Maxum Indemnity Company v. Audiology LLC
Filing
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ORDER AND REASONS denying 10 Motion to Dismiss for Lack of Jurisdiction. Plaintiff has not properly pleaded complete diversity in the Complaint. Plaintiff shall amend its Notice of Removal within 15 days or this case will be dismissed for lack of subject matter jurisdiction. Signed by Judge Jane Triche Milazzo. (ecm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MAXUM INDEMNITY COMPANY
CIVIL ACTION
VERSUS
NO: 13‐5216
AUDIOLOGY LLC
SECTION: “H”(3)
ORDER AND REASONS
Before the Court is a Motion to Dismiss for lack of subject matter jurisdiction (Doc. 10). For
the following reasons, the Motion is DENIED.
BACKGROUND
Plaintiff filed this action for declaratory judgment invoking the Court's diversity jurisdiction.
Plaintiff issued a commercial general liability insurance policy to Defendant. Defendant has been
sued in Louisiana state court for alleged violations of the Louisiana Unfair Trade Practices Act.
Plaintiff seeks a declaration that the liability insurance policy it issued does not provide coverage
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for the suit against Defendant in state court and that Plaintiff has no duty to defend or indemnify
Defendant. Defendant alleges that this court lacks subject matter jurisdiction.
LAW AND ANALYSIS
Subject matter jurisdiction in this case is allegedly premised upon diversity of citizenship.
See 28 U.S.C. § 1332. Cases arising under § 1332 require complete diversity of citizenship and an
amount in controversy in excess of $75,000.00. Id.; Stiftung v. Plains Mktg., L.P., 603 F.3d 295, 297
(5th Cir. 2010). "The concept of complete diversity requires that all persons on one side of the
controversy be citizens of different states than all persons on the other side." McClaughlin v.
Mississippi Power Co., 376 F.3d 344, 353 (5th Cir. 2004). In this matter, the burden of proving
complete diversity lies with Defendant. Getty Oil Corp., a Div. of Texaco, Inc. v. Ins. Co. of N. Am.,
841 F.2d 1254, 1259 (5th Cir. 1988). To carry this burden, Plaintiff must "distinctly and affirmatively
allege [ ] the citizenship of the parties." Howery v. Allstate Ins. Co., 243 F.3d 912, 919 (5th Cir.
2001) (alteration in original).
In this case, both Plaintiff and Defendant are business entities. The manner in which a court
determines the citizenship of a business entity varies. A corporation is a citizen of every state in
which it is incorporated as well as the state in which its principal place of business is located. 28
U.S.C. § 1332(c)(1). Unlike corporations, the "citizenship of a LLC is determined by the citizenship
of all of its members." Harvey v. Grey Wold Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008).
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Accordingly, Plaintiff "must list the citizenship of each member of each limited liability company
to properly allege diversity of jurisdiction." Bona Fide Demolition & Recovery, LLC v. Crosby Constr.
Co. of Louisiana, Inc., No. 07–3115, 2009 WL 413504, at *1 (E.D. La. Feb. 18, 2009); see also
Pyramid Transp., Inc. v. Greatwide Dallas Mavis, LLC, No. 3:12–CV–0149–D, 2013 WL 840664, at
*6 (N.D. Tex. Mar. 7, 2013) ("The citizenship of each member of a limited liability company must
be alleged."); Toney v. Knauf Gips KG, No. 12–638–JJB–SCR, 2012 WL 5923960, at *1 (M.D. La. Oct.
25, 2012) ("[T]o properly allege the citizenship of a limited liability company . . . the party asserting
jurisdiction must identify each of the entity's members . . . and the citizenship of each [member].").
The Complaint alleges that Defendant is a Louisiana LLC with its principle place of business
in Louisiana. In order to properly plead the citizenship of Defendant, Plaintiff must list the identity
and citizenship of all of Defendant's members. Plaintiff will be granted leave to amend its
complaint to properly plead the citizenship of Defendant within 15 days of the entry of this order.
As to the question of amount in controversy, Defendant contends that the amount in
controversy in this case is less than $75,000. When determining the amount in controversy for
jurisdictional purposes, a court first considers the allegations in the complaint. Etheridge v. Piper
Aircraft Corp., 559 F.2d 1027, 1028 (5th Cir. 1977). "The amount in controversy, in an action for
declaratory or injunctive relief, is the value of the right to be protected or the extent of the injury
to be prevented." St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1252–53 (5th Cir.
1998). "When an insurer seeks a declaratory judgment regarding the coverage provided by an
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insurance policy, the 'object of the litigation' is the policy and the 'value of the right to be
protected' is plaintiff's potential liability under that policy." Id. at 1253. "[T]he jurisdictional
amount in controversy is measured by the value of the underlying claim— not the face amount of
the policy." Hartford Ins. Grp. v. Lou‐Con Inc., 293 F.3d 908, 911 (5th Cir. 2002).
In order to assess the amount in controversy in this case, the Court must consider whether
Plaintiff's potential liability under the policy exceeds $75,000. The answer to that question
depends on the value of the claim asserted against Defendant in state court. If it appears that the
value of a potential judgment against Defendant, plus the amount Plaintiff would spend providing
a defense to Defendant in state court would exceed $75,000, then the Court has jurisdiction over
this action.1
The action in state court was filed by Westco Breathalyzers, LLC against Louisiana Interlocks,
LLC and Audiology, LLC. Westco alleges that Louisiana Interlocks is in the business of renting
ignition interlock devices.2 According to Westco, it entered into a contract with Louisiana Interlocks
wherein Westco was the exclusive installer and service provider for interlock devices rented by
Louisiana Interlocks. Westco alleges that it currently holds one hundred service agreements with
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The policy at issue has a $1 million limit per occurrence. Neither party contends that the value of
this claim approaches the policy limit.
2
An ignition interlock device is a mechanism installed into the ignition system of a customer's
vehicle. The interlock device requires the operator of the vehicle to breathe into the system prior to the
vehicle starting. If the operator is intoxicated, the interlock device will prevent the vehicle from starting.
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Louisiana Interlocks customers. Westco complains that Louisiana Interlocks and Audiology, LLC
conspired to enter into business together to the detriment of Westco and its contracts with
Louisiana Interlocks customers. Louisiana Interlocks allegedly began telling its customers not to
use Westco but to use Audiology instead and began referring customers to Audiology despite the
contract with Westco. Westco alleges that it is entitled to monetary damages from Audiology for
loss of business income, loss of goodwill, loss of reputation, loss of business opportunities, and
mental anguish. Importantly, Westco claims that it is entitled to triple damages and attorney's fees
pursuant to the Louisiana Unfair Trade Practices Act.
In light of these allegations, the Court turns to the question at hand: whether it appears that
the value of cause of action against Audiology in state court, plus the cost to defend that action,
exceeds $75,000. The Court has little trouble answering that question in the affirmative. Westco
claims that it lost the business of over one hundred customers. If the value of each customer is
only $250, then the damages for loss of business alone would be $25,000, tripled to $75,000. Thus,
assuming a relatively modest award, the potential liability associated with the state court suit,
before attorney's fees, exceeds $75,000. Accordingly, since Plaintiff would potentially be liable for
not only the award, but the attorney's fees of both Plaintiff and Audiology, it appears to the Court
that Plaintiff's potential liability for the instant insurance claim exceeds $75,000.
CONCLUSION
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For the forgoing reasons, the Court finds that the amount in controversy requirement is
met. Therefore the Motion to Dismiss is DENIED. However, Plaintiff has not properly pleaded
complete diversity in the Complaint. Plaintiff shall amend its Notice of Removal within 15 days or
this case will be dismissed for lack of subject matter jurisdiction.
New Orleans, Louisiana, this 15th day of July, 2014.
____________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
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