Allstate Ins. Co. v. Longwell

• Decision Date: 07 March 1990
• Docket Number: No. 87 Civ. 7818(KC).,87 Civ. 7818(KC).
• Citation: 735 F. Supp. 1187
• Parties: ALLSTATE INSURANCE CO., Plaintiff, v. Robert LONGWELL, Defendant.
• Court: U.S. District Court — Southern District of New York

735 F. Supp. 1187

ALLSTATE INSURANCE CO., Plaintiff, v. Robert LONGWELL, Defendant.

No. 87 Civ. 7818(KC).

United States District Court, S.D. New York.

March 7, 1990.

COPYRIGHT MATERIAL OMITTED

Robert J. Brennan, Porzio, Bromberg & Newman, New York City, for plaintiff.

Frank M. Blancato, Peekskill, N.Y., for defendant.

MEMORANDUM AND ORDER

CONBOY, District Judge:

This action arises out of a dispute between an insurer and an insured as to whether the insured, who invoked his Fifth Amendment right against self-incrimination rather than answer questions relating to a claimed loss, complied with his duty of cooperation under the insurance policy, which obligation the insurer maintains is a condition precedent to recovery thereunder.

STATEMENT OF FACTS

Allstate Insurance Company ("Allstate") issued a homeowner's insurance policy, number 003 206 244 (the "policy"), to the defendant, Robert Longwell ("Longwell") beginning January 21, 1987, for a one year term. On March 3, 1987, a fire destroyed Longwell's home located at 7 Depew Court, Peekskill, Westchester County, New York.

At the time of the fire, the premises were insured by Allstate, with a coverage of $180,000 for the building and $90,000 for the contents. On April 13, 1987, Longwell executed a sworn statement claiming a $42,193.02 loss under the policy with respect to personal property (contents). See Exhibit A, Affidavit of Robert J. Brennan, sworn to March 4, 1988, in Support of Motion for Summary Judgment ("Brennan 3/4/88 Aff.").¹ Allstate had good reason to believe that Longwell falsified this sworn statement in order to increase the amount of his claim. See Affidavit of Michael Lane, sworn to February 24, 1988 ("Lane Aff."), at ¶¶ 5-10 (insurance investigator relating facts of bribe by Longwell in exchange for fraudulently inflating claim).

On August 7, 1987, Longwell submitted to an Examination Under Oath ("EUO") pursuant to a clause in the insurance policy. During the EUO, Longwell refused to answer certain questions concerning some items in the personal property claim inventory and proof of loss. He based his refusal on Fifth Amendment grounds due to the criminal matter pending against him at the time stemming from the submission of the allegedly inflated loss claim. See infra at 1193.

On November 2, 1987, Allstate, in a letter to Longwell, denied Longwell's claims. On the same date, Allstate filed a complaint in this Court, Civil Action No. 87 Civ. 7818, seeking declaratory relief that the insurance policy was void on the basis of fraud by the insured and a breach of certain policy provisions by the insured. On March 2, 1988, Longwell commenced an action in New York State Supreme Court, Westchester County, seeking to recover on the policy in the amount of $125,000, the alleged amount of property damage. Allstate, then, on March 7, 1988, moved for summary judgment in the federal action, seeking an order declaring that they have no obligation to pay any policy proceeds to Longwell. On March 18, Longwell cross-moved to dismiss the federal action in deference to the similar, though later filed, action pending in state court.

Prior to Longwell's cross-motion to dismiss, Allstate had, on March 14, removed the state court action to this federal court, and claims to have given the requisite notice to this effect to Longwell. The removed action was given the civil action number of 88 Civ. 1746. On April 11, 1988, in response to the removal, Longwell, in the first-filed federal action (87 Civ. 7818), made a motion to remand the second action (88 Civ. 1756) to the state court. On April 27, 1988, Allstate sought an order awarding attorney's fees under Fed.R.Civ.P. 11 solely with respect to Longwell's motion to remand.

In June of 1989, while the above-described motions were sub judice before the judge to whom they were assigned, both actions were transferred to us. We held a pre-trial conference in the cases and allowed the parties to submit any new developments in the law during the pendency of the motions. The last of these letters was received in September 1989. We also held a telephone conference in an attempt to track down papers that had not been filed with the Clerk.

DISCUSSION

A. Defendant's Motion to Remand and Cross-Motion to Dismiss

As indicated above, Longwell moves in the first action to have the second action remanded to the New York State Supreme Court, Westchester County, pursuant to 28 U.S.C. § 1447(c). Section 1447(c) provides in relevant part that:

A motion to remand the case on the basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.

As is obvious by its unambiguous language, this section is directed toward "defects in the removal procedure." 1A J. Moore, B. Ringle, and J. Wicker, Moore's Federal Practice ¶ 0.1571.-4 at 45. These defects may involve the improper removal of an action which does not fit one of the categories described in 28 U.S.C. § 1441 or one of the other removal sections, and hence the lack of federal jurisdiction, or, the defects may relate to the statutory procedure for the removal itself under sections 1446 and 1447.

As Longwell concedes, the second action is one over which the federal court has original jurisdiction pursuant to 28 U.S.C. § 1332: Allstate is a foreign corporation organized under the laws of Illinois, while Longwell is a citizen of the State of New York, and the amount in controversy is $125,000, clearly in excess of the $10,000 minimum requirement then in effect. Furthermore, all of the statutory procedural requirements of 28 U.S.C. § 1446(a), (b), (d) and (e) and Civil Rule 25 of the Southern and Eastern District Courts have been met. Accordingly, Longwell has failed to establish any defect in the removal. Longwell does not, however, challenge the removal on procedural grounds. Rather, he claims the court should remand on abstention grounds. Recognizing that "classic removal makes little room for abstention," one respected commentator states that "although under § 1447(c) remand is proper only where a case has been `improperly removed and without jurisdiction' (which does not include abstention), we believe that after removal has been effected a federal court, while retaining jurisdiction of a case, may invoke principles of abstention in any situation where they would be applicable in a case within the court's original jurisdiction." Moore's, supra, ¶ 0.1571.-4 at 45-46 (parentheses in original).

In his supplemental letter to the Court, Longwell cites two cases to support his abstention argument, which were not referred to in his original memorandum of law in support of the remand: Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988) and Corcoran v. Ardra Ins. Co., Ltd., 842 F.2d 31 (2d Cir.1988). Longwell's reliance on these cases is, however, misplaced. In fact, Cohill does not involve abstention, but rather discretionary remand of pendent state claims. Cohill involved a case which was originally brought in state court alleging state and federal causes of actions. 484 U.S. at 345, 108 S.Ct. at 616. The defendants removed the entire case to the federal court on the basis of the federal claim. Id. at 346, 108 S.Ct. at 616. After the removal, the plaintiffs sought to amend their complaint to delete the sole federal claim, which motion was granted by the district court. Id. With no federal jurisdictional ground remaining, the plaintiffs then sought a remand of the pendent state claims to the state court, which the district court granted. Id. The Supreme Court affirmed, stating that despite the lack of explicit statutory authority, a district court could, in its discretion, remand a removed case to state court when all federal law claims have been eliminated from the action and only pendent state law claims remain. Id. at 348, 354-57, 108 S.Ct. at 618, 620-22. The Court specifically differentiated a removed case where there was no longer federal jurisdiction from a removed case where there was diversity jurisdiction. Id. at 356, 108 S.Ct. at 621 (discussing Thermtron Products Inc. v. Hermansdorfer, 423 U.S. 336, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976)). The Court stated that where there is diversity jurisdiction, which is nondiscretionary, the court may not eliminate the case from its docket, whether by a remand or a dismissal. Id.; see also Law Enforcement Ins. Co., Ltd. v. Corcoran, 807 F.2d 38, 41 (2d Cir.1986) ("And while there have been many scholarly and judicial expressions of doubt as to the desirability of its continuation, so long as Congress chooses to have us exercise diversity jurisdiction, we must do so unflaggingly."). In the instant cases, we have diversity jurisdiction and thus Thermtron and not Cohill provides the governing rule of law.

In Corcoran v. Ardra Ins. Co., LTD, 842 F.2d 31 (2d Cir.1988), the Second Circuit examined Cohill in conjunction with the abstention doctrine announced in Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), and concluded by reasoning analogously that "if a district court has the power to dismiss an action on grounds of abstention it has the power to remand to the state court on those grounds." Ardra, 842 F.2d at 36. The district court had remanded the removed action to the state court relying principally on Burford. The circuit court found that the Burford abstention was appropriate because the complex regulatory "question before the court was a novel one," Ardra, 842 F.2d at 37 (litigation involved the State Superintendent's power to collect on reinsurance agreements entered into by a liquidated company). It also concluded that it was proper to remand the case in lieu of dismissing it. Ardra, 842 F.2d at 36.

Abstention pursuant to Burford is designed to avoid federal...