Crunch Logistics Inc. v. Donegal Ins. Grp., 5:21-cv-00639

• Decision Date: 11 June 2021
• Docket Number: No. 5:21-cv-00639,5:21-cv-00639
• Parties: CRUNCH LOGISTICS INC., T/A MONTY'S SANDWICH SHOP, on behalf of itself and all others similarly situated, Plaintiff, v. DONEGAL INSURANCE GROUP, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

CRUNCH LOGISTICS INC., T/A MONTY'S SANDWICH SHOP,on behalf of itself and all others similarly situated, Plaintiff, v. DONEGAL INSURANCE GROUP, Defendant.

No. 5:21-cv-00639

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA

June 11, 2021

OPINION

Plaintiff's Motion to Remand, ECF No. 12—DENIED

Defendant's Motion for Judgment on the Pleadings—ECF No. 15—GRANTED

Joseph F. Leeson, Jr. United States District Judge

I. INTRODUCTION

This putative class action is one of many insurance coverage disputes stemming from the effects of the COVID-19 pandemic on the ability of restaurants to operate. Plaintiff Crunch Logistics Inc. ("Crunch") owns and operates a sandwich shop in Southampton, Pennsylvania. Crunch seeks to represent a nationwide class of similarly situated restaurants and contends that it and the class are owed coverage for COVID-related economic losses under commercial property insurance policies issued by Defendant Donegal Insurance Group ("Donegal"). After this Court granted Crunch's request to voluntarily dismiss a nearly identical class action¹ Complaint against Donegal, Crunch commenced the instant action in the Pennsylvania Court of Common Pleas forPhiladelphia County. Donegal removed the case to this Court, invoking federal jurisdiction under the Class Action Fairness Act of 2005 ("CAFA").

Presently before the Court are two motions: Crunch's motion to remand the case to state court, and Donegal's motion for judgment on the pleadings. For the reasons set forth below, Crunch's motion to remand is denied, and Donegal's motion for judgment on the pleadings is granted.

II. CRUNCH'S MOTION TO REMAND

A. Relevant Procedural Background

On May 28, 2020, Crunch filed a federal class action Complaint against Donegal in this District under case number 5:20-cv-02525. See ECF No. 1. Crunch's Complaint sought a declaration under the Federal Declaratory Judgment Act that Crunch and the class were entitled to coverage under the terms of commercial property insurance policies issued by Donegal. See id. At the time the Complaint was filed the case was assigned to United States District Judge Timothy Savage. Donegal filed its Answer to the Complaint on August 12, 2020. See ECF No. 7. On October 6, 2020, the case was reassigned from Judge Savage to the Undersigned. See ECF No. 13. This Court held a Rule 16 conference with counsel on November 30, 2020, at which time discovery deadlines were set and class certification was discussed. See ECF Nos. 17-18. However, shortly thereafter, on December 3, 2020, Crunch filed a notice and request of voluntary dismissal pursuant to Federal Rule of Civil Procedure 41(a)(2). See ECF No. 20. Donegal filed objections to Crunch's request on December 11, 2020, arguing that Crunch failed to state any reason for the request and that the true reason was Crunch's desire to avoid this Court's jurisdiction. Notwithstanding the conspicuous timing of Crunch's request and theabsence of an explanation for it, the Court granted the request and dismissed the matter without prejudice. See ECF No. 22.

Shortly thereafter, on December 23, 2020, Crunch commenced the instant action by filing a class action Complaint against Donegal in the Pennsylvania Court of Common Pleas for Philadelphia County. See ECF No. 1-4. Crunch's second class action Complaint is essentially identical to its prior Complaint,² in that it asserts a single claim for declaratory relief as to its and the class's right to coverage under commercial property insurance policies issued by Donegal. See id. Crunch's second class action Complaint also avers that "[d]iversity of citizenship does not exist under the Class Action Fairness Act of 2005 because, upon information and belief, over two-thirds (2/3rds) of the proposed class and Defendants are both citizens of Pennsylvania." Id. ¶ 5. Nonetheless on February 11, 2021, Donegal removed the case to this Court on the basis of CAFA jurisdiction. See ECF No. 1. Crunch filed its motion to remand the matter to state court on March 3, 2021, see ECF No. 12, and Donegal filed its motion for judgment on the pleadings on March 25, 2021, see ECF No. 15. Both motions have been fully briefed.

B. Legal Standards and Applicable Law

1. Removal and CAFA jurisdiction

Under the removal statute, "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, 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(a). Ordinarily, "[r]emoval statutes are to be strictly construed, with all doubts to be resolved in favor of remand." Brown v. Jevic, 575F.3d 322, 326 (3d Cir. 2009). As the party removing a case, the defendant has the burden of demonstrating that federal jurisdiction exists and removal is proper. Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990) (explaining "a party who urges jurisdiction on a federal court bears the burden of proving that jurisdiction exists"); see Frederico v. Home Depot, 507 F.3d 188, 193 (3d Cir. 2007).

Donegal removed this action based on the grant of federal jurisdiction set forth in CAFA. The "primary objective" of CAFA is "ensuring Federal court consideration of interstate cases of national importance." Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 595 (2013). Notwithstanding the strict construction normally owed to removal statutes, because "Congress enacted [CAFA] to facilitate adjudication of certain class actions in federal court," the Supreme Court has explained that "no antiremoval presumption attends cases invoking CAFA." Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 89 (2014); Gallagher v. Johnson & Johnson Consumer Companies, Inc., 169 F. Supp. 3d 598, 602 (D.N.J. 2016).

CAFA expands the scope of traditional federal diversity jurisdiction, see 28 U.S.C. § 1332(a), to include "mass actions" that meet certain requirements. Haley v. AMS Servicing, LLC, No. CIV. 13-5645, 2014 WL 2602044, at *3 (D.N.J. June 11, 2014). Specifically, CAFA confers federal jurisdiction over class actions in which the class contains at least 100 people, the amount in controversy exceeds $5,000,000, and (A) any member of the class is a citizen of a state different from any defendant, (B) any member of the class is a foreign state or citizen of a foreign state and any defendant is a citizen of a state, or (C) any member of the class is a citizen of a state and any defendant is a foreign state or citizen of a foreign state. See 28 U.S.C. §§ 1332(d)(2), (5)(B); see also Dart Cherokee Basin Operating Co., 574 U.S. at 84-85.

2. Remand and the "interests of justice" exception to the exercise of CAFA jurisdiction

CAFA also contains three exceptions to the exercise of federal jurisdiction, one discretionary and two mandatory. See, e.g., 28 U.S.C. §§ 1332(d)(3)-(4). Crunch argues that CAFA's discretionary exception to the exercise of jurisdiction is applicable here, warranting a remand of this action to state court. Specifically, Crunch argues that this class action presents local and unsettled legal issues unique to Pennsylvania, and as such this Court should, in its discretion, decline to exercise jurisdiction under 28 U.S.C. § 1332(d)(3). Section 1332(d)(3) provides, in full, as follows:

A district court may, in the interests of justice and looking at the totality of the circumstances, decline to exercise jurisdiction under paragraph (2) over a class action in which greater than one-third but less than two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the State in which the action was originally filed based on consideration of—

(A) whether the claims asserted involve matters of national or interstate interest;

(B) whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States;

(C) whether the class action has been pleaded in a manner that seeks to avoid Federal jurisdiction;

(D) whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm, or the defendants;

(E) whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizens from any other State, and the citizenship of the other members of the proposed class is dispersed among a substantial number of States; and

(F) whether, during the 3-year period preceding the filing of that class action, 1 or more other class actions asserting the same or similar claims on behalf of the same or other persons have been filed.

"These factors are designed to elicit whether the parties' dispute is 'uniquely local' as opposed to multistate in character." Dicuio v. Brother Int'l Corp., No. CIV.A. 11-1447, 2011 WL 5557528, at *2 (D.N.J. Nov. 15, 2011). Once a district court is satisfied it has original jurisdiction under CAFA, the party seeking to invoke an exception to CAFA jurisdiction bears the burden of proving by a preponderance of the evidence that the exception applies. Vodenichar v. Halcon Energy Props., Inc., 733 F.3d 497, 503 (3d Cir. 2013).

C. Summary of the Parties' Arguments

As noted, Crunch's motion to remand is based on its contention that "[t]his case involves overwhelmingly Pennsylvania interests," and "although [Crunch] seeks a nationwide class, Donegal has issued 666 policies in Pennsylvania which represent over half of the class." ECF No. 12-1, at 5. Crunch avers that "[t]hese 666 policies are going to require the analysis of Pennsylvania law which is not even settled yet." Id. "In addition to the case involving the analysis of Pennsylvania law," Crunch observes that "the parties are Pennsylvania citizens" and Donegal "is headquartered in Pennsylvania."³ Id. Therefore, according to Crunch, the totality of the circumstances...