Traynor v. O'Neil

• Decision Date: 07 March 2000
• Docket Number: No. 99-C-0773-C.,99-C-0773-C.
• Citation: 94 F.Supp.2d 1016
• Parties: Timothy TRAYNOR and Luann Traynor, Plaintiffs, v. Richard O'NEIL, General Casualty Co. of Wisconsin, and Thomas & Betts Corporation, Defendants.
• Court: U.S. District Court — Western District of Wisconsin

94 F.Supp.2d 1016

Timothy TRAYNOR and Luann Traynor, Plaintiffs, v. Richard O'NEIL, General Casualty Co. of Wisconsin, and Thomas & Betts Corporation, Defendants.

No. 99-C-0773-C.

United States District Court, W.D. Wisconsin.

March 7, 2000.

Ardell W. Skow, Doar, Drill & Skow, Office Park, Baldwin, WI, for Timothy Traynor and Luann Traynor.

Edmund Manydeeds, III, Eau Claire, WI, for General Casualty Co. of Wisconsin and Richard O'Neil.

Donald Chance Mark, Fafinski Mark & Johnson, P.A., Eden Prairie, MN, for Thomas & Betts Corporation.

OPINION AND ORDER

CRABB, District Judge.

In this civil action, Timothy and Luann Traynor sued defendants Richard O'Neil and General Casualty Company of Wisconsin for injuries arising from an automobile accident. Plaintiffs added defendant Thomas & Betts Corporation as a defendant pursuant to Wisconsin law to enable the company to assert its subrogation rights. Defendant Thomas & Betts Corporation contended that plaintiffs were adding it to the case as a defendant not to protect its subrogation rights as they alleged but to estop it from asserting those rights. Defendant Thomas & Betts argued that this was a separate and independent claim implicating ERISA-based federal question jurisdiction and removed this case to federal court. Plaintiffs have moved for a remand of the proceedings to state court and for an award of attorney fees and costs. Because I find that this court lacks subject matter jurisdiction over plaintiffs' claims, plaintiffs' motion to remand the case will be granted, as will their motion for an award of attorney fees and costs.

ALLEGATIONS OF FACT

On May 19, 1995, plaintiff Timothy Traynor was injured when his motorcycle collided with a vehicle driven by defendant Richard O'Neil. O'Neil was insured by General Casualty Company of Wisconsin. Plaintiff was a participant in an employee health plan sponsored by Thomas & Betts Corporation. Medical payments were made to plaintiff under the plan.

On March 18, 1996, plaintiff and his wife, Luann Traynor, filed this action in the Circuit Court for Pierce County, Wisconsin, suing O'Neil and General Casualty Company of Wisconsin for negligence.

On November 8, 1999, after settlement negotiations broke down, plaintiffs added defendant Thomas & Betts Corporation as a defendant pursuant to Wis. Stat. § 803.03(2) because its potential subrogation interest made it a necessary party.

On December 8, 1999, Thomas & Betts Corporation filed a notice of removal in this action pursuant to 28 U.S.C. § 1441(c) and 28 U.S.C. § 1331, contending that plaintiffs had stated a separate and independent claim against it concerning an ERISA-based plan.

OPINION

28 U.S.C. § 1441(c) provides that, "whenever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates." Section 1331 provides federal jurisdiction over all civil actions arising under the Constitution, laws, or treaties of the United States. Thus, in order for removal of this action to be proper, the claim against Thomas & Betts Corporation must be separate and independent and raise a federal question. See 28 U.S.C. § 1441(c).

Before analyzing the propriety of removal under 28 U.S.C. § 1441(c), it is important to clarify the nature of plaintiffs' claim against defendant Thomas & Betts Corporation. Defendant Thomas & Betts was joined by amended complaint as a necessary party under Wis. Stat. § 803.03(2), which provides that, "[a] party asserting a claim for affirmative relief shall join as parties to the action all persons who at the commencement of the action have claims based upon subrogation to the rights of the party asserting the principal claim." In addition to joining defendant because of its claimed subrogation interest, plaintiffs asserted that defendant's subrogation rights were subordinate to plaintiff Timothy Traynor's right of recovery. Am. Compl., dkt. # 16, ¶ 13. Further, plaintiffs asserted that defendant's subrogation claims were "precluded under the doctrines of unclean hands, equitable estoppel and waiver." Am. Compl. ¶ 14. Defendant characterizes plaintiffs' asserted defenses as affirmative claims "for equitable relief in order to prevent Thomas & Betts from asserting any right to subrogation or reimbursement under the ERISA plan." Def.'s Br. in Opp'n, dkt. # 9, at 2. In response, plaintiffs argue that the doctrines of waiver, estoppel and unclean hands were raised in the amended complaint as affirmative defenses to defendant's subrogation claim. Plaintiffs deny that they are seeking an injunction against defendant or any other form of equitable relief.

I conclude that plaintiffs have the better argument. Defendant Thomas & Betts was joined as a necessary party because of its potential subrogation interest. At the same time, plaintiffs chose to raise affirmative defenses to any subrogation claim defendant might assert. Plaintiffs have not asserted a claim against defendant; all plaintiffs have done is join a necessary defendant under state law and tip their hand as to what defenses they would raise if defendant asserts that its subrogation interest has priority over plaintiffs' interest. Raising a defense against a possible claim is not the same as asserting a claim. To find otherwise would deny plaintiffs' status as masters of their complaint and turn the well-pleaded complaint rule on its head.

A. Separate and Independent Claim

The standard for a "separate and independent claim or cause of action" under 28 U.S.C. § 1441(c) was established by the United States Supreme Court in American Fire & Casualty Co. v. Finn, 341 U.S. 6, 14, 71 S.Ct. 534, 95 L.Ed. 702 (1951) (cited with approval in Lewis v. Louisville & Nashville Railroad Co., 758 F.2d 219, 221 (7th Cir.1985)). "[W]here there is a single wrong to plaintiff, for which relief is sought, arising from an interlocked series of transactions, there is no separate and independent claim or cause of action under 1441(c)." Finn, 341 U.S. at 14, 71 S.Ct. 534. In other words, "[i]t is well-settled that a claim is not `separate and independent' if it arises from the same loss or actionable wrong." Lewis, 758 F.2d at 221. Further, "[e]ven if more than a single wrong exists, claims are not `separate and independent' if the wrongs arise from an interlocked series of transactions." Id. The purpose of the "separate and independent claim" requirement is to limit removal from state courts. See Finn, 341 U.S. at 10-11, 71 S.Ct. 534.

In the present case, the single wrong for which plaintiffs seek relief is personal injury resulting from the alleged negligence of defendant O'Neil. Defendant Thomas & Betts's potential subrogation claim is indivisible from this negligence action since defendant is merely asserting a right to share in any damages awarded to plaintiffs. State law makes defendant a necessary party to the negligence action. For that reason, its presence in the suit is considered necessary for a just adjudication of the principal negligence claim.

Defendant argues that, "[o]n similar facts, courts in this circuit have found adverse claims concerning subrogation rights to be `separate and independent' for purposes of removal under 28 U.S.C. § 1441(c)." Def.'s Br. in Opp'n, dkt. # 9, at 4. However, the cases defendant cites in support of this proposition are distinguishable on their facts. In Shannon v. Shannon, 965 F.2d 542 (7th Cir.1992), for example, a child who was severely injured when she nearly drowned filed a personal injury action in state court against her parents, their insurer, her next-door neighbors and their insurer. The mother's employee health plan intervened to assert subrogation and reimbursement claims against the plaintiff and her parents because it had paid part of the medical expenses. The plaintiff and her parents counterclaimed against the plan for termination of payments. The plan removed the case to federal court under 28 U.S.C. § 1441(c) and the district court denied plaintiff's motion to remand. In affirming the district court's denial of remand, the Court of Appeals for the Seventh Circuit stated that the plan's subrogation claim, "more than likely invoked ERISA-based removal," but if it did not, the plaintiff and her parents' counterclaims against the plan surely did. Id. at 546. Because removal had been sought under 28 U.S.C. § 1441(c), the court of appeals must have found that a separate and independent claim existed, although it did not discuss this point. However, Shannon is distinguishable from this case, which does not involve any counterclaims. In fact, plaintiffs have made no claims against defendant whatsoever. They have merely joined defendant as a necessary party and identified what affirmative defenses they will raise should the defendant assert a subrogation interest.

Defendant cites Scianna v. Furlong, 56 F.Supp.2d 1000 (N.D.Ill.1999), for the proposition that a petition to adjudicate a lien presents a separate and independent claim, In Scianna, a father filed suit in state court against his employee benefit plan on behalf of his children, who had been injured in an automobile accident. As part of the suit, he petitioned to compel the plan to pay medical bills and to prevent it from asserting subrogation rights against his sons' recovery under a settlement agreement. The court found that the petition was in fact a complaint seeking affirmative relief from the plan. Therefore, the court concluded, the petition represented a separate and independent claim. By contrast, in this case, plaintiffs have not sought to recover benefits from defendant under the plan. (Moreover, as a district court opinion, Scianna has no precedential value.) In fact, plaintiffs have no need to...