Applied Underwriters v. S.E.B. Servs. of New York ( 2017 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
07/28/2017 09:08 AM CDT
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Nebraska Supreme Court A dvance Sheets
297 Nebraska R eports
APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
A pplied Underwriters, Inc., a Nebraska corporation,
and A pplied R isk Services, I nc., appellants, v.
S.E.B. Services of New York, Inc., a New York
corporation, and 20th Century Services
of New York, I nc., a New York
corporation, appellees.
___ N.W.2d ___
Filed July 21, 2017. No. S-16-496.
1. Appeal and Error. An appellate court is not obligated to engage in an
analysis that is not necessary to adjudicate the case and controversy
before it.
2. Moot Question: Jurisdiction: Appeal and Error. Mootness is a justi-
ciability doctrine that operates to prevent courts from exercising juris-
diction, and an appellate court reviews mootness determinations under
the same standard of review as other jurisdictional questions.
3. Standing: Jurisdiction: Parties. Standing is a jurisdictional component
of a party’s case because only a party who has standing may invoke the
jurisdiction of a court.
4. Jurisdiction: Judgments. A jurisdictional issue that does not involve a
factual dispute presents a question of law.
5. Moot Question: Words and Phrases. A moot case is one which seeks
to determine a question that no longer rests upon existing facts or
rights—i.e., a case in which the issues presented are no longer alive.
6. Moot Question. Mootness refers to events occurring after the filing of
a suit which eradicate the requisite personal interest in the resolution of
the dispute that existed at the beginning of the litigation.
7. Moot Question: Jurisdiction: Appeal and Error. Although mootness
does not prevent appellate jurisdiction, it is a justiciability doctrine that
can prevent courts from exercising jurisdiction.
8. Moot Question. As a general rule, a moot case is subject to sum-
mary dismissal.
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Nebraska Supreme Court A dvance Sheets
297 Nebraska R eports
APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
9. ____. The central question in a mootness analysis is whether changes
in circumstances that prevailed at the beginning of litigation have fore-
stalled any occasion for meaningful relief.
10. Parties: Standing. The question of standing can be raised by any party,
or the court, at any time during the proceeding.
11. Standing: Jurisdiction: Parties. Standing refers to whether a party had,
at the commencement of the litigation, a personal stake in the outcome
of the litigation that would warrant a court’s or tribunal’s exercising its
jurisdiction and remedial powers on the party’s behalf.
12. Standing: Words and Phrases. Standing involves a real interest in the
cause of action, meaning some legal or equitable right, title, or interest
in the subject matter of the controversy.
13. Standing: Claims: Parties. To have standing, a litigant must assert the
litigant’s own rights and interests, and cannot rest a claim on the legal
rights or interests of third parties.
14. Standing: Jurisdiction: Proof. A party invoking a court’s or tribunals’
jurisdiction bears the burden of establishing the elements of standing.
15. Pleadings: Standing. At the pleading stage, the standard for determin-
ing the sufficiency of a complaint to allege standing is fairly liberal.
16. Actions: Breach of Contract. As a general rule, one who is neither a
party to a contract nor an agent of a party to a contract has no rights
under the contract, and cannot bring an action for breach thereof.
17. Standing: Jurisdiction. The defect of standing is a defect of subject
matter jurisdiction. And when questions relating to both subject matter
jurisdiction and personal jurisdiction are present in a case, the court
must first determine the question of subject matter jurisdiction.
Appeal from the District Court for Douglas County:
K imberly Miller Pankonin, Judge. Affirmed.
Jeffrey A. Silver for appellants.
Stephen M. Bruckner and Patrick S. Cooper, of Fraser
Stryker, P.C., L.L.O., for appellees.
Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy,
K elch, and Funke, JJ.
Stacy, J.
Applied Underwriters, Inc. (Applied), and Applied Risk
Services, Inc. (ARS), appeal from an order dismissing their
breach of contract action against S.E.B. Services of New York,
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Nebraska Supreme Court A dvance Sheets
297 Nebraska R eports
APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
Inc., and 20th Century Services of New York, Inc. (collectively
S.E.B.). The district court dismissed the action for lack of
personal jurisdiction over S.E.B. and alternatively found that
Nebraska was an inconvenient forum. We affirm the dismissal,
but on different grounds.
FACTS
Applied is a Nebraska corporation located in Omaha,
Nebraska. It markets and administers workers’ compensation
insurance programs nationwide. S.E.B. is a New York cor-
poration with its principal place of business in New York.
S.E.B. provides security services and security guards in at least
22 states.
In 2014, S.E.B.’s third-party insurance broker contacted
Applied to discuss obtaining workers’ compensation coverage
for S.E.B. Subsequently, S.E.B. entered into a “Reinsurance
Participation Agreement” (RPA) with Applied Underwriters
Captive Risk Assurance Company, Inc. (AUCRAC). AUCRAC
is not a party to this litigation. A “true and accurate copy”
of the RPA was attached to the complaint in this matter.
Paragraph 8 of the RPA recites that ARS is the “billing
agent” for AUCRAC and is authorized “to account for, offset
and true up any and all amounts due . . . and owing” under
the RPA.
The RPA provides workers’ compensation coverage through
what it describes as a “segregated protected cell reinsurance
program” established by AUCRAC. The details of the pro-
gram are complex but irrelevant for purposes of resolving
this appeal. In general, according to the RPA, AUCRAC is
part of a “Reinsurance Treaty” composed of several “Issuing
Insurers” that participate in a pooling arrangement and col-
lectively issue the workers’ compensation coverage afforded
under the RPA.
From November 2014 through August 2015, S.E.B. reported
payroll information to Applied in Omaha, and Applied used
the information to calculate S.E.B.’s premium payments under
the RPA. Initially, Applied withdrew amounts for premium
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Nebraska Supreme Court A dvance Sheets
297 Nebraska R eports
APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
payments directly from S.E.B.’s bank account in New York
via electronic debits, but at some point, S.E.B. became dis-
satisfied with that arrangement and terminated the auto-
matic debits.
S.E.B. fell behind on the required premium payments, and
on May 5, 2015, the president of S.E.B. executed a promissory
note in favor of “Applied . . . and its affiliates and subsidi­
aries” in the amount of $42,362.59, payable in monthly install-
ments. The record shows the promissory note was paid in full
on December 22, 2015.
On October 26, 2015, Applied and ARS filed suit against
S.E.B. in the district court for Douglas County. In count I
of the complaint, Applied alleged S.E.B. breached the prom-
issory note and sought recovery of $8,144.27. In count II,
ARS alleged S.E.B. breached the RPA between AUCRAC and
S.E.B., and it sought recovery of $752,926.98.
On November 30, 2015, S.E.B. filed a motion to dismiss
the complaint pursuant to Neb. Ct. R. Pldg. § 6-1112(b)(2)
(lack of personal jurisdiction), (b)(6) (failure to state claim
upon which relief could be granted), and (b)(7) (failure to join
necessary party). S.E.B.’s motion also alleged dismissal was
appropriate under Neb. Rev. Stat. § 25-538 (Reissue 2016),
which 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.”
A hearing on the motion to dismiss was held January 8,
2016. The district court received three affidavits for the lim-
ited purpose of ruling on the motion to dismiss for lack of
personal jurisdiction. In addition, the court took judicial notice
of the case file.
In an order entered May 9, 2016, the district court dismissed
the action for lack of personal jurisdiction and, alternatively,
on the ground that Nebraska was an inconvenient forum.
Applied and ARS timely appealed, and we moved the case
to our docket on our own motion pursuant to our statutory
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Nebraska Supreme Court A dvance Sheets
297 Nebraska R eports
APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
authority to regulate the caseloads of the appellate courts of
this state.1
ASSIGNMENTS OF ERROR
Applied and ARS assign, restated and summarized, that the
district court erred in (1) finding it lacked personal jurisdiction
over S.E.B. under Nebraska’s long-arm statute, (2) declaring
the forum selection provisions of the RPA unenforceable, and
(3) finding Nebraska was not a reasonably convenient place
for trial.
SUPPLEMENTAL BRIEFING
After hearing oral arguments in this case, we directed the
parties to submit supplemental briefing on two issues: (1)
whether the promissory note had been paid in full, rendering
the appeal on count I moot, and (2) whether Applied and/or
ARS had standing to bring the claim alleged in count II when
neither was a party to the RPA.
[1] Having reviewed the parties’ supplemental briefing, we
find the issues of mootness and standing are dispositive. As
such, we do not address the original assignments of error. An
appellate court is not obligated to engage in an analysis that is
not necessary to adjudicate the case and controversy before it.2
STANDARD OF REVIEW
[2] Mootness is a justiciability doctrine that operates to pre-
vent courts from exercising jurisdiction, and an appellate court
reviews mootness determinations under the same standard of
review as other jurisdictional questions.3
[3] Standing is a jurisdictional component of a party’s case
because only a party who has standing may invoke the jurisdic-
tion of a court.4
1
See Neb. Rev. Stat. § 24-1106(3) (Reissue 2016).
2
State v. Senn, 295 Neb. 315, 888 N.W.2d 716 (2016); State v. Planck, 289
Neb. 510, 856 N.W.2d 112 (2014).
3
See Al-Ameen v. Frakes, 293 Neb. 248, 876 N.W.2d 635 (2016).
4
In re Application A-18503, 286 Neb. 611, 838 N.W.2d 242 (2013).
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Nebraska Supreme Court A dvance Sheets
297 Nebraska R eports
APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
[4] A jurisdictional issue that does not involve a factual
dispute presents a question of law.5
ANALYSIS
Claim on Promissory
Note Is Moot
In count I of its complaint, Applied alleges S.E.B. failed
to pay amounts due under the promissory note and $8,144.27
remains due and owing. The record from the hearing on
S.E.B.’s motion to dismiss indicates the promissory note was
paid in full in December 2015, after the lawsuit was filed. The
parties acknowledged this fact at oral argument and confirmed
it in supplemental briefing to this court.
[5-8] A moot case is one which seeks to determine a ques-
tion that no longer rests upon existing facts or rights—i.e.,
a case in which the issues presented are no longer alive.6
Mootness refers to events occurring after the filing of a suit
which eradicate the requisite personal interest in the resolution
of the dispute that existed at the beginning of the litigation.7
Although mootness does not prevent appellate jurisdiction, it
is a justiciability doctrine that can prevent courts from exercis-
ing jurisdiction.8 As a general rule, a moot case is subject to
summary dismissal.9
[9] Applied argues that count I should not be considered
moot because, when the complaint was filed, S.E.B. owed
sums on the promissory note. But the central question in a
mootness analysis is whether changes in circumstances that
prevailed at the beginning of litigation have forestalled any
5
Id.
6
Blakely v. Lancaster County, 284 Neb. 659, 825 N.W.2d 149 (2012).
7
Id.; Professional Firefighters Assn. v. City of Omaha, 282 Neb. 200, 803
N.W.2d 17 (2011).
8
Blakely v. Lancaster County, supra note 6.
9
Greater Omaha Realty Co. v. City of Omaha, 258 Neb. 714, 605 N.W.2d
472 (2000).
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297 Nebraska R eports
APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
occasion for meaningful relief.10 Here, the record and the
judicial admissions of the parties demonstrate such changes in
circumstances have occurred since the action was filed. By the
time of the hearing on the motion to dismiss, the promissory
note had been paid and there was no money remaining due.
These changes effectively forestalled any occasion for mean-
ingful relief on count I, rendering the claim moot.
Although the district court’s dismissal was premised on lack
of personal jurisdiction, we conclude count I is moot and we
affirm the dismissal on that basis.
No Standing to Bring Claim
for Breach of RPA
[10] The named plaintiffs in this action are Applied and
ARS; neither entity is a party to the RPA which S.E.B. is
alleged to have breached. We ordered supplemental briefing on
the issue of whether Applied and ARS have standing to assert
a claim that S.E.B. breached the RPA. The question of stand-
ing can be raised by any party, or the court, at any time during
the proceeding.11
[11-15] Standing refers to whether a party had, at the com-
mencement of the litigation, a personal stake in the outcome
of the litigation that would warrant a court’s or tribunal’s
exercising its jurisdiction and remedial powers on the party’s
behalf.12 Standing involves a real interest in the cause of
action, meaning some legal or equitable right, title, or interest
in the subject matter of the controversy.13 To have standing,
a litigant must assert the litigant’s own rights and interests,
10
Blakely v. Lancaster County, supra note 6; In re 2007 Appropriations of
Niobrara River Waters, 278 Neb. 137, 768 N.W.2d 420 (2009).
11
See Brook Valley Ltd. Part. v. Mutual of Omaha Bank, 281 Neb. 455, 797
N.W.2d 748 (2011).
12
Field Club v. Zoning Bd. of Appeals of Omaha, 283 Neb. 847, 814 N.W.2d
102 (2012).
13
In re Interest of Enyce J. & Eternity M., 291 Neb. 965, 870 N.W.2d 413
(2015).
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297 Nebraska R eports
APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
and cannot rest a claim on the legal rights or interests of third
parties.14 A party invoking a court’s or tribunal’s jurisdiction
bears the burden of establishing the elements of standing.15
At the pleading stage, the standard for determining the suf-
ficiency of a complaint to allege standing is fairly liberal.16
[16] As a general rule, one who is neither a party to a con-
tract nor an agent of a party to a contract has no rights under
the contract, and cannot bring an action for breach thereof.17
Here, Applied admits that as a nonparty to the RPA, it lacks
standing to bring the claim in count II based on breach of the
RPA. ARS, however, argues it has standing to bring the claim
for breach of the RPA even though it is not a party thereto,
because it is acting as AUCRAC’s billing agent.
The complaint alleged the RPA appointed ARS the billing
agent for AUCRAC and authorized ARS “to account for, offset
and true up any and all amounts due . . . and owing” under
the RPA. ARS argues this language in the RPA identifying
ARS as “the billing agent” for AUCRAC creates an agency
relationship that allows ARS to sue S.E.B. for breach of the
RPA. ARS analogizes this case to Deutsche Bank Nat. Trust
Co. v. Siegel.18
In Deutsche Bank Nat. Trust Co., a loan servicer filed a
complaint on behalf of the holder of a deed of trust, seek-
ing judicial foreclosure of real property. The property owners
claimed the court lacked subject matter jurisdiction because
the loan servicer was not the real party in interest. We held
that the loan servicer had standing as the trust holder’s agent
for two reasons. First, a contract between the trust holder and
the loan servicer authorized the loan servicer “‘to institute
14
In re Interest of Meridian H., 281 Neb. 465, 798 N.W.2d 96 (2011).
15
Field Club v. Zoning Bd. of Appeals of Omaha, supra note 12.
16
Id.
17
See Marten v. Staab, 249 Neb. 299, 543 N.W.2d 436 (1996).
18
Deutsche Bank Nat. Trust Co. v. Siegel, 279 Neb. 174, 777 N.W.2d 259
(2010).
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APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
foreclosure proceedings . . . on behalf of the Trustee.’”19
Second, the contract expressly granted a power of attorney to
the loan servicer. We found that the power of attorney autho-
rized the loan servicer to act as the trust holder’s agent and
that the loan servicer acted within the scope of its agency in
bringing the foreclosure action. As such, the loan servicer had
authority and, implicitly, standing to bring the action on behalf
of the trust holder.
The instant case is factually distinguishable from Deutsche
Bank Nat. Trust Co. Here, ARS is not seeking to enforce the
RPA on behalf of AUCRAC pursuant to a power of attorney
or any express authorization to institute legal action. Rather,
it purports to enforce the RPA as the appointed billing agent
for AUCRAC.
The signed RPA was attached to the complaint. We see
nothing in the RPA, and ARS directs us to nothing other
than its status as the billing agent, which indicates AUCRAC
has authorized ARS to bring a legal action for breach of the
RPA. To the contrary, the RPA expressly provides that in the
event S.E.B. is in default of any obligations under the RPA,
“[AUCRAC] may take all reasonable steps to protect its and
its affiliates’ interests.” Referring expressly to bringing legal
actions for breach, the RPA provides:
[I]t is understood and agreed that in the event of any
such breach or threatened breach of this Agreement,
[AUCRAC] may apply to any federal or state court
located in Omaha, Douglas County, Nebraska for, and
shall be entitled to, injunctive relief from such court,
without the requirement of posting a bond or proof of
damages, designed to cure existing breaches and to pre-
vent a future occurrence or threatened future occurrence
of like breaches on the part of [S.E.B.]
Furthermore, the RPA expressly disavows any suggestion that
any entity other than AUCRAC or S.E.B. has the implied
authority to bring an action to enforce the RPA:
19
Id. at 178, 777 N.W.2d at 263.
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APPLIED UNDERWRITERS v. S.E.B. SERVS. OF NEW YORK
Cite as 297 Neb. 246
This Agreement is for the sole benefit of the Parties
[defined elsewhere in the agreement as AUCRAC and
S.E.B.] and nothing in this Agreement, express or implied,
is intended to confer upon any Party, other than the
Parties hereto and their affiliates, successors and permit-
ted assigns, any legal or equitable rights, remedies, obli-
gations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
Under the facts of this case, even interpreting the pleadings
liberally, ARS has neither alleged nor shown an agency rela-
tionship between AUCRAC and itself sufficient to give ARS
standing to bring an action for breach of the RPA.
[17] The defect of standing is a defect of subject matter
jurisdiction.20 And when questions relating to both subject
matter jurisdiction and personal jurisdiction are present in a
case, the court must first determine the question of subject
matter jurisdiction.21
The district court dismissed the action for lack of personal
jurisdiction, but we conclude that neither Applied nor ARS has
standing to bring the claim alleged in count II, and we there-
fore affirm the dismissal on that basis.
CONCLUSION
For the foregoing reasons, the dismissal of this action is
affirmed, but on grounds different from those articulated by
the district court.
A ffirmed.
20
Citizens Opposing Indus. Livestock v. Jefferson Cty., 274 Neb. 386, 740
N.W.2d 362 (2007).
21
See Sherman T. v. Karyn N., 286 Neb. 468, 837 N.W.2d 746 (2013).