Baker Roofing Company v. American Guarantee and Liability Insurance Company et al

Filing 20

ORDER granting 10 Motion to Remand. Signed by Honorable Patrick Michael Duffy on 02/23/2017.(adeh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
Baker Roofing Company,
Plaintiff,
v.
American Guarantee and Liability
Insurance Company, Zurich American
Insurance Company, and Builders
Premier Insurance Company,
Defendants.

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C.A. No.: 2:16-cv-3776-PMD
ORDER

This case is before the Court on Plaintiff Baker Roofing Company’s motion to remand
pursuant to 28 U.S.C. § 1447(c) (ECF No. 10).

Baker argues, inter alia, that Defendants

American Guarantee and Liability Insurance Company and Zurich American Insurance
Company improperly removed the case to federal court without Defendant Builders Premier
Insurance Company’s consent. Baker seeks an award of costs and attorney’s fees. For the
reasons set forth herein, the Court grants Baker’s motion for remand but denies its request for
attorney’s fees.
BACKGROUND AND PROCEDURAL HISTORY
This is an insurance-coverage dispute.

It stems from a construction-defect lawsuit

pending against Baker in South Carolina state court. Baker seeks primary liability coverage
from Builders Premier, which issued Baker a commercial general liability policy with a coverage
period of July 1, 2013 to July 1, 2014, and from Zurich, which issued Baker a commercial
general liability policy covering the succeeding one-year period. Baker seeks excess coverage
from American Guarantee under two successive umbrella policies with a combined coverage

period of July 1, 2013 to July 1, 2015. Without admitting its policy provides coverage, Builders
Premier has agreed to defend Baker. Zurich and American Guarantee, however, have refused to
provide coverage.
In the present lawsuit, Baker seeks a declaratory judgment that all three insurers must
provide it defense and indemnity coverage in the construction-defect litigation. It has also
asserted claims against Zurich and American Guarantee for breach of contract and insurance bad
faith. All three defendants deny that their policies afford Baker defense or indemnity coverage.
On November 30, 2016, Zurich and American Guarantee removed the case to this Court.
Builders Premier neither joined in their notice of removal nor consented to removal.

On

December 21, Baker moved to remand, arguing removal was improper because inter alia, the
defendants did not unanimously agree to removal. The motion has been fully briefed; Builders
Premier supports it, while Zurich and American Guarantee oppose it. The matter is therefore
ripe for consideration.
DISCUSSION
For the following reasons, the Court finds that Zurich and American Guarantee’s removal
was defective and that remand is necessary.

However, the Court finds that an award of

attorney’s fees and costs is not warranted.
I.

Lack of Unanimity Among Defendants

28 U.S.C. § 1441(a) allows “the defendant or defendants” named in certain types of statecourt cases to remove the case to federal district court.

The “defendant or defendants”

accomplish removal by filing a notice that contains a short and plain statement of the grounds for
removal. 28 U.S.C. § 1446(a). Courts have construed the “defendant or defendants” language in
those statutes as requiring that all defendants in a case join in or consent to removal. Hartford

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Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255, 259 (4th Cir. 2013). That requirement
is called the “rule of unanimity.” Id. Failure to comply with the rule renders the removal
defective and is grounds to remand the case to state court. See Payne ex rel. Estate of Calzada v.
Brake, 439 F.3d 198, 203 (4th Cir. 2006) (holding the failure of all defendants to join in the
removal petition is a nonjurisdictional defect in the removal); Palmetto Automatic Sprinkler Co.
v. Smith Cooper Int’l, Inc., 995 F. Supp. 2d 492, 495 (D.S.C. 2014) (“[O]rdinarily, the failure of
any defendant to consent to removal renders the removal improper and requires remand.”)
Builders Premier neither joined nor consented to Zurich and American Guarantee’s
removal notice. Thus, it appears the unanimity rule has not been satisfied.
No so fast, say Zurich and American Guarantee, for an exception to the rule applies here.
A nominal defendant—one with “no immediately apparent stake in the litigation” either before
or after removal—need not join in or consent to removal. Hartford Fire Ins. Co., 736 F.3d at
259, 260. Zurich and American Guarantee contend Builders Premier is a nominal defendant
because it has agreed to provide Baker defense coverage.
The nominal-defendant exception is meant to “ensure[] that only those parties with a
palpable interest in the outcome of a case, and not those without any real stake, determine
whether a federal court can hear a case.” Hartford Fire Ins. Co., 736 F.3d at 259. Analyzing
whether the exception applies is straightforward: the court decides whether the non-removing
defendant “has an interest in the outcome of the case.” Id. at 261; see also id. at 260 (“[T]he key
inquiry is whether the suit can be resolved without affecting the non-consenting . . . defendant in
any reasonably foreseeable way.”).
Builders Premier clears that threshold. Baker has been sued by a plaintiff seeking more
than $20 million in actual damages alone. In asserting its declaratory judgment claim against

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Builders Premier, Baker asks this Court to hold that Builders Premier must pay lawyers to defend
Baker in that suit and must pay at least some part of any judgment the plaintiff might obtain.
The Court cannot say Builders Premier “has no dog in this fight.” See Hartford Fire Ins. Co.,
736 F.3d at 261.
The nominal-defendant exception “helps to preserve the adversity that is central to our
system of justice.” Hartford Fire Ins. Co., 795 F.3d at 262. Relying on that statement, Zurich
and American Guarantee argue Builders Premier must be a nominal defendant because, unlike
them, it has not refused to provide coverage and thus there is no genuine adversity between it and
Baker. To be sure, Builders Premier has agreed to defend and indemnify Baker, and it asserts it
is fulfilling its obligations to Baker under the policy. However, Builders Premier denies that it
actually has a legal obligation to defend or indemnify Baker, it disputes Baker’s allegations
regarding what its policy covers, and it asks that Baker’s claim against it be dismissed. The
position Builders Premier has laid out resembles—and in fact may well be—that of an insurer
that initially agrees to defend its insured without admitting it has any coverage obligations and
subject to a reservation of its right to later disclaim or challenge coverage. That position gives
the Court no concern that Baker and Builders Premier lack adversity.

Thus, Zurich and

American Guarantee have not shown that Builders Premier is a nominal defendant. See Palmetto
Automatic Sprinkler Co., 995 F. Supp. 2d at 495 (“[W]here a defendant does not consent to
removal, the party seeking removal has the burden of proving that an exception to the rule of
unanimity applies.”).
Anticipating that conclusion, Zurich and American Guarantee argue alternatively that
they did not need Builders Premier’s consent to remove because it should be realigned as a
plaintiff. The Court disagrees.

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The potential realignment of parties is a two-step analysis: “First, the court must
determine the primary issue in the controversy.

Next, the court should align the parties

according to their positions with respect to the primary issue.” U.S. Fid. & Guar. Co. v. A & S
Mfg. Co., 48 F.3d 131, 133 (4th Cir. 1995) (diversity issue); see Wayne J. Griffin Elec., Inc. v.
Travelers Prop. Cas. Co. of Am., No. 1:13CV882, 2014 WL 842983, at *4–5 (M.D.N.C. Mar. 4,
2014) (unanimity issue). The primary issue in this case is obvious: whether these three insurance
companies must defend and indemnify Baker in the construction-defect case. Cf. U.S. Fid. &
Guar. Co., 48 F.3d at 134. Baker and Builders Premier are therefore properly situated on
opposing sides of that issue.

See Wayne J. Griffin Elec., Inc., 2014 WL 842983, at *6

(recognizing that in insurance coverage declaratory judgment cases, using “the v.” to separate
insurers from insureds often will properly reflect the case’s primary issue).
Baker, of course, has an interest in getting as many insurers as possible to defend and
indemnify it. Zurich and American Guarantee contend that, because Builders Premier has an
interest in seeing that other insurers share in Baker’s defense and indemnity costs, it has the same
interest as Baker and thus must be viewed as a plaintiff. Contribution among the insurers,
however, is ancillary to the primary issue of whether the insurers are liable to Baker at all. See
U.S. Fid. & Guar. Co., 48 F.3d at 134. On that primary issue, the three insurers appear to be a
united front. The Court will therefore not realign Builders Premier.
Because Zurich and American Guarantee have not shown that they satisfied the
unanimity rule, the Court finds their removal defective and must therefore remand this matter to
state court. 1

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1.

Consequently, the Court does not reach Baker’s other grounds for remand.

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II.

Costs and Attorney’s Fees

Baker seeks an award of costs and attorney’s fees it incurred challenging the defective
removal. Subsection 1447(c) authorizes the awarding of such fees as a deterrent against litigants
using removal as a delay tactic. See Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).
It follows, then, that courts should decide whether to make such awards by deciding whether the
removal, though defective, was nonetheless reasonable and attempted in good faith. See id. The
Court so finds here, and thus it denies Baker’s request for attorneys’ fees.
CONCLUSION
For the reasons given above, it is ORDERED that Baker’s motion to remand is
GRANTED. This case is hereby REMANDED to the Court of Common Pleas for Charleston
County, South Carolina. Baker’s request for attorney’s fees is DENIED.
AND IT IS SO ORDERED.

February 23, 2017
Charleston, South Carolina

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