D. Cummins Corporation et al v. United States Fidelity and Guaranty Company et al

Filing 28

ORDER by Judge Samuel Conti granting 15 Motion to Remand (sclc1, COURT STAFF) (Filed on 5/28/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court

For the Northern District of California

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D. CUMMINS CORPORATION and
D. CUMMINS HOLDING LLC,

) Case No. 14-cv-935-SC
)
) ORDER REMANDING CASE
Plaintiffs,
)
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v.
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UNITED STATES FIDELITY AND
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GUARANTY COMPANY, UNITED STATES )
FIRE INSURANCE COMPANY, and DOES )
1-100,
)
Defendants.
)
)
)
)
)

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I. INTRODUCTION
Plaintiffs D. Cummins Corporation ("Cummins Corp.") and D.

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Cummins Holding LLC ("Cummins Holding") brought this action in

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California Superior Court against Defendants United States Fidelity

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and Guaranty Company ("USF&G") and United States Fire Insurance

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Company ("US Fire") seeing declaratory judgment regarding the terms

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of Cummins Corp.'s insurance contracts.

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action to federal court pursuant to 28 U.S.C. § 1441.

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Defendants removed the

Now before the Court is Plaintiffs' motion to remand the

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The motion is fully briefed 1 and suitable

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matter to state court.

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for determination without oral argument per Civil Local Rule 7-

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1(b).

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GRANTED and the matter is REMANDED to the California Superior

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Court.

For the reasons set forth below, Plaintiffs' motion is

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II. BACKGROUND

United States District Court

For the Northern District of California

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Cummins Corp., formerly known as Valley Asbestos Company, was

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an installer of insulation products.

Some of the products it

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installed contained asbestos, and it now faces hundreds of asbestos

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bodily injury lawsuits.

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Cummins Corp. is insured by Defendants.

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brought this action in California state court seeking declaratory

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relief.

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insurance policies provide defense and indemnity coverage for

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liability arising out of claims alleging bodily injury as a result

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of exposure to asbestos, and that the policies require Defendants

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to defend and indemnify Cummins Corp. against such claims.

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31.

ECF No. 1 ("Removal Not.") at 31-32.
Id. at 33.

Plaintiffs

Primarily, Cummins Corp. seeks declarations that the

Id. at

Defendants removed this action to federal court.

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III. LEGAL STANDARD

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Defendants to a civil action brought in state court may remove

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the matter to federal district court, so long as the district court

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has original jurisdiction.

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before final judgment it appears that the district court lacks

28 U.S.C. § 1441.

"If at any time

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ECF Nos. 15 ("Mot."), 20 ("Opp."), 22 ("Reply").

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subject matter jurisdiction, the case shall be remanded."

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U.S.C.A. § 1447(c).

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against removal jurisdiction," and "[f]ederal jurisdiction must be

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rejected if there is any doubt as to the right of removal in the

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first instance."

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1992).

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Courts "strictly construe the removal statute

Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.

Federal district courts have original jurisdiction over "all

United States District Court

For the Northern District of California

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civil actions arising under the Constitution, laws, or treaties of

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the United States."

28 U.S.C. § 1331.

They also have original

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jurisdiction over civil actions where the amount in controversy

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exceeds $75,000 and is between citizens of different states.

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U.S.C. § 1332.

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IV. DISCUSSION
The parties agree that federal question jurisdiction does not

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exist in this case, as the sole cause of action is grounded in

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California law.

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diversity jurisdiction exists.

However, the parties differ as to whether

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A.

Diversity Jurisdiction

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Diversity jurisdiction exists in civil actions between

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citizens of different states where the amount in controversy

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exceeds $75,000.

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whether the amount in controversy requirement is met; the sole

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issue in dispute is whether the parties are diverse.

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jurisdiction under 28 U.S.C. § 1332(a) requires complete diversity:

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no plaintiff can be from the same state as any defendant.

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Lamar Corp., 385 F.3d 1177, 1181 (9th Cir. 2004).

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There appears to be no dispute in this case as to

Diversity

A corporation is a citizen of the state in which it is

Kuntz v.

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business.

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Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006).

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Cummins Corp. is incorporated in California, and its principal

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place of business is there as well.

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Corp. is a citizen of California only.

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Connecticut with its principal place of business in Connecticut.

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United States District Court

incorporated and the state where it has its principal place of

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For the Northern District of California

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Id. at 3.

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incorporated in Delaware with its principal place of business in

28 U.S.C. § 1332(c)(1); Johnson v. Columbia Properties

Id. at 31.

Plaintiff

Therefore Cummins

USF&G is incorporated in

USF&G is a citizen of Connecticut only.

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New Jersey.

Id. at 31.

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Delaware and New Jersey.

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US Fire is

US Fire is therefore a citizen of both

defendant has citizenship in California.

Those parties are plainly diverse, as no

The diversity problem arises with Plaintiff Cummins Holding,

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which is a limited liability company ("LLC").

An LLC is a citizen

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of every state of which its members are citizens.

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Properties, 437 F.3d at 899.

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Kyrtos Ltd. ("Kyrtos"), a corporation, and Raymond Tellini, an

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individual.

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Tellini have been members of Cummins Holding since its inception.

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Id.

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business address is in Hong Kong.

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citizen of the United Kingdom and China.

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Connecticut and intends to remain there indefinitely.

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He is therefore a citizen of Connecticut, and his citizenship is

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imputed to Cummings Holding.

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Defendant USF&G are both citizens of Connecticut, the parties to

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this case are not diverse.

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//

Columbia

Cummins Holding has two members:

ECF No. 25-1 ("Tellini Decl.") ¶¶ 2-3.

Kyrtos and Mr.

Kyrtos is incorporated in the British Virgin Islands, and its
Id. ¶ 4.

Kyrtos is therefore a

Mr. Tellini resides in
Id. ¶¶ 5-6.

Because Plaintiff Cummins Holding and

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Defendants argue that Cummins Holding was fraudulently joined

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and that its citizenship should be ignored for diversity purposes.

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A defendant is fraudulently joined if the plaintiff's failure to

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state a cause of action against that defendant is "obvious

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according to the well-settled rules of the state."

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Sys., Inc. v. AT&T Corp., 298 F.3d 756, 761 (9th Cir. 2002).

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United States District Court

B.

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For the Northern District of California

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Fraudulent Joinder

fraudulently joined defendant's "presence in the lawsuit is ignored

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for purposes of determining diversity . . . ."

United Computer
A

Morris v. Princess

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Cruises, Inc., 236 F.3d 1061, 1067 (9th Cir. 2001).

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to ignore Cummins Holding's citizenship, no plaintiff and no

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defendant would be citizens of the same state, and complete

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diversity would exist.

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Were the Court

Defendants' claim that Cummins Holding is fraudulently joined

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is based on the principle that an insurance policy's duties run

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only to the insured.

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that only parties to an insurance contract may sue on it; the

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owners of an insured corporation may not sue the insurer on the

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corporation's behalf.

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Co., 163 Cal. App. 3d 1055, 1068 (Cal. Ct. App. 1984) (holding that

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two 50 percent owners of corporation could not state a cause of

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action against corporation's insurers); Gantman v. United Pac. Ins.

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Co., 232 Cal. App. 3d 1560, 1566-69 (Cal. Ct. App. 1991) (members

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of homeowners association lacked standing to sue on association's

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insurance policy).

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the insurance policy or the express or implied covenants derived

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therefrom, there would be no doubt that Cummins Holding lacks

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standing.

A number of California state courts have held

See, e.g., C&H Foods Co. v. Hartford Ins.

Were Plaintiffs suing in a contract action on

But those are not the causes of action that Plaintiffs

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bring in this case.
Instead, Plaintiffs bring only a claim for declaratory relief

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section permits "[a]ny person interested under a written

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instrument . . . or under a contract" to bring an action "for a

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declaration of his or her rights and duties in the premises,

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including a determination of any question of construction or

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United States District Court

under California Code of Civil Procedure Section 1060.

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For the Northern District of California

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That

validity arising under the instrument or contract."

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Proc. Code § 1060.

Cal. Civ.

Plaintiffs argue that Cummins Holding, as the

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owner of Cummins Corp. is a "person interested" in the resolution

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of the questions of contract construction for which they seek

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declaratory relief.

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qualifies as an interested person under Section 1060 appears to be

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an unresolved question of California state law. 2

Whether the owner of an insured corporation

Defendants cite two cases for the proposition that "a

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shareholder such as [Cummins Holding] has no standing to maintain a

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cause of action under the corporation’s insurance policy, including

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for declaratory relief."

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Superior National Insurance Co.

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App. 1999).

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court's discussion of the shareholders' standing to sue a

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corporation's insurer is limited to claims for bad faith and

Opp. at 4-5.

The first is Seretti v.

71 Cal. App. 4th 920 (Cal. Ct.

A close reading of Seretti, however, reveals that the

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The declaratory relief statute is embodied in California's Code
of Civil Procedure but creates a cause of action. Federal courts
sitting in diversity apply the substantive law of the forum state
but follow federal procedural rules. Erie R.R. v. Tompkins, 304
U.S. 64, 78 (1938). Federal courts "have consistently applied
California Code of Civil Procedure § 1060 rather than the federal
Declaratory Judgment Act when sitting in diversity." Schwartz v.
U.S. Bank, Nat. Ass'n, CV 11-08754 MMM JCG, 2012 WL 10423214 at *15
(C.D. Cal. Aug. 3, 2012).

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negligent infliction of emotional harm.

Id. at 928-31.

There is

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no discussion of shareholders as interested persons under Section

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1060 in that case.

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limited to bad faith and emotional distress claims in its

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discussion of shareholder standing.

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1068 (Cal. Ct. App. 1984).

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person" standard of Section 1060.

The second case Defendants cite is similarly

C&H Foods, 163 Cal. App. 3d at

It too fails to analyze the "interested

United States District Court

For the Northern District of California

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With no California authority interpreting the "interested

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person" standard in this context, the Court must conclude that

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whether the shareholder of an insured corporation has standing to

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sue the corporation's insurer for declaratory relief under Section

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1060 is not a well-settled matter of California law.

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can find fraudulent joinder only if Plaintiffs' failure to state a

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cause of action against Cummins Holding is "obvious according to

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the well-settled rules of the state."

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298 F.3d at 761.

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according to California law that Plaintiffs fail to state a claim

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against Cummins Holding.

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Holding was fraudulently joined and accordingly cannot ignore its

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presence in the case for diversity purposes.

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Plaintiff Cummins Holding and Defendant USF&G share Connecticut

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citizenship.

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case, this Court lacks subject-matter jurisdiction, and the case

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must be remanded to state court.

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But the Court

See United Computer Sys.,

The Court therefore finds that it is not obvious

The Court cannot conclude that Cummins

As discussed above,

Because complete diversity does not exist in this

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V. CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiffs' motion

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and REMANDS this case to the Superior Court of California, County

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of Alameda.

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IT IS SO ORDERED.

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United States District Court

For the Northern District of California

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Dated: May 28, 2014

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UNITED STATES DISTRICT JUDGE

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