Gen. Refractories Co. v. First State Ins. Co., CIVIL ACTION No. 04-3509
| Decision Date | 27 January 2012 |
| Docket Number | CIVIL ACTION No. 04-3509 |
| Parties | GENERAL REFRACTORIES COMPANY v. FIRST STATE INSURANCE CO., et al. (Granite State Insurance Company Applicant for Intervention ) |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Citing Federal Rule of Civil Procedure 24(a) and (b), Granite State Insurance Company applies to intervene as of right or by permission (doc. no. 389). Jurisdiction is diversity. 28 U.S.C. § 1332.
In this litigation, Plaintiff General Refractories Company (GRC), a manufacturer and supplier of asbestos-containing products, sues its insurance carriers for a declaration of excess insurance coverage for underlying asbestos-related claims. GRC is a defendant in numerous asbestos-related suits throughout the United States. Two of those insurance carriers are Lexington Insurance Company and AIU Insurance Company.
On July 23, 2004, GRC filed a complaint, naming among other defendant insurers Granite State, Lexington, and AIU. On November 1, 2004 (doc. no. 59), these defendants, represented by the same counsel, filed a joint answer. On April 14, 2005, after Granite State answered that it is incorporated in Pennsylvania (id. at ¶ 7), GRC dismissed its claims against Granite State without prejudice for lack of diversity (doc. no. 134), and on April 15, 2005,Granite State in turn dismissed its counterclaim against GRC (doc. no. 136). Discovery was closed by June 7, 2010.1 On October 31, 2011, shortly before all briefs on dispositivemotions were submitted by November 15, 2011, Granite State filed this motion to intervene. The motion will be denied.
Granite State, Lexington, and AIU each issued to GRC a separate policy for the 1984-85 period. None of the policies or a policy endorsement has an exclusion for claims related to asbestos products.2 These insurers concede as much, but assert the omission resulted from a series of mistakes by their underwriters, and the intent of the parties to include such an exclusion can be shown by extrinsic evidence.3 That issue - whether these policies should be reformed to contain asbestos-related exclusions - was presented by GRC and defendants Lexington and AIU on cross-motions for summary judgment on these defendants' counterclaims for reformation and rescission (doc. nos. 315, 360, 361 (sealed)); Counterclaims ¶¶ 9, 16, 23, doc. no. 284). By separate order today, GRC's motion for summary judgment will be granted, and Lexington and AIU's counterclaims will be dismissed with prejudice.
According to Granite State, its policy rights and obligations "have been put in jeopardy" by the cross-motions for summary judgment filed by GRC, Lexington, and AIU. Def. br., doc. no. 389 at 4-5. Granite State requests intervention to assert affirmative claims for reformation or rescission of its policy, describing the alignment of its interests as beingthose of a "defendant." Id. at 6, 7; Def. reply br., doc. no. 405 at 3-4; Compl. in intervention, doc. no. 389, Ex. A. It submits that much of the same extrinsic evidence in support of those motions shows the parties' intent to include an asbestos-related exclusion in the Granite State policy. It requests an opportunity for additional discovery. Def. br., doc. no. 389 at 14-15.
Because of the dismissal of Lexington's and AIU's counterclaims, the rest of this memorandum constitutes dicta. As the complaint for intervention asserts only state law claims, no independent basis exists for intervention.
In a letter dated May 2, 1985, GRC's broker, Jennifer Romano of Marsh McLennan, wrote to Granite State's underwriter, Michael Bruzzi: "An asbestos exclusion was critical to our negotiations, but your policy does not exclude it." Doctors Aff. 9/9/11, Ex. 33, doc. no. 361. While Bruzzi received the letter, the record does not reflect that he responded to Romano or that thereafter any communication took place with Granite State about such an exclusion.
Granite State maintains that it first became aware in October-November, 2010 that its policy did not contain an exclusion, when GRC filed motions for summary judgment against Lexington and AIU, contending those policies did not contain such exclusions (doc. nos. 277, 278). Granite State believed "available copies of [its] policy were merely incomplete." Def. br., doc. no. 389 at 13. It did not discover "definitive information" and "did not realize its policy failed to contain an asbestos exclusion endorsement until the March 2010 conclusion of a search . . . pursuant to the subpoena of GRC." Id. at 3, 13-14.
As the party moving to intervene, Granite State has the burden of showing that its claims are properly before the court. Dev. Fin. Corp. v. Alpha Hous. & Health Care, Inc., 54 F.3d 156, 158 (3d Cir. 1995). Here, jurisdiction depends on complete diversity between all plaintiffs and all defendants. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). However, there is no diversity of citizenship between GRC and Granite State because both are Pennsylvania corporations. As the complaint in intervention asserts only state law claims, no independent basis exists for exercising federal jurisdiction.
Granite State maintains the court has supplemental jurisdiction over the complaint in intervention under 28 U.S.C. § 1367(a) and (b). According to Granite State, the proposed claims share common questions of law and fact arising out of the transaction or occurrence which is the subject of this action. In particular, Granite State relies on the subject matter of GRC's claims against Lexington and AIU, and these defendants' counterclaims for reformation and rescission of their policies. Therefore, it submits, the proposed claims are "so related" to the current claims before the court that they form part of the same "case or controversy" for purposes of supplemental jurisdiction under § 1367(a). Further: §1367(b)'s restrictions on the extension of jurisdiction over claims asserted by plaintiffs do not preclude Granite State's intervention as a defendant. GRC: Granite State proposes to intervene as a plaintiff "to assert a declaratory judgment action against GRC for reformation and rescission in the guise of intervening as a defendant"; and § 1367(b) removes such jurisdiction. Pl. br., doc. no. 394 at 4-5.
Section 1367 codifies common law "pendent" and "ancillary" jurisdiction. In re Texas E. Transmission Corp. PCB Contamination Ins. Coverage Litig., 15 F.3d 1230, 123738 & n.7 (3d Cir. 1994) (). Subsection 1367(a) provides:
Except as provided in subsections (b) and (c) . . . in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
This subsection codifies the minimum constitutional requirements for exercise of federal judicial power when jurisdiction is based on federal question or diversity of citizenship. See Owen Equip. and Erection Co. v. Kroger, 437 U.S. 98, 371-2 & n.10 (1978). To satisfy the case or controversy requirement, all claims, including claims by persons moving to intervene, must derive from a "common nucleus of operative fact." Doherty v. Teamsters Pension Trust Fund of Philadelphia & Vicinity, 142 Fed. App'x 573, 575 (3d Cir. 2005) (Becker, J.).
Subject matter jurisdiction is limited not only by the provisions of Article III, but also by Acts of Congress. Owen, 537 U.S. at 372 (). Subsection 1367(b), which interposes the most obvious problems for Granite State's intervention, limits the general grant of supplemental jurisdiction in conformity withstatutory law:
In any civil action of which the district courts have original jurisdiction, founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) . . . over claims by persons . . . seeking to intervene as plaintiffs under Rule 24 . . . , when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.
By its terms, § 1367(b) expressly limits jurisdiction over claims by persons intervening as plaintiffs under Rule 24; see Dev. Fin., 54 F.3d at 159 (). See also Owen, 437 U.S. at 376 (). Although Granite State captions its motion as one to intervene as a defendant, the court must "penetrate the nominal party alignment and . . . consider the parties' actual adversity of interest." Dev. Fin, 54 F.3d at 159-60.
Granite State does not propose defensive counterclaims because it has not been haled into court against its will. In early 2005, GRC and Granite State stipulated to dismissal of their claims. Moreover, Granite State moves to initiate affirmative claims for reformation and rescission that do not depend on resolution of any current claims within the court's diversity jurisdiction.
Nonetheless, Granite State, Lexington, and AIU have concerns that coincide. Granite State's liability, along with that of the other defendant excess insurers, is joint and several.J.H. France Refractories Co. v. Allstate...
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