El Chico Restaurants, Inc. v. Aetna Cas. and Surety Co., CIV. 197-027.

Decision Date15 October 1997
Docket NumberNo. CIV. 197-027.,CIV. 197-027.
PartiesEL CHICO RESTAURANTS, INC., individually and as representative of a class of all other persons similarly situated, Plaintiff, v. The AETNA CASUALTY AND SURETY COMPANY, et al., individually and as representatives of a class of all other persons similarly situated, Defendants.
CourtU.S. District Court — Southern District of Georgia

John Chapman Bell, Jr., Bell & James, Augusta, GA, Richard Henry Weiss, Elaine Kusel, Milberg, Weiss, Bershad, Hynes & Lerach, LLP, New York, NY, Fred Misko, Jr., Charles E. Ames, Law Office of Fred Misko, Jr., Dallas, TX, Michael C. Dodge, Dodge & Associates, P.C., Dallas, TX, for Plaintiff.

Thomas William Tucker, Dye, Tucker, Everitt, Wheale & Long, Augusta, GA, Joseph E. Coughlin, Rowe W. Snider, Lord, Bissell & Brook, Chicago, IL, for Defendants Aetna Cas. and Ins. Co., Standard Fire Ins. Co.

Thomas William Tucker, Dye, Tucker, Everitt, Wheale & Long, Augusta, GA, Michael L. McCluggage, Michael R. Blankshain, Leland H. Chait, Richard Jonathon Street, Wildman, Harrold, Allen & Dixon, Chicago, IL, for Defendants American Nat. Fire Ins. Co., Continental Cas., Transcontinental Ins. Co., Transp. Ins. Co.

Patrick J. Rice, Hull, Towill, Norman & Barrett, Augusta, GA, Michael Lowenberg, P.C., Kelly A. Rittenberry, Akin, Gump, Strauss, Hauer & Feld, LLP, Dallas, TX, for Defendants Argonaut Ins. Co., Argonaut Southwest Ins. Co. Jerome L. Kaplan, Arnall, Golden & Gregory, Macon, GA, Karen B. Bragman, Arnall, Golden & Gregory, LLP, Atlanta, GA, Lyman G. Hughes, Barry R. Bell, Carrington, Coleman, Sloman & Blumenthal, LLP, Dallas, TX, for Defendants Cigna Ins. Co., Cigna Property and Cas. Ins. Co., Ins. Co. of North America, Pacific Employers Ins. Co.

Patrick J. Rice, Richard N. Carrell, William R. Pakalka, John E. Chapoton, Jr., Fulbright & Jaworski, LLP, Houston, TX, for City Ins. Co., Home Indem. Co., Home Ins. Co., Home Ins. Co. of Indiana.

Tony G. Powers, Rogers & Hardin, Atlanta, GA, David J. Healey, Stephen L. Lundwall, Robert B. Lytle, Arnold, White & Durkee, Houston, TX, for Defendant Hartford Ins. Co.

Patrick J. Rice, Fulbright & Jaworski, LLP, Houston, TX, Robert C. Walters, Russell Yager, Brian E. Robison, Vinson & Elkins, Dallas, TX, for Defendants Liberty Ins. Corp., Liberty Mut. Fire Ins. Co., Liberty Mut. Ins. Co.

William H. Stanhope, Thomas J. Gallo, Robins, Kaplan, Miller & Ciresi, Atlanta, GA, for Defendants Nationwide Mut. Ins. Co., Nationwide Property and Cas. Ins. Co., Wausau Ins. Co.

David E. Hudson, Patrick J. Rice, Hull, Towill, Norman & Barrett, Augusta, GA, Jeffrey J. Cox, Robert W. Jordan, Mary L. Scott, Van H. Beckwith, Baker & Botts, LLP, Dallas, TX, for Defendants Planet Ins. Co., Reliance Ins. Co., Reliance Nat. Ins. Co.

Mary L. Skelton, Lane & Crowe, Brunswick, GA, J. Hampton Skelton, Skelton & Woody, Austin, TX, for Defendant St. Paul Mercury Ins. Co., St. Paul Fire and Marine Ins. Co.

Donald A. Loft, Lewis E. Hassett, Morris, Manning & Martin, LLP, Atlanta, GA, Guy C. Quinlan, Rogers & Wells, New York, NY, for Defendant Nat. Council on Compensation Ins., Inc.

ORDER

BOWEN, District Judge.

Two motions are currently pending before the Court in the above-captioned case: Plaintiff's Motion to Remand and Plaintiff's Motion for Leave to Add Parties and to Serve an Amended Complaint. For the reasons set forth below, Plaintiff's Motion to Remand is DENIED and Plaintiff's Motion for Leave to Add Parties and to Serve an Amended Complaint is GRANTED. Furthermore, because Plaintiff's Complaint as amended asserts claims against non-diverse Defendants, this Court no longer has subject matter jurisdiction over this case and therefore must REMAND it to the Superior Court of Richmond County, Georgia, pursuant to 28 U.S.C. § 1447(e).

I. BACKGROUND

On January 10, 1997, El Chico Restaurants, Inc. (Plaintiff), a Texas corporation with its principal place of business in Dallas, Texas, filed this class action lawsuit in the Superior Court of Richmond County, Georgia, on behalf of itself and all persons who purchased retrospectively rated workers' compensation insurance policies covering risks in the state of Georgia from January 1, 1987, through the time of filing. Plaintiff named thirty insurance companies as Defendants in the action, suing them both in their individual capacities and as representatives of a defendant class under O.C.G.A. § 9-11-23.

Plaintiff contends that the Defendants conspired to, and did in fact, charge illegally high rates for these insurance policies. Plaintiff asserts claims under Georgia law for breach of contract, negligent misrepresentation, civil conspiracy, and unjust enrichment, as well as claims arising from alleged violations of O.C.G.A. § 33-9-4 (excessive insurance rates), O.C.G.A. § 23-2-52 (misrepresentation as legal fraud), O.C.G.A. § 33-9-37 (conspiracy to fix insurance rates), O.C.G.A. § 10-1-372 (deceptive trade practices), and O.C.G.A. § 16-14-1 (RICO). Plaintiff seeks statutory, compensatory, and punitive damages, various items of equitable relief, and of course costs and attorneys' fees.

In addition, Plaintiff named as a Defendant the National Council on Compensation, Inc. (NCCI), a licensed rate service organization allegedly controlled by the Defendant insurance companies, which Plaintiff contends acted as a conduit for the insurer Defendants to coordinate and effect their alleged wrongful conduct. Plaintiff asserts the same claims against NCCS as it asserts against the insurance company Defendants, with the exception of its claims for breach of contract and unjust enrichment.

On February 6, 1997, Defendants removed the case to this Court, claiming that the Court has removal jurisdiction because it could have exercised original jurisdiction under the diversity of citizenship provision, 28 U.S.C. § 1332. On March 10, 1997, Plaintiff filed a Motion to Remand the case pursuant to 28 U.S.C. § 1447(c), asserting that removal is improper because complete diversity does not exist and that in any event, removal is barred by the no-local-defendant rule of 28 U.S.C. § 1441(b). On June 17, 1997, Plaintiff filed a Motion for Leave to Add Parties and to Serve an Amended Complaint (Motion to Amend), in which Plaintiff seeks (1) to name five additional Plaintiffs and over one hundred additional Defendants, (2) to eliminate allegations relating to a defendant class, and (3) to clarify the allegations in its Complaint. The Court held a hearing on both of Plaintiff's motions on July 28, 1997.

Plaintiff has at times blurred the distinctions between its two motions, arguing that the Court should grant its Motion to Remand because its Complaint as amended will name non-diverse parties.1 Unfortunately, the Court's task is not so simple. Before ruling on Plaintiff's Motion to Amend, the Court first must consider Plaintiff's Motion to Remand; for if the Court remands the case because complete diversity is lacking, the Court necessarily lacks subject matter jurisdiction over Plaintiff's Motion to Amend. See Memphis Am. Fed'n of Teachers v. Board of Educ., 534 F.2d 699, 701 (6th Cir. 1976) ("Without a finding that there is federal jurisdiction over a particular claim for relief the federal courts are without power to proceed.") (citing Ex Parte McCardle, 74 U.S. (7 Wall.) 506, 514, 19 L.Ed. 264 (1868)); cf. Pullman Co. v. Jenkins, 305 U.S. 534, 537, 59 S.Ct. 347, 348-49, 83 L.Ed. 334 (1939) (holding that amended complaint should not have been considered in determining defendant's right to remove because "the right to remove ... [is] to be determined according to the plaintiffs' pleading at the time of the petition for removal"). Thus, the Court now turns to consider Plaintiff's Motion to Remand.

II. MOTION TO REMAND

Under 28 U.S.C. § 1441(a), a defendant in a case originally filed in state court may remove the case to federal district court if the district court could have exercised original jurisdiction in the case. Under 28 U.S.C. § 1447(c), however, the case must be remanded to state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." Defendants claim that the Court has removal jurisdiction in this case because it could have exercised original jurisdiction under the diversity of citizenship provision, 28 U.S.C. § 1332.

Plaintiff, however, argues that the case must be remanded for two reasons. First, Plaintiff asserts that complete diversity does not exist because Defendant CIGNA of Texas f/k/a INA of Texas (CIGNA of Texas) is, like Plaintiff El Chico, a citizen of Texas for diversity purposes. Second, Plaintiff claims that even if complete diversity exists, removal is barred by the no-local-defendant rule of 28 U.S.C. § 1441(b) because Defendant Home Indemnity Company maintains its principal place of business in Georgia. Defendants, on the other hand, contend that Plaintiff fraudulently2 joined CIGNA of Texas solely to destroy complete diversity, and therefore the Court must disregard CIGNA of Texas in determining whether diversity of citizenship exists. Furthermore, Defendants argue that Home Indemnity's principal place of business is New York, not Georgia, and thus removal is not barred by the second sentence of § 1441(b).

A. Fraudulent Joinder

Section 1332(a) imposes two requirements for diversity jurisdiction: (1) the amount in controversy must exceed $75,000, exclusive of interest and costs; and (2) the parties must be of diverse citizenship. Plaintiff apparently does not challenge Defendants' assertion that the amount in controversy exceeds $75,000. Indeed, although no specific dollar amount is prayed for in the Complaint, it readily appears that the legal and equitable relief sought by Plaintiff exceeds the jurisdictional minimum. Therefore, the primary issue is whether the parties are of diverse citizenship.

It is well established that all plaintiffs must be diverse from all defendants in order to...

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