Inter Insurance Agency Services Ltd. v. Insurance Department of the State of Oklahoma

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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INTER INSURANCE AGENCY SERVICES LTD.,

and UNIVERSAL CASUALTY RISK RETENTION

GROUP, INC.

Plaintiffs, MEMORANDUM AND ORDER

2:24-cv-03720-OEM-LGD

-against-

INSURANCE DEPARTMENT OF THE STATE OF

OKLAHOMA, GLEN MULREADY, DONNA

WILSON, RICK BINGHAM, and OKLAHOMA

RECEIVERSHIP OFFICE, INC.

Defendants.

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ORELIA E. MERCHANT, United States District Judge:

On May 23, 2024, plaintiffs Inter Insurance Agency Services Ltd. (“Inter Insurance”) and

Universal Casualty Risk Retention Group, Inc. (“UCRRG,” together with Inter Insurance

“Plaintiffs”) filed their initial complaint against the Insurance Department of the State of

Oklahoma (the “OID”) and Glen Mulready (“Mulready”), in his official capacity. See Complaint

(“Compl.”), ECF 1. On June 3, 2024, Plaintiffs filed a motion for a temporary restraining order

and order to show cause against the OID and Mulready.

On June 18, 2024, the OID and Mulready (the “Movant Defendants”) moved to dismiss

this action for lack of personal jurisdiction, lack of proper venue, and because the Insurance

Department and Mulready are purportedly immune from suit. See Motion to Dismiss (“MTD”),

ECF 24. On June 24, 2024, Plaintiffs amended their complaint and included as additional

defendants Donna Wilson (“Wilson”), Rick Bingham (“Bingham”), and the Oklahoma

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Receivership Office, Inc. (the “ORO,” together with all other defendants, “Defendants”). See

Amended Complaint (“Am. Compl.”), ECF 32.

On July 8, 2024, Plaintiffs filed a second motion for temporary restraining order, order to

show cause, and preliminary injunction. See July 8 Memorandum in Support re: Unsigned Order

to Show Cause (“July 8 TRO”), ECF 47.

Before the Court now is Defendants’ motion to dismiss. For the reasons that follow, this

action is hereby transferred to the Western District of Oklahoma pursuant to 28 USC § 1406(a)

and 28 U.S.C. § 1404(a), and Defendants’ motion to dismiss is denied without prejudice to renewal

following the transfer of this action.

BACKGROUND

Plaintiff UCRRG is a federally chartered risk retention group domiciled in Oklahoma. Am.

Compl. at 3. Risk retention groups are groups of “similar business[es] and professionals that

create[] [their] own insurance company to self-insure […] risks.” Id. Though incorporated and

domiciled in Oklahoma, UCRRG “actually functions in California, Florida, Georgia, New Jersey,

New York and Texas, and is managed from offices maintained by Plaintiff Inter Insurance on Long

Island.” Id. at 12. Plaintiff Inter Insurance writes liability insurance through UCRRG. Id. at 2-3.

Defendants are the OID, an administrative state agency exercising administrative and

executive powers in the State of Oklahoma; the Insurance Commissioner of the OID, Glen

Mulready; the ORO, a nonprofit domiciled in Oklahoma; Donna Wilson, the Assistant Receiver

and Estate Manager of ORO; and Rick Bingham, principal at Glynloen Insurance Consulting, and

an appointed representative of the OID and the ORO. Id. at 8.

Plaintiffs allege that Defendants, in violation of federal and Oklahoma state law, issued an

injunctive order enjoining UCRRG from writing business in Oklahoma without proper court

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approval. Id. at 2, 5. The Liability Risk Retention Act, 15 U.S.C.A. §3901 et seq. (the “LRRA”)),

provides that “[a]ny district court of the United States may issue an order enjoining a risk retention

group from soliciting or selling insurance, or operating, in any State (or in all States) or in any

territory or possession of the United States upon a finding of such court that such group is in

hazardous financial condition.” 15 U.S.C. §3906. Oklahoma’s own statute regarding the regulation

of risk retention groups, Okla. Stat. Ann. tit. 36, §6451-68 (the “OK RR Act”), states that the

Insurance Commissioner has the authority to “seek injunctive relief” but that the “injunctive

authority of the Commissioner for risk retention groups is restricted by the requirement that any

injunction be issued by a court of competent jurisdiction.” 36 O.S. §6460.

Although Defendants are permitted to regulate insurance companies domiciled in

Oklahoma under the McCarran-Ferguson Act, 15 U.S.C. §§1011-1015, Plaintiffs argue that the

LRRA preempts Defendants’ regulatory authority “to the extent that such law, rule, regulation, or

order would make unlawful, or regulate, directly or indirectly, the operation of a risk retention

group.” Am. Compl. at 3-4; 15 U.S.C. §3902(a)(1).

In 2019, OID notified UCCRG of its plans to conduct an audit of UCCRG’s books and

records as required by Oklahoma state law every three years. Am. Compl. at 20. To conduct the

audit, OID representatives traveled to Jericho, New York for a “multi-day in person audit.” Id. at

21.

On March 1, 2023, UCRRG submitted its annual report, including audited financial

statements, in accordance with the LRRA and the OK RR Act. Id. 22. On October 26, 2023,

Mulready issued an Emergency Order of Supervision (“Emergency Order”) alleging that

UCRRG’s risk based capital ratio was too low and that UCRRG was thus in a financially hazardous

condition. Mulready ordered UCRRG to be placed under the supervision of the OID, effective

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immediately. Id. at 5. On March 26, 2024, Mulready issued a “Suspension Instanter Due to

Hazardous Financial Condition Order” (the “Suspension Order”) pursuant to the Oklahoma

Insurance Code and the OK RR Act, shutting down Plaintiff’s operations in Oklahoma and every

other state in which Plaintiffs conduct business. Id. at 25-26.

Plaintiffs argue that the Suspension Order violated both the LRRA and the OK RR Act

because OID issued an injunctive order without first receiving an order from “a court of competent

jurisdiction.” Id. at 6; 15 U.S.C. §3906; Okla. Stat. Ann. tit. 36, §6460. Plaintiffs further argue

that the Suspension Order violates Plaintiffs’ due process and equal protection rights under the

Constitution. Id. at 7.

STANDARD OF REVIEW

The Movant Defendants seek dismissal (1) for lack of personal jurisdiction pursuant to

Federal Rule of Civil Procedure 12(b)(2) and (2) for improper venue pursuant to Federal Rule of

Civil Procedure 12(b)(3). “A court applies the same standard of review in Rule 12(b)(3) dismissals

as Rule 12(b)(2) dismissals for lack of jurisdiction.” Fedele v. Harris, 18 F. Supp. 3d 309, 316

(E.D.N.Y. 2014). Plaintiffs carry the burden of establishing that this Court has personal

jurisdiction over Defendants and that venue in this District is proper. See Metro. Life Ins. Co. v.

Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996) (“On a Rule 12(b)(2) motion to dismiss

for lack of personal jurisdiction, the plaintiff bears the burden of showing that the court has

jurisdiction over the defendant.”). In making its determination regarding the propriety of venue in

this District, the Court must “view all facts in a light most favorable to plaintiff” and “may consider

facts outside the pleadings.” Tour Tech. Software, Inc. v. RTV, Inc., 377 F. Supp. 3d 195, 200

(E.D.N.Y. 2019).

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DISCUSSION

The initial question before the Court is whether to address Defendants’ personal

jurisdiction challenge or Defendants’ venue challenge first. “The question of personal jurisdiction,

which goes to the court’s power to exercise control over the parties, is typically decided in advance

of venue, which is primarily a matter of choosing a convenient forum.” Leroy v. Great Western

United Corp., 443 U.S. 173, 180 (1979). However, because “neither personal jurisdiction nor

venue is fundamentally preliminary in the sense that subject-matter jurisdiction is, when there is a

sound prudential justification for doing so, a court may reverse the normal order of considering

personal jurisdiction and venue.” Id.; Japan Press Serv., Inc. v. Japan Press Serv., Inc., No. 11

CV 5875 SJF ETB, 2013 WL 80181, at *5 (E.D.N.Y. Jan. 2, 2013) (same); see also SBAV LP v.

Porter Bancorp, Inc., No. 13 CIV. 372 PAE, 2013 WL 3467030, at *2 (S.D.N.Y. July 10, 2013)

(“Although it is common to resolve challenges to personal jurisdiction before addressing motions

to transfer venue, courts are not required to do so. Courts may instead address venue applications

at the threshold, ‘when there is a sound prudential justification for doing so.’”).

Here, because the Court finds “that there are sound reasons for reversing the customary

order in this case, we address the issue of venue first.” Leon C. Baker, P.C. v. Bennett, 942 F.

Supp. 171, 175 (S.D.N.Y. 1996). Reversing the customary order is particularly appropriate here,

where the question of personal jurisdiction is considerably less clear-cut than the question of

venue. See, e.g., SBAV, 2013 WL 3467030 at *2 (“Addressing a venue motion in lieu of first

addressing personal jurisdiction is particularly sensible where there is a close question whether

personal jurisdiction exists over a defendant.”).

Turning to the question of venue, the Court finds that a transfer of venue to the Western

District of Oklahoma is proper pursuant to both 28 U.S.C § 1406(a) and 28 U.S.C. § 1404(a).

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A. 28 U.S.C. § 1406(a)

The Movant Defendants argue in their motion to dismiss that this Court should dismiss this

action for improper venue pursuant to 28 U.S.C. § 1406(a), or in the alternative transfer venue to

the Western District of Oklahoma, which the Movant Defendants “do not dispute” as a “proper

venue for this action.” Reply Memorandum of Law in Support of Defendants’ Motion to Dismiss

(“Defendants’ Reply”), ECF 45. Pursuant to 28 U.S.C. § 1406(a), “[t]he district court of a district

in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the

interest of justice, transfer such case to any district or division in which it could have been

brought.”

Defendants contend that venue is improper in this District because Plaintiffs failed to

establish venue pursuant to 28 U.S.C. § 1391(b)(2), which provides that a civil action may be

brought in “a judicial district in which a substantial part of the events or omissions giving rise to

the claim occurred, or a substantial part of property that is the subject of the action is situated.”

Defendants argue that “a substantial part” of the events or omissions giving rise to this claim did

not take place in the Eastern District of New York.

In assessing venue pursuant to 28 U.S.C. § 1391(b)(2), the Second Circuit has instructed

district courts to construe the venue statute strictly. See Gulf Ins. Co. v. Glasbrenner, 417 F.3d

353, 356 (2d Cir. 2005) (“In doing so, however, we caution district courts to take seriously the

adjective ‘substantial.’ We are required to construe the venue statute strictly. That means for

venue to be proper, significant events or omissions material to the plaintiff’s claim must have

occurred in the district in question, even if other material events occurred elsewhere. It would be

error, for instance, to treat the venue statute’s ‘substantial part’ test as mirroring the minimum

contacts test employed in personal jurisdiction inquiries.”) (cleaned up).

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Assessing substantiality for purposes of venue is a fundamentally fact-specific inquiry. See

Cold Spring Harbor Lab’y v. Ropes & Gray LLP, 762 F. Supp. 2d 543, 553–54 (E.D.N.Y. 2011)

(“Where there are some acts which took place within the plaintiff’s chosen forum, they are properly

deemed ‘significant’ if they have a ‘close nexus to the claims.’ ‘Only the events that directly give

rise to a claim are relevant. And of the places where the events have taken place, only those

locations hosting a substantial part of the events are to be considered.’ Although section

1391(b)(2) does not require that the most substantial part of the events giving rise to the claim

occurred in the Eastern District, the Second Circuit has cautioned district courts ‘to take seriously

the adjective ‘substantial’ ‘and thus ‘for venue to be proper, significant events or omissions

material to the plaintiff's claim must have occurred in the district in question.’”) (cleaned up).

Here, the Court first must determine the scope of Plaintiffs’ claims and then must determine

which events directly gave rise to Plaintiffs’ claims. Plaintiffs bring a claim for declaratory

judgment and multiple claims brought under 42 U.S.C. §1983 and the United States Constitutions.

Each of these claims challenges the regulatory actions taken in Oklahoma by Oklahoma regulators

and their agents. Though Plaintiffs allege background facts that involve this district—primarily a

2019 in-person audit occurring in the Eastern District of New York and communications sent

between Defendants in Oklahoma and Plaintiffs in the Eastern District—these events did not

directly give rise to the claims brought by Plaintiffs nor do they bear a sufficiently close nexus to

the claims to qualify as “a substantial part” for purposes of venue.

In determining venue, this Court has considered and weighed the financial harm that

Plaintiffs allege they have suffered in New York. However, this Court does not find Plaintiffs’

alleged New York-based financial harms to be sufficient to establish proper venue in this District.

See, e.g., Fedele, 18 F. Supp. 3d at 318 (“Other cases have held that the situs of the alleged harm

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to the plaintiff is a factor in deciding whether a substantial part of the events or omissions giving

rise to a claim occurred in the particular district. However, ‘this Court finds that venue

determinations based solely on the location of the harm is contrary to Congress's intent in drafting

section 1391(b) and the Second Circuit’s directive that the venue analysis should focus on the

relevant activities of the defendants.’”) (cleaned up); Blauschild v. Tudor, 31 F. Supp. 3d 527,

532–33 (E.D.N.Y. 2014) (“As other cases in this circuit have held, ‘when a court examines the

question of whether venue in a forum is proper, it must focus on where the defendant’s acts or

omissions occurred.’ Adhering to this rule comports with the purpose of the venue statute to

‘protect[ ] a defendant from the inconvenience of having to defend an action in a trial court that is

either remote from the defendant’s residence or from the place where the acts underlying the

controversy occurred.’”) (cleaned up).

Because the Court finds that Plaintiffs have not established proper venue in this District

pursuant to 28 U.S.C. § 1391(b)(2), it must comply with 28 U.S.C. § 1406(a)’s directive that “[t]he

district court of a district in which is filed a case laying venue in the wrong division or district shall

dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it

could have been brought.”

Here, the Court finds that Plaintiffs could have brought this action in the Western District

of Oklahoma. Venue is appropriate in the Western District of Oklahoma as a substantial part of

the events giving rise to Plaintiffs’ claims took place there. The Western District of Oklahoma

also has personal jurisdiction over each of Defendants. Defendants Mulready and Wilson are

alleged to be domiciled in the State of Oklahoma, granting the state general personal jurisdiction

over them. Am. Compl. at 8; Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915,

924 (2011) (“For an individual, the paradigm forum for the exercise of general jurisdiction is the

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individual's domicile.”). Likewise for the OID and the ORO, which are alleged to have principal

places of business in the state. Am. Compl. at 8; Daimler AG v. Bauman, 571 U.S. 117, 137-38

(2014). The Western District of Oklahoma also appears from Plaintiffs’ allegations to have

specific personal jurisdiction over Defendant Bingham under Oklahoma’s longarm statute, which

is “is coextensive with the constitutional limitations imposed by the Due Process Clause.”

Williams v. Bowman Livestock Equip. Co., 927 F.2d 1128, 1131 (10th Cir. 1991). Plaintiffs have

adequately pled minimum contacts for Bingham, who is alleged to have an extensive business

relationship with Oklahoma through his work with and on behalf of the ORO, where he purportedly

acts “as the representative of the Supervisor, D. Wilson” and engages in weekly calls with Ms.

Wilson. Am. Compl. at 23-24; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).

Because the Court finds that the interest of justice would be served by transferring this

action to the Western District of Oklahoma, the Court finds that a transfer to that District is merited

pursuant to 28 USC § 1406(a).

B. 28 U.S.C. § 1404(a)

The Court also finds that transferring this action to the Western District of Oklahoma is

justified under 28 U.S.C. § 1404(a), which states that “[f]or the convenience of 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 or to any district or division to which all parties have

consented.”

“Section 1404(a) serves to ‘prevent the waste of time, energy and money and to protect

litigants, witnesses and the public against unnecessary inconvenience and expense.’ ‘[M]otions

for transfer lie within the broad discretion of the district court and are determined upon notions of

convenience and fairness on a case-by-case basis.’” Hall v. S. Orange, 89 F. Supp. 2d 488, 493–

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94 (S.D.N.Y. 2000) (cleaned up). A district court “may sua sponte transfer an action in the interest

of justice and for the convenience of the parties and witnesses, pursuant to 28 U.S.C. §

1404(a).” Taite v. Colgate Univ., No. 12-CV-3435, 2012 WL 9334547, at *1 (E.D.N.Y. July 11,

2012) (citations omitted).

“The factors for evaluating a motion for transfer include: (1) the convenience to parties;

(2) the convenience of witnesses; (3) the relative ease of access to sources of proof; (4) the

availability of process to compel attendance of unwilling witnesses; (5) the cost of obtaining

willing witnesses; (6) the practical problems indicating where the case can be tried more

expeditiously and inexpensively; and (7) the interests of justice, a term broad enough to cover the

particular circumstances of each case, which in sum indicate that the administration of justice will

be advanced by a transfer.” Hall, 89 F. Supp. 2d at 494. “The core determination under § 1404(a)

is the center of gravity of the litigation […] Courts routinely transfer cases where the principal

events occurred, and the principal witnesses are located in another district.’” Totonelly v.

Cardiology Associates of Corpus Christi, Inc., 932 F.Supp. 621, 623 (S.D.N.Y.1996) (citations

omitted).

Here, having considered the totality of the factors and the allegations in this case, the Court

finds a transfer of this action to the Western District of Oklahoma to be proper pursuant to 28

U.S.C. § 1404(a). The practical considerations of trying this case, the balance of the witnesses and

the sources of proof, the convenience to the witnesses and the parties, and the interests of justice

all weigh in favor of a transfer of this action, as does the Western District of Oklahoma’s superior

familiarity with the state laws governing the Oklahoma regulatory state.

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CONCLUSION

For the reasons set forth above, this action is hereby transferred to the Western District of

Oklahoma pursuant to 28 U.S.C. § 1406(a) and 28 U.S.C. § 1404(a) and Defendants’ motion to

dismiss is denied without prejudice to renewal following the transfer of this action. Because the

Court finds that a transfer of venue is appropriate here it does not reach the question of personal

jurisdiction.

The Clerk of Court is respectfully directed to transfer this case to the Western District of

Oklahoma.

SO ORDERED

__/s/_______________________

ORELIA E. MERCHANT

United States District Judge

Dated: July 15, 2024

Brooklyn, New York

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