Davis & Associates, P.C. et al v. Westchester Fire Insurance Company et al
Filing
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ORDER denying 8 Plaintiff's Motion to Remand by Judge Robert E. Blackburn on 9/26/2011.(erv, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Case No. 10-cv-03126-REB-CBS
DAVIS & ASSOCIATES, PC, n/k/a DAVIS SHILKEN, PC, and
KEITH L. DAVIS,
Plaintiffs,
v.
WESTCHESTER FIRE INSURANCE COMPANY, and
THE PLUS COMPANIES, INC.,
Defendants.
ORDER DENYING PLAINTIFF’S MOTION TO REMAND
Blackburn, J.
This matter is before me on the Plaintiffs’ Motion To Remand [#8]1 filed
January 12, 2011. The defendants filed a response [#17] and the plaintiffs filed a reply
[#23]. I deny the motion.
I. JURISDICTION
Putatively, I have jurisdiction over this case pursuant to 28 U.S.C. § 1332
(diversity of citizenship).
II. STANDARD OF REVIEW
Under 28 U.S.C. § 1441(a), an action may be removed from a state court to a
federal district court if it is one over which the district court would have had original
jurisdiction. In order to effectuate removal properly,
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“[#8]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s case management and electronic case filing system (CM/ECF). I use this
convention throughout this order.
[a] defendant or defendants . . . 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 signed pursuant to Rule 11 of the Federal Rules of Civil
Procedure and containing a short and plain statement of the grounds for
removal, together with a copy of all process, pleadings, and orders served
upon such defendant or defendants in such action.
28 U.S.C. § 1446(a). The notice of removal must be filed within thirty days after receipt
by the defendant, “through service or otherwise,” of the initial pleading setting forth the
plaintiff’s claims for relief. 28 U.S.C. § 1446(b). See also Murphy Brothers v.
Michetti Pipe Stringing, Inc., 526 U.S. 344, 356 (1999) (holding that deadline for
removal does not begin to run until party is formally served with process). A defendant
who does not act within this deadline forfeits its right to remove the action to federal
court. See Huffman v. Saul Holdings Limited Partnership, 194 F.3d 1072, 1077 (10th
Cir. 1999).
III. ANALYSIS
On November 17, 2010, the plaintiffs filed this lawsuit against the defendants in
Colorado state court. The defendants were served with the complaint on November 23,
2010. The defendants filed their Notice of Removal [#1] on December 23, 2010. On
January 11, 2011, the defendants filed a Supplement To Notice of Removal [#6]. In
the supplement [#6], the defendants sought to correct certain defects in their Notice of
Removal [#1].
A. Inclusion of State Court Process, Pleadings, and Orders
The plaintiffs argue that the defendants’ notice of removal is defective because
the defendants failed to attach to the notice copies of “all process, pleadings, and orders
served upon such defendant or defendants in such action.” § 1446(a). The Notice of
Removal [#1] does not include copies of the returns of service, plaintiffs’ C.R.C.P. 55
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motion for default judgment, the proposed order, and the exhibits filed with the motion
for default judgment. The plaintiffs argue that the defendants’ Supplement To Notice
of Removal [#6], in which the defendants sought to cure these defects, is ineffective
because it was filed after the 30 day window in which a notice of removal may be filed.
The defendants concede that they failed to attach to their notice of removal copies of all
process, pleadings, and orders served on the defendants in the state court case. They
argue, in essence, that this lapse is a mere procedural error that does not render their
removal notice defective, and that the flaws were corrected in the Supplement To
Notice of Removal [#6].
In Countryman v. Farmers Ins. Exchange, 639 F.3d 1270 (10th Cir. 2011), the
United States Court of Appeals for the Tenth Circuit held that the
omission of a summons from Defendants' joint notice of removal was an
inadvertent, minor procedural defect that was curable, either before or
after expiration of the thirty-day removal period. Defendants
supplemented their joint notice of removal to include the summons, and
Plaintiff was not prejudiced by the omission. Nor was the district court’s
ability to proceed with the case materially impaired.
Id. at 1272. In the present case, the fact that the defendants’ notice of removal in this
case did not include copies of the returns of service, plaintiffs’ C.R.C.P. 55 motion for
default judgment, the proposed order, and the exhibits filed with the motion for default
judgment, all filed in the state court, constitutes a minor defect that did not prejudice the
plaintiffs or materially impair this court’s ability to proceed with the case. The defect
was cured in the Supplement To Notice of Removal [#6]. Applying the principles and
holding in Countryman to these facts, I conclude that the plaintiffs’ Notice of Removal
[#1] and Supplement To Notice of Removal [#6] effectively satisfy the requirement
that the notice of removal include “all process, pleadings, and orders served upon such
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defendant or defendants in such action.” § 1446(a).
B. Diversity of Citizenship
Under 28 U.S.C. § 1332(a), diversity jurisdiction requires complete diversity,
which exists only when “each defendant is a citizen of a different State from each
plaintiff.” Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978). The
plaintiffs argue that the defendants’ notice of removal is fatally defective because it fails
to allege affirmatively complete diversity of citizenship between the parties. I disagree.
In the notice of removal, the defendants allege that defendant, Plus Companies,
Inc., “is a New Jersey corporation with its principal place of business in New Jersey.”
Notice of removal [#1], ¶ 13 (d). For the purpose of determining federal diversity
jurisdiction, a corporation is deemed a citizen of “any State by which it is incorporated
and of the state where it has its principal place of business.” 28 U.S.C. § 1332(c). The
plaintiffs argue that the defendant does not aver specifically that Plus is incorporated by
the state of New Jersey and leaves open the possibility that Plus is incorporated in
Colorado, which would defeat complete diversity. I disagree. Although the allegation
could be more explicit, I read the allegation “is a New Jersey corporation” to mean that
Plus allegedly is incorporated by the state of New Jersey. The plaintiffs do not raise any
factual contention that Plus actually is incorporated in Colorado.
In the notice of removal, the defendants allege that Davis & Assoc. “is a Colorado
professional corporation.” Notice of removal [#1], ¶ 13 (a). As with Plus, I read this
allegation to mean that Davis & Assoc. is a professional corporation created under
Colorado law. That makes Davis & Assoc. a citizen of Colorado, and there is no
allegation or other indication that Davis & Assoc. is a citizen of any other state.
In the complaint the plaintiffs allege that Keith Davis “is a Colorado licensed
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attorney and a shareholder” of Davis & Assoc. Complaint [#1-3], ¶ 2. In the
supplement to the notice of removal, the defendants allege that Davis is a Colorado
licensed attorney and “a resident of Colorado, believed to be residing” at a stated
address in Golden, Colorado. Supplement [#6], ¶ 2. The plaintiffs contend that these
allegations are not sufficient to show that Davis is a citizen of the State of Colorado.
The plaintiffs, Keith Davis and Davis & Assoc., do not assert any facts that tend to show
that Davis is a citizen of a state other than Colorado.
“For purposes of federal diversity jurisdiction, an individual’s state citizenship is
equivalent to domicile. To establish domicile in a particular state, a person must be
physically present in the state and intend to remain there.” Smith v. Cummings, 445
F.3d 1254, 1259-60 (10th Cir. 2006) (internal citation omitted). In the context of a case
filed initially in federal court, as opposed to a removal case, the Tenth Circuit has held
that an allegation of residency in a particular state creates a presumption of continuing
residence in that state. State Farm Mut. Auto. Ins. Co. v. Dyer, 19 F.3d 514, 519 (10th
Cir. 1994). Continuing residence establishes domicile, and domicile establishes
citizenship. This presumption places the burden of coming forward with contrary
evidence on the party who seeks to prove domicile in a different state. Id. In an earlier
case, which also was filed initially in federal court, the Tenth Circuit said that “(p)roof
that a person is a resident of a state is prima facie evidence that he is a citizen thereof,
and shifts the burden of showing that his domicile and citizenship is other than the place
of his residence to him who alleges it.” Kelleam v. Maryland Cas. Co. of Baltimore,
Md., 112 F.2d 940, 943 (10th Cir. 1940), rev’d on otr. grounds, 312 U.S. 377 (1941).
In essence, the allegation that Davis is a resident of Golden, Colorado
establishes a prima facie case that Davis also is a domiciliary and citizen of Colorado.
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By arguing that the allegation of Davis’s residence is not sufficient to establish complete
diversity of citizenship, the plaintiffs argue, in effect, that the allegation of residence
does not establish a prima facie case of citizenship. Given the law noted above, I do
not agree. Absent a factual challenge by the plaintiffs to the this prima facie case, there
is no reason to disregard this allegation in the supplement to the notice of removal. Of
course, the plaintiffs may challenge this prima facie case by disputing that the state in
which Davis is alleged to reside also is his state domicile or his state of citizenship. The
plaintiffs have not presented such a challenge.
I have read and considered the opinion of United States District Judge Philip A.
Brimmer in Nichols v. Golden Rule Ins. Co., Case No. 10-cv-00031-PAB-KMT (D.
Colo. May 3, 2010 (order granting motion to remand). In Nichols, the removing party
alleged in the notice of removal that the plaintiffs “are residents of the State of
Colorado.” In their motion to remand, the plaintiffs argued that the allegations
concerning the plaintiffs’ residency were insufficient to establish the plaintiffs’ state of
citizenship for the purpose of establishing diversity jurisdiction. Judge Brimmer noted
that “the burden on removing defendants to prove jurisdictional facts is, if anything,
greater than it is on parties who initially file a case in federal court.” As with any
allegation, a reasonable belief must underpin allegations of citizenship. FED. R. CIV. P.
11(b)-(b)(3). Id. at 9. Judge Brimmer noted that several types of evidence are readily
available to a removing party that could be the basis for such a reasonable belief. Id. at
8 - 9. Ultimately, Judge Brimmer saw “no reason to allow a removing defendant simply
to allege and prove the residence of a plaintiff” as a means of establishing citizenship
for the purpose of establishing diversity jurisdiction in a notice of removal. Id. at 10.
In the present case, I conclude that the undisputed allegations that Davis is a
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shareholder of a Colorado LLC, a Colorado licensed attorney, and resides at a specified
address in Colorado are sufficient to allege that Davis is a resident of Colorado. This
allegation of residency establishes a prima facie case that Davis is a citizen of
Colorado. This prima facie case shifts the burden of production to the plaintiffs to
surmount factually the prima facie showing. Absent such a challenge, the allegation of
residency is sufficient to establish Davis’s citizenship for the purpose of determining
diversity jurisdiction. To the extent Judge Brimmer’s approach in Nichols is to the
contrary, I noe my respectful disagreement.
C. Amount In Controversy
The plaintiffs argue that the defendants have not established that the amount in
controversy in this case exceeds the 75,000 dollar jurisdictional threshold of 28 U.S.C. §
1332. In the Tenth Circuit, a defendant seeking to remove a case from state court must
“affirmatively establish in the petition [for removal] that the amount in controversy
exceeds the statutory requirement.” Laughlin v. Kmart Corp., 50 F.3d 871, 872 (10th
Cir. 1995). Because the complaint in this case does not recite a specific dollar amount
of recovery sought, the burden is on the defendants, as the removing parties, to
establish by a preponderance of the evidence that the jurisdictional amount is satisfied.
Martin v. Franklin Capital Corp., 251 F.3d 1284, 1290 (10th Cir. 2001). In this
circumstance, the removing party must show contested factual assertions in the case
that make it possible that at least 75,000 dollars is at issue. McPhail v Deere & Co.,
529 F.3d 947, 954 - 955 (2008). “A complaint that presents a combination of facts and
theories of recovery that may support a claim in excess of $75,000 can support
removal.” Id. at 955 - 956. In addition to the allegations in the complaint, a variety of
additional means are available to a defendant to meet this burden of proof. Id. at 954 7
956. As required by McPhail, I have considered carefully the allegations in the
plaintiffs’ complaint [#1-3] and the allegations in the Notice of Removal [#1] and
Supplement To Notice of Removal [#6].
The complaint concerns a lawyer’s professional liability policy issued by
defendant Westchester Fire Insurance Company to the plaintiffs, Davis & Associates
P.C. and Keith L. Davis. Complaint [#1-3]. Davis and Davis & Assoc. allege that they
were named as defendants in a separate malpractice lawsuit brought against them by
Ella Mae Bates. In her lawsuit, Bates asserts claims based on theories of breach of
implied warranty, professional negligence, and negligent misrepresentation.
Westchester denied coverage under the lawyer’s professional liability policy for the
claims asserted by Ella Bates against Davis and Davis & Associates.
In the notice of removal, the defendants allege that Bates seeks “in excess of
$75,000 in damages” in her lawsuit against Davis and Davis & Assoc. Notice of
removal [#1], ¶ 3. The defendants assert that the amount of damages to Bates resulting
from the alleged malpractice of Davis and Davis & Assoc. “exceeds $135,000 . . . .” Id.,
¶ 16. The defendants allege further that the plaintiffs are seeking damages against the
defendants based on the defendants’ alleged breach of contract and bad faith in failing
to defend and indemnify the plaintiffs in the Bates lawsuit. Id., ¶ 15. The defendants
note that, based on the plaintiffs’ allegation of bad faith conduct by the defendants, the
plaintiffs in this case seek also “double damages” under §§10-3-1115 and 10-3-1116,
C.R.S. Based on the allegations in the complaint [#1-3], the allegations in the Bates
lawsuit, and the theories of recovery asserted in both lawsuits, the defendants estimate
that the plaintiffs in this case seek damages “in excess of $75,000, exclusive of interest
and costs.” Id., ¶ 17.
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The defendants estimate of the amount in controversy is reasonable based on
the relevant allegations. I find and conclude that the complaint [#1-3] in this case
presents a combination of facts and theories of recovery that may support a claim in
excess of 75,000 dollars. Therefore, the defendants have established that the amount
in controversy in this case exceeds 75,000 dollars.
IV. CONCLUSION & ORDER
Under the rule established in Countryman, the plaintiff’s Supplement To Notice
of Removal [#6] effectively cures the plaintiff’s failure to attach to the Notice of
Removal [#1] “all process, pleadings, and orders served upon such defendant or
defendants in such action.” § 1446(a). Considering the Notice of Removal [#1], the
Supplement To Notice of Removal [#6], and the allegations in the pleadings attached
to the notice and supplement, the defendants have established both diversity of
citizenship and the amount in controversy, as required by § 1332.
THEREFORE, IT IS ORDERED that the Plaintiffs’ Motion To Remand [#8]
filed January 12, 2011, is DENIED.
Dated September 26, 2011, at Denver, Colorado.
BY THE COURT:
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