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Creekstone Juban I, L.L.C. v. XL Insurance America, Inc.

Supreme Court of Louisiana

May 8, 2019

CREEKSTONE JUBAN I, L.L.C.
v.
XL INSURANCE AMERICA, INC.

          ON SUPERVISORY WRITS TO THE TWENTY-FIRST JUDICIAL DISTRICT COURT, PARISH OF LIVINGSTON

          CRICHTON, J.

         We granted this writ to resolve the question of whether La. R.S. 22:868(A)(2) prohibits the enforcement of the forum selection clause in dispute. For the reasons set forth below, we find that the statute does not prohibit enforcement of the forum selection clause to which these parties contractually agreed. Accordingly, we reverse the ruling of the trial court and remand the matter to the trial court for further proceedings pursuant to La. Code Civ. P. art. 121.

         FACTS AND HISTORY

         This case concerns a disagreement over a claim for flood damage submitted by Plaintiff-Respondent Creekstone/Juban I, LLC ("Creekstone"), a Delaware limited liability company, under a commercial property and casualty insurance policy ("Policy") issued by Defendant-Appellant XL Insurance America, Inc. ("XL Insurance"), a Delaware corporation. The Policy was issued to named insured MRMG Commercial and delivered to MRMG Commercial in Lufkin, Texas. According to the parties, though not evident from the record, Creekstone was one of 20 unrelated additional insureds who obtained coverage under the Policy, which covers over 100 properties in more than 20 states.[1]

         Creekstone is the owner of the insured property (commonly known as Juban Crossing), located in Livingston Parish, which consists of high-end, multi-use facilities for retail sales, restaurants, and a theater. Creekstone is a Delaware limited liability company. It is a single asset company that has no business other than Juban Crossing. The managing member of Creekstone is a Louisiana resident, and Creekstone's principal business office is in Baton Rouge. XL Insurance is a Delaware corporation, licensed within Louisiana and admitted by the Louisiana Department of Insurance to issue various lines of insurance, including property and casualty insurance. XL Insurance's address on file with the Louisiana Department of Insurance is in Connecticut.

         The Policy includes a forum selection clause, whereby the parties agreed that "any disagreement" related to the Policy "shall" be brought exclusively in the State of New York. The clause states, in pertinent part:

19. SERVICE OF SUIT AND CHOICE OF LAW
In the event that any disagreement arises between the "insured" and the "Company" requiring judicial resolution the "insured" and the "Company" each agree that any suit shall be brought and heard in a court of competent jurisdiction within the State of New York. The "Insured" and the "Company" further agree to comply voluntarily with all the requirements necessary to give such court jurisdiction. . . .
The "Insured" and the Company" further agree that New York law shall control the interpretation, application and meaning of this contract, whether in suit or otherwise.

         In August 2016, as a result of a massive flood, Juban Crossing sustained extensive flood damage to the buildings and their contents, including loss of revenue. Before the lawsuit was filed, XL Insurance forwarded to Creekstone $5, 000, 000. However, due to various issues in dispute that are not before this Court, XL Insurance did not immediately pay Creekstone certain additional requested sums, and Creekstone filed suit in the Twenty-First Judicial District Court, Parish of Livingston.

         In response, XL Insurance filed a Declinatory Exception of Improper Venue, Peremptory Exception of No Cause of Action, and Motion to Dismiss. XL Insurance argued that in the forum selection clause, the parties agreed to litigate all issues involving the contract exclusively in the State of New York. Creekstone opposed the motion, contending that the forum selection clause was invalid under La. R.S. 22:868, which provides that no insurance contract "delivered or issued for delivery" in Louisiana and covering subjects in Louisiana shall contain any provision "[d]epriving the courts of this state of the jurisdiction of action against the insurer." Pursuant to La. R.S. 22:868, any such provision would be void. After a hearing, the trial court overruled XL's exceptions and motion, finding that upholding the forum selection clause would violate Louisiana's public policy.[2]

         XL Insurance filed an application for supervisory writs, and the Court of Appeal, First Circuit, granted certiorari. After full briefing and argument, a five-judge panel denied the writ in a split decision and without opinion. Creekstone Juban I, LLC v. XL Insurance America, Inc., No. 17-1223 (La.App. 1 Cir. 4/9/18). Judge Crain wrote separately, stating that he favored denying the writ, because the forum selection clause "effectively deprives Louisiana courts of the ability to exercise jurisdiction over this case." Id. p. 2. Judge Guidry and Judge Holdridge dissented from the writ denial, stating they would grant the writ application and reverse the trial court because, in their opinion, the contractual forum selection clause does not deprive the court of jurisdiction and does not violate Louisiana public policy.

         This Court thereafter granted XL Insurance's application for supervisory writs. 2018-0748 (La. 9/28/18), 252 So.3d 918.

         DISCUSSION

         Legislation is the solemn expression of the legislative will; thus, the interpretation of legislation is primarily the search for the legislative intent. Cat's Meow, Inc. v. City of New Orleans, 98-0601, p.15 (La. 10/20/98), 720 So.2d 1186, 1198. See also La. R.S. 24:177(B)(1). The starting point for interpretation of any statute is the language of the statute itself. Id. When a law is clear and unambiguous, and its application does not lead to absurd consequences, it shall be applied as written, with no further interpretation made in search of the legislative intent. Id.; La. R.S. 1:4. Further, a statute must be interpreted and applied in a manner consistent with logic and the presumed fair purpose and intention of the legislature in passing it. MAW Enterprises, L.L.C. v. City of Marksville, 14-0090, p. 12 (La. 9/3/14), 149 So.3d 210, 218. It is presumed that the intention of the legislative branch is to achieve a consistent body of law. Id

         With these principles in mind, we turn to the statute at issue in this case. The narrow legal question presented is whether the forum selection clause in the XL Insurance policy, which requires that litigation be brought in New York state, violates La. R.S. 22:868 and Louisiana public policy. Revised Statute 22:868 provides, in pertinent part:

A. No insurance contract delivered or issued for delivery in this state and covering subjects located, resident, or to be performed in this state, . . ., shall contain any condition, stipulation, or agreement either:
(1) Requiring it to be construed according to the laws of any other state or country except as necessary to meet the requirements of the motor vehicle financial responsibility laws of such other state or country.
(2) Depriving the courts of this state of the jurisdiction of action against the insurer.

         Contractual forum selection clauses are prima facie valid and are enforced in Louisiana "unless the resisting party can 'clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching . . . [or that] enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision.'" Shelter Mutual Ins. Co. v. Rimkus Consulting Group, Inc. of La., 2013-1977, p. 16-17 (La. 7/1/14), 148 So.3d 871, 881 (Johnson, C.J.) (quoting Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 13 (1972)). In Shelter Mutual, this Court explained the evolution of forum selection clauses, noting that they were historically found to be invalid as against public policy or that their effect was to impermissibly "oust the jurisdiction" of a court. 2013-1977, p. 4, 148 So.3d at 874. However, a shift occurred after the Supreme Court's decision in Bremen v. Zapata Offshore Co., in which the Supreme Court described this view as a "vestigial legal fiction," that has "little place in an era when all courts are overloaded and when businesses once essentially local now operate in world markets." 407 U.S. at 12. The Bremen Court held that forum selection clauses "should be deemed presumptively valid and ordinarily enforceable, unless enforcement would be unreasonable, or the consent of the party challenging the clause was obtained through fraud or undue influence, or the chosen forum is unreasonable and seriously inconvenient." Shelter Mutual, 2013-1977, p.4-5, 148 So.3d at 874 (describing Bremen holding). This Court adopted the Bremen view in Shelter Mutual, holding that "[t]he right of parties to freely contract must encompass the correlative power to agree to bring suit under that contract in a particular forum." Shelter Mutual, 2013-1977, p. 17, 148 So.3d at 882.

         Creekstone argues that the Legislature expressed a clear public policy, by way of La. R.S. 22:868, to prohibit the operation of forum selection clauses in Louisiana, and that the forum selection clause violates La. R.S. 22:868(A)(2) because it divests the Louisiana court of the ability to hear the dispute and thereby vitiates jurisdiction in Louisiana. XL Insurance argues, to the contrary, that the statute's plain language addresses jurisdiction only and forum selection clauses do not deprive the Louisiana court of jurisdiction over the action. Rather, the clause at issue sets forth a contractual agreement that New York is the proper venue for any action under the Policy, and leaves the court's subject matter jurisdiction unaffected.

         A. The Plain Language of the Statute Favors the Insurer

         The Code of Civil Procedure defines "jurisdiction" as "the legal power and authority of a court to hear and determine an action or proceeding involving the legal relations of the parties, and to grant the relief to which they are entitled." La. C.C.P. art. 1. This Court has previously explained that jurisdiction and venue are distinct legal concepts: "If jurisdictional requirements are met, courts throughout the state have the legal power and authority to hear the case; however, not all courts with jurisdiction are in the proper venue." Turner v. Leslie, 96-2288, p.2 (La. 12/6/96), 684 So.2d 395, 396 (emphasis added). Accordingly, where the parties have contracted for a particular forum or venue for litigating disputes, this does not mean they have deprived the courts of this state of the legal authority to hear the dispute (i.e., the jurisdiction). And, as noted above, the Court cited Bremen in Shelter Mutual for the proposition that "the traditional view that forum selection clauses impermissibly oust courts of jurisdiction" is a "vestigial legal fiction." Shelter Mutual, 2013-1977, p.4-5, 148 So.3d at 874. Thus, it is apparent that the plain language of La. R.S. 22:868(A)(2) does not prohibit the forum selection clause at issue in this case, as it chooses New York as the venue for the dispute, and does not deprive Louisiana courts of jurisdiction.

         Our interpretation of the plain language is reinforced by the Court's recent analysis in Shelter Mutual. Shelter Mutual addressed the validity of a forum selection clause in a business contract and resolved a split in the appellate courts over whether the clause violated public policy. In evaluating the statute at issue in that case, this Court recognized that the legislature has enacted a limited number of statutes making forum selection clauses unenforceable in certain specific situations. The Court singled out several statutes, observing that the legislature has been "unequivocal" in enacting such statutes in at least three instances: (a) cases brought under the Louisiana Unfair Trade Practices Act;[3] (b) construction contracts involving a Louisiana domiciliary in which the work to be done is in Louisiana;[4] and (c) cases involving employment contracts.[5] Shelter Mutual, 2013-1977, p. 7-9, 148 So.3d at 879-82. After reviewing these statutes, the Shelter Mutual Court held:

It is clear the legislature has only declared forum selection clauses unenforceable and against public policy in very limited circumstances. We reject a blanket application of the public policy stated in these statutes to every contractual forum selection clause. The legislature has clearly provided for a more limited application, and has recognized Louisiana's public policy only militates against the use of forum selection clauses in these particular circumstances. The legislature has been unequivoc ...

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