WAYNE J. GRIFFIN ELECTRIC, INC. v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA et al

Filing 26

MEMORANDUM OPINION AND ORDER signed by MAG/JUDGE L. PATRICK AULD on 3/4/2014, that Defendant Travelers' Motion to Realign Parties (Docket Entry 2 ) is GRANTED and Defendants Guilford County, Balfour Beatty, and D.H. Griffin are hereby REALIGNED as party Plaintiffs. FURTHER, that Plaintiff's Motion to Remand to the Superior Court of Guilford County (Docket Entry 15 ) is DENIED. (Lloyd, Donna)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

WAYNE J. GRIFFIN
ELECTRIC, INC.,

)
)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA, et al.
Defendants.

1:13CV882

MEMORANDUM OPINION AND ORDER
This case comes before the Court on Defendant Travelers’
Motion to Realign Parties (Docket Entry 2) and Plaintiff’s Motion
to Remand (Docket Entry 15).

For the reasons that follow, the

Court will grant Defendant Travelers’ Motion to Realign Parties and
will deny Plaintiff’s Motion to Remand.1
BACKGROUND
Plaintiff’s Complaint asserts a claim for breach of contract
and seeks a declaratory judgment of Plaintiff’s rights, as well as
those of other insured parties, under a builders insurance policy
issued by Defendant Travelers.

(Docket Entry 6 at 6-7.)

It

contends that, in connection with the construction of the Guilford

1

For the reasons stated in William E. Smith Trucking, Inc. v.
Rush Trucking Ctrs. of N.C., Inc., No. 1:11CV887, 2012 WL 214155,
at *2–6 (M.D.N.C. Jan. 24, 2012) (unpublished), the undersigned
United States Magistrate Judge disposes of this matter by order,
rather than by recommendation.

County Detention Center in Greensboro, North Carolina, Defendant
Travelers issued a builders all risks policy to Defendants Guilford
County, Balfour Beatty Construction, and D.H. Griffin Construction,
as well as to any subcontractors, including Plaintiff.
see also Docket Entry 6-1 (insurance policy).)2

(Id. at 3;

The Complaint

further alleges that Plaintiff, as an electrical subcontractor,
incurred substantial additional costs to investigate and repair
widespread damage to the facility’s electrical conduit allegedly
caused during concrete pours and drilling by one or more other
subcontractors.

(Docket Entry 6 at 3-5.)

According to the Complaint, on August 31, 2011, Plaintiff sent
notice of its claimed losses to Defendants Balfour Beatty and D.H.
Griffin and, at their request, provided supplemental documentation
on September 19, 2011.

(Id. at 5.)

Defendants Balfour Beatty and

D.H. Griffin allegedly failed to put Defendant Travelers on notice
with regard to the claim, despite Plaintiff’s request to that
effect.

(Id.)

The

Complaint

further

states

that

Plaintiff

notified the insurance broker of the claimed loss on December 29,
2011, and Defendant Travelers denied coverage on March 9, 2012.
(Id.; see also Docket Entry 16-3 at 1-3 (coverage denial letter).)

2

Defendants Balfour Beatty and D.H. Griffin formed a joint
venture for the Guilford County Detention Center project and the
record reflects that [Defendant] Travelers issued the insurance
policy to the joint venture rather than the individual companies.
(See Docket Entry 6 at 2-3; see also Docket Entry 6-1 at 2
(insurance policy identifying “Balfour Beatty/D.H. Griffin JV” as
a named insured).)
-2-

The denial letter asserts that “the damages claimed by [Plaintiff]
were caused by faulty planning, siting, design, specifications
and/or workmanship[,] all of which are expressly excluded under the
policy.”

(Docket Entry 16-3 at 3.)

It further contends that

Plaintiff’s alleged delay in reporting the loss “constitut[ed] a
breach of the duty of timely reporting of a loss.”

(Id.)

Plaintiff (a citizen of Massachusetts) filed the instant
action in North Carolina state court and named as Defendants
Travelers (a citizen of Connecticut), Guilford County (a citizen of
North Carolina), Balfour Beatty (a citizen of Delaware and Texas),
and D.H. Griffin (a citizen of North Carolina).
1-2.)

(Docket Entry 6 at

Defendant Travelers then removed the action to this Court

based on diversity of citizenship (Docket Entry 1), moved to
realign

parties

(Docket

Entry

2),

and

filed

its

Answer

to

Plaintiff’s Complaint (Docket Entry 3).
The relevant statute bars removal “if any of the parties in
interest properly joined and served as defendants is a citizen of
the

State

1441(b)(2).

in

which

such

action

is

brought.”

28

U.S.C.

§

Thus, the presence of Defendants Guilford County and

D.H. Griffin, both citizens of North Carolina, would appear to
preclude removal.

However, Defendant Travelers’ instant Motion

asserts that Defendants Guilford County, Balfour Beatty, and D.H.
Griffin constitute nominal parties who need not consent to removal
and whose citizenship does not impact the diversity determination.

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(Docket Entry 3 at 4-5.)

It additionally contends that the Court

should realign Defendants Guilford County, Balfour Beatty, and D.H.
Griffin as Plaintiffs on the grounds that “their interests are at
odds with [Defendant] Travelers[] because they could be exposed to
potential liability for property damages should the Travelers
policy not afford the coverage [Plaintiff] seeks.”

(Docket Entry

2 at 2.)
Plaintiff responded in opposition and moved to remand to state
court.

(Docket

Entry

15.)

Defendant

Travelers

responded in opposition to Plaintiff’s Motion.

replied

and

(Docket Entry 22.)

Plaintiff replied. (Docket Entry 24.) Defendants Guilford County,
Balfour Beatty, and D.H. Griffin have not responded to either of
the instant Motions.

(See Docket Entries dated Oct. 3, 2013, to

present.)
DISCUSSION
The party “who seek[s] to preserve removal, bear[s] the burden
of establishing that the requirements for removal have been met.
[It] do[es] so understanding that removal statutes, being in
derogation of state sovereignty, are strictly construed, and all
doubts will be resolved in favor of remand to state court.”
Canadian Am. Ass’n of Prof’l Baseball, Ltd. v. Ottawa Rapidz, 686
F. Supp. 2d 579, 583 (M.D.N.C. 2010) (Schroeder, J.) (internal
citations omitted); see also Barbour v. International Union, 640 F.
3d 599, 605 (4th Cir. 2011) (en banc) (“Removal statutes, in

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particular, must be strictly construed, inasmuch as the removal of
cases from state to federal court raises significant federalism
concerns.”),
1446(b)(2)(B).

abrogated

on

other

grounds

by

28

U.S.C.

§

Therefore, Defendant Travelers, as the removing

party, must demonstrate that this case belongs in federal court,
either because the North Carolina Defendants qualify as nominal
parties, because they constitute Plaintiffs rather than Defendants,
or both.
The Fourth Circuit has recently addressed the standard for
identifying nominal parties in the context of removal, stating that
“[n]ominal means simply a party having no immediately apparent
stake in the litigation either prior or subsequent to the act of
removal.

In other words, the key inquiry is whether the suit can

be resolved without affecting the non-consenting nominal defendant
in any reasonably foreseeable way.”

Hartford Fire Ins. Co. v.

Harleysville Mut. Ins. Co., 736 F.3d 255, 260 (4th Cir. 2013).

In

addition, this Court has recognized a “broad consensus concerning
the type of situations which would be covered by the [nominal
party] exception.”

Blue Mako, Inc. v. Minidis, 472 F. Supp. 2d

690, 696 (M.D.N.C. 2007) (Tilley, J.).

Examples of situations

reflecting nominal parties “include one where the party was not
involved in the activities charged in the complaint, [the party]
ha[s] already settled with the plaintiff, [the party] ha[s] only

-5-

been named as [a] John Doe defendant[], or where there is no basis
for imputing liability.”

Id.

Defendent Travelers’ instant Motion contends that its coDefendants “have no personal stake in litigation brought solely to
determine the rights and obligations between Plaintiff [] and
[Defendant] Travelers. There are no counts asserted against any of
them.

There is no relief sought from any of them.”

22 at 3.)

(Docket Entry

However, Plaintiff’s Complaint specifically seeks “a

declaratory judgment as to the obligations and liabilities of
[Defendant] Travelers, as well as the rights and obligations, if
any, of Defendants Guilford County, Balfour Beatty, and D.H.
Griffin as potential insureds with respect to the Claimed Loss
under the Builders Risk Policy.”
added).)

(Docket Entry 6 at 7 (emphasis

Although Plaintiff has not asserted counts against

Defendants Guilford County, Balfour Beatty, and D.H. Griffin and
does not seek relief directly from them in this action (see Docket
Entry 6 at 6-8), Defendant Travelers has not shown that “the suit
can

be

resolved

without

affecting

the

non-consenting

nominal

[D]efendant[s] in any reasonably foreseeable way,” Hartford Fire,
736 F.3d at 260.
Rather, Defendant Travelers, in arguing for the realignment of
its co-Defendants, undermines its position that its co-Defendants
have no interest in the suit:
[Plaintiff]
[Defendant]

specifically seeks a declaration that
Travelers owes coverage to [Defendants]
-6-

Guilford County, Balfour Beatty, and D. H. Griffin as
well as to [Plaintiff]. Conversely, a declaration that
[Defendant] Travelers does not provide the coverage
sought might ultimately place the burden of liability
upon [Defendants] Guilford County, Balfour Beatty, and D.
H. Griffin to compensate Plaintiff for a portion, or all,
of the Damage.
(Docket

Entry

3

at

8.)

Thus,

there

exists

a

“reasonably

foreseeable way” that Defendants Guilford County, Balfour Beatty,
and D.H. Griffin could face substantial liability as a result of a
declaratory judgment denying insurance coverage.

Even though the

apportionment of any liability between Plaintiff and the other
insureds forms the subject of separate arbitration proceedings (see
Docket Entry 22 at 7), as Defendant Travelers concedes, “[a] grant
of coverage to Plaintiff [] by this Court will reduce the potential
exposure of [Defendants Guilford County, Balfour Beatty, and D.H.
Griffin] for any award that might be made against them though the
[a]rbitration” (see id.).

Although Defendant Guilford County has

not been made a party to the arbitration, as Plaintiff notes (see
Docket Entry 24 at 6 n.3), that fact alone would not seem to
preclude the realistic possibility that this case could expose the
County

to

subsequent

liability

if,

for

example,

the

Court

determines the damage resulted from faulty plans or specifications.
See Burke Cnty. Pub. Sch. Bd. of Ed. v. Juno Constr. Corp., 304
N.C. 187, 188, 282 S.E. 2d. 778, 778 (1981) (“[W]here a contractor
is required to and does comply with the plans and specifications
prepared by the owner or the owner’s architect, the contractor will

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not be liable for the consequences of defects in the plans and
specifications.”).
Furthermore,

as

Plaintiff

contends,

pursuant

to

various

existing agreements between the parties, any of Defendants Guilford
County, Balfour Beatty, and D.H. Griffin might ultimately have to
reimburse Plaintiff for the policy deductible.

(See Docket Entry

16 at 6-7 (citing Docket Entry 16-1 at 69 (agreement between
Defendants Guilford County, Balfour Beatty, and D.H. Griffin);
Docket Entry 16-2 at 20 (agreement between Plaintiff and Defendants
Balfour Beatty and D.H. Griffin)).)

District courts in this

Circuit have held that the foreseeable risk of paying a deductible
precludes nominal-party status. See General Star Nat’l Ins. Co. v.
North Carolina

Pub.

Officers

&

Emps.

Liab.

Ins.

Comm’n,

No.

3:10CV262-RJC-DSC, 2011 WL 4398163, at *5 (W.D.N.C. Sept. 21, 2011)
(unpublished); Beaufort Cnty. Sch. Dist. v. United Nat’l Ins. Co.,
519 F. Supp. 2d 609, 612 (D.S.C. 2007).

For these reasons,

Defendants Guilford County, Balfour Beatty, and D.H. Griffin appear
to have an interest in the outcome of this suit sufficient to
preclude their designation as nominal parties.
Defendant Travelers further argues that its co-Defendants
constitute nominal parties by analogy to a declaratory judgment
action concerning uninsured-motorist coverage within an automobile
insurance policy.
5-6.)

(See Docket Entry 3 at 4-5; Docket Entry 22 at

In such cases, district courts in this Circuit have held

-8-

that the uninsured motorist who caused the damage constitutes a
nominal party to an action by the insured against the insurer,
because

the

motorist.

insured
See

seeks

Trigo

v.

no

recovery

Travelers

against

Commercial

the

uninsured

Ins.

Co.,

No.

3:10CV28, 2010 WL 3521759, at *4-5 (W.D. Va. Sept. 7, 2010)
(unpublished); Lloyd v. Travelers Prop. Cas. Ins. Co., 699 F. Supp.
2d 812, 816 (E.D. Va. 2010).

However, in those cases, the

uninsured motorists face potential liability regardless of the
outcome of the suit: as one court noted, “at most, it could only
change the name of the payee on any checks they write as a result
of the personal injury suit.”

Lloyd, 699 F. Supp. 2d at 816.

In contrast, Defendants Guilford County, Balfour Beatty, and
D.H. Griffin have a considerably more significant interest because
the instant matter may determine the amounts (if any) of their
respective liabilities, not simply who they have to pay.

Further,

unlike an uninsured motorist, Defendants Guilford County, Balfour
Beatty,

and

D.H.

Griffin

represent

parties

to

the

contract that forms the subject matter of the dispute.

insurance
See, e.g.,

Trigo, 2010 WL 3521759, at *5-6 (finding fact that uninsured
motorist “is not a party to the Policy or in privity with any party
to the Policy” significant to determination he constituted a
nominal party).

Ultimately, the interests of the non-consenting

Defendants in the instant case appear distinct from the interest of
an uninsured motorist in the cases cited by Defendant Travelers.

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Under these circumstances, Defendant Travelers has not shown that
its co-Defendants qualify as nominal parties.3
Nonetheless, the Court concludes that Defendant Travelers has
demonstrated the need to realign its co-Defendants as Plaintiffs to
this action. The Fourth Circuit has adopted the two-step principal
purpose test to assess the proper alignment of parties.

Palisades

Collections LLC v. Shorts, 552 F.3d 327, 337 (4th Cir. 2008).
Under that test, “[f]irst, [the Court] determine[s] the primary
issue in the controversy by considering the ‘plaintiff’s principal
purpose for filing its suit’ [and,] [s]econd, ‘[the Court] align[s]
the parties according to their positions with respect to the
primary issue.’” Builders Mut. Ins. Co. v. Dragas Mgmt. Corp., 497
F. App’x 313, 316 (4th Cir. 2012) (internal citation omitted)
(quoting Palisades Collections, 552 F.3d at 337).

“The principal

purpose test, however, does not require the [C]ourt to . . .
determine whether adversarial elements exist between parties.

The

relevant inquiry is to determine the parties’ positions with

3

Plaintiff additionally argues that Defendants Guilford
County, Balfour Beatty, and D.H. Griffin do not constitute nominal
parties because the North Carolina Declaratory Judgment Act
requires their joinder.
(Docket Entry 16 at 3.)
Plaintiff’s
argument fails, because the Fourth Circuit “treat[s] a state court
declaratory action that is removed as invoking the Federal
Declaratory Judgment Act, 28 U.S.C. § 2201.” Hartford Fire Ins.,
736 F.3d at 261 n.3 (citing Jones v. Sears Roebuck & Co., 301 F.
App’x 276, 281 n.12 (4th Cir. 2008)). Thus, the North Carolina
Declaratory Judgment Act does not control the nominal party
determination.
-10-

respect to the primary issue in this case, not whether the parties
are adversaries in another matter pending before another court.”
Marsh v. Cincinnati Ins. Co., No. 4:08CV2441-RBH, 2008 WL 4614289,
at *2 (D.S.C. Oct. 15, 2008) (unpublished).
Defendant

Travelers’ instant

Motion

contends

that

“[t]he

primary and controlling issue in controversy in this case is
whether

[Defendant]

Travelers

has

any

obligation

to

provide

insurance coverage to [Plaintiff], [Defendants] Guilford County,
Balfour Beatty, and/or D.H. Griffin.”
(emphasis added).)

(Docket Entry 3 at 6

Accordingly, Defendant Travelers asserts its

“position and interests lie in a finding of no coverage under the
Policy . . . . [, whereas Defendants] Guilford County, Balfour
Beatty, and D.H. Griffin – like [Plaintiff] – all have an interest
in a finding that [Defendant] Travelers must provide the coverage
[Plaintiff] seeks under the Policy.”

(Id. at 7-8.)

In that

regard, Defendant Travelers notes that “[a] grant of coverage to
Plaintiff [] by this Court will reduce the potential exposure of
[Defendants Guilford County, Balfour Beatty, and D.H. Griffin] for
any award that might be made against them through the Arbitration.”
(Docket Entry 22 at 7.)4

4

Plaintiff argues that Defendant Guilford County has not
participated in the arbitration and, thus, would not face liability
as a result of its outcome.
(See Docket Entry 24 at 6 n.3.)
However, as discussed above and as conceded by Plaintiff elsewhere,
(continued...)
-11-

In contrast, Plaintiff contends that “the central issue in
dispute is not merely the fact of coverage, but the question of
which party is responsible for the loss under the application of
the subject exclusions.”

(Docket Entry 16 at 10.)

Because Defendant Travelers denied coverage due to faulty planning
and/or workmanship (id. at 7), Plaintiff asserts “this Court will
necessarily consider and rule upon the factual bases as to why that
exclusion applies” (Docket Entry 24 at 6).

In other words,

Plaintiff frames its principal purpose in filing this suit as the
assignment of responsibility for the covered losses amongst the
insured parties, on which question Plaintiff holds an adverse
position to Defendants Guilford County, Balfour Beatty, and D.H.
Griffin.
Neither

Plaintiff

nor

Defendant

Travelers

have

provided

supporting cases involving the precise scenario presented by the
instant matter.

In opposition to realignment, Plaintiff cites

cases in which defendants chiefly alleged fraudulent joinder of
parties to defeat diversity jurisdiction, an inquiry distinct from
that required for a motion to realign parties.

(See Docket Entry

24 at 6-7 (citing Peerless Ins. Co. v. Philadelphia Ins. Co., C.A.
No.

12-906ML,

2013

WL

1947177,

4

at

*4

(D.R.I.

May

9,

2013)

(...continued)
Defendant Guilford County may ultimately face liability for some or
all of the losses upon a finding of no coverage. (See Docket Entry
16 at 7.)
-12-

(unpublished); PW Shoe Lofts, LP v. State Auto Prop. & Cas. Ins.
Co., No. 4:10CV2241, 2011 WL 2295068, at *4 (E.D. Mo. June 7, 2011)
(unpublished)).)

Although these district courts also briefly

considered and declined to realign parties, they did not rely on
the principal purpose test followed by the Fourth Circuit.

See

Peerless Ins., 2013 WL 1947177, at *4; PW Shoe Lofts, 2011 WL
2295068, at *4.
However, a recent decision from the District of Maryland
addressed a nearly identical factual scenario to this case.

See

Universal Concrete Prods. Corp. v. Peerless Ins. Co., Civ. A. No.
CCB-08-317, 2008 WL 4104171 (D. Md. Aug. 21, 2008) (unpublished).
In that case, a subcontractor brought a declaratory judgment action
in state court against two insurers, the contractor, another
subcontractor, and the owner of the subject property. Id. at *1-2.
One of the insurers removed to federal court in spite of the
presence of home state defendants, in part on grounds that those
defendants’ interests warranted their realignment as plaintiffs.
Id. at *2.
Noting that the subcontractor plaintiff’s complaint “allege[d]
no cause of action against [the contractor, subcontractor, or owner
defendants] and ma[de] no claim of any kind of relief against
them,” the district court found that the question of whether an
insurer owed coverage to the subcontractor represented the primary
and controlling purpose of plaintiff’s suit.

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Id. at *4.

Despite

the existence of adversity between the contractor, subcontractor,
and owner defendants in a separate proceeding, the district court
found

that

“those

parties

have

an

interest

in

seeing

[the

subcontractor] indemnified by its insurance policy in order to
ensure they are able to recover the full amount of any damages that
may be awarded” and realigned those defendants as plaintiffs. Id.;
see also Marsh, 2008 WL 4614289, at *2 (realigning defendant
insured

parties

as

plaintiffs,

despite

substantial

conflicts

between insureds, because all insureds would benefit from finding
of coverage under policy).
The Court finds that the same principles should apply here and
thus concludes that the question of whether Defendant Travelers
owes coverage to Plaintiff constitutes the primary and controlling
issue in this case.

In doing so, the Court does not set forth a

general rule, as Plaintiff warns against, “that carriers belong on
one side of the ‘v.’ while insureds belong on the other.”
Entry 16 at 10-11; see also Docket Entry 21 at 7.)

(Docket

However, the

Court recognizes that, in this and many other circumstances, such
an alignment will properly reflect the principal purpose of a
delaratory judgment suit to determine whether the insurer owes
coverage.

See, e.g., United States Fid. & Guar. Co. v. A & S Mfg.

Co., Inc., 48 F.3d 131, 134 (4th Cir. 1995) (concluding that
“dispute among [multiple] insurers is secondary to whether the

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insurers are liable to [insured plaintiff] and is hypothetical
until the insurers’ liability is determined”).
Given the Court’s decision to realign Defendants Guilford
County, Balfour Beatty, and D.H. Griffin as Plaintiffs, the Court
will deem immaterial said Defendants’ lack of consent to removal.
See Lott v. Scottsdale Ins. Co., 811 F. Supp. 2d 1220, 1222 n.2
(E.D. Va. 2011) (“[D]efendants are not required to consent to
removal

given

the

realignment

.

.

.

as

plaintiffs

for

jurisdictional purposes.”); Gurney’s Inn Resort & Spa Ltd. v.
Benjamin, 743 F. Supp. 2d 117, 126 (E.D.N.Y. 2010) (“[R]ealignment
cures the defects in the removal notice by creating complete
diversity and excusing [removing defendant’s] failure to comply
with the rule of unanimity.”); Universal Concrete Prods., 2008 WL
4104171, at

*3

n.5

(“[P]arties

aligned

in interest

with the

plaintiff are not required to join or consent to the removal.”
(quoting Smiglin v. New York Life Ins. Co., 854 F. Supp. 464 (S.D.
Tex. 1994)).
CONCLUSION
Defendant Travelers has established federal subject-matter
jurisdiction to support removal of this action.
IT IS THEREFORE ORDERED that Defendant Travelers’ Motion to
Realign Parties (Docket Entry 2) is GRANTED and Defendants Guilford
County, Balfour Beatty, and D.H. Griffin are hereby REALIGNED as
party Plaintiffs.
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IT IS FURTHER ORDERED that Plaintiff’s Motion to Remand to the
Superior Court of Guilford County (Docket Entry 15) is DENIED.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
March 4, 2014

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