The Cincinnati Insuance Company v. J. Marsh Enterprises, Inc. et al
MEMORANDUM OPINION AND ORDER DENYING defendant J. Marsh's 13 motion to dismiss, as further set out in order. Signed by Honorable William Keith Watkins on 12/28/10. (Attachments: # 1 civil appeals checklist)(djy, )
-WC The Cincinnati Insurance Company v. J. Marsh Enterprises, Inc. et al
IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION T H E CINCINNATI INSURANCE C O M P A N Y as subrogee of Edmund C annon, P la in tif f , v. J . MARSH ENTERPRISES, INC., and A D D IS O N STEEL TRUSS COMPANY, I N C ., D e f e n d a n ts. ) ) ) ) ) ) ) ) ) ) ) ) )
CASE NO. 3:10-CV-465-WKW [WO]
M E M O R A N D U M OPINION AND ORDER T h is cause is before the court on Defendant J. Marsh Enterprises, Inc.'s ("J. Marsh") M o tio n to Dismiss (Doc. # 13) for lack of subject matter jurisdiction, which is construed as a motion made pursuant to Federal Rule of Civil Procedure 12(b)(1).1 The Cincinnati In s u ra n c e Company ("Cincinnati Insurance") has responded in opposition. (Doc. # 16.) Upon a thorough review of the parties' briefs and the applicable law, J. Marsh's motion is d u e to be denied.
J. Marsh labels the motion as arising under Federal Rule of Civil Procedure 12(b)(6). (Def.'s Br., at 1.) However, a 12(b)(6) motion to dismiss for failure to state a claim tests the legal sufficiency of the complaint and the facts alleged therein. See generally Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). As discussed below, J. Marsh is not challenging the legal sufficiency of factual allegations in the Complaint; rather, J. Marsh is moving to dismiss on the ground that the court's jurisdictional requirements under 28 U.S.C. § 1332, specifically the requirement of complete diversity, have not been met.
I. BACKGROUND Cincinnati Insurance filed, as subrogee of Edmund Cannon ("Mr. Cannon"), a fourc o u n t Complaint alleging state law claims for (1) breach of express/implied warranties, (2) n e g lig e n c e , (3) failure to warn, and (4) breach of contract. (Compl. ¶¶ 14-34 (Doc. # 1).) The Complaint alleges subject matter jurisdiction based on diversity of citizenship under 28 U .S .C . § 1332. (Compl. ¶ 5.) In support of diversity of citizenship, the Complaint alleges th a t both Defendants are Alabama corporations with principal places of business in Alabama, and alleges that Cincinnati Insurance "is a foreign corporation authorized to conduct business i n the State of Alabama." (Compl. ¶ 1.) The amount in controversy is alleged to be $ 2 5 0 ,0 0 0 .0 0 . (Compl. ¶ 4.) J. Marsh has moved to dismiss. J. Marsh contends that because Cincinnati Insurance is proceeding in this cause as subrogee of Edmund Cannon, and because Edmund Cannon (a c c o rd in g to J. Marsh) is an Alabama resident, "complete diversity is not present and this c a s e is due to be dismissed." (Def.'s Br. ¶ 4.) Cincinnati Insurance opposes the motion. Cincinnati Insurance argues that because it has paid the entire loss suffered by Mr. Cannon, it is the only real party in interest to this la w s u it. (Compl. ¶ 13; Pl.'s Br. ¶ 2.) "[A]s Cincinnati Insurance Company is the real party in interest in this matter, diversity of citizenship exists and this matter is properly before this c o u rt." (Pl.'s Br. ¶ 3.)
II. STANDARD OF REVIEW A Rule 12(b)(1) motion directly challenges the district court's subject matter ju ris d ic tio n . Gilmore v. Day, 125 F. Supp. 2d 468, 470 (M.D. Ala. 2000). "Rule 12(b)(1) m o tio n s to dismiss for lack of subject matter jurisdiction can be asserted on either facial or f a c tu a l grounds." Carmichael v. Kellogg, Brown & Root Servs., Inc., 572 F.3d 1271, 1279 (1 1 th Cir. 2009) (citing Morrison v. Amway Corp., 323 F.3d 920, 925 n.5 (11th Cir. 2003)). "Facial challenges to subject matter jurisdiction are based solely on the allegations in the c o m p la in t." Id. "When considering such challenges, the court must, as with a Rule 12(b)(6) m o tio n , take the complaint's allegations as true." Id. On the other hand, a "factual attack" c h a lle n g e s "subject matter jurisdiction in fact, irrespective of the pleadings." Morrison, 323 F .3 d at 925. In a factual attack, "matters outside the pleadings, such as testimony and a f f id a v its , are considered." Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2 0 0 9 ) (quotation omitted). "The party commencing suit in federal court . . . has the burden o f establishing, by a preponderance of the evidence, facts supporting the existence of federal ju ris d ic tio n ." Underwriters at Lloyd's, London v. Osting-Schwinn, 613 F.3d 1079, 1085 (1 1 th Cir. 2010). III. DISCUSSION J . Marsh argues that complete diversity does not exist because Mr. Cannon, whom J. M a rs h alleges to be a citizen of Alabama within the meaning of § 1332, is a real party in in te re s t and, therefore, complete diversity is destroyed. J. Marsh's attack is facial to the
extent that the court must determine whether, under Alabama substantive law, Cincinnati In s u ra n c e has pled sufficient allegations to support its position that subrogation has occurred a n d that Cincinnati Insurance is the real party in interest to this case. R u le 17(a) requires that every action "be prosecuted in the name of the real party in in te re s t." Fed. R. Civ. P. 17(a). "Whether a person is a real party in interest depends upon h is substantive rights, which, in diversity cases . . . are determined by state law." United S ta te s v. 936.71 Acres of Land, More or Less, in Brevard Cnty., State of Fla., 418 F.2d 551, 5 5 6 (5th Cir. 1969). "Thus, while a real party in interest analysis is a matter of federal p ro c e d u re , reference must be made to state substantive law to identify the true owner of the le g a l interest at issue." DM II, Ltd. v. Hosp. Corp. of Am., 130 F.R.D. 469, 471 (N.D. Ga. 1 9 8 9 ) (citing New Orleans Pub. Serv., Inc. v. United Gas Pipeline Co., 732 F.2d 452 (5th C ir. 1984)). " T h e general rule [is] that a [properly] subrogated insurer is the real party in interest." Couch on Insurance § 241:30 (3d ed. 1995). Alabama appears to follow the majority rule in th is respect. Prior to 2004, the now-extinct second paragraph of Alabama Rule of Civil P ro c e d u re 17(a) read as follows: (a ) Real Party in Interest. Every action shall be prosecuted in the name of th e real party in interest . . . . In subrogation cases, regardless of whether s u b ro g a tio n has occurred by operation of law, assignment, loan receipt, or o th e rw is e , if the subrogor no longer has a pecuniary interest in the claim, the a c tio n shall be brought in the name of the subrogee. If the subrogor still has a pecuniary interest in the claim, the action shall be brought in the names of the s u b ro g o r and the subrogee.
Ala. R. Civ. P. 17(a) (amended 2004). T h e Committee Comments to the 2004 amendment state that "[s]ubrogation (e.g., w h e n rights of subrogation arise, and the extent of those rights) is an issue of substantive, not p ro c e d u ra l, law." Ala. R. Civ. P. 17 cmt. Thus, the Committee omitted the paragraph on s u b ro g a ti o n not because it was an incorrect statement of the law, but because it was a s ta te m e n t of substantive law. Since the 2004 amendment, the Alabama Supreme Court has n o t addressed subrogation in the context of determining the real party in interest. The A la b a m a Court of Civil Appeals, on the other hand, has. In Broadnax v. Griswold, 17 So. 3 d 656 (Ala. Civ. App. 2008), the court of civil appeals, citing the new Rule 17(a), held that " p a ym e n t [by the insurer] divested the [insured] of any right she might have had to recover d a m a g e s [ ] and made the insurer the `real party in interest.'" Id. at 660 (quoting Ala. R. Civ. P . 17(a)); see also Manning v. Zapata, 350 So. 2d 1045, 1048 (Ala. Civ. App. 1977) ("Since [ th e insurance company] is the one who actually paid the claim of its insured, it is clear that [ it is] the real party in interest."); see also Pendergast v. Sprint Nextel Corp., 592 F.3d 1119, 1 1 3 3 (11th Cir. 2010) ("In instances where a state's highest court has not ruled on a point of la w , "`federal courts are bound by decisions of a state's intermediate appellate courts unless th e re is persuasive evidence that the highest state court would rule otherwise.'") (quoting K in g v. Order of United Commercial Travelers of Am., 333 U.S. 153, 158 (1948)). F u rth e rm o re , pre-2004 decisions by the Alabama Supreme Court have treated s u b ro g a tio n agreements with deference. See Int'l Underwriters/Brokers, Inc. v. Liao, 548
So. 2d 163 (Ala. 1989), opinion reinstated, 764 So. 2d 543 (Ala. 2000) (recognizing that e q u ita b le principle of and requirements for subrogation could be modified by contract). In light of (1) Alabama's substantive rule that the subrogee is the "real party in in te re s t" once the subrogation provisions of the contract are satisfied, and (2) Cincinnati In s u ra n c e 's allegations (which are taken as true) that it (a) "bargained for and obtained the ri g h t to institute this subrogation action," that it (b) "paid [Mr. Cannon] [$250,000.00] p u r s u a n t to the policy[,]" and that it (c) seeks $250,000.00 from J. Marsh, J. Marsh's a rg u m e n t that Mr. Cannon is a real party in interest is erroneous. Cincinnati Insurance made M r. Cannon whole for his claim; therefore, "it is clear that [Cincinnati Insurance] [is] the real p a rty in interest." Manning, 350 So. 2d at 1048. By the same token, Mr. Cannon is not a real p a rty in interest to this lawsuit because Cincinnati Insurance's payment of his claim "divested [ M r. Cannon] of any right [he] might have had to recover damages." Broadnax, 17 So. 3d a t 660. The court, having determined that Mr. Cannon is not a real party in interest, finds that M r. Cannon's citizenship for the purposes of § 1332 is irrelevant. J. Marsh's motion to d is m is s is due to be denied. I V . CONCLUSION A c c o rd in g ly, it is ORDERED that Defendant J. Marsh's Motion to Dismiss (Doc. # 1 3 ) is DENIED. D O N E this 28th day of December, 2010.
/s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE
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