Mac Parent LLC v. North American Elite Insurance Company, Index No. 906489/2020, Supreme Court, Albany County

On March 29, 2021, Justice Richard J. Platkin, of the Albany County Commercial Division, dismissed an insurance coverage dispute pursuant to CPLR § 3211(a)(4) due to another action that was pending in New York County, making clear that New York courts do not tolerate forum-shopping in the face of clear forum selection clauses.  Mac Parent LLC v. North American Elite Insurance Company, 2021 NY Slip Op 50268(U) (Sup. Ct. Albany Cnty 2021).

Plaintiff Mac Parent LLC (“Mac Parent”) filed its case in Albany County seeking a determination that its chain restaurants were covered under an all-risk commercial insurance policy (the “Policy”) issued by defendant North American Elite Insurance Company (“NAE”) for the loss of business income and extra expenses incurred due to governmental orders issued in response to the COVID-19 pandemic.  Back in July 2020, Mac Parent (and other, unrelated restaurant owners) initially brought suit against NAE in Illinois state court (the “Illinois Action”), along with over a dozen other carriers, despite the Policy’s forum selection clause, which required that New York law govern the interpretation of the Policy and that the parties submit to the “exclusive jurisdiction of the Courts of the State of New York.” Mac Parent ultimately agreed to dismiss NAE from the Illinois Action, without prejudice.

Soon thereafter, on October 12, 2020, NAE commenced an action in New York County against Mac Parent (the “New York County Action”), seeking a declaration that the NAE policy did not cover Mac Parent’s losses arising out of the government-mandated closures of its restaurants due to COVID-19.  It also sought damages resulting from Mac Parent’s breach of the Policy by initially suing NAE in Illinois, despite the forum selection clause.  The very next day, on October 13, 2020, Mac Parent commenced an action in Albany County (the “Albany County Action”), seeking a declaration that the governmental shutdown and reopening orders caused “direct physical loss or damage” to its covered restaurants, as well as causes of action for breach of the insurance policy and unjust enrichment.

NAE moved to dismiss the Albany County Action pursuant to CPLR § 3211 (a)(4) and (8) based upon, inter alia, the pendency of a prior action in the Supreme Court, New York County between the same parties concerning the same coverage dispute. While the Court declined to dismiss the Albany County Action on the basis of improper service and lack of personal jurisdiction, it found dismissal was warranted pursuant to CPLR § 3211(a)(4) and in light of the New York County Action.

In granting the dismissal motion, the Court considered the wide discretion afforded to it pursuant to CPLR § 3211(a)(4). Citing Cherico, Cherico & Assoc. v. Midollo,, 67 A.D.3d 622, 622 (2d Dep’t 2009), Justice Platkin noted that dismissal of an action due to the pendency of a prior action is appropriate if there is a substantial identity of the parties and the causes of action.  While the Court recognized that New York courts typically follow the first-in-time rule, which provides that the court which has first taken jurisdiction is the one in which the matter should be determined, it found that this was not dispositive of the issue in this instance because the two actions were commenced only one day apart, even though the New York County Action was initiated first. The Court thus undertook a more substantive analysis and considered each action’s ties to its respective forums.

The Court recognized that New York County was the “proper and logical forum” for the insurance coverage dispute because NAE maintained a substantial physical presence as well as its principal place of business in New York.  In contrast, however, the Court found that Mac Parent’s ties to both New York County and Albany County were insignificant – Mac Parent is a Delaware company with its headquarters in Colorado and its only tie to Albany County was a single closed restaurant.  Justice Platkin also found the New York County Action to be “more comprehensive”, citing to Specialty Ins. Co. v. AR Capital, 181 A.D.3d 546, 546 (1st Dep’t 2020) and AIG Fin. Prods. Corp. v. Penncara Energy, LLC, 83 A.D.3d 495, 495 (1st Dep’t 2011).  The Court found that both actions sought similar (but contrary) relief concerning coverage under the Policy, but that the New York County Action included the additional issue of NAE’s claim for damages based upon the purported breach of the Policy’s forum selection clause.

Mac Parent argued that NAE improperly rushed to sue in New York County after Mac Parent agreed to dismiss   NAE from the Illinois Action.  It also stressed that, based on discussions between the parties, NAE knew that Mac Parent would not agree to file suit in New York County.  NAE therefore filed the New York County Action over a holiday weekend to beat Mac Parent to the courthouse steps.

The Court, however, was not persuaded.  It stated that similar, preemptive/forum shopping arguments could likewise be made against Mac Parent, which initiated the action in Illinois in disregard of the forum selection clause. The Court thus found that NAE “reasonably chose to see the dispute litigated in its home county, a proper and logical forum” thus granting the dismissal motion pursuant to CPLR § 3211(a)(4).

The Mac Parent case reinforces the fact that improper forum shopping in the face of a forum selection clause will not be tolerated by New York courts.  Rather than simply apply the “first in time” rule, the courts are willing to scrutinize the parties’ contacts and a connection with the state in analyzing a dismissal motion pursuant to CPLR § 3211(a)(4).