New Energy Co. of Indiana v. CIGNA Ins. Co.

• Decision Date: 29 April 1988
• Docket Number: No. IP 87-1264-C.,IP 87-1264-C.
• Citation: New Energy Co. of Indiana v. CIGNA Ins. Co., 685 F.Supp. 1073 (S.D. Ind. 1988)
• Parties: NEW ENERGY COMPANY OF INDIANA and New Energy Corporation of Indiana, Plaintiffs, v. CIGNA INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Indiana

685 F. Supp. 1073

NEW ENERGY COMPANY OF INDIANA and New Energy Corporation of Indiana, Plaintiffs, v.CIGNA INSURANCE COMPANY, Defendant.

No. IP 87-1264-C.

United States District Court, S.D. Indiana, Indianapolis Division.

April 29, 1988.

Robert D. MacGill, Greta Morris, Susan B. Bayh, Barnes & Thornburg, Indianapolis, Ind., for plaintiffs.

Richard R. McDowell, Hill, Fulwider, McDowell, Funk & Matthews, Indianapolis, Ind., Stephen D. Marcus, Vincent T. Borst, Clausen, Miller, Gorman, Caffrey & Witous, P.C., Chicago, Ill., for defendant.

ENTRY

BARKER, District Judge.

Factual Background

DefendantCIGNA Insurance Company("CIGNA") is a California corporation; its principal place of business is the state of Delaware and its main office is in the state of Indiana.The first-named plaintiff, New Energy Company of Indiana ("NECOMI"), is a limited partnership organized under Indiana law.Some of NECOMI's limited partners are citizens of CIGNA's state of incorporation, California.The second-named plaintiff is New Energy Corporation of Indiana ("NECOR"), a corporation organized under Indiana law.NECOR is the general partner in NECOMI.

The instant case revolves around an insurance policy which CIGNA issued to plaintiffs.The policy allegedly contained CIGNA's obligation to reimburse the New Energies¹ for possible design or construction errors in a planned energy production facility in the state of Indiana.The New Energies allege that, during the design and construction of the facility, work covered by the policy was inadequately performed and damaged some of the facility's machines.These setbacks required the New Energies to redesign or rebuild the faulty work, and these remedial efforts so taxed plaintiffs' resources that they appealed to CIGNA for compensation under the policy.CIGNA responded that it was not obliged to pay for the repairs, and refused plaintiffs' claim.

As a result the New Energies filed a suit for damages against CIGNA in state court on November 10, 1987, alleging injury from CIGNA's wrongful denial of their policy claim.Two weeks later CIGNA removed the action in this court, alleging original jurisdiction based on diversity of citizenship.On December 9, 1987, plaintiffs filed a motion to remand, alleging lack of jurisdiction based on the fact that NECOMI's California limited partners were non-diverse vis-a-vis CIGNA.CIGNA replied by repeating its claim that NECOMI is properly diverse to CIGNA, and by asserting in the alternative that federal jurisdiction is proper under the "separate and independent" provisions of section 1441(c).

Discussion and Decision

I.Diversity Jurisdiction Under 28 U.S.C. § 1332

Plaintiffs' first ground for remand is lack of diversity between NECOMI and CIGNA.The diversity requirement for federal jurisdiction is set forth in 28 U.S.C. § 1332(a)(1), which requires that the parties be citizens of different states.²Plaintiffs contend that the limited partners of NECOMI who are citizens of California should be included in a section 1332 diversity determination.The New Energies claim that if NECOMI's limited partners are so included this case should be remanded under the holding in Owen Equip. & Erection Company v. Kroger,437 U.S. 365, 373, 98 S.Ct. 2396, 2402, 57 L.Ed.2d 274(1978), that "diversity jurisdiction does not exist unless eachdefendant is a citizen of a different State from eachplaintiff."(Emphasis original).See alsoStrawbridge v. Curtiss,7 U.S. (3 Cranch) 267, 267-68, 2 L.Ed. 435(1806).CIGNA responds that this case meets section 1332(a)(1)'s requirement because NECOMI's California partners must be excluded from a diversity analysis of this case.

The Seventh Circuit appeared to enunciate the applicable diversity rule for limited partnerships in Elston Investment, Ltd. v. David Altman Leasing Corporation,731 F.2d 436(1984).In that case suit was brought by an Illinois limited partnership against a Delaware corporation.One of plaintiff's limited partners was also a Delaware corporation.Addressing the contention that limited partners should be excluded from diversity analysis, the Seventh Circuit stated that "unincorporated associations are mere collections of individuals.When the `persons composing such association' sue in their collective name, they are the parties whose citizenship determines the diversity jurisdiction of a federal court."Id. at 437-38(quotingGreat Southern Fire Proof Hotel Co. v. Jones,177 U.S. 449, 456, 20 S.Ct. 690, 693, 44 L.Ed. 842(1900))(footnote omitted).Consequently the court held "that the citizenship of a limited partnership is the citizenship of all the partners—both general and limited—composing the partnership."Elston,731 F.2d at 439.Under Elston, CITNA is non-diverse to NECOMI.Thus, if applicable, Elston would bar this court from exercising jurisdiction under Owen Equipment's requirement of complete section 1332(a)(1) diversity.

Yet CIGNA mounts two arguments as to why Elston should not apply to this case.First, on at least two grounds CIGNA urges that Elston should be "limited to its facts."CIGNA points out that Elston dealt with a partnership of three individuals, while NECOMI comprises over 3,000 partners.Furthermore, CIGNA claims that Elston involved a single claim by one plaintiff, while the instant suit involves two plaintiffs whose claims are "separate and independent" under section 1441(c).CIGNA's second argument for ignoring Elston is that it conflicts with the Supreme Court's interpretation of the diversity standard for limited partnerships.Hence, states CIGNA, Elston does not apply.This court, however, finds both of CIGNA's arguments against applying Elston unconvincing.

With regard to CIGNA's first argument, the court notes that Elston gave no indication that its holding was limited to "small" partnerships as opposed to "large" ones.The passages quoted above leave no doubt that the court of appeals intended to enunciate a diversity standard for all limited partnerships.CIGNA is correct in pointing out that Elston involved a single plaintiff, while the instant case involves two plaintiffs.But Elston cannot be read plausibly as limiting its holding to "one-plaintiff" lawsuits.The Elston court addressed the diversity standard for limited partnerships; it did not purport to enunciate a diversity standard for cases in which such partnerships sit alone at counsel's table.

Turning to defendant's second argument, CIGNA contends that Elston"does not comport with established Supreme Court authority ... to date there has been no adjudication ... by the Supreme Court of this issue...."³CIGNA relies on two circuit court opinions which exclude limited partners from diversity analysis and which look only to the citizenship of the general partners to support its claim that this court should ignore Elston.SeeMesa Operating Ltd. Partnership v. Louisiana Intrastate Gas Corporation,797 F.2d 238(5th Cir.1986);Colonial Realty Corporation v. Bache & Company,358 F.2d 178(2d Cir.1966), cert. denied,385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56(1966).⁴CIGNA contends that both cases demonstrate that Elston's rule is inconsistent with the law of federal jurisdiction.

CIGNA initially asserts that the Supreme Court's denial of certiorari in Colonial Realty establishes the "general-partner-only" diversity formula "by implication."It is hornbook law that a denial of certiorari is incapable of illuminating the Supreme Court's views of a given issue.Writs of certiorari are issued upon the discretion of the Supreme Court.Given the enormous annual number of certiorari petitions lodged there it cannot be plausibly asserted that the denial of such a writ indicates Supreme Court approval or disapproval of the lower court's decision.Even the briefest perusal of Supreme Court holdings on this issue makes this clear.See, e.g., Brown v. Allen,344 U.S. 443, 497, 73 S.Ct. 397, 441, 97 L.Ed. 469(1953);Sunal v. Large,332 U.S. 174, 181, 67 S.Ct. 1588, 1592, 91 L.Ed. 1982(1947);House v. Mayo,324 U.S. 42, 48, 65 S.Ct. 517, 521, 89 L.Ed. 739(1945).CIGNA can hardly expect this court to give greater import to the Supreme Court's denial of certiorari than the court itself gives to such denials.

CIGNA also argues that the Mesa Operating court"discerned" that the Supreme Court approved the "general-partners-only" diversity formula in Navarro Savings Association v. Lee,446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425(1980).Although it is true that Navarro's holding(that only business trustees, and not trust beneficiaries, were to be counted for diversity purposes) was regarded by the Mesa Operating court to require an analogous exclusion of limited partners, Mesa Operating,797 F.2d at 242-43, the Elston court considered the Supreme Court to have "explicitly rejected" this argument in Navarro itself.Elston,731 F.2d at 438.⁵At most, therefore, Mesa Operating and Elston present a difference between two Circuits regarding the meaning of a Supreme Court decision.The mere fact of such a rift does not authorize this lower court's rebellion against the legal interpretation of its superior.

For these reasons CIGNA fails to convince the court that it should ignore the clear dictates of Elston.Therefore this court finds that it does not possess diversity jurisdiction over this case.

II."Separate and Independent" Jurisdiction Under 28 U.S.C. § 1441(c)

CIGNA argues in the alternative that, even if this court chooses to follow Elston, it should still adjudicate the present case under 28 U.S.C. § 1441(c).⁶CIGNA argues that section 1441(c) applies to this case because NECOR's "claim or controversy" would be removable if sued upon alone, and because NECOR's claim is "separate and independent" from NECOMI's.Thus, CIGNA argues, this court should allow section 1441(c) removal of the entire lawsuit.⁷

As CIGNA's motion indicates, the threshold inquiry in a section 1441(c) motion is whether a "claim...