OHIO CASUALTY INSURANCE COMPANY et al v. WAL-MART STORES, INC. et al
MEMORANDUM OPINION filed. Signed by Judge Michael A. Shipp on 12/9/2015. (mmh)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
OHIO CASUALTY INSURANCE
COMPANY, et al.,
Civil Action No. 15-7414 (MAS) (DEA)
WAL-MART STORES, INC., et al.,
SHIPP, District Judge
This matter comes before the Court on Plaintiffs Ohio Casualty Insurance Company ("Ohio
Casualty") and Liberty Insurance Underwriters Inc.'s ("LIU") (collectively, "Plaintiffs") motion
to remand this case to the Superior Court ofNew Jersey, Middlesex County pursuant to 28 U.S.C.
§ 1447(c). (ECF No. 9.) Defendants St. Paul Fire and Marine Insurance Company ("St. Paul"),
XL Insurance America, Inc. ("XL"), and QBE Insurance Corporation ("QBE") (collectively,
"Insurer Defendants") join in Plaintiffs' motion to remand. (ECF Nos. 18, 19, 23.) Defendants
Wal-Mart Stores, Inc. and Wal-Mart Transportation, LLC (collectively, "Wal-Mart Defendants")
opposed the motion (ECF No. 28), and Plaintiffs replied (ECF No. 30). The Court has carefully
considered the parties' submissions and decides the matter without oral argument pursuant to Local
Civil Rule 78.1. For the reasons stated below, Plaintiffs' motion to remand is granted.
This is an insurance coverage declaratory judgment action brought by Plaintiffs pursuant
to the New Jersey Declaratory Judgment Act, N.J.S.A. 2A:l6-50. Plaintiffs seek a declaration that
they, and Insurer Defendants, do not have an obligation to reimburse Wal-Mart Defendants for
settlement amounts paid in connection with an underlying personal injury lawsuit because: the
settlement was unreasonable; Wal-Mart Defendants failed to cooperate or obtain prior consent;
and a portion of the settlement is attributable to punitive damages. (See generally Compl., ECF
On October 12, 2015, Wal-Mart Defendants removed this action. (Notice of Removal,
ECF No. 1.) In their Notice of Removal, Wal-Mart Defendants assert that Plaintiffs filed this
action in New Jersey state court one day after Wal-Mart Defendants filed a complaint in the Circuit
Court of Benton County, Arkansas Civil Division, against Plaintiffs and Insurer Defendants
seeking a declaration of their rights under the insurance policies issued by each insurer. (Id.
Wal-Mart Defendants additionally assert that Plaintiffs fraudulently joined Insurer Defendants in
this action because Plaintiffs have not stated any causes of action against them and do not seek any
relief from them. (Id.
if 8.) Wal-Mart Defendants removed this case expressly on the basis of
diversity jurisdiction 1 because there is complete diversity between Plaintiffs and Wal-Mart
Defendants and "[t]he citizenship of the Insurer Defendants is irrelevant because those parties were
fraudulently joined." (Id.
Ohio Casualty is an insurance company organized under the laws ofNew Hampshire with
its principal place of business in Massachusetts. (Compl.
if 10.) LIU is an insurance company
organized under the laws of Illinois with its principal place of business in Massachusetts. (Id.
if 11.) St. Paul is an insurance company organized under the laws of Connecticut with its principal
"To establish diversity jurisdiction under 28 U.S.C. § 1332(a), the party asserting jurisdiction
must show that there is complete diversity of citizenship among the parties and an amount in
controversy exceeding $75,000." Schneller ex rel. Schneller v. Crozer Chester Med. Ctr., 387 F.
App'x 289, 292 (3d Cir. 2010).
place of business in Connecticut. (Id. , 15.) XL is an insurance company organized under the
laws of Delaware with its principal place of business in Connecticut. (Id. , 16.) QBE is an
insurance company organized under the laws of Pennsylvania with its principal place of business
in New York. (Id., 14.) Wal-Mart Stores, Inc. is a Delaware corporation with its principal place
of business in Arkansas. (Id. , 12.) Wal-Mart Transportation LLC is a wholly owned subsidiary
of Wal-Mart Stores, Inc. 2 (Id. , 13.) Plaintiffs, joined by Insurer Defendants, move to remand
this action back to state court for lack of subject matter jurisdiction. Specifically, Plaintiffs argue
that this Court lacks subject matter jurisdiction because, when the Court arranges the parties
according to their sides of the dispute, complete diversity of citizenship does not exist.
Under§ 1447(c), "[i]f at any time before final judgment it appears that the district court
lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. §1447(c). Thus, where
a federal court lacks subject matter jurisdiction over a case removed from state court, the case must
be remanded. The law is clear in this Circuit, that "the party asserting federal jurisdiction in a
removal case bears the burden of showing, at all stages of the litigation, that the case is properly
before the federal court." Frederico v. Home Depot, 507 F.3d 188, 193 (3d Cir. 2007) (citing
Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 396 (3d Cir. 2004)). The removal statute
"is to be strictly construed against removal, so that the Congressional intent to restrict federal
diversity jurisdiction is honored." Samuel-Bassett, 357 F.3d at 396 (citing Boyer v. Snap-On Tools
A limited liability company that is a wholly owned subsidiary of a corporation shares the
citizenship of its parent corporation for purposes of jurisdiction. See One Commc 'ns Corp. v.
Sprint Nextel Corp., 495 F. Supp. 2d 219, 224 (D. Mass. 2007) (citing Johnson v. Columbia Props.
Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006)); Cattie v. Wal-Mart Stores, Inc., No. 06-0897,
2007 WL 935582, at *l (S.D. Cal. Mar. 21, 2007)).
Corp., 913 F.2d 108, 111 (3d Cir. 1990)). "This policy 'has always been rigorously enforced by
the courts."' Id. (quoting St. Paul Mercury lndem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938)).
Plaintiffs, joined by Insurer Defendants, argue that this case should be remanded to state
court because complete diversity of citizenship does not exist when the parties are arranged
according to their sides in the dispute. (Pis.' Moving Br. 14-18, ECF No. 9-1.) Specifically,
Plaintiffs argue that Insurer Defendants should be realigned with Plaintiffs for purposes of
determining jurisdiction. Once realigned, complete diversity does not exist because XL and WalMart Defendants are all citizens of Delaware and on opposite sides of the dispute. (Id.)
In response, Wal-Mart Defendants do not address Plaintiffs' realignment argument, but
instead argue that the citizenship oflnsurer Defendants is irrelevant because they were fraudulently
joined. (Wal-Mart Defs.' Opp'n Br. 11, ECF No. 28.) In support of their argument, )Val-Mart
Defendants place significant reliance on the Honorable Dickinson R. Debevoise, U.S.D.J.'s
decision in First Trenton Indemnity Co. v. Chrysler Insurance Co., No. 10-2588, 2010 WL
3740841 (D.N.J. Sept. 20, 2010). (Id. at 4, 6-10.) In First Trenton, there was an insurance
coverage dispute between multiple insurers and the insured was named as a defendant in the action.
Id. at 1. The plaintiff moved to remand the action to state court, and the defendant insurers argued
both that the insured was fraudulently joined as a defendant and that he should be realigned as a
plaintiff for purposes of determining diversity jurisdiction. Id. Judge Debevoise found that the
insured's joinder as a defendant was fraudulent, however, he also determined that the insured was
more properly classified as a plaintiff and realigned him as such for determining diversity
jurisdiction. Id. at 5-6. Wal-Mart Defendants only address Judge Debevoise's holding regarding
realignment in a footnote, stating: "The Court in First Trenton subsequently realigned the parties
so that [the insured] was a plaintiff, rather than a defendant, thus establishing diversity
jurisdiction." (Wal-Mart Defs.' Opp'n Br. 9, n.3.) In light of First Trenton, Wal-Mart Defendants'
argument fails to connect how this Court's determination of the fraudulent joinder issue would
have any effect over its determination of realignment of the parties. It is Wal-Mart Defendants'
burden to establish that this case was properly removed as it is the party asserting federal
jurisdiction. As Wal-Mart Defendants do not delineate why their fraudulent joinder argument has
any bearing on the outcome of this motion, the Court declines to reach the issue. 3
The Supreme Court has held that "[ d]iversity jurisdiction cannot be conferred upon the
federal courts by the parties' own determination of who are plaintiffs and who [are] defendants."
City of Indianapolis v. Chase Nat. Bank of City ofNY., 314 U.S. 63, 69 (1941 ). This is because,
the Supreme Court reasoned, that litigation is "not a game of chess," and therefore, "it is [the duty]
of the lower federal courts to 'look beyond the pleadings, and arrange the parties according to
their sides in the dispute."' Id. (quoting Dawson v. Columbia Ave. Sav. Fund, Safe Deposit, Title
& Trust Co., 197 U.S. 178, 180 (1905)). In determining whether parties should be realigned, the
Third Circuit applies the "'principal purpose' or 'primary issue' test, under which a court must
first identify the primary issue in controversy and then determine whether there is a real dispute
by opposing parties over that issue." Emp 'rs Ins. of Wausau v. Crown Cork & Seal Co., 942 F.2d
862, 864 (3d Cir. 1991 ).
Here, Plaintiffs' primary purpose of bringing this action is seeking a declaration that they,
as well as Insurer Defendants, do not have an obligation to reimburse Wal-Mart Defendants related
to the settlement in the underlying action. This purpose is further demonstrated by Wal-Mart
The Court also declines to reach the parties' additional argument regarding the necessity of
consent of all defendants to remove an action because realignment of the parties destroys diversity
Defendants' similar Arkansas action against Plaintiffs and Insurer Defendants. Additionally, since
Wal-Mart Defendants' Notice of Removal was filed, all of the Insurer Defendants have filed
answers and asserted cross-claims against Wal-Mart Defendants. (ECF Nos. 1-2, 6, 12.) It is clear
that Plaintiffs and Insurer Defendants are joined in the common goal of avoiding obligations to
Wal-Mart Defendants related to the settlement in the underlying action.
Defendants are more properly classified as plaintiffs and will be realigned as such to determine
The realignment of Insurer Defendants, specifically XL, results in a lack of diversity
between plaintiffs and defendants because XL and Wal-Mart Defendants are all citizens of
Delaware. Accordingly, as this Court lacks subject matter jurisdiction, the motion to remand will
Costs and Fees
Plaintiffs also seek recovery of costs and attorneys' fees associated with their motion to
remand pursuant to 28 U.S.C. § 1447(c). (Pls.' Moving Br. 28-30.) Under§ 1447(c), "[a]n order
remanding the case may require payment of just costs and any actual expenses, including attorney
fees, incurred as a result of the removal." 28 U.S.C. § 1447(c). A court may award costs and
attorney's fees if the removing party lacked an objectively reasonable basis for seeking removal.
Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). Plaintiffs argue that this Court should
award costs and fees because of"Wal-Mart's wholly improper attempt to remove the New Jersey
lawsuit in contradiction of clear case law holding that there are no grounds for finding fraudulent
joinder by Plaintiffs." (Pls.' Moving Br. 28.) Wal-Mart Defendants contend that this Court has
substantial discretion not to award fees and, here, fees should not be awarded because, inter alia,
at the time of removal non-diverse XL had not been named a plaintiff nor had it filed any cross-
claims against Wal-Mart. (Wal-Mart Defs.' Opp'n Br. 13-14.) Here, an award of costs and fees
is not appropriate. Even though this Court did not reach the fraudulent joinder argument, and thus
the subsequent consent argument, Plaintiffs' briefing continually asserted that there were
numerous decisions of the Third Circuit and this Court squarely on point regarding fraudulent
joinder. (Pls.' Moving Br. 4, 28-29; Pls.' Reply Br. 11-12.) This Court, however, fails to see how
any of the cases cited by Plaintiffs "squarely" address the fraudulent joinder question in this case.
Accordingly, Plaintiffs' request for costs and fees is denied.
For the reasons set forth above, Plaintiffs' motion to remand is granted and their request
for an award of costs and fees is denied. An order consistent with this Memorandum Opinion will
s/ Michael A. Shipp
MICHAEL A. SHIPP
UNITED STATES DISTRICT JUDGE
Dated: December 9, 2015
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