Encompass Ins. Co. v. Stone Mansion Rest. Inc.

• Decision Date: 22 August 2018
• Docket Number: No. 17-1479,17-1479
• Citation: 902 F.3d 147
• Parties: ENCOMPASS INSURANCE COMPANY, Appellant v. STONE MANSION RESTAURANT INCORPORATED
• Court: U.S. Court of Appeals — Third Circuit

902 F.3d 147

ENCOMPASS INSURANCE COMPANY, Appellant

v.STONE MANSION RESTAURANT INCORPORATED

No. 17-1479

United States Court of Appeals, Third Circuit.

Argued: October 12, 2017

Filed: August 22, 2018

Joshua R. Guthridge, Esq. [ARGUED], R. Sean O’Connell, Esq., Robb Leonard Mulvihill LLP, BNY Mellon Center, Suite 2300, 500 Grant Street, Pittsburgh, PA 15219, Counsel for Appellant

Miles A. Kirshner, Esq. [ARGUED], Kyle T. McGee, Esq., Margolis Edelstein, 535 Smithfield Street, Suite 1100, Pittsburg, PA 15222, Counsel for Appellee

Before: CHAGARES, JORDAN, FUENTES, Circuit Judges.

OPINION

CHAGARES, Circuit Judge.

This appeal, which presents issues of statutory interpretation, stems from a tragic automobile crash that killed the intoxicated driver and seriously injured the sole passenger. Encompass Insurance Company ("Encompass"), the liability carrier for the vehicle, settled the passenger’s claims against the driver’s estate and all other possible parties, including Stone Mansion Restaurant Incorporated ("Stone Mansion") — the restaurant that allegedly overserved the driver. Thereafter, Encompass brought the instant action against Stone Mansion in Pennsylvania state court, seeking contribution under state law. Stone Mansion removed the case to the United States District Court for the Western District of Pennsylvania. Following a dispute over removal, the District Court concluded that the case was properly before it and later dismissed the case pursuant to Federal Rule of Civil Procedure 12(b)(6). Encompass appeals both the decision on the removal and the dismissal. For the reasons stated below, we will affirm in part and reverse in part.

I.

On the night of March 20 and the early morning of March 21, 2011, Brian Viviani attended an event at Stone Mansion, a restaurant in Pittsburgh, Pennsylvania. The restaurant allegedly furnished him with alcohol until he became intoxicated and then continued to serve him alcohol. Thereafter, Viviani left Stone Mansion and drove away in an automobile with Helen Hoey, who had hosted the event. After Viviani drove a short distance, the vehicle struck a guardrail and flipped onto its roof, killing him and causing Hoey significant injury.

Hoey filed a civil action against Viviani’s estate on July 25, 2013, in the Court of Common Pleas of Allegheny County, Pennsylvania. She alleged that the accident occurred because Viviani was driving while intoxicated. His estate tendered the defense against the lawsuit to Encompass, which was at all relevant times the liability insurance carrier for the vehicle. Encompass reached a settlement agreement with Hoey, whereby it paid her $600,000 and she released her claims against all possible defendants.

Encompass, a citizen of Illinois, then brought the instant action against Stone Mansion, a Pennsylvania corporation, in the Court of Common Pleas of Allegheny County. Encompass alleged that: (1) it stands in the shoes of the insured, Viviani’s estate; (2) Stone Mansion served Viviani alcohol while he was visibly intoxicated; (3) "[u]nder Pennsylvania’s Dram Shop law, a business or individual who serves alcohol to a visibly intoxicated person is legally responsible for any damage that person might cause"; and (4) as a joint tortfeasor under the Uniform Contribution Among Tort-feasors Act ("UCATA"), Stone Mansion is liable to Encompass for contribution. Appendix ("App.") 36–44.

In email correspondence between counsel for Encompass and for Stone Mansion, counsel for Stone Mansion agreed to accept electronic service of process instead of requiring formal service. Specifically, counsel for Stone Mansion informed counsel for Encompass that "[i]n the event your client chooses to file suit in this matter, I will be authorized to accept service of process" and that "if and when you do file, provide your Complaint to me along with an Acceptance form."¹ App. 85. Minutes later, counsel for Encompass replied in relevant part, "Thank you ... for agreeing to accept service." Id. On January 23, 2017, Encompass sent Stone Mansion a copy of the filed complaint and a service acceptance form via email. Counsel for Stone Mansion replied, "I will hold the acceptance of service until I get the docket n[umber]." App. 92. That same day, Encompass provided the docket number; however, Stone Mansion did not return the acceptance form. App. 95, 99. Instead, on January 26, counsel for Stone Mansion responded:

Thank you for your patience in this regard. ... I want to explain why I have not yet returned the Acceptance of Service form.

Noting that there is diversity of citizenship, and an amount in controversy in excess of $75,000, we are considering removing this action to federal court. While 28 USC [sic] § 1441(b) generally prevents a resident defendant from removing an action to federal court in its own state, the language of the statute precludes such removal when a resident defendant has been "properly joined and served". We are aware of an opinion from Chief Judge Conti in the Western District of PA, interpreting this to mean that a resident defendant can remove prior to being served.

I fully acknowledge having agreed prior to your filing suit that we will accept service. I maintain that agreement, but because it may affect our client’s procedural ability to remove the case, I have to hold off doing so until after the Notice of Removal is filed. I expect this will happen in the next one or two days. Happy to discuss this with you over the phone if you desire.

App. 99.

Thereafter, prior to formal acceptance, Stone Mansion timely removed the matter to the United States District Court for the Western District of Pennsylvania. Encompass filed a motion to remand the matter to the Pennsylvania state trial court on the grounds that removal was improper pursuant to the forum defendant rule; however, the District Court denied the motion. The District Court concluded that the forum defendant rule does not apply because it precludes removal only "if any of the parties in interest properly joined and served as defendants is a citizen of the State in which [the] action is brought" and because Stone Mansion’s counsel "did not accept service of [Encompass’] Complaint until after [it] filed a Notice of Removal." App. 3–4 (quoting 28 U.S.C. § 1441 ).

Stone Mansion then moved to dismiss the action under Federal Rule of Civil Procedure 12(b)(6), arguing that Pennsylvania’s Dram Shop law establishes liability for liquor licensees only "in favor of third persons on account of damages inflicted upon them" and that neither Encompass nor the estate of Viviani are in that class of persons. App. 104–08. The District Court granted the motion to dismiss with prejudice, noting:

The plain, unambiguous reading of [the Dram Shop law] indicates that a licensee, such as Stone Mansion, is liable only to third persons (Hoey in this case), for damages inflicted upon the third person — off the licensee’s premises — by a customer of the licensee (Viviani in this case), but only when the licensee furnishes that customer (Viviani) with alcohol when he was visibly intoxicated. [The Dram Shop law], with its limited scope, indicates that Stone Mansion may have been liable to Hoey — depending upon whether Stone Mansion served Viviani alcohol while he was visibly intoxicated. Encompass’ Complaint establishes that Encompass is acting as if it were Viviani in order to recover under Pennsylvania’s Uniform Contribution Among Tortfeasors Act. Because the[r]e is no potential cognizable claim under [the Dram Shop law] as between Viviani/Encompass and Stone Mansion, there is likewise no claim for contribution, and thus, Stone Mansion’s Motion to Dismiss will be granted.

App. 16. Encompass then filed a motion for reconsideration, arguing that it was not proceeding under the Dram Shop law, but rather the UCATA. Encompass contended that it had included the Dram Shop law in its complaint and previous briefings "only to establish that the Stone Mansion was a joint tortfeasor in the action brought by Hoey — i.e. a person jointly or severally liable in tort." App. 150. The District Court denied the motion for reconsideration, noting that the relevant provision of the Dram Shop law "limits a liquor licensee’s liability, whereas Encompass’ argument sought to expand a licensee’s liability." App. 20. Encompass timely filed a notice of appeal.

II.

The District Court exercised jurisdiction pursuant to 28 U.S.C. § 1332. Because the District Court’s dismissal of the action and denial of the motion for reconsideration constitute final decisions, this Court has appellate jurisdiction under 28 U.S.C. § 1291.

"We exercise plenary review over the denial of a motion to remand to the extent that the underlying basis is a legal question. ..." Ario v. Underwriting Members of Syndicate 53 at Lloyds for 1998 Year of Account, 618 F.3d 277, 287 (3d Cir. 2010). We likewise exercise plenary review of a motion to dismiss pursuant to Rule 12(b)(6). Bruni v. City of Pittsburgh, 824 F.3d 353, 360 (3d Cir. 2016). We must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Id. (quoting Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) ).

III.

On appeal, Encompass raises two issues: (1) whether the District Court erred in denying Encompass’ motion to remand the matter to the Pennsylvania state trial court; and (2) whether the District Court erred in dismissing the matter.

A.

We first consider whether the District Court erred in denying Encompass’ motion to remand this case to the Pennsylvania state trial court. Removal of state court actions to federal district court is governed by 28 U.S.C. §§ 1441 – 55. The general removal statute provides:

Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original

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