Utica Mutual Insurance Company v. American Re-Insurance Company
Filing
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MEMORANDUM-DECISION AND ORDER granting 13 Motion to Remand to State Court: The Court hereby ORDERS that Utica's motion to remand is GRANTED; and the Court further ORDERS that this action is REMANDED to the New York State Supreme Court in Oneid a County for all further proceedings; and the Court further ORDERS that th Clerk is directed to mail a certified copy of this Memorandum-Decision and Order to the Clerk of the Supreme Court of the State of New York in Oneida County and instruct him t o file the Memorandum-Decision and Order in Utica Mut. Ins. Co. v. Am. Re-Insurance Co. a/k/a Munich Reinsurance Am. Co., Inc., and Transatlantic Reinsurance Co., IndexNo. CA2013-2587; and the Court further ORDERS that the Clerk of the Court shall cl ose this case; and the Court further ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision and Order on the parties in accordance with the Local Rules. Signed by U.S. District Judge Mae A. D'Agostino on 4/27/2015. (ban)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
UTICA MUTUAL INSURANCE COMPANY,
Plaintiff,
vs.
6:14-CV-1558
(MAD/TWD)
AMERICAN RE-INSURANCE COMPANY
a/k/a MUNICH REINSURANCE AMERICA, INC.,
Defendant.
____________________________________________
APPEARANCES:
OF COUNSEL:
FELT, EVANS LAW FIRM
4-6 North Park Row
Clinton, New York 13323
Attorneys for Plaintiff
KENNETH L. BOBROW, ESQ.
SIMPSON, THACHER LAW FIRM NEW YORK OFFICE
425 Lexington Avenue
New York, New York 10017-3954
Attorneys for Plaintiff
MARY KAY VYSKOCIL, ESQ.
ALEXANDER BLANK SIMKIN, ESQ.
JONATHAN S. ZELIG, ESQ.
HUNTON, WILLIAMS LAW FIRM MCLEAN, VIRGINIA OFFICE
1751 Pinnacle Drive
Suite 1700
McLean, Virginia 22102
Attorneys for Plaintiff
SYED S. AHMAD, ESQ.
RUBIN, FIORELLA LAW FIRM
630 Third Avenue
New York, New York 10017
Attorneys for Defendant
BRUCE M. FRIEDMAN, ESQ
JAMES E. MERCANTE, ESQ.
PETRONE, PETRONE LAW FIRM UTICA OFFICE
1624 Genesee Street
Utica, New York 13502
Attorneys for Defendant
LORI E. PETRONE, ESQ.
Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
On December 22, 2014, Defendant, American Re-Insurance Company a/k/a Munich
Reinsurance America, Inc. ("MRAm"), removed this case pursuant to 28 U.S.C. §§ 1441 and
1446. See Dkt. No. 1. On January 21, 2015, Plaintiff Utica Mutual Insurance Company ("Utica")
filed a motion to remand, which is currently before the Court. See Dkt. No. 13.
II. BACKGROUND
A.
The state court action
On December 24, 2013, Utica filed a complaint in state court alleging breach of contract,
and asked the state court to issue a declaratory judgment pursuant to C.P.L.R. § 3001, to clarify
"the parties' rights and obligations under certain reinsurance contracts entered into between Utica
and [MRAm]." Dkt. No. 15-1 at 3. The complaint also named Transatlantic Reinsurance
Company ("Transatlantic"), "a corporation organized under the laws of the State of New York,
with its principal place of business in New York, New York." Id. at 4. As Utica is also
incorporated under New York law, with its principal place of business is in New Hartford, New
York, MRAm was prevented from removing the case to federal court because complete diversity
did not exist between the parties. Id. On November 24, 2014, the state court severed Utica's
claims against MRAm and Transatlantic. See Dkt. No. 15-4. The court reasoned that
[e]ven if permissive joinder of the two defendants in this matter
may be proper, severance pursuant to CPLR § 1003 is appropriate
in the interest of justice as a matter of discretion. Litigation
involving these two defendants would impose upon each an undue
burden because it would cause each of them to be indirectly
involved in plaintiff's claims against the other. This is particularly
true in the case of discovery, motion practice, and other pre-trial
proceedings. Further, as a matter of judicial economy and
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consistency, severance will afford defendant Munich Re the
opportunity to remove the claim against it to federal court where a
similar claim involving the same parties, and the same or similar
reinsurance contracts has been adjudicated, and is on appeal. It is
also likely that severance will afford each defendant with a more
expeditious resolution of the respective claims against it.
Id. at 6. Utica has appealed the severance order to the Fourth Department Appellate Division.
See Dkt. No. 13-2 at 5.
B.
Utica's motion to remand
Utica argues that "Munich Re cannot meet its burden to show that removal is appropriate
because removability can only be created by Utica's voluntary conduct." Dkt. No. 13-1 at 8
(emphasis in original). Accordingly, Utica claims that removal is improper because diversity of
citizenship was created "without voluntary action by the plaintiff." Id. at 9 (citing 310-318
Midtown Equities, LLC v. Atl. Cas. Ins. Co., 2014 WL 2451594, *1 (S.D.N.Y. May 16, 2014)).
Utica also cites Miller v. Fulton, 113 F. Supp. 2d 1035, 1039 (S.D. Miss. 2000), for the
proposition that a severance order is an involuntary action, and removal is not proper when the
plaintiff opposes severance. Id. at 10.
C.
MRAm's opposition
MRAm argues that removal was proper pursuant to 28 U.S.C. §§ 1332(a) and 1446(b)(3)
because "[t]he statute[s] contemplate[] that the time for removal does not begin to run until all
obstacles to removal have been eliminated." Dkt. No. 15-5 at 8. MRAm alleges that Utica's
joinder of Transatlantic was one of the obstacles contemplated by the statutes. Id. Additionally,
MRAm argues that Utica joined MRAm and Transatlantic purely to avoid a Northern District
decision that "granted summary judgment in MRAm's favor against Utica on a legal issue which
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was common to both cases filed by Utica against MRAm[,]" and therefore the voluntaryinvoluntary rule should not allow Utica "to defeat diversity under the circumstances."1 Id. at 9.
MRAm then argues that even if the voluntary-involuntary rule applies, there is an
exception based on the fraudulent misjoinder doctrine. Id. at 10. MRAm claims that this concept
"has been applied in numerous cases in other New York Districts Courts," as well as in the
Eastern and Southern Districts. Id. at 11 (citing Humphrey v. Riley, No. 1:14-CV-80, 2014 WL
3400964 (N.D.N.Y. July 10, 2014)) (other citations omitted). Accordingly, MRAm asserts that
"[t]he citizenship of Transatlantic should be disregarded in determining diversity jurisdiction
because it is not and never was properly joined to Utica's claims to MRAm, as established by the
[state court] Decision." Id.
Finally, MRAm argues that "concern over judicial economy weighs in favor of
maintaining diversity jurisdiction." Id. at 15. In support of this position, MRAm argues that
Utica's appeal is frivolous, and that even if the state court severance order was reversed,
"discovery in federal court is readily transferrable to the state court." Id. at 16.
D.
Utica's reply
In Utica's reply memorandum of law, it reiterates that the voluntary-involuntary rule
dictates remand, because "[t]he express purpose of this bright-line rule . . . 'is to protect against
the possibility that a party might secure a reversal on appeal in state court of the nondiverse
party's dismissal, 'which would create a 'renewed lack of complete diversity in the state court
The Court notes that this summary judgment motion was vacated and remanded by the
Second Circuit on December 4, 2014, over two months before MRAm filed its opposition to
Utica's motion to remand currently before the Court. See Utica Mut. Ins. Co. v. Munich
Reinsurance Am., No. 13-4170-CV, 594 Fed. Appx. 700 (2d Cir. Dec. 4, 2014).
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action.'" Dkt. No. 17 at 8 (quoting Quinn v. Aetna Life & Cas. Co., 616 F.2d 38, 40 n.2 (2d Cir.
1980)).
Utica also advances a number of arguments in opposition to MRAm's asserted fraudulent
misjoinder exception. Id. at 11-15. First, Utica claims that MRAm's removal based on fraudulent
misjoinder is untimely, because "[i]n the context of fraudulent joinder claims, the statute requires
removal within thirty days 'from the time defendants can first ascertain that a party has been
fraudulently joined.'" Id. at 12 (quoting Deming v. Nationwide Mut. Ins. Co., No. Civ.A
3:03CV1225, 2004 WL 332741, *5 (D. Conn. Feb. 14, 2004). Second, Utica asserts that MRAm
cannot rely on fraudulent joinder as grounds for removal, because it was not included in MRAm's
notice of removal. Id. at 12-13. Third, Utica states that the Second Circuit has not recognized
fraudulent misjoinder, and therefore this Court should not create an exception to "the voluntaryinvoluntary rule based on a theory not recognized in this Circuit." Id. at 14. Finally, Utica asserts
that MRAm has not proven by clear and convincing evidence that Transatlantic was fraudulently
misjoined, and in fact there is "nothing to suggest that Utica committed fraud aside from vague
and conclusory assertions that Utica[] engaged in 'wrongful conduct.'" Id. at 15.
III. DISCUSSION
A.
Standard of review
Federal district courts are courts of limited jurisdiction. Under 28 U.S.C. § 1332(a), a
federal court has jurisdiction over the subject matter of a civil action where the amount in
controversy exceeds the sum or value of $75,000, exclusive of interests and costs, and is between
citizens of different states. See 28 U.S.C. § 1332(a). A defendant may remove to federal court
"'any civil action brought in a State court of which the district courts of the United States have
original jurisdiction.'" Shapiro v. Logistec USA Inc., 412 F.3d 307, 309-10 (2d Cir. 2005)
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(quoting 28 U.S.C. § 1441(a)). However, once a case has been removed, it must be remanded
"'[i]f at any time before final judgment it appears that the district court lacks subject matter
jurisdiction.'" Id. at 310 (quoting 28 U.S.C. § 1447(c)). Where, as here, jurisdiction is asserted
by a defendant in a removal petition, the defendant bears the burden of establishing that removal
is proper. See Cal. Pub. Employees' Ret. Sys. v. WorldCom, Inc., 368 F.3d 86, 100 (2d Cir. 2004)
(citations omitted). If there are any doubts as to removability, they are resolved against
removability "out of respect for the limited jurisdiction of the federal courts and the rights of the
states." In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 488 F.3d 112, 124 (2d
Cir. 2007) (citation omitted). Although there is a presumption that the court has jurisdiction when
the matter is brought in federal court in the first instance, "[a] defendant removing a case to
federal court encounters instead the general principle that removal is disfavored and remand
favored." Pollock v. Trustmark Ins. Co., 367 F. Supp. 2d 293, 296-97 (E.D.N.Y. 2005) (citation
omitted).
B.
Analysis
1. The voluntary-involuntary rule
According to the Second Circuit, "the involuntary dismissal of non-diverse parties does
not make an action removable." Quinn, 616 F.2d at 40 n.2 (citation omitted). The Second Circuit
has explained the purpose of the so-called "voluntary-involuntary" rule as follows:
[It] protect[s] against the possibility that a party might secure a
reversal on appeal in state court of the non-diverse party's dismissal,
producing renewed lack of complete diversity in the state court
action, a result repugnant to the requirement in 28 U.S.C. § 1441
that an action, in order to be removable, be one which could have
been brought in federal court in the first instance.
Id. "The determinative factor in the [Quinn] decision . . . was not that the dismissal was voluntary,
but rather that it was final." LGP GEM Ltd. v. Cohen, 636 F. Supp. 881, 883 (S.D.N.Y. 1986).
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Utica cites two cases in support of remand under the voluntary-involuntary rule. In the
first case, Midtown, the court remanded where "the sole basis for removal is the diversity of
citizenship created by the severance order[,]" and "[the plaintiff] opposed the severance order."
310-318 Midtown Equities, LLC, 2014 WL 2451594, at *2. Further, the court found that the
removing party's "assertion that it [was] likely to prevail on appeal in support of the severance
order [was] irrelevant." Id. Although MRAm asserts that the procedural posture of 310-318
Midtown Equities, LLC renders it materially different from the current case, the legal principals
articulated and applied in Midtown would not change if the defendant was named in the
complaint, rather than joined subsequent to the complaint as a third party.
In Miller v. Fulton, the court remanded because it could not conclude that the removing
party had "satisfied its burden of establishing that the state court intended to sever the claims . . .
as opposed to merely ordering separate trials." Miller, 113 F. Supp. 2d at 1039. However, the
court went on to state that, "even were the court persuaded that the state court had severed the
claims, given that [the plaintiff] opposed the severance, the court would nonetheless remand the
case based on the voluntary-involuntary rule." Id. MRAm argues that Miller is distinguishable
because the court based remand on "the state court's ordering of separate trials[,]" and "not on the
basis of the severance of claims." Dkt. No. 15-5 at 15. However, as the court stated that they
would have remanded even if the claims had been severed due to the voluntary-involuntary rule,
MRAm's attempt to distinguish Miller from the present case is not convincing.
Additionally, MRAm's assertion that Utica's appeal is frivolous has no bearing on the
Court's decision, because according to Quinn, "the possibility" of reversal on appeal is the
purpose behind the voluntary-involuntary rule. Dkt. No. 15-5 at 15; Quinn, 616 F.2d at 40 n.2.
Therefore, Utica's likelihood of success on appeal does not change the Court's analysis.
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The situation Quinn attempts to prevent is present in the current case. Utica has appealed
the state court's severance order to the Fourth Department, meaning that the severance order is not
yet final under Quinn. Dkt. No. 13-2 at 5. As doubts regarding removability are resolved against
removal, the current situation requires that the Court remand this case based on the voluntaryinvoluntary rule, unless MRAm can establish that removal is warranted despite Utica's opposition
to the severance order currently on appeal.
However, as set forth below, MRAm may not rely on the fraudulent misjoinder exception,
because the grounds for removal were apparent at the latest, by February 20, 2014, the date
MRAm filed its answer in the state court action. See Dkt. No. 1-2 at 11.
2. Timeliness of removal based on fraudulent misjoinder
According to the federal removal statute, 28 U.S.C. § 1446(b), "[t]he notice of removal of
a civil action or proceeding shall be filed within thirty days after the receipt by the defendant,
through service or otherwise, of a copy of the initial pleading setting forth the claim for relief
upon which such action or proceeding is based. . . ." Id. "The essential command of the statute is
that a defendant must remove the action promptly after the grounds for removal become
apparent." Trustees of Masonic Hall & Asylum Fund v. PriceWaterhouseCoopers LLP, Nos. 08
Civ. 10495, 08 Civ. 10494, 2009 WL 290543, *7 (S.D.N.Y. Feb. 6, 2009). Specifically, "[a] case
is removable when the initial pleading 'enables the defendant to intelligently ascertain'
removability from the face of such pleading, so that in its petition for removal[, the] defendant
can make a short and plain statement of the grounds for removal as required [by] 28 U.S.C. §
1446(a).'" Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 205-06 (2d Cir. 2001) (quoting
Richstone v. Chubb Colonial Life Ins., 988 F. Supp. 401, 403 (S.D.N.Y. 1997)). "A pleading
enables a defendant to intelligently ascertain removability when it provides 'the necessary facts to
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support [the] removal petition.'" Id. at 206 (quoting Rowe v. Marder, 750 F. Supp. 718, 721
(W.D. Pa. 1990)).
Even assuming that the fraudulent misjoinder theory applies, the Court agrees with Utica
that MRAm "knew the basis for its fraudulent misjoinder claim no later than February 20, 2014,
when it filed its answer. Accordingly, [MRAm] was required to file a notice of removal on the
basis of its fraudulent [mis]joinder claim within 30 days of February 20, 2014 at the latest." Dkt.
No. 17 at 12. "'While few courts have expressly addressed the issue of when a removal notice
must be filed in a case involving fraudulent joinder, most reported opinions have enforced a 30day removal period that begins to run from the time defendants can first ascertain that a party has
been fraudulently joined.'" Deming, 2004 WL 332741 at *5 (quoting Delaney v. Viking Freight
Inc., 41 F. Supp. 2d 672, 674 n.2 (E.D. Tex. 1999)) (emphasis in original). Although Deming
analyzed removal based on a fraudulent joinder claim, which is distinct from a fraudulent
misjoinder claim,2 the difference is not applicable to the time frame within which removal is
allowed. Further, MRAm admits that they understood "Utica's motivation for joining
Transatlantic and MRAm as defendants in the same action." Dkt. No. 15-5 at 9. Accordingly, the
thirty day removal period was triggered at the latest on February 20, 2014, the date MRAm filed
its answer in the state court action where one of MRAm's affirmative defenses alleged that "Utica
Fraudulent misjoinder is distinct from fraudulent joinder, "a doctrine that is widely
recognized in the federal courts." In re Propecia (Finasteride) Product Liability Litigation, Nos.
12-MD-2331, 12-CV-2049, 2013 WL 3729570, *3 (E.D.N.Y. May 17, 2013). In a fraudulent
joinder claim, "a diverse defendant argues that the plaintiff is attempting to join a non-diverse
defendant against whom the plaintiff has no real claim solely to defeat federal jurisdiction." Id. at
*4 (citing Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 460-61 (2d Cir. 1998)). In contrast,
fraudulent misjoinder is present when "a plaintiff has added claims to the complaint – either
claims by other non-diverse plaintiffs or claims against other non-diverse defendants – which,
although perhaps valid, are nevertheless not properly joined under the applicable permissive
joinder rules." Id.
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has improperly joined Transatlantic Reinsurance Company as a defendant in this action for the
sole purpose of defeating complete diversity of citizenship and to prevent removal to Federal
Court by MRAm as a matter of right." Dkt. No. 1-2 at 10-11. Therefore, removal on the grounds
of fraudulent misjoinder is untimely.
The approach New York district courts have adopted regarding fraudulent misjoinder
supports the Court's interpretation of the removal time frame.
The typical situation in which fraudulent misjoinder is argued
involves a complaint for which diversity is lacking on its face. The
defendant has nevertheless removed the case to federal court, and
has asked the court to sever the claims involving the non-diverse
parties and remand them to state court, while retaining jurisdiction
over only the claims as to which diversity jurisdiction exists.
In re Propecia (Finasteride) Product Liability Litigation, Nos. 12-MD-2331, 12-CV-2049, 2013
WL 3729570, *4 (S.D.N.Y. May 17, 2013). In Propecia, the court agreed with other court's
reasoning that "the fraudulent misjoinder doctrine can be applied to sever and remand non-diverse
claims." Id. at *8. Further, a critical question for a federal court to consider when applying the
fraudulent misjoinder doctrine is whether state or federal law governs "the question of proper
joinder." Fed. Ins. Co. v. Tyco Int'l Ltd., 422 F. Supp. 2d 357, 379 (S.D.N.Y. 2006). In order to
consider the severance of non-diverse claims as in Propecia, or to decide which joinder law
applies as in Federal Insurance Company, the case must have been removed before the nondiverse parties are severed.3 Presently, the Court may not decide whether state or federal joinder
law applies, because state law was already applied by the state court, and the Court has no
opportunity to sever and remand the improperly joined parties.
In further support of this interpretation, the Court was unable to find any case law that
addressed the fraudulent misjoinder doctrine when a state court had severed the non-diverse
parties prior to removal.
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Based on the foregoing, the Court remands this case to the New York State Supreme
Court of Oneida County for all further proceedings.
IV. CONCLUSION
After carefully reviewing the entire record in this matter, the parties' submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that Utica's motion to remand is GRANTED; and the Court further
ORDERS that this action is REMANDED to the New York State Supreme Court in
Oneida County for all further proceedings; and the Court further
ORDERS that th Clerk is directed to mail a certified copy of this Memorandum-Decision
and Order to the Clerk of the Supreme Court of the State of New York in Oneida County and
instruct him to file the Memorandum-Decision and Order in Utica Mut. Ins. Co. v. Am. ReInsurance Co. a/k/a Munich Reinsurance Am. Co., Inc., and Transatlantic Reinsurance Co., Index
No. CA2013-2587; and the Court further
ORDERS that the Clerk of the Court shall close this case; and the Court further
ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision
and Order on the parties in accordance with the Local Rules.
IT IS SO ORDERED.
Dated: April 27, 2015
Albany, New York
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