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Ward Manufacturing, Inc. v. Royal Indemnity Co.

July 19, 2006

WARD MANUFACTURING, INC., PLAINTIFF AND LARRY BERRY, ET AL., INVOLUNTARY PLAINTIFFS
v.
ROYAL INDEMNITY COMPANY (INDIVIDUALLY AND AS SUCCESSOR TO ROYAL INSURANCE COMPANY OF AMERICA), ET AL., DEFENDANTS



The opinion of the court was delivered by: Muir, U.S. District Judge

Notice of Removal filed 4/25/06

ORDER

THE BACKGROUND OF THIS ORDER IS AS FOLLOWS

On March 27, 2006, Plaintiff Ward Manufacturing, Inc. ("Ward"), filed a complaint in the Court of Common Pleas of Tioga County, Pennsylvania (the "Tioga County complaint"). Ward is a Pennsylvania Corporation that manufactures pipe fittings and corrugated stainless steel tubing, a flexible stainless steal pipe used to transport natural gas in residential homes. Ward's principal place of business is at 115 Gulick Street, Blossburg, Pennsylvania. The Tioga County complaint was filed to address certain insurance issues flowing from a potential nationwide class action filed in Arkansas state court.

The Arkansas state court action was filed in November 2004 by Larry Berry, Matt Lovelis, Roger Winfield and Mark Bledsoe, the class representatives ("the Berry complaint"). The Berry complaint alleges that a nationwide class has suffered injury because corrugated stainless steel tubing allegedly installed in residential homes poses an unreasonable danger of fire from lighting strikes. The Berry plaintiffs seek to hold each manufacturer jointly and severally liable for all manufacturers' products. The Berry plaintiffs allege a continuing injury from the date of Ward's first manufacture and sale of the corrugated stainless steel tubing in the early 1990s to the present.

Ward names as Involuntary Plaintiffs in the Tioga County complaint the Berry plaintiffs. Ward names as Defendants several insurance companies that provide it with "primary, umbrella and excess commercial general liability insurance." Those Defendants are as follows: (1) Royal Indemnity Company (individually and as successor to Royal Insurance Company of America)("Royal"); (2) Federal Insurance Company; (3) Vigilant Insurance Company; (4) Mitsui Sumitomo Insurance USA Inc. (formerly known as Mitsui Marine and Fire Insurance Company of America); (5) ACE American Insurance Company; (6) SOMPO Japan Insurance Company of America ("SOMPO"); (7) Tokio Marine & Nichido Fire Insurance Co., Ltd. (U.S. Branch); (8) St. Paul Fire & Marine Insurance Company; and (9) Great American Assurance Company.

In the Tioga County complaint Ward seeks damages, fees, costs and interest against its liability insurers under the various policies. Ward also seeks, inter alia, a declaratory judgment against its liability insurers declaring that the insurance companies are obligated to pay a judgment or settlement involving the Berry plaintiffs.

Ward in the Tioga County complaint alleges that the damage claims asserted by the Berry plaintiffs "exceed the total stated limits of liability of defendants' primary, umbrella and excess policies issued to Ward." See paragraph 29 of the Tioga County complaint. Ward asserts that the Berry plaintiffs' damage calculations suggest a potential liability of in excess of $1 billion. This is based purportedly on the cost to provide lightning protection systems for 406,900 homes. The cost for each home allegedly is $2500 to $3500.

Ward in the Tioga County complaint further alleges, inter alia, that it provided the insurance companies with timely notice of the class action and the potential liability it faced and that Royal and SOMPO repudiated both its defense and indemnity obligations in connection with the class action.

On April 25, 2006, SOMPO filed a notice of removal of the Tioga County complaint to this court. The notice of removal was based on the contention that this court has diversity jurisdiction under 28 U.S.C. § 1332. All of the other Defendants named in the Tioga County complaint filed notices stating that they consented to the removal of that complaint to this court.

On May 22, 2006, Ward filed a motion to remand the action to state court. On June 6, 2006, Ward filed a brief in support of that motion. On June 26, 2006, SOMPO, Royal, Great American Assurance Company, St. Paul Fire & Marine Insurance Company, and ACE American Insurance Company, filed briefs in opposition to Ward's motion to remand. On June 30, 2006, Vigilant Insurance Company and Federal Insurance Company filed a brief in opposition. The motion became ripe for disposition on July 14, 2006, with the filing of Ward's consolidated reply brief. We see no need for oral argument on the motion.

28 U.S.C. § 1332 gives this court jurisdiction to entertain a lawsuit if there is diversity of citizenship and the amount in controversy exceeds $75,000.00. Defendants removed this action to this court pursuant to 28 U.S.C. § 1441(a) which states in pertinent part that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States for the district and division embracing the place where such action is pending." Defendants contends that the grounds for removal are that the parties to the action are citizens of different states and the amount in controversy exceeds $75,000.00.

The diversity of citizenship prong of the above test for removal requires complete diversity between the parties. City of Indianapolis v. Chase Nat'l Bank, 314 U.S. 63, 62 (1941)(to satisfy the diversity requirement, there must be complete diversity of citizenship among the parties, that is, the citizenship of each plaintiff must be different from the citizenship of each defendant). The Court of Appeals for this circuit stated that "[i]t is axiomatic that the federal diversity jurisdiction depends on complete diversity between all plaintiffs and all defendants." Development Fin. Corp. v. Alpha Housing & Health Care, Inc., 54 F.3d 156, 158 (3d Cir. 1995).

The Defendants have the burden of establishing that removal was warranted. Dukes v. U.S. Health Care, 57 F.3d 350, 359 (3d Cir. 1995). Furthermore, the removal statutes are to be strictly construed and all doubts with respect to this court's subject-matter jurisdiction to entertain a case are to be ...


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