Indiana Lumbermens Mutual Insurance Company v. Lumber One Wood Preserving LLC et al

Filing 56

MEMORANDUM OPINION. Signed by Judge Abdul K Kallon on 9/16/2014. (AVC)

FILED
2014 Sep-16 PM 03:18
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHWESTERN DIVISION

INDIANA LUMBERMENS
MUTUAL INSURANCE
COMPANY,
Plaintiff,
v.
LUMBER ONE WOOD
PRESERVING, LLC et al.,

}
}
}
}
}
}
}
}
}

Case No.: 3:13-cv-1978-AKK

Defendants.

MEMORANDUM OPINION
Plaintiff Indiana Lumbermens Mutual Insurance Co. (“ILM”) pursues this
declaratory judgment action against its insured, Lumber One Wood Preserving,
LLC (“Lumber One”), and several other parties, including Robert C. Lisk, who
have brought actions against Lumber One for allegedly distributing defectively
treated lumber. See doc. 1. Before the court is defendant Lisk’s motion to dismiss.
Doc. 50. Lisk contends that the court lacks subject-matter jurisdiction over ILM’s
declaratory judgment action against him individually because the amount in
controversy between ILM and himself does not exceed $75,000, as required for
this court to exercise jurisdiction pursuant to 28 U.S.C. § 1332(a). The motion is

Page 1 of 7

fully briefed, see docs. 48 and 49, and ripe for review. Based on a review of the
record and the law, Lisk’s motion is due to be granted.
I.

Brief Factual Background

In August 2010, ILM issued a Commercial General Liability Insurance
Policy to Lumber One, effective from August 9, 2010 until August 9, 2011. Doc.
1-6. Lumber One renewed the policy for 2012 and 2013. Docs. 1-7 and 1-8.
On July 30, 2013, Lisk filed suit against Lumber One in this court, alleging
that Lumber One distributed defectively treated lumber, injuring him and a class of
similarly situated consumers. Doc. 1-1 at 1. Lisk’s complaint indicates that he
incurred damages in the amount of $3,248.16 as a result of the allegedly defective
lumber and that the amount in controversy, i.e. the damages sustained by the
putative class as a whole, exceeded $5,000,000.1 Id. at 3.
On October 28, 2013, ILM initiated the present matter against Lumber One,
Lisk, and five other parties who have filed suit against Lumber One in connection
with its purported distribution of defective lumber, “seek[ing] a declaration of the
parties’ rights, duties, and liabilities under insurance policies issued by ILM to
1

Lisk’s complaint alleged a violation of the Alabama Deceptive Trade Practices Act (“ADTPA”) and
breach of express warranty on behalf of himself and the putative class. Doc. 1-1 at 6–8. On January 8, 2014, after
ILM initiated this lawsuit, see doc. 1 (ILM’s complaint, filed October 28, 2013), this court dismissed all of Lisk’s
claims except for his individual ADTPA claim, Lisk v. Lumber One Wood Preserving, LLC, 993 F. Supp. 2d 1376,
1386 (N.D. Ala. 2014), and subsequently dismissed the remaining ADTPA claim after Lisk failed to show that it
met 28 U.S.C. § 1332(a)’s minimum amount in controversy requirement, Order Dismissing Plaintiff’s Remaining
Claim, Lisk v. Lumber One Wood Preserving, LLC, No. 3:13-cv-01402-AKK (N.D. Ala. April 1, 2014). The
dismissal of Lisk’s claims is irrelevant to the matter currently pending before the court because, as noted above, the
dismissal occurred after ILM initiated this lawsuit, and courts “measure the amount in controversy on the date on
which the court’s diversity jurisdiction is first invoked.” The Burt Co. v. Clarendon Nat’l Ins. Co., 385 F. App’x
892, 894 (11th Cir. 2010).

Page 2 of 7

Lumber One . . . with respect to the substantially similar and overlapping claims in
four lawsuits” filed against Lumber One. Doc. 1 at 2. More specifically, ILM
contends that “it has no duty to defend or indemnify Lumber One in the underlying
suits.” Id. at 3.
II.

Analysis

When a party invokes federal jurisdiction based on the parties’ diversity of
citizenship, as is the case here, see doc. 1 at 1, the amount in controversy must
exceed $75,000, see 28 U.S.C. § 1332(a). In an action seeking a declaratory
judgment, the amount in controversy “is the monetary value of the object of the
litigation that would flow to the plaintiffs if the injunction were granted.” Leonard
v. Enterprise Rent a Car, 279 F.3d 967, 973 (11th Cir. 2002) (citing Ericsson GE
Mobile Commc’ns Inc. v. Motorola Commc’ns & Elecs., 120 F.3d 216, 218 (11th
Cir. 1997)). Lisk contends that the court cannot exercise its diversity jurisdiction
with regards to ILM’s declaratory judgment action against him because the amount
in controversy, i.e. his “loss resulting from the actions of ILM’s insured, [] Lumber
One,” is only $3,248.16. Doc. 50 at 1.
ILM first contends that it has met § 1332(a)’s minimum amount in
controversy requirement because “the amount in controversy in the underlying
Lisk complaint was five million dollars, based on the allegations of the Lisk
complaint itself[, which] explicitly stated that ‘the amount in controversy exceeds
Page 3 of 7

the sum or value of $5,000,000.’” Doc. 49 at 7 (quoting doc. 1-1 at 2). While the
court acknowledges that there is a degree of symmetrical logic to ILM’s argument,
which is basically that because Lisk was able to invoke federal jurisdiction by
alleging that the damages incurred by the putative class he represented exceeded
$5,000,000, ILM should be able to invoke federal jurisdiction by alleging that the
damages incurred by the putative class Lisk represents exceed $5,000,000, and that
consequently, the value of the litigation the present matter is based on exceeds
$75,000. Unfortunately for ILM, its argument runs afoul of well-established legal
principles.
Generally, a plaintiff may not aggregate claims against multiple defendants
to satisfy a minimum amount in controversy. “[T]he rule applicable to several
plaintiffs having separate claims, that each must represent an amount sufficient to
give the court jurisdiction, is equally applicable to several liabilities of different
defendants to the same plaintiff.” Walter v. Ne. R.R. Co., 147 U.S. 370, 374
(1893); see also State Farm Mut. Auto. Ins. Co. v. A & J Med. Center, Inc., Case
No. 14-20066-CIV, 2014 WL 2025799, at *3 (quoting Jewell v. Grain Dealers
Mutual Ins. Co., 290 F.2d 11, 13 (5th Cir. 1961)2) (“The general rule for
aggregating claims against multiple defendants to satisfy the amount-incontroversy requirement is that ‘where a suit is brought against several defendants
2

The decisions of the Fifth Circuit handed down before the close of business on October 1, 1981 are
binding precedent in the Eleventh Circuit. Bonner v. City of Prichard, Ala, 661 F.2d 1206, 1207 (11th Cir. 1981)).

Page 4 of 7

asserting claims against each of them which are separate and distinct, the test of
jurisdiction is the amount of each claims, and not their aggregate.’”). When Lisk
filed his lawsuit in this court, he relied upon a statutory exception to this general
rule created by the Class Action Fairness Act of 2005, see doc. 1-1 at 2, which
provides that federal jurisdiction is proper when, among other things, plaintiffs in a
class action lawsuit allege an aggregate of five million dollars or more in claims,
see 28 U.S.C. 1332(d)(2). As this is a declaratory judgment action, not a class
action, ILM cannot (and does not, see doc. 51 3 (ILM’s surreply, stating that it
“does not rely on the Class Action Fairness Act . . . as a basis for subject matter
jurisdiction) (emphasis in original)) rely on § 1332 (d)(2) to establish diversity
jurisdiction. Instead, it must rely on § 1332(a), and ILM has not cited—nor is the
court aware of—any legal basis for allowing it to aggregate Lisk’s $3,248.16 claim
with those of the putative class members in Lisk’s lawsuit to meet the minimumamount-in controversy requirement for diversity jurisdiction. Consequently, ILM
cannot satisfy § 1332(a)’s $75,000 minimum amount in controversy requirement
based on the value of Lisk’s class action.
ILM presents two alternative theories for establishing diversity jurisdiction,
neither of which is persuasive. The first, that “the value of the litigation [is] ILM’s
policy limits in the ILM-Lumber One policy agreement, which are $1,000,000 per

3

ILM’s motion to file a surreply, doc. 51, is GRANTED.

Page 5 of 7

‘occurrence,’” doc. 49 at 7 n. 3 (citing doc. 1-9), is a nonstarter because in cases
concerning insurance coverage, if the face value of the policy is not at issue, a
statement of the policy limit is not sufficient to establish the amount in
controversy. See Friedman v. N.Y. Life Ins. Co., 410 F.3d 1350, 1357 (11th Cir.
2005). ILM’s second theory seeks to reframe the amount in controversy as the total
value of the
four underlying suits, all of which arise from the same underlying issues,
specifically, the allegedly defective fence posts sold and/or distributed by
Lumber One. In other words, from ILM’s perspective, there is only one
claim at issue in the litigation—the demand by Lumber One for the sum of
the defense and indemnity in the underlying suits.
Doc. 49 at 9. Recognizing that, on its face, this theory is at odds with the antiaggregation principles discussed above, ILM notes that “the Seventh Circuit has
held that the general ‘anti-aggregations of claims’ rule [does] not apply in a federal
declaratory judgment action between an insurer and [its] insured, stating, ‘[f]rom
[the insurer’s] perspective, there is only one claim—by its insured, for the sum of
the defense and indemnity.’” Id. (citing Meridian Sec. Ins. Co. v. Sadowski, 441
F.3d 536, 539 (7th Cir. 2006)). Sadowski might provide useful guidance if the issue
before the court was whether jurisdiction existed over ILM’s declaratory judgment
action against Lumber One—i.e. if it concerned an action between an insurer and
its insured. But, it is not, and nothing in the Sadowski opinion supports ILM’s
apparent contention that the aggregate value of the underlying litigation against
Page 6 of 7

Lumber One can serve as the basis for satisfying the amount in controversy
requirement in a declaratory judgment action against an individual plaintiff in that
underlying litigation. In sum, there is simply no legal basis to support either of
ILM’s alternative theories for establishing § 1332(a)’s minimum amount in
controversy requirement.
III.

Conclusion

Because the amount in controversy between Lisk and ILM is $3,248.1, far
less than the $75,000 minimum amount in controversy required by § 1332(a), and
because the aggregate value of neither Lisk’s putative class action nor the litigation
underlying this action can be used to satisfy § 1332(a), this court lacks subjectmatter jurisdiction over ILM’s declaratory judgment action against Lisk. “If the
court determines at any time that it lacks subject-matter jurisdiction, the court must
dismiss

the action.” Fed. R. Civ. P. 12(h)(3). Consequently, Lisk’s motion to dismiss

ILM’s claim against him is granted. The court will issue a separate order consistent
with this opinion.
Done the 16th day of September, 2014.

_________________________________
ABDUL K. KALLON
UNITED STATES DISTRICT JUDGE

Page 7 of 7