Bancroft Life & Casualty ICC, LTD v. Scolari, No. 3:2011cv05017 - Document 76 (W.D. Wash. 2011)
Court Description: ORDER denying 47 Plaintiff's Motion to Dismiss Amended Counterclaims, signed by Judge Ronald B. Leighton.(DN)
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Bancroft Life & Casualty ICC, LTD v. Scolari 1 Doc. 76 HONORABLE RONALD B. LEIGHTON 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 8 9 BANCROFT LIFE & CASUALTY ICC, LTD, 10 Plaintiff, 11 12 CASE NO. C11-5017RBL ORDER DENYING PLAINTIFF’S MOTION TO DISMISS AMENDED COUNTERCLAIMS v. CESAR SCOLARI, 13 Defendant. 14 THIS MATTER is before the Court on Plaintiff’s Motion to Dismiss Amended 15 Counterclaims [Dkt. #47]. The Court has reviewed the record and the Court has heard oral 16 argument. 17 The Motion is based on a forum selection clause contained in a 2005 Application and 18 Subscription Agreement between the parties. The clause provides: “The benefits of this 19 coverage may only be enforced within the jurisdiction and under the laws of St. Lucia1.” [See 20 21 22 1 Scolari points out that in 2005, Bancroft was located in the British Virgin Islands, and that the forum selection clause was revised in 2008, apparently with the intent of making it 24 retroactively “effective” and thus applicable to prior Certificate Holders, such as Scolari. 23 ORDER DENYING PLAINTIFF’S MOTION TO DISMISS AMENDED COUNTERCLAIMS - 1 Dockets.Justia.com 1 Dkt. #42-1 Ex. 1] Bancroft seeks to enforce the forum selection clause, and asks this Court to 2 dismiss Scolari’s fraud-based counterclaims in favor of adjudicating them in St. Lucia. 3 Because the allegations of fraudulent conduct are plausible, are directly related to 4 Bancroft’s collection action, and are not within the forum selection clause at issue, Bancroft’s 5 Motion to Dismiss the Amended Counterclaims is DENIED. 6 I. BACKGROUND 7 This case involves a complicated, secretive insurance arrangement. Bancroft Life & 8 Casualty ICC, Ltd. (“Bancroft”) is a corporation owned by Bradley Barros. It was formerly 9 (including 2005) organized in Tortola, BVI, and is now organized under the laws of St. Lucia. It 10 runs an insurance program called Premium Lite. Bancroft’s insured, Semper Fidelis, Inc., is 11 alleged to be a shell entity, also owned by Bradley Barros. Semper Fidelis has no place of 12 business, no productive activity, and no employees. 13 Semper Fidelis apparently issues Certificates of Insurance to “Certificate Holders” such 14 as Defendant Scolari and his entities, Sea Czar, Inc. and Staffworks, Inc. Certificate Holders 15 must be members of yet another Barros-owned entity, Associates Benefits Group (ABG). 16 Bancroft insures Semper Fidelis as owner and beneficiary of the policy. ABG in turn supplies 17 group insurance to its members, through the Certificates of Insurance. The members are given 18 only the Certificates; they are not given copies of the “Group Master Policy,” which is kept 19 confidential. 20 In order to even view the Group Master Policy, a Certificate Holder must make a written 21 request to do so, make an appointment, and travel to Semper Fidelis’ offices in Castries, St. 22 Lucia, West Indies. 23 24 ORDER DENYING PLAINTIFF’S MOTION TO DISMISS AMENDED COUNTERCLAIMS - 2 1 As a material inducement to purchase its Premium Lite Insurance, Bancroft offers to loan 2 back to the Certificate Holders 70-75% of the premiums they have paid. This loan obligation is 3 reflected in a Promissory Note, and the Certificate Holder is obligated to pay annual interest until 4 maturity. At the expiration of an insurance policy’s term (usually five years) Bancroft refunds a 5 portion of the premiums paid, adjusted for gains or losses on investments made by Bancroft with 6 these premiums (including loans to Certificate Holders), less claims paid and administrative 7 expenses. 8 A company that creates a self-insurance fund is typically required to pay taxes to the 9 United States Government on the fund. In contrast, if the statutory and regulatory requirements 10 of the jurisdiction in which Bancroft is domiciled are strictly followed, a United States company 11 participating in Bancroft’s “insurance” program can apparently deduct the premium payments on 12 their tax return. This tax avoidance feature is the material benefit to the Certificate Holder. 13 In September 2005, Bancroft’s Master Group Policy, described this “premium return” 14 feature: 15 16 17 18 If after being continuously covered for a minimum period of three years, should any Certificate Holder elect to terminate insurance under the policy and Certificate of Insurance, the Company agrees to return a portion of the premium paid by the Certificate Holder from the inception of insurance on an experienced-based formula. Under the cloak of secrecy surrounding the Group Master Policy terms, Bradley Barros 19 (acting for Bancroft and Semper Fidelis) unilaterally modified the premium return benefit, 20 effective 2010, adding that the return would be in Bancroft’s sole and absolute discretion: 21 22 23 If after being continuously covered for a minimum period of three years, should any Certificate Holder elect to terminate insurance under the policy and Certificate of Insurance, the Company may, in its sole and absolute discretion, return a portion of the premiums paid by the Certificate Holder from inception of insurance on an experience-based formula. (Emphasis added). 24 ORDER DENYING PLAINTIFF’S MOTION TO DISMISS AMENDED COUNTERCLAIMS - 3 1 Bancroft also unilaterally revised at least some of the Forum Selection provisions in its 2 various documents over the course of Scolari’s involvement in the Premium Lite Program. For 3 example, the 2010 version of the Group Master Policy2 includes a much broader forum selection 4 clause, which provides in part: 5 6 7 Any action at law or in equity based upon, arising from or in any way related to the policy or any Claim, including, but not limited to, benefits payable under the policy, coverage issues, termination issues and premium refunds (i) must be brought in the Courts of St. Lucia, West Indies, which shall have exclusive jurisdiction over such matters[.] 8 9 Scolari enrolled in Bancroft’s Premium Lite program beginning in 2005. He paid 10 something over $7 million in premiums, and borrowed back more than $5 million. When the 11 parties’ business relationship soured for a variety of reasons, Sacolari refused to pay3 on the 12 loans and Bancroft sued on the notes. Scolari has asserted counterclaims including fraud, bad 13 faith and the like, which are both defenses to the collection action and affirmative claims for 14 relief. Bancroft seeks dismissal of the Counterclaims in light of the forum selection clause(s). 15 II. LEGAL STANDARD 16 Federal Rule of Civil Procedure 12(b)(3) permits a defendant to seek dismissal for 17 improper venue. The Plaintiff has the burden of showing that venue is proper. See Piedmont 18 Label Co. v. Sun Garden Packing Co., 598 F.2d 591, 496 (9th Cir. 1979). On a Rule 12(b)(3) 19 20 2 It is disputed whether Scolari or his attorney saw this document, or its predecessor, prior 21 to paying his premium. There is some evidence that the 2010 document was not actually so revised until recently, with a retroactive “effective” date. Indeed, the record reflects a number of 22 instances where Bancroft revised documents and dates after the fact. 3 Though such an action would seem to fall within the forum selection clause as Bancroft broadly reads it, the notes themselves provided for enforcement in the U.S., where the bulk of 24 Scolari’s assets are presumably located. 23 ORDER DENYING PLAINTIFF’S MOTION TO DISMISS AMENDED COUNTERCLAIMS - 4 1 motion to dismiss “the trial court must draw all reasonable inferences in favor of the non-moving 2 party and resolve all factual conflicts in favor of the non-moving party[.]” Murphy v. Schneider 3 Nat’l, Inc., 362 F.3d 1133, 1138 (9th Cir. 2004). However, the pleadings need not be accepted as 4 true and a court may consider facts outside the pleadings. Holland Am. Line, Inc. v. Wartsila 5 North Am., Inc., 485 F.3d 450, 455 (9th Cir. 2007) (citing Murphy, 362 F.3d at 1137). 6 Forum selection clauses are presumptively valid. Murphy, 362 F.3d at 1140. “[A] clause 7 establishing ex ante the forum for dispute resolution has the salutary effect of dispelling any 8 confusion about where suits arising from the contract must be brought and defended .” E. & J. 9 Gallo Winery v. Andina Licores S.A., 446 F.3d 984, 992 (9th Cir. 2006) (quoting Carnival Cruise 10 Lines, Inc. v. Shute, 499 U.S. 585, 593-94 (1991)). Thus, “a forum [selection] clause should 11 control absent a strong showing that it should be set aside.” M/S Bremen v. Zapata Off-Shore 12 Co., 407 U.S. 1, 15 (1972); Murphy, 362 F.3d at 1140 (“Because forum selection clauses are 13 presumptively valid, they should be honored ‘absent some compelling and countervailing 14 reason.’” (quoting M/S Bremen, 407 U.S. at 12)). “The party challenging the clause bears a 15 ‘heavy burden of proof’ and must ‘clearly show that enforcement would be unreasonable and 16 unjust, or that the clause was invalid for such reasons as fraud or over-reaching.’” Murphy¸362 17 F.3d at 1140 (quoting M/S Bremen, 407 U.S. at 15) (emphasis added). 18 Bancroft’s primary argument is that “the forum selection clause” requires all of Scolari’s 19 counterclaims – including those for fraud in the inducement – to be litigated in St. Lucia. 20 Bancroft glosses over the fact that Scolari’s initial application included only a limited forum 21 22 23 24 ORDER DENYING PLAINTIFF’S MOTION TO DISMISS AMENDED COUNTERCLAIMS - 5 1 selection clause, and instead emphasizes the broad language4 it alleges is contained in the Group 2 Master Policy(s). But those policies were not signed, were possibly not seen, and were likely not 3 even in existence at the time Bancroft first accepted Scolari’s premiums. The only executed 4 clause in effect at that time is not broad enough to encompass Scolari’s fraud claims. 5 Furthermore, the counterclaims’ allegations – broadly, fraud – are both defenses to 6 Bancroft’s collection action and affirmative claims for relief. There is ample evidence that 7 Bancroft unilaterally (and retroactively and secretly) modified provisions in the agreement, 8 including specifically the “return of premium benefit.” The action to collect on the promissory 9 notes and the claims regarding the return of premiums are inextricably linked, and should be 10 tried together. 11 The Motion to Dismiss the Amended Counterclaims [Dkt. #47] is therefore DENIED. 12 Dated this 28th day of November, 2011. 14 A 15 RONALD B. LEIGHTON UNITED STATES DISTRICT JUDGE 13 16 17 18 19 20 21 22 4 In an effort to overcome Scolari’s claim that he never even saw, much less signed, the Group Master Policy, Bancroft also argues that Scolari is a third party beneficiary of the 24 Bancroft/Semper Fidelis “contract.” This argument is not persuasive and is rejected. 23 ORDER DENYING PLAINTIFF’S MOTION TO DISMISS AMENDED COUNTERCLAIMS - 6
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