Bromwell v. Michigan Mut. Ins. Co.

• Decision Date: 06 June 1997
• Docket Number: No. 96-3181,96-3181
• Citation: 115 F.3d 208
• Parties: William David BROMWELL, Personal Representative of the Estate of Elizabeth Naomi Bromwell, Deceased; John Darrow, Sr., Personal Representative of the Estate of John Darrow, Jr., Deceased; and Ormand Keith Adams and Mitchell J. Cornwell, Personal Representatives of the Estate of Brian Kent Adams, Deceased; and Pete L. Wurm, Appellants, v. MICHIGAN MUTUAL INSURANCE COMPANY and Michigan Automobile Insurance Placement Company.
• Court: U.S. Court of Appeals — Third Circuit

Page 208

115 F.3d 208

William David BROMWELL, Personal Representative of the

Estate of Elizabeth Naomi Bromwell, Deceased; John Darrow,

Sr., Personal Representative of the Estate of John Darrow,

Jr., Deceased; and Ormand Keith Adams and Mitchell J.

Cornwell, Personal Representatives of the Estate of Brian

Kent Adams, Deceased; and Pete L. Wurm, Appellants, v. MICHIGAN MUTUAL INSURANCE COMPANY and Michigan Automobile

Insurance Placement Company.

No. 96-3181.

United States Court of Appeals, Third Circuit.

Argued Jan. 10, 1997.

Decided June 6, 1997.

William A. Loftus (Argued), Shrager, McDaid, Loftus, Flum & Spivey, Philadelphia, PA, Daniel M. Berger, Berger Law Firm, Pittsburgh, PA, for Appellants.

L. John Argento, Michael F. Nerone, Stephen R. Mlinac (Argued), Dickie, McCamey & Chilcote, Pittsburgh, PA, for Appellees.

Before COWEN, ALITO, and ROSENN, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

This appeal, having wended a tortured procedural path to arrive finally at this court, raises an interesting issue concerning the extent of a federal court's jurisdiction: whether a federal district court, having previously dismissed an action for lack of subject-matter jurisdiction, could properly exert jurisdiction over an identical state court action removed to that federal court by the defendants on diversity grounds. Having considered the jurisdictional limitations imposed on a federal court by statutory law and the doctrine of res judicata, we hold that the district court is precluded from exercising further jurisdiction over that claim and must remand the case to the state court from which it was removed.

I.

The current litigation arose out of a tragic accident that occurred at the Breezewood Interchange of the Pennsylvania Turnpike on June 17, 1990. A tractor-trailer owned by Ralph Meyers Trucking, Inc. ("Meyers Trucking") and operated by David A. Stacey "rear-ended" a motorcycle operated by Brian Kent Adams, on which Elizabeth Naomi Bromwell was a passenger, and then "rear-ended" a second motorcycle operated by John Darrow, Jr. Stacey's truck pushed the two motorcycles into the rear of another tractor-trailer, driven by Pete L. Wurm. The three motorcyclists, Adams, Bromwell, and Darrow, were killed in the collision and Wurm suffered serious physical and psychological injuries.

Representatives of the estates of the three deceased motorcyclists individually brought actions against Meyers Trucking and Stacey for wrongful death and negligence; Wurm brought an action against Meyers Trucking and Stacey for negligence. These actions were filed in the United States District Court for the Western District of Pennsylvania and were consolidated into a single case, with jurisdiction premised on diversity grounds pursuant to 28 U.S.C. § 1332. Both Meyers Trucking and Stacey are citizens of Michigan, Wurm is a citizen of Missouri, and the three decedents were citizens of Maryland.

On January 27, 1992, the district court granted a motion for partial summary judgment filed by the estate representatives and Wurm (hereinafter collectively referred to as "Appellants") on the issue of liability. The Appellants subsequently entered into a settlement agreement and release with Meyers Trucking's insurers, Michigan Mutual Insurance Company and Michigan Automobile Insurance Placement Facility (hereinafter referred to collectively as "Appellees"). The terms of the settlement agreement are, in pertinent part:

For and in consideration of the sum of Seven Hundred and Fifty Thousand Dollars ($750,000.00) plus whatever other liability insurance coverage that may be declared available by judgment of any Court as the result of any Declaratory Judgment action now pending or to be filed ... hereby fully and forever release, acquit and discharge Ralph Meyers Trucking, Inc. and David Stacey to the full extent of their personal and/or corporate liability (while at the same time preserving our rights to pursue to the full extent possible the limits of insurance coverage available to either David Stacey and/or Ralph Meyers Tucking, Inc. pursuant to policies of insurance issued by Michigan Mutual and Michigan Automobile Insurance Placement Facility, the extent of said coverage having been placed at issue in the U.S. District Court for the Western District of Pennsylvania at Civil Actions Nos. 92-0183 and 92-1172 and/or which may be placed in issue in another court of competent jurisdiction) from any and all actions ... by John Darrow, Jr., Elizabeth Naomi Bromwell, Pete L. Wurm, and Brian Kent Adams or our property sustained or received on or about the 17th day of June, 1990 when a vehicular accident occurred in the vicinity of the Breezewood Interchange of the Pennsylvania Turnpike for which injuries, losses and damages we claim Ralph Meyers Trucking, Inc. and David Stacey to be legally liable and on account of which suit was brought in the United States District Court for the Western District of Pennsylvania at Civil Actions Nos. 90-1120, 90-1608, and 91-1154, it being understood and agreed that the acceptance of said sum is in full accord and satisfaction of a disputed claim and that the payment of said sum is not an admission of liability by Ralph Meyers Trucking, Inc. and David Stacey.

The agreement further addressed the pending declaratory judgment action brought by the Appellants against the Appellees, stating:

It is further agreed and understood that this release and settlement agreement is not intended to compromise, reduce or in any way affect the continued prosecution or outcome of the Declaratory Judgment Actions filed by us and Michigan Mutual Insurance Company/Michigan Automobile Insurance Placement Facility at Nos. 92-0183 and 92-1172 in the United States District Court for the Western District of Pennsylvania or of any other Declaratory Judgment action that may be filed or of any appeals that may be taken therefrom. It is further agreed and understood by the parties hereto that the within Settlement Agreement and Release will not be raised as a defense in any Declaratory Judgment action. It is also acknowledged that all parties hereto retain their right to appeal any judgment reached in any Declaratory Action.

The district court entered an order on August 13, 1993, approving this settlement agreement and dismissing the action "without prejudice to any claims which may arise under the settlement agreement." No order was issued with regard to the district court's previous grant of summary judgment in favor of the Appellants on the issue of liability.

At the time the district court dismissed this matter, two additional actions were pending in federal court. The Appellants had filed a complaint in the United States District Court against Meyers Trucking and Stacey, seeking a declaratory judgment pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. In this action, the Appellants sought a declaration that the incident which occurred on June 17, 1990, constituted three separate accidents, and therefore the available liability insurance coverage would be $2,250,000 and not the $750,000 available for a single accident. The district court dismissed this action against Meyers Trucking and Stacey for lack of subject-matter jurisdiction. The action concerned only the scope of the available insurance coverage and thus realigned Meyers Trucking and Stacey with the Appellants against the Appellees. Since Meyers Trucking, Stacey, and the Appellees are all Michigan residents, the realignment destroyed diversity of citizenship. No other basis for federal court jurisdiction existed in that action.

The Appellees brought the second action against the Appellants, Meyers Trucking, and Stacey. This complaint purported to raise a federal question but the gravamen of the declaratory judgment action was the interpretation of the term "accident" in the insurance policy. The district court dismissed this action for lack of subject-matter jurisdiction, concluding that the Appellees were precluded from bringing this action because there was no underlying judgment of liability, a prerequisite to the only possible claim under federal law.

Following the dismissal of their action, the Appellants filed a Motion to Reconsider, which the district court denied. The court concluded that the error in pleadings that led to the initial dismissal had not been corrected. Additionally, the court stated that "[i]f this Court has subject matter jurisdiction over the parties' dispute, one or more of the parties must have an action for coercive relief--damages in this case--against the others." Darrow v. Ralph Meyers Trucking, Inc., C.A. No. 92-183, mem. order at 3 (W.D.Pa. Sept. 3, 1993). The court then granted the Appellants leave to amend the complaint. The Appellants chose, however, to file a second declaratory judgment action in the federal district court.

The Appellants filed this second declaratory judgment action against only the Appellees; Meyers Trucking and Stacey were not parties to the action. The Appellants premised jurisdiction on diversity grounds, and diversity was not defeated due to a realignment of the parties, as had occurred in the previous action. The district court again dismissed the action without prejudice, however, this time for failure to allege a "case or controversy" sufficient to invoke the federal court's subject-matter jurisdiction under the Federal Declaratory Judgment Act. The court concluded that both "the claim and counterclaim in the present action do not contain within them a justiciable controversy." Bromwell et al. v. Michigan Mutual Insur. Co. et al., C.A. No.93-1602, mem. op. at 16 (W.D.Pa. Mar. 28, 1994). Again, the district court focused on the absence of an underlying judgment as the main bar to prosecution of this complaint and the accompanying counterclaims. Thus, the court dismissed the Appellants' complaint and the Appellees' counterclaims without prejudice.

Rather than appeal ...