First Mercury Insurance Company v. Monitronics International, Inc. et al
Filing
59
MEMORANDUM OPINION AND ORDER granting First Mercury Insurance Company's 23 MOTION to Remand to Circuit Court; directing that this case is hereby REMANDED to the Circuit Court of Cabell County; denying First Mercury's request for reimbursement of all costs expended in the defense of this removal. Signed by Judge Robert C. Chambers on 1/17/2017. (cc: counsel of record; any unrepresented parties) (jsa)
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
FIRST MERCURY INSURANCE
COMPANY,
Plaintiff,
v.
CIVIL ACTION NO. 3:16-4381
MONITRONICS INTERNATIONAL, INC.,
ALLIANCE SECURITY, INC.,
ISI ALARMS, INC.,
ISI ALARMS NC, INC.,
VERSATILE MARKETING SOLUTIONS, INC.,
MAXIMUM SECURITY ALARM,
POWER HOME TECHNOLOGIES, LLC,
POWER HOME TECHNOLOGIES, INC.,
STEADFAST INSURANCE COMPANY,
LEXINGTON INSURANCE COMPANY,
ABC CORPS 1-50 (Said names being fictitious and
unknown entities), and
JOHN DOE INSURERS 1-50 (Said names being
fictitious and unknown entities),
Defendants.
MEMORANDUM OPINION AND ORDER
On April 8, 2016, Plaintiff First Mercury Insurance Company (First Mercury) filed
a declaratory judgment action in the Circuit Court of Cabell County, West Virginia, against
Monitronics International, Inc. (Monitronics), Alliance Security, Inc. (Alliance), ISI Alarms, Inc.
and ISI Alarms NC, Inc. (collectively ISI), Versatile Marketing Solutions, Inc. (Versatile),
Maximum Security Alarm (Maximum), Power Home Technologies, LLC and Power Home
Technologies, Inc. (collectively Power Home), ABC Corps 1-50 (said names being fictitious and
unknown entities), and John Doe Insurers 1-50 (said names being fictitious and unknown entities)
over an insurance dispute arising from a consolidated multi-district litigation (MDL) action, and
other related actions, filed against Defendant Monitronics. The MDL action is pending in the
Northern District of West Virginia and involves class action claims under the Telephone Consumer
Protection Act (TCPA lawsuits). In the TCPA lawsuits, the plaintiffs generally allege that
Monitronics’ dealers and agents violated the TCPA by placing calls to sell home alarm and security
systems.
On May 13, 2016, Monitronics removed the declaratory judgment action to this
Court pursuant to 28 U.S.C. § 1332(a)(1) based upon diversity of citizenship and an amount in
controversy exceeding $75,000.1 Despite the necessity of diversity of citizenship under the statute,
Monitronics concedes in its Notice of Removal that Plaintiff First Mercury and Defendant Alliance
are non-diverse parties, as both are Delaware corporations. Nevertheless, Monitronics argues that
Alliance is fraudulently joined, making its citizenship irrelevant and removal proper. First Mercury
disagrees and has filed a Motion to Remand.2 Additionally, just five days after removal, First
Mercury filed an Amended Complaint naming three insurance companies who were previously
unknown to First Mercury and identified in the original complaint as “John Doe Insurers.” These
new Defendants include Steadfast Insurance Company (Steadfast), Lexington Insurance Company
(Lexington), and Mt. Hawley Insurance Company (Mt. Hawley). Both Steadfast and Lexington
also are alleged to be Delaware corporations and, thus, non-diverse defendants.3
Section 1332(a)(1) provides, in part: “district courts shall have original jurisdiction of all
civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of
interest and costs, and is between . . . citizens of different States . . . .” 28 U.S.C. § 1332(a)(1).
1
2
The parties do not dispute the amount in controversy exceeds $75,000.
3
Mt. Hawley was voluntarily dismissed from this action on August 12, 2016.
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When confronted with a question of fraudulent joinder, the Fourth Circuit has stated
that “the removing party must demonstrate either ‘outright fraud in the plaintiff’s pleading of
jurisdictional facts’ or that ‘there is no possibility that the plaintiff would be able to establish a
cause of action against the in-state defendant in state court.’” Hartley v. CSX Transp., Inc., 187
F.3d 422, 424 (4th Cir. 1999) (emphasis in original) (quoting Marshall v. Manville Sales Corp., 6
F.3d 229, 232 (4th Cir. 1993)). Additionally, “the party alleging fraudulent joinder bears a heavy
burden—it must show that the plaintiff cannot establish a claim even after resolving all issues of
law and fact in the plaintiff’s favor.” Id. (citation omitted). At this point, a plaintiff’s pleadings are
treated with great deference as “this standard is even more favorable to the plaintiff than the
standard for ruling on a motion to dismiss under [Federal Rule of Civil Procedure] 12(b)(6).” Id.
(citation omitted). The court also must “resolve all doubts about the propriety of removal in favor
of retained state court jurisdiction.” Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir.
1993) (citation omitted).
Setting aside the parties’ dispute as to whether this Court should even consider the
citizenship of Steadfast and Lexington as they were identified post-removal, the Court turns to
whether Alliance was fraudulently joined as it was named in the original Complaint. In this case,
First Mercury alleges Alliance (and the other Marketing Contractor Defendants) entered into
service contracts with Monitronics (collectively referred to as the AMPA Contracts), which
contain identical hold harmless and indemnification provisions. Compl. at ¶¶ 16-25. First Mercury
contends these provisions require the Marketing Contractor Defendants to defend, indemnify, and
hold Monitronics harmless for the claims made in the MDL action. Id. at ¶¶71-78. In turn, First
Mercury argues it has a Transfer of Rights provision in its insurance policies, which require
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Monitronics to transfer its rights to coverage under the AMPA contracts to First Mercury. In
relevant part, this provision states: “If the insured has rights to recover all or part of any payment
we have made under this Coverage Part, those rights are transferred to us. The insured must do
nothing after loss to impair them.” Compl. at ¶ 42. Given these provisions, First Mercury argues it
properly asserted a claim against the Marketing Contractor Defendants, including Alliance, that
they are liable to pay some or all of the defense costs First Mercury has incurred in defending
Monitronics.4
In response, Monitronics states it filed a coverage lawsuit against First Mercury in
the Northern District of Texas one day prior to First Mercury filing its action in the Circuit Court
of Cabell County. Monitronics asserts First Mercury filed in state court and named Alliance as a
non-diverse Defendant to avoid the Fourth Circuit’s first-to-file rule, which would give Texas
priority over the lawsuits. See Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581,
594–95 (4th Cir. 2004) (stating “the first suit should have priority, absent the showing of balance
of convenience in favor of the second action” (quoting Ellicott Mach. Corp. v. Modern Welding
Co., 502 F.2d 178, 180 n. 2 (4th Cir. 1974)). Monitronics argues, however, the claims against
Alliance are not viable and, therefore, removal was proper.
Specifically, Monitronics states there is a provision in its contract with Alliance
that gives exclusive jurisdiction to Texas. Thus, assuming arguendo that First Mercury has a right
to subrogation, Monitronics insists it cannot bring a claim in West Virginia. Additionally,
This argument is made in the alternative in the Complaint. First Mercury’s first argument
is for a declaration that it does not owe Monitronics any duty to defend or indemnify.
4
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Monitronics asserts that Texas law applies to the AMPA policies. Under Texas law, Monitronics
argues that any indemnity obligations Alliance owes Monitronics does not extend to First Mercury.
Monitronics states that indemnity provisions under the AMPA contracts only apply to payments
made by Monitronics. On the other hand, First Mercury’s subrogation right is limited to payments
First Mercury has made. Therefore, Monitronics insists that First Mercury cannot assert a claim
for subrogation against Alliance. Furthermore, Monitronics argues that, even if First Mercury can
assert a valid claim against Alliance, such claim is not ripe and premature under Texas law and the
Transfer of Rights provision in First Mercury’s policy because the only ripe claim is whether First
Mercury has a duty to defend Monitronics.
First Mercury replies that Monitronics’ arguments require this Court to entangle
itself with contested substantive issues over the validity, enforceability, and interpretation of
contractual provisions and a dispute over what state law applies and how the law should be applied
to the facts of this case. In particular, First Mercury argues it intends to challenge the forum/venue
selection clauses in the AMPA contracts, and it hotly contests Monitronics interpretation of the
policies. However, Monitronics’ motion requires First Mercury to respond its arguments, and for
this Court to embark on a path to resolve these issues, without the benefit of any discovery.
Nevertheless, as indicated by First Mercury, the ultimate issue before this Court on its motion to
remand is not what side will be victorious on the merits of those arguments. Rather, it is whether
First Mercury has pled “only a slight possibility of a right to relief” against a non-diverse
defendant. Hughes v. Wells Fargo Bank, N.A., 617 F. App’x 261, 264-65 (4th Cir. 2015) (quoting
Mayes v. Rapoport, 198 F.3d 457, 466 (4th Cir. 1999)). If so, this Court is without jurisdiction.
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Here, it is undisputed that First Mercury has incurred expenses defending
Monitronics. First Mercury alleges the contractual provisions in its policy and the AMPA policies
allow it to recover those costs from Alliance and others. Although Monitronics disputes First
Mercury’s claims and insists the claims may not be brought in West Virginia, the Court must treat
the pleadings with great deference and apply a standard that is even more lenient than a motion
raised under Rule 12(b)(6) of the Federal Rules of Civil Procedure. In doing so, Monitronics has
a “heavy burden” to show that First Mercury “cannot establish a claim even after resolving all
issues of law and fact in the [First Mercury’s] favor.” Hartley, 187 F.3d at 424 (citation omitted).
This Court’s role is not to get embroiled in arguments that are best addressed in a motion to dismiss
or one for summary judgment, such as challenges to the validity, enforceability, and interpretation
of the contractual provisions relied upon by the parties. It is merely to determine if a possible claim
exists against a non-diverse defendant.
Under this standard, the Court has no difficulty finding Monitronics has failed to
meet its burden. First Mercury has set forth sufficient information in its Complaint to state-at leastthe slight possibility of a claim against Alliance. First Mercury brought this action as a declaratory
judgment action for a court to determine the respective rights and obligations of the parties under
the various contracts. Resolving the law and facts in First Mercury’s favor and resolving all doubts
in favor of the state court retaining jurisdiction, the Court finds remand is necessary. “Once the
court identifies this glimmer of hope for the plaintiff, the jurisdictional inquiry ends.” Hartley, 187
F.3d at 426.
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Accordingly, the Court finds diversity jurisdiction does not exist and GRANTS
First Mercury’s Motion to Remand.5 ECF No. 23. This case is hereby REMANDED to the Circuit
Court of Cabell County.
In its motion, First Mercury also seeks reimbursement of all costs expended in the
defense of this removal. Although the Court finds removal was improper, the Court finds that
Monitronics’ had an objectively reasonably basis for seeking removal. Therefore, DENIES First
Mercury’s request for reimbursement.
The Court DIRECTS the Clerk to send a copy of this written Opinion and Order
to counsel of record and any unrepresented parties.
ENTER:
5
January 17, 2017
As this Court finds it does not have jurisdiction over this matter, the Court does not rule
on Monitronics’ Motion to Strike the Amended Complaint in which it names Lexington, Steadfast,
and Mt. Hawley as Defendants. ECF No. 44. Additionally, the Court need not address whether or
not these Defendants were fraudulently joined.
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