Walter E. Campbell Co. v. Hartford Fin. Servs. Grp., Inc.

• Decision Date: 13 August 2013
• Docket Number: Civil Action No. 13–0181(ABJ).
• Citation: 959 F.Supp.2d 166
• Parties: WALTER E. CAMPBELL COMPANY, Plaintiff, v. HARTFORD FINANCIAL SERVICES GROUP, INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

959 F.Supp.2d 166

WALTER E. CAMPBELL COMPANY, Plaintiff,

v.HARTFORD FINANCIAL SERVICES GROUP, INC., et al., Defendants.

Civil Action No. 13–0181(ABJ).

United States District Court,

District of Columbia.

Aug. 13, 2013.

Steven A. Luxton, Morgan, Lewis & Bockius LLP, Washington, DC, for Plaintiff.

Edward B. Parks, II, James Pio Ruggeri, Shipman & Goodwin, LLP, Benjamin R. Dryden, Lori Allison Rubin, Foley & Lardner, LLP, Prashant Kumar Khetan, Troutman Sanders LLP, Jennifer Winter Persico, Gordon & Rees, LLP, Harry Lee, Steptoe & Johnson LLP, Washington, DC, Jeffrey Robert DeCaro, DeCaro, Doran, Siciliano, Gallagher & Deblasis, LLP, Bowie, MD, Jacob C. Cohn, Gordon & Rees, LLP, William P. Shelley, Gordon & Rees, LLP, John C. Sullivan, Post & Schell, P.C., Philadelphia, PA, Albert J. Mezzanotte, Whiteford, Taylor & Preston, LLP, Baltimore, MD, John J. Hathway, Whiteford, Taylor & Preston, LLP, Bethesda, MD, for Defendants.

MEMORANDUM OPINION

AMY BERMAN JACKSON, District Judge.

Plaintiff Walter E. Campbell Company (“WECCO”)—a Maryland Corporation with its principal place of business in Maryland—brings this action against eight diverse corporations, and Property and Casualty Insurance Guaranty Corporation (“PCIGC”)—another Maryland Corporation with its principal place of business in Maryland. WECCO originally filed its complaint in Superior Court for the District of Columbia. Original File [Dkt. # 24–1] at 34–43. In the Superior Court, PCIGC moved to dismiss all claims against it or, in the alternative, for summary judgment, for lack of personal jurisdiction. Id. at 8–22. With the consent of PCIGC, the other eight defendants then removed the action to this Court on February 11, 2013, under the theory that WECCO had fraudulently joined PCIGC to the action in order to sever complete diversity and prevent jurisdiction in the federal court system. Id. at 1–3. See generally Mem. of Points and Authorities in Support of Certain Defs.' Opp. to Pl.'s Mot. to Remand [Dkt. # 39] (“Defs.' Mem.”). In this Court, six of the defendants have moved to dismiss the action or, in the alternative, for a stay pending the resolution of a related action in the United States District Court for the District of Maryland. Certain Defs.' Mot. to Dismiss or, in the Alternative, to Stay [Dkt. # 19]. WECCO has now moved to remand the action back to the Superior Court. Mot. to Remand [Dkt. # 28]. Both of those motions are fully briefed and currently pending. Because the Court finds that defendants have not met their burden of proving that WECCO fraudulently joined PCIGC as a defendant to defeat diversity jurisdiction in the federal courts, the Court lacks subject matter jurisdiction over this matter and will, therefore, remand the action to the Superior Court for the District of Columbia.

BACKGROUND

WECCO is a Maryland corporation that deals in insulation materials. Compl., Dkt. # 24–1 at 35–43, ¶ 4. Its principal place of business is in Maryland. Id. According to the complaint, WECCO was “headquartered” in the District of Columbia until 1968, and “[t]hroughout its history, WECCO's business centered on the District of Columbia, and in the immediately surrounding areas.” Id. ¶¶ 4, 15.

The complaint in this action alleges that for many decades, WECCO handled, installed, disturbed, removed, and sold asbestos-containing insulation material. Compl. ¶ 4. Defendants are insurance companies that either themselves provided, or guaranteed other now-insolvent insurance companies that had provided, liability insurance to WECCO. Id. ¶¶ 5–14. The sole cause of action in the complaint before this Court arises from an insurance dispute between WECCO and defendants concerning coverage for bodily injury and wrongful death lawsuits that have been filed against WECCO alleging exposure to asbestos during WECCO's work. Id. ¶¶ 30–36. The complaint alleges that according to the asbestos plaintiffs' bar, WECCO used asbestos-containing materials in its work throughout the period comprising the insurance policies at issue in this action. Id. ¶ 4. WECCO seeks a declaration that the personal injury suits are within the general liability portion of the policies at issue and subject only to the “per occurrence” limits of liability in those policies, and that the present and future asbestos suits against WECCO arise out of multiple “occurrences” as that term is used in the policies. Compl. at 10.

Defendant PCIGC is a Maryland Corporation with its principal place of business in Maryland. Compl. ¶ 14. PCIGC was established by a Maryland statute, Md.Code, Insurance § 9–301 et seq., under which it is required to pay covered claims to Maryland policyholders on behalf of insolvent insurance companies. By statute, PCIGC acts as a guarantor only for insurers that are residents of the State of Maryland. Md.Code, Insurance § 9–301(d)(1)(i), (h). PCIGC acts as a guarantor for both American Mutual Liability Insurance Company (“American Mutual”) and Centennial Insurance Company (“Centennial”). Compl. ¶ 14.¹ According to the complaint, both American Mutual and Centennial are insolvent insurers that issued liability policies to WECCO. Id. American Mutual contracted with WECCO to provide insurance between 1963 and November 19, 1972. Id. ¶ 19. Centennial contracted with WECCO to provide insurance between March 1, 1973, and March 1, 1974. Id. ¶ 22.

WECCO filed its complaint in Superior Court for the District of Columbia on January 7, 2013. See Original File [Dkt. # 24–1] at 64. Defendants filed their notice of removal in this Court on February 11, 2013. Notice of Removal [Dkt. # 1] at 5.

STANDARD OF REVIEW

A defendant may remove to federal court an action brought in a state court only when the federal court might have originally been brought in the federal court, including on the basis of diversity of citizenship. 28 U.S.C. § 1441(a); see Busby v. Capital One, N.A., 932 F.Supp.2d 114, 126–28, 2013 WL 1191180, at *6 (D.D.C.2013). Diversity jurisdiction exists when the amount in controversy exceeds $75,000 per plaintiff, exclusive of interest and costs, and the matter in controversy is between citizens of different states. 28 U.S.C. § 1332(a). When a federal court lacks subject matter jurisdiction over a dispute removed from state court, the court must remand the action back to the state court. 28 U.S.C. § 1447(c). The removing party bears the burden of showing that the federal court has subject matter jurisdiction over the action. Wexler v. United Air Lines, 496 F.Supp.2d 150, 152 (D.D.C.2007). “[I]f federal jurisdiction is doubtful, a remand to state court is necessary.” Breakman v. AOL, LLC, 545 F.Supp.2d 96, 100 (D.D.C.2008).

In support of a removal petition, defendants may submit affidavits and deposition transcripts; and in support of a motion for remand, a plaintiff may submit affidavits and deposition transcripts along with the factual allegations contained in the verified complaint. B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.1981). In assessing the motion for remand, the Court must assume all of the facts set forth by plaintiff to be true and resolve all uncertainties as to state substantive law in favor of the plaintiff. Id. “Moreover, the court must resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff.” Id.

ANALYSIS

WECCO asks the Court to remand this action to the Superior Court because, it argues, defendants erred in removing this case on diversity grounds.² As explained above, the district courts have original jurisdiction over all civil actions if the matter is between citizens of different states, as long as the $75,000 amount in controversy requirement is satisfied. 28 U.S.C. § 1332. Here, it is undisputed that both WECCO and PCIGC are citizens of Maryland. Compl. ¶¶ 4, 14. So at first glance, it would appear that WECCO is correct that the parties lack complete diversity of citizenship.

Defendants, however, maintain that removal on diversity grounds was proper because WECCO fraudulently named PCIGC, the only non-diverse defendant, for purposes of defeating diversity jurisdiction in the federal courts. See generally Defs.' Mem. The fraudulent joinder doctrine allows the Court to “disregard, for jurisdictional purposes, the citizenship of certain nondiverse defendants, assume jurisdiction over a case, dismiss the nondiverse defendants, and thereby retain jurisdiction.” Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir.1999). Thus, defendants argue that the Court should dismiss the non-diverse defendant PCIGC from the case, and thereby retain jurisdiction.

In assessing a claim of “fraudulent joinder,” the removing party bears the burden of proving that, either “(1) there is no possibility the plaintiff can establish a cause of action against the resident defendant; or (2) the plaintiff has fraudulently pled jurisdictional facts to bring the ... defendant into state court.” In re Tobacco/Governmental Health Care Costs Litig., 100 F.Supp.2d 31, 39 (D.D.C.2000). Here, defendants make only the first argument. They argue that there is no possibility that WECCO can establish a cause of action against PCIGC because the Court lacks personal jurisdiction over it.

Defendants' burden of proof to establish fraudulent joinder is “a heavy one.” In re Tobacco/Governmental Health Care Costs Litig., 100 F.Supp.2d at 39, quoting Pacheco de Perez v. AT & T, 139 F.3d 1368, 1380 (11th Cir.1998) (internal quotation marks omitted). Fraudulent joinder only arises if, construing all facts and uncertainties in the state substantive law in favor of the plaintiffs, the district court finds that there is “no possibility of a valid cause of action being set forth against the in-state defendant[.]” B., Inc., 663 F.2d at 550. “However, if there is even a possibility that a state court would find a cause of action stated against [the instate defendant] on the facts alleged by the plaintiff, then the federal court must find that the...