Plentywood Hardware, Inc. v. Liberty Mutual Group Inc. et al

Filing 23

IT IS ORDERED that Plaintiffs Motion to Remand, Doc. 6 is GRANTED. This case is REMANDED to the Montana Fifteenth Judicial District Court, Sheridan County. Signed by Judge Brian Morris on 9/28/2015. (SLL, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
GREAT FALLS DIVISION
CV 15-45-GF-BMM

PLENTYWOOD HARDWARE, INC.,
Plaintiff,

ORDER REMANDING CASE

vs.
LIBERTY MUTUAL GROUP, INC.
and AMERICAN FIRE AND
CASUALTY COMPANY,
Defendants.

I. BACKGROUND
Defendants, Liberty Mutual Group, Inc., and American Fire and Casualty
Company (collectively “Liberty Mutual”), removed this case from the Montana
Fifteenth Judicial District Court, Sheridan County, on June 8, 2015, based on this
Court’s original jurisdiction under 28 U.S.C. §1332(a)(1). (Doc. 1.) Plaintiff,
Plentywood Hardware, Inc., (“Plentywood”), filed a Motion to Remand based on
its claim that the amount in controversy was insufficient. (Doc. 6). Plentywood has
filed affidavits of Vice Presidents of Plentywood Hardware, Dennis Chandler
(“Chandler”), and Chris Wiens (“Wiens”), in support of the Motion to Remand.
The affidavits attest that the combined total damages at issue in this case fail to
meet or exceed $75,000. (Doc. 6-1; Doc. 18-1.)
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Liberty Mutual asserts that Plentywood involuntarily dissolved on December
4, 2007. Liberty Mutual argues that Plentywood can bring a lawsuit only it its own
name for events that occurred before its dissolution. Liberty Mutual contends that
the conduct that gave rise to this lawsuit occurred after Plentywood had dissolved.
As a result, Liberty Mutual argues that the affidavits fail to bind Plentywood. (Doc.
9 at -10.) The Court directed the parties to submit additional briefing regarding
Plentywood’s corporate status. Both parties submitted briefs on the issue. (Doc. 21;
Doc. 22.)
II. DISCUSSION
A. Corporate Status
Plentywood originally incorporated with the Montana Secretary of State on
July 29, 2004. (Doc. 21 at 2.) The Secretary of State involuntarily dissolved
Plentywood on December 4, 2007, after it failed to file its annual reports. (Doc. 21
at 2.) Plentywood continued to operate. (Doc. 22 at 2.)
Plentywood purchased an insurance policy from American Fire & Casualty
Company effective from March 1, 2014, to March 1, 2015. The underlying claim
in this case arose from two hail storms that caused damage to Plentywood’s
building. The first storm took place on May 26, 2014, and the second one on July
6, 2015 (Doc. 22 at 2.) Plentywood re-incorporated on August 5, 2015. (Doc. 21 at
2.)
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Liberty Mutual argues that Plentywood forfeited its rights to transact
business when it dissolved. Liberty Mutual contends that Plentywood’s directors
held the building at the time it was damaged. (Doc. 22 at 3.)
A dissolved corporation continues to exist to wind up and liquidate its
business and affairs, but may not continue to carry on business. Mont. Code Ann. §
35-1-935(1). A dissolved corporation can bring a proceeding in its corporate name.
Mont. Code. Ann. § 35-1-935(2)(e). The Montana Code Annotated § 35-1-937,
provides in pertinent part:
[T]he dissolution of a corporation, including by the expiration of its
term, does not take away or impair any remedy available to or against
the corporation or its officers, directors or shareholders for any claim
or right, whether or not the claim or right existed or accrued prior to
dissolution. A proceeding by or against the corporation may be
prosecuted or defended by the corporation in its corporate name.
Liberty Mutual argues that the conduct giving rise to a lawsuit must occur before
the corporation dissolves. (Doc. 22 at 11.)
The Montana Supreme Court has not addressed whether a corporation can
prosecute or defend a lawsuit over events that occur after the corporation has
dissolved. The Montana Supreme Court has addressed the situation where events
that occurred before dissolution gave rise to injury that accrued after dissolution.
Allen v. A. Richfield Co., 124 P.3d 132, 135 (Mont. 2005). The corporation in Allen
operated a vermiculate expansion plant where it manufactured and sold products
containing asbestos. Id. at 133. The corporation dissolved in December 1989. Id.
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Plaintiffs filed suit in July, 2001 for injuries stemming from asbestos related
disease. Id. The Court looked to Montana Code Annotated §§ 35-1-935 and 35-1937. The Court determined that theses statutes “maintain the status quo concerning
corporate rights and responsibilities before and after dissolution.” Id. at 135. The
Court in First Security Bank of Glendive v. Gary, 798 P.2d 523, 524 (Mont. 1990),
likewise determined that the corporation, rather than the individual, represented the
real party in interest when damages arose while the corporation owned and
operated the business. These statutes appear to allow a proceeding by the
corporation to be “prosecuted” by the corporation in its corporate name. Mont.
Code Ann. § 35-1-937.
A Montana district court has addressed a situation where the events giving
rise to the cause of action occurred after the corporation dissolved. The court
allowed an injured worker to bring a tort action against his employer’s general
partner-corporation, pursuant to Montana Code Annotated § 35-1-937, even though
the general partner corporation had been defunct for four years before the worker’s
accident. Skramstad v. Plum Creek Merger Co., Inc., 45 F. Supp. 2d 1022 (D.
Mont. 1999).
Liberty Mutual also argues that Plentywood possessed no ownership interest
in the Plentywood building damaged by the hailstorm. (Doc. 22 at 7.) Liberty
Mutual contends that Plentywood cannot be reinstated after it had been dissolved
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for more than five years. Liberty Mutual reasons that Plentywood’s directors own
its corporate assets and represent the proper plaintiffs to this action. (Doc. 22 at 7.)
The directors of a corporation hold the corporation’s property in trust when
the corporation has been involuntarily dissolved. Mont. Code. Ann. § 35-6-104(5).
No transfer of the title of property to the directors takes place. Mont. Code Ann. §
35-1-935(2)(a). “The shareholders of a dissolved corporation have a vested
equitable interest in corporate property subject to creditor claims, but still do not
have a legal ownership interest.” State v. Debus, 59 P.3d 1154, 1159 (Mont. 2002).
Shareholders take legal ownership interest in corporate assets only after creditors
are paid and the corporation’s winding up has been completed. Id.
These decisions lead the Court to conclude that a dissolved corporation can
bring a proceeding in its corporate name under Montana law. Plentywood retained
legal property rights in the damaged building and other corporate assets after its
involuntary dissolution. Plentywood has submitted affidavits from Chandler and
Wiens, as agents of the involuntarily dissolved corporation, that bind the
corporation.
B. Amount in Controversy
Liberty Mutual alleges that Chandler’s affidavit failed to show that the amount
in controversy was less than $75,000. Liberty Mutual argues that the affidavit
failed to state affirmatively that Plentywood would not seek more than $75,000.
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(Doc. 9 at 3.) Plentywood filed Wien’s affidavit in response. Wien attested that
Plentywood would “not seek to recover damages in excess of $75,000.00.”
The District Court possesses original jurisdiction over all civil actions
between citizens of different states where the matter in controversy exceeds the
sum or value of $75,000, exclusive of interest and costs. 28 U.S.C.A § 1332(a)(1).
A federal court can require a plaintiff to file an affidavit or stipulation stating that
he will not seek to recover damages in excess of $75,000 as a pre-condition for
remand. Sherman v. Nationwide Mut. Ins. Co., CV 12-152-M-DLC-JCL, 2013 WL
550265, at *2 (D. Mont. Jan. 15, 2013) report and recommendation adopted, CV
12-152-M-DLC-JCL, 2013 WL 550659 (D. Mont. Feb. 12, 2013). Plaintiffs
provided an affidavit in Sherman stating that they would “not claim more than
$75,000 in damages.” The court determined that the amount in controversy failed
to satisfy the jurisdictional requirement. Id.
Plentywood has submitted Wiens’s affidavit which states that Plentywood
seeks $51,135.58 in total damages. (Doc. 18 at 2.) Wien affirmatively attested that
Plentywood will seek no additional damages. (Doc. 18 at 2.) The amount in
controversy fails to satisfy the jurisdictional requirement.

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IT IS ORDERED that Plaintiff’s Motion to Remand, Doc. 6, is
GRANTED. This case is REMANDED to the Montana Fifteenth Judicial District
Court, Sheridan County.
DATED this 28th day of September, 2015.

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