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Ward Manufacturing, Inc. v. Royal Indemnity Co.


July 19, 2006


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

Notice of Removal filed 4/25/06



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 resolved in favor of remand. Brown v. Francis, 75 F.3d 860, 865 (3d Cir. 1996).

The key question before the court is whether or not we have diversity jurisdiction to entertain the present action. It is undisputed that the Plaintiff Ward and Defendant ACE American Insurance Company are citizens of Pennsylvania. Ward argues in its motion that removal of this case to federal court was improper because the existence of ACE American Insurance Company as a non-diverse Defendant invalidates the basis of diversity jurisdiction. We agree with Ward. According to the Court of Appeals for the Third Circuit

[i]t is settled that the removal statutes are to be strictly construed against removal and all doubts should be resolved in favor of remand. Abels v. State Farm Fire & Casualty Co., 770 F.2d 26, 29 (3d Cir. 1985).

Ruling on whether an action should be remanded to the state court from which it was removed, the district court must focus on the plaintiff's complaint at the time the petition for removal was filed. Id. In so ruling the district court must assume as true all factual allegations of the complaint, Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir. 1983), cert. denied, 464 U.S. 1039, 104 S.Ct. 701, 79 L.Ed.2d 166 (1984), ....

Steel Valley Authority v. Union Switch and Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987)(footnote deleted)(emphasis added). There is clearly a lack of diversity of citizenship and Defendants have not demonstrated that ACE American Insurance Company was fraudulently named to defeat diversity. Courts have consistently held that

[w]hen a non-diverse party has been joined as a defendant, then in the absence of a substantial federal question the removing defendant may avoid remand only by demonstrating that the non-diverse party was fraudulently joined. ... Joinder is fraudulent "'where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment.'" ... But, "'[i]f there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that joinder was proper and remand the case to state court.'"

Batoff v. State Farm, Ins. Co., 977 F.2d 848, 851 (3d Cir. 1992)(citations omitted). The Court of Appeals for the Third Circuit in Batoff further held that unless the claim against the allegedly non-diverse defendant may be characterized as "wholly insubstantial and frivolous," the case should be remanded. Id., at 852.

In this case Ward, as noted infra, has alleged 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." ACE American Insurance Company is alleged to have issued to Ward an excess liability policy for the April 1, 2005, to April 1, 2006, period with a per occurrence and aggregate limit of $25 million. The allegations in Ward's complaint establish a factual basis for its declaratory judgment action against ACE American Insurance Company.

When ruling on a motion to remand, we are not authorized to evaluate thoroughly the asserted claims. As noted by the Court of Appeals for this circuit in Batoff

[a] claim which can be dismissed only after an intricate analysis of state law is not so wholly insubstantial and frivolous that it may be disregarded for purposes of diversity jurisdiction.

Id. at 851. Ward is seeking a declaratory judgment against ACE American Insurance Company and the other Defendants with respect to its rights and the insurance companies duties under numerous insurance policies. Based on the information presented to us, we cannot characterize Ward's action against ACE American Insurance Company as wholly insubstantial and frivolous. With a potential liability of $1 billion in the Arkansas state court action, the claim that ACE American Insurance Company was fraudulently joined is devoid of merit.*fn1

Under the circumstances presented, there are many doubts regarding the jurisdiction of this court to entertain this action. Consequently, we will comply with the requirement that all doubts be resolved in favor of remand.

Ward has also in its motion requested attorney's fees and costs. We will deny that request without prejudice to Ward's right to file a separate motion seeking such relief accompanied by a brief.


1. SOMPO's motion for oral argument (Doc. 99) is denied.

2. Ward's' motion to remand (Doc. 67 is granted.

3. This case is remanded to the Court of Common Pleas of Tioga County, Pennsylvania.

4. Ward's request for counsel fees and costs is denied without prejudice.

5. The Clerk of Court shall close the file in this case. Jurisdiction is retained, however, to act on any motion by Ward for counsel fees and costs.

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