300 W 22 Realty, LLC v. Strathmore Insurance Company ( 2023 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
300 W 22 REALTY, LLC, )
)
Plaintiff, )
)
v. ) C.A. No. N22C-03-147 MMJ CCLD
)
STRATHMORE INSURANCE )
COMPANY , )
)
Defendant.
Submitted: February 14, 2023
Decided: March 1, 2023
On Defendant’s Motion to Dismiss
GRANTED
On Plaintiff’s Request for Jurisdictional Discovery
DENIED
OPINION
Benjamin P. Chapple, Esq., Reed Smith LLP, Wilmington, DE, Nicholas M. Insua,
Esq. (pro hac vice) (Argued), Princeton, NJ, Attorneys for Plaintiff 300 W 22
Realty, Inc.
Curtis J. Crowther, Esq., Robinson & Cole LLP, Wilmington, DE, Gregory P.
Varga, Esq. (pro hac vice), Jonathan E. Small, Esq. (pro hac vice) (Argued),
Robinson & Cole LLP, Hartford, CT, Attorneys for Defendant Strathmore
Insurance Company
JOHNSTON, J.
FACTUAL AND PROCEDURAL CONTEXT
This is a property insurance action. Plaintiff 300 W 22 Realty (“Plaintiff”)
owns and operates a hotel in New York, New York. Plaintiff is a Delaware limited
liability company (“LLC”). Defendant Strathmore Insurance Company
(“Defendant”) is an insurance company licensed to issue policies in Delaware.
Defendant is a New York corporation. Defendant has its principal place of
business in New York, New York. Plaintiff obtained insurance coverage from
Defendant for physical loss or damage to its property, along with coverage for
business interruption losses and expenses. Defendant issued the insurance policy
to Plaintiff in New York through a New York broker. Plaintiff alleges it suffered
losses from the COVID-19 pandemic that fall within the scope of its insurance
coverage.
On March 17, 2022, Plaintiff filed the instant action, seeking: (1) declaratory
judgment that Plaintiff is entitled to coverage; and (2) damages for breach of
contract. On June 22, 2022, Defendant filed its Motion to Dismiss under Delaware
Superior Court Civil Rule 12(b)(2), alleging this Court lacks personal jurisdiction.
The Court heard oral argument on December 19, 2022. Defendant submitted
supplemental authority on December 23, 2022. Plaintiff responded on January 18,
2023. On February 2, 2023, Defendant filed a Motion to Strike Portions of
2
Plaintiff’s January 18, 2023 Response to Supplemental Authority. On February
14, 2023, Plaintiff responded.
PERSONAL JURISDICTION STANDARD OF REVIEW
In Delaware, the Plaintiff has the burden to demonstrate a prima facie case
establishing personal jurisdiction.1 The Plaintiff “must plead specific facts and
cannot rely on mere conclusory assertions.”2 In deciding whether the Court has
personal jurisdiction over a nonresident defendant, the Court must engage in a two-
step analysis.3 First, the Court must determine whether Delaware’s long-arm
statute is applicable. Second, the Court must decide whether subjecting a
nonresident defendant to jurisdiction would violate due process.4
An exercise of specific jurisdiction requires that a “defendant’s suit-related
conduct…create[d] a substantial connection with the forum State.”5 Where the
Plaintiff fails to allege that the defendant’s “in-state activity . . . gave rise to the
episode-in-suit,” the defendant is not subject to specific jurisdiction.6
1
Techview Invs. Ltd. v. Amstar Poland Prop. Fund I, L.P., 2021 WL 3891573, at *6 (Del.
Super.).
2
Mobile Diagnostics Grp. Holdings, LLC v. Suer, 972 A.2d 799, 802 (Del. Ch. 2009).
3
Matthew v. Woods Group, 56 A.3d 1023, 1027 (Del. 2012).
4
Id.; see also RE: Zuoli Li v. Xu-Nuo Pharma, Inc. & Yinglin Mark Xu, 2022 WL 17588101, at
*3 (Del. Super.) (“[T]o assess whether personal jurisdiction exists over non-resident defendants,
Delaware courts apply a two-step analysis, asking first whether there is a statutory basis for
jurisdiction and then inquiring into whether the exercise of personal jurisdiction over the
defendants would be consistent with due process.” (quoting BAM Int’l, LLC v. MSBA Gp., Inc.,
2021 WL 5905878, at *5 (Del. Ch.))).
5
Walden v. Fiore, 571 U.S. 277, 284 (2014).
6
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 923–24 (2011); see also
Bristol-Myers Squibb Co. v. Sup. Ct. of Cal., 137 S. Ct. 1773, 1780 (2017) (“[S]pecific
3
ANALYSIS
Specific Jurisdiction Under the Delaware Long-Arm Statute
Delaware’s long-arm statute states:
As to a cause of action brought by any person arising from
any of the acts enumerated in this section, a court may
exercise personal jurisdiction over any nonresident, or a
personal representative, who in person or through an
agent:
(1) Transacts any business or performs any
character of work or service in the State;
(2) Contracts to supply services or things in this
State;
(3) Causes tortious injury in the State by an act or
omission in this State;
(4) Causes tortious injury in the State or outside of
the State by an act or omission outside the State if the
person regularly does or solicits business, engages in any
other persistent course of conduct in the State or derives
substantial revenue from services, or things used or
consumed in the State;
(5) Has an interest in, uses or possesses real
property in the State; or
(6) Contracts to insure or act as surety for, or on,
any person, property, risk, contract, obligation or
agreement located, executed or to be performed within the
jurisdiction is confined to adjudication of issues deriving from, or connected with, the very
controversy that establishes jurisdiction.”); Walden, 571 U.S. at 283 (explaining that specific
jurisdiction “depends on an affiliation between the forum and the underlying controversy (i.e., an
activity or occurrence that takes place in the forum State and is therefore subject to the State’s
regulation)”).
4
State at the time the contract is made, unless the parties
otherwise provide in writing.7
The two applicable sections of the long-arm statute applicable in this case
are Sections 3104(c)(1) and (6).
Jurisdiction Under Section 3104(c)(1)
Plaintiff argues jurisdiction is proper under Section 3104(c)(1). Section
3104(c)(1) confers jurisdiction over a non-resident defendant if the non-resident
defendant “‘[t]ransacts any business’ in the State, so long as the claims in question
‘aris[e] from’ that transaction of business.”8 “[C]ontracting with or transacting
business with a Delaware corporation is insufficient to support personal
jurisdiction, absent facts . . . that, at a minimum, establish that the performance of
the contract/transaction took place in Delaware.”9
Plaintiff argues four reasons why Defendant should be subject to personal
jurisdiction in Delaware under Section 3104(c)(1): (1) Defendant is licensed to
7
10 Del. C. § 3104(c).
8
Yankees Ent. & Sports Network, LLC v. Hartford Fire Ins. Co., 2022 WL 6735556, at *4 (D.
Del.) (quoting 10 Del. C. § 3104(c)(1)).
9
Id. at *5 (quoting Zausner Foods Corp. v. ECB USA, Inc., 2022 WL 609110, at *9 (D. Del.),
report and recommendation adopted, 2022 WL 884235 (D. Del.)); see also Techview, 2021 WL
3891573, at *7 (stating, in reference to the constitutional standard for specific personal
jurisdiction, that “[c]ontracting with an out-of-state party is insufficient to establish minimum
contacts in the out-of-state party’s home forum” (citing Burger King Corp. v. Rudzewicz, 471
U.S. 462, 478 (1985)); Lenape Properties Mgmt., Inc. v. Prudential Ins. Co. of Am., 2022 WL
17826010, at *2 (Del. Super. Ct.) (stating, in reference to the constitutional standard for specific
personal jurisdiction, that “[m]erely contracting with an entity incorporated in Delaware is not
enough to support a finding of specific jurisdiction”).
5
issue insurance policies in Delaware and has conducted business in Delaware with
third parties; (2) Defendant contracted with a Delaware LLC for the specific
insurance agreement at issue in this case; (3) Defendant has voluntarily litigated in
Delaware in the past; and (4) the Plaintiff’s business interruption insurance claims
seek coverage for losses that flow to Delaware because Plaintiff is a Delaware
LLC.
The United States District Court for the District of Delaware addressed a
similar situation in Yankees Entertainment and Sports Network, LLC v. Hartford
Fire Insurance Company (“YES Network”).10 In that case, the plaintiff was a
Delaware LLC arguing for insurance coverage related to losses at seven properties
all outside of Delaware.11 The plaintiff in YES Network made the same arguments
Plaintiff makes in the instant case.12
The District Court found each argument unavailing, concluding that: (1)
issuing insurance policies to third parties formed under Delaware law did not
constitute “transacting business” under Section 3104(c)(1) because the cause of
action did not arise from contacts with the third parties;13 (2) contracting with a
Delaware LLC for an agreement negotiated and executed outside of Delaware does
10
2022 WL 6735556 (D. Del.).
11
Id. at *1.
12
Id. at *3–5.
13
Id. at *4.
6
not qualify as “transacting business” under Section 3104(c)(1);14 (3) voluntarily
litigating with third parties in Delaware is insufficient to constitute “transacting
business” under Section 3104(c)(1) when those previous suits fail “to demonstrate
any logical or causal relationship” to the instant case;15 and (4) a plaintiff cannot
rely on its own business losses to demonstrate that a defendant transacted business
in Delaware.16 In sum, the District Court explained:
[T]he Policy at issue was negotiated and executed
out-of-state, the coverage it provides is tied to
premises located outside of Delaware, and the
Policy does not specify any other locations from
which [the plaintiff] derives revenue. [The
plaintiff] has not argued that any other meaningful
connections between the Policy and the state of
Delaware exist. Thus, I conclude that [the plaintiff]
has not established that [the defendant] has
“transacted business” in this state within the
meaning of § 3104(c)(1).17
The YES Network analysis is applicable to the instant case. Plaintiff has
failed to establish that Defendant “transacted business” in Delaware within the
meaning of Section 3104(c)(1). Therefore, this Court cannot exercise jurisdiction
over Defendant under Section 3104(c)(1).
14
Id. at *5 (“[S]ubsection (c)(1) ‘requires some action by the defendant occurring in the State of
Delaware.’ The bare fact that [YES Network] is a Delaware LLC is therefore insufficient to
satisfy subsection (c)(1).” (quoting Fischer v. Hilton, 549 F. Supp. 389, 391 (D. Del. 1982))).
15
Id. at *4.
16
Id. at *5 (citing Walden v. Fiore, 571 U.S. 277, 285–86 (2014)).
17
Id.7
Jurisdiction Under Section 3104(c)(6)
Plaintiff also contends this Court may exercise personal jurisdiction under
Section 3104(c)(6). Section 3104(c)(6) permits Delaware to exercise jurisdiction
over a company that “[c]ontracts to insure or act as surety for, or on, any person,
property, risk, contract, obligation or agreement:” (1) located within Delaware at
the time the contract was made; (2) executed within Delaware at the time the
contract was made; or (3) to be performed within Delaware at the time the contract
was made.18 Section 3104(a) makes clear that “[t]he term ‘person’ in this section
includes any natural person, association, partnership or corporation.”
Defendant argues that Section 3104(c)(6) does not grant jurisdiction to this
Court because the property being insured is in New York. Plaintiff contends
Section 3104(c)(6) does grant jurisdiction to this Court because Plaintiff is a
Delaware LLC “located in Delaware” under the statute.19
Plaintiff is a Delaware LLC, which makes Plaintiff a “person” located in
Delaware. However, Defendant did not insure Plaintiff. Rather, Defendant
insured Plaintiff’s property located in New York. Therefore, Defendant did not
contract to insure a “person . . . located within Delaware at the time the contract
18
10 Del. C. § 3104(c)(6).
19
Plaintiff failed to address this argument in its Answering Brief, though it did address the
argument in its Response to Defendant’s Supplemental Authority.
8
was made.”20 Instead, Defendant contracted to insure property owned by a
Delaware LLC.
This case is distinguishable from Energy Transfer Equity, L.P. v. Twin City
Fire Ins. Co.,21 where this Court granted jurisdiction over an insurer under Section
3104(c)(6).22 In Energy Transfer, the insurance policies at issue were “policies
insuring the actions of officers and directors of Delaware corporate entities.”23 The
Court found that insuring the officers and directors of Delaware Corporate entities
qualified as “‘contracts to insure’ a person . . . located and/or to be performed in
Delaware at the time the Policies were issued.”24 The insurance was directly
insuring the Delaware entity’s corporate fiduciaries. Delaware has an interest in
the activities of corporate fiduciaries and the management of Delaware corporate
entities.
In contrast, the instant insurance policy is property insurance covering a
New York property owned by a Delaware LLC. The insurance is directly insuring
property located in New York, rather than an entity or person in which Delaware
20
10 Del. C. § 3104(c)(6).
21
2020 WL 5757343 (Del. Super.).
22
Id. at *5 (concluding Section 3104(c)(6) granted personal jurisdiction over an insurer because
the insured was “located in Delaware” as an entity “organized and existing under the laws of the
State of Delaware,” and the policies “insur[ed] the actions of officers and directors of Delaware
corporate entities”).
23
Id.
24
Id.
9
has an interest. The fact that the real property is owned by a Delaware LLC is
tangential to the insurance coverage.
The Court finds Defendant did not contract to insure a “person . . . located
within Delaware at the time the contract was made” under Section 3104(c)(6).
Therefore, this Court may not exercise personal jurisdiction over Defendant under
Section 3104(c)(6). None of the other provisions in Section 3104(c) grant personal
jurisdiction to this Court. Because this Court cannot exercise personal jurisdiction
over Defendant under Delaware’s long-arm statute, it is not necessary to address
Defendant’s right to due process.25
Jurisdictional Discovery
“[A] court may allow limited discovery before resolving a motion to dismiss
for lack of personal jurisdiction.”26 “Faced with a challenge to personal
jurisdiction, plaintiffs are entitled to discovery if their assertion of jurisdiction is
minimally plausible.”27
Plaintiff argues that it is entitled to limited jurisdictional discovery to
determine Defendant’s knowledge of Plaintiff’s connection to Delaware. But even
if Plaintiff could establish that Defendant knew of Plaintiff’s connections to
25
YES Network, 2022 WL 6735556, at *6.
26
Tell v. Roman Cath. Bishops of Diocese of Allentown, 2010 WL 1691199, at *7 (Del. Super.).
27
Munoz v. Vazquez-Cifuentez, 2019 WL 669935, at *5 (Del. Super.); see also Toys “R” Us, Inc.
v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir. 2003) (“[C]ourts are to assist the plaintiff by
allowing jurisdictional discovery unless the plaintiff's claim is ‘clearly frivolous.’”).
10
Delaware, this would not have any bearing on the analysis under Section
3104(c)(1) or 3104(c)(6). The instant case still would not sufficiently “arise from”
Defendant’s interactions with Delaware. Nor would the insurance directly cover a
person or entity in which Delaware has an interest.
Plaintiff also argues it is entitled to limited jurisdictional discovery to
determine Defendant’s connections to Delaware. Plaintiff suggests that discovery
would help it determine “whether [Defendant] has reinsurance for [Plaintiff]’s
claim that it purchased from any Delaware companies, real estate owned or leased
in the State, employees and agents in the State, premium income from Delaware,
non-premium income sources from Delaware, advertisements directed to
Delaware, and traffic on Strathmore’s website or apps originating from
Delaware.”28 However, none of these determinations would help establish this
Court’s personal jurisdiction under Section 3104(c)(1) or 3104(c)(6). The instant
case still would not sufficiently “arise from” Defendant’s interactions with
Delaware. Nor would the insurance directly cover a person or entity in which
Delaware has an interest.
The Court finds limited jurisdictional discovery is not warranted. Personal
jurisdiction is not “minimally plausible.” No information obtained in the requested
discovery would lead this Court to deny Defendant’s Motion to
28
Pl.’s Answering Br. at 20.
11
Dismiss.29 Therefore, the case must be dismissed under Delaware Superior Court
Civil Rule 12(b)(2).
CONCLUSION
The Court finds Plaintiff has failed to establish that Defendant “transacted
business” in Delaware within the meaning of Section 3104(c)(1). This Court also
may not exercise personal jurisdiction over Defendant under Section 3104(c)(6).
The Court finds limited jurisdictional discovery is not warranted. Therefore, the
Court hereby GRANTS Defendant’s Motion to Dismiss, and hereby DENIES
Plaintiff’s request for jurisdictional discovery.
Defendant’s Motion to Strike Portions of Plaintiff’s January 18, 2023
Response to Supplemental Authority is hereby DENIED AS MOOT.
IT IS SO ORDERED.
/s/ Mary M. Johnston
Judge Mary M. Johnston
29
See YES Network, 2022 WL 6735556, at *5 n.2.
12