forms approved by
New York’s Department of Financial Services or its pred­
ecessor, the New York Insurance Department;
2. A reinsurance agreement (the Reinsurance Treaty)
between defendant Applied Underwriters Captive Risk
Assurance Company, Inc. (AUCRA) and affiliates of
defendant Applied Underwriters, Inc. (AU), including
Continental and California; and
3. A Reinsurance Participation Agreement (RPA)
between AUCRA and Milmar.
Milmar commenced this action, complaining that the
RPA is illegal and fraudulent, and seeking, inter alia, a
declaratory judgment that the RPA is void and unenforce-
able under the New York Insurance Law, equitable rescis-
sion of the RPA and money damages for sums paid under
the RPA in excess of premiums due under the Continental
and California insurance policies.
Defendants move, inter alia, (1) to dismiss Milmar’s
claims against AUCRA on the ground that the RPA des-
ignates the courts of Nebraska as the exclusive forum
for resolving “any matter concerning this Agreement
that is not subject to the dispute resolution provisions
of Paragraph 13 hereof,” and (2) to dismiss Milmar’s
claims against all remaining defendants on the ground
that AUCRA is a necessary party who cannot be joined in
this New York action.
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714Milmar Food Group II, LLC v. Applied Underwriters, Inc.,
61 Misc. 3d at 815-16, 85 N.Y.S.3d at 350-51 (emphasis
in original).
The New York court ultimately determined that the RPA’s
Nebraska forum selection clause was enforceable. It also deter-
mined that the forum selection clause should not be set aside.
The court stated:
Milmar has not shown that trial in Nebraska would be so
gravely difficult that it would, for all practical purposes,
be deprived of its day in court. Applying a forum non
conveniens analysis in accord with what it takes to be
Nebraska law, Milmar claims only that Nebraska is not
a reasonably convenient place for the trial of this action.
Under New York law, however, “where a party to a con-
tract has agreed to submit to the jurisdiction of a court,
that party is precluded from attacking the court’s juris-
diction on forum non conveniens grounds.” (Honeywell
Intl. Inc. v ARC Energy Servs., Inc., [152 A.D.3d 444,
444, 55 N.Y.S.3d 658, 658 (N.Y. App. Div. 2017)];
Sterling Natl. Bank v Eastern Shipping Worldwide, Inc.,
[35 A.D.3d 222, 223, 826 N.Y.S.2d 235, 238 (N.Y. App.
Div. 2006)]).
In view of the foregoing, Milmar has failed to carry
its heavy burden under New York law of showing that
the RPA’s Nebraska forum selection clause should be
set aside.
Milmar Food Group II, LLC v. Applied Underwriters, Inc., 61
Misc. 3d 812, 821-22, 85 N.Y.S.3d 347, 355 (2018).
Accordingly, the New York court dismissed Milmar’s
claims against defendant Applied Underwriters Captive Risk
Assurance Company (AUCRA) without prejudice and Milmar
was “granted leave to recommence its action against AUCRA
in the courts of the State of Nebraska.” Id. at 832, 85 N.Y.S.3d
at 362.
The New York court further found that AUCRA was a
necessary party to all claims asserted by Milmar, and it there-
fore ordered that Milmar’s claims against defendants Applied
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714Underwriters, Applied Risk Services, Applied Risk Services
of New York, North American Casualty Company, Continental
Indemnity Company, and California Insurance Company
were dismissed without prejudice for nonjoinder of defendant
AUCRA due to the aforesaid Nebraska forum selection clause.
The court noted
in particular that Milmar has an effective remedy in
Nebraska because all named defendants except Applied
Risk Services of New York, Inc.—a peripheral defend­
ant against whom no specific allegations are made in
the complaint—are Nebraska corporations, or have their
principal place of business in Nebraska, and are therefore
subject to general jurisdiction in the courts of Nebraska.
Id. at 833, 85 N.Y.S.3d at 362.
Nebraska Lawsuit
On March 3, 2019, Milmar filed a complaint against Applied
in the district court for Douglas County. Milmar alleged nine
claims against Applied based on the RPA, which Milmar
asserts violated New York insurance law. Specifically, Milmar’s
“Demand[s] for Relief ” were (1) “Declaratory Judgment That
the RPA Is Void and Unenforceable Under New York Insurance
Law § 2347,” (2) “Declaratory Judgment That the RPA Is Void
and Unenforceable Under New York Insurance Law as an
Unlawful Reinsurance Agreement,” (3) “Violation of New York
Insurance Law § 4226 for Misrepresentations By Insurers,” (4)
“Equitable Rescission of the RPA,” (5) “Fraudulent Business
Practices Under Gen. Bus[.] Law § 349,” (6) “Common Law
Fraud,” (7) “Negligent and/or Improper Claims Handling,” (8)
“Violation of the Nebraska Consumer Protection Act,” and (9)
“Violation of the Nebraska Uniform Deceptive Trade Practices
Act.” Milmar sought declaratory relief and damages.
On April 29, 2019, Applied filed a motion to dismiss
Milmar’s complaint pursuant to Neb. Ct. R. Pldg. § 6-1112(b)(6)
“for the reason that [Milmar’s] Complaint fails to state a claim
upon which relief can be granted.”
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714A hearing was held on Applied’s motion to dismiss on June
11, 2019; however, a record was not made in connection with
that hearing, and we therefore do not have a bill of exceptions
from that hearing.
On December 26, 2019, the district court entered its order.
The district court, sua sponte, invoked the doctrine of forum
non conveniens to dismiss the case without prejudice. The
court stated:
Although Nebraska courts have jurisdiction over the par-
ties, resolution of the claims in this case involves analysis
of whether the [RPA] is void under New York regulations
relating to New York workers’ compensation insurance.
Resolution of these issues impacts the availability of this
type of [RPA] for workers’ compensation insurance hold-
ers in New York. These issues are complex and would be
“best administered by the individual state’s agencies or
courts.” . . . Additionally, the judicial system’s interest in
obtaining the most efficient resolution of this controversy
lies in having this case tried in the New York courts. .
. . New York courts have greater expertise and interest
in the matters involved in this case, including their own
workers’ compensation insurance laws and regulations.
Additionally, this Court takes judicial notice of the filing
of other similar cases in its docket and determines these
cases would consume significant judicial resources of the
State of Nebraska.
The court found that its analysis of the issue was distinct from
that of the New York court which
declined to set aside the forum selection clause, [but]
did not analyze the clause under the doctrine of forum
non conveniens as codified in [Neb. Rev. Stat.] § 25-538
[(Reissue 2016)]. Rather, the New York court’s analysis
reached only the issues of whether the Nebraska Choice
of Forum Act, constitutional due process, or fraud nulli-
fied the forum selection clause.
The district court determined, sua sponte, that “the forum
selection clause should be set aside under the doctrine of
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714forum non conveniens and this action should be dismissed
without prejudice and [Milmar is] given leave to file in the
courts of the State of New York.” Accordingly, “the Court does
not reach the merits of [Applied’s] arguments relating to its
12(b)(6) Motion to Dismiss.”
Applied appeals.
ASSIGNMENT OF ERROR
Applied assigns, summarized, that the district court erred
when it dismissed the complaint sua sponte on forum non con-
veniens grounds.
STANDARD OF REVIEW
[1] Whether a suit should be entertained or dismissed under
the rule of forum non conveniens depends largely upon the
facts of the particular case and rests in the discretion of the
trial court. Christian v. Smith, 276 Neb. 867, 759 N.W.2d
447 (2008).
ANALYSIS
[2,3] The doctrine of forum non conveniens (literally, “an
unsuitable court”) provides that a state will not exercise juris-
diction if it is a seriously inconvenient forum for the trial of
the action, provided that a more appropriate forum is provided
to the plaintiff. Ameritas Invest. Corp. v. McKinney, 269 Neb.
564, 694 N.W.2d 191 (2005). It refers to the discretionary
power of a court to decline jurisdiction when the convenience
of the parties and the ends of justice would be better served
if the action were brought and tried in another forum. Id.Neb. Rev. Stat. § 25-538 (Reissue 2016) states, “When the
court finds that in the interest of substantial justice the action
should be heard in another forum, the court may stay or dis-
miss the action in whole or in part on any conditions that may
be just.”
[4,5] In its analysis, the district court looked to this court’s
opinion in Applied Underwriters v. E.M. Pizza, 26 Neb. App.
906, 923 N.W.2d 789 (2019). While the district court noted
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714that the legal framework of Applied Underwriters v. E.M. Pizza
involved a jurisdictional issue not applicable to the present
case, it found Applied Underwriters v. E.M. Pizza instructive
because “the [public interest] factors that inform[ed] analysis
[in that case] are the same factors considered by a court ana-
lyzing convenience of the forum under the doctrine of forum
non conveniens.” In Applied Underwriters v. E.M. Pizza, this
court stated:
A plaintiff’s choice of a forum should not be over-
turned except for “‘weighty reasons,’” and only when
trial in the chosen forum would establish oppressiveness
and vexation to the defendant out of all proportion to
the plaintiff’s convenience, or when the forum is inap-
propriate because of considerations affecting the court’s
own administrative and legal problems. . . . [I]t is also
appropriate for a court to consider the advantages of hav-
ing trial in a forum that is at home with the state law that
must govern the case, rather than having a court in some
other forum untangle problems in conflict of laws, and in
law foreign to itself. . . .
The U.S. Supreme Court recently addressed the issue
of whether a plaintiff’s choice-of-forum clause could be
set aside under the doctrine of forum non conveniens
when seeking a dismissal or transfer under 28 U.S.C.
§ 1406(a) (2012). See Atlantic Marine Constr. Co. v.
United States Dist. Court for Western Dist. of Tex., 571
U.S. 49, 134 S. Ct. 568, 187 L. Ed. 2d 487 (2013). In
doing so, the Court identified both private interest factors
and public interest factors. The Court stated that when
parties agree to a forum selection clause, they waive the
right to challenge the preselected forum as inconvenient
or less convenient for themselves or their witnesses, or
for their pursuit of the litigation. Id. In essence, they
waive the right to challenge the private interest factors.
However, a trial court may consider arguments about
public interest factors. Id. These public interest factors
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714include the administrative difficulties flowing from court
congestion, the local interest in having localized contro-
versies decided at home, and the interest in having the
trial of a diversity case in a forum that is at home with
the law. Id. These public interest factors are consistent
with the factors the Nebraska Supreme Court identified in
Ameritas Invest. Corp. v. McKinney, 269 Neb. 564, 694
N.W.2d 191 (2005).
26 Neb. App. at 919-20, 923 N.W.2d at 800-01 (emphasis sup-
plied). This court then stated:
California has a significantly greater interest in the issues
in this case than does Nebraska and that California’s judi-
cial system in interpreting its own workers’ compensation
laws clearly would provide a more efficient resolution of
the controversies within this case. . . .
. . . [A] Nebraska court would likely have to apply
California’s complex workers’ compensation laws to this
dispute. We find that this factor weighs heavily against a
finding that this state is a reasonably convenient place for
the trial of this action as required under [Neb. Rev. Stat.]
§ 25-414(1)(b) [(Reissue 2016) of the Model Uniform
Choice of Forum Act]. As stated by Professor Larson
in his treatise on workers’ compensation law, due to
the complexity of workers’ compensation laws, cases in
which they are involved are best administered by the indi-
vidual state’s agencies or courts. See 13 Arthur Larson
& Lex K. Larson, Larson’s Workers’ Compensation Law
§ 140.02[4] (2017). Therefore, a California court would
be in the best position to interpret and apply its own
workers’ compensation laws to this dispute which affects
primarily California workers.
Finally, the judicial system’s interest in obtaining the
most efficient resolution of this controversy lies in hav-
ing this case tried in the California courts. As stated by
counsel during oral arguments, there are numerous other
cases stemming from similar RPA’s that are pending
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714in the Nebraska courts, which consume this State’s judi-
cial resources.
Applied Underwriters v. E.M. Pizza, 26 Neb. App. 906, 920-21,
923 N.W.2d 789, 801 (2019).
As stated previously, the district court in the present case
found that resolution of Milmar’s claims involves analysis of
whether the RPA is void under New York regulations relating
to New York workers’ compensation insurance. The district
court stated, “Resolution of these issues impacts the availabil-
ity of this type of [RPA] for workers’ compensation insurance
holders in New York. These issues are complex and would
be ‘best administered by the individual state’s agencies or
courts’” because “New York courts have greater expertise and
interest in the matters involved in this case, including their
own workers’ compensation insurance laws and regulations.”
Additionally, the district court took judicial notice of the fil-
ing of other similar cases in its docket and determined these
cases would consume significant judicial resources of the State
of Nebraska. The district court determined that “this is one of
a rare set of cases in which public interest factors . . . support
setting aside the forum selection clause [in the RPA] under the
doctrine of forum non conveniens.” The district court then dis-
missed the action without prejudice and gave Milmar leave to
file in the courts of New York.
Applied argues that the district court incorrectly applied
the law of forum non conveniens because “[t]he Nebraska
Supreme Court has repeatedly emphasized that a case cannot
be dismissed on forum non conveniens grounds unless another
forum is available to hear the dispute.” Brief for appellants at
15. In support of its assertion, Applied refers us to Christian
v. Smith, 276 Neb. 867, 876, 759 N.W.2d 447, 457 (2008)
(“doctrine of forum non conveniens provides that a state will
not exercise jurisdiction if it is a seriously inconvenient forum
for the trial of the action, provided that a more appropri-
ate forum is provided to the plaintiff”), and Ameritas Invest.
Corp. v. McKinney, 269 Neb. 564, 694 N.W.2d 191 (2005)
(same). Applied contends that Milmar has no available forum
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714in New York because Milmar’s claims have already been dis-
missed by the New York courts.
Milmar agrees with Applied that the district court erred in
dismissing this case because the court did not identify a more
appropriate forum, given that the New York court’s decision
“effectively precludes Milmar from pursuing its claims against
[Applied] in New York.” Brief for appellees at 3. Milmar
states, “Perhaps a New York court, armed with this [Nebraska]
decision, would change the result to avoid Milmar being left
without any forum, but that is speculation.” Id.Both Applied and Milmar support reversal of the district
court’s dismissal of the complaint, and both request that the
matter be remanded back to the district court for consideration
of Applied’s motion to dismiss for failure to state a claim. We
agree with the parties that the dismissal should be reversed and
the matter remanded, but we direct a different initial step on
remand, as explained below.
Although we are reversing the district court’s dismissal of
the action, we agree with its consideration of the public inter-
est factors as set forth in Applied Underwriters v. E.M. Pizza,
26 Neb. App. 906, 923 N.W.2d 789 (2019). We also agree with
its conclusion that New York is the better forum for this action
in light of those factors. However, the court considered those
factors without also considering the unique circumstances
of the present case, namely, a New York court already dis-
missed Milmar’s case because it determined the case should
be heard in Nebraska based on the RPA’s forum selection
clause. Additionally, when addressing Milmar’s claim that
Nebraska was an inconvenient forum, that same New York
court concluded the argument lacked merit because Milmar
had agreed to submit to Nebraska’s jurisdiction by contract.
Notably, however, while the New York court was not per-
suaded by Milmar’s apparent argument of private interest
factors under forum non conveniens, it did not address the
public interest factors of forum non convieniens, as the district
court did in this action. Although the district court dismissed
the case without prejudice and gave Milmar leave to file in
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Nebraska Court of Appeals Advance Sheets
29 Nebraska Appellate Reports
MILMAR FOOD GROUP II v. APPLIED UNDERWRITERS
Cite as 29 Neb. App. 714the courts of New York, it did not analyze whether New York
is now a reasonably available forum given the circumstances
just described.
We conclude the district court abused its discretion when
it used the public interest factors of forum non conveniens to
dismiss Milmar’s case without also considering whether there
was a more appropriate forum available to Milmar. Given the
unique circumstances present in this case, rather than dismiss-
ing the action, the district court should have stayed the action
on the condition that the case is filed in and accepted by the
New York courts. Section 25-538 provides, “When the court
finds that in the interest of substantial justice the action should
be heard in another forum, the court may stay or dismiss the
action in whole or in part on any conditions that may be just.”
Accordingly, we reverse the decision of the district court dis-
missing the case without prejudice and remand the matter with
directions that the court stay the action on the condition that
the case is filed in and accepted by the New York courts.
As an aside, we note that a case with similar underlying
issues to those in Milmar’s complaint is currently working
its way through the New York courts, which case may war-
rant attention on remand in the present matter to the extent
the New York courts decline to accept Milmar’s efforts to
refile its action in that state once the present action has been
stayed in Nebraska. See Air-Sea Packing Group, Inc. v. Applied
Underwriters, Inc., No. 711035 2019, 2020 WL 3507690 (N.Y.
Sup. May 21, 2020).
CONCLUSION
For the reasons set forth above, we reverse the decision of
the district court dismissing the case without prejudice and
remand the matter with directions that the court stay the action
on the condition that the case is filed in and accepted by the
New York courts.
Reversed and remanded with directions.