Garica v. Century Surety Company et al

Filing 41

ORDER granting in part and denying in part 18 Motion to Remand. This case is REMANDED to the Weld County District Court. By Magistrate Judge Michael J. Watanabe on 4/7/2015.(tscha, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 14-cv-3196-RM-MJW
LORENA GARCIA, for herself and as the Personal Representative of the Estate of
Reyes Garcia,
Plaintiff,
v.
CENTURY SURETY COMPANY,
SCHNEIDER ENERGY SERVICES, INC. n/k/a LAVIR HOLDINGS, INC., and
WILLIAM R. SMITH,
Defendants.
ORDER ON PLAINTIFF’S MOTION TO REMAND (Docket No. 18)
MICHAEL J. WATANABE
United States Magistrate Judge
This case is before the Court on District Judge Raymond P. Moore’s Order of
Reference (Docket No. 22) and Order Reassigning Magistrate Judge (Docket No. 40).
There is one motion pending: Plaintiff’s Motion for Remand. (Docket No. 18, referred by
Docket No. 23.)
Background
William Smith and Schneider Energy Services operated a gas well in Weld
County, Colorado. In 2007, the well exploded in flames—burning and ultimately killing
Reyes Garcia. Garcia’s widow sued in state court for wrongful death, winning a
multimillion-dollar jury verdict well in excess of Smith’s and Schneider Energy’s
insurance coverage.

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Smith’s insurance company, Century Surety, defended Smith and Schneider
Energy in that lawsuit—under a reservation of rights. See Hecla Mining Company v.
N.H. Ins. Co., 811 P.2d 1083, 1089 (Colo. 1991). Century Surety has since sued for
declaratory judgment, disclaiming coverage. That case was brought in this Court and is
docketed as Case No. 14-cv-00947.
Garcia then filed her own declaratory judgment action, in state court. Century
Surety removed this second declaratory action, and it is now docketed in this Court as
Case No. 14-cv-03196. Garcia has moved to remand to state court.
Motion to Remand
Garcia makes two arguments: first, that this Court lacks removal jurisdiction
because she named non-diverse defendants; second, that Century Surety has waived
its right to remove.
I.

Subject-Matter Jurisdiction
Century Surety removed this case under 28 U.S.C. § 1441(a), alleging diversity

jurisdiction under 28 U.S.C. § 1332. The party invoking federal jurisdiction bears the
burden of proving that such jurisdiction exists. Montoya v. Chao, 296 F.3d 952, 955
(10th Cir. 2002). Here, the parties dispute only one jurisdictional element. Garcia
argues that Century Surety cannot show “complete diversity”—the rule that no plaintiff
may be from the same state as any defendant, see Lincoln Prop. Co. v. Roche, 546
U.S. 81 (2005)—because Defendants Smith and Schneider Energy are Coloradoans,
like her. Century Surety responds that, for purposes of diversity jurisdiction, Smith and
Schneider Energy should be realigned as plaintiffs according to their true interest in this
action. See City of Indianapolis v. Chase Nat. Bank of City of New York, 314 U.S. 63,

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69 (1941) (“Diversity jurisdiction cannot be conferred upon the federal courts by the
parties’ own determination of who are plaintiffs and who defendants. It is our duty . . . to
look beyond the pleadings, and arrange the parties according to their sides in the
dispute.”).
The Court agrees with Century Surety. In this declaratory action, Garcia’s
interests align completely with Smith’s and Schneider Energy’s: all three would like to
see Century Surety foot as much of the bill for the wrongful-death verdict as possible.
In similar coverage disputes, federal courts routinely realign the parties to place the
injured third party on the same side of the caption as the tortfeasing insured, as against
the insurer. Cornella Bros. v. Liberty Mut. Fire Ins. Co., No. 13-cv-00558-CMA-MEH,
2013 WL 1876770, at *1-2 (D. Colo. May 3, 2013); see also Hulliung Gymnastics, Inc. v.
Philadelphia Indem. Ins. Co., 2014 WL 3400549, at *2 (S.D. Ill. July 9, 2014); Scott v.
State Farm Fire & Cas. Co., 2014 WL 3054784, at *5 (E.D. Mich. July 7, 2014); Wayne
J. Griffin Elec., Inc. v. Travelers Prop. Cas. Co. of Am., 2014 WL 842983, at *4 (M.D.
N.C. Mar. 4, 2014); Lark v. Nationwide Ins. Co. of Am., 2013 WL 5918310, at *3 (W.D.
Va. Oct. 31, 2013); Lott v. Scottsdale Ins. Co., 811 F. Supp. 2d 1220, 1224 (E.D. Va.
2011); Earnest v. State Farm Fire & Cas. Co., 475 F. Supp. 2d 1113, 1117 (N.D. Ala.
2007); Liebau v. Columbia Cas. Co., 176 F. Supp. 2d 1236, 1243 (D. Kan. 2001).
Garcia’s arguments to the contrary are unpersuasive. First, Garcia relies heavily
on the argument that, in a declaratory action, the insured is a necessary party. But that
point is undisputed—indeed, Century Surety named both Smith and Schneider Energy
as defendants in its own declaratory action—and has nothing to do with aligning
interests for purposes of diversity jurisdiction. Second, Garcia argues that as the

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judgment-creditor in the underlying negligence case, her interests are “obviously”
adverse to those of the judgment-debtors, Smith and Schneider Energy. But no one
denies that Garcia, Smith, and Schneider Energy have adverse interests as to the
underlying negligence action. The question is whether they have adverse interests as
to this coverage action—and they do not. Indeed, it is worth noting that Smith and
Schneider Energy have both filed Answers in this case in which they admit the material
allegations, allege that Century Surety is liable, and deny nothing of any real relevance
to the case. (See Docket Nos. 13, 33-1.) And further, in the first-filed declaratory
judgment action (Case No. 14-cv-00947), there are no cross-claims at all between
Garcia, Smith, and Century Surety. Finally, Garcia relies on Hildebrand v. National Fire
& Marine Insurance Co., Case No. 09-cv-00899-MSK-KLM, 2010 WL 455240 (D. Colo.
2010), in which Chief Judge Krieger declined to realign the parties because (as here)
both the judgment-creditor and judgment-debtor argued that they still had material
disputes between them. But in Hildebrand, there was no indication that the parties to
the underlying lawsuit had entered into Bashor-type agreements, as have the parties
here. To the extent the Garcia, Smith, and Schneider Energy have any further conflicts
ahead of them, it is only if they breach their settlement agreements—which would be a
separate transaction or occurrence, not properly part of this coverage dispute.
Accordingly, applying the analysis from City of Indianapolis v. Chase Nat. Bank
of City of New York, 314 U.S. 63, 69 (1941), the Court concludes that it has subjectmatter jurisdiction in this matter.

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II.

Waiver of Right to Remove
Garcia argues in the alternative that Century Surety has waived its right to

remove this case through the insurance policy’s service-of-suit clause, which provides
that Century Surety “will, at [the insured]s’ request, submit to the jurisdiction of any court
of competent jurisdiction within the United States of America and will comply with all
requirements necessary to give such court jurisdiction . . . .” (Docket No. 18-1.) In
applying such clauses, the Court’s “review ‘is basically one of contract interpretation,
requiring de novo consideration.’ [The] aim is to ‘enforce the agreement between the
parties in accordance with its own terms.’ Central to [the] inquiry, however, is the legal
principle that ‘a waiver of one’s statutory right to remove a case from a state to a federal
court must be clear and unequivocal.’” Pine Tel. Co. v. Alcatel-Lucent USA, Inc., 486 F.
App'x 724, 726 (10th Cir. 2012) (emphasis in original) (quoting Milk ‘N’ More, Inc. v.
Beavert, 963 F.2d 1342, 1345–46 (10th Cir. 1992), and SBKC Serv. Corp. v. 1111
Prospect Partners, L.P., 105 F.3d 578, 582 (10th Cir. 1997)).
Almost every court to review the question has concluded that this language
clearly and unequivocally waives an insurer’s right to remove. See, e.g., City of Rose
City v. Nutmeg Ins. Co., 931 F.2d 13, 16 (5th Cir. 1991); Foster v. Chesapeake Ins. Co.,
Ltd., 933 F.2d 1207, 1216–17 (3d Cir. 1991); Travelers Ins. Co. v. Keeling, 1993 WL
18909, at *2 (S.D. N.Y. Jan. 19, 1993), aff'd in part, appeal dismissed in part, 996 F.2d
1485 (2d Cir. 1993) (collecting cases). But see Holloway v. Scottsdale Ins. Co., No. 1312907, 2014 WL 2764859, at *2 (E.D. Mich. June 18, 2014) (concluding that the clause
did not constitute waiver). The Court agrees with the great weight of authority that this

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language is clear and unequivocal, and it waives Century Surety’s right to choose the
forum for litigating disputes with its insureds.
Century Surety’s arguments to the contrary are not persuasive. First, Century
Surety argues that Garcia (and Smith) consented to federal jurisdiction because they
participated in the other two cases pending before this court. The Court sees no reason
why Garcia’s and Smith’s participation in related litigation (on pain of default) should
have any bearing on this case. Second, Century Surety argues that the clause’s
language does not extend to third-party judgment creditors; that may be right, but it is
irrelevant because (1) Garcia is the assignee of the insured’s rights, standing in their
shoes, and (2) the Court has already (at Century Surety’s request) realigned the
insureds as plaintiffs suing Century Surety in this case. Finally, Century Surety argues
that Garcia should not be able to trump its first-filed federal case with a later-filed state
case. But the answer to that objection is for Century Surety to ask the state court to
stay its parallel proceedings. International Ins. Co. v. McDermott Inc., 956 F.2d 93, 95
(5th Cir. 1992). The Court concludes that the forum-selection clause applies, that
Century Surety has clearly and unequivocally waived its right to remove, and that
Plaintiff’s motion to remand should be granted.
III.

Attorneys’ Fees
The Court finds that it was not objectively unreasonable for Century Surety to

remove this case to federal court, for several reasons. First, the Court found Century
Surety’s jurisdictional argument to be correct. Second, although the operation of the
service-of-suit clause has been clear “for decades,” as Garcia argues, how that clause
applies to judgment-creditors is much less clear—and there are still no truly apposite

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cases. Third, there are already two other cases pending in this Court raising the same
legal issues, and it is not unreasonable to attempt to consolidate the cases on some
sort of waiver theory.
ORDER
For the foregoing reasons, it is hereby ORDERED that:
(1)

Plaintiff’s Motion for Remand (Docket No. 18) is GRANTED IN PART,

insofar as it seeks remand;
(2)

Plaintiff’s Motion for Remand (Docket No. 18) is DENIED IN PART, insofar

as it seeks an award of costs and fees;
(3)

This case is REMANDED to the Weld County District Court; and

(4)

The Clerk of Court is directed to transmit the case file accordingly.

Dated: April 7, 2015
Denver, Colorado

/s/ Michael J. Watanabe
Michael J. Watanabe
United States Magistrate Judge