Wash. Exec. Servs., Inc. v. Hartford Cas. Ins. Co.
| Decision Date | 28 September 2021 |
| Docket Number | Civil Action No. 20-2119 (TJK) |
| Citation | 567 F.Supp.3d 1 |
| Parties | WASHINGTON EXECUTIVE SERVICES, INC. et al., Plaintiffs, v. HARTFORD CASUALTY INSURANCE COMPANY et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Anna R. Margolis, Christopher L. LaFon, Scott Howard Rome, Veritas Law Firm, Washington, DC, for Plaintiffs.
Sarah Gordon, William L. Drake, Steptoe & Johnson LLP, Washington, DC, for Defendants.
TIMOTHY J. KELLY, United States District Judge Plaintiffs Washington Executive Services, Inc. and Chevy Chase Executive Services, Inc. are shared workspace providers. In the spring of 2020, as COVID-19 spread throughout the United States, their businesses came to an abrupt halt. To comply with local governmental orders issued to prevent transmission of the virus, Plaintiffs had to stop using all their offices and meeting spaces. They reached out to their insurance provider, Defendant Hartford Casualty Insurance Company, seeking coverage for their lost income, but Hartford denied their claims. Plaintiffs thus filed this suit against Hartford and the District of Columbia in the Superior Court of the District of Columbia, seeking (1) a declaration that the District of Columbia's orders required them to stop their business operations and that their loss of income is covered under their insurance policy, and (2) a judgment that Hartford breached its contract by denying coverage for their losses. Hartford removed the suit, arguing that this Court has diversity jurisdiction because Plaintiffs had fraudulently joined the District of Columbia. Hartford then moved to dismiss Plaintiffs’ complaint under Federal Rule of Civil Procedure 12(b)(6), claiming that an exclusion provision in the insurance policy precludes coverage here. For the reasons below, the Court finds that it has jurisdiction and will grant the motion to dismiss the complaint with prejudice.
"A civil action filed in state court may only be removed to a United States district court if the case could originally have been brought in federal court." Nat'l Consumers League v. Flowers Bakeries, LLC. , 36 F. Supp. 3d 26, 30 (D.D.C. 2014) (citing 28 U.S.C. § 1441(a) ). "Where the district court's jurisdiction is dependent solely on the basis of diversity of citizenship between the parties, there must be ‘complete diversity,’ meaning that no plaintiff may have the same citizenship as any defendant." Arenivar v. Manganaro Midatlantic, LLC , 317 F. Supp. 3d 362, 366–67 (D.D.C. 2018) (quoting Busby v. Capital One, N.A. , 932 F. Supp. 2d 114, 130 (D.D.C. 2013) ). That said, "[t]he 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." Id. at 367 (cleaned up). To show fraudulent joinder, the removing defendant has a heavy burden: that defendant must show that "either (1) there is no possibility the plaintiff can establish a cause of action against the [nondiverse] defendant; or (2) the plaintiff has fraudulently pled jurisdictional facts to bring the [nondiverse] defendant into state court." Id. (cleaned up). If there is any chance that the state court would find that the complaint states a cause of action, then the nondiverse defendant was properly joined—meaning "that there is incomplete diversity, and that the case must be remanded to the state courts." Brown v. Brown & Williamson Tobacco Corp. , 26 F. Supp. 2d 74, 77 (D.D.C. 1998).
Meanwhile, "[t]o survive a motion to dismiss [under Rule 12(b)(6) ], a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (cleaned up). The Court accepts "well-pleaded factual allegations as true and draw[s] all reasonable inferences from those allegations in the plaintiff's favor." Arpaio v. Obama , 797 F.3d 11, 19 (D.C. Cir. 2015). Still, "a complaint must have ‘facial plausibility,’ meaning it must ‘plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ " Hettinga v. United States , 677 F.3d 471, 476 (D.C. Cir. 2012) (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ).
Although a court seldom considers "matters beyond the pleadings for a motion to dismiss, it may consider ... documents attached as exhibits or incorporated by reference in the complaint," as well as "documents upon which the plaintiff's complaint necessarily relies even if the document is produced not by the plaintiff in the complaint but by the defendant in a motion to dismiss." Xiaobing Liu v. Blinken , No. 21-cv-629 (TJK), 544 F.Supp.3d 1, 8 (D.D.C. June 18, 2021) (quoting Feng Wang v. Pompeo , No. 18-cv-1732 (TSC), 2020 WL 1451598, at *3 (D.D.C. Mar. 25, 2020) ). Thus, because Plaintiffs’ complaint "refers to" the "insurance policy, the Court may consider the associated policy documents that" Hartford "has attached to the motion to dismiss." Gebretsadike v. Travelers Home & Marine Ins. Co. , 103 F. Supp. 3d 78, 82 (D.D.C. 2015). For the same reason, the Court may consider the District of Columbia's COVID-related orders. See also Turpin v. Ray , No. 19-cv-2394 (RC), ––– F.Supp.3d ––––, –––– n.6, 2020 WL 1510412, at *5 n.6 (D.D.C. Mar. 30, 2020) ().
On its face, Plaintiffs’ complaint suggests that this Court lacks jurisdiction. Hartford removed the case based on diversity jurisdiction, ECF No. 4 at 2, but Plaintiffs listed the District of Columbia as a defendant. ECF No. 1-1 at 7. And "the District of Columbia is treated like a state ‘when a person attempts to sue the District under the diversity statute in federal court.’ " Howerton v. Ogletree , 466 F. Supp. 2d 182, 184 (D.D.C. 2006). Since "a state is not considered a citizen," it would seem that "this suit is not between ‘citizens of different States.’ " Id. This Court, however, can disregard the District of Columbia's citizenship (or lack thereof) because the District was fraudulently joined. "[T]here is no possibility" Plaintiffs "can establish a cause of action against the" District. Arenivar , 317 F. Supp. 3d at 367.
As in other COVID-related business interruption coverage cases in which state or local governments have been found to be fraudulently joined, Plaintiffs’ "only asserted claim against" the District of Columbia "is a standalone claim for declaratory relief." 10E, LLC v. Travelers Indem. Co. of Connecticut , 483 F. Supp. 3d 828, 833 (C.D. Cal. 2020). And like those other cases, Plaintiffs’ standalone claim is not justiciable. See Local 36 Intl. Assn. v. Rubin , 999 A.2d 891, 896 (D.C. 2010) () (alteration in original).1 Even in suits seeking only declaratory relief, there still must be "a possibility that further penalties or legal disabilities can be imposed as a result of the judgment." McClain v. United States , 601 A.2d 80, 81 (D.C. 1992). There is no such possibility here. Melange Cafe LLC v. Erie Ins. Prop. & Cas. Co. , No. 2:20-cv-00441, 2020 WL 5199275, at *4 (S.D.W. Va. Aug. 31, 2020). All Plaintiffs ask is for a declaration that "the District of Columbia's March 24, 2020 Order issued through its Mayor required that [Plaintiffs] cease [their] business operations." ECF No. 1-1 at 17. "To the extent any interpretation of the orders may be required, it would be akin to the interpretation of any law, regulation, or order routinely performed by courts without requiring the participation of the regulatory body." Melange Cafe , 2020 WL 5199275, at *4. Further, Plaintiffs have not "articulate[d] a ground for some future challenge to the legality of [the District's] order[s] nor explain[ed] how such a challenge could be raised in the context of this insurance dispute." 10E, LLC , 483 F. Supp. 3d at 834.
All in all, Hartford has met the "heavy burden" necessary to prove fraudulent joinder. Arenivar , 317 F. Supp. 3d at 367. This Court will thus "disregard, for jurisdictional purposes, the citizenship of ... [the District of Columbia], assume jurisdiction over [this] case, dismiss the ... [District of Columbia], and thereby retain jurisdiction." Simon v. Hofgard , 172 F. Supp. 3d 308, 315 (D.D.C. 2016).
With its jurisdiction confirmed, this Court can move on to the merits—i.e. , whether Plaintiffs have stated a claim under the contract at issue. See Tolson v. The Hartford Fin. Servs. Grp., Inc. , 278 F. Supp. 3d 27, 33 (D.D.C. 2017) () (citing Stevens v. United Gen. Title Ins. Co. , 801 A.2d 61, 66 (D.C. 2002) ). Under District of Columbia law, "the text of an insurance contract controls if it is unambiguous." Whiting v. AARP , 701 F. Supp. 2d 21, 26 (D.D.C. 2010). If the relevant provisions are in fact ambiguous, then "the correct interpretation becomes a question for a factfinder." Carlyle Inv. Mgmt. L.L.C. v. Ace Am. Ins. Co. , 131 A.3d 886, 895 (D.C. 2016) (quoting Debnam v. Crane Co. , 976 A.2d 193, 197–98 (D.C. 2009) ). But "a contract is not ambiguous merely because the parties do not agree over its meaning, and courts are enjoined not to create ambiguity where none exists." Id. The Court must "give the words used in an insurance contract their common, ordinary, and popular meaning," Redmond v. State Farm Ins. Co. , 728 A.2d 1202, 1205 (D.C. 1999) (cleaned up), and "interpret the contract ‘as a whole, giving reasonable, lawful, and effective meaning to all its terms, and...
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