Erie Insurance Exchange v. Harbor Freight Tools, USA Inc. et al
Memorandum of Opinion and Order For the reasons set forth herein, the Court grants Plaintiff's Motion for Remand for Lack of Subject Matter Jurisdiction (ECF No. 17 ). The case is remanded to the Trumbull County, Ohio Court of Common Pleas forthwith. The Telephonic Status Conference scheduled for 5/4/2017 at 12:00 p.m. is cancelled. Judge Benita Y. Pearson on 5/4/2017. (JLG)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
ERIE INSURANCE EXCHANGE,
HARBOR FREIGHT TOOLS, USA INC., et
CASE NO. 4:16CV2212
JUDGE BENITA Y. PEARSON
MEMORANDUM OF OPINION AND
ORDER [Resolving ECF No. 17]
Pending is the Motion for Remand for Lack of Subject Matter Jurisdiction (ECF No. 17)
filed by Plaintiff Erie Insurance Exchange to which the Defendant Harbor Freight Tools, USA
Inc. opposes (ECF No. 20). The Court has been advised, having reviewed the record, the parties’
briefs and the applicable law. For the reasons set forth below, the Court grants Plaintiff Erie
Insurance Exchange’s motion for remand.
I. Background & Procedural History
Plaintiff filed this product liability action in the Trumbull County, Ohio Court of
Common Pleas, seeking compensation for payments made to Plaintiff’s insureds for damages
sustained to the insureds’ real and personal property. ECF No. 1-2, ¶¶ 13-14. In its Complaint,
Plaintiff alleges that Defendant designed and manufactured a float charger whose defective parts
failed causing fire damage to Plaintiff's insureds' real and personal property and loss of use of the
property in the amount of $360,891.47. ECF No. 1-2, ¶¶ 6-8, 13. Defendant removed the case to
this Court on September 2, 2016 pursuant to 28 U.S.C. §§ 1441 and 1446, and based upon
diversity jurisdiction under 28 U.S.C. § 1332. ECF No. 1, ¶¶ 2, 15, 16.
On December 16, 2016, Plaintiff attempted to file an amended complaint (ECF No. 12)
without leave of Court. On the same day, during the Telephonic Case Management Conference,
counsel for Plaintiff informed the Court that potential jurisdictional issues may arise because of
Plaintiff’s status as an insurance exchange. Given the potential jurisdictional issues, the Court
ordered Plaintiff to file a motion to remand or notice on jurisdiction by January 13, 2017. See
Mins. of Proceeding. The Court also set a March 31, 2017 cut-off to file amended pleadings.
See Case Management Conference Plan/Order, ECF No. 13, ¶ 13. The Court subsequently
granted Plaintiff’s motion for leave to file an amended complaint (ECF No. 15). See Order, Jan.
9, 2017. On January 10, 2017, Plaintiff filed its First Amended Complaint (ECF No. 16) in
which it alleged: “Plaintiff Erie Insurance Exchange  is a reciprocal insurance exchange
organized under the Insurance Law of the Commonwealth of Pennsylvania and is authorized to
write property and casualty insurance contracts in the State of Ohio, with its principal place of
business located at 100 Erie Insurance Place in Erie, Pennsylvania.” ECF No. 16, ¶ 1 (emphasis
Contra Complaint, ECF No. 1-2, ¶ 1 ("Plaintiff Erie Insurance Company  is an
insurance company Licensed to do business and issue policies of insurance in the State of
Ohio, with its principal place of business located at 301 Commonwealth Drive in
Warrendale, Pennsylvania.") (emphasis added). Otherwise, the First Amended Complaint
raises the same substantive claims as the Complaint filed in state court. See ECF No. 16,
¶¶ 7-9, 13-15.
On January 12, 2017, Plaintiff filed its motion for remand requesting that the Court return
the case to the Trumbull County, Ohio Court of Common Pleas. ECF No. 17. Plaintiff argues
that the Court lacks subject matter jurisdiction over this case because: (1) as a reciprocal
insurance exchange and unincorporated association, Plaintiff is considered to have the citizenship
of its subscribers and policyholders (ECF No. 17 at PageID #: 99-100); (2) Plaintiff has
subscribers who are citizens of Delaware and California (Id. at PageID #: 100); (3) Defendant is
a Delaware corporation with its principal place of business in California (Id. at PageID #: 98);
and, therefore (4) Defendant is a citizen of Delaware and California (Id. at PageID #: 99).
Therefore, Plaintiff avers, the Court should remand this action back to state court because
complete diversity of citizenship and diversity jurisdiction is lacking. Id. at PageID #: 101. In
opposition, Defendant urges the Court to recognize that there is a split authority as to the
citizenship of an insurance exchange and asks the Court to “adopt the alternate position that an
insurance exchange’s subscribers and policyholders are mere ‘customers’ who should not be
considered for purposes of diversity jurisdiction.” ECF No. 20 at PageID #: 116. In the
alternative, Defendant avers that the Court should deny Plaintiff’s motion because “Plaintiff has
failed to provide sufficient evidence that it actually has subscribers or policyholders who are
citizens of Delaware . . . or California.” Id. at PageID #: 117. The matter is now ripe for
II. Legal Standard
Pursuant to 28 U.S.C. § 1441(a), “any civil action brought in a State court of which the
district courts of the United States have original jurisdiction, may be removed by the defendant or
defendants, to the district court of the United States for the district and division embracing the
place where such action is pending.” District courts have original jurisdiction over civil actions
that arise under federal law, see 28 U.S.C. § 1331, or that involve parties of diverse citizenship
and exceed $75,000 in controversy, see 28 U.S.C. § 1332. Diversity jurisdiction exists where
“each defendant is a citizen of a different state from each plaintiff.” Owen Equip. & Erection
Co. v. Kroger, 437 U.S. 365, 373 (1978).
The removing party bears the burden of showing that diversity jurisdiction exists. Rogers
v. Wal-Mart Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000) (citing Wilson v. Republic Iron &
Steel Co., 257 U.S. 92, 97 (1921)). In a removal case, if, at any time prior to final judgment, it
appears that the court lacks subject-matter jurisdiction, the case must be remanded. 28 U.S.C. §
A. Plaintiff’s Citizenship
Plaintiff is a reciprocal insurance exchange and an unincorporated association that is
considered to have the citizenship of its members. See ECF No. 17 at PageID #: 100; ECF No.
20 at PageID #: 120. District courts have recognized a split authority on the issue of whether an
insurance exchange’s members include its subscribers and policyholders. See, e.g., James G.
Davis Const. Corp. v. Erie Ins. Exch., 953 F. Supp. 2d 607, 610 (D. Md. 2013) (“This question
has split federal judges in this District and beyond.”).
Fairly recent decisions including one issued by the Northern District of Ohio2, support the
finding that as an unincorporated association, Plaintiff is considered to have the citizenship of its
members for the purposes of diversity jurisdiction and Plaintiff’s members include its subscribers
and policy holders. See Themis Lodging Corp. v. Erie Ins. Exch., No. 1:10 CV 0003, 2010 WL
2817251, at *1 (N.D. Ohio July 16, 2010) (Wells, J.) (“A reciprocal insurance exchange . . . is an
unincorporated business organization of a special character in which the participants, called
subscribers (or underwriters) are both insurers and insureds. . . . Courts have long recognized that
reciprocal exchange insurance associations, like Erie, do not receive fictional citizenship as do
corporations but, instead, bear the citizenship of each member.”); James G. Davis Const. Corp.,
953 F. Supp. 2d at 610 (holding that Erie's members include its policyholders); Mid-Century Ins.
Co. v. Johnson, No. 13-2191-RDR, 2013 WL 3013620, at *3 (D. Kan. June 14, 2013) (granting
remand and holding that “[t]he law is well-settled in most jurisdictions . . . that for purposes of
diversity jurisdiction, the citizenship of a reciprocal insurance exchange is determined to be each
state within which it has a subscriber or member.”). See also AMCO Ins. Co. v. Erie Ins. Exch.,
No. 11 C 4842, 2011 WL 5833977, at *3 (N.D. Ill. Nov. 16, 2011) (ruling on 12(b) motion and
stating “[a]lmost every court that has decided this issue has concurred in this finding”) (citing
Like the majority of courts, the Court is not inclined to adopt, as Defendant requests, the
position that an insurance exchange’s subscribers and policyholders are its customers, not
Defendant concedes that “this Court previously has been inclined to view that
there is no ‘legally significant distinction’ between subscribers and members.” See ECF
No. 20 at PageID #: 121.
members, and should not be considered for purposes of diversity jurisdiction. ECF No. 20 at
PageID #: 116.
B. Proof of Citizenship
By way of affidavit prepared by Plaintiff’s Vice President James Hovart, Plaintiff asserts
that: “Erie Insurance Exchange has subscribers, i.e., policyholders, who have addresses in or are
citizens of Delaware and California.” See Affidavit of James Horvat, ECF No. 17-1, ¶ 12.
Defendant contends that the Affidavit is insufficient evidence of Plaintiff’s citizenship. ECF No.
20 at PageID #: 121 (“Plaintiff has failed to provide sufficient evidence to show that it actually
has policyholders or subscribers who are citizens of Delaware or California.”). To buttress this
argument, Defendant hypothesizes that, among other things, “it is very possible that [Plaintiff’s]
subscribers or policyholders [with an address in Delaware or California] may be citizens of some
other state who merely happen to have an address in Delaware or California.” Id. at PageID #:
122. Defendant also attacks the Affiant as lacking “personal knowledge as to whether those
subscribers or policyholders are actually citizens of or domiciled in Delaware or California.” Id.
at PageID #: 123. Additionally, Defendant avers that the Affidavit does not specifically “identify
any  subscribers or policyholders, provide any proof of their addresses or citizenship, or provide
any other documentation[.]” Id. But, as the removing party, Defendant bears the burden of
proving that diversity jurisdiction exists; not Plaintiff. Defendant has not met its burden.
Accordingly, the Court finds that: (1) as a reciprocal insurance exchange and
unincorporated association, Plaintiff is considered to have the citizenship of its subscribers and
policyholders; (2) Plaintiff has subscribers who are citizens of Delaware and California; (3)
Defendant is a Delaware corporation with its principal place of business in California; (4)
Defendant is a citizen of Delaware and California; and (5) Plaintiff and Defendant are both
citizens of Delaware and California. Therefore, complete diversity is lacking, the Court lacks
subject matter jurisdiction over this action, and the matter must be remanded to state court
pursuant to 28 U.S.C. § 1447(c).
For the foregoing reasons, the Court grants the Motion for Remand for Lack of Subject
Matter Jurisdiction (ECF No. 17). The case is remanded to the Trumbull County, Ohio Court of
Common Pleas forthwith. The Telephonic Status Conference scheduled for May 4, 2017 at
12:00 p.m. is cancelled.
IT IS SO ORDERED.
May 4, 2017
/s/ Benita Y. Pearson
Benita Y. Pearson
United States District Judge
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