Hulliung Gymnastics, Inc. v. Philadelphia Indemnity Insurance Company et al

Filing 23

MEMORANDUM AND ORDER, The Court DENIES Alexanders (Doc. 7 ) and Hulliungs (Doc. 8 ) motions for remand. The Clerk of Court is DIRECTED to terminate Family Sportsplex as a defendant. The Clerk of Court is further DIRECTED to terminate Alexander as a defendant and add her as a plaintiff in this case. Signed by Judge J. Phil Gilbert on 7/9/2014. (jdh)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
HULLIUNG GYMNASTICS, INC., doing
business as WORLD CLASS GYMNASTICS,
Plaintiff,
vs.

Case No. 13-cv-1279-JPG-DGW

PHILADELPHIA INDEMNITY
INSURANCE COMPANY, TINA
ALEXANDER and FAMILY SPORTSPLEX,
Defendants.

MEMORANDUM AND ORDER
This matter comes before the Court on defendant Tina Alexander’s (Doc. 7) and plaintiff
Hulliung Gymnastics, Inc.’s (“Hulliung”) motions for remand (Doc. 7 &8). Defendant
Philadephia Indemnity Insurance Company (“PIIC”) filed a response (Doc. 10). For the
following reasons, the Court denies both motions.
1. Background
PIIC removed the instant declaratory judgment action from the Circuit Court for the
Twentieth Judicial Circuit, St. Clair County, Illinois, based on diversity of citizenship. Hulliung,
Alexander, and defendant Family Sportsplex are Illinois citizens. PIIC is a Pennsylvania citizen.
If the Court accepts Hulliung’s alignment of the parties in its claim, there is no doubt diversity
jurisdiction is not present. PIIC, however, argues that Hulliung fraudulently joined Family
Sportsplex and the Court should realign Alexander as a plaintiff in this action. If the Court
agrees with PIIC, diversity will exist and this Court will have jurisdiction over the matter.

2. Analysis
Removal is proper where the district court has original jurisdiction. 28 U.S.C. § 1441(a).
The party seeking removal bears the burden of establishing diversity of citizenship. Doe v.
Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993). There is a strong presumption in favor of
remand and courts must narrowly interpret the removal statute. Id. With these standards in
mind, the Court will consider the parties’ arguments.
a. Family Sportsplex – Fraudulent Joinder
First, the Court will address whether Family Sportsplex was fraudulently joined. To
establish fraudulent joinder, “[t]he defendant must show that, after resolving all issues of fact
and law in favor of the plaintiff, the plaintiff cannot establish a cause of action against the instate defendant.” Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir. 1992). If the removing
defendant establishes fraudulent joinder, “the federal district court considering removal may
‘disregard, for jurisdictional purposes, the citizenship of certain nondiverse defendants, assume
jurisdiction over a case, dismiss the nondiverse defendants, and thereby retain jurisdiction.’”
Morris v. Nuzzo, 718 F.3d 660, 666 (7th Cir. 2013) (quoting Schur v. L.A. Weight Loss Ctrs.,
Inc., 577 F.3d 752, 763 (7th Cir. 2009)).
In its notice of removal, PIIC alleged Family Sportplex was fraudulently joined and
pointed out that there were no allegations against Family Sportsplex in Hulliung’s complaint. In
their motions for remand, Hulliung and Alexander fail to address the alleged fraudulent joinder
of Family Sportsplex.
Here, Hulliung seeks an order declaring that PIIC, Hulliung’s insurer, has a duty to
defend and indemnify Hulliung in the underlying state court case. Hulliung seeks no relief from
Family Sportsplex in this action. As such, the Court concludes Family Sportsplex is fraudulently

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joined. The Court will disregard Family Sportsplex for the purposes of jurisdiction and dismiss
Family Sportsplex from this case.
b. Realignment – Alexander
Next, PIIC contends this Court has diversity jurisdiction because Alexander must be
realigned in this action as a plaintiff. In its notice of removal, PIIC asserts that Alexander’s and
Hulliung’s interests are identical as evidenced by the fact that Alexander admitted Hulliung’s
allegations and asked this Court to “grant [Hulliung]’s Complaint for Declaratory Judgment in its
entirety.” In its motion for remand, Hulliung asserts that Alexander is a necessary party to the
declaratory judgment action and properly named as a defendant is this litigation.
“Where jurisdiction is based on diversity of citizenship, the court may ascertain the
alignment of the parties as plaintiff and defendant conforms with their true interests in the
litigation. Realignment is proper when the court finds that no actual, substantial controversy
exists between parties on one side of the dispute and their named opponents.” American
Motorists Ins. Co. v. Trane Co., 657 F.2d 146, 149 (7th Cir. 1981) (citing Indianapolis v. Chase
Nat’l Bank, 314 U.S. 63, 62 (1941)). “Ordinarily the victim of an insured is on one side of the
lawsuit and the insured and his insurance carrier are on the other . . . .” Truck Ins. Exchange v.
Ashland Oil, Inc., 951 F.2d 787, 788 (7th Cir. 1991). However, in a declaratory judgment action
such as the instant case, the insurance company is really the adversary of the insured and the
insured’s victim. See id. As such, “the normal alignment of parties in a suit seeking a
declaratory judgment of non-coverage is Insurer versus Insured and Injured Party.” Home Ins.
Co. of Ill. V. Adco Oil Co., 154 F.3d 739, 741 (7th Cir. 1998).
Here, the interests of both Hulliung and Alexander are identical because both seek a
declaration that PIIC must indemnify Hulliung. See Doc. 2-1 (Alexander “prays that this Court

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grant plaintiff’s Complaint for Declaratory Judgment in its entirety”). While Hulliung and
Alexander may have adverse interests in the underlying case, their interests in the instant
declaratory judgment action are aligned. Therefore, the Court will realign the parties
accordingly.
3. Conclusion
For the foregoing reasons, the Court DENIES Alexander’s (Doc. 7) and Hulliung’s (Doc.
8) motions for remand. The Clerk of Court is DIRECTED to terminate Family Sportsplex as a
defendant. The Clerk of Court is further DIRECTED to terminate Alexander as a defendant and
add her as a plaintiff in this case.
IT IS SO ORDERED.
DATED: July 9, 2014

s/ J. Phil Gilbert
J. PHIL GILBERT
DISTRICT JUDGE

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