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UNITED STATES FIRE INSURANCE COMPANY v. ALDWORTH COMPANY

June 28, 2005.

UNITED STATES FIRE INSURANCE COMPANY and THE NORTH RIVER INSURANCE COMPANY, Plaintiffs,
v.
ALDWORTH COMPANY, INC., Defendant.



The opinion of the court was delivered by: JEROME SIMANDLE, District Judge

OPINION

Plaintiffs United States Fire Insurance Company ("U.S. Fire") and The North River Insurance Company ("North River") brought this declaratory judgment action pursuant to 28 U.S.C. § 2201 and Fed.R.Civ.P. 57, seeking a declaration by the Court that Plaintiffs have no duty to defend or indemnify Defendant Aldworth Company, Inc. ("Aldworth") for liability arising out of the underlying personal injury action, England v. Barron, No. 01SV541 (Coweta County, Georgia). Defendant seeks to dismiss the complaint pursuant to Rules 12(b)(2) and 12(b)(3) of the Federal Rules of Civil Procedure for lack of personal jurisdiction and improper venue.*fn1 Alternatively, Defendant seeks to have this matter transferred either to the Northern District of Georgia, the jurisdiction encompassing the forum in which the underlying action is pending, or to the District of Massachusetts, the place of the insurance contract. For the reasons now stated, the motion will be denied in its entirety.

  I. BACKGROUND

  Defendant Aldworth is a corporation organized under the laws of Massachusetts with its principal place of business in Lynnfield, Massachusetts. (Compl. ¶ 3.) Aldworth is in the business of leasing drivers, warehouse workers, and other relevant employees to firms whose business involves transporting goods. Duncan v. Aldworth, 124 F.Supp.2d 268, 275 (D.N.J. 1999). Plaintiffs are New Jersey corporations with their principal places of business in Morristown, New Jersey.

  On August 14, 2001, Aldworth was sued on a respondeat superior theory of liability by Sandra and Andrew England in state court in Coweta County, Georgia, claiming that on August 30, 1999, Sandra England was punched in the face by Ricky Barron, a truck driver employed by Aldworth and/or Keystone Freight Company. (Id. at ¶¶ 6-8.) According to Plaintiffs, service of process on Aldworth was properly effectuated. (Id. at ¶ 10.)

  Upon receipt of process, Aldworth's Director of Operations at that time, Wayne Kundrat, failed to forward copies of the underlying action to North River. (Id. at ¶¶ 11, 12.) North River, upon its own inquiries, first received notice of the underlying lawsuit on October 22, 2001. (Id. at ¶ 13.) That same day, North River sent a reservation of rights letter to Aldworth requesting an explanation as to why North River had not been notified of the underlying litigation. (Id.) On October 29, 2001, Kevin Roy, an Executive Vice President at Aldworth, responded by telephone to North River's letter and informed North River Claims Specialist Ritchie Royston that Wayne Kundrat had been instructed to forward a copy of the underlying action to North River but simply had failed to do so. (Id. at ¶ 14.) The next day, North River sent a letter to Aldworth declining coverage for liability arising from the underlying lawsuit on the grounds that Aldworth had breached its contractual duties to North River. (Id. at ¶ 15.) In the underlying tort action, default judgment was entered against Aldworth as to liability and the amount of damages was tried to a jury. A judgment was subsequently entered against Aldworth for $750,000 in compensatory damages and $1 million in punitive damages. (Id. at 16.)

  II. DISCUSSION

  Transfer here may be appropriate regardless of whether venue is proper or whether this Court has personal jurisdiction over Defendant. See Gehling v. St. George's School of Medicine, Ltd., 773 F.2d 539, 544 (3d Cir. 1985) (citing Reyno v. Piper Aircraft Co., 630 F.2d 149, 164-65 (3d Cir. 1980), rev'd on other grounds 454 U.S. 235 (1981), reh'g denied 455 U.S. 928 (1928)); Goldlawr v. Heiman, 369 U.S. 463, 466 (1962); 15 Charles Alan Wright, R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3827 (2d ed. 1986) (explaining that if "transfer can be ordered [under 28 U.S.C. § 1406(a)] of a case from a district where both venue and personal jurisdiction are lacking, it should follow a fortiori that there can be transfer [under § 1404(a)] if venue is proper and only personal jurisdiction is lacking"). Nonetheless, insofar as the Court's determination as to personal jurisdiction will govern which provision — either 28 U.S.C. §§ 1404(a) or 1406(a) — controls the transfer analysis, that issue must be discussed at the outset. See Jumara v. Evangelina, 55 F.3d 873, 878 (3d Cir. 1995). A. This Court Has Personal Jurisdiction Over Defendant

  Defendant is subject to the personal jurisdiction of this Court. The issue of personal jurisdiction is approached as follows:
[T]o exercise personal jurisdiction over a defendant, a federal court sitting in diversity must undertake a two-step inquiry. First, the court must apply the relevant state long-arm statute to see if it permits the exercise of personal jurisdiction; then, the court must apply the precepts of the Due Process Clause of the Constitution. In New Jersey, this inquiry is collapsed into a single step because the New Jersey long-arm statute permits the exercise of personal jurisdiction to the fullest limits of due process. . . .
Personal jurisdiction under the Due Process Clause depends upon the relationship among the defendant, the forum, and the litigation. Physical presence within the forum is not required to establish personal jurisdiction over a nonresident defendant. Instead, the plaintiff must show that the defendant has purposefully directed its activities toward the residents of the forum state, or otherwise purposefully availed itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.
IMO Industries, Inc. v. Kiekert AG, 155 F.3d 254, 258-59 (3d Cir. 1998) (internal citations omitted).

  This Court has had the occasion to discuss Aldworth's relationship to the State of New Jersey once before. See Duncan v. Aldworth, 124 F.Supp.2d 268 (D.N.J. 1999). There, the Regional Director of the National Labor Relations Board ("NLRB") petitioned the Court for a temporary injunction pursuant to section 10(j) of the National Labor Relations Act (the "Act"), as amended, 29 U.S.C. § 160(j), following the issuance of an unfair labor practice complaint under section 10(b) of the Act alleging that Aldworth and Dunkin' Donuts Mid-Atlantic Distribution Facility ("Dunkin' Donuts") engaged in unfair labor practices. In reaching the conclusion that Aldworth and Dunkin' Donuts were "joint employers" for purposes of the Act, the Court noted that Aldworth employed about 1,500 employees in roughly 24 states, including New Jersey; Aldworth provided services to about 25 businesses, including Dunkin' Donuts, which maintained a distribution facility in Swedesboro, New Jersey; at that facility, Aldworth employed about 130-140 employees, consisting of about 63 drivers, 40-45 warehouse employees, 30-40 driver helpers and a number of supervisors. Id. at 276. The Court further noted that "Aldworth pays the [Dunkin' Donuts] employees wages and benefits, maintains workers' compensation insurance, withholds taxes, and keeps records." Id.

  Moreover, another of Aldworth's customers, Commodity Specialist Company ("Commodity"), currently maintains an office in Newark, New Jersey. (12/15/04 Dunn Aff. at ¶ 5.) Aldworth leases drivers to Commodity who report to work at the Newark office. (Id.) As with its Dunkin' Donuts customers, Aldworth has purchased New Jersey workers' compensation insurance for Commodity employees. (Def. Reply Br. at 7.) In addition, it is undisputed that Aldworth obtained an employers' liability insurance policy from U.S. Fire for its employment activities in New Jersey and that it maintains a New Jersey Taxpayer identification number. (Pls. Br. at 8; Pls. Sur-Reply Br. at 2.) These facts support the Court's conclusion that Aldworth "has purposefully directed its activities toward the residents of [New Jersey], or otherwise purposefully availed itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Kiekert AG, 155 F.3d at 258-59. The Court thus has general jurisdiction over Defendant.*fn2

  In any event, the Court finds that there is specific jurisdiction.

 
In order for specific jurisdiction to be properly exercised under the Due Process Clause, the plaintiff must satisfy a two-part test. First, the plaintiff must show that the defendant has constitutionally sufficient "minimum contacts" with the forum. Second, for jurisdiction to be exercised the court must determine, in its discretion, that to do so would comport with "traditional notions of fair play and substantial justice."
IMO Industries, 155 F.3d at 259 (internal citations omitted). Both prongs are satisfied here. Specifically, the subject matter of the complaint in part was the U.S. Fire Insurance policy which Aldworth sought in order to cover its employment activities in the District of New Jersey. As such, it does not offend "traditional notions of fair play and substantial justice" that Defendant would be hailed into a New Jersey court in a matter relating to that very agreement. B. Transfer Under § 1404(a)

  Because this Court has personal jurisdiction over Defendant Aldworth, Defendant "resides" in this judicial district within the meaning of 28 U.S.C. § 1391(a) and (c).*fn3 For that reason, venue here is proper. Even though venue is proper, however, the Court has discretion to transfer the matter to another district pursuant to 28 U.S.C. § 1404(a). That section provides that "[f]or the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."*fn4 28 U.S.C. § 1404(a); see Shutte v. ARMCO Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970). First, the events giving rise to this action took place in Georgia and, thus, this action could have been originally filed there.*fn5 (Compl. at ¶ 7; Def. Br. at 2.) However, the transferee venue is not more convenient to the parties and witnesses. To be sure, courts are not limited to considerations of convenience alone. Instead, "commentators have called on the courts to `consider all relevant factors to determine whether on balance the litigation would more conveniently proceed and ...


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