G&s Holdings LLC v. Cont'l Cas. Co

Decision Date08 March 2011
Docket NumberNo. 3:09-CV-00592 JD,3:09-CV-00592 JD
CourtU.S. District Court — Northern District of Indiana
PartiesG&S HOLDINGS, LLC, et al., Plaintiffs, v. CONTINENTAL CASUALTY CO. and HYLANT GROUP, INC., Defendants.

Now before the Court are the Motion to Remand [DE 9] filed by Plaintiffs on January 5, 2010, the Motion to Dismiss [DE 11] filed by Defendant Continental Casualty Company on January 6, 2010, and the Motion to Dismiss [DE 18] filed by Defendant Hylant Group, Inc. on February 5, 2010. For the following reasons, Plaintiffs' Motion to Remand [DE 9] is DENIED, and Defendants' Motions to Dismiss [DE 11; DE 18] are GRANTED.

I. Background

On November 29, 2007, there was an explosion at a Manchester, Georgia metal-processing plant owned by G&S Metal Consultants, Inc. ("GSMC"). GSMC made a claim under its insurance policy, which was issued by Continental Casualty Company ("Continental"). There is no dispute that insurance coverage existed, or that the explosion was an incident covered by the policy. [DE 2 at ¶ 13; DE 17 at 5].

Continental made some payments to GSMC on its claim for the Manchester explosion. [DE 1 at ¶ 19]. Plaintiffs allege that these payments were "far short of the damages suffered", and that Continental therefore breached the terms of the policy. On this ground, GSMC filed suitagainst Continental. This separate suit is currently pending in the Northern District of Indiana under case number 3:09-CV-493.

GSMC, now in bankruptcy, is not a party to the suit in this case. Plaintiffs in this suit are G&S Holdings, LLC, G&S Metal Trading, LLC, Aluminum Sizing, Inc., R. Scott Galley, II, and Cynthia Galley. G&S Holdings, G&S Metal Trading, and Aluminum Sizing are businesses that were affiliated with GSMC [DE 1 at ¶ 26]. These businesses are also listed as additional named insureds in the policy issued by Continental. [DE 19-1 at 21]. The Galleys were owners and operators of GSMC. [DE 1 at ¶ 44]. Importantly, no Plaintiff in this case has made a claim under the policy. [DE 2 at 5 n.2].

Instead, Plaintiffs contend that they suffered financial injuries as a result of Continental's alleged failure to pay GSMC's claim in full. Those Plaintiffs listed in the policy as additional named insureds claim that their status as such gives them standing to sue Continental for its alleged underpayment to GSMC, arguing that "[i]f the claim owed to [GSMC] had been paid, the additional insureds would not have suffered injury." [DE 17 at 5]. Likewise, the Galleys claim that they are third-party beneficiaries under the policy, and therefore have standing to sue. Id. at 6.

Plaintiffs also join their former insurance broker, Hylant Group, Inc. ("Hylant"), as a defendant. Plaintiffs allege that they suffered injury as a result of their reliance on Hylant in obtaining the insurance policy at issue. [DE 17 at 6].

Plaintiffs' complaint lists seven counts: (1) a breach of contract claim against Continental; (2) a promissory estoppel claim against Continental and Hylant; (3) a bad faith claims handling claim against Continental; (4) a negligent claims handling claim againstContinental; (5) a tortious interference with contract claim against Continental; (6) a negligent infliction of emotional distress claim against Continental; and (7) a breach of fiduciary duties claim against Continental and Hylant. [DE 1].

II. Motion to Remand

Plaintiffs' Motion to Remand claims that the U.S. District Court does not have original jurisdiction to hear this case. [DE 9 at ¶¶ 4-5].

Under 28 U.S.C. § 1332(a)(1), federal district courts have original jurisdiction to hear civil actions between citizens of different states when the amount in controversy exceeds $75,000. The requirement that suits be between citizens of different states generally requires complete diversity of citizenship between all plaintiffs and all defendants. See, e.g., Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). As a rule,

in deciding whether the required diversity is present, the court will confine inquiry to the citizenship of the named parties. If there is the required complete diversity of citizenship among them, the question whether the suit can be maintained will depend on whether the named parties are the real parties in interest and whether any indispensable party has been left out.

F. & H.R. Farman-Farmaian Consulting Eng'rs Firm v. Harza Eng'g Co., 882 F.2d 281, 284 (7th Cir. 1989). A corporation is deemed a citizen of both the state of its incorporation and the state in which it has its principle place of business. 28 U.S.C. § 1332(c)(1). The U.S. Supreme Court has defined "principle place of business" as "the place where the corporation's high level officers direct, control, and coordinate the corporation's activities[,]" which "will typically be found at a corporation's headquarters." Hertz Corp. v. Friend, 130 S. Ct. 1181, 1186 (2010); accord Wisconsin Knife Works v. Nat'l Metal Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986).

In addition to suits filed in federal court, 28 U.S.C. § 1441, "authorizes the removal ofcivil actions from state court to federal court when the action initiated in state court is one that could have been brought, originally, in a federal district court." Lincoln Prop. Co. v. Roche, 546 U.S. 81, 83 (2005). When removing to federal court based on the diversity of the parties, removal requires that no defendant be "a citizen of the State in which [the] action [was] brought." § 1441(b).1

In this case, the parties do not dispute that the amount in controversy exceeds $75,000. There is also no dispute that Plaintiffs are citizens of Indiana. [DE 1, ¶¶ 1-5; DE 15-2]. It is further uncontested that Continental is a citizen of Illinois, where it is incorporated and has its principle place of business. [DE 2 at ¶ 3.]; see also 28 U.S.C. § 1332(c)(1) (establishing corporate citizenship as such). The only dispute concerns the citizenship of Hylant Group, Inc.

Defendants contend that Hylant is a citizen of Ohio. [DE 15-2 at ¶ 2; DE 2 ¶ 4]. In support of this claim, they cite the declaration of William Pridgeon, Treasurer of Hylant Group, Inc., who reports that Hylant is incorporated under the laws of Ohio and has its headquarters in Toledo, Ohio, from which it "provides managerial and administrative oversight of Hylant Group's other offices, " including its office in Fort Wayne, Indiana. [DE 15-3]. Defendants therefore conclude that Hylant Group, Inc. is a citizen of Ohio.

Plaintiffs, however, contend that Hylant Group, Inc. is an assumed name for Hylant of Indiana, LLC, which they claim is an Indiana citizen. [DE 9 at ¶ 3]. Plaintiffs support this claim with a purported record from an Indiana Secretary of State website listing "Hylant Group, Inc." as an assumed name for Hylant of Indiana, LLC. [DE 9-2]. Plaintiffs thus assert that the partiesare not completely diverse, and therefore that the U.S. District Court lacks original jurisdiction to hear this case.

For two reasons, Plaintiffs' argument is without merit. First, generally, "in deciding whether the required diversity is present, the court will confine inquiry to the citizenship of the named parties." F. & H.R. Farman-Farmaian, 882 F.2d at 284; accord Cont'lInfo. Servs., Inc. v. Am. Salvage Pool Assoc., 230 F.3d 342, 346 (7th Cir. 2000). In this case, Plaintiffs' complaint names Hylant Group, Inc.-not Hylant of Indiana, LLC-as a defendant.2 [DE 1]. Likewise, the summons was issued to Hylant Group, Inc. [DE 15-4]. As the Court held in Lincoln Property Co. v. Roche, 546 U.S. 81 (2005), this Court has "no warrant... to inquire whether some other person might have been joined as an additional or substitute defendant[,]" because "[i]t is not incumbent on the named defendants to negate the existence of a potential defendant whose presence in the action would destroy diversity." Id. at 93, 84.

Second, uncontroverted submissions to the Court establish that Hylant Group, Inc. is the real party in interest. The affidavit of William Pridgeon explains that from Ohio, Hylant Group, Inc. oversees the operations and pays the employees of Hylant Group's Fort Wayne office. [DE 15-3]. Hylant Group, Inc. also holds all insurance licenses required for sales in Indiana. Id. As the Court pointed out in Lincoln Property, "Congress surely has not directed that a corporation, for diversity-of-citizenship purposes, shall be deemed to have acquired thecitizenship of all or any of its affiliates." 546 U.S. at 94.

Because complete diversity between all Plaintiffs and all Defendants exists, and because Hylant Group, Inc. is the real party in interest, the Court has original jurisdiction to hear this case. Accordingly, Plaintiffs Motion to Remand [DE 9] is hereby DENIED.

III. Motions to Dismiss
A. Choice of Law

Before addressing the merits of Defendants' motions to dismiss [DE 11; DE 18], the Court must first determine the law to be applied to this case.

"When a federal court hears a case in diversity, it does not necessarily apply the substantive law of the forum state; rather, it applies the choice-of-law rules of the forum state to determine which state's substantive law applies." Auto-Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543, 547 (7th Cir. 2009) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)); accord Nautilus Ins. Co. v. Reuter, 537 F.3d 733, 737 (7th Cir. 2008). Indiana is the forum state in this matter. As a result, the Court will apply Indiana choice-of-law rules to determine what state's substantive law governs this dispute.

Indiana courts honor reasonable choice-of-law stipulations by parties to contract cases. Auto-Owners, 580 F.3d at 546-47 (honoring them "regardless of whether such stipulations were made formally or informally, in writing or orally"); see also Santa's Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339, 345 (7th Cir. 2010) (applying the law of the forum state because no party raised a choice of law issue)...

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