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Forshaw Industries, Inc. v. Insurco, Ltd.

United States District Court, W.D. North Carolina, Charlotte Division

March 4, 2014

INSURCO, LTD. et. al., Defendants

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For Forshaw Industries, Inc., Plaintiff: Matthew F Branch, Roger S. Sumrall, LEAD ATTORNEYS, PRO HAC VICE, Bendin Sumrall & Ladner, Atlanta, GA; Reginald Bernard Gillespie, Jr., LEAD ATTORNEY, Wilson & Ratledge, PLLC, Raleigh, NC.

For Insurco, Ltd, as successor to A& G Insurance Co., Ltd., Agrichem Insurance Co., Ltd, Insurco International, Ltd., Imanco, Ltd., Inter-Industry Insurance Company, Ltd., Jonathan Marshall, Harley McNair, David Glessner, Insurco Reinsurance, Ltd, formerly known as Inter-Industry Insurance Company, Ltd, formerly known as Imanco (IOM) Limited, Defendants: William Wayne Pollock, LEAD ATTORNEY, Amie C. Sivon, Ragsdale Liggett PLLC, Raleigh, NC.

For John Rubin, Rubin Insurance Brokers, Inc., Defendants: Susan K. Burkhart, LEAD ATTORNEY, Cranfill, Sumner & Hartzog, LLP, Raleigh, NC.

For A& G Insurance Co., Ltd, Defendant: William Wayne Pollock, LEAD ATTORNEY, Ragsdale Liggett PLLC, Raleigh, NC.


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Robert J. Conrad, Jr., United States District Judge.



THIS MATTER is before the Court on the Rubin Defendants' Motion to Dismiss (Doc. 23), the Insurco Defendants' Motion to Dismiss (Doc. 26), the parties' briefs and exhibits (Docs. 24, 25, 27-30, 39-43), the Magistrate Judge's Memorandum and Recommendation (M& R) (Doc. 44), and the parties' objections (Docs. 45, 46).

It is ripe for review.

A. Background

This case presents a thicket of parties and contracts and business entities sprawling across decades and national boundaries alike. At heart, the case involves the actions and obligations of various parties as related to a series of insurance contracts procured by Plaintiff.

There are seven insurance contracts and one " Administrative Services Agreement" at issue. They are the following:

o AGL-2000: Effective January 1, 1980 [1]
o CGL-1009: Effective June 1, 1987
o CGL-4013: Effective June 30, 1994
o UML-4014: Effective January 31, 2001
o CGL-4039: Effective November 30, 2002
o CGL-4109:Effective November 30, 2004
o UML-4106:Effective November 30, 2004
o Administrative Services Agreement between Forshaw Industries and Rubin Insurance Brokers: Effective August 31, 2006

The parties, several of whose identities and locations are unknown to the Plaintiff, are the following: Forshaw Industries (Plaintiff/Forshaw) produces and distributes chemical products in Charlotte, North Carolina; the Insurco Defendants, identified here collectively, are counter-parties to Plaintiff in the insurance contracts; the Rubin Defendants acted as agents for the Insurco Defendants and include John Rubin and Rubin Insurance Brokers (RIBI)(collectively: Rubin Defendants); Defendants Glessner, McNair and Marshall also acted as agents for the Insurco Defendants.[2] Defendant Glessner is a citizen of North Dakota, while Defendant McNair is a citizen of New Jersey. The

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remaining Defendants are citizens of Canada, the Isle of Man, and Grand Cayman.

B. Factual Background

Plaintiff Forshaw produced and distributed pest control and wood treatment products at its facility in Charlotte, North Carolina. Forshaw entered into a series of insurance contracts with the Insurco defendants, the first of which became effective on January 1, 1980 and remained so until June 1, 1987.[3] This contract did not contain an arbitration clause. The remaining contracts, in the aggregate, were in effect from June 1, 1987 through, at the earliest, November 30, 2007. Each of the succeeding contracts contained an arbitration clause, but the venue provisions and choice of venue varied over the course of contracts. In contract CGL-1009, effective August 24, 1993, the parties agreed to arbitrators chosen from a pool of former and current officials of English casualty insurance or reinsurance companies who would construe the policy in accordance with the laws of England and choose where to conduct the proceeding. (English clause). (Doc. 28-6 at 31).

The English clause remained in place through the series of contracts until November 30, 2002 when the parties signed a provision directing arbitration to be administered by three arbitrators form the American Arbitration Association (AAA) under its Commercial Arbitration Rules and to take place in New York, New York (AAA clause). (Doc. 28-9 at 25). Additionally, the arbitrators were precluded from awarding punitive or exemplary damages, a provision that would remain through later iterations of the arbitration agreement. (Doc. 28-8 at 37). Signifying an intent to be governed no longer by the English clause, the parties included a provision expressly deleting it from UML 4014. (Doc. 28-9 at 21). The AAA clause remained in effect for the remainder of the contracts between Forshaw and the Insurco Defendants.

Finally, on August 31, 2006, Forshaw and the Rubin Defendants formed an Administrative Services Agreement (Agreement) whereby RIBI would act as the Named Insurance Representative (NIR) for Forshaw with respect to business transacted with the Insurco Defendants. (Doc. 24-1). The Agreement contained an arbitration provision that designated that the Agreement would be construed in accordance with the laws of Manitoba, Canada and that any dispute would be referred to arbitration there (Manitoba clause). (Id. at 2).

Plaintiff had chemical spills (" occurrences" ) at the Site and was compelled to expend money to remediate the spills at the behest of state and federal agencies. Plaintiff does not allege in his complaint when these spills occurred. At some point, Plaintiff submitted a claim to Defendants which was denied on April 15, 2009 because of late notice and pollution exclusions in the policies. (Doc. 18 at ¶ 27). Plaintiff filed suit in this Court on February 12, 2013.

A. Procedural Background

Alleging complete diversity of citizenship and an amount in controversy exceeding $75,000, Plaintiff filed this action under 28 U.S.C. § 1332. (Doc. 1). After Plaintiff twice amended its Complaint, the Rubin Defendants moved to dismiss for lack of subject matter jurisdiction, improper venue, or, in the alternate, to compel arbitration and stay the matter until completed. (Doc. 24, 25). The Insurco Defendants moved to dismiss for insufficient

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process, improper service of process, lack of personal jurisdiction, failure to state a claim, failure to plead fraud with particularity, and that Plaintiff's claims were barred under the Statute of Limitations. (Docs. 26-30). The Insurco Defendants also moved, in the alternative, to compel arbitration and stay the matter pending the outcome. (Id.).

Plaintiff contends that the Court should deny Defendants' motions. (Docs. 39, 40). Specifically, Plaintiff states that the arbitration clauses are void because they were induced by fraud and that it would be unconscionable to enforce them. (Id.).

On October 4, 2013, the Magistrate Judge issued an M& R which recommended denying Defendants' respective motions to dismiss but granting the motions to compel arbitration. (Doc. No. 44). Forshaw and the Insurco Defendants filed timely objections to the M& R which the Court now considers along with their replies. (Docs. 45-48).


A party may file specific, written objections to a magistrate judge's M& R within fourteen days after being served with a copy of the recommended disposition. 28 U.S.C. § 636(b)(1); see also Fed.R.Civ.P. 72(b); United States v. Midgette, 478 F.3d 616, 621 (4th Cir. 2007) (holding that " a party must object to the finding or recommendation on that issue with sufficient specificity so as reasonably to alert the district court of the true ground for the objection" ). A district judge must conduct a de novo review of those portions of the report to which proper objections are made. 28 U.S.C. § 636(b)(1).


The Court reviews de novo those matters on which the parties have lodged specific objections.

A. Personal Jurisdiction

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