DBS, Inc. v. Selective Way Insurance Company

Filing 28

OPINION AND ORDER that GRANTS Defendant's 16 Motion to Amend, and DENIES Plaintiff's 8 Motion to Remand. Signed by District Judge Henry C. Morgan, Jr on 7/8/2013 and filed on 7/10/2013. (rsim, )

FILED
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

JUL 1 0 2013

Norfolk Division

DBS, INC.,

CLERK, U.S. DISTRICT COURT
NORFOLK. VA

Plaintiff,
Civil Case No.: 2:13cv312

v.

SELECTIVE WAY INSURANCE CO.,
Defendant.

OPINION AND ORDER

This matter is before the Court on Plaintiffs Motion to Remand, Doc. 8, and Defendant's

Motion to Amend/Correct Notice of Removal, Doc. 16. After examining the Motions and the
associated briefs, the Court finds that oral argument is unnecessary because all facts and legal

contentions are adequately presented and oral argument would not aid in the decisional process.
E.D. Va. Loc. Civ. R. 7(J). For the reasons explained herein, the Court GRANTS Defendant's
Motion to Amend, Doc. 16, and DENIES Plaintiffs Motion to Remand, Doc. 8.
I. Background

Plaintiff DBS, Inc. ("Plaintiff) filed this case in the Circuit Court for the City of Norfolk,
Virginia, against Defendant Selective Way Insurance Co. ("Defendant") seeking to collect on an

insurance policy issued by Defendant. Defendant was served with the complaint on 16 May 2013
and filed its notice of removal, Doc. 1, on 4 June 2013. On 18 June 2013, Plaintiff moved to

remand this action. Docs. 8, 9. On 20 June 2013, Defendant filed a memorandum in opposition,
Doc. 15, to Plaintiffs Motion to Remand and filed a Motion to Amend/Correct notice of removal,

Docs. 16, 17. On 24 June 2013, Plaintiff filed a reply in support, Doc. 21, of its Motion to
Remand and filed a memorandum in opposition, Doc. 22, to Defendant's Motion to Remand.

Finally, Defendant replied in support of its Motion to Amend on 27 June 2013. Doc. 27. Both
parties requested a hearing on their motions. Docs. 23, 24. Because the Court has determined that
oral argument is not necessary, the matter is now ready for adjudication.
II. Legal Standards

Federal law allows a defendant to remove "any civil action brought in a State court of

which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). To

effectuate removal, the defendant must file "a notice of removal. .. containing a short and plain
statement of the grounds for removal, together with a copy of all process, pleadings, and orders
served upon such defendant... in such action." 28 U.S.C. § 1446(a). "[T]he party seeking

removal bears the burden of establishing federal jurisdiction." Id Additionally, "when diversity
of citizenship is a basis of removal jurisdiction, it must exist both at the time the original action

is filed in the state court and at the time the removal is sought." Hubbard v. Tripp, 611 F. Supp.
895, 896 (E.D. Va. 1985) (quoting 14A Charles Alan Wright et al., Federal Practice and

Procedure, Jurisdiction 2d § 3723 (1985)) (internal quotation marks omitted). Further, "a
corporation shall be deemed to be a citizen of every State and foreign state by which it has been

incorporated and of the State or foreign state where it has its principal place of business." 28
U.S.C.A. § 1332(c)(1).

Accordingly, properly alleging the citizenship of a corporation for purposes of removal

requires alleging four temporally and geographicallydistinct facts: the corporation's (1) state of
incorporation and (2) principal place of business at the time of filing of the complaint and the
corporation's (3) state of incorporation and (4) principal place of business at the time of filing the
notice of removal.

III. Analysis

There are two issues before the Court: (1) whether Defendant sufficiently alleges its

citizenship for purposes of diversity jurisdiction; and (2) if not, whether Defendant's notice of
removal may be amended outside of the thirty (30) day window for removing.
1. Sufficiency of Allegations of Jurisdiction

Plaintiff argues that Defendant insufficiently alleged its citizenship in its notice of
removal because the notice omits Defendant's principal place of business at the time the

complaint was filed. The notice of removal states the following with regard to Defendant's
citizenship:

At the time this action began, the defendant Selective Way Insurance Company
was, and still remains incorporated in the State of New Jersey and has its principal
place of business in New Jersey.

Doc. 1. At first glance, it appears that Defendant referred to its principal place of business only in
the present tense. However, Defendant argues that the clause is dependent on the introductory
clause—"At the time this action began"—and so its principal place of business is alleged at both
relevant times. Doc. 15. Plaintiff insists that the clause "and has its principal place of business in
New Jersey" is independent of the introductory clause and, since it is in the present tense, only
states Defendant's principal place of business at the time the notice of removal was filed. Doc.
21 at 3.

The Court must take "into account rules of grammar" when interpreting legal documents.
See Miller's Apple Valley Chevrolet Olds-Geo, Inc. v. Goodwin, 177 F.3d 232, 234 (4th Cir.
1999) (discussing the same in the context of statutory interpretation). Grammar matters. The

Court cannot permit a party to mean something without actually saying it; otherwise, poor
writing could serve as cover for missing facts. Here, as Plaintiff points out, there is no past-tense

word or clause that modifies Defendant's principal place of business. Doc. 27 at 3. Instead, while

referring to its principal place ofbusiness with a present-tense verb indicating possession, "has,"

the only past-tense modifier in the sentence is the state-of-being verb "was." Reading "was" to
also refer to Defendant's principal place of business results in an improperly constructed

phrase—"[a]t the time this action began, the defendant. .. was ... its principal place of business

in New Jersey."1 Nonetheless, the introductory clause does appear to apply to the whole
sentence. The fact that "and still remains" is not set off with commas as a parenthetical, but

rather the whole present-tense phrase—"and still remains incorporated in the State of New Jersey
and has its principal place ofbusiness in New Jersey"—is separated from the entirely past-tense

introduction—"at the time this action began, the defendant Selective Way Insurance Company
was"—by a comma after "was," indicates that the introductory clause and the word "was" was
intended to apply, however incorrectly, to both facts of citizenship.
Ultimately, the grammar Defendant used in its allegations makes it unclear whether it

meant to communicate that New Jersey was its principal place of business only at the time the

notice of removal was filed or also at the time the complaint was filed. Because a removing

corporation bears the burden of alleging both its state of incorporation and its principal place of
business both at the time the complaint was filed and at the time the notice of removal was filed,

Defendant's grammaticallyunclear allegation of diversityjurisdiction "fails to negate the

possibilitythat diversitydoes not exist." Contreras v. Thor Norfolk Hotel, L.L.C.. 292 F. Supp.
2d 794, 797 (E.D. Va. 2003) (citing Baer v. United Services Auto. Ass'n. 503 F.2d 393, 397 (2d
Cir.1974)). Accordingly, Defendant's allegation of its citizenship is insufficient.

1Effectively, Defendant implies that what it meant was "At the time this action began, the defendant Selective Way
Insurance Company was, and still remains[,] incorporated in the State of New Jersey and [had, and still] has[,] its
principal place of business in New Jersey." Or it could be phrased, "had and continues to have," as Defendant does
in its proposed amendment. Doc. 16, Ex. 1^3. However, what Defendant actually wrote is not so clear.

2Itisworth noting that Plaintiff, inits only full block-quote ofthe language, misquotes the notice ofremoval by
adding a comma to make "and still remains" parenthetical. Doc. 21 at 3.
4

2. Amendment of Allegations of Jurisdiction

Defendant argues that, even if its allegations of its citizenship were insufficient,
Defendant should be permitted to amend its notice of removal to effect "a change in verbiage."

Doc. 17 at 3.3 "Defective allegations ofjurisdiction may be amended, upon terms, in thetrial or
appellate courts." 28 U.S.C. § 1653. "§ 1653 ... allows [] courts to remedy inadequate
jurisdictional allegations, but not defective jurisdictional facts." Newman-Green, Inc. v. AlfonzoLarrain, 490 U.S. 826, 832 (1989) (holding that § 1653 did not permit an amendment to dismiss

a party to create complete diversity). Here, there is no argument that the parties are not
completely diverse or lacking in any other jurisdictional fact. The only issue as to jurisdiction is
Defendant's insufficient allegations of one jurisdictional fact. Accordingly, for purposes of §

1653, the allegations are defective and susceptible to amendment. However, in applying § 1653
in the context of amending a notice of removal after 28 U.S.C. § 1446(b)'s thirty-day window for
removal has elapsed, this Court has developed a split of authority. See SunTrust Bank v. Vill. at
Fair Oaks Owner, LLC, 766 F. Supp. 2d 686, 690 (E.D. Va. 2011). Some decisions have

followed a strict approach only allowing the correction of "imperfectly stated" allegations, not
the addition of new or supplemental allegations. Ig\ at 691 (collection decisions); see also Iceland

Seafood Corp. v. Nat'l Consumer Co-op. Bank, 285 F. Supp. 2d 719, 726 (2003) (denying an
amendment seeking to supply a missing allegation). Other decisions have followed a more liberal

approach that allows adding supplemental allegations. SunTrust Bank. 733 F. Supp. 2d at 690

(collecting cases); see also Muhlenbeck, 304 F. Supp. 2d 797, 800 (E.D. Va. 2004) (applying a
more liberal approach in permitting the addition of allegations of LLC member's citizenship in
the place of a corporate citizenship designation, but still indicating that amendments adding

allegations that were "missing entirely" or that "materially] and substantially]" changed the
Apart from the one defect discussed supra. Defendant has adequately alleged diversity jurisdiction.
5

notice of removal would be denied). In an unpublished opinion, arguably in dicta, the Fourth

Circuit indicated that it preferred the liberal approach—permitting supplemental allegations to
cure a defective general allegation of diversity jurisdiction. Nutter v. New Rents, Inc., 945 F.2d

398, at *2 (4th Cir. 1991) (unpublished table decision).4
Here, the Court has found Defendant's allegations ofjurisdiction to be insufficient

because they are unclear grammatically. The insufficiency of these allegations is best seen as an
"imperfect statement" of presently undisputed jurisdictional facts rather than an omission.
Accordingly, even under the "strict" approach, permitting amendment would be within the
Court's discretion. If the Court were to militantly apply the rules of grammar to conclude that the

best reading of Defendant's allegations was an omission of its principal place of business at the
time the complaint was filed, the Court would still be inclined to find amendment permissible.

The Court agrees that "[b]ecause of the 'significant federalism concerns implicated' by the
removal of an action from state court, federal courts must strictly construe removal statutes."
Herod v. Fisher & Son Co.. Inc., 3:12CV712, 2012 WL 5729106 (E.D. Va. Nov. 15, 2012)

(citing Lontz v. Tharp, 413 F.3d 435,440 (4th Cir.2005)). Nonetheless, where the defendant has

removed within the time permitted by the removal statute, continues to rely on the same basis of
jurisdiction, and merely seeks to correct allegations of facts, the truth of which are not in dispute,
the concerns of federalism are not as pronounced. Though unpublished, the Fourth Circuit's
handling of the matter is especially persuasive. There, a removing defendant forgot entirely to

allege its principal place of business. Nutter v. New Rents, Inc.. 945 F.2d 398, at *2.
Nonetheless, the Defendant had removed in time and alleged its state of incorporation, was

continuing to rely on diversity of citizenship as the basis of federal jurisdiction, and merely
sought to add an allegation of its principal place of business. Under those circumstances the
The Fourth Circuit alternatively held that the objections to the amendment were waived. Id.
6

Fourth Circuit held that amendment was permissible. Id That is nigh exactly similar to the case

here, and so this Court is persuaded to find amendment permissible. Accordingly, the Court
exercises its discretion to grant defendant leave to amend the notice of removal.
IV. Conclusion

For the reasons explained above, Defendant's Motion to Amend/Correct Notice of
Removal, Doc. 16, is GRANTED and Plaintiffs Motion to Remand, Doc. 8, is DENIED.

The Clerk is REQUESTED to send a copy of this Order to all counsel of record.

It is so ORDERED.

/s/
Henry Coke Morgan, Jr.
Senior United States District Judge,
HENRY COKE MORGAN, JR.
SENIOR UNITED STATES DISTRICT fl

Norfolk, Virginia
Date: July
g ,2013