141 F.3d 314 (7th Cir. 1998), 97-1328, Indiana Gas Co., Inc. v. Home Ins. Co.
|Docket Nº:||97-1328, 97-1381.|
|Citation:||141 F.3d 314|
|Party Name:||INDIANA GAS COMPANY, INC., et al., Plaintiffs-Appellants, v. HOME INSURANCE COMPANY, et al., Defendants-Appellees.|
|Case Date:||April 06, 1998|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued Jan. 6, 1998.
Opinion Denying Rehearing May 13, 1998.
Edward P. Henneberry, Mark Levy (argued), Howry & Simon, Washington, DC, for Indiana Gas Co., Inc., Richmond Gas Corp. and Terre Haute Gas Corp.
Roger E. Warin, Harry Lee (argued), Steptoe & Johnson, Washington, DC, for Home Ins. Co.
Thomas J. Quinn, Stephen T. Roberts (argued), Mendes & Mount, LLP, New York City, James E. Rocap, Jr., Kandi Kilkelly Hidde, Rocap, Witchger & Threlkeld, Indianapolis, IN, for Certain Underwriters at Lloyd's London and Certain London Market Ins Companies.
James S. Stickles, Jr., Johnson & Bell, Chicago, IL, for Ranger Ins. Co.
Mary K. Reeder, Riley Bennett & Egloff, Indianapolis, IN, Sonia S. Waisman (argued), Kathy Pisula Waring, Luce, Forward, Hamilton & Scripps, San Diego, CA, for St. Paul Fire & Marine Ins. Co.
Before POSNER, Chief Judge, and EASTERBROOK and EVANS, Circuit Judges.
EASTERBROOK, Circuit Judge.
Long ago, predecessors to Indiana Gas Company manufactured gas by heating coal and oil at nine sites in Indiana. The principal residual was coal tar, a sludge containing pitch plus pyridine and additional organic compounds that are raw materials for the production of paints, dyes, plastics, pharmaceuticals, and other synthetic products. Some coal tar was discarded before these beneficial uses were discovered, additional byproducts of gas manufacturing were not suitable feedstocks for other industries, and at all events production often exceeded the demand. What could not be sold or given away was placed in containment structures of various kinds, from which it has begun to leak. At two sites (and perhaps others) residuals were placed in holder pits and used as fill to level off the ground. Coal tar has some dangerous constituents, so Indiana Gas faces cleanup costs, for which it sought indemnity from its insurers. When the insurers refused, Indiana Gas and affiliated companies (collectively "Indiana Gas") initiated this comprehensive action against many of the firms that issued policies over the course of the last century, seeking a declaratory judgment that would require them to cover the cleanup costs and liability to third parties that Indiana Gas foresees. In order to resolve the suit the district court addressed many issues, such as whether the coal tar's escape was inevitable or may be characterized as an "accident" covered by the policies, and if so whether the pollution exclusions in many of the policies negate indemnity. After 11 published opinions terminated most claims in defendants' favor, 946 F.Supp. 627; 946 F.Supp. 639, 951 F.Supp. 759; 951 F.Supp. 820, settlements were reached on the rest, and Indiana Gas has appealed.
Searching for a comprehensive solution to insurance-coverage questions creates a potential problem when jurisdiction depends on 28 U.S.C. § 1332 (in this case, § 1332(a)(3)). The more defendants, the more likely it is that one of them will have the same citizenship as one of the plaintiffs, spoiling the
"complete diversity" that under Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806), is essential. Plaintiffs are incorporated and have their principal places of business in Indiana, so the suit is untenable if any defendant must be treated as a citizen of Indiana. The complaint named among the defendants "Certain Underwriters at Lloyd's, London" and "Certain London Market Insurance Companies." Which underwriters and companies are the "certain" underwriters and companies? What kinds of entities are they, and what rules govern ascertainment of their citizenships? The complaint does not say, and the district judge did not require Indiana Gas to be more specific. The London Market Insurers inform us that all but five of the "companies" are corporations organized under the law of the United Kingdom, with principal places of business there, and that none of the five domestic corporations is incorporated or has a principal place of business in Indiana. But what is the citizenship of the "underwriters"? A syndicate that underwrites insurance through the exchange at Lloyd's can have hundreds of members (known as "names"), located throughout the world, and any given policy is underwritten by multiple syndicates. Indiana Gas's brief asserts: "Defendants Certain Underwriters at Lloyd's, London and Certain London Market Insurers ("London") are various corporations and syndicates, none of which is incorporated or maintains its principal place of business in Indiana." This treats each syndicate as an entity with a single citizenship taken from its principal place of business. The London Market Insurers' brief, by contrast, treats the syndicates as unincorporated associations: "Underwriters at Lloyd's, London, defendants below, are natural persons and sole traders, subscribing to policies of insurance each for his or her own part and not one for the other. They are members of various syndicates which are located in and have their principal place of business in London, England." On this view the right parties are not the syndicates but either (a) the persons who subscribed to the policies on behalf of the syndicates, or (b) all of the names.
Every name in a syndicate faces unlimited personal liability, like a partner in a general partnership. Syndicates are run, however, much like limited partnerships, with a lead member (the "active underwriter" or "managing agent") able to transact business without consulting the investors. Descriptions of the London insurance market and the organization of underwriting syndicates at Lloyd's may be found in Daly v. Lime Street Underwriting Agencies Ltd.,  2 FTLR 277 (Q.B.); John Hayter Underwriting Agency Ltd. v. R.B.H.S. Agencies,  2 Lloyd's Rep. 105 (C.A.1976); and Edinburgh Assurance Co. v. R.L. Burns Corp., 479 F.Supp. 138, 145-46 (C.D.Cal.1979), affirmed (with an immaterial exception), 669 F.2d 1259 (9th Cir.1982).
Corporate citizenship is specified by 28 U.S.C. § 1332 (c)(1): a corporation is deemed a citizen of the jurisdiction where it is incorporated, plus the jurisdiction in which it has its principal place of business. Unincorporated business entities, however, are treated as citizens of every jurisdiction in which any equity investor or member is a citizen. Thus both general and limited partnerships are citizens of every jurisdiction of which any partner is a citizen. Carden v. Arkoma Associates, 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990); Guaranty National Title Co. v. J.E.G. Associates, 101 F.3d 57 (7th Cir.1996). Membership associations such as labor unions, joint stock companies, and joint ventures take the citizenship of each member. United Steelworkers v. R.H. Bouligny, Inc., 382 U.S. 145, 86 S.Ct. 272, 15 L.Ed.2d 217 (1965); Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 20 S.Ct. 690, 44 L.Ed. 842 (1900). Underwriting syndicates are not corporations, and, because a court has a duty to ensure that subject-matter jurisdiction is present even if the parties disregard the issue, we inquired at oral argument whether, when this case began (the only relevant time, see Denlinger v. Brennan, 87 F.3d 214 (7th Cir.1996)), any of the names in any of the syndicates was a citizen of Indiana. None of the lawyers knew, so we directed Indiana Gas and the London Market Insurers to supplement the record with the necessary information. We also extended to Indiana Gas the option of dismissing the London syndicates in order to
ensure complete diversity and permit final resolution of its claims against its other insurers, see Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989), and offered all parties an opportunity to address the legal significance of the names' citizenship.
All parties other than Indiana Gas and the London Market Insurers have passed on the opportunity to discuss the jurisdictional consequences of the names' citizenship, although the issue imperils the judgment with respect to every party. After a search of their records, the London Market Insurers inform us that "there is at least one subscribing name who was domiciled in Indiana as of the date of the filing of the Complaint." For its part, Indiana Gas has volunteered to dismiss any names who were citizens of Indiana when the complaint was filed. This offer is pointless, for the names are not parties to begin with and therefore cannot be dismissed. Either the active underwriters or the syndicates are the right parties; no view of the situation makes the names parties in their own right. It may be that the active underwriters or syndicates have multiple citizenships, but this does not imply that there are multiple parties. See Carden, 494 U.S. at 190 n. 2, 110 S.Ct. at 1019 n. 2. Indiana Gas can no more dismiss individual names than it could sue a partnership and "dismiss" any partners who are citizens of Indiana. A syndicate is in or out as a unit. Indiana Gas had a chance under Newman-Green to dismiss the London underwriting syndicates, so that it could proceed against the other insurers. It elected not to do so. As a result, we must decide whether the citizenship of the underwriters is the citizenship of every name, or only of the active underwriter who acts as the managing agent.
An underwriting syndicate at Lloyd's has the personal-liability characteristics of a general partnership and the management structure of a limited partnership. It is not incorporated and does not have the structure of a trust--to quote again from the London Market Insurers' brief, the names "are natural persons and sole traders, subscribing to policies of insurance each for his or her own part and not...
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