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Pearson v. Catlin Specialty Insurance Company, Inc.

United States District Court, Southern District of Georgia, Mancross Division

March 17, 2015

RICHARD E. PEARSON d/b/a PEARSON SERVICE COMPANY, Plaintiff,
v.
CATLIN SPECIALTY INSURANCE COMPANY, INC., ROGER DALE GRIFFIS, and H.H. BURNET & COMPANY INSURANCE AND REAL ESTATE, INC., Defendants.

ORDER

LISA GODBEY WOOD, CHIEF JUDGE

In this case, the ultimate question before the Court is whether Defendant Catlin Specialty Insurance Company may properly remove Plaintiff Pearson's declaratory judgment action from state court. The parties have approached this question from multiple angles, as evinced by the slew of motions ripe for adjudication: Defendant Catlin's Motion to Realign the Parties (Dkt. no. 5); Defendant Catlin's Motion to Dispense of the Bond Requirement (Dkt. no. 6); Defendant Catlin's Motion to Strike Plaintiff Pearson's Amended Complaint (Dkt. no. 12); Plaintiff Pearson's Request for Leave to Amend his Complaint (Dkt. no. 40); and Plaintiff Pearson's Motion to Remand to State Court (Dkt. no. 41). The Court's ruling on the first motion, though, resolves the removal question: the parties should not be realigned in this case, and therefore the diversity of citizenship required under 28 U.S.C. § 1441(b) is lacking. The case must be remanded to state court, which can properly rule on the remaining motions not mooted by this Order.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Pearson filed the present action on May 12, 2014 in the Superior Court of Ware County, Georgia. See Dkt. no. 1-1. The action seeks a declaratory judgment determining that Defendant Catlin is obligated to both indemnify and defend Plaintiff Pearson in a pending civil action in Ware County State Court. Id. at p. 13.

In the underlying state court action, Plaintiff (in this action) Pearson was sued by Defendant Roger Dale Griffis. Griffis alleges that Plaintiff Pearson negligently used certain chemicals without proper ventilation when repairing an air conditioning unit at Griffis's workplace. Griffis claims that fumes from these chemicals have caused her to become sick and to suffer other injuries. Defendant Catlin, Plaintiff Pearson's insurer, denies that Pearson's policy with Catlin imposes any duty to defend or indemnify Pearson in the underlying lawsuit because, under Catlin's interpretation of the policy, indemnity and defense for the claims in the underlying lawsuit are barred by the policy's "Total Pollution Exclusion" and because Pearson provided late notice of the claim.

In Plaintiff Pearson's declaratory judgment action, he named both Catlin and Griffis as Defendants, but did not assert any claims against Griffis. Both Griffis and Pearson are Georgia residents, but Catlin is a citizen of Delaware.

Catlin removed this case to federal court on August 13, 2014. See Dkt. no. 1 (Notice of Removal). However, because Griffis, named as a Defendant in the declaratory judgment action, is a Georgia resident, the case lacks the complete diversity necessary for removal under 28 U.S.C. § 1441(b). To overcome this jurisdictional hurdle, Defendant Catlin filed a Motion to Realign the Parties according to their "true" interests on August 14, 2014. Dkt. no. 5.

Four days after Defendant Catlin filed its Motion to Realign, Plaintiff Pearson amended his Complaint to add a new party, Defendant H.H. Burnet & Company Insurance and Real Estate, Inc. Dkt. no. 7. H.H. Burnet is a Georgia company that served as Pearson's insurance broker for the Catlin Policy. Pearson alleges that H.H. Burnet is liable for failure to procure insurance. Also, Pearson claims that, even if the Court realigns Griffis to be a Plaintiff in this action, H.H. Burnet's presence in this case still precludes the complete diversity necessary for removal under 28 U.S.C. § 1441(b).

On August 27, 2014, Defendant Catlin filed a Motion to Strike Plaintiff Pearson's Amended Complaint. Dkt. no. 12. After a period of briefing on both the Motion to Strike and Motion to Realign, Plaintiff Pearson filed a Motion for Leave to Amend his Complaint (Dkt. no. 40) and a Motion to Remand to State Court (Dkt. no. 41) on October 26, 2014. All of these motions are fully briefed.

DISCUSSION

"[F]ederal courts are required to realign the parties in an action to reflect their interests in the litigation. The parties themselves cannot confer diversity jurisdiction upon the federal courts by their own designation of plaintiffs and defendants." City of Vestavia Hills v. Gen. Fidelity Ins. Co., 676 F.3d 1310, 1313 (11th Cir. 2012) (citing City of Indianapolis v. Chase Nat'l Bank, 314 U.S. 63, 69 (1941)). Conversely, "parties cannot avoid diversity by their designation of the parties ..." Id. (emphasis in original). Rather, lower federal courts must look beyond the pleadings and arrange the parties according to their sides in a dispute, as determined by the "principal purpose of the suit" and "the primary and controlling matter in dispute." I Id. at 1313-14. Even where the parties are opposed outside of the subject action, parties with the same interests in the subject action must be aligned together. Id. at 1314.

Because removal jurisdiction raises significant federalism concerns, "federal courts are directed to construe removal statutes strictly. Indeed, all doubts about jurisdiction should be resolved in favor of remand to state court." Id. at 1313 (quoting Univ. of S. Ala, v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999}}. As the removing party, Catlin "bears the burden of demonstrating federal jurisdiction." Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 n.4 (11th Cir. 1998).

Here, the Court must determine the proper alignment of the parties in a declaratory judgment action naming the injured party and the insurer as defendants and the insured as the plaintiff. The parties have thoroughly briefed this issue and have provided an abundance of cases addressing realignment under these circumstances. While the cases often reach different outcomes, those differences usually turn on two primary (and related) considerations: (1) whether the plaintiff seeks a declaration of rights for indemnity and defense in the underlying suit pre- or post-judgment; and (2) whether the plaintiff is seeking a defense or merely indemnity from the defendant insurer.

In Vestavia Hills, the Eleventh Circuit concluded that the plaintiff in the underlying suit, Vestavia Hills, should be realigned with the insured, Cameron Development Corporation, in a declaratory judgment action seeking coverage from the insurer, ...


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