Consumers Energy v. Underwriters, Lloyd's London

• Decision Date: 19 March 1999
• Docket Number: No. 98-74779.,98-74779.
• Citation: 45 F.Supp.2d 600
• Parties: CONSUMERS ENERGY COMPANY, Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S LONDON, et al., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

45 F.Supp.2d 600

CONSUMERS ENERGY COMPANY, Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S LONDON, et al., Defendants.

No. 98-74779.

United States District Court, E.D. Michigan, Southern Division.

March 19, 1999.

James E. Brunner, Consumers Power Company, Legal Department, Jackson, MI, Paul L. Schroeder, Jeffrey G. Close, Jones, Day, Chicago, IL, J. W. Montgomery, III, Charles H. Moellenberg, Jr., Jones, Day,, Lester O. Brown, Jones, Day, Los Angeles, CA, for Plaintiff.

Jack O. Kalmink, Cross Wrock, Detroit, MI, for Defendant Icarom.

Roger E. Warin, Anita G. Fox, Steptoe & Johnson, Washington, DC, for Defendant Home Ins. Co.

Ronald W. Rice, Rice, Galin, Southfield, MI, for Defendant Fireman's Fund Ins. Co.

David L. Harrison, Tolley, Vandenbosch, Grand Rapids, MI, for Defendant Yosemite Ins. Co.

Richard B. Poling, Jr., Poling, McGaw, Troy, MI, for Great Southwest Fire Ins. Co.

Philip A. Erickson, Thrun, Maatsch, Lansing, MI, for Intern. Ins. Co.

ORDER DENYING PLAINTIFF'S MOTION TO REMAND AND SCHEDULING CERTAIN DATES

EDMUNDS, District Judge.

This matter comes before the Court on Plaintiff's motion to remand. This case involves a declaration of coverage for environmental contamination costs, filed by Consumers Energy Company against its insurers. The amended complaint named ICAROM, a foreign state, as a Defendant. ICAROM removed the case to federal court under the removal provision of the Foreign Sovereign Immunities Act, 28 U.S.C. § 1441(d). Although the Plaintiff eventually dismissed ICAROM with prejudice, three of the Defendant-insurers filed cross-claims against the foreign state. The Plaintiff has filed a motion to remand its state law claims. As the discussion below will reveal, this Court has jurisdiction over this entire case pursuant to 28 U.S.C. § 1441(d). Further, to the extent that the exercise of supplemental jurisdiction is discretionary in this context, this Court declines to exercise its discretion, as more fully set forth below. Accordingly, the Plaintiff's motion to remand is DENIED.

I. Procedural Background

This lawsuit was filed by Consumers Energy Corporation, (Consumers) against its insurers in Jackson County Circuit Court on May 5, 1998. The complaint seeks recovery of costs and a declaration of coverage for approximately $100 million in environmental contamination costs at various gas plants operated by Consumers. The suit involves sixty-two insurance policies, spanning from 1936 through 1972. Although there is a dispute concerning how many sites the complaint purports to cover, it covers somewhere between 4 and 34 different sites throughout Michigan. The complaint does not state any claim based on federal law.

The initial Defendants, named in the original complaint, are Consumers' insurers, namely, Certain Underwriters at Lloyd's London, The Home Insurance Co., Fireman's Fund Insurance Co., North Star Reinsurance Corp., Yosemite Insurance Co., Great Southwest Fire Insurance Co. ("Great Southwest") and International Surplus Lines Insurance Co. ("ISLIC").

On September 29, 1998, in a move it likely regrets, Consumers filed an amended complaint adding ICAROM as an additional Defendant. ICAROM, formerly known as "The Insurance Company of Ireland," is wholly owned by the Irish government. ICAROM qualifies as a "foreign state" as that term is defined in the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602-1611. See Opinion and Order Denying American Re Insurance Company's Motion to Dismiss and Finding Proper Subject Matter Jurisdiction, Aetna Casualty & Surety Co. v. Dow Chemical Co., 44 F.Supp.2d 870 (E.D.Mich.1999) (Edmunds, J.). See also, In re Texas Eastern Transmission Corp. PCB Coverage Litigation, 15 F.3d 1230, 1238 n. 8 (3d Cir.1994); Board of Trustees of the Univ. of Illinois v. Insurance Corp. of Ireland, Ltd., 969 F.2d 329, 330 n. 1 (7th Cir.1992).

On November 4, 1998, Home Insurance Co. (Home), filed a cross-claim against ICAROM in state court for contribution. On November 5, 1998, ICAROM removed the entire action to federal court based on 28 U.S.C. § 1441(d), which allows a foreign state to remove "any civil action brought in a state court against a foreign state." 28 U.S.C. § 1441(d).

Subsequent to removal, two other insurance companies filed cross-claims against ICAROM. Great Southwest filed its cross-claim on November 18, 1998. Likewise, ISLIC filed its cross-claim on November 19, 1998. Both cross-claims are based upon "other insurance clauses" and seek declaratory rulings regarding the rights and obligations of ICAROM in relation to Great Southwest and ISLIC.

On November 20, 1998, Consumers voluntarily dismissed ICAROM with prejudice as a Defendant in the main action pursuant to Fed.R.Civ.Pro. 41(a)(1)(i). Consumers filed a motion to remand on December 4, 1998. Following a review of the briefs, this Court ordered the parties to show cause regarding (1) whether diversity jurisdiction existed between the parties pursuant to 28 U.S.C. § 1332; and (2) whether there was an independent legal basis for the cross-claims against ICAROM in light of Consumers' dismissal of ICAROM with prejudice.

A review of the briefs filed in response to the Court's show cause order reveals that while the parties to this action meet the diversity of citizenship requirements for diversity jurisdiction,¹ the $75,000 amount in controversy requirement cannot be met by at least three London Market insurance companies, namely, British Aviation Insurance Company, Ltd., Spere Drake Insurance Co., and Swiss National Insurance Co. Ltd. of Basle. (See London Market Insurers' Submission Regarding Diversity Jurisdiction at pg. 2) Further, Consumers has not pled, nor contended that diversity jurisdiction exists. Therefore, for the purposes of this motion, the Court will assume that there is no diversity jurisdiction over this matter.

II. Jurisdiction Existed at the Time of Removal

At the time this action was removed to federal court, there was federal jurisdiction. The action was removed by ICAROM on November 5, 1998 pursuant to 28 U.S.C. § 1441(d), the removal jurisdiction provision of the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602-1611. Section 1441(d) reads:

Any civil action brought in a State court against a foreign state as defined in section 1603(a) of this title may be removed by the foreign state to the district court of the United States for the district and division embracing the place where such action is pending.

28 U.S.C. § 1441(d).

As this Court has held in the context of another lawsuit, ICAROM is a foreign state as that term is defined in the FSIA because ICAROM is 100% owned by the Republic of Ireland. See Opinion and Order Denying American Re Insurance Company's Motion to Dismiss and Finding Proper Subject Matter Jurisdiction, Aetna Casualty & Surety Co. v. Dow Chemical Co., 44 F.Supp.2d 870 (Edmunds, J.); see also, Liberty Mutual Ins. Co. v. Ins. Corp. of Ireland, 693 F.Supp. 340 (W.D.Pa.1988) (Republic of Ireland owns majority of Insurance Corporation of Ireland and thus it qualifies as a foreign state); Declaration of Brendan Murphy at 2.²

Under 28 U.S.C. § 1447(c), which discusses procedure in the context of removal cases, if at any time this Court loses subject matter jurisdiction over a removed action, the case must be remanded. "If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). As discussed below, this Court has jurisdiction under both § 1441(d) and § 1367(a).

III. Scope of Removal Jurisdiction Under the Foreign Sovereign Immunities Act

The question to be determined in this case is whether the removal provision of the Foreign Sovereign Immunities Act (FSIA) allows this Court to exercise pendant party jurisdiction over claims over which it would not otherwise have subject matter jurisdiction. If the Court finds that § 1441(d) does not provide for pendant party jurisdiction, the inquiry is at an end, and the remaining pendant state claims must be remanded. 28 U.S.C. § 1447(c). If, on the other hand, the Court decides that § 1441(d) does confer pendent party jurisdiction over the nonfederal claims, the Court must decide whether the exercise of that jurisdiction is mandatory or discretionary.³ If it is mandatory, the entire case will remain in this Court. If it is discretionary, the Court may decide to remand the pendant state law claims and retain jurisdiction over the cross-claims involving ICAROM. With this analytical roadmap in mind, we look to other cases dealing with the scope of the FSIA's removal provision for guidance.⁴

A. Courts Split on Scope of Removal Jurisdiction Under § 1441(d)

The FSIA's jurisdictional provision states:

The district courts shall have original jurisdiction without regard to amount in controversy of a nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity.

28 U.S.C. § 1330(a).

As discussed previously, ICAROM qualifies as a foreign state under the FSIA as it is 100% owned by the Irish government. See supra p. 603. Immunity under the FSIA has been called the rule and not the exception. Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). While the Act generally preserves immunity from suit, it grants federal jurisdiction when a foreign state waives immunity or engages in commercial activity. Amerada Hess, 488 U.S. at 434 n. 1, 109 S.Ct. 683. The district court must make a finding that immunity does not apply before asserting jurisdiction in such a case. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 494, n. 20, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983). The Court assumes the commercial exception applies here. Cf. 28 U.S.C. § 1605(a)(2); see also, Opinion and Order Denying American Re Insurance Company's ...