28 Fla. L. Weekly Supp. 491a

Online Reference: FLWSUPP 2806DEAU

Insurance — Venue — Forum selection clause — Motion for reconsideration of predecessor judge’s denial of motion to dismiss based on mandatory forum selection clause is denied — Predecessor judge did not commit clear legal error or abuse discretion in finding that compelling reason exists not to enforce clause where enforcement would send claims against one insurer in multi-party litigation to New York, resulting in inconsistent and simultaneous interstate litigation

DEAUVILLE HOTEL PROPERTY LLC, Plaintiff, v. ENDURANCE AMERICAN SPECIALTY INSURANCE COMPANY, et. al., Defendants. Circuit Court, 11th Judicial Circuit in and for Miami-Dade County. Case No. 2019-016336-CA-01, Section CA43. May 27, 2020. Michael Hanzman, Judge. Counsel: Meghan C. Moore and Michael E. Iles, Weisbrod Matteis & Copley, PLLC, Fort Lauderdale; Bruce S. Rogow and Tara A. Campion, Bruce S. Rogow, P.A., Ft. Lauderdale; and Gonzalo Dorta and Matias R. Dorta, Law Office of Gonzalo A. Dorta, P.A., Coral Gables, for Plaintiff. Kevin C. Schumacher and Kevin M. Corona, Cole, Scott & Kissane, P.A., Miami; Schuyler A. Smith, Lowell P. Karr, and Bradley A. Silverman, Hamilton Miller & Birthisel, Miami; Mia Jamila Pintard and Mitchell Silver, Conroy Simberg (Co-Counsel), West Palm Beach; William D. Wilson and Brooke O. Turetzky, Mound Cotton Wollan & Greengrass LLP, Fort Lauderdale; Melissa M. Sims and Judith Beth Goldstein, Coral Gables; and Taylor L. Davis, Jane Warring, and Pamela Young-Wynn, Clyde & Co. US LLP, Atlanta, GA, for Defendants.

ORDER DENYING FIRST SPECIALTY INSURANCE CORPORATION’S MOTION FOR RECONSIDERATION

I. INTRODUCTION

Defendant, First Specialty Insurance Corporation (“First Specialty”), moves for reconsideration of the Court’s predecessor’s oral ruling denying its motion to dismiss based upon an admittedly “mandatory” forum selection clause contained in the parties’ insurance contract.¹ First Specialty insists that the Court’s predecessor committed clear legal error in finding that a “compelling reason” exists not to enforce this provision; that “compelling reason” being that “enforcement of the clause would lead to multiple lawsuits, a splitting of causes of action, and the potential for conflicting results in different courts, including inconsistent and simultaneous interstate litigation.” Dec. 11, 2019 Tr p. 67. According to First Specialty, this ruling was clear error because: (a) there is no “compelling reason” exception to the “explicit rule on enforcement of mandatory forum selection clauses” recognized by “any Florida Supreme Court or Third DCA case law,” Mot. pp. 9-10; and (b) even if “the notion of a compelling reason” exception was viable, the Court’s predecessor erred in finding a “compelling reason” to deny enforcement present here.

As this Court has pointed out before, it should hesitate to undo the work of another judge, as the “the rotation of judges from one division to another should not be an opportunity to revisit the predecessor’s rulings.” Gemini Inv’rs III, L.P. v. Nunez, 78 So. 3d 94, 97 (Fla. 3d DCA 2012) [37 Fla. L. Weekly D240a]. For this reason, the Court “is loath to — and has rarely — revisited rulings of a predecessor Judge. But it has done so when convinced that a prior ruling — particularly one of pure law — was clearly incorrect.” S. Florida Stadium, LLC v. Alberici Constructors, Inc., 28 Fla. L. Weekly Supp. 37a (Fla. 11 Jud. Cir. Ct. Jan. 22, 2020) (Hanzman, J); Teva Trading Ltd., v. Banif Financial Services, Inc., 23 Fla. L. Weekly Supp, 1009e (Fla. 11 Jud. Cir. Ct. March 8, 2016) (Hanzman, J); Carol A. Adams, Et. Al., v. Surf House Condominium Association, Inc., 26 Fla. L. Weekly Supp. 638a (Fla. 11 Jud. Cir. Ct. Oct. 16, 2018) (Hanzman, J). In this case, however, the Court cannot conclude that its predecessor committed clear error for two reasons.

First, despite First Specialty’s insistence to the contrary, our intermediary appellate courts, including the Third District, permit trial courts to deny enforcement of a mandatory forum selection clause based upon “compelling reasons.” While First Specialty may believe that such an “exception” to the general rule of enforcement is contrary to Florida Supreme Court precedent, this basis to deny enforcement has been explicitly recognized by intermediate appellate precedent, including a decision out of the Third District. This Court, like its predecessor, is bound by that precedent.

Second, this “compelling reason” exception is an inherently imprecise metric and applying it therefore involves discretion. What one court finds to be a “compelling reason” to deny enforcement may not be “compelling” to another, and the question is obviously fact intensive. Factors bearing on the question would include such things as: (a) how many separate cases would enforcement of the clause generate; (b) how many third parties will (or may) suffer prejudice if the clause is enforced; (c) what is the likelihood of inconsistent results in more than one court if the clause is enforced; (d) what degree of prejudice will the party resisting enforcement likely suffer if compelled to litigate in multiple forums; (e) how many common questions of law or fact would have to be litigated in multiple forums; and (f) how much would the judiciary (i.e., taxpayers) be burdened by requiring that multiple courts address claims that, as a practical matter, should be litigated together in a single proceeding. These are just some of the factors that must be evaluated in deciding whether a “compelling reason” exists to deny enforcement of a mandatory forum selection clause. And weighing those factors undoubtedly involves an exercise of discretion.

For these reasons, this Court cannot conclude that its predecessor committed clear legal error (or abused her discretion) in denying First Specialty’s motion to dismiss. It follows that First Specialty’s Motion for Reconsideration must be denied.

II. THE PENDING CLAIMS AND DEFENSES

Plaintiff, Deauville Hotel Property, LLC (“Deauville”), brings this action to recover damages allegedly caused to its hotel by a fire. Deauville claims that this fire resulted from the negligence of contractors that worked on the property: Defendants Trane U.S. Inc., Tirone Electric Inc., and Edd Helms Air Conditioning, Inc. Deauville has also named as Defendants three insurers that it claims provided coverage for this loss — a primary insurer and the two excess carriers: Defendants Endurance American Specialty Insurance Company (primary), First Specialty Insurance Corporation (first layer of excess), and Great American Insurance Company of NY (second layer of excess).

Through their answers, the contractor Defendants have denied liability, claiming that they were not the “proximate cause” of the loss, and that whatever loss occurred resulted from wear and tear, economic waste, natural causes, or negligence on the part of others, including Plaintiff. See, e.g., Edd Helms Answer and Affirm. Defenses dated July 9, 2019; Tirone Electric’s Answer and Affirm. Defenses dated Nov. 8, 2019; Trane U.S. Inc.’s Answer and Affirm. Defenses dated Jan. 19, 2020. Suffice it to say, material issues raised by the pleadings include: (a) what actually caused this loss; (b) which entity is wholly or partially responsible for that occurrence; (c) were there other contributing causes; and (d) was Deauville itself at fault.

As for the insurer Defendants, each have claimed that the incident that took place on the property was not a fire at all, and that “exclusions” from coverage are triggered for some of the same reasons the contractor Defendants disclaim liability (i.e., wear and tear, natural causes, etc.). See, e.g., Endurance American’s Fist Amended Answer and Affirm. Defenses dated Nov. 18, 2019; Great American’s Answer and Affirm. Defenses dated Sept. 20, 2019. The insurer Defendants also raise other defenses similar to those advanced by the contractor Defendants. And the excess policies are, with limited exceptions, “following form” contracts which adopt the terms and conditions of the primary insurer’s policy. For that reason, most (if not all) of the coverage/exclusion issues raised by each carrier are similar, if not the same. See, e.g., CNL Hotels & Resorts, Inc. v. Houston Cas. Co., 505 F. Supp. 2d 1317 (M.D. Fla. 2007).

Without belaboring the point, it is apparent that: (a) the claims and defenses advanced by the parties raise common issues of both law and fact that will have to be adjudicated; (b) that discovery will be overlapping; and (c) significant party, third party and judicial labor will be conserved if all the claims and defenses are litigated together in one forum. And absent First Specialties’ forum selection clause, no rational judge would ever consider “sending” Plaintiff’s claim against one insurer to another forum unless it were compelled to do so due to an absence of personal jurisdiction. So the question then is whether precedent mandates that the Plaintiff’s claim against First Specialty be sent to New York, while this Court adjudicates all the other claims and defenses. In other words, does the parties’ private agreement trump the obvious benefits that the parties, third parties and the court system itself will realize if these claims are efficiently litigated in one place? The answer is no.

III. ANALYSIS

At the outset, the Court begins by noting that it is a strong enforcer of private contracts. This Court, sitting both as an associate appellate and circuit judge, has written, time and time again, that “contracts are voluntary undertakings, and contracting parties are free to bargain for — and specify — the terms and conditions of their agreement.” Okeechobee Resorts, L.L.C. v. E Z Cash Pawn, Inc., 145 So.3d 989, 993 (Fla. 4th DCA 2014) [39 Fla. L. Weekly D1871a]; City of Pompano Beach v. Beatty, 222 So. 3d 598, 600 (Fla. 4th DCA 2017) [42 Fla. L. Weekly D1556a]; Sky Bell Asset Mgmt., LLC And Sky Bell Select, L.P., v. National Union Fire Ins. Co. of Pittsburgh, P.A., 23 Fla. L. Weekly Supp. 535a (11 Jud. Cir., Dec. 17, 2015); DePrince v. Starboard, 23 Fla. L. Weekly Supp. 1022a (11 Jud. Cir., April 7, 2016); JDJ of Miami, Inc., v. Valdez, et. al., 23 Fla. L. Weekly Supp. 1026a (11 Jud. Cir., March 23, 2016); Regalia Beach Developers, LLC, v. MVW Mgmt. LLC, 24 Fla. L. Weekly Supp. 286a (11Jud. Cir., June 30, 2016). And when parties bargain for the terms of their contract, it is not the Court’s prerogative to “substitute [its] judgment for that of the parties in order to relieve one from an alleged hardship of an { “pageset”: “Sd82532fe0d3311d99830b5efa1ded32a”, “pageNumber”: “31” }improvident bargain.” Int’l Expositions, Inc. v. City of Miami Beach, 274 So. 2d 29, 30-31 (Fla. 3d DCA 1973). Rather, the Court’s task is “to enforce the contract as plainly written.” Okeechobee Resorts, L.L.C., supra at 993; Gulliver Sch., Inc. v. Snay, 137 So. 3d 1045, 1047 (Fla. 3d DCA 2014) [39 Fla. L. Weekly D457a].

A mandatory forum selection clause is nothing more than a contract or, more accurately speaking, a “contract within a contract.” The “contract” between Deauville and First Specialty clearly and unequivocally provides that:

The parties irrevocably submit to the exclusive jurisdiction of the Courts of the State of New York, and to the extent permitted by law the parties expressly waive all rights to challenge or otherwise limit such jurisdiction.

This type of forum selection clause “enhance(s) contractual and economic predictability, while conserving judicial resources and benefitting commercial entities as well as consumers.” Am. Online, Inc. v. Booker, 781 So. 2d 423, 424-25 (Fla. 3d DCA 2001) [26 Fla. L. Weekly D386a].

Deauville does not contest the fact that this provision is “mandatory” and enforceable pursuant to binding Supreme Court of Florida precedent: Manrique v. Fabbri, 493 So. 2d 437 (Fla. 1986). In Manrique, our Supreme Court held “that forum selection clauses should be enforced in the absence of a showing that enforcement would be unreasonable or unjust.” Id. at 440. While the Court did not attempt to identify all circumstances where enforcement would (or could) be “unreasonable” or “unjust,” it commented that:

It should be incumbent on the party seeking to escape his contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court. Absent that, there is no basis for concluding that it would be unfair, unjust, or unreasonable to hold that party to his bargain.

Id. at 440 fn. 4.

Although footnote 4 suggests that a forum selection clause must always be enforced unless the party resisting enforcement would, “for practical purposes,” be “deprived of [their day] in court,” Manrique was a two party case and, for that reason, our Supreme Court had no occasion to address the question of whether enforcement can be denied if, in multi-party litigation, substantial party, third party and judicial resources would be squandered by enforcing this type of private covenant. Furthermore, the Manrique court adopted the reasoning enunciated by the U.S. Supreme Court in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), the decision relied upon by the Fourth District in Mar. Ltd. P’ship v. Greenman Advert. Associates, Inc., 455 So. 2d 1121 (Fla. 4th DCA 1984), which allows a court to deny enforcement of a forum selection clause if: (1) the forum was chosen because of one party’s overwhelming bargain power; or (2) enforcement would contravene public policy; or (3) the purpose of the agreement was to transfer a local dispute to a remote and alien forum in order to inconvenience one or both parties. That is the actual standard our Supreme Court approved of in Manrique, and that standard is, without doubt, more flexible than one mandating, in every type of case, a showing that enforcement would completely deprive the resisting party of “their day in court.”

Needless to say, in this Court’s view Manrique sends a mixed message. If footnote 4 is actually the showing that must, in all cases, be met (i.e., enforcement would deprive the resisting party of their day in court) the analysis is simple and Plaintiff’s claims against First Specialty should be sent to New York, as that jurisdiction obviously would provide a forum to litigate Deauville’s claims and First Specialty’s defenses. Stated differently, enforcing the forum selection clause would not deprive Deauville of its “day in court.” On the other hand, if the standard is a bit more flexible, as articulated by Zapata and Mar. Ltd., (the two decisions Manrique approved of) then a court can, as a matter of public policy, refuse to enforce private forum selection clauses based upon “compelling [policy] reasons,” including practical considerations.

The question of which of these two markedly different standards must be applied is often academic because, as was the case in Manrique, most cases addressing the enforceability of a forum selection clause involve what are (or essentially are) two-party disputes. As it is difficult to envision “compelling reasons” to deny enforcement in this scenario our intermediary appellate courts, including the Third District, have predictably and routinely enforced mandatory forum selection clauses in such cases, even in circumstances where the chosen forum may not provide the “remedy” that would be available here. See, e.g., Am. Online, Inc. v. Booker, 781 So. 2d 423, 424 (Fla. 3d DCA 2001) [26 Fla. L. Weekly D386a] (enforcing mandatory forum selection clause even though chosen forum — Virginia — had “no mechanism” for class actions); Land O’Sun Mgmt. Corp. v. Commerce & Indus. Ins. Co., 961 So. 2d 1078, 1080 (Fla. 1st DCA 2007) [32 Fla. L. Weekly D1787a] (enforcing forum selection clause contained in environmental insurance policy, as “[t]he contracting parties have the right to demand that the litigation occur in the contractually selected forum”); Powers v. Melick, 211 So. 3d 122 (Fla. 4th DCA 2017) [42 Fla. L. Weekly D288b] (relying on Manrique in enforcing mandatory venue clause); Signtronix, Inc. v. Annabelle’s Interiors, Inc., 260 So. 3d 1186 (Fla. 1st DCA 2018) [44 Fla. L. Weekly D151b] (enforcing agreement to submit all disputes to the “Courts of the State of California”); Corsec, S.L. v. VMC Intern. Franchising, LLC, 909 So. 2d 945, 946 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D1942b] (enforcing agreement to submit disputes to “the courts and tribunals of the capital City of Madrid”); Reyes v. Claria Life & Health Ins. Co., 190 So. 3d 154 (Fla. 3d DCA 2016) [41 Fla. L. Weekly D685b] (enforcing mandatory forum selection clause requiring that disputes be submitted to binding arbitration in the State of Delaware).²

Conversely, in those rare two-party cases where enforcement would result in a “splitting of the claim,” and in multi-party cases where enforcement would result in duplicative effort and expense, a risk of inconsistent results, and the taxing of resources in multiple jurisdictions, our intermediary appellate courts have uniformly said that enforcement may be denied for “compelling reasons.” See, e.g., Girdley Const. Co. v. Architectural Exteriors, Inc., 517 So. 2d 137, 138 (Fla. 5th DCA 1987) (refusing to enforce mandatory venue provision in two party case where “. . . such a transfer would result in multiple suits and a splitting of causes of action”); Mason v. Homes By Whitaker, Inc., 971 So. 2d 1029, 1030 (Fla. 5th DCA 2008) [33 Fla. L. Weekly D210b] (refusing to enforce mandatory venue clause in order to “avoid multiple lawsuits, minimize judicial labor, reduce the expenses to the parties and avoid inconsistent results,” because lien foreclosure could only be brought in Clay County — not the specified forum — Marion County — and thus enforcing clause would split the claim); Love’s Window & Door Installation, Inc. v. Acousti Eng’g Co., 147 So. 3d 1064, 1065 (Fla. 5th DCA 2014) [39 Fla. L. Weekly D1963a] (refusing enforcement of mandatory forum selection clause in “complex litigation” regarding a construction project, as “compelling reasons” existed not to enforce clause, including “avoiding multiple lawsuits, minimizing judicial labor, reducing the expenses to the parties, and avoiding inconsistent results”); McWane, Inc. v. Water Mgmt. Services, Inc., 967 So. 2d 1006, 1007 (Fla. 1st DCA 2007) [32 Fla. L. Weekly D2598a] (refusing to enforce forum selection provision in multi-party litigation, “when it appears that enforcement of the provision will lead to multiple lawsuits, a splitting of the causes of action, and the potential for conflicting results in different courts”); Dore v. Roten, 911 So. 2d 218, 220 (Fla. 2d DCA 2005) [30 Fla. L. Weekly D2273a] (refusing enforcement of mandatory forum selection clause in cases against multiple defendants arising out of the same incident, recognizing that “enforcing this venue provision would result in multiple lawsuits, split the causes of action, and create the potential for conflicting results in Florida and Michigan”); Carlson-Se. Corp. v. Geolithic, Inc., 530 So. 2d 1069, 1072 (Fla. 1st DCA 1988) (denying motion to enforce mandatory venue clause where result of enforcement would be “that multiple suits will be filed and enforcement of a venue provision could generate conflicting results in different courts”).

In its motion for reconsideration, First Specialty says that this “compelling reason” exception finds “no support in Florida Supreme Court of (sic) Third DCA case law. . . .” Mot. p. 2. That is incorrect. In Am. Safety Cas. Ins. Co. v. Mijares Holding Co., LLC, 76 So. 3d 1089, 1092 (Fla. 3d DCA 2011) [37 Fla. L. Weekly D36a], our appellate court cited McWane with approval and made clear that: “we agree that inconsistent and simultaneous interstate litigation is an applicable compelling reason” to deny enforcement of a mandatory forum provision. While it is true, as First Specialty points out, that the Third District found “compelling reasons” to deny enforcement of the contract absent “in [that] case,” there can be no dispute that the court again “agree[d] that inconsistent and simultaneous interstate litigation is an applicable compelling reason” to deny enforcement. The court therefore expressly embraced the “compelling reason” exception adopted by its sister courts. And even if the Third District had not expressly approved of this “exception,” this Court would be bound by the decisions of those other appellate courts that uniformly have, so long as the Third District had not expressly rejected it. See Pardo v. State, 596 So. 2d 665, 666 (Fla. 1992) (“. . . in the absence of inter-district conflict, district court decisions bind all Florida trial courts”).³

In this Court’s view, our intermediary appellate courts are correct in holding that when “compelling reasons” exist, a trial court can (and should) deny enforcement of a mandatory forum selection clause. While parties undeniably have a “right to control their litigation destinies by bargaining for the ability to litigate in a specific forum,” Am. Online,781 So. 2d at 425, this “private” bargain should yield when enforcing it would place an undue burden on the parties, third parties and the judiciary. When enforcement of a private contract would result in a single dispute being litigated in multiple jurisdictions, thereby forcing two courts to deal with a case that could (and should) be litigated in one forum, and would cause the parties (and possibly third parties) to expend substantial resources duplicating discovery and litigating the same (or substantially similar) claims in multiple jurisdictions, a “private” forum selection clause should give way for the public good. But this Court’s views on the subject are irrelevant because our appellate courts have said just that, and this Court — like its predecessor — is bound by those uniform appellate decisions.⁴

IV. CONCLUSION

The Court recognizes that forum selection provisions serve a valuable purpose, as they provide contractual and economic predictability by dispelling any “confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum. . .” Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 594 (1991). The Court also recognizes that, as a general rule, parties “have the right to control their litigation destinies” Am. Online, 781 So. 2d at 425, and that “[w]hatever inconvenience” a contracting party would suffer by being compelled to litigate in its agreed upon forum was “clearly foreseeable at the time of contracting.” The M/S Bremen, 407 U.S. at 18. But appellate precedent affords trial courts the discretion to deny enforcement of these covenants when necessary to prevent disputes arising out of a common nucleus of operative facts from being simultaneously litigated in more than one jurisdiction, thereby causing unnecessary expense to the parties (and third parties), and over-taxing our judiciary.

In this case, the Court’s predecessor applied the “compelling reason” exception to enforcement embraced by our appellate courts and concluded, as a matter of discretion, that this “mandatory” clause must give way in the public interest. This Court cannot say that decision was “clear” legal error, or that it was an abuse of discretion. See, e.g., Castillo v. Castillo, 59 So. 3d 221 (Fla. 3d DCA 2011) [36 Fla. L. Weekly D616c] (a discretionary decision of a trial court will only be reversed on appeal if “no reasonable judge would have decided as this one did”); Canakaris v. Canakaris, 382 So. 2d 1197 (Fla. 1980) (discretion is abused “. . . when the judicial action is arbitrary, fanciful, or unreasonable, which is another way of saying that discretion is abused only where no reasonable man would take the view adopted by the trial court”).

For the foregoing reasons, First Specialty’s Motion for Reconsideration is DENIED.

__________________

¹The parties agree that the operative clause here is “mandatory.” See, e.g., Shoppes Ltd. P’ship v. Conn, 829 So. 2d 356 (Fla. 5th DCA 2002) [27 Fla. L. Weekly D2378a] (discussing the difference between “mandatory” and “permissive” forum selection clauses).

²Other jurisdictions also routinely enforce these clauses in two-party (or essentially two-party) disputes. See, e.g., Saye v. First Specialty Insurance Co., 2015 U.S. Dist. Lexis 50243 (E.D. N. Y. 2015) (Gleeson, J) (enforcing forum selection clause in dispute brought by insured against First Specialty and brokerage firm that sold policy); Al Copeland Inv., LLC v. First Specialty Ins. Corp., 2017 WL 2831689 (E.D. La. June 29, 2017), aff’d by 884 F.3d 540 (5th Cir. 2018) (affirming trial court’s grant of First Specialty’s motion to dismiss based on forum selection clause); Chandler Mgmt. Corp. v. First Specialty Ins. Corp., 2013 WL 715811 1 (Tex. Dist. 1st Apr. 30, 2013); Deeba v. First Specialty Ins. Corp., 2014 WL 4852268 (W.D. Okla. Sept. 29, 2014) (granting First Specialty’s motion to dismiss based on forum selection clause).

³First Specialty also contends that Plaintiff, in the forum selection clause, waived “any objections to the clause’s enforcement.” Reply Memo p. 2. That is not exactly true. What Plaintiff “waived” was its right “to challenge or otherwise limit [NY] jurisdiction,” not its right to argue that the forum selection clause should not be enforced on public policy grounds. But it makes no difference. If “compelling reasons” not to enforce the forum selection clause itself are present, those “compelling reasons” also support not “enforcing” a party’s “waiver” of any right to contest that clause.

⁴The Court notes that this is not the only context in which Florida courts will refuse to enforce a “private” contract based upon “compelling” public policy grounds. See Ronnie Suggs Dpm v. Podiatry Ins. Co., No. 3:09cv260-MCR/MD, 2009 U.S. Dist. LEXIS 145821 (N.D. Fla. Oct. 21, 2009) (“Florida courts generally enforce choice-of- law provisions in contracts absent a compelling public policy reason not to”); Nahar v. Nahar, 656 So. 2d 225 (Fla. 3d DCA 1995) [20 Fla. L. Weekly D1356a] (exception to general rule barring enforcement of interlocutory foreign court orders may be based on “compelling public policy reasons”).