Powko Industries, L.L.C. v. DMI Contractors, Inc. et al

Filing 16

NOTICE AND ORDER: DMI shall file a response to LMICs 14 Memorandum in Support of Federal Subject Matter Jurisdiction on or before 3/15/2017. Signed by Magistrate Judge Erin Wilder-Doomes on 3/8/2017. (LLH)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
POWKO INDUSTRIES, LLC
CIVIL ACTION
VERSUS
NO. 17-19-BAJ-EWD
DMI CONTRACTORS, INC. ET AL.
NOTICE AND ORDER
This civil action arises out of a Third Party Demand filed by Scott Folse, DMI Contractors,
Inc. and DMI Pipe Fabrication, LLC (collectively, “DMI”) against LM Insurance Corporation
(“LMIC”) in the Nineteenth Judicial District Court for the Parish of East Baton Rouge, State of
Louisiana in a suit captioned Powko Industries, LLC v. DMI Contractors, Inc. and DMI Pipe
Fabrication, LLC, No. 629,238 (the “State Court Suit”).1 By their Third Party Demand, DMI
seeks to recover sums DMI paid to settle claims asserted by Powko Industries, Inc. in the State
Court Suit, as well as in a parallel federal suit which alleged federal RICO and Lanham Act claims,
Powko Industries, LLC v. Scott Folse, et al., No. 15-388-BAJ-SCR (the “First Federal Court
Suit”).2 DMI asserts that under the terms of an insurance policy issued by LMIC to DMI
Contractors, Inc., LMIC was obligated to participate “in the settlement of and payment of a
settlement,” and that LMIC has breached that obligation in bad faith.3
On January 11, 2017, LMIC filed a Notice of Removal, asserting that the Third Party
Demand is a new lawsuit over which this court has federal subject matter jurisdiction pursuant to

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R. Doc. 1, ¶ 1.
R. Doc. 1-2, ¶¶ 3 & 16-19.
3
R. Doc. 1-2, ¶¶ 16 & 17. LMIC has also filed a separate declaratory judgment action, seeking a declaration from
this court that LMIC does not owe a duty to defend DMI in the State Court Suit, that the CGL policies at issue do not
cover the parties’ settlement, and that DMI’s statutory bad faith claims against LMIC related to the State Court Suit
and the First Federal Court Suit are prescribed and/or without merit. LM Ins. Corp. v. Scott Folse, DMI Contractors,
Inc., and DMI Pipe Fabricators LLC, No. 17-cv-20-BAJ-RLB, United States District Court, Middle District of
Louisiana.
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28 U.S.C. § 13324 because the parties are completely diverse and the amount in controversy
exceeds $75,000.00.5 In its Notice of Removal, LMIC asserts that “despite the parties’ settlement
– which indisputably was consummated more than a year ago – the state court lawsuit against DMI
inexplicably was not formally dismissed.”6 The undersigned’s review of the state court record
attached to LMIC’s Notice of Removal confirms that the State Court Suit was not formally
dismissed.7
On January 23, 2017, the undersigned ordered LMIC to file a Memorandum in Support of
Federal Subject Matter Jurisdiction by February 13, 2017 specifically addressing, inter alia: (1)
whether this suit fits within the limited exceptions set forth in Central of Georgia Ry. Co. v. Riegel
Textile Corp., 426 F.2d 935 (5th Cir. 1970) and Johns, Pendleton & Assocs. v. Miranda, Warwick
& Milazzo, 2002 WL 31001838 (E.D. La. Sept. 4, 2002) to the general rule that a third party
defendant may not remove a case based on diversity jurisdiction; and (2) based on the status of the
State Court Suit at the time of removal, whether the entire matter (i.e., including the original
plaintiff’s claims against non-diverse defendants) was removed pursuant to Eckert v.
Administrators of the Tulane Educational Fund, 2016 WL 158919 (E.D. La. Jan. 14, 2016) and, if
so, whether complete diversity between the parties exists.8 The undersigned further ordered that
DMI “shall file any response within twenty-one (21) days of LM Insurance Corporation filing its
Memorandum in Support of Federal Subject Matter Jurisdiction.”9

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The Notice of Removal also alleges this court has federal question subject matter jurisdiction pursuant to 28 U.S.C.
§ 1331. However, LMIC provides no explanation or support for that position and its Notice of Removal only presents
allegations of federal subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
5
With regard to the amount in controversy, LMIC alleges that “DMI’s pleading is silent as to the settlement amount,
but this amount is $1.5 million, which far exceeds the jurisdictional minimum.” R. Doc. 1, ¶ 22. LMIC further
alleges that “DMI seek to recover penalties and attorney fees for LMIC’s alleged bad faith in failing to pay the
settlement. These amounts are considered in determining the amount in controversy.” R. Doc. 1, ¶ 23.
6
R. Doc. 1, ¶ 6.
7
R. Doc. 1-7.
8
R. Doc. 8. The undersigned also ordered LMIC to address the basis for subject matter jurisdiction pursuant to 28
U.S.C. § 1331, if any. LMIC’s February 13, 2017 Memorandum in Support of Federal Subject Matter Jurisdiction
does not set forth any basis for federal question subject matter jurisdiction. R. Doc. 14.
9
R. Doc. 8.

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Pursuant to the January 23, 2017 Notice and Order, LMIC filed its Memorandum in
Support of Federal Subject Matter Jurisdiction on February 13, 2017.10 However, despite this
court’s Notice and Order granting DMI twenty-one (21) days to file a response regarding subject
matter jurisdiction, DMI failed to file any memorandum regarding subject matter jurisdiction by
the March 6, 2017 deadline. Instead, the only indication that DMI has since considered federal
subject matter jurisdiction is contained in the parties’ March 2, 2017 Status Report, wherein DMI
asserts, without explanation, that it “contests the jurisdiction of the Court pursuant to 28 U.S.C. §
1332(c).”11
Despite DMI’s failure to timely file a response, this court is required to consider whether
federal subject matter jurisdiction exists and the undersigned finds that briefing from DMI on the
issues previously outlined in this court’s January 23, 2017 Notice and Order and addressed in
LMIC’s Memorandum in Support of Federal Subject Matter Jurisdiction would be helpful to
making the determining regarding the existence of subject matter jurisdiction.
Accordingly,
IT IS HEREBY ORDERED that DMI shall file a response to LMIC’s Memorandum in
Support of Federal Subject Matter Jurisdiction on or before March 15, 2017. DMI’s briefing
shall address the issues previously outlined in this court’s January 23, 2017 Notice and Order12
and shall explain why DMI “contests the jurisdiction of the Court pursuant to 28 U.S.C. § 1332(c)”
as asserted in the parties’ Status Report.13
Signed in Baton Rouge, Louisiana, on March 8, 2017.

S
ERIN WILDER-DOOMES
UNITED STATES MAGISTRATE JUDGE
10

R. Doc. 14.
R. Doc. 15.
12
R. Doc. 8.
13
R. Doc. 15.
11

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