17TH Street Associates v. Markel Intern. Ins. Co.
| Decision Date | 01 June 2005 |
| Docket Number | No. CIV.A. 2:04CV681.,CIV.A. 2:04CV681. |
| Citation | 373 F.Supp.2d 584 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | 17TH STREET ASSOCIATES, LLP, Plaintiff, v. MARKEL INTERNATIONAL INSURANCE COMPANY LIMITED, Certain Underwriters at Lloyds, London, Raphael & Associates, TPA Alan J. Stolzberg, Associated Adjusters, Inc., and Howard J. Thomas, Defendants. |
John Webb Drescher, Breit Drescher & Imprevento PC, Norfolk, VA, for 17th Street Associates, LLP, Plaintiff.
Clement Jay Robbins, Robert S. Reverski, Jr., Midkiff Muncie & Ross PC, Richmond, VA, for Markel International Insurance Company Limited, Certain Underwriters at Lloyds London, Alan J. Stolzberg, Raphael & Associates, TPA, Associated Adjusters, Inc., Howard J. Thomas, Defendants.
Plaintiff filed a motion for judgment in the Circuit Court of the City of Virginia Beach, Virginia alleging that Defendants, an insurer and its agents, breached an insurance agreement and committed intentional misconduct and acted in bad faith to deprive it of a business expectancy separate and apart from the insurance agreement. Defendants, two of which hail from the United Kingdom, two from New Jersey, and two from the Commonwealth, filed a petition for removal alleging that only the insurer, a British corporation, is a real party in interest to the suit. The petition urges this Court to exercise removal jurisdiction on the ground of diversity and alienage and to dismiss the remaining defendants pursuant to the fraudulent joinder doctrine.
At bottom, this is a garden variety coverage claim against an insurer cloaked in the garb of a complex business tort for the tactical purpose of defeating diversity and alienage jurisdiction (and perhaps in the hope of recovering punitive damages). That said, this case, unwittingly perhaps, also touches upon peculiarly federal interests involving federal alienage jurisdiction and fundamental federalism principles that strongly favor the exercise of removal jurisdiction. For the reasons that follow, this matter will remain where it belongs: in federal court.1
Plaintiff 17th Street Associates, LLP ("17th Street"), a limited liability partnership organized under the laws of the Commonwealth of Virginia, is the fee simple owner of a tract of land known as the "Peppers Property," which contains a two-story building that at one time housed a beauty shop, restaurant, and residential apartments. 17th Street rents units within the Peppers Property to residential and commercial tenants pursuant to oral month-to-month lease agreements.
According to the complaint, 17th Street entered into an Insurance Agreement (the "Agreement") on or about February 28, 2003 with Defendant Markel International Limited ("Markel") to insure the Peppers Property through February 28, 2004. Markel is a non-United States insurer organized under the laws of the United Kingdom with its principal place of business in London, England. Markel is apparently eligible to provide insurance in the Commonwealth of Virginia. The coverage required by the Agreement was allegedly provided by Defendants Certain Underwriters at Lloyd's London ("Certain Underwriters"), all of which are apparently organized under the laws of the United Kingdom and maintain their principal places of business in London, England. Despite not being licensed and regulated by the Virginia State Corporation Commission, the Certain Underwriters are apparently authorized to issue surplus lines insurance in Virginia.
The Peppers Property sustained fire damage on December 3, 2003. Following the fire, 17th Street claims to have taken the steps necessary under the Agreement to file an insurance claim (the "Claim"), including submitting a sworn proof of loss detailing the damage caused by the fire. Thereafter, Markel apparently assigned the Claim's adjustment to Defendant Raphael & Associates, TPA ("Raphael & Associates"), a claims management administration firm organized under the laws of the State of New Jersey and maintaining its principal place of business there. Defendant Alan J. Stolzberg ("Stolzberg"), a property division supervisor for Raphael & Associates, and a resident, domiciliary, and citizen of New Jersey, was assigned responsibility for adjusting the Claim on behalf of Raphael & Associates. Stolzberg in turn allegedly engaged the services of Defendant Associated Adjusters, Inc. ("Associated Adjusters"), a local adjustment company organized under the laws of the Commonwealth and maintaining its principal place of business in Virginia Beach, Virginia. Defendant Howard J. Thomas, an employee of Associated Adjusters and a resident and domiciliary of Virginia, was placed in charge of adjusting the Claim for Associated Adjusters.
To date, the Claim has not been paid and the Peppers Property has not been restored to its pre-fire condition. This prompted 17th Street to file a motion for judgment in the Circuit Court of the City of Virginia Beach, Virginia on September 20, 2004. lIn addition to claiming to be owed compensation to conduct repairs on the Peppers Property pursuant to the Insurance Agreement, 17th Street also claims that Defendants committed intentional misconduct and acted in bad faith, which deprived it of a business expectancy from the alleged oral lease agreements it once had with its tenants. Accordingly, the motion for judgment, or complaint, contains one count sounding in contract and another sounding in tort.
Under the federal removal statute, a defendant may remove "[a]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction... to the district court for the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). Defendants filed a petition for removal on November 12, 2004,2 contending that the dispute should be litigated in federal court because there are only two real parties in interest: Plaintiff 17th Street (Virginia) and Defendant Markel (United Kingdom). They contend that the other parties named in the suit were fraudulently joined to defeat diversity and alienage jurisdiction. Accordingly, Defendants' removal petition urges this Court to invoke the "fraudulent joinder" doctrine, which would permit the Court to dismiss all Defendants but Markel and to exert removal jurisdiction pursuant to the diversity and alienage provisions of the federal jurisdictional statutory scheme. See id. § 1332(a)(2) (); id. § 1441(b) ().
17th Street countered the removal petition with a motion to remand the case to state court. The motion alleges that each Defendant named in the suit is a real party in interest to the controversy and is therefore properly joined. As Defendants Associated Adjusters and Thomas are citizens of the Commonwealth, 17th Street urges that the case be remanded on the ground that, absent complete diversity, this Court lacks subject matter jurisdiction to adjudicate the dispute. See id. § 1447(c) ().
It is undisputed that the claims pled are based on Virginia law and do not involve a federal question. Thus, the only question before this Court is whether it may exert removal jurisdiction on the basis of diversity and alienage and dismiss the non-diverse Defendants pursuant to the "fraudulent joinder" doctrine. Having reviewed the parties' memoranda and entertained oral argument on February 17, 2005, the question is ripe for judicial resolution.3
The threshold question in any matter brought before a federal court is whether the court has jurisdiction to resolve the controversy involved. The obligation to ascertain the basis for jurisdictional authority "`spring[s] from the nature and limits of the judicial power of the United States' and is `inflexible and without exception.'" Steel Co. v. Citizens for a Better Env't, 424 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (quoting Mansfield, C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 28 L.Ed. 462 (1884)).
"The burden of establishing federal jurisdiction is placed upon the party seeking removal." Mulcahey v. Columbia Organic Chemicals Co., Inc., 29 F.3d 148, 151 (4th Cir.1994) (citing Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 42 S.Ct. 35, 66 L.Ed. 144 (1921)). Removal statutes are strictly construed because of the "significant federalism concerns" implicated by divesting a state court of jurisdiction over a matter originally brought before it. Id. (citing Shamrock Oil & Gas Corp. v Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941)). Thus, "[i]f federal jurisdiction is doubtful, a remand is necessary." Id.; see also Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 815-16 (4th Cir.2004); Sonoco Products v. Physicians Health Plan, Inc., 338 F.3d 366, 370 (4th Cir.2003). Before reaching the merits of the instant removal petition, the strict construal of removal statutes, as well as the apparent federalism concerns raised by consideration of a removal petition, necessitate additional context and discussion.
The strict construal of removal statutes serves...
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