Betts v. Progressive Specialty Insurance Company et al

Filing 16

Order that Berkley Insurance is to file and serve a supplemental to its notice of removal as set out in order by 7/27/2016. Signed by Magistrate Judge Katherine P. Nelson on 7/13/2016. (srr)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
GREGORY BETTS,
Plaintiff,
v.
PROGRESSIVE SPECIALTY
INSURANCE COMPANY, et al.,
Defendants.

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CIVIL ACTION NO. 16-00254-N

ORDER
This action is before the Court sua sponte on review of its subject matter
jurisdiction. This case was removed to this Court from the Circuit Court of Monroe
County, Alabama, under 28 U.S.C. § 1441(a).1

The Notice of Removal (Doc. 1)

claims diversity of citizenship under 28 U.S.C. § 1332(a) as the sole basis for the
Court’s subject matter jurisdiction.

See 28 U.S.C. § 1446(a) (“A defendant or

defendants desiring to remove any civil action from a State court shall file in the
district court of the United States for the district and division within which such
action is pending a notice of removal…containing a short and plain statement of the
grounds for removal…”).

“A party removing a case to federal court based on

diversity of citizenship bears the burden of establishing the citizenship of the
parties.” Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020,
1022 (11th Cir. 2004) (per curiam).

See also, e.g., Ray v. Bird & Son & Asset

Realization Co., Inc., 519 F.2d 1081, 1082 (5th Cir. 1975) (“The burden of pleading
diversity of citizenship is upon the party invoking federal jurisdiction . . .” (citing

Monroe County is part of the Southern Division of this judicial district.
81(c)(2).

1

See 28 U.S.C. §

Mas v. Perry, 489 F.2d 1396 (5th Cir. 1974)).2
“It is . . . axiomatic that the inferior federal courts are courts of limited
jurisdiction. They are ‘empowered to hear only those cases within the judicial power
of the United States as defined by Article III of the Constitution,’ and which have
been entrusted to them by a jurisdictional grant authorized by Congress.”

Univ. of

S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v.
Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994)). Accordingly, “it is well settled that
a federal court is obligated to inquire into subject matter jurisdiction sua sponte
whenever it may be lacking” and “should inquire into whether it has subject matter
jurisdiction at the earliest possible stage in the proceedings.”

Id. at 410. “If at any

time before final judgment it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded.”

28 U.S.C. § 1447(c).

The Plaintiff’s state court complaint (Doc. 1-1) names “Berkley Oil & Gas
Specialty Services” (hereinafter, “Berkley Oil & Gas”) as one of the defendants.
However, an entity identifying itself as “Berkley Regional Insurance Company”
(hereinafter, “Berkley Insurance”) filed the Notice of Removal. Berkley Insurance
claims that it was “incorrectly identified” in the complaint as Berkley Oil & Gas
(Doc. 1 at 1), which suggests a mere misnomer of a defendant by the Plaintiff.
However, the affidavit of Monica Harmon (Doc. 1-6), which Berkley Insurance has
attached to the Notice of Removal, indicates that Berkley Oil & Gas and Berkley
Insurance are in fact two separate legal entities.3

Specifically, Harmon avers that

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), the Eleventh
Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed down
prior to the close of business on September 30, 1981.

2

“The misnomer/misidentification dichotomy usually arises in cases involving whether the
statute of limitations was tolled by filing suit against a party that is defectively named in

3

she is “employed as a Claims Supervisor with Berkley Oil & Gas,” and that
“Berkley Regional Insurance Company and Berkley Oil & Gas do business within
the State of Alabama, but neither is incorporated in Alabama, nor does either
maintain its principal place of business in Alabama.”

(Id. (emphasis added)).4

If this is so, nothing in the record indicates that Berkley Insurance was
substituted for Berkley Oil & Gas or was otherwise added as a defendant in the state
court action prior to removal. This presents a problem for two reasons. First,
only “the defendant or the defendants” may remove a civil action under 28 U.S.C. §
1441(a).

In this Circuit, removal under § 1441 by a non-party to the suit is a

jurisdictional, rather than procedural, defect.

See Hous. Auth. of City of Atlanta,

Ga. v. Millwood, 472 F.2d 268, 272 (5th Cir. 1973) (“We conclude that HUD was not
made a party to the suit, a precondition for the district court to have removal
jurisdiction under either Title 28, U.S.C., Section 1441 or Section 1442(a)(1).

The

district court lacked jurisdiction to rule on the substantive issues.”).5
some way. With a misnomer, the correct party, although misnamed, is served with notice of
the suit; in that situation, limitations is tolled. This is in contrast to a misidentification,
which arises when two separate legal entities actually exist and a plaintiff mistakenly sues
the entity with a name similar to that of the correct entity. A misidentification, unlike a
misnomer, does not toll the statute of limitations.” De Jongh v. State Farm Lloyds, 555 F.
App'x 435, 438 n.4 (5th Cir. 2014) (per curiam) (unpublished) (ciations and quotation
omitted). However, “we are not here dealing with the issue of statute of limitations under
state law but the question of whether [Berkley Insurance] was a party to the case who could
remove the action under federal law.” Id.
Harmon further muddies the waters by also averring that “Berkley Oil & Gas writes
insurance policies under the name Berkley Regional Insurance Company,” which could
indicate that Berkley Insurance is not itself a separate entity but is instead simply a trade
name of Berkley Oil & Gas. Given the other representations in the affidavit and the Notice
of Removal, the undersigned finds it more likely that this is simply poor wording and that
Berkley Insurance is claiming to be a distinct legal entity. If this is not the case, however,
Berkley Insurance should clarify this point in its response to this Order. See infra.

4

Non-binding Fifth Circuit authority issued after September 1981 persuasively supports
this reading of Millwood. See Salazar v. Allstate Tex. Lloyd's, Inc., 455 F.3d 571, 575 (5th

5

Second, “[d]iversity jurisdiction requires complete diversity; every plaintiff
must be diverse from every defendant.”

Triggs v. John Crump Toyota, Inc., 154

F.3d 1284, 1287 (11th Cir. 1998). Moreover, “removal jurisdiction is determined at
the time of removal…”

Conn. State Dental Ass'n v. Anthem Health Plans, Inc., 591

F.3d 1337, 1351 n.9 (11th Cir. 2009). See also Scimone v. Carnival Corp., 720 F.3d
876, 882 (11th Cir. 2013) (“[W]e assess jurisdictional facts at the time of removal.”).
Thus, only the citizenship of Berkley Oil & Gas, not Berkley Insurance, is relevant to
determining diversity jurisdiction.

The complaint and Notice of Removal both

identify Berkley Oil & Gas as a corporation, meaning that it is deemed “a citizen of
every State and foreign state by which it has been incorporated and of the State or
foreign state where it has its principal place of business” for purposes of diversity
jurisdiction. 28 U.S.C. § 1332(c)(1). However, the Notice of Removal only alleges
these states for Berkley Insurance (respectively, Delaware and Connecticut). The

Cir. 2006) (“[T]his court has held that where an entity has not properly been made a party in
state court, removal jurisdiction cannot be premised on its presence in the action. See
Housing Auth. v. Millwood, 472 F.2d 268, 272 (5th Cir. 1973).”); De Jongh v. State Farm
Lloyds, 555 F. App'x 435, 437, 439 n.5 (5th Cir. 2014) (per curiam) (unpublished) (“Under 28
U.S.C. § 1441(a), only a defendant may remove a civil action from state court to federal
court. A non-party, even one that claims to be a real party in interest, lacks the authority to
institute removal proceedings. See Salazar v. Allstate Tex. Lloyd's, Inc., 455 F.3d 571, 575
(5th Cir. 2006) (“[W]here an entity has not properly been made a party in state court,
removal jurisdiction cannot be premised on its presence in the action.”); Hous. Auth. of City
of Atlanta, Ga. v. Millwood, 472 F.2d 268, 272 (5th Cir. 1973) (holding that, where removal
is initiated by a non-party, the district court is without subject matter jurisdiction). []Here,
State Farm never became a party in this action. Jongh did not name State Farm as a
defendant in her original petition; although it asserted in its answer and notice of removal
that Jongh incorrectly named Lloyds as a defendant, State Farm did not move to intervene
or otherwise request that the district court substitute it as the proper party in interest.
Consequently, it lacked the authority to remove this action to federal court. See Salazar, 455
F.3d at 575; Millwood, 472 F.2d at 272 … State Farm contends that, to the extent it erred in
improperly removing the case to federal court as a non-party, such error is, at worst, a
‘procedural defect’ that Jongh waived when she failed to move for remand within thirty days
of removal. See 28 U.S.C. § 1447(c). We disagree. State Farm's removal of this case did not
transform it into a party to the case.”).

Notice of Removal does not similarly allege “every State and foreign state by which
[Berkley Oil & Gas] has been incorporated and of the State or foreign state where
[Berkley Oil & Gas] has its principal place of business…”

Id. Because the Court

does not know the citizenship of Berkley Oil & Gas, it cannot ascertain whether
complete diversity exists for purposes of jurisdiction under § 1332(a).6
“Defective allegations of jurisdiction may be amended, upon terms, in the trial
or appellate courts.”

28 U.S.C. § 1653.

“ ‘[W]here subject matter jurisdiction

exists and any procedural shortcomings may be cured by resort to § 1653, we can
surmise no valid reason for the court to decline the exercise of jurisdiction.’ ”

Corp.

Mgmt. Advisors, Inc. v. Artjen Complexus, Inc., 561 F.3d 1294, 1297 (11th Cir. 2009)
(quoting In re Allstate Ins. Co., 8 F.3d 219, 221 (5th Cir. 1993)). See also Majd-Pour
v. Georgiana Cmty. Hosp., Inc., 724 F.2d 901, 903 n.1 (11th Cir. 1984) (“[L]eave to
amend should be freely granted when necessary to cure a failure to allege
jurisdiction properly.”).

Accordingly, Berkley Insurance is ORDERED to file and

serve, no later than Wednesday, July 27, 2016, a supplement to its notice of
removal addressing whether Berkley Oil & Gas and Berkley Insurance are two
separate legal entities. If they are, Berkley Insurance must also (1) affirmatively
allege facts showing Berkley Oil & Gas’s citizenship under § 1332(c)(1), and (2)
explain, with citation to appropriate authority, why this case should not be
remanded for lack of subject matter jurisdiction under the reasoning of Millwood.7

Harmon’s affidavit does assert that Berkley Oil & Gas is not incorporated in Alabama and
does not have its principal place of business there. (Doc. 1-6, ¶ 5). However, such an
assertion does not satisfy a removing defendant’s burden to affirmatively plead facts
establishing the citizenship of a party.

6

Any other interested party may also file and serve briefing addressing these issues by the
same deadline.

7

The failure to supplement as ordered may result in this case being remanded for lack
of subject matter jurisdiction.

See 28 U.S.C. § 1447(c).

DONE and ORDERED this the 13th day of July 2016.
/s/ Katherine P. Nelson
KATHERINE P. NELSON
UNITED STATES MAGISTRATE JUDGE