XL Specialty Insurance Company v. Bollinger Shipyards, Inc. et al

Filing 270

ORDER AND REASONS denying 215 MOTION to Remand filed by Bollinger Shipyard, Inc., Halter Bollinger Joint Venture, LLC, Bollinger Shipyards Lockport, L.L.C. and finding as moot 216 MOTION to Dismiss for Failure to State a Claim filed by Willis Of Louisiana, Inc.. Signed by Chief Judge Sarah S. Vance on 10/22/14.(Reference: 14-1377)(jjs)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

XL SPECIALTY INSURANCE COMPANY

CIVIL ACTION

VERSUS

NO: 12-2071

BOLLINGER SHIPYARDS, INC., ET AL.

SECTION: R(2)

ORDER AND REASONS
Bollinger1

moves

to

remand

to

state

court

its

insurance

coverage suit against Illinois National Insurance Company (Illinois
National), American International Specialty Lines Insurance Company
(AISLIC), AIG Claims, Inc. (AIG), and Willis of Louisiana, Inc.
(Willis).2 For the following reasons, Bollinger's motion is DENIED,
and Bollinger's claims against Willis are dismissed.
I.

BACKGROUND
This insurance coverage dispute arises out a False Claims Act

action brought against Bollinger by the United States in connection
with a ship conversion project for the United States Coast Guard.
The factual and procedural history of the underlying FCA suit has
been described elsewhere3 and will not be repeated here.

1

"Bollinger" refers collectively to Bollinger Shipyards,
Inc., Bollinger Shipyards Lockport, L.L.C., and Halter Bollinger
Joint Venture, L.L.C.
2

R. Doc. 215.

3

See, e.g., R. Doc. 102.

In an effort to obtain coverage for its costs defending the
FCA suit, Bollinger filed claims with and eventually sued a number
of its insurers in addition to the insurers involved in this
motion. The Court consolidated the suits against the other insurers
with a declaratory judgment action brought against Bollinger by yet
another insurance carrier.4
On

April

29,

2014,

Bollinger

brought

this

suit

against

Illinois National, AISLIC, AIG, and Willis in state court.5 On June
12, 2014, Illinois National, AISLIC, and AIG removed to federal
court on the basis of diversity jurisdiction under 28 U.S.C. §
1332, contending that Bollinger had improperly joined Willis, the
only non-diverse party.6 The suit was then consolidated with the
other insurance actions pending before this Court.7
In its complaint, Bollinger alleges that (1) "at all relevant
times" it was a "named insured[] under Directors, Officers, and
Private Company Liability Insurance Policies issued by AISLIC and
Illinois National;" (2) that these policies "included coverage for
defense costs;" (3) that all of its claims were administered by
AIG; (4) that AIG, AISLIC, and Illinois National are under common

4

See R. Docs. 1, 6, 19.

5

See Bollinger Shipyards, Inc., et al. v. Illinois
National Insurance Co., et al., No. 14-cv-1377, R. Doc. 1-2.
6

See Bollinger Shipyards, Inc., et al. v. Illinois
National Insurance Co., et al., No. 14-cv-1377, R. Doc. 1.
7

R. Doc. 211.
2

ownership and/or control; and (5) that it had paid all of its
premiums and that its D&O policies with AISLIC and Illinois
National "were in full force" when the United States "made certain
claims against Bollinger" in connection with the Coast Guard ship
conversion project.8 Bollinger also alleges that after the United
States revoked acceptance of the vessels, Bollinger directed its
insurance agent, Willis, to put its underwriters on notice of a
possible claim and that "all appropriate notice was given to the
underwriters."9 Bollinger alleges that the insurer defendants -AISLIC,

Illinois

National,

and

AIG

--

"failed

to

undertake

Bollinger's defense and have refused to pay defense costs . . . due
under the policy."10 In addition, Bollinger claims that defendants'
refusal to pay violates both La. R.S. § 22:1892 and La. R.S. §
22:1973, and that Bollinger is entitled to recover statutory
penalties under one or both of these statutes.11
Next, in the event that the "Court finds proper notice was not
given," Bollinger makes allegations in the alternative against
Willis for "fraud and breach of fiduciary duties."12 Specifically,
Bollinger alleges that Willis committed "fraud" because "[a]fter

8

R. Doc. 222-1 at 4.

9

Id. at 6.

10

Id. at 4.

11

Id. at 5-6.

12

Id. at 6.
3

receiving Bollinger's direction to put the underwriters on notice,
Willis, through silence and inaction, misrepresented that this was
done."13 Likewise, Bollinger alleges that Willis "breached its
fiduciary duties to Bollinger . . . insofar as proper notice was
not given to Bollinger's underwriters."14
Bollinger now moves to remand this suit to state court,
arguing that the presence of Willis as a defendant destroys
diversity.15 AISLIC, Illinois National, and AIG contend that removal
remains proper because Willis, the only non-diverse defendant, was
improperly joined in the suit.16 They assert that the claims against
Willis are preempted under La. R.S. § 9:5606 and that Bollinger's
complaint fails to satisfy the fraud exception to the statute.
La. R.S. § 9:5606 governs claims against insurance agents.17
Section 9:5606 provides:
No action for damages against any insurance agent,
broker, solicitor, or other similar licensee under this
state, whether based upon tort, or breach of contract, or
otherwise, arising out of an engagement to provide
insurance services shall be brought unless filed . . .
within one year . . . from the date that the alleged act,
omission, or neglect is discovered or should have been
discovered. However, even as to actions filed within one
year from the date of such discovery, in all events such

13

Id.

14

Id.

15

R. Doc. 215.

16

R. Doc. 213

17

Id. at 2.
4

actions shall be filed at the latest within three years
from the date of the alleged act, omission, or neglect.
In addition, section 9:5606 provides that "[t]he peremptive period
. . . shall not apply in cases of fraud."
AISLIC, Illinois National, and AIG submit evidence in the
form of emails and deposition testimony showing that by February
21, 2008, Bollinger knew Willis had not informed Bollinger's
underwriters of any claims against Bollinger. Specifically, their
evidence shows that on May 24, 2007, Bollinger informed Michael
Tubbs of Willis that the United States had revoked acceptance of
the ships and told Tubbs, "it may be prudent to put the appropriate
underwriters on notice of this event."18 Seven and a half months
later, on January 4, 2008, Bollinger followed up by email, again
instructing Tubbs to "advise underwriters of possible claim."19 A
month later, on February 1, 2008, Bollinger replaced Willis with
Arthur J. Gallagher as its insurance agent.20
A

couple

of

weeks

after

switching

insurance

agents,

on

February 18, 2008, Bollinger sent a follow up email to Nigel
Brunning at Willis, notifying Brunning that it had never received
confirmation from Tubbs that its underwriters had been advised of

18

R. Doc. 213-1 at 32.

19

Id. at 38.

20

Id. at 21.
5

a claim, and asking Brunning to check whether it had been done.21
Brunning responded that he would look into it.22 Three days later,
on February 21, 2008, without having received confirmation one way
or another from Brunning, Bollinger informed Brunning that it had
passed the information about the United States' claims on to its
new agent, Gallagher, and told Brunning "you do not have to worry
about it."23 That same day, Brunning wrote back to say that Willis
"didn't find any record" of having reported any possible claims to
Bollinger's underwriters.24 Thus, as of February 21, 2008, Bollinger
had confirmation that Willis had no record of informing Bollinger's
underwriters of anything. Therefore, AISLIC, Illinois National, and
AIG contend that section 5606's one-year peremptive period has long
since extinguished any claim Bollinger could bring against Willis
arising out of Willis's alleged failure to advise Bollinger's
underwriters.
II.

LEGAL STANDARD
Unless a federal statute expressly provides otherwise, a

defendant may remove a civil action filed in state court if the
federal court would have had original jurisdiction over the case.
28 U.S.C. § 1441(a). The removing party "bears the burden of

21

Id. at 38.

22

Id. at 37.

23

Id.

24

Id. at 40.
6

showing that federal jurisdiction exists and that removal was
proper." Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 397 (5th Cir.
2013) (citing Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d
720, 723 (5th Cir. 2002)). In assessing whether removal was
appropriate, the Court is guided by the principle, grounded in
notions of comity and the recognition that federal courts are
courts of limited jurisdiction, that "removal statute[s] should be
strictly construed in favor of remand." Manguno, 276 F.3d at 723
(citing Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir.
2000)). The Court must remand the case to state court "[i]f at any
time before final judgment it appears that the district court lacks
subject matter jurisdiction."

28 U.S.C. § 1447(c).

When federal jurisdiction is based on diversity, a defendant
may remove only if none of the "parties in interest properly joined
and served as defendants is a citizen of the State in which such
action is brought." 28 U.S.C. § 1441(b) (emphasis added). Improper
joinder doctrine provides a narrow exception to the rule requiring
complete

diversity,

and

the

burden

of

demonstrating

improper

joinder is a heavy one. See Campbell v. Stone Ins., Inc., 509 F.3d
665, 669 (5th Cir. 2007) (citing McDonal v. Abbott Labs., 408 F.3d
177, 183 (5th Cir. 2005)). A defendant may establish improper
joinder

by

showing

either

(1)

actual

fraud

in

pleading

jurisdictional facts, or (2) the plaintiff's inability to establish
a cause of action against the non-diverse parties in state court.

7

Id. (citing Ross v. Citifinancial, Inc., 344 F.3d 458, 461 (5th
Cir. 2003)). Here, there is no allegation that the plaintiffs
fraudulently pleaded jurisdictional facts. Accordingly, only the
second prong of the improper joinder test is at issue. Under this
prong, the Court asks whether there is arguably a reasonable basis
for predicting that state law might impose liability on the nondiverse defendants. Id. This possibility of recovery "must be
reasonable, not merely theoretical." Travis v. Irby, 326 F.3d 644,
648 (5th Cir. 2003) (citing Great Plains Trust Co. v. Morgan
Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002)).
To decide whether a plaintiff has demonstrated a reasonable
possibility of recovery, "the district court may 'conduct a Rule
12(b)(6)-type analysis, looking initially at the allegations of the
complaint to determine whether the complaint states a claim under
state law against the in-state defendant.'" Menendez v. Wal–Mart
Stores, Inc., 364 F. App'x 62, 69 (5th Cir. 2010) (per curiam)
(quoting Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th
Cir. 2004)). The scope of the inquiry for improper joinder,
however, is broader than that for Rule 12(b)(6), because the Court
may "pierce the pleadings" and consider summary judgment-type
evidence to determine whether the plaintiff has a basis in fact for
its claim. Smallwood, 385 F.3d at 573 (citing Badon v. R J R
Nabisco

Inc.,

224

F.3d

382,

389

(5th

Cir.

2000));

see

also

Menendez, 364 F. App'x at 69. In conducting this inquiry, the Court
8

must "take into account all unchallenged factual allegations,
including those alleged in the complaint, in the light most
favorable to the plaintiff." Travis, 326 F.3d at 649. Further, the
Court must resolve all contested issues of fact and all ambiguities
of state law in favor of the plaintiff. Id.; Elam v. Kan. City S.
Ry. Co., 635 F.3d 796, 813 (5th Cir. 2011).
III. DISCUSSION
The question to be answered is whether there is arguably a
reasonable basis for predicting that Louisiana law might impose
liability on Willis. The Court concludes that there is not.
La. R.S. § 9:5606
Bollinger’s claims against Willis are governed by La. R.S. §
9:5606, which governs claims for damages against an insurance
“agent, broker, solicitor, or other similar licensee." The parties
do not appear to dispute that Willis is an insurance agent within
the meaning of the statute, and that the statute therefore applies
to actions against it. Section 9:5606(A) provides that all actions
for damages against an insurance agent must be brought within one
year of the date on which the alleged wrongful act, omission, or
neglect was or should have been discovered, and that no claim
against an insurance agent may be filed more than three years from
the date when the alleged act, omission, or neglect occurred. In
addition, § 5606(C) provides that "[t]he peremptive period . . .
shall not apply in cases of fraud." The facts here establish that
9

unless the fraud exception applies, Bollinger's claims against
Willis

are

extinguished

by

both

the

one-year

and

three-year

peremptive periods of section 9:5606.
First, the three-year peremptive period bars claims made more
than three years after the occurrence of the alleged wrongful act,
omission, or neglect. Willis ceased to be Bollinger’s insurance
agent on February 1, 2008, when Bollinger replaced Willis with
Arthur J. Gallagher Risk Management as its sole insurance agent and
broker.25 Therefore the latest that Willis could have committed a
wrong

as

Bollinger's

insurance

agent

was

February

1,

2008.

Bollinger did not initiate this suit until April 26, 2014, over six
years later. Thus, this suit falls well outside the three-year
peremptive period of section 9:5606.
Second, the one-year peremptive period bars claims made more
than one year after the date on which the alleged wrongful act,
omission, or neglect was or should have been discovered. Here,
Bollinger requested that Willis notify its insurers in 2007 and
again in early 2008. On February 18, 2008, Bollinger followed up
with

Willis,

asking

Willis

to

check

if

it

had

ever

given

Bollinger's underwriters the requested notice.26 Three days later,
on February 21, 2008, Willis wrote back to say that it "didn't find
any

record"

of

having

reported

25

R. Doc. 213-1 at 21.

26

Id. at 38.
10

any

claims

to

Bollinger's

underwriters.27

Thus,

as

of

February

21,

2008,

Bollinger

had

confirmation that Willis had no record of informing Bollinger's
underwriters of anything. Again, Bollinger did not initiate this
suit until April 26, 2014, over six years later. Therefore, this
suit also falls outside the one-year peremptive period of section
9:5606.

Accordingly,

unless

the

fraud

exception

applies,

Bollinger's claims against Willis are perempted.
Fraud
Preliminarily, the Court notes that Bollinger has failed to
plead fraud with the level of particularity demanded by Federal
Rule of Civil Procedure 9(b). Pleading fraud with particularity in
the Fifth Circuit requires a plaintiff to plead the "time, place
and contents of the false representations, as well as the identity
of the person making the misrepresentation and what [that person]
obtained thereby." Williams v. WMX Technologies, Inc., 112 F.3d
175, 177 (5th Cir. 1997) (quoting Tuchman v. DSC Communications
Corp., 14 F.3d 1061, 1068 (5th Cir. 1994). Plaintiffs must "set
forth an explanation as to why the statement or omission complained
of was false or misleading."

Id.

at 179

(citation omitted).

Finally, "although scienter may be 'averred generally,' . . .
pleading scienter requires more than a simple allegation that a
defendant had fraudulent intent. To plead scienter adequately, a

27

Id. at 40.
11

plaintiff must set forth specific facts that support an inference
of fraud." Tuchman, 14 F.3d at 1068 (quoting F.R.C.P. 9(b)).
Here, Bollinger conclusorily alleges that Willis "committ[ed]
fraud against Bollinger" and "committ[ed] . . . professional
fraud."28

Beyond

that,

Bollinger

alleges

only

that

“[a]fter

receiving Bollinger’s direction to put the underwriters on notice,
Willis, through silence and inaction, misrepresented that this was
done, though it unjustly benefitted from being paid by Bollinger
nonetheless, and Bollinger was caused a loss through this fraud.”29
Bollinger fails to allege the date or dates on which the underlying
wrong (here, the failure to notify) took place, the place where the
misrepresentation "through silence and inaction" occurred, or the
names of the people involved. Nor does Bollinger explain why
Willis's "silence and inaction" -- behavior that appears just as
consistent with simple inattention or incompetence as it does with
fraud -- "was false or misleading." Williams, 112 F.3d at 179.
Finally, Bollinger does not allege, "generally" or otherwise, that
Willis acted with the requisite scienter when it failed to inform
Bollinger that the underwriters were not put on notice. F.R.C.P.
9(b). Indeed, Bollinger makes no allegations at all concerning
Willis's knowledge or intentions. Therefore, Bollinger has utterly

28

Bollinger Shipyards, Inc., et al. v. Illinois National
Insurance Co., et al., No. 14-cv-1377, R. Doc. 1-2 at ¶ 15.
29

R. Doc. 222-1 at 6 ¶ 14.
12

failed to plead fraud with the requisite particularlity. For this
reason alone, Bollinger's fraud allegations would be insufficient
to bring Bollinger within the fraud exception of section 9:5606(C).
In

addition,

however,

when

making

an

improper

joinder

determination, a court may "pierce the pleadings" and consider
summary judgment-type evidence to determine whether the plaintiff
has a basis in fact for its claim. Smallwood, 385 F.3d at 573. The
Court has done so here and finds that there is also no basis in
fact for Bollinger's conclusory allegations of fraud. Therefore,
the fraud exception to section 9:5606 does not apply.
The fraud exception provision of section 9:5606 refers to
article 1953 of the Louisiana Civil Code. Article 1953 of the Civil
Code defines fraud as "a misrepresentation or a suppression of the
truth made with the intention either to obtain an unjust advantage
for one party or to cause a loss or inconvenience to the other,"
and provides that fraud "may also result from silence or inaction."
In support of their Opposition to Bollinger's Motion to Remand,
AISLIC, Illinois National, and AIG submitted summary judgment style
evidence in the form of emails and deposition testimony. These
documents reveal that there is no basis to conclude that Willis's
alleged "silence and inaction" constituted anything close to the
type of fraudulent conduct described by article 1953 of the
Louisiana Civil Code.

13

The relevant facts are as follows: In a May 24, 2007 email to
Michael Tubbs at Willis, Bollinger informed Willis that the United
States had revoked acceptance of the cutters.30 In that email,
Bollinger stated, "it may be prudent to put the appropriate
underwriters on notice of this event."31 There is no indication that
Tubbs responded. Seven and a half months later, on January 4, 2008,
Bollinger followed up by email, again instructing Tubbs to "advise
underwriters of possible claim."32 Again, there is no indication
that Tubbs responded. One month later, on February 1, 2008,
Bollinger replaced Willis with Arthur J. Gallagher as its insurance
agent.33 Two weeks after switching insurance agents, on February 18,
2008,

Bollinger

contacted

a

different

Willis

employee,

Nigel

Brunning, and notified him that it had never received confirmation
that its underwriters had been advised of a claim.34 Bollinger asked
Brunning to check if it had been done.35 Brunning responded that
same day saying that he would look into it.36 Three days later, on
February 21, 2008, without having received confirmation one way or

30

R. Doc. 213-1 at 32.

31

Id.

32

Id. at 38.

33

Id. at 21.

34

Id. at 38.

35

Id.

36

Id. at 37.
14

another from Brunning, Bollinger informed him that it had passed
the information about the United States' claims on to its new
agent, Gallagher, and told Brunning "you do not have to worry about
it."37 That same day, Brunning wrote back anyway with a report of
what he had gathered about the status of Bollinger's claims. He
said that Willis "didn't find any record" of having reported any
possible claims to Bollinger's underwriters.38 Brunning's clear and
direct

response

is

fundamentally

the

opposite

of

fraud

or

concealment. Indeed, the only conduct in this sequence of events
that could be characterized as "silence and inaction" is Tubbs's
failure to respond to the Bollinger's May 24, 2007 and January 4,
2008 emails. But this conduct does not constitute fraud either.
First,

nothing

indicates

that

Bollinger

was

misled

by

this

omission. To the contrary, that Bollinger saw need to follow up at
least

twice

to

check

if

the

requested

notice

had

been

made

indicates that it did not rely upon Tubb's failure to respond to
the emails as an indication that notice had been made. Second,
there is simply nothing to suggest that Tubbs chose not to respond
to Bollinger's emails "with the intention . . . to obtain an unjust
advantage . . . or to cause a loss or inconvenience." La. Civ. Code
art. 1953. Therefore, no fraud occurred that would satisfy the

37

Id.

38

Id. at 40.
15

fraud

exception

provision

of

section

9:5606(C).

Accordingly,

section 9:5606(A) perempts Bollinger's claims against Willis.
Because the peremptive statute bars Bollinger's claims against
Willis, Bollinger does not have a viable cause of action against
Willis. This means that Bollinger improperly joined Willis, the
only non-diverse party in the suit. Complete diversity exists
between Bollinger and the remaining defendants, AISLIC, Illinois
National, and AIG. Therefore, the Court finds that removal was
proper.
IV. CONCLUSION
For the forgoing reasons, Bollinger’s motion to remand is
DENIED and Bollinger’s claims against Willis are dismissed.
In addition, in light of the Court's dismissal of Bollinger's
claims against Willis, Willis's pending Motion to Dismiss39 is now
moot.

New Orleans, Louisiana, this 22ndday of October, 2014.
__

_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

39

R. Doc. 216.
16