Privilege Underwriters Reciprocal Exchange v. Research Products Corporation
Filing
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MEMORANDUM OPINION AND ORDER by Judge David J. Hale on 2/14/2017 - Plaintiff's motion for remand 7 is GRANTED. This action is REMANDED to Jefferson Circuit Court and is STRICKEN from the Court's docket. cc: Counsel, Jefferson Circuit Court (via Certified Mail)(DAK)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
PRIVILEGE UNDERWRITERS
RECIPROCAL EXCHANGE,
Plaintiff,
v.
Civil Action No. 3:16-cv-426-DJH
RESEARCH PRODUCTS CORPORATION,
Defendant.
* * * * *
MEMORANDUM OPINION AND ORDER
Plaintiff Privilege Underwriters Reciprocal Exchange seeks remand of this subrogation
action to Jefferson Circuit Court.
(Docket No. 7)
Because Defendant Research Products
Corporation has failed to show that the Court possesses subject matter jurisdiction, the motion to
remand will be granted.
I. BACKGROUND
Plaintiff filed this action in state court as subrogee of Alan and Angela Jones. (D.N. 1-1,
PageID # 5) Plaintiff insured the Joneses’ real and personal property, which was damaged by
fire in January 2016. (Id., PageID # 6–7) Defendant designs, manufactures, distributes, and sells
electronic air cleaners known as Aprilaire. (Id., PageID # 6) The Joneses’ home featured an
Aprilaire that Plaintiff alleges caused the fire. (Id., PageID # 7)
Plaintiff is a member-owned, unincorporated association established and based in Florida
that acts as a reciprocal insurance exchange. (Id., PageID # 5) A reciprocal insurance exchange
is an unincorporated association of members, known as subscribers, who are both insurers and
insureds. See Themis Lodging Corp. v. Erie Ins. Exch., No. 1:10 CV 0003, 2010 WL 2817251,
at *1 (N.D. Ohio July 16, 2010).
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Defendant removed this action pursuant to 28 U.S.C. § 1332(a)(1), alleging that complete
diversity exists between the parties and the amount in controversy exceeds $75,000. (D.N. 1,
PageID # 2) Defendant is a corporation organized and existing under the laws of Wisconsin with
its principal place of business in Wisconsin. (Id.) Defendant’s notice of removal asserts that
“[u]pon information and belief, there exists no known member or owner of the Plaintiff who is a
legal resident of the State of Wisconsin.” (Id.)
II. STANDARD
“When considering a motion to remand, the Court must examine whether the case was
properly removed to federal court.” Graves v. Standard Ins. Co., 66 F. Supp. 3d 920, 922 (W.D.
Ky. 2014) (internal quotations omitted). “Federal courts are courts of limited jurisdiction.”
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Therefore, the removing
party has the burden of establishing federal jurisdiction. Hertz Corp. v. Friend, 559 U.S. 77, 96
(2010); Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999). Because Defendant
removed this action based on diversity jurisdiction, it must show by a preponderance of the
evidence that (1) the action is between citizens of different states and (2) the amount in
controversy exceeds $75,000. 28 U.S.C. § 1332(a); Everett v. Verizon Wireless, Inc., 460 F.3d
818, 829 (6th Cir. 2006). Failure to satisfy either of these requirements defeats diversity
jurisdiction. Here, the relevant question is whether Defendant has properly established that the
parties are diverse.
III. DISCUSSION
Generally, in a case removed to federal court, “[t]he existence of subject matter
jurisdiction is determined by examining the complaint as it existed at the time of removal.”
Harper v. AutoAlliance Int’l, 392 F.3d 195, 210 (6th Cir. 2006). Here, the complaint states that
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Privilege Underwriters is an unincorporated association and acts as a reciprocal insurance
exchange. (D.N. 1-1, PageID # 5) However, the complaint does not indicate the citizenship of
each member or assert that it has a Wisconsin member. This deficiency is significant because
unincorporated associations bear the citizenship of their members. Carden v. Aroma Assoc., 494
U.S. 185, 195–96 (1990). Further, while the Sixth Circuit Court of Appeals has not addressed
this issue, many district courts within the Sixth Circuit agree that “[c]ourts have long recognized
that reciprocal exchange associations . . . bear the citizenship of each member.” See, e.g.,
Hollins v. Farmers Ins. Exch., No. 3:13-01026, 2014 WL 1922757, at *1 (M.D. Tenn. May 14,
2014); see also Hartfield v. Farmers Ins. Exch., No. 11-13719, 2013 WL 136235, at *3 (E.D.
Mich. Jan. 10, 2013); Themis Lodging Corp., 2010 WL 2817251 at *1; Brown v. Farmers Ins.
Co., No. 06-13693, 2007 WL 496669, at *3 (E.D. Mich. Feb. 13, 2007).
In its motion to remand, Plaintiff asserts that its membership includes citizens of
Wisconsin. (D.N. 7, PageID # 29) It submits an affidavit from Gary Stephen, Executive Vice
President of Claims and Risk Management for Privilege Underwriters, who attests that “[o]n the
date of the loss in this case, the date of filing of the Complaint for this case, and on an on-going
and continuous basis through today, [Privilege Underwriters] has members that are citizens of
the State of Wisconsin.” (D.N. 7-2, PageID # 39)
This case is similar to Brown v. Farmers Ins. Co., in which the Eastern District of
Michigan granted the defendant’s motion to dismiss for lack of subject matter jurisdiction. See
2007 WL 496669 at *1. Brown concerned a dispute over how the plaintiff’s insurer, Fire
Insurance Exchange, should pay the remaining proceeds after the plaintiff filed a fire loss claim.
Id. Like Privilege Underwriters, Fire Insurance Exchange was a reciprocal insurance exchange.
Id. at *2. Fire Insurance Exchange asserted that, as an unincorporated association, it had
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members who were citizens of Michigan. Id. Fire Insurance Exchange submitted a sworn
affidavit from its Assistant Secretary, who attested to the fact that Fire Insurance Exchange had
Michigan members. Id. The court found this affidavit to be sufficient evidence that Fire
Insurance Exchange had a Michigan member. Id. at *3. Because the plaintiff was also a citizen
of Michigan, the court determined that there was no diversity and thus no subject matter
jurisdiction. Id.
“The district court has ‘wide discretion to allow affidavits, documents and even a limited
evidentiary hearing to resolve disputed jurisdictional facts.’” Cmty. Ins. Co. v. Rowe, 85 F.
Supp. 2d 800, 804 (quoting Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir.
1990)). At the very least, the affidavit submitted by Plaintiff creates some doubt as to whether
subject matter jurisdiction exists. Any doubt as to the propriety of removal must be resolved in
favor of remand. Coyne, 183 F.3d at 493. Defendant asserts that the affidavit is insufficient and
Plaintiff must prove that it is in fact an unincorporated association as well as identify at least one
member from Wisconsin. (D.N. 8, PageID # 42–43) But the burden to establish subject matter
jurisdiction rests with the party seeking removal. See Coyne, 183 at 493. In the absence of
contrary proof, the Court must presume that it lacks subject matter jurisdiction. Kokkonen, 511
U.S. at 377.
Defendants also argue that even if there is a Wisconsin member, its citizenship must be
ignored because that Wisconsin member has no connection to the case and is not a real party in
interest. (D.N. 15, PageID # 68–69) This argument ignores established law that unincorporated
associations and reciprocal insurance exchanges bear the citizenship of their members. See
Carden, 494 U.S. at 195–96; Hollins, 2014 WL 1922757 at *1; Hartfield, 2013 WL 136235 at
*3; Themis Lodging Corp., 2010 WL 2817251 at *1; Brown, 2007 WL 496669 at *3. Privilege
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Underwriters is an unincorporated association with a Wisconsin member that acts as a reciprocal
insurance exchange. (D.N. 1-1, PageID # 5; D.N. 7, PageID # 28–29) Further, Privilege
Underwriters is a real party in interest because as subrogee of the Joneses, it is entitled to enforce
the right for which it is suing. See Certain Interested Underwriters at Lloyds London England v.
Layne, 26 F.3d 39, 42–43 (6th Cir. 1994) (“[T]he real party in interest is the person who is
entitled to enforce the right asserted under the governing substantive law.”); Wine v. Globe Am.
Cas. Co., 917 S.W.2d 558, 561 (Ky. 1996) (discussing subrogation under Kentucky law and
recognizing the right of the insurer to be placed in the position of its insured in order to pursue
recovery for payments made to the insured). Defendant’s arguments are unavailing, and the
motion to remand will be granted.
IV. CONCLUSION
The Court concludes that it lacks subject matter jurisdiction. Accordingly, and the Court
being otherwise sufficiently advised, it is hereby
ORDERED that Plaintiff’s motion for remand (D.N. 7) is GRANTED. This action is
REMANDED to Jefferson Circuit Court in accordance with 28 U.S.C. 1447(c) and is
STRICKEN from the Court’s docket.
February 14, 2017
David J. Hale, Judge
United States District Court
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