Getty Oil Corp., a Div. of Texaco, Inc. v. Insurance Co. of North America, No. 87-2074

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Citation841 F.2d 1254
PartiesGETTY OIL CORPORATION, Succeeded by and a DIVISION OF TEXACO, INC., Plaintiff-Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, et al., Defendants-Appellees.
Docket NumberNo. 87-2074
Decision Date13 April 1988

Otto D. Hewitt, III, Ervin A. Apffel, Jr., Kenneth J. Bower, McLeod, Alexander, Powel & Apffel, Galveston, Tex., E. D. Vickery, Houston, Tex., for Getty Oil.

Byron Lee, Coats, Yale, Holm & Lee, Houston, Tex., for Insurance Co. of North America.

Tom Lorance, William K. Luyties, Lorance & Thompson, Houston, Tex., for Companies Collective.

John C. Allen, Houston, Tex., for N.L. Industries.

Appeal from the United States District Court for the Southern District of Texas.


GARWOOD, Circuit Judge:

Plaintiff-appellant "Getty Oil Corporation, Succeeded by and a Division of Texaco, Inc." (Getty), brought this action against defendants-appellees Insurance Company of North America (INA), Companies Collective, and NL Industries, Inc. (NL) in a Texas court. INA, joined by Companies Collective and subsequently by NL, filed a petition for removal pursuant to 28 U.S.C. Secs. 1441(b) and 1446(a), and the case was removed to the United States District Court for the Southern District of Texas. Alleging defects in the removal petition and the lack of federal jurisdiction, Getty filed a motion to remand. Without addressing the jurisdictional issue or ruling on the motion to remand, the district court entered a final judgment dismissing the action on the merits. Getty appeals. We vacate the judgment of the district court and remand the case for a determination of jurisdiction and for consideration of the other matters as set forth in this opinion.

Facts and Proceedings Below

In 1983, Getty and NL entered into a contract in which NL agreed to furnish certain chemicals for Getty's oil well operations. The contract, which provided that NL would maintain insurance with insurers acceptable to Getty, required that all insurance coverage carried by NL extend to and protect Getty. The contract also provided that NL would indemnify Getty for damages arising from NL's performance under the contract, but not for damages arising from Getty's sole negligence.

Shortly after the parties entered into this agreement, a barrel of chemicals manufactured and supplied by NL exploded on one of Getty's oil wells, killing an employee named Carl Duncan. Duncan's survivors brought a wrongful death action in a Texas court against Getty and NL, and Getty filed a cross-claim therein against NL for contribution and contractual indemnification. After trial, the jury found that Getty alone was responsible for the accident. In accordance with this finding, the Texas trial court entered a $28,000,000 judgment against both Getty and its parent company, Texaco, Inc., and denied Getty's cross-action against NL. Getty settled with the plaintiffs and appealed the denial of its cross-claim. The Texas appellate court affirmed, stating that the contract between Getty and NL precluded indemnification for liability based solely on Getty's negligence. See Getty Oil Corp. v. Duncan, 721 S.W.2d 475, 477 (Tex.App.--Corpus Christi 1986, writ ref'd n.r.e.).

Getty then filed an insurance claim against NL's insurers, INA and Companies Collective, as an additional insured under NL's policies. Both insurers refused to honor the claim. Consequently, Getty filed the instant suit in state court naming NL, INA, and Companies Collective as defendants. In this action, Getty claimed that INA and Companies Collective breached their contractual obligation to defend Getty in the Duncan case and to pay Getty's insurance claim for the losses arising from that case. Getty also claimed that if it was not covered as an additional insured under the insurance policies carried by NL, then NL breached its contractual obligation to procure insurance for Getty. 1 INA was served on September 3, 1986, Companies Collective was served on September 5, 1986, 2 and NL was served on September 24, 1986.

On September 26, 1986, INA filed a petition for removal to the federal district court pursuant to 28 U.S.C. Sec. 1441, which permits the removal of certain cases that fall within the original jurisdiction of the federal district courts. Companies Collective joined in the original removal petition, and NL joined in the petition on October 24, 1986.

In the removal petition, INA maintained that the district court had original jurisdiction of the case on the basis of diversity of citizenship under 28 U.S.C. Sec. 1332. INA alleged in the petition that NL was a corporation organized and existing under the laws of New Jersey, that INA was a Pennsylvania corporation with a principal place of business in Pennsylvania, and that Companies Collective "is foreign insurers not citizens of" Texas. INA further stated that Getty, a Delaware corporation, had its principal place of business in California, and that Texaco, also a Delaware corporation, had its principal place of business in New York.

On October 20, 1986, Getty moved to remand the case to the state court pursuant to 28 U.S.C. Sec. 1447(c), requiring remand of any case removed improvidently and without jurisdiction. Getty asserted that the case was improvidently removed because not all the defendants had properly joined in the removal petition and because the petition failed to adequately set forth facts essential to the court's jurisdiction, namely, the citizenship of each party. Getty further alleged that the court lacked subject matter jurisdiction because complete diversity did not exist and the case did not involve a federal question. A hearing on Getty's motion was set for December 5, 1986, but was reset to January 5, 1987 at the request of Companies Collective.

On November 3, 1986, NL filed a motion to dismiss the action under the doctrine of res judicata. NL argued that Getty's claim for damages arising from NL's alleged failure to obtain insurance was identical to Getty's cross-claim for indemnification in the Duncan case. NL argued that since the state court in that case entered judgment denying Getty's cross-claim for indemnification, the principles of res judicata and collateral estoppel barred Getty from asserting a failure to procure insurance claim in a subsequent action. NL further argued that it was named as a defendant for the sole purpose of defeating diversity jurisdiction.

On December 8, 1986, the district court granted NL's motion to dismiss, holding that the operative facts in the present case were the same as those in Getty's previous action against NL in Duncan. Thus, without addressing the jurisdictional issues or the motion to remand, the court ruled that Getty's suit against NL was barred by res judicata. Shortly after the court ruled on this motion, Companies Collective filed a motion to dismiss and INA filed a motion for summary judgment. Both defendants argued that res judicata barred Getty's suit against them as well.

Getty then filed a motion for reconsideration of the order dismissing its suit against NL. In the motion to reconsider, Getty again argued that complete diversity did not exist and that the district court lacked subject matter jurisdiction. However, on December 22, 1986, Getty filed a motion to continue the January 5 hearing on the previous motion to remand. In this motion, Getty suggested, and the other parties agreed, that the hearing should be postponed pending the court's ruling on Getty's motion to reconsider. The magistrate granted the motion and the hearing was continued. A week later, INA filed a supplemental petition for removal in which it asserted that NL's principal place of business was New York and, on information and belief, that Companies Collective was "a citizen or subject of England" and "not a citizen of" Texas or California. INA further alleged that Texaco was an improper or nominal party to the suit.

On January 9, 1987, the district court entered a final judgment denying Getty's motion to reconsider, granting the motions filed by INA and Companies Collective, dismissing Getty's suit on the merits, and declaring that all other pending motions were moot. The court never addressed the question of jurisdiction nor ruled on Getty's motion to remand.

I. Subject Matter Jurisdiction

On appeal, Getty argues that the district court erred by entering final judgment without first determining whether it had jurisdiction. Getty contends that the court lacked subject matter jurisdiction because of the lack of complete diversity among the parties. Getty points out that both NL and Texaco have their principal places of business in New York, and further contends that the defendants-appellees failed to meet their burden of establishing diversity jurisdiction because they never adequately alleged the principal place of business of Companies Collective or its member companies. Respecting the latter contention, Getty argues that Companies Collective is an unincorporated association and that the citizenship of each of its constituent members must be considered in determining the presence or absence of diversity.

In response, NL, INA, and Companies Collective claim that Texaco is not a proper party to this action so that its principal place of business should not be considered in determining diversity jurisdiction. 3 In addition, they argue that any alleged defects regarding allegations of citizenship 4 were cured by a Supplemental Joinder and Consent to Removal tendered for filing in this Court in which Companies Collective alleges that "Companies Collective, at the time this action was commenced, were and still are foreign insurers who do not have their principal place of business in the States of Texas, California, New York, or Delaware." 5 Finally, the defendants-appellees argue that the district court did not err by failing to address the jurisdictional issue because ...

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