Sanborn Plastics Corp. v. St. Paul Fire and Marine Ins.

• Decision Date: 02 August 1990
• Docket Number: No. 1:90CV960.,1:90CV960.
• Citation: 753 F. Supp. 660
• Parties: SANBORN PLASTICS CORPORATION, Plaintiff, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Ohio

753 F. Supp. 660

SANBORN PLASTICS CORPORATION, Plaintiff, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant.

No. 1:90CV960.

United States District Court, N.D. Ohio, E.D.

August 2, 1990.

Paul J. Dolan, Thrasher, Dinsmore & Dolan, Chardon, Ohio, for plaintiff.

Jeffrey Chilton, Toledo, Ohio and Steven Kelley, Detroit, Mich., for defendant.

MEMORANDUM OF OPINION AND ORDER DENYING DEFENDANT'S PETITION FOR REMOVAL AND OVERRULING PLAINTIFF'S MOTION TO REMAND

KRENZLER, District Judge.

The above captioned case was initiated by plaintiff, Sanborn Plastics Corporation ("Sanborn"), against defendant, St. Paul Fire and Marine Insurance Company ("St. Paul"), in the Court of Common Pleas, Geauga County, case No. 89 M 699 ("Current Action"). The Current Action is an action for declaratory judgment, pursuant to Chapter 2721 of the Ohio Revised Code and Rule 57 of the Ohio Rules of Civil Procedure, seeking to declare the rights and obligations of the parties under a multicover insurance policy as it relates to an action currently before this Court, entitled United States of America v. Alvin F. Laskin, et al., civil action No. C84-2035Y ("Underlying Action"). The Current Action is a civil action between citizens of different states, plaintiff corporation having been incorporated under the laws of the State of Ohio and having its principal place of business in the County of Geauga, Ohio, and defendant corporation having been incorporated under the laws of the State of Minnesota, having its principal place of business in the City of St. Paul, Minnesota, and being licensed to conduct insurance business in the State of Ohio by the Ohio Department of Insurance.

I.

The undisputed facts are that St. Paul issued Sanborn a multicover insurance contract. Sanborn was sued as a third-party defendant to the Underlying Action, which was filed by the United States pursuant to the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("Superfund Statute"). Plaintiff's amended complaint for declaratory judgment, served on December 5, 1989, did not state a specific amount in controversy; however, it did adopt and incorporate by reference the Underlying Action. St. Paul neither provided Sanborn with a defense nor agreed to indemnify Sanborn for any damages incurred as a result of the Underlying Action. As a result, Sanborn engaged independent counsel to represent it in the Underlying Action as well as in this action in which Sanborn is seeking both indemnification for any liability that it may incur from the Underlying Action and attorneys' fees for both actions. Following a status call, St. Paul received a letter from Sanborn on May 1, 1990 which proposed a settlement of $68,807.10. Subsequently, on May 25, 1990, St. Paul filed a petition to remove the Current Action, as of right, to this Court pursuant to 28 U.S.C. §§ 1332, 1441 and 1446(b).

II.

The diversity requirements of these statutes are met and are uncontested. Thus, the issues in the case at bar concern the requisite amount in controversy necessary to remove a case to federal district court, which is currently $50,000. Specifically, the first issue is whether the amount in controversy for an indemnification action involving the Superfund Statute is determined from the plaintiff's individual liability or from the entire clean up cost for which all participants are jointly and severally liable. The second issue is whether the pleadings of the Current Action contained sufficient information about the amount in controversy, such that a reasonably qualified attorney would or should have been able to determine, within the thirty-day discovery period, whether the amount in controversy of the Current Action was such that defendant could, in good faith, file a petition for removal to this Court. The last issue is whether an action may be removed based on an untimely petition for removal, which satisfies all other removal criteria.

III.

The statutes regulating removal of a state action to federal district court in a diversity situation set forth explicit criteria and limitations. The requirements for diversity of citizenship and amount in controversy are stipulated in 28 U.S.C. 1332, rules governing removability are contained in 28 U.S.C. § 1441¹ and the relevant procedure for removal is contained in 28 U.S.C. § 1446(b).²

The amount in controversy is a critical element in determining whether a federal district court has jurisdiction in a diversity action and should be specifically stated in the pleadings. However, in the absence of such a statement, the amount in controversy is determined by the "whole record." Pinel v. Pinel, 240 U.S. 594, 595, 36 S.Ct. 416, 60 L.Ed. 817 (1916).

The Underlying Action was "incorporated by reference" into the Current Action. This Court agrees with the United States District Court of North Carolina which holds that to "incorporate a separate document by reference" is to declare that the former document shall be taken as part of the document in which the declarationis made, as much as if it were set out at length therein. Booker v. Everhart, 294 N.C. 146, 240 S.E.2d 360, 363 (1978). Thus, a reasonably qualified attorney would or should have known to consider the Underlying Action when assessing the amount in controversy of the Current Action.

The Underlying Action is based on the Superfund Statute, which deals with large scale waste clean up usually amounting to millions of dollars in liability. This statute also confers "joint and several" liability upon all defendants. 42 U.S.C. § 9607. Joint and several liability has been interpreted to mean "... each defendant is liable to the plaintiff for the whole of plaintiff's damages, except that the plaintiff may not collect, from all the defendants together, more than those damages." Chicago's Finest Worker's Co. v. Industrial Commission, 61 Ill.2d 340, 335 N.E.2d 434, 437 (1975). The Supreme Court of the United States, as early as 1881, set forth criteria for assessing liability with respect to the amount in controversy in the event of multiple defendants. Russel v. Stansell, 105 U.S. 303, 26 L.Ed. 989 (1881). Defendants charged separately with "several" amounts assessed against them may not be aggregated these to satisfy the requisite amount in controversy because "there is no joint responsibility resting on them as a body." Id. 105 U.S. at 304. Thus, any reasonably qualified attorney would or should realize that the correllary of this holding indicates that the amounts in controversy for individual defendants are to be aggregated when assessing the requisite amount in controversy where there is joint responsibility resting on the defendants as a body. It is equally apparent that "joint and several liability" is a situation where such joint responsibility restson the defendants as a body. Therefore, regardless of how minute the individual's liability, each defendant is potentially liable for the entire clean-up cost. Thus, any third-party action for indemnification of a defendant's joint and several liability in an underlying action, which satisfies the amount in controversy, is removable to a federal district court. Therefore, the incorporation by reference of the Superfund Statute in the pleadings of an action can almost, as a matter of law, be considered...