National Casualty Company v. Utica Mutual Insurance Company
OPINION AND ORDER regarding Jurisdiction. Defendant Utica Mutual Insurance Company may have until 11/21/2012 to file supplemental materials showing that subject matter jurisdiction is present under 28 U.S.C. § 1332. Both sides may have until 11/ 21/2012 to file supplemental materials on the question whether this court has authority to enforce Pennsylvania's and New York's rules of professional conduct in the context of this case. Signed by District Judge Barbara B. Crabb on 11/8/2012. (arw)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - NATIONAL CASUALTY COMPANY,
OPINION AND ORDER
UTICA MUTUAL INSURANCE COMPANY,
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Plaintiff National Casualty Company filed this lawsuit in state court in Wisconsin,
seeking a declaration that the rules of professional conduct for Pennsylvania and New York
lawyers prohibit defendant Utica Mutual Insurance Company from using the law firm
Hunton & Williams from representing defendant in arbitration proceedings against plaintiff
in New York. Defendant has removed the case to federal court under 28 U.S.C. §§ 1441 and
“The first question in every case is whether the court has jurisdiction.” Avila v.
Pappas, 591 F.3d 552, 553 (7th Cir. 2010). In its notice of removal, defendant says that
jurisdiction is present under 28 U.S.C. § 1332, but I cannot make that determination from
defendant’s allegations in the notice.
To establish jurisdiction under § 1332, a party must show that the plaintiff and
defendant have diverse citizenship and the amount in controversy is greater than $75,000.
With respect to citizenship, defendant alleges that it is a New York corporation and that
New York is the location of its principal place of business; it alleges that plaintiff is a
Wisconsin “company” and that Wisconsin is plaintiff’s principal place of business. Dkt. #1,
¶¶ 5-6. If both plaintiff and defendant are corporations, these allegations are sufficient to
show diverse citizenship. Hoagland ex rel. Midwest Transit, Inc. v. Sandberg, Phoenix &
von Gontard, P.C., 385 F.3d 737, 740-43 (7th Cir. 2004) (corporation is citizen of its state
of incorporation and state where its principal place of business is located). Although it seems
likely that plaintiff is a corporation, defendant’s ambiguous allegation that plaintiff is a
Wisconsin “company” leaves room for doubt. The distinction is important because courts
determine the citizenship of unincorporated business entities differently.
Bartolotta, 150 F.3d 729, 731 (7th Cir. 1998).
A second question relates to the amount in controversy. Defendant says that “the
amount in dispute in the arbitration, and the additional expenses Utica will incur if Utica
is ordered to obtain new counsel” are greater than $75,000. Dkt. #1, ¶ 8. Defendant does
not explain further, but presumably it is relying on two general rules. First, “[i]n the context
of actions to compel arbitration, [the court of appeals has] adhered to the rule that, in order
to ascertain whether the jurisdictional amount for the diversity statute has been met, the
appropriate focus is the stakes of the underlying arbitration dispute.” America's MoneyLine,
Inc. v. Coleman, 360 F.3d 782, 786 (7th Cir. 2004). Second, when the plaintiff is seeking
a declaration, the amount in controversy is measured by “the value of the object of the
litigation," Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 347
(1977), that is, “what the plaintiff stands to gain, or what it would cost the defendant to
meet the plaintiff's demand.” Macken ex rel. Macken v. Jensen, 333 F.3d 797, 799-800 (7th
An initial problem with defendant’s reliance on these rules is that it does not identify
“the amount in dispute in the arbitration” or the amount that it would cost to replace its
counsel. Although defendant does not need to provide detailed evidence, it needs at least
a good faith basis for its belief that the amount in controversy is met. Nightingale Home
Healthcare, Inc. v. Anodyne Therapy, LLC, 589 F.3d 881, 886 (7th Cir. 2009).
A second problem is that defendant seems to be assuming that it may satisfy the
amount in controversy requirement with some combination of the “the amount in dispute
in the arbitration” and the amount that it would cost to replace its counsel, but it cites no
authority for that proposition. These two amounts represent different ways of valuing the
dispute, so it is not clear why defendant would be entitled to add the amounts together.
Third, it is not clear whether the rule of America’s Moneyline should apply to this
case at all. Neither side is trying to compel arbitration or challenging a decision of the
arbitrator. Rather, the parties are debating an issue about how the arbitration should
Because I have an independent obligation to insure that jurisdiction exists, Booker-El
v. Superintendent, Indiana State Prison, 668 F.3d 896, 899 (7th Cir. 2012), I must resolve
these questions before turning to the pending motions. Accordingly, I will give defendant
an opportunity to address the questions about citizenship and the amount in controversy.
A review of plaintiff’s complaint reveals a separate issue not addressed by the parties.
In particular, it is not clear what authority this court has to entertain plaintiff’s request to
disqualify defendant’s counsel in the context of another proceeding. Most requests for
disqualification occur in the context of a larger lawsuit brought under an independent cause
of action. Cromley v. Board of Education of Lockport Township High School District 205,
17 F.3d 1059, 1064 (7th Cir. 1994) (§ 1983 lawsuit); Schiessle v. Stephens, 717 F.2d 417,
420 (7th Cir. 1983) (antitrust lawsuit); Silicon Graphics, Inc. v. ATI Technologies, Inc., 741
F. Supp. 2d 970, 978 (W.D. Wis. 2010) (patent lawsuit). The authority to grant those
requests comes from a federal court’s inherent power to regulate its own cases. Silicon
Graphics, 741 F. Supp. 2d at 980. In this case, the parties cite no law giving this court or
any other the authority to enforce a state’s rules of professional conduct in a freestanding
lawsuit regarding conduct in another forum.
Although the Federal Arbitration Act creates a cause of action for various disputes
that arise in arbitration, a dispute about counsel is not one of them. 9 U.S.C. § 4 (order to
compel arbitration); 9 U.S.C. § 5 (order to appoint arbitrator); 9 U.S.C. § 7 (order to compel
attendance of witness); 9 U.S.C. § 9 (order to confirm arbitration award); 9 U.S.C. § 10
(order to vacate arbitration award); 9 U.S.C. § 11 (order to modify arbitration award). The
only statute plaintiff cites in its complaint relates to declaratory judgments generally, but a
request for a declaratory judgment is not an independent cause of action, at least not in
federal court. Chevron Corp. v. Naranjo, 667 F.3d 232, 244 (2d. Cir. 2012); Ali v.
Rumsfeld, 649 F.3d 762, 778 (D.C. Cir. 2011); Davis v. United States, 499 F.3d 590, 594
(6th Cir. 2007); Okpalobi v. Foster, 244 F.3d 405, 424 (5th Cir. 2001); Akins v. Penobscot
Nation, 130 F.3d 482, 490 (1st Cir. 1997).
I will give both sides an opportunity to address the question whether this court has
authority to enforce Pennsylvania’s and New York’s rules of professional conduct in the
context of this case. In addition, the parties should discuss whether this is a jurisdictional
question that must be decided first or whether it is a merits question that should be decided
after the issues related to personal jurisdiction and venue are resolved.
IT IS ORDERED that
1. Defendant Utica Mutual Insurance Company may have until November 21, 2012,
to file supplemental materials showing that subject matter jurisdiction is present under 28
U.S.C. § 1332.
2. Both sides may have until November 21, 2012, to file supplemental materials on
the question whether this court has authority to enforce Pennsylvania’s and New York’s rules
of professional conduct in the context of this case.
3. If the parties do not respond by November 21, I will remand the case to the state
Entered this 8th day of November, 2012.
BY THE COURT:
BARBARA B. CRABB