Opinion
No. 02-2792 Section "T"(5)
November 21, 2002
CIVIL ACTION
Before the Court are two Motions to Remand filed on behalf of the Plaintiffs, Gene Alonzo, et al., and on behalf of the Defendant, State of Louisiana, through the Department of Natural Resources. The Court, having considered the arguments of counsel, the evidence presented, the law and applicable jurisprudence, is filly advised in the premises and ready to rule.
ORDER
I. BACKGROUND:
On or about May 2, 1996, the Plaintiffs, Gene Alonzo, et al., filed a civil action in the 34th Judicial District Court, Parish of St. Bernard, State of Louisiana against the State of Louisiana seeking, inter alia, damages or compensation for the "taking" of their property and/or property interests. Judgments in favor of the Plaintiffs' individual claims have been rendered by the trial court against the State of Louisiana in this suit. On January 11, 2002, the trial court rendered a money judgment in favor of the Plaintiffs on their individual claims against the State. The State suspensively appealed the money judgment of January 11, 2002. Most of the remaining claims asserted by Plaintiffs were tried between January 22, 2002 and February 1, 2002. On February 21, 2002, the trial court, following a trial on the merits, rendered a money judgment in favor of Plaintiffs and against the State. All claims were merged into the judgment rendered on February 21, 2002. The State did not apply for a new trial or seek post-trial modification of the money judgment rendered on February 21, 2002. The delays for seeking a new trial or a suspensive or devolutive appeal of the February 21, 2002 judgment have expired. The judgment, therefore, is a definitive judgment for which no right to appeal exists under Louisiana law. The trial on the merits of the remaining Plaintiffs' claims was conducted between March 21 and March 22, 2002. The decision on the merits was, at the time of the petition, under advisement by the trial court. No individual claims remain to be considered on the merits. The only remaining issue pertains to quantifying the costs and expenses which were awarded to the Plaintiffs.
The Plaintiffs filed the current suit for Declaratory Judgment under Louisiana law on August 15, 2002 in the 34th Judicial District Court, Parish of St. Bernard, State of Louisiana. The Plaintiffs allege the State's insurer, National Union Fire Insurance Company of Pittsburgh, PA, hereinafter "National Union," is contractually obligated to pay some or all of the money judgments rendered in favor of Plaintiffs on February 21, 2002.
The common issues of fact and law, common to all Plaintiffs and Defendants described, and/or issues for which Declaratory Judgment is sought include:
a. Whether the State complied with all of its obligations arising under the policy(ies) of insurance issued to it by National Union;
b. Whether the policy(ies) of insurance issued to the State by National Union provide coverage for sum or all of the money judgment(s) rendered in favor of the Plaintiffs against the State in the Alonzo lawsuit; and
c. The amount and scope of the coverage provided to the State by its insurer, National Union, with respect to the individual claims of the Plaintiffs and/or money judgment(s) in favor of Plaintiffs.
II. ARGUMENTS OF THE RESPECTIVE PARTIES:
A. Arguments on Behalf of Gene Alonzo, et al., in Support of Motion to Remand:
The Plaintiffs argue that the State of Louisiana is an indispensable party to the litigation and the case must be remanded to the 34th Judicial District Court, Parish of St. Bernard, State of Louisiana because there is no removal jurisdiction. The removing party bears the burden of establishing removal jurisdiction and the Defendant, National Union, has failed to carry its burden. There is no diversity of citizenship. The Plaintiffs are all citizens of Louisiana and the State is a named party. The Louisiana Declaratory Judgment Act is to be broadly construed and grants the Plaintiffs a cause of action against the State. In this case, the Plaintiffs seek a declaration of the specific coverage issues which exist not only between the State and National Union but the Plaintiffs also seek a particular finding as to the amount of insurance coverage available to them. The State, therefore, is clearly an indispensable party to any proceeding which seeks a determination of coverage issues and rights and responsibilities under a contract to which the state is a party. The Plaintiffs rely on the Ranger Ins. Co. v. United Housing of New Mexico, Inc., 488 F.2d 682 (5th Cir. 1973), decision. In Ranger the Fifth Circuit held that the claimant, the insured, and the insurer are all indispensable parties in actions which seek to determine whether an insurer is liable for judgments rendered against its insured in favor of a claimant. Id. Another decision considered whether an insured was a dispensable party in a declaratory action and concluded that the insured and its parent company were both indispensable parties. National Union Fire Ins. Co. of Pittsburgh, PA v. Rite Aid of South Carolina, Inc., 210 F.3d 246 (4th Cir. 2000). The State, therefore, is a properly joined indispensable party.
B. Arguments of the State of Louisiana, Through the Department of Natural Resources, in Support of Motion to Remand:
The Defendant, State of Louisiana, through the Department of Natural Resources, argues that they are an indispensable party and have not been fraudulently joined. The Defendant adopts the same argument as the Plaintiff in support of the Motion to Remand.
The Defendant also argues that National Union has not carried its burden of establishing removal jurisdiction. National Union's argument that the State was fraudulently joined in order to defeat diversity jurisdiction is unsupported by the facts. The State court must decide the issue as to whether or not the Defendant State has complied with its obligations under the policy issued by National Union. The Defendant, National Union, therefore, has failed to carry its heavy burden to establish fraudulent joinder.
The Defendant further argues that the removal is improper because the State has not waived its sovereign immunity and that National Union has not complied with the rule of unanimity. Since there are several grounds to remand, the case should be remanded to the 34th Judicial District Court, Parish of St. Bernard, State of Louisiana.
C. Arguments of National Union in Opposition to Motion to Remand:
The Defendant, National Union, argues that the removal is proper because diversity jurisdiction exists because the State was fraudulently joined. There was no need to obtain the consent to removal from the State because the State was fraudulently joined. On its face, the Plaintiffs Petition for Declaratory Judgment does not state a cognizable claim for relief against the State. Plaintiffs' only allegation against the state is "whether the state complied with its obligations arising under policy(ies) of insurance issued to it by National Union." This allegation does not set out a justiciable controversy and, consequently, does not state any possible cause of action. The Plaintiffs do not have a viable cause of action under the Louisiana Declaratory Judgment Act because the requisite controversy is not present. The Plaintiffs and the State are aligned with one another with respect to whether or not the State complied with its obligations under the National Union policy. Furthermore, the State owes no duty, either in tort or contract, to Plaintiffs to comply with the State's obligations under the National Union policy. The Plaintiffs' Petition, therefore, does not state any possible cause of action against the State.
The Defendant also argues that the Plaintiffs and State rely on cases that do not support the Plaintiffs' argument that the State is an indispensable party. The Rite Aid case involved parties who were parties to the underlying insurance contract. Id. This case, however, involves strangers to the insurance policy (the Plaintiffs) who have no standing to assert whether or not notification requirements or other policy obligations have been met by the insureds. The Ranger case is also distinguishable because the court found that claimants, not the insured, were indispensable parties and the facts are distinguishable. Id.
The Defendants further argue that neither the Plaintiffs nor the State are entitled to anything under 28 U.S.C. § 1447 (c) in the event that the motion to remand is granted. Any award under 28 U.S.C. § 1447 (c) regarding payment of costs or attorney's fees is committed to the discretion of the court. Sims v. Ward, 2001 WL 1104636 (E.D. La. 2001). The question in applying § 1447(c) is whether the defendant had objectively reasonable grounds to believe the removal was legally proper. Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 292-293. The court should use its discretion to
deny any such award because National Union is being sued by individuals who are claiming coverage for alleged "unjust taking" of property and this is not covered by National Union's policy. Furthermore, the state court judgments rendered against the State do not allow the Plaintiffs to have a cause of action against National Union when none exists. National Union should not have to pay costs or attorney's fees because they have reasonable grounds to believe the suit is removable.
III. LAW AND ANALYSIS:
A. Law on Remand/Fraudulent Joinder:
A motion to remand a case to state court on the basis of any defect other than lack of subject matter jurisdiction must be made within thirty days after the filing of the notice of removal. 28 U.S.C. § 1447 (c). In the case at hand, the defendant filed its notice of removal on September 13, 2002 and the Plaintiff filed the motion to remand on October 9, 2002. The Defendant's Motion to Remand was likewise filed timely on October 11, 2002. As both motions were timely filed, the Court will address the issues presented therein.
"The burden of persuasion placed upon those who cry `fraudulent joinder' is indeed a heavy one." B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981); Ford, et al. v. Elsbury. et al. 32 F.3d 931, 935 (5th Cir. 1994). Where charges of fraudulent joinder are used to establish federal jurisdiction, the removing party has the burden of proving the claimed fraud. Dodson v. Spiliada Maritime Corp., et al., 951 F.2d 40, 42 (5th Cir. 1992). In order to establish that a plaintiff fraudulently joined an in-state defendant so as to preclude exercise by a federal court of diversity jurisdiction, the removing party must show 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; or that there has been outright fraud in the plaintiffs pleadings of jurisdictional facts. Dodson, 951 F.2d at 42; B., Inc., 663 F.2d at 549.
Claims of fraudulent joinder should be resolved in a summary judgment-like procedure whenever possible. Sid Richardson Carbon Gasoline Co. v. Interenergy Resources, Ltd., 99 F.3d 746 (5th Cir. 1996). Although the district court may "pierce the pleadings" to examine affidavits and other evidentiary material, it should not conduct a full evidentiary hearing on questions of fact, but rather should make a summary determination by resolving all disputed facts in favor of the plaintiff Id. at 751; Ford, 32 F.3d at 935; Dodson, 951 F.2d at 42.
B. The Court's Analysis:
The Defendant, National Union, has failed to carry its burden of establishing fraudulent joinder. In order to establish fraudulent joinder, the Defendant must show that there is no possibility of recovery from the Defendant in State court. The Defendant State, however, is an indispensable party to the judgments that have been rendered. Any claims in regard to the insurance policy the State has with the Defendant National Union involves the State. Because the State is an indispensable party, there is no complete diversity and the case must be remanded to the 34th Judicial District Court, Parish of St. Bernard, State of Louisiana. The Court, however, will use its discretion to deny imposing costs or attorney's fees in conjunction with the Motion to Remand, on the Defendant National Union.
Accordingly,
IT IS ORDERED that the Motions to Remand of the Plaintiff, Gene Alonzo, et al., and Defendant, State of Louisiana, through the Department of Natural Resources, be and the same are hereby GRANTED.