Harper v. National Flood Insurers Ass'n

• Decision Date: 18 July 1980
• Docket Number: Civ. A. No. 78-577.
• Parties: LaVerta HARPER, Individually and t/d/b/a LaVerta's Beauty Salon, Inc., Plaintiff, v. NATIONAL FLOOD INSURERS ASSOCIATION, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

494 F. Supp. 234

LaVerta HARPER, Individually and t/d/b/a LaVerta's Beauty Salon, Inc., Plaintiff, v. NATIONAL FLOOD INSURERS ASSOCIATION, Defendant.

Civ. A. No. 78-577.

United States District Court, M. D. Pennsylvania.

July 18, 1980.

Stuart, Murphy, Smith, Mussina, Harris & Rieders, Williamsport, Pa., for plaintiff.

Barbara Allen Babcock, Dennis G. Linder, David Epstein, Vicki L. Hawkins, U. S. Dept. of Justice, Washington, D. C., Carlon M. O'Malley, Jr., U. S. Atty., Scranton, Pa., Harry A. Nagle, Asst. U. S. Atty., Lewisburg, Pa., for defendant; Robert D. Sokolove, Dept. of Housing & Urban Development, Washington, D. C., of counsel.

MEMORANDUM

RAMBO, District Judge.

This action was initiated in the Court of Common Pleas of Lycoming County, Pennsylvania on April 28, 1978. The complaint originally named the National Flood Insurers Association (NFIA) as defendant and alleged that defendant wrongfully denied insurance coverage for damage to a waterproofing membrane caused by a flood in September of 1975. The Court of Common Pleas of Lycoming County consolidated this action with other actions initiated by the plaintiff in that court against an architectural firm and a contractor, both of which actions also involved water damage suffered by plaintiff to her residence as a result of the flood of September 1975. On June 16, 1978 defendant NFIA petitioned for removal of this action to the United States District Court for the Middle District of Pennsylvania pursuant to 28 U.S.C. §§ 1441(b) and 1442(a)(1). On August 7, 1978 the court granted an uncontested motion for substitution of Patricia Roberts Harris, Secretary of the Department of Housing and Urban Development (HUD), as the sole party defendant. On July 5, 1979 a second motion for substitution was filed requesting that the Director of the Federal Emergency Management Agency (FEMA) be substituted as the sole party defendant in this action; this motion, too, was unopposed by plaintiff. The court granted the motion on July 20, 1979.

Presently before the court is plaintiff's motion to remand this matter to the Court of Common Pleas of Lycoming County, Pennsylvania, and defendant's motion to dismiss based upon the court's alleged lack of jurisdiction.

Motion for Remand

In support of the motion for remand, plaintiff argues that pursuant to 28 U.S.C. § 1447(c), remand is proper at any time prior to final judgment if removal was granted "improvidently and without jurisdiction"; that neither 28 U.S.C. § 1441(b) nor § 28 U.S.C. § 1442(a)(1), which grant removal jurisdiction, are applicable in this case; that defendant may not now allege 28 U.S.C. § 1441(a) as a basis for removal jurisdiction; and therefore the case should be remanded. Defendant, on the other hand, alleges that removal was proper under 28 U.S.C. §§ 1441(b) and 1442(a)(1), and if not, certainly under 28 U.S.C. § 1441(a); that 42 U.S.C. § 1447(c) is applicable only when removal is granted "improvidently and without jurisdiction" and is not apposite; and that removal was proper and therefore plaintiff's motion for remand should be denied.

Since the court finds there is proper removal jurisdiction based upon § 1441(a), it need not address the issues of whether removal was proper under § 1441(b) or § 1442(a)(1). Section 1441(a) reads:

Except as otherwise expressly provided by Act of Congress, 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.

The court is granted original jurisdiction over actions involving flood insurers operating under the National Flood Insurance Act (hereinafter Act), 42 U.S.C. §§ 4001 et seq., in 42 U.S.C. § 4053, which provides in pertinent part:

. . . Upon the disallowance by any such company or other insurer of any such claim, or upon the refusal of the claimant to accept the amount allowed upon any such claim, the claimant, within one year after the date of mailing of notice of disallowance or partial disallowance of the claim, may institute an action on such claim against such company or other insurer in the United States District Court for the district in which the insured property or the major part thereof shall have been situated, and jurisdiction is hereby conferred upon such court to hear and determine such action without regard to the amount in controversy. (Emphasis added.)

Plaintiff alleges that defendant should be precluded from arguing that removal was proper under § 1441(a) because defendant did not allege § 1441(a) as a basis for removal jurisdiction in its petition for removal. Plaintiff argues that a petition for removal may be amended freely within the statutory 30-day filing period but thereafter only amendments to cure defects are proper; amendments seeking to set forth additional grounds are not. Plaintiff cites numerous cases in support of this argument. A fair reading of these cases is that a defendant may not, after the statutory 30-day filing period, amend the petition for removal in such a manner as to change or alter the import of the petition, the resultant effect being to create jurisdiction where none existed before. Hence the rule that only technical changes, as well as amendments to cure defective allegations, will be permitted. Van Horn v. Western Electric Co., 424 F.Supp. 920, 925 (E.D.Mich.1977); Kinney v. Columbia Savings & Loan Association, 191 U.S. 78, 48 L.Ed. 103 (1903); Carlton Properties, Inc. v. Crescent City Leasing Corporation, 212 F.Supp. 370 (E.D. Pa.1962).

In the instant case, defendant's omission of § 1441(a) can clearly be classified as a technical error or defective allegation. The facts alleged to support removal jurisdiction were not changed and no additional grounds were alleged. Since defendant may amend to cure a defect, the court will consider the petition to remove amended so as to allege jurisdiction properly under § 1441(a). Accordingly, the court finds that removal jurisdiction exists and removal is proper.¹

Motion to Dismiss

In its motion to dismiss, defendant argues that the federal district court, pursuant to the express language of 42 U.S.C. § 4053, has exclusive jurisdiction to hear cases against flood insurers under the Act; that since there was no jurisdiction in the state court, there can be no derivative jurisdiction in this court; that removal jurisdiction is based solely upon derivative jurisdiction; and that since the state court had no jurisdiction to hear the case, no derivative jurisdiction was acquired by this court upon removal, requiring dismissal by this court for a lack of jurisdiction.

Plaintiff, in opposing defendant's motion to dismiss, contends that 42 U.S.C. § 4053 does not confer exclusive jurisdiction upon the federal district court but, at best, concurrent jurisdiction; that since concurrent jurisdiction does exist, if the case was properly removed, which plaintiff disputes, this court has jurisdiction; therefore the court should not dismiss the case for want of subject matter jurisdiction.

Both defendant and the magistrate² rely heavily on a prior Middle District case, Dunkle v. National Flood Insurers Association, 432 F.Supp. 489 (M.D.Pa.1977), as well as a recent case in the Central District of Illinois, Schultz v. Director, Federal Emergency Management Agency, 477 F.Supp. 118 (C.D.Ill.1979). The cornerstone of the Dunkle decision, which was adopted by the court in Schultz, was the interpretation of the word "may" in 42 U.S.C. § 4053. The court in Dunkle held:

A fair and reasonable reading of the language contained in Section 4053 indicates that the word "may" was intended to characterize and qualify the institution of suit by the claimant rather than the forum in which the claim could be brought. Under this construction, where a claimant elects to institute suit pursuant to the provision of the Act, he is required under the special jurisdictional grant included in Section 4053 to file his action in the federal district courts. Id. at 490.

The court went on to analogize 42 U.S.C. § 4053 with 15 U.S.C. § 15,³ which has been interpreted to confer exclusive jurisdiction upon the federal courts. The court concluded a "similar and consistent result should be reached," holding claims under the National Flood Insurance Act may be litigated only in federal courts. Id. at 491.

This court does not agree with the result nor the reasoning in Dunkle, particularly in light of plaintiff's arguments and contrary case law, both in and out of this district. Plaintiff contends that the interpretation given in Dunkle should not be applied in the instant case for the following reasons:

1. The statute itself does not expressly state that exclusive jurisdiction lies with the federal courts.

2. The legislative history of the statute expressly, although parenthetically, provides for remedies in state courts.

3. The Code of Federal Regulations has been amended to eliminate any implication of exclusive jurisdiction.

4. The general rules of interpretation dictate that "may" is permissive while "shall" is directive.

5. Cases have already held that the federal courts do not have exclusive jurisdiction.

In a case very similar to the one sub judice, the Supreme Court held that § 301(a) of the Labor Management Act, 1947, which confers on federal courts jurisdiction over suits for violations of contracts between employers and certain labor organizations, did not divest state courts of jurisdiction of such suits.⁴Charles Dowd Box Co., Inc. v. Courtney, 368 U.S. 502, 82 S.Ct. 519, 7 L.Ed.2d 483 (1962). The Court stated:

On its face § 301(a) simply gives the federal district courts jurisdiction over suits for violation of certain specified types of contracts. The statute does not state nor even suggest that such jurisdiction shall be exclusive. It provides that suits of

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