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July 2013

California Appellate Court Clarifies Standards for Stays Based on Forum Non Conveniens Grounds

In National Football League v. Fireman’s Fund Insurance Co., the California Court of Appeal, Second Appellate District, affirmed the trial court’s stay of a California declaratory relief action pending the outcome of New York insurance coverage actions.  The Court of Appeal clarified the standards to be applied by a trial court that intends to stay, rather than dismiss, a California case on grounds of forum non conveniens.  The appellate court further held that plaintiffs, whose principal places of business are in New York City, are not California residents in the inconvenient forum context.  Lastly, the court found no abuse of discretion in the trial court’s analysis and conclusion that the California action should be stayed.

The plaintiffs included the National Football League (NFL), an unincorporated association headquartered in New York City since 1960 and comprised of 32 member “clubs” based in various states throughout the country, and NFL Properties LLC, a Delaware corporation headquartered in New York City since 1970.  Thirty-two insurers are named as defendants in the instant coverage case and allegedly issued at least 187 commercial general liability (CGL) policies providing primary and excess coverage during a 45-year period. The majority of the policies were brokered and delivered to the NFL in New York City.  All the defendants are licensed and/or doing business in both California and New York and almost all have their principal places of business east of the Mississippi River.  The majority are located within 250 miles of New York City. 

Initially, 73 former football players sued the NFL and NFL Properties along with helmet maker Riddell in Los Angeles Superior Court, alleging concussions and other injuries sustained during their NFL careers had resulted in brain and other neurological damages and the NFL negligently failed to protect players against such long-term injuries.  Eventually, more than 174 lawsuits were filed against the NFL and NFL properties.  Most were filed in states other than California.  Most of these cases were or will be consolidated and transferred to the Eastern District of Pennsylvania.  The underlying tort claims are being handled at NFL’s New York headquarters with a New York broker. 

Alterra America Insurance Co. (represented by Gordon & Rees partner Peter Schwartz and senior counsel Gary Collis of Los Angeles) filed a declaratory relief action against the NFL in the New York State Supreme Court in Manhattan.  Two days later, the NFL instituted a breach of contract and declaratory relief action against Alterra and 31 other insurers in Los Angeles Superior Court.  The defendant insurers filed motions to dismiss or stay the NFL’s action on forum non conveniens grounds.  The trial court granted the insurers’ motions and imposed a stay of the California action, pending the outcome of the parallel New York matters. 

On appeal, the appellate court first observed that the weighing and balancing of private and public factors is reviewed pursuant to an abuse of discretion standard and “substantial deference” is accorded the trial court’s ruling.  Applying this standard, the appellate court held the NFL is not a California resident for purposes of a forum non conveniens analysis even if some of the NFL’s member “clubs” reside in California.  The plaintiffs are headquartered in New York and run their operations from there, brokered most of their insurance policies from there, have important documents and key executives there, and have personnel involved in the coverage litigation employed there. 

The court also determined that neither the “strong presumption” nor “seriously inconvenient” standard applied in the case.  First, the court concluded that California does not recognize a strong presumption in favor of a nonresident plaintiff’s choice of forum; especially where a stay is involved, a nonresident plaintiff’s choice of forum is of lesser significance.  A nonresident who files suit in California is entitled to due deference under the circumstances presented, not a strong presumption, in favor of its choice of forum.  That deference is weighed and balanced along with other pertinent factors.  The appellate court concluded that prior decisions holding otherwise were questionable and inapposite.  Thus, the defendant insurers were not required to prove California is a seriously inconvenient forum to prevail on the motions to stay.

Finally, the appellate court concluded the trial court’s stay order was not an abuse of discretion.  The trial court did not skew various factors, including the residences of two insurers, the past and present contacts between plaintiffs and California, and the brokering of policies in California, by incorrectly concluding the factors weighed against the Los Angeles venue.  In addition, the trial court determined California has no substantial interest in retaining the coverage action.  Further, the trial court did not unduly emphasize the burden of the coverage litigation on California’s court system and taxpayers.  Thus, the appellate court concluded the trial court applied the correct standards and affirmed the orders staying the below proceedings pending the outcome of the parallel New York actions.

Click here for the opinion. 

The opinion in National Football League v. Fireman’s Fund Insurance Co. (May 28, 2013)___ Cal. Rptr. 3d ; 13 C.D.O.S. 5314, is not final. It may be withdrawn from publication, modified on rehearing, or review may be granted by the California Supreme Court. These events would render the opinion unavailable for use as legal authority in California state courts.

This and other case bulletins, as well as other publications of Gordon & Rees LLP, may be found at www.gordonrees.com.

Insurance

David L. Jones



Insurance

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