United Services Automobile Association v. Cataldo et al

Filing 26

ORDER. 17 REPORT AND RECOMMENDATIONS is adopted and confirmed. 18 Objections aare overruled. Complaint is dismissed for lack of subject matter jurisdiction. The Clerk is directed to close the case. Signed by Judge Anne C. Conway on 11/1/2015. (LAK)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
UNITED SERVICES AUTOMOBILE
ASSOCIATION,
Plaintiff,
v.

Case No: 6:15-cv-1131-Orl-22TBS

MICHAEL CATALDO, et al.,
Defendants.

ORDER
This cause comes before the Court on Plaintiff’s Objection (Doc. No. 18) to the Magistrate
Judge’s Report and Recommendation (“R&R”) (Doc. No. 17), filed on September 30, 2015. For
the reasons provided herein, this Court will adopt and confirm the Magistrate Judge’s
recommendation to dismiss this case for lack of subject matter jurisdiction.
Plaintiff is a reciprocal inter-insurance exchange, which it describes as an insurance company
cooperatively owned by those it insures. (Doc. No. 1, ¶ 1; Doc. No. 14 at p. 3). At an earlier stage in this

litigation, in response to the Magistrate Judge’s sua sponte Order directing Plaintiff to explain its
corporate structure for the purpose of determining its citizenship for subject matter jurisdiction,
Plaintiff argued that it should be treated as a corporation, despite the fact that it is not incorporated.
(See Doc. No. 14). Plaintiff’s argument was primarily based on how Texas statutes and case law
interprets a reciprocal inter-insurance exchange. (Id.) The Magistrate Judge’s own research,
however, revealed substantial authority addressing Plaintiff’s corporate structure and arriving at
the opposite conclusion. A number of federal circuits and district courts have concluded that
Plaintiff should be treated as an unincorporated entity for diversity jurisdiction purposes. (See the
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R&R (Doc. No. 17) at pp. 3-5).  Under this analysis, Plaintiff would be a citizen of all fifty states in

which its insured subscribers are citizens. (Id.)
In recommending that this Court dismiss the present case, the Magistrate Judge agreed with
the majority of cases concluding that Plaintiff is to be treated as an unincorporated entity for
purposes of determining diversity jurisdiction. (Id. at p. 5). Since Plaintiff has insured subscribers
in Florida, Plaintiff is a citizen of Florida. (Doc. No. 1, ¶¶ 7, 9; Doc. No. 14, ¶¶ 3, 5). Therefore,
there is lack of complete diversity in this case because Defendants are also Florida citizens. (Doc.
No. 1, ¶ 2). In Plaintiff’s Objection, Plaintiff merely reiterates an almost identical analysis
previously presented to the Court in its memorandum discussing its corporate structure. (See Doc.
No. 14).
The undersigned Judge is unpersuaded by the section of Plaintiff’s Objection asking this
Court to find that it has jurisdiction over this case. Notably, Plaintiff does not explain why the
Court should not follow the majority of cases that have concluded that Plaintiff is an
unincorporated entity rather than a corporation for purposes of determining diversity jurisdiction.
Plaintiff does not provide a compelling reason why the Court should look to Texas law to analyze
its citizenship; especially since the Fifth Circuit, which includes Texas district courts, has
determined that Plaintiff is an unincorporated entity for purposes of diversity jurisdiction. See True
v. Robles, 571 F.3d 412, 422 n.5 (5th Cir. 2009). As the undersigned Judge agrees with the
Magistrate Judge’s determination regarding Plaintiff’s citizenship for purposes of subject matter
jurisdiction, the Court will adopt and confirm the R&R.
Additionally, the Magistrate Judge has recommended that the undersigned Judge order
Plaintiff to show cause why Rule 11 sanctions should not be imposed for its failure to disclose any
of the circuit and district court cases on point. (See the R&R (Doc. No. 17) at pp. 3-5). However,

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since Plaintiff’s Objection primarily focuses on why Rule 11 sanctions should not be imposed in
this case, the Court will construe the Objection as tantamount to a show-cause response regarding
the sanctions issue. (See Doc. No. 18). Therefore, this Court need not issue an order to show cause
on the sanctions issue; instead, it will consider the sanctions arguments raised in Plaintiff’s
Objection. The Defendants have not bothered to respond to Plaintiff’s arguments regarding the
imposition of Rule 11 sanctions.
After a thorough review of the many cases the Magistrate Judge cites in the R&R
discussing the proper citizenship of Plaintiff, the Court certainly shares the Magistrate Judge’s
concerns and frustration with Plaintiff’s potentially sanctionable conduct. However, Plaintiff has
raised a colorable argument against the imposition of Rule 11 sanctions. Plaintiff argues that Rule
11 sanctions should not be imposed because it has made a good faith argument “for extension,
modification, and/or reversal of existing law in the 11th Circuit” regarding how Plaintiff’s
citizenship should be analyzed for subject matter jurisdiction purposes since the Eleventh Circuit
has not yet addressed the issue. (Doc. No. 18 at p. 5.) The Court has considered Plaintiff’s
arguments and notes Defendants’ apparent lack of interest in the matter of sanctions. The Court,
in its discretion, determines that it will not impose Rule 11 sanctions for Plaintiff’s failure to
disclose the extremely relevant but merely persuasive authority regarding the issue of subject
matter jurisdiction. However, the Court ADMONISHES Plaintiff because it has come perilously
close to sanctionable conduct in this case.
Based on the foregoing, it is ORDERED as follows:
1.

Plaintiff United Services Automobile Association’s Objection (Doc. No. 18) to the

Magistrate Judge’s R&R, filed on September 30, 2015, is OVERRULED.

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2.

The Report and Recommendation (Doc. No. 17), filed on September 16, 2015, is

ADOPTED and CONFIRMED, to the extent it recommends dismissal of this action due to lack
of subject matter jurisdiction.
3.

Plaintiff United Services Automobile Association’s Complaint (Doc. No. 1), filed

on July 14, 2015, is DISMISSED without prejudice for lack of subject matter jurisdiction.
4.

The Clerk is directed to close the case.

DONE and ORDERED in Chambers, in Orlando, Florida on November 1, 2015.

Copies furnished to:
Magistrate Judge
Counsel of Record
Unrepresented Parties

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