Schlumberger Industries, Inc. v. National Sur. Corp.

• Decision Date: 07 October 1994
• Docket Number: 93-1086,Nos. 92-2626,s. 92-2626
• Citation: 36 F.3d 1274
• Parties: SCHLUMBERGER INDUSTRIES, INCORPORATED, Plaintiff-Appellant, v. NATIONAL SURETY CORPORATION; Fireman's Fund Insurance Company; the Travelers Indemnity Company; the Globe Indemnity Company; American Motorists Insurance Company; Puritan Insurance Company; Prudential Reinsurance Company; United States Fire Insurance Company; Royal Insurance Company of America; Jackson & Companies; the American Insurance Company, Defendants-Appellees (Two Cases).
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1274

36 F.3d 1274

30 Fed.R.Serv.3d 729

SCHLUMBERGER INDUSTRIES, INCORPORATED, Plaintiff-Appellant, v. NATIONAL SURETY CORPORATION; Fireman's Fund Insurance

Company; the Travelers Indemnity Company; the Globe

Indemnity Company; American Motorists Insurance Company;

Puritan Insurance Company; Prudential Reinsurance Company;

United States Fire Insurance Company; Royal Insurance

Company of America; Jackson & Companies; the American

Insurance Company, Defendants-Appellees (Two Cases).

Nos. 92-2626, 93-1086.

United States Court of Appeals, Fourth Circuit.

Argued March 10, 1994.

Decided Oct. 7, 1994.

ARGUED: John Edward Heintz, Howrey & Simon, Washington, DC, for appellant. Mary Kay Vyskocil, Simpson, Thacher & Bartlett, New York City, for appellees. ON BRIEF: Wendy M. Anderson, Howrey & Simon, Washington, DC, for appellant. John Bowman McLeod, Haynsworth, Marion, McKay & Guerard, Greenville, SC, for appellee Travelers Indemn. Co.; Lawrence A. Levy, Gary Dennis Centola, Rivkin, Radler & Kramer, Uniondale, NY; Elizabeth Scott Moise, Nelson, Mullins, Riley & Scarborough, Columbia, SC, for appellees Nat. Sur. Corp., Fireman's Fund Ins. Co., and American Ins. Co.; John Ephraim Johnston, Leatherwood, Walker, Todd & Mann, Greenville, SC, for appellees Globe Indem. Co. and Royal Ins. Co.; George Bartlett Hall, Jr., Julia A. Dietz, Phelps Dunbar, New Orleans, LA; Mason Anderson Goldsmith, Love, Thornton, Arnold & Thomason, Greenville, SC, for appellee Jackson & Companies; John Chesney, Drinker, Biddle & Reath, Philadelphia, PA; Steven Bennett, Drinker, Biddle & Reath, Washington, DC, for appellee American Motorists Ins. Co.; James Covington Parham, Jr., Marshall Winn, Wyche, Burgess, Freeman & Parham, P.A., Greenville, SC, for appellees American Motorists Ins. Co. and Puritan Ins. Co.; Kimball Ann Lane, Craig Brown, Frances J. Phillips, Adams, Duque & Hazeltine, New York City, for appellee Puritan Ins. Co.; Karen L. Douglas, Michael Raymond Gregg, Merlo, Chapello & Douglas, Ltd., Chicago, IL; Paul J. Foster, Jr., Foster, Plaxco & Foster, Greenville, SC, for appellee Prudential Reinsurance Co.; Robert J. Kelly, Pamela Tanis, McElroy, Deutsch & Mulvaney, Morristown, NJ; Wilburn Brewer, Marcus A. Manos, Nexsen, Pruet, Jacobs & Pollard, Columbia, SC, for appellee U.S. Fire Ins. Co.

Before RUSSELL, Circuit Judge, SPROUSE, Senior Circuit Judge, and BRITT, United States District Judge for the Eastern District of North Carolina, sitting by designation.

Vacated and remanded with instructions by published opinion. Judge DONALD RUSSELL wrote the opinion, in which Senior Judge SPROUSE and District Judge BRITT joined.

OPINION

DONALD RUSSELL, Circuit Judge:

Schlumberger Industries, Inc., appeals from a decision of the United States District Court for the District of South Carolina, granting summary judgment in two consolidated cases to the appellee insurance companies. After hearing initial oral argument, we asked the parties to provide supplemental briefing and present argument on the question of the propriety of the district court's subject matter jurisdiction. We conclude, for the reasons recited below, that subject matter jurisdiction was lacking, and we order relief accordingly.

I.

From 1956 to 1977, Sangamo Weston, Inc. ("Sangamo"), predecessor in interest to appellant Schlumberger Industries, Inc. ("Schlumberger"), both of which are Delaware corporations with principal places of business in Georgia, manufactured capacitors at its plant in Pickens County, South Carolina. In the mid-1970's, the South Carolina Department of Health and Environmental Control ("DHEC") and the United States Environmental Protection Agency ("EPA") determined that soil and water at certain locations were contaminated by polychlorinated biphenyls and volatile organic compounds, all "hazardous substances" subject to regulation under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C. Secs. 9601- 9675. ¹ Sangamo was notified that it was a potentially responsible party under CERCLA Sec. 107(a), 42 U.S.C. Sec. 9607(a), for such contamination. Rather than have DHEC and EPA conduct the cleanup and then hold it liable for their "response costs" under CERCLA, ² Sangamo elected to enter into a consent agreement, under which Sangamo was to perform the cleanup at its own expense, subject to EPA oversight.

II.

In 1988, following Sangamo's completion of the cleanup to EPA's satisfaction, two insurers, National Surety Corporation ("National") and American Insurance Company ("American"), brought a declaratory judgment suit in federal district court in South Carolina (the "Anderson Division case") against Sangamo to determine their rights and responsibilities for Sangamo's cleanup costs under comprehensive general liability ("CGL") insurance policies they had issued to Sangamo. ³ National is incorporated in, and has its principal place of business in, Illinois; American is incorporated in New Jersey and has its principal place of business in California. Thus, the district court had complete diversity jurisdiction over this case. See 28 U.S.C. Sec. 1332(c)(1).

Approximately one month after the Anderson Division case was filed, Sangamo filed an analogous declaratory judgment suit in South Carolina state court (the "Greenville County case") against numerous insurance companies, including National and American, to determine the rights and responsibilities of the insurance companies for cleanup costs under CGL policies they had issued to Sangamo. ⁴ Two of the insurance companies in the Greenville County case, The Globe Indemnity Company and Prudential Reinsurance Company, were incorporated in Delaware, as was Sangamo (and is Schlumberger). As a result, there was not complete diversity in the Greenville County case. See 28 U.S.C. Sec. 1332(c)(1). Nevertheless, one named defendant in the Greenville County case, The Insurance Company of Ireland ("ICI"), removed the Greenville County case to federal district court pursuant to 28 U.S.C. Sec. 1441(d).

Sangamo voluntarily dismissed ICI and, based upon the lack of complete diversity and any other type of subject matter jurisdiction, sought to have the Greenville County case remanded to state court. By Order dated August 11, 1989, the district court denied the motion and retained the case in district court. J.A. 72-73. Sangamo also moved to dismiss the Anderson Division case on the ground that its other insurers were necessary and indispensable parties to the case, and joinder of these parties would destroy complete diversity, the court's only basis for subject matter jurisdiction over the Anderson Division case. In light of its decision to retain the Greenville County case in federal court, the district court denied this motion as well. The court, noting that both the Anderson Division case and the Greenville County case sought declaratory relief regarding the insurance companies' liability under CGL policies for Sangamo's cleanup costs, consolidated the two cases.

Subsequently, the district court granted summary judgment for the insurers, holding that CGL coverage did not extend to CERCLA response costs. Sangamo appealed that decision. The panel voted initially to certify the question of liability under the CGL policies to the Supreme Court of South Carolina. Subsequently, however, we directed the parties to address the possibility of a defect in the district court's subject matter jurisdiction. ⁵ We now conclude that the district court's exercise of subject matter jurisdiction was defective.

III.

ICI removed the Greenville County case to federal district court pursuant to a provision of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. Secs. 1330, 1332(a)(2)-(4), 1391(f), 1441(d), 1602-1611. The FSIA's removal provision, 28 U.S.C. Sec. 1441(d), states:

Any civil action brought in a State court against a foreign state as defined in section 1603(a) of this title may be removed by the foreign state to the district court of the United States embracing the place where such action is pending. Upon removal the action shall be tried by the court without jury....

Although never stated in the record, because there was a lack of complete diversity and no federal question was raised, subject matter jurisdiction in the district court as to Sangamo's claims against ICI would have to have been premised upon either removal jurisdiction under section 1441(d), or the FSIA's original jurisdiction provision, 28 U.S.C. Sec. 1330(a), ⁶ which states:

The district courts shall have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement.

The problem arises with respect to the district court's subject matter jurisdiction over the claims against the defendants in the Greenville County case other than ICI. Jurisdiction over the claims against these parties could only have been pendent party jurisdiction ⁷ and, under the Supreme Court's opinion in Finley v. United States, 490 U.S. 545, 109 S.Ct. 2003, 104 L.Ed.2d 593 (1989), the district court lacked proper pendent party jurisdiction.

In Finley, the Court addressed whether a tort plaintiff who brought claims in a district court against the federal government under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. Sec. 1346(b), could also bring state law claims in the same case against private parties. Because the private parties were not of completely diverse citizenship from the plaintiff, the district court's only possible basis for subject matter jurisdiction as to the state law claims against the private parties would have been by virtue of the fact that they were pendent to the FTCA claim against the government. The Court held that ...