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MAC PARENT LLC, Plaintiff, v. NORTH AMERICAN ELITE INSURANCE COMPANY, Defendant.
This case presents an insurance coverage dispute. Specifically, plaintiff Mac Parent LLC (“Mac Parent”) seeks a determination that its chain restaurants are covered under an all-risk commercial insurance policy issued by defendant North American Elite Insurance Company (“NAE”) for the loss of “millions of dollars of business income” and “extra expenses” incurred as a result of governmental orders issued in response to the global COVID-19 pandemic (NYSCEF Doc No. 1 [“Complaint”], ¶ 1).
In lieu of answering, NAE moves to dismiss the Complaint under CPLR 3211 (a) (4) and (8) for lack of proper service and based on the pendency of a prior action in Supreme Court, New York County between the same parties concerning the same coverage dispute. Alternatively, NAE seeks to transfer venue in this action to New York County pursuant to CPLR 511. Mac Parent opposes the motion.
Mac Parent is a Delaware limited liability company with its principal place of business in Denver, Colorado (see Complaint, ¶ 23). Mac Parent allegedly owns and/or operates Sullivan's Steakhouse and Macaroni Grill restaurants in 28 states (see id., ¶¶ 33-38), including “locations in or around Albany and Rochester, New York” (id., ¶ 23). It is undisputed, however, that Mac Parent's restaurant in Albany County, a Macaroni Grill, has been closed for some time (see NYSCEF Doc No. 4 [“Santoro Aff.”], ¶¶ 3-4; Complaint, ¶ 41; NYSCEF Doc No. 32 [“Opp Mem”], p. 3 n 1).
NAE is a New Hampshire insurer with its principal place of business in New York County that transacts business throughout the United States (see Complaint, ¶ 24; see also NYSCEF Doc No. 24 [“LaRocca Aff.”], ¶¶ 2-4).
Mac Parent purchased from NAE an all-risk commercial insurance policy that was in effect from April 17, 2019 to June 1, 2020 (see Complaint, ¶ 43; see also NYSCEF Doc Nos. 2, 9 [“Policy”]). The Policy insured against “all risks of direct physical loss or damage” to covered properties (Policy, p. 1). The Policy also covered Mac Parent for “Actual Loss Sustained” at its properties “due to the necessary interruption of the Insured's business during the ‘Period of Liability’ ” (id., p. 30). The Policy provides that New York law “shall govern [its] construction and interpretation,” and the parties “irrevocably submit[ted] to the exclusive jurisdiction of the Courts of the State of New York” (id., p. 56).
On June 9, 2020, Mac Parent submitted a notice of claim to NAE for business interruption coverage, citing the loss of income at its restaurants due to “unprecedented state and municipal Shutdown Executive Orders” and “restrictive Partial Reopening Executive Orders” issued in response to the COVID-19 pandemic (Complaint, ¶¶ 1, 3, 44). According to Mac Parent, “NAE acknowledged receipt of the claim on June 10, 2020,” but failed to provide a substantive response (id., ¶ 45).
On July 30, 2020, “having not heard from [NAE] regarding its claim, and having received communications indicating that [NAE] has denied or will deny coverage of Plaintiff's claim,” Mac Parent, along with other, unrelated restaurant owners affected by the government orders, sued NAE and 18 other insurers in the courts of Illinois (“Illinois Action”) (id., ¶ 46; see NYSCEF Doc No. 10).
Following removal of the case to the Illinois federal courts, NAE moved to sever and dismiss Mac Parent's claims based on the Policy's forum selection clause (see NYSCEF Doc Nos. 11-13). On October 9, 2020, Mac Parent voluntarily dismissed NAE from the Illinois Action without prejudice (see Complaint, ¶ 47; NYSCEF Doc No. 14).
On October 12, 2020, NAE commenced an action against Mac Parent in Supreme Court, New York County (Index No. 655193/2020 [“New York County Action”]), seeking: (1) a declaration that NAE does not owe coverage to Mac Parent for losses arising out of the government-mandated closures of its restaurants; and (2) damages for Mac Parent's breach of the Policy by suing NAE in Illinois (see NYSCEF Doc No. 15, ¶¶ 49, 50-57). Mac Parent was served with process in the New York County Action on October 15, 2020 (see NYSCEF Doc No. 16).
Mac Parent commenced this action on October 13, 2020, one day after the New York County Action, seeking a declaration that the governmental shutdown and reopening orders caused “direct physical loss or damage” to its covered restaurants (Complaint, ¶¶ 48-53). Mac Parent also alleged causes of action for breach of the Policy and unjust enrichment (see id., ¶¶ 54-67).
Mac Parent then moved for dismissal of the New York County Action under CPLR 3211 (a) (4) based on the pendency of this action (see Santoro Aff., ¶ 5). In that connection, Mac Parent submitted an affidavit to Supreme Court averring that the initiatory papers in this action were served via “Email Service Only” pursuant to certain “COVID Rules” (NYSCEF Doc No. 6; see also NYSCEF Doc No. 28). Mac Parent's motion to dismiss the New York County Action has not yet been decided.
On November 27, 2020, NAE served upon Mac Parent a demand to transfer the venue of this action to New York County under CPLR 511 (b), alleging that: (i) Albany County is an improper venue “because neither NAE nor Mac Parent is a resident of Albany County, and a substantial part of the events giving rise to the claims asserted in the complaint did not occur in Albany County”; and (ii) “New York County is a proper venue because NAE maintains its principal office in New York, New York, and thus is a resident of New York County” (NYSCEF Doc No. 17).
Mac Parent's counsel responded with an affirmation asserting that venue is proper in Albany County because a substantial part of the events giving rise to the claims alleged in its Complaint occurred here (see CPLR 503 [a]). Mac Parent's counsel emphasized that one of Mac Parent's restaurants, Romano's Macaroni Grill, was located in Albany County, and that the governmental orders at issue “detrimentally altered and directly and physically impaired the Albany Property” (NYSCEF Doc No. 39, ¶¶ 5-8).
NAE now moves, pre-answer, for an order dismissing this action for improper service of process and based on the pendency of the prior New York County Action, or, in the alternative, transferring venue to New York County.
A. Personal Jurisdiction
The Court begins with the threshold issue of personal jurisdiction (see CPLR 3211 [a] ). In this regard, “[t]he plaintiff bears the ultimate burden of proving by a preponderance of the evidence that jurisdiction over the defendant was obtained by proper service of process” (Cedar Run Homeowners’ Assn., Inc. v Adirondack Dev. Group, LLC, 173 AD3d 1330, 1330 [3d Dept 2019] [internal quotation marks and citations omitted]).
NAE argues that plaintiff's October 15, 2020 “Email Service Only” pursuant to unspecified “COVID Rules” (NYSCEF Doc No. 6) is not a statutorily authorized method of serving a business corporation (see CPLR 311 [a] ; 313; Business Corporation Law §§ 306, 307; Strong v Bi-Lo Wholesalers, 265 AD2d 745, 745-746 [3d Dept 1999]; see also 22 NYCRR 202.5-b [f] ; Siegel & Connors, NY Prac § 77 [6th ed 2020], Cumulative Supplement).
Regardless of any defect in the manner of the October 15, 2020 service, Mac Parent properly and timely re-served NAE under Insurance Law § 1212 by mailing the Summons & Complaint to the Superintendent of Financial Services at the New York Department of Financial Services (“DFS”). The record further establishes that DFS acknowledged service on December 16, 2020 and mailed a duplicate of service to NAE (see NYSCEF Doc No. 33, ¶¶ 8-9; NYSCEF Doc Nos. 37-38), rendering service complete (see Insurance Law § 1212 [b]; Appelbaum v Star Fire Ins. Co., 115 App Div 117, 117-118 [1st Dept 1906]).
Inasmuch as any deficiency in the October 15, 2020 service was cured by Mac Parent within the requisite 120-day period (see CPLR 306-b), and NAE does not challenge the method or timeliness of the re-service (see NYSCEF Doc Nos. 48-49), the branch of NAE's motion seeking dismissal for lack of personal jurisdiction is denied (see generally Moffett v Gerardi, 71 AD3d 845, 848 [2d Dept 2010]; Rink v Fulgenzi, 231 AD2d 562, 562 [2d Dept 1996]).
B. Another Action Pending
NAE next contends that this action should be dismissed in favor of the New York County Action, which, according to NAE, is the first-filed, first-served and more comprehensive action. Mac Parent opposes dismissal on the ground that the New York County Action was commenced preemptively.
CPLR 3211 (a) (4) grants a court discretion to dismiss an action or proceeding where “there is another action pending between the same parties for the same cause of action in a court of any state or the United States.” Dismissal of a case due to the pendency of a prior action is warranted “where there is a substantial identity of the parties and causes of action” (Cherico, Cherico & Assoc. v Midollo, 67 AD3d 622, 622 [2d Dept 2009]; see Matter of Schaller v Vacco, 241 AD2d 663, 663-664 [3d Dept 1997]).
There is a complete identity of parties and a substantial identity of issues between this action and the New York County Action. The two suits are essentially mirror images of one another, with each plaintiff seeking determination of the parties’ respective rights and obligations under the Policy relative to the business-interruption losses claimed by Mac Parent.
“New York courts generally follow the first-in-time-rule, which instructs that ‘the court which has first taken jurisdiction is the one in which the matter should be determined and it is a violation of the rules of comity to interfere’ ” (XL Specialty Ins. Co. v AR Capital, 181 AD3d 546, 546 [1st Dept 2020], quoting City Trade & Indus., Ltd. v New Cent. Jute Mills Co., 25 NY2d 49, 58 ).
Nonetheless, the first-in-time rule “should not be applied in a mechanical way, and ․ special circumstances may warrant deviation ․ where the action sought to be restrained is vexatious, oppressive or instituted to obtain some unjust or inequitable advantage” (L-3 Communications Corp. v SafeNet, Inc., 45 AD3d 1, 7 [1st Dept 2007] [internal quotation marks and citation omitted]). Thus, “[c]ourts will deviate from the first-in-time rule and not reward conduct where one party files an action preemptively after learning of the opposing parties’ intent to commence litigation” (Quatro Consulting Group, LLC v Buffalo Hotel Supply Co., Inc., 55 Misc 3d 615, 617 [Sup Ct, Monroe County 2017], citing L-3 Communications Corp., 45 AD3d at 7; see Certain Underwriters at Lloyd's, London v Hartford Acc. & Indem. Co., 16 AD3d 167, 168 [1st Dept 2005]).
The New York County Action was filed first and, arguably, was served first, given the alleged impropriety of Mac Parent's initial email service. However, the two actions were filed within one day of each other, rendering their “chronology ․ not dispositive” (IRX Therapeutics, Inc. v Landry, 150 AD3d 446, 447 [1st Dept 2017]; see Flintkote Co. v American Mut. Liab. Ins. Co., 103 AD2d 501, 505 [2d Dept 1984], affd 67 NY2d 857 ).
Accordingly, in exercising its broad discretion under CPLR 3211 (a) (4), the Court will consider and rely upon each action's ties to its respective forum. Case law holds that an earlier-filed action does not constitute a preemptive filing where the forum in which the first action was brought “ ‘is the logical and proper place ․ to go forward’ ” (XL Specialty Ins. Co., 181 AD3d at 546, quoting Seneca Ins. Co. v Lincolnshire Mgt., 269 AD2d 274, 275 [1st Dept 2000]).
There is no question that New York County is a proper and logical forum for the parties’ insurance coverage dispute, as it is the county in which defendant-insurer maintains its principal place of business and a substantial physical presence (see CPLR 503 [a], [c]; Complaint, ¶ 24; LaRocca Aff., ¶¶ 3-4, 11, 21-28). By contrast, Mac Parent is Delaware company headquartered in Colorado that is not registered or licensed to do business in New York, and its only tie to Albany County is a single closed restaurant (see Santoro Aff., ¶¶ 3-4; Complaint, ¶ 41; Opp Mem, p. 3 n 1),1 which was just one of about 80 restaurants insured under the Policy (see Complaint, ¶ 23). On these facts, New York County has a far “more substantial nexus to the parties and the dispute” (AR Capital, 181 AD3d at 546).2
The New York County Action also is somewhat “more comprehensive” (id.; see AIG Fin. Prods. Corp. v Penncara Energy, LLC, 83 AD3d 495, 495 [1st Dept 2011]). Both actions seek similar (but contrary) relief concerning coverage under the Policy, but the New York County Action also includes the additional issue of NAE's claim for damages based on the alleged breach of the Policy's forum selection clause.
Finally, Mac Parent complains that NAE improperly rushed to sue in New York County after Mac Parent consented to NAE's dismissal from the Illinois Action. Mac Parent emphasizes that NAE knew, from the parties’ discussions in the Illinois Action, that Mac Parent would not consent to suit in New York County and that NAE filed this action over a holiday weekend.
While Mac Parent's arguments are not without some force, similar arguments as to preemptive filing/forum shopping also could be made against Mac Parent (see Quatro Consulting Group, 55 Misc 3d at 619), which commenced the Illinois Action despite a forum selection clause requiring the dispute to be litigated in the New York courts and its counsel's awareness that NAE “sought to enforce ․ clause” (NYSCEF Doc No. 5, ¶ 7). Following dismissal of the improperly-brought Illinois Action, NAE reasonably chose to see the dispute litigated in its home county, a proper and logical forum.
Accordingly, the Court finds, in the exercise of its “broad discretion” (Whitney v Whitney, 57 NY2d 731, 732 ), that this action should be dismissed under CPLR 3211 (a) (4) in favor of the New York County Action.3
Based on the foregoing, it is
ORDERED that the branch of defendant's motion to dismiss pursuant to CPLR 3211 (a) (8) for lack of personal jurisdiction is denied; and it is further
ORDERED that the branch of defendant's motion to dismiss under CPLR 3211 (a) (4) is granted; and finally it is
ORDERED that this action is dismissed.
This constitutes the Decision & Order of the Court, the original of which is being uploaded to NYSCEF for electronic entry by the Albany County Clerk. Upon such entry, counsel for defendant shall promptly serve notice of entry on all parties entitled thereto (see Uniform Rules for Trial Cts [22 NYCRR] § 202.5-b [h] , ).
1. According to a local business journal, the Albany restaurant “closed in mid-March ” (Albany Business Review, https://www.bizjournals.com/albany/news/2020/09/30/romanos-macaroni-grill-wolf-road-back-rent.html [last accessed Mar. 24, 2021]).
2. Indeed, on the foregoing facts, it is questionable whether “a substantial part of the events or omissions giving rise to [Mac Parent's] claim [for business interruption coverage under the Policy] occurred” in Albany County, so as to make the venue here proper under CPLR 503 (a) (see generally Harvard Steel Sales, LLC v Bain, 188 AD3d 79, 82 [4th Dept 2020]). In view of the disposition ordered herein, however, the Court need not address NAE's alternative argument that this action should be transferred to New York County pursuant to CPLR 511.
3. Given that the New York County Action remains pre-answer, the Court finds dismissal to be the appropriate remedy under CPLR 3211 (a) (4).
Richard M. Platkin, J.
Response sent, thank you
Docket No: 906489-20
Decided: March 29, 2021
Court: Supreme Court, Albany County, New York.
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