Aetna Cas. & Sur. Co. v. Hillman
| Decision Date | 13 August 1986 |
| Docket Number | No. 85-3057,85-3057 |
| Citation | 796 F.2d 770 |
| Parties | AETNA CASUALTY & SURETY CO., et al., Plaintiffs-Appellants, v. Michael A. HILLMAN, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Donald O. Collins, John M. Holahan, Jr., New Orleans, La., for plaintiffs-appellants.
Robert H. Schmolke, Edmund J. Schmidt, III, Baton Rouge, La., for Hillman.
Nel F. Vezina, Gretna, La., for James A. Freeman.
Howard Daigle, Jr., New Orleans, La., Docia L. Dalby, Baton Rouge, for GE Credit Corp.
Dennis C. Weber, Baton Rouge, La., for David Gyer.
Appeal from the United States District Court for the Middle District of Louisiana.
Before GEE, RANDALL, and GARWOOD, Circuit Judges.
Appellant United States Fidelity and Guaranty Company (USF&G) appeals the district court's grant of defendants' motion to dismiss for lack of subject matter jurisdiction and its determination that the suit was in any event not appropriate for declaratory relief. We affirm.
In December 1983, a fire completely destroyed a 1973 Mitsubishi aircraft parked at the Iberville Parish Airport. The airplane was owned by Freeman and Gyer Rentals and leased to James A. Freeman, David Gyer, and Michael A. Hillman, d/b/a FGH Flying Service. The airplane was mortgaged to General Electric Credit Corporation (GECC) and insured by United States Aircraft Insurance Group (USAIG).
USAIG is a conglomerate of nineteen insurance companies. Policies of insurance are issued by USAIG rather than through a particular member company. When the insurer files suit respecting a policy, the suit is filed in the name of a member company chosen by the group rather than in the name of USAIG. Policies issued by USAIG specifically provide that any member company may file suit. 1 The member companies are incorporated and have principal places of business in various states.
Shortly after the fire, counsel for the owner and lessees began negotiating settlement of the insurance claim with local counsel for USAIG. In March 1984, insurance counsel filed on behalf of Aetna Casualty & Surety Company (Aetna), a member company of USAIG, a suit for declaratory judgment in the United States District Court for the Middle District of Louisiana. GECC and the lessees were named defendants. Aetna alleged that the fire was intentionally set by or at the direction of the plane's owner and lessees. Aetna's complaint alleges that it is a Connecticut corporation with its principal place of business in that state and that it issued the policy in question. The complaint makes no mention of any other insurance company or of USAIG, and it contains not the slightest indication that any other party might have an interest in the case as plaintiff, or that Aetna was in any way or to any extent acting in a representative capacity either in issuing the policy or in bringing the suit. The lessees, the federal court defendants who are appellees here, immediately filed suit in Louisiana state court seeking the insurance proceeds and penalties and adding a claim for defamation against members of a local law firm representing USAIG. 2
Prior to the filing of any responsive pleadings in the federal court action, a first amended complaint pursuant to Fed.R.Civ.P. 15 was filed substituting USF&G, a member company of USAIG, as plaintiff in place of Aetna. The Attorney General of Louisiana originally had informed USAIG that GECC was a New York corporation; however, after the suit was filed Aetna learned that GECC was incorporated in Connecticut. Since Aetna is also a domiciliary of Connecticut, there was not complete diversity of citizenship. The mentioned amended complaint substituting USF&G, a Maryland corporation, as plaintiff in lieu of Aetna, was then filed. The amended complaint alleges that USF&G is a Maryland corporation with its principal place of business in that state. Otherwise, it amends the complaint simply by substituting USF&G for Aetna throughout (including the caption). The amended complaint makes no mention of any other insurance company or of USAIG, and contains no indication that any party other than USF&G might have an interest in the case as plaintiff or that USF&G was in any way or to any extent acting in a representative capacity either in issuing the policy or bringing the suit. GECC filed a Fed.R.Civ.P. 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, claiming there was incomplete diversity between GECC and Aetna and that USF&G was collusively joined as a plaintiff for the purpose of creating diversity jurisdiction in violation of 28 U.S.C. Sec. 1359. 3 The remaining defendants filed similar Rule 12(b)(1) motions adopting GECC's arguments. In addition, defendants Hillman, Gyer, Freeman, Freeman and Gyer Rentals, and the FGH Flying Service filed a motion to dismiss for failure to join an indispensable party, claiming that each of the eighteen domestic insurance companies that make up USAIG should be joined.
After the substitution of counsel for Aetna on motion of one of the defendants claiming a conflict of interest, Judge Polozola held a hearing regarding GECC's Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. Judge Polozola found that Aetna was not a diverse plaintiff at the time the suit was filed and, therefore, the court had no jurisdiction. The judge reasoned that if the court did not have jurisdiction at the time the suit was filed, it had no jurisdiction over the amended complaint. He reinstated Aetna as a party plaintiff and then dismissed the case for lack of subject matter jurisdiction. As an alternative reason for his dismissal, the judge held the suit was in any event not an appropriate one for declaratory relief due to the pendency of the state court actions dealing with the same issues.
On November 13, 1984, USF&G filed a motion requesting the district court to reconsider its ruling on the motions to dismiss and to allow plaintiff to present newly discovered evidence regarding the alleged nondiverse defendant GECC. USF&G also moved to depose GECC regarding its status as a real party in interest in the suit. On January 7, 1985, the district court made a minute entry denying the motion to reconsider for the reasons set forth in the earlier dismissal. A judgment dated January 14, 1985 was then entered "dismissing this suit without prejudice at plaintiff's cost." USF&G filed an appeal to this court. 4 USF&G asserts that the amendment substituting plaintiffs was in accord with federal procedure and that the district court had abused its discretion in refusing to hear the case under the declaratory judgment act.
Federal courts are courts of limited jurisdiction having subject matter jurisdiction only over those matters specifically designated by the Constitution or Congress. Epps v. Bexar-Medina-Atascosa Counties Water Improvement District, 665 F.2d 594, 595 (5th Cir.1982); B., Inc. v. Miller Brewing Co., 663 F.2d 545, 548 (5th Cir.1981). Federal courts have jurisdiction over suits between citizens of different states if the amount in controversy is over $10,000. 28 U.S.C. Sec. 1332. Aetna and GECC as corporations are each deemed to be citizens both of the state in which they are incorporated and of the state where they have their principal place of business. 28 U.S.C. Sec. 1332(c). Since the early 1800s, United States courts have construed the requirement for diversity to mean that all plaintiffs must have a different citizenship from all defendants. Stawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806). Aetna, the original plaintiff, is and was a citizen of Connecticut and GECC, a defendant, is and was also a citizen of Connecticut, so that complete diversity as defined in Strawbridge v. Curtiss, supra, did not exist at the time suit was filed. It was attempted to cure the jurisdictional defect by amending the original complaint under Rule 15 to name USF&G as a plaintiff in place of Aetna. USF&G is a citizen of Maryland such that complete diversity would, at least facially, appear to then exist.
USF&G argues that Rule 15 allows an amendment curing the jurisdictional defect, and that the amendment relates back to the original complaint so that at the time the case was filed diversity jurisdiction existed. Rule 15 states:
The attempt to amend can be viewed from two perspectives. One is that USF&G and Aetna are separate entities bringing suit in their own names and rights. The other view is that each is a designated representative of USAIG.
If USF&G and Aetna are separate entities each suing in its own right, then the amendment is not effective because if Aetna did not have the ability to bring the suit in federal court it could not amend. This is distinct from the situation where a plaintiff amends...
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