BREAKAWAY COURIER CORPORATION v. California Insurance Company et al., Defendants-Respondents. (2023)

Order, Supreme Court, New York County (Melissa Anne Crane, J.), entered on or about July 8, 2021, which granted defendants-respondents’ (Applied Defendants) motion to dismiss the complaint, unanimously affirmed, without costs.

The motion court properly dismissed the complaint based on the forum selection clause in the Reinsurance Participation Agreement (RPA).  As this Court held in Amazing Home Care Servs., LLC v. Applied Underwriters Captive Risk Assur. Co. Inc., 191 A.D.3d 516, 518, 142 N.Y.S.3d 507 (1st Dept. 2021), the forum selection clause in the RPA executed by plaintiff and by defendant Applied Underwriters Captive Risk Assurance Company, Inc. (AUCRA) requires challenges to the RPA to be litigated in Nebraska, including the claim that the RPA itself is invalid.  As in that case, the controlling factor is not whether the RPA itself was illegal or unreasonable, but whether the forum selection clause itself was illegal or unreasonable (id.;  see British W. Indies Guar. Trust Co. v. Banque Internationale A Luxembourg, 172 A.D.2d 234, 567 N.Y.S.2d 731 [1st Dept. 1991]).

Paragraph 13 of the RPA required the parties to resolve any dispute arising under the RPA by arbitration in the British Virgin Islands.  However, AUCRA agreed, as part of a consent order it entered into with the New York State Department of Financial Services, not to commence arbitration proceedings or enforce arbitration provisions pursuant to contracts entered into in the State of New York or by New York employers.  Therefore, Paragraph 16 of the RPA, which states that “[t]his Agreement shall be exclusively governed by and construed in accordance with the laws of Nebraska and any matter concerning this Agreement that is not subject to the dispute resolution provisions of Paragraph 13 hereof shall be resolved exclusively by the courts of Nebraska without reference to its conflict of laws” is controlling.  As there is no longer any matter concerning the RPA that is subject to the dispute resolution provisions of Paragraph 13, Paragraph 16's broad and clear forum selection clause requires the dismissal of the complaint as the claims must be heard in Nebraska.

Plaintiff's assertion that Amazing Home Care is distinguishable because, in this case, plaintiff's claims center on the workers’ compensation policies rather than on the RPA itself, is unavailing.  Initially, although most of the claims in Amazing Home Care centered on the RPA, several did not (Amazing Home Care Servs., LLC, 191 A.D.3d at 517, 142 N.Y.S.3d 507).  Additionally, 10 of plaintiff's 13 causes of action in this case address the RPA directly.  Moreover, the gravamen of plaintiff's allegations against the workers’ compensation policies is that they illegally required plaintiff to enter into the RPA as a condition of the policies, that the representations made by defendants were misleading and fraudulent and, as in Amazing Home Care, that the entire scheme was an illegal attempt to evade state regulators.

Finally, because defendant AUCRA, which provided the RPA to plaintiff, is an essential party to this litigation, the court properly dismissed the complaint against all Applied Defendants.