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Hensley v. CNA

United States District Court, E.D. Pennsylvania

October 10, 2019



          Baylson, J.


         In this action, Caroleanne Hensley and John R. Greisiger (“Plaintiffs”) claim that CNA (“Defendant”) is liable for attorneys' fees and costs under the professional liability insurance policy (the “Policy”) that it issued to Fox & Roach (the “insured”). (ECF 1, Notice of Removal, Ex. 3.) Plaintiffs' claims arise out of a separate litigation that is currently pending in the Court of Common Pleas of Bucks County between Plaintiffs, the insured, and various defendants concerning liability under an agency contract (the “State Court Litigation”).[1] Plaintiffs originally filed this action against Defendant seeking attorneys' fees in the Court of Common Pleas of Bucks County, and Defendant filed a Notice of Removal with this Court (the “CNA Litigation”).[2]

         Currently pending is Plaintiffs' Motion to Remand the CNA Litigation to the Court of Common Pleas of Bucks County pursuant to 28 U.S.C. 1447(c). The issue is whether Plaintiffs' claims constitute a direct action within the meaning of 28 U.S.C. § 1332(c)(1), thereby destroying complete diversity between the parties and requiring remand. For the reasons discussed below, Plaintiffs' Motion to Remand is denied.


         The following procedural history recites the events in the CNA Litigation-the action that was the subject of Defendant's Notice of Removal and is the subject of Plaintiffs' Motion to Remand.

         On April 15, 2019, Plaintiffs filed a Praecipe for Summons in the Court of Common Pleas of Bucks County. (Notice of Removal, Ex. 1.)[3] On May 24, 2019, Defendant filed a Praecipe and Rule to File, requiring Plaintiffs to file a complaint. (Notice of Removal, Ex. 2.) Plaintiffs timely filed their complaint on June 13, 2019. (Notice of Removal, Ex. 3.) Thereafter, on June 27, 2019, Defendant filed a Notice of Removal, alleging diversity jurisdiction pursuant to 28 U.S.C. § 1332. (ECF 1.) Plaintiffs timely filed a Motion to Remand on July 24, 2019. (ECF 6.) Defendant filed a response in opposition to Plaintiffs' Motion on August 6, 2019. (ECF 7.)


         Subject to limited exceptions, a plaintiff is entitled to choose between filing her suit in either federal or state court, as federal and state courts generally enjoy concurrent jurisdiction. See Claflin v. Houseman, 930 U.S. 130, 136 (1876) (“[I]f exclusive [federal court] jurisdiction [is] neither express nor implied, the State courts have concurrent jurisdiction.”). However, a defendant may, at its option, remove an action originally filed in state court to federal court if the federal court would have had original jurisdiction over the litigation. 28 U.S.C. § 1441(a). There are two types of subject matter jurisdiction that may confer original jurisdiction: jurisdiction based on diversity of citizenship; and jurisdiction based on a federal question raised in the case.[4] Diversity jurisdiction exists where “the matter in controversy exceeds … $75, 000, exclusive of interest and costs, and is between citizens of different States.” 28 U.S.C. 1332(a)(1). Removal statutes should be “strictly construed against removal and all doubts should be resolved in favor of remand.” In re Briscoe, 448 F.3d 201, 217 (3d Cir. 2006). The party who “urges jurisdiction on a federal court”-in the case of removal, the removing defendant-“bears the burden of proving that jurisdiction exists.” Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990).


         A. Diversity of Citizenship

          For purposes of diversity, an individual is a citizen of the state where she is domiciled. GBForefront, L.P. v. Forefront Mgmt. Grp., LLC, 888 F.3d 29, 34 (3d Cir. 2018). A corporation maintains citizenship in (a) all states where it has been incorporated and (b) the one state where it has its principal place of business. Id. The Supreme Court has defined principal place of business as the place where the corporation has its “nerve center;” that is, where the “corporation's officers direct, control, and coordinate the corporation's activities.” Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010).

         A caveat to the general rule on corporate citizenship applies if the complaint is a “direct action” within the scope of 28 U.S.C. § 1332(c)(1). If a complaint involves a “direct action against the insurer of a policy or contract of liability insurance … to which action the insured is not joined as a party-defendant, ” then the insurer is deemed a citizen of “every State and foreign state of which the insured is a citizen.” Id. § 1332(c)(1)(A) (emphasis added). Said differently, § 1332(c)(1) provides that if a third-party plaintiff pursues a direct action against the insurer of his tortfeasor, then the insurer is considered a citizen of the state of the insured for diversity purposes.

         Since § 1332 does not provide a definition for “direct action, ” the legislative history of the direct action amendment is especially helpful in illuminating the narrow situation that Congress intended this proviso to apply to. The Supreme Court explained that Congress enacted § 1332(c) “in 1964 in response to a sharp increase in the caseload of [f]ederal [d]istrict [c]ourts in Louisiana resulting largely from that State's adoption of a direct action statute [which] permitted an injured party to sue the tortfeasor's insurer directly without joining the tortfeasor as a defendant.” Northbrook Nat'l Ins. Co. v. Boyer, 493 U.S. 6, 9-10 (1989). With the amendment, Congress intended to “eliminate under the diversity jurisdiction of the U.S. district courts, suits on certain tort claims in which both parties are local residents, but which, under a State ‘direct action' statute, may be brought directly against a foreign insurance carrier without joining the local tortfeasor as a defendant.” Id. at 9 (internal quotations omitted); see also Myers v. State Farm Ins. Co., 842 F.2d 705, 707 n.3 (3d Cir. 1988) (noting that “Congress enacted [§ 1332(c)] specifically to ...

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