Baxter International Inc. v. AXA Versicherung AG

Citations: 908 F. Supp. 2d 920; 2012 WL 5429618; 2012 U.S. Dist. LEXIS 159378Docket: No. 11 C 9131

Court: District Court, N.D. Illinois; November 6, 2012; Federal District Court

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Baxter International Inc. has initiated a lawsuit against AXA Versicherung AG for declaratory relief and breach of contract, stemming from claims related to the “Second Generation Litigation,” which involves allegations of contaminated blood products. Baxter seeks insurance coverage for defense and settlement costs associated with these claims. AXA's motion to dismiss the complaint is based on a forum selection clause and the doctrine of forum non conveniens, but the court denies this motion.

Baxter, an Illinois-based company, acquired Immuno Group, an Austrian company, in 1996. At the time of acquisition, Immuno was insured by Colonia Versicherung AG, which later became AXA. Baxter was named as an additional insured under Immuno's policy, which contains a choice of law provision and a forum selection clause specifying German law and Cologne as the jurisdiction for disputes.

The court assesses the enforceability of the forum selection clause by evaluating its validity and applicability under German law, as specified in the choice of law provision. The court references Seventh Circuit precedent, establishing that the validity of a forum selection clause is governed by the law of the jurisdiction specified in the contract. The defendant argues that German law effectively requires applying EU law regarding jurisdictional matters, but the court maintains that it must analyze the clause under the specified German law, which remains uncontested.

Defendant cites the Brussels I Regulation (Council Regulation 44/2001) as the applicable EU law governing jurisdiction and forum selection clauses. Plaintiff contends that applying this regulation in a U.S. district court is inappropriate, arguing it is a procedural law limited to the EU. However, the court emphasizes that under Seventh Circuit law, it must refer to the law of Germany, the jurisdiction specified in the choice of law provision, to assess the validity of the forum selection clause. 

Both parties acknowledge that the Brussels I Regulation governs jurisdiction clauses in Germany. Experts agree that under Article 23(1) of the regulation, a forum selection clause is presumed exclusive unless there is evidence to the contrary. Disputes arise over translations of the clause in the insurance policy, but the distinction is deemed insignificant as plaintiff fails to provide evidence that its translation impacts the presumption of exclusivity. 

Plaintiff argues that the clause does not meet the validity requirements of the Brussels Convention, which was in effect when the policy was executed, claiming this invalidates the clause. However, plaintiff's expert notes the lack of case law interpreting Article 23, and no evidence was presented to show that the parties agreed the clause was non-exclusive. In contrast, defendant’s expert cites German case law affirming that both translations support the presumption of exclusivity, asserting that the validity of the clause is not affected by when the policy was issued. The court concludes that plaintiff has not overcome this presumption, affirming the jurisdiction clause's validity and exclusivity under German/EU law. It then addresses the enforceability of the clause against the plaintiff, referencing specific provisions of the Brussels I Regulation regarding jurisdiction in insurance matters.

Article 13 of the Brussels I Regulation permits jurisdiction agreements in insurance contracts under specific conditions, particularly as outlined in Article 13(5), which validates such agreements if they pertain to 'large risks' defined in Article 14. Both parties, Immuno Management AG and Baxter, qualify as 'large risks.' However, an expert, Prof. Brand, contends that the European Court of Justice’s (ECJ) ruling in Société Financière et Industrielle du Peloux v. Axa Belgium (SFIP) restricts the enforcement of the forum selection clause against Baxter, who is a co-insured but not a direct party to the insurance policy. 

SFIP determined that a jurisdiction clause valid under the previous Brussels Convention was unenforceable against a non-party insured. Although the Brussels I Regulation introduced the 'large risk' category, the defendant argues that SFIP is not applicable since it interpreted the earlier Convention, not the new Regulation. However, similarities between Articles 12 and 13 suggest that the SFIP ruling remains relevant. The defendant further claims that both parties being 'large risks' disqualifies Baxter from being considered the 'economically weakest party' entitled to protections under the Regulation. Nevertheless, Prof. Brand argues that the SFIP decision did not hinge on economic weakness and asserts that 'large risk' insureds still benefit from the Regulation’s forum provisions while having greater flexibility.

A 'large risk' insured must affirmatively consent to a forum prohibited by the Brussels I Regulation. Defendant's expert acknowledges a lack of case law regarding the SFIP decision's relevance to the Brussels I Regulation or its 'large risk' exception. Two commentators suggest that 'large risks' might create an exception to the non-binding nature of jurisdiction agreements for non-parties to the insurance contract, but these views do not adequately address the separability doctrine reinforced by the SFIP decision, which requires separate consent for forum selection clauses, and the strengthened protections for insureds. Consequently, under the SFIP decision, a valid jurisdiction clause cannot be enforced against an insured who did not agree to the contract, rendering the forum selection clause unenforceable against the plaintiff.

The defendant contends that even if the forum selection clause is unenforceable, the case should be dismissed under the forum non conveniens doctrine, which allows dismissal if it serves the convenience of the parties and justice. The plaintiff does not dispute that Cologne, Germany, is an adequate alternative forum. The defendant argues that private interest factors favor Cologne due to the presence of witnesses in Germany, while the plaintiff highlights its own witnesses and relevant documents located in the U.S. The court finds that both parties face inconveniences, with no evidence of oppression or vexation from the defendant.

Regarding public interest factors, the defendant claims Cologne is preferable because the policy is in German and German law will govern the dispute. However, the mere need to apply foreign law does not suffice to justify dismissal without a comprehensive evaluation of relevant factors. Thus, the defendant fails to demonstrate that public interest factors warrant dismissal. As a result, the defendant's motion to dismiss based on the forum selection clause and the forum non conveniens doctrine is denied, and the plaintiff's motion to file a sur-response is granted. The issue of personal jurisdiction, raised by the defendant, remains unbriefed.