National Union Fire v. Esi Ergonomic Solutions

• Citation: 342 F.Supp.2d 853
• Decision Date: 29 September 2004
• Docket Number: No. CIV-03-2417-PHX-SRB.,No. CIV-04-0010-PHX-SRB.,CIV-03-2417-PHX-SRB.,CIV-04-0010-PHX-SRB.
• Parties: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, PA, Plaintiff, v. ESI ERGONOMIC SOLUTIONS, LLC, et al., Defendants. ESI Ergonomic Solutions, LLC, Plaintiff, v. National Union Fire Insurance Company Of Pittsburg, Pa, Garnishee.
• Court: U.S. District Court — District of Arizona

342 F.Supp.2d 853

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, PA, Plaintiff, v. ESI ERGONOMIC SOLUTIONS, LLC, et al., Defendants.

ESI Ergonomic Solutions, LLC, Plaintiff, v. National Union Fire Insurance Company Of Pittsburg, Pa, Garnishee.

No. CIV-03-2417-PHX-SRB.

No. CIV-04-0010-PHX-SRB.

United States District Court, D. Arizona.

September 29, 2004.

COPYRIGHT MATERIAL OMITTED

Timothy J. Thomason, Maxine Mary Becker, Mariscal Weeks McIntyre & Friedlander PA, Steven Plitt, Joshua D. Rogers, Kunz Plitt Hyland Demlong & Kleifield PC, Phoenix, AZ, for Plaintiff.

Edward Moomjian, II, Chandler & Udall LLP, Tucson, AZ, Christopher Alan LaVoy, LaVoy & Chernoff PC, Phoenix, AZ, for Defendants.

ORDER

BOLTON, District Judge.

These consolidated actions arise out of class representative ESI Ergonomic Solutions, LLC's efforts to collect on a judgment entered against United Artists Theatre Circuit, Inc. ("United Artists") in litigation filed in Maricopa County Superior Court. Because the Court lacks subject matter jurisdiction, it remands one of the actions and dismisses the other.

BACKGROUND

In August 1999, United Artists contracted with American Blast Fax, Inc. ("ABF"), a company that distributes advertisements by fax, to send a one-page advertisement for discount movie ticket packages. ESI Ergonomic Solutions, LLC v. United Artists Theatre Circuit, Inc., 203 Ariz. 94, 96, 50 P.3d 844, 846 (Ariz.Ct.App.2003). The next month, ABF sent the advertisement to about 90,000 fax machines in the Phoenix area. Id. ESI received the advertisement and instituted class-action litigation in Maricopa County Superior Court alleging a violation of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227.¹ Id. ESI requested statutory damages of $500.00 per violation on behalf of the class as well as treble damages. Id. It also requested injunctive relief. Id.

In response, United Artists filed a declaratory judgment action in this District, alleging that the TCPA violated the First Amendment See United Artists Theatre Circuit, Inc. v. FCC, 147 F.Supp.2d 965 (D.Ariz.2000). ESI moved to dismiss the declaratory judgment action, arguing that federal courts lacked subject matter jurisdiction over TCPA claims and that in any event abstention was appropriate. Id. at 970. The matter was assigned to Judge Broomfield. Citing a decision rendered by the Ninth Circuit after United Artists' filed its complaint, Judge Broomfield noted that state courts have exclusive subject matter jurisdiction over TCPA claims. Id. at 972. From there, he found that the court lacked subject matter jurisdiction to hear United Artists' defensive declaratory judgment action. Id. at 973-976. To the extent that jurisdiction existed, he found that abstention was appropriate. Id. at 977-79.

In September 2000, United Artists filed for Chapter 11 bankruptcy, and all judicial proceedings against it were automatically stayed. ESI Ergonomic Solutions, LLC, 203 Ariz. at 96, 50 P.3d at 846. While in bankruptcy, United Artists sent notice to the recipients of the fax advertisement that any person having a potential claim should file a proof of claim in the bankruptcy proceedings. Id. ESI filed a proof of claim on behalf of the putative class and moved for relief from the automatic stay. Id. Upon the stipulation of the parties, the bankruptcy court lifted the automatic stay to permit the parties to pursue the litigation in Arizona. Id. The order specifically provided that any judgment or settlement could be executed only against United Artists' insurance policies and not against the company itself. Id.

After the bankruptcy court lifted the automatic stay, the state court action continued. After class certification and a summary judgment proceeding, the trial court entered judgment against United Artists and in favor of ESI and the absent class. (11/07/03 Order, attached as Exh. 2 to ESI's Mot. to Dismiss [Doc. # 3]). The court found that at least 57,600 class members received the faxed advertisement, including class representative ESI, and entered judgment in favor of each class member for the statutory amount of $500.00 plus interest at 10% per annum. The total amount of the judgment is $40,446,246.58. (Id.) The court saved the questions of whether the defendants sent more than 57,600 faxes and whether it should treble damages for another day, but made clear that the judgment was final and appealable notwithstanding the fact that it did not dispose of all of the claims. (Id.)

On December 5, 2003, ESI filed a garnishment action in Arizona state court against United Artists' insurer, National Union Fire Insurance Company ("National Union"), seeking to collect on the judgment. That same day, National Union filed a declaratory judgment action in this District against United Artists and class representative ESI, alleging diversity jurisdiction and seeking a determination that it has no obligation to indemnify United Artists. The declaratory judgment action was assigned to Judge Roslyn O. Silver and numbered CIV-03-2417. On January 2, 2004, ESI moved to dismiss the action for lack of subject matter jurisdiction, arguing that no case or controversy existed with respect to United Artists and that National Union could not acquire diversity jurisdiction over ESI and the class without impermissibly aggregating claims; alternatively, ESI asked the Court to abstain in favor of the state court garnishment action. (ESI's Mot. to Dismiss at 3-12 [Doc. # 3].) ESI's Motion to Dismiss is still pending.

On January 5, 2004, National Union removed ESI's garnishment action to federal court, again alleging diversity jurisdiction. (Not. of Removal at 1-2 [CIV-04-0010 Doc. # 1].) The matter was assigned to Judge Earl H. Carroll and numbered CIV-04-0010. On January 6, 2004, ESI moved to remand the garnishment action, arguing (i) that the federal court could not assert diversity jurisdiction without impermissibly aggregating claims, and (ii) that not all of the defendants had consented in the removal. (ESI's Mot. to Remand at 3-4 [CIV-04-0010, Doc. # 3].) It also asked for costs and attorneys' fees under 28 U.S.C. §§ 1447(c) and 1927. (Id. at 4.) A few weeks later, Judge Carroll recused himself and this Court received the assignment. On February 2, 2004, National Union moved in CIV-03-2417 to consolidate the declaratory judgment action with the garnishment action. (Mot. to Consolidate at 1 [Doc. # 6].) ESI did not object to consolidation.

On February 11, 2004, pursuant to the stipulation of the parties, the Court remanded the non-garnishment portion of the case to Arizona state court (the garnishment action had been filed in the same case number as the underlying state court litigation and the entire litigation was removed when National Union filed its Notice of Removal). On July 30, 2004, the Court denied ESI's Motion to Remand, rejecting ESI's unanimous consent argument and finding that the non-aggregation rule did not apply. (07/30/04 Order at 5-6 [CIV-04-0010 Doc. # 17].)

Judge Silver granted ESI's Motion to Consolidate in an Order dated August 30, 2004 [Doc. # 19]. On September 16, 2004, Judge Silver recused and the consolidated case was randomly reassigned to this Court. This Order considers whether subject matter jurisdiction exists over National Union's declaratory judgment action and reconsiders whether subject matter jurisdiction exists over ESI's garnishment action. Although the Court previously found jurisdiction over the garnishment action, a court has discretion to reconsider its orders. See Barber v. Hawaii, 42 F.3d 1185, 1198 (9th Cir.1994). Further, it always has jurisdiction to consider its jurisdiction. See Fed.R.Civ.P. 12(h)(3) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action"); Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999) ("[S]ubject matter jurisdiction delineations must be policed by the courts on their own initiative even at the highest level.")

DISCUSSION

The Court lacks subject matter jurisdiction over both ESI's garnishment action and National Union's declaratory judgment action. It will remand the garnishment action and dismiss the declaratory judgment action.

I. The Garnishment Action

A. Legal Standards

A defendant may remove "any civil action brought in a State court of which the district courts of the United States have original jurisdiction ... to the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). A district court has diversity jurisdiction over any civil action between citizens of different states as long as the amount in controversy exceeds $75,000.00, excluding interest and costs. 28 U.S.C. § 1332. If before final judgment it appears that a district court lacks subject matter jurisdiction over a case that has been removed, the case must be remanded. 28 U.S.C. § 1447(c).

A strong presumption exists against removal jurisdiction, and the party that seeks to remain in federal court has the burden of proof on a motion to remand to state court. Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir.1997). In cases in which the existence of diversity jurisdiction depends on the amount in controversy, "[t]he district court may consider whether it is `facially apparent' from the complaint that the jurisdictional amount is in controversy." Id. If the complaint is silent on the amount of damages claimed, "the court may consider facts in the removed petition and may require the parties to submit summary-judgment-type evidence relevant to the amount in controversy at the time of the removal." Id. (quotation omitted).

B. Analysis

The Court may not exercise diversity jurisdiction over the garnishment action because class representative ESI's $500.00 claim does not meet the threshold $75,000.00 amount in controversy and the absent class members'...