Hudson Specialty Insurance Company v. Talex Enterprises, LLC et al

Filing 52

ORDER denying Defendant Cox Architecture, P.A.'s Motion to Change Venue 33 and Amended Motion to Change Venue 34 , construed as motions to remand. Signed by Honorable David C. Bramlette, III on February 8, 2018 (JBR)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
WESTERN DIVISION
HUDSON SPECIALTY INSURANCE COMPANY
v.

PLAINTIFF
CAUSE NO. 5:17-CV-137-DCB-MTP

TALEX ENTERPRISES, LLC,
JUBILEE PERFORMING ARTS CENTER, INC.,
TERRANCE L. ALEXANDER, and the
BOARD OF MAYOR AND SELECTMEN
OF MCCOMB, MISSISSIPPI, et al.

DEFENDANTS

OPINION AND ORDER
This cause is before the Court on a Motion for Change of Venue
Due to Improper Jurisdiction [Doc. 33] and an Amended Motion for
Change of Venue Due to Improper Jurisdiction [Doc. 34] filed by
Defendant

Cox

Architecture,

P.A.

(“Cox”).

Although

styled

as

motions for change of venue, Cox’s motions actually seek to remand
this case —— not merely to change venue. Having considered the
motions, responses, and applicable statutory and case law, and
being otherwise fully informed in the premises, the Court finds as
follows:
I. BACKGROUND
This declaratory judgment action stems from the collapse of
a downtown McComb, Mississippi building due to over-accumulation
of water on its roof.

Invoking diversity jurisdiction, the building’s New Yorkcitizen insurer sued in this Court for a declaration voiding two
insurance

policies

on

the

building

on

the

basis

of

misrepresentations by its Mississippi-citizen insureds. Joined as
defendants are the insureds and a litany of Mississippi-citizen
individuals

and

businesses

potentially

affected

by

any

adjudication of rights under the policies.1 One such defendant
moves to remand, contending diversity is lacking because the
plaintiff-insurer is deemed to share the Mississippi citizenship
of its insureds under 28 U.S.C. § 1332(c)(1).
A.

The Parties
Plaintiff Hudson Specialty Insurance Company (“Hudson”) is a

New York corporation with a New York principal place of business.
[Doc. 1, ¶2] Defendant Terrance Alexander is a Mississippi citizen
and the principal of Defendants Talex Enterprises, LLC (“Talex”)
and

Jubilee

Mississippi

Performing
citizens.

Arts
[Doc.

Center,
1,

Inc.

¶¶3-5]

(“Jubilee”),

Defendant

Cox

both
is

a

Mississippi citizen and one of seventeen persons or entities Hudson
names “so that the declarations and relief sought herein may be
binding upon them.” [Doc. 1, ¶7]

1 These Defendants are Samuel Alexander, Allie’s Enterprises, LLC, Clear
Creek Cabinetry Inc., Concepts by Mere, LLC, Cox Architecture, P.A., Faraway,
LLC, Gilbert Law Firm, PLLC, Graphics Etc. LLC, Lott Furniture Company, McComb
Neurology, PA, Michelle Nelson, Nieman & Associates PC, Office Automation
Center, Pics N Sips, LLC, Professional Beauty, Barber & Equipment, Inc., Twice
as Nice, LLC, and Ronnie Whittington. [Doc. 1, ¶7(a)-(q)]

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B.

The 2016 Alexander Policy
In

July

Alexander

2016,

covering

Hudson
property

issued

a

located

policy
at

of

220-230

insurance2
Main

to

Street,

McComb, Mississippi (the “Main Street Building”) and 730 Vogel
Street, McComb, Mississippi (the “Vogel Street Building”). [Doc.
1, ¶13]
In January 2017, a roof drain on the Main Street Building
ruptured, and Alexander made a claim under the policy. [Doc. 1,
¶¶16-17] About a month later, Hudson issued Alexander a check to
cover the repairs. [Doc. 1, ¶19] But the roof, according to Hudson,
was never repaired. [Doc. 1, ¶20]
C.

The 2017 Talex Policy
On July 20, 2017, Hudson renewed Alexander’s policy3 on the

Main Street Building and the Vogel Street Building and issued a
separate policy to Talex (the “2017 Talex Policy”). [Doc. 1, ¶26]
The 2017 Talex Policy includes a $600,000 general aggregate
limit and a $300,000 per-occurrence limit. And it lists both the
Main Street Building and the Vogel Street Building as covered
premises. [Doc. 1-3, p. 12]

2
Hudson alleges that when Alexander applied for the policy,
misrepresented that he owned the Main Street building [Doc. 1, ¶15].

he

3 The renewed policy described in Hudson’s complaint as the “2017 Alexander
Policy,” policy number HBD 100119191, has a general aggregate limit of $2
million and a per-occurrence limit of $1 million. [Doc. 1-2, p. 12]

3

Hudson alleges that Alexander misrepresented, during renewal
negotiations, that the Main Street Building roof had been repaired
and that Talex owned the Vogel Street Building. [Doc. 1, ¶¶22, 23]
Hudson also alleges that Alexander failed to disclose that a
contractor had expressed concern about the structural integrity of
the roof of the Main Street Building. [Doc. 1, ¶25]
Three days after Hudson renewed Alexander’s policy, the Main
Street Building collapsed. [Doc. 1, ¶29]
D.

The Underlying Lawsuit
In August 2017, The Board of Mayor and Selectmen of the City

of McComb, Mississippi (the “City”) sued Alexander, Talex, and
Hudson in Pike County Chancery Court seeking at least $400,000 for
damage caused by the collapse of the Main Street Building. [Doc.
1, ¶30] The City has twice since amended its chancery court
complaint. [Docs. 1-5, 1-6]
The City’s claims against Talex rest on public nuisance and
negligence theories. Talex was negligent, the complaints reason,
because it failed to correct the dangerous condition presented by
over-accumulation of water on the roof of the Main Street Building
—— despite actual notice of the danger. {Docs. 1-4, 1-5, 1-6] And
as to Hudson, the City seeks an attachment and the imposition of
a constructive trust. [Docs. 1-5, pp. 6-7; 1-6, ¶¶10-11]

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E.

This Suit
Hudson asks the Court to rescind or declare void the 2017

Talex

policy

and

misrepresentations

the

renewed

it

2017

contends

Alexander

Alexander

made

Policy

due

to

during

renewal

negotiations. Cox challenges subject-matter jurisdiction and urges
remand.
Cox contends that Hudson, as a liability insurer to Alexander
and Talex, is deemed to share the Mississippi citizenship of
Alexander and Talex under 28 U.S.C. § 1332(c)(1)(A). Hudson rejoins
that § 1332(c)(1)’s proviso does not apply because this suit is
not a “direct action” under the statute.
II. DISCUSSION
The Court has jurisdiction over suits between parties of
diverse citizenship and in which more than $75,000, exclusive of
interest and costs, is in controversy. 28 U.S.C. § 1332(a)(1).
Generally, a corporation like Hudson is a citizen only of its
state of incorporation and the state in which it maintains its
principal

place

of

business.

28

U.S.C.

§

1332(c)(1).

It

is

undisputed that Hudson, a New York corporation with a principal
place of business in New York, is diverse from the Defendants, all
Mississippi citizens.
But the rule of corporate citizenship is altered by a proviso
expanding corporate citizenship in certain insurance cases. 28
5

U.S.C. § 1332(c)(1)(A)-(C). Under its terms, an insurer sued in a
direct action to which its insureds are not joined as defendants
is deemed a citizen of each state of which its insureds are
citizens. 28 U.S.C. § 1332(c)(1)(A). If § 1332(c)(1)’s proviso
applies here, as Cox contends, then Hudson is considered not only
a citizen of New York, but also a citizen of Mississippi —— the
citizenship of its insureds. And if Cox is correct, then complete
diversity is lacking and remand is required.
Cox

is

inapplicable

incorrect.
for

two

Section

reasons.

1332(c)(1)’s

First,

§

proviso

1332(c)(1)’s

is

proviso

applies only to “direct action” suits, and Hudson’s declaratory
judgment suit is not a “direct action” under the statute. Second,
§ 1332(c)(1)’s proviso applies only when the liability insurer’s
insured is not named as a defendant, and Hudson’s suit names its
insureds as defendants.
A.

Hudson’s Suit is Not a “Direct Action” Under § 1332(c)(1)
A “direct action” is a suit brought by a plaintiff damaged by

the conduct of an insured against the tortfeasor’s insurer, alone.
See Tuck v. United services Auto. Ass’n, 859 F.2d 842, 847 (10th
Cir. 1988); Crescent City Pediatrics v. Bankers Ins. Co., 459 F.
Supp. 2d 510, 513 (E.D. La. 2006) (a suit is not a direct action
unless “the liability sought to be imposed against the insurer
could be imposed against the insured.”). Cox cites no authority
6

and offers no analysis to support characterizing this suit as a
“direct action” under § 1332(c)(1)’s proviso.
This suit cannot qualify as a “direct action” for obvious
reasons: Hudson is the plaintiff; it has not sued itself for
Alexander and Talex’s supposed negligence. And it does not seek to
impose, by virtue of its own declaratory judgment, liability upon
itself for property damage caused by its insureds’ conduct. See
Northbrook Nat. Ins. Co. v. Brewer, 493 U.S. 6, 7 (1989) (“[T]he
language of the proviso is unambiguously limited to actions brought
against insurers.”)(emphasis in original).
Because Hudson’s suit is neither a “direct action” nor a suit
“against” an insurer, § 1332(c)(1)’s proviso does not apply. The
mere presence of an insurance carrier in this suit does not
transform it into a “direct action” under § 1332(c)(1).

See

Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185, 1188 (5th Cir.
1988).
B.

Hudson Has Named Its Insureds as Defendants
Even if this suit were a “direct action,” § 1332(c)(1)’s

proviso would not apply because Hudson has joined its insureds as
defendants. The text of the proviso unequivocally limits its
application to situations in which “the insured is not joined as
a party-defendant.” 28 U.S.C. § 1332(c)(1). As Hudson correctly

7

notes, it has joined its insureds —— Talex and Alexander —— as
defendants.
Section 1332(c)(1)’s “direct action” proviso does not apply
to

this

case,

and

Hudson

is

completely

diverse

from

the

Mississippi-citizen Defendants. The diversity inquiry resolved,
the Court turns to the amount in controversy issue.
C.

The Amount in Controversy Requirement is Met
In declaratory judgment suits, the amount in controversy is

measured in one of two ways: the policy limit or the value of the
underlying claim. By either measure, the amount in controversy
here exceeds the jurisdictional minimum of $75,000, exclusive of
interest and costs.
When a declaratory judgment attacks the validity of the
contract

of

insurance,

the

policy

limit

sets

the

amount

in

controversy. Hartford Ins. Grp. V. Lou-Con Inc., 293 F.3d 908, 911
(5th

Cir.

2002)(internal

citation

omitted).

But

when

the

declaratory judgment asks the Court to order that the policy does
not provide coverage for a particular occurrence, the value of the
underlying claim sets the amount in controversy. Id. at 911.
The amount placed in controversy by Hudson’s declaratory
judgment suit can be measured either way. Indeed, the policy limit
measure could apply because Hudson’s suit asks the Court to rescind
and declare void the Talex Policy and the 2017 Alexander Policy.
8

[Doc. 1, ¶¶48-51] And the underlying claim measure could apply
because Hudson seeks a declaration that it is not obliged to
provide defense and indemnity to Talex or Alexander in connection
with the City’s suit against them for damage caused by the collapse
of the Main Street Building’s roof. [Doc. 1, ¶¶60-64]
Because the limits on the 2017 Talex Policy and the 2017
Alexander Policy far exceed the $75,000 amount in controversy, and
the City of McComb alleges its underlying claim against Hudson’s
insureds is for at least $400,000, the amount in controversy in
this declaratory judgment action exceeds $75,000, exclusive of
interest and costs.
III. CONCLUSION
The Court has diversity jurisdiction over this declaratory
judgment action. The parties are completely diverse, the amount in
controversy exceeds $75,000, exclusive of interest and costs, and
§ 1332(c)(1)’s proviso does not apply.

9

ACCORDINGLY,
IT IS HEREBY ORDERED that Defendant Steve Cox Architecture,
P.A.’s Motion for Change of Venue Due to Improper Jurisdiction
[Doc. 33] and Amended Motion for Change of Venue Due to Improper
Jurisdiction [Doc. 34], construed as motions to remand, are DENIED.
SO ORDERED, this the 8th day of February, 2018.
/s/ David Bramlette_________
UNITED STATES DISTRICT JUDGE

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