Opinion
Civil Action No. 04-2397 Section "N".
December 14, 2004
ORDER AND REASONS
Before the Court is a Motion to Remand filed by plaintiff Gulf Belting Gasket Co., Inc. ("Gulf Belting") on October 18, 2004. (Rec. Doc. No. 6). For the reasons stated herein, plaintiff's motion is DENIED.
I. BACKGROUND
This action arises out of insurance coverage disputes between plaintiff Gulf Belting Gasket Co., Inc. ("Gulf Belting") and three of its insurers, Select Insurance Company ("Select"), CNA Insurance Co. ("CNA"), and The Travelers Insurance Co. ("Travelers"). Gulf Belting was sued for worker's compensation benefits in the Office of Workers' Compensation Court, District 8, in the proceeding entitled, John F. Fischer, et al v. Gulf Belting Gasket Co., et al, No. 03-07955. After Select, CNA and Travelers each refused to provide coverage for the claim, Gulf Belting filed this suit against the three insurers in the Civil District Court for the Parish of Orleans, State of Louisiana. See generally Petition (Ex. A to Notice of Removal) (Rec. Doc. No. 1).
On August 20, 2004, Continental, with the consent of CNA and Travelers, removed the matter to this Court, stating in its Notice of Removal that this Court has original jurisdiction pursuant to 28 U.S.C. § 1332, as the matter in controversy exceeds the sum or value of $75,000, exclusive of interests and costs, and is between citizens of different states. See Notice of Removal at ¶ 2. Addressing diversity of citizenship, Continental averred: (i) Gulf Belting is a Louisiana corporation with its principal place of business in Louisiana; (ii) Continental is an Illinois corporation with its principal place of business in Illinois; (iii) Travelers is a Connecticut corporation with its principal place of business in Connecticut; and (iv) Select is a Texas corporation with its principal place of business in Texas. See id. at ¶¶ 3-7.
On October 18, 2004, plaintiff filed the instant motion to remand on the grounds that diversity jurisdiction as required by 28 U.S.C. ¶ 1332(c)(1) does not exist, and that this Court should abstain under the Colorado River Abstention Doctrine. (Rec. Doc. No. 6). Continental opposes plaintiff's motion, arguing that plaintiff's motion is untimely and without merit.
II. LAW AND ANALYSIS
A. Whether plaintiff's motion is timely 28 U.S.C. § 1447(c) provides in relevant part:
A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.
Defendant contends that remand here is not premised on subject matter jurisdiction. A cursory review of plaintiff's motion reveals that defendant is incorrect. Through its motion, plaintiff seeks remand on two different grounds. First, plaintiff asserts that removal is not proper because there is no diversity of citizenship as required by 28 U.S.C. § 1332(c)(1). Second, plaintiff asserts that this Court should stay this action and, under the Colorado River Abstention Doctrine, allow the case to continue in state court. As revealed by the first argument, it is clear that plaintiff is indeed attacking the subject matter jurisdiction of this Court.
B. Whether this Court has diversity jurisdiction
The federal removal statute permits a defendant to remove any civil action in which the United States district courts have original jurisdiction unless removal is otherwise prohibited by federal law. 28 U.S.C. § 1441(a). Federal removal jurisdiction extends to disputes between citizens of different States where the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a). In this matter, the parties do not dispute that the amount in controversy exceeds $75,000, and it is "facially apparent" that the plaintiff's claims seeking coverage for a worker's compensation asbestosis claim are likely to exceed $75,000. Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880 (5th Cir. 2000). The parties dispute whether complete diversity of jurisdiction exists. Specifically, plaintiff argues that its suit is a direct action against the insurers as provided for by Louisiana Direct Action Statute, and, as such, the defendant insurance companies must adopt the Louisiana citizenship of their insured, Gulf Belting, under 28 U.S.C. § 1332(c)(1), thereby destroying diversity of citizenship in this case. Continental argues, on the other hand, that the instant suit is not a direct action as contemplated by 28 U.S.C. § 1332, and that the suit is properly in federal court.
Louisiana Revised Statute 22:655 provides in relevant part:
B. (1) The injured person . . . at [his] option, shall have a right of direct action against the insurer within the terms and limits of the policy; and, such action may be brought against the insurer alone, or against both the insured and insurer jointly and in solido. . . . However, such action may be brought against the insurer alone only when:
(a) The insured has been adjudged a bankrupt by a court of competent jurisdiction or when proceedings to adjudge an insured a bankrupt have been commenced before a court of competent jurisdiction.
(b) The insured is insolvent;
(c) Service of citation or other process cannot be made on the insured;
(d) When the cause of action is for damages as a result of an offense or quasi-offense between children and their parents or between married persons;
(e) When the insurer is an uninsured motorist carrier; or
(f) The insured is deceased.
In general, federal law deems a corporation to be a citizen of its state of incorporation and also a citizen of the state in which it has its principal place of business. 28 U.S.C. § 1332(c)(1). An exception to § 1332's general corporate citizenship rule lies in the context of liability insurance, where the insurer in a direct action suit must adopt an additional state's citizenship, i.e., the citizenship of its insured. Section 1332(c)(1) provides in relevant part:
In 1964, Congress adopted the "direct action" provision of § 1332 in response to Louisiana's Direct Action Statute. See Evanston Ins. Co. v. Jimco, Inc., 844 F.2d 1185, 1188 (5th Cir. 1988). Prior to that time, Louisiana federal courts had been inundated with suits based on diversity jurisdiction filed by Louisiana residents who met the requirement of complete diversity by naming only a non-resident insurer as the defendant. See id.
in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen. . . .
If, in the instant matter, this Court finds that the lawsuit against the three insurers is a direct action as provided by La.R.S. 22:655 and as contemplated by 28 U.S.C. § 1332, then the three defendants would adopt the Louisiana citizenship of the insured Gulf Belting, thereby destroying diversity of citizenship. If, on the other hand, the lawsuit is not a direct action, then the Court would be compelled to find that it has original jurisdiction. The question for this Court therefore is whether this lawsuit based on a coverage dispute is a "direct action."
Under Louisiana's Direct Action Statute, a liability insurer may be sued directly by an injured third party. See La.R.S. 22:655. "However, the 'injured party' accorded a right of direct action is a 'person injured as a result of tortious conduct and not one injured as a result of breach of contract.'" North Am. Specialty Ins. Co. v. Georgia Gulf Corp., 99 F.Supp.2d 726, 728 (M.D.La. 2000) (quoting Pennsylvania Fire Ins. Co. v. Underwriters at Lloyd's, 140 So.2d 212 (La.App. 4 Cir. 1962)). Accordingly, federal courts sitting in Louisiana have consistently held that the direct action provision of § 1332 is not applicable to a breach of contract claim against an insurance company. See Medical Research Ctrs., Inc. v. St. Paul Property and Liab. Ins. Co., 303 F.Supp.2d 811, 814 (E.D.La. 2004) (Fallon, J.) (holding that the direct action provision is not applicable to "a simple coverage dispute between the insured and his own insurer"). See also Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 995 (5th Cir. 1985); North Am. Specially Ins. Co. v. Georgia Gulf Corp., 99 F.Supp.2d 726, 728 (M.D.La. 2000). Therefore, because the instant lawsuit is not a "direct action" whereby the insurers would adopt the citizenship of their insured, the Court will only look to the actual citizenship of the three corporate defendants: (i) Illinois (Continental); (ii) Connecticut (Select); and (iii) Texas (CNA). Accordingly, because complete diversity exists between plaintiff — a Louisiana corporation — and defendants, the Court concludes that it does have original jurisdiction pursuant to 28 U.S.C. § 1332.
Plaintiff does not dispute that, absent a finding of a direct action, Continental is otherwise considered a citizen of Illinois, Select a citizen of Connecticut, and CNA a citizen of Texas.
3. Whether this Court should abstain under the Colorado River Abstention Doctrine
Having concluded the Court does have subject matter jurisdiction, the issue the Court must now address is whether it should dismiss this action in view of a parallel pending state court proceeding. Plaintiff's invocation of the Colorado River Abstention Doctrine is misplaced, however, because no parallel state court proceeding exists. Plaintiff has directed the Court's attention of only one other proceeding, John F. Fischer, et al v. Gulf Belting Gasket Co., et al, No. 03-07955, filed in the Louisiana Office of Workers' Compensation Court, District 8. However, the only suit involving insurance coverage is this one, which was filed by Gulf Belting in state court and which has been removed to this Court. Therefore, no parallel proceeding exists such that the Colorado River Abstention Doctrine could be applied, and plaintiff's motion to remand must be denied.
Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236 (1976). See also Moses H. Cone Memorial Hosp. v. Mercury Const. Co., 460 U.S. 1, 103 S.Ct. 927 (1983) (considering whether a federal court should stay an action because of the pendency of a state court suit).
Presumably, the worker's compensation claim does not address any insurance coverage issues. Additionally, in its memorandum, plaintiff seems to admit that this action is the only suit involving insurance coverage when it stated: "If this matter were to proceed in [federal court], it would not preclude suit in the future in State Court on coverage issues which this Court is precluded from hearing now." Pl.'s Mem., p. 3 (emphasis added). Plaintiff's apparent concern is with either "piecemeal" or "duplicative" litigation as a result of the exercise of this Court's jurisdiction. However, if this Court does decide whether the Continental, Select, and/or CNA policies afford coverage for the worker's compensation claim made, then the need for further treatment of this issue in future state court litigation may be obviated.