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Del Webb Communities Inc. v. American Home Assurance Co.

United States District Court, D. South Carolina, Beaufort Division

September 28, 2016

Del Webb Communities, Inc., Plaintiff,
v.
American Home Assurance Company, AIG Specialty Insurance Company f/k/a Chartis Specialty Insurance Company f/k/a American International Specialty Lines Insurance Company, Crum & Forster Specialty Insurance Company, Interstate Fire & Casualty Company, Maryland Casualty Company, National Union Fire Insurance Company of Pittsburgh PA, Commerce & Industry Insurance Company, Everest National Insurance Company, Burlington Insurance Company, The Liberty Mutual Insurance Company, Zurich American Insurance Company, The Insurance Company of the State of Pennsylvania, Mt. Hawley Insurance Company, American Empire Insurance Company, American Empire Surplus Lines Insurance Company, First Mercury Insurance Company, ANSE, Inc., Archer Exteriors, Inc., D.J. Construction Co., LLC d/b/a Leor Company, LLC, Georgia State Plastering, LLC, Integrity Wall Systems, LLC, MASCO Contractor Services Central, Inc. a/k/a MASCO Corporation and its subsidiaries a/k/a Gale Industries, Inc. a/k/a Gale Fiberglass Installations a/k/a Gale Contractor Services a/k/a Fiberglass Installations, Inc. a/k/a L&H Insulation, LLC a/k/a L&H Insulation a/k/a Builder Services Group, Inc., Ramiro Rodriquez a/k/a Ram Construction, and South Carolina State Plastering, Defendants.

          ORDER

          PATRICK MICHAEL DUFFY, United States District Judge.

         This matter is before the Court on Plaintiff Del Webb Communities, Inc.'s motion to remand (ECF No. 43). For the reasons stated herein, Del Webb's motion is granted.

         BACKGROUND

         This action arises out of an insurance dispute between Del Webb and its subcontractors' insurance companies concerning Del Webb's Sun City project. Several homeowners have sued Del Webb and its subcontractors in state court, alleging defects in the homes it built during its Sun City project. Del Webb has brought this action for a declaratory judgment of its rights to defense and indemnity in those cases as an alleged additional insured under the insurance policies issued to its subcontractors.[1]

         PROCEDURAL HISTORY

         Defendant Liberty Mutual Insurance Company removed this action from the Court of Common Pleas for Beaufort County on April 18, 2016. Del Webb filed its motion to remand on May 18, 2016. Liberty Mutual filed a response in opposition on June 20 and Defendant Mt. Hawley filed a similar response on June 30.[2] Del Webb filed its reply on July 14. Accordingly, these matters are now ripe for consideration.

         LEGAL STANDARD

         The burden of demonstrating jurisdiction resides with “the party seeking removal.” Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004) (citing Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994)). District courts are obliged to construe removal jurisdiction strictly because of the “significant federalism concerns” that removal implicates. Id. “If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). Therefore, “[i]f federal jurisdiction is doubtful, a remand [to state court] is necessary.” Dixon, 369 F.3d at 816; see also Hartley v. CSX Transp., Inc., 187 F.3d 422, 425 (4th Cir. 1999) (“[C]ourts should ‘resolve all doubts about the propriety of removal in favor of retained state court jurisdiction.'” (quoting Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993))).

         DISCUSSION

         The Court initially notes that Liberty Mutual and the other insurer defendants do not contest Del Webb's allegations as to the citizenship of any of the non-diverse subcontractor defendants. Thus, whether remand is appropriate in this case turns on two related, but distinct questions. First, the Court must determine whether the subcontractors were fraudulently joined as defendants in order to defeat this Court's diversity jurisdiction. If the Court determines that the subcontractors were not fraudulently joined, the Court must then decide whether the subcontractors are nominal parties such that they should be excepted from the complete diversity requirement of 28 U.S.C. § 1332. If the subcontractors were fraudulently joined or if they are nominal parties, then the Court has jurisdiction and should retain this case. In contrast, if the subcontractors were not fraudulently joined and are also not nominal parties, then the Court must grant Del Webb's motion to remand.

         I. Fraudulent Joinder

         Del Webb named four non-diverse defendants in its complaint. “Normally, this would defeat removal on the basis of diversity jurisdiction under 28 U.S.C. § 1332 because complete diversity of citizenship . . . is necessary for a federal court to exercise diversity jurisdiction.” Johnson v. Am. Towers, LLC, 781 F.3d 693, 704 (4th Cir. 2015) (citing Mayes v. Rapoport, 198 F.3d 457, 464 (4th Cir. 1999)). However, under the fraudulent-joinder doctrine, “naming non-diverse defendants does not [necessarily] defeat diversity jurisdiction.” Id. Instead, the doctrine “‘effectively permits a district court to disregard, for jurisdictional purposes, the citizenship of certain non[-]diverse defendants, and thereby retain jurisdiction.'” Id. (quoting Mayes, 198 F.3d at 461). “‘The party alleging fraudulent joinder bears a heavy burden-it must show that the plaintiff cannot establish a claim [against the non-diverse defendant(s)] even after resolving all issues of law and fact in the plaintiff's favor.'” Id. (quoting Hartley, 187 F.3d at 424). “‘The removing party must show either outright fraud in the plaintiff's pleading of jurisdictional facts or that there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court.'” Id. (quoting Hartley, 187 F.3d at 424) (emphasis added).

         Here, the insurer defendants rely on the “no possibility” avenue. They argue that Del Webb's complaint does not assert any claims against the subcontractor defendants and that Del Webb's requested declarations relate only to its own status as an additional insured under the policies issued to the subcontractors by the insurer defendants. The Court disagrees.

         Del Webb's complaint contains twenty-seven different counts requesting declaratory relief against the insurer defendants. Each of those counts, however, includes a request that the Court determine whether the named insureds on the insurer defendants' policies are the subcontractors or their privies. Importantly, Del Webb also requests that the Court determine whether those subcontractors have coverage under the insurer defendants' policies with respect to the underlying litigation.[3] Although these requested declarations are not expressly directed at the subcontractors in each count's heading, there is no question that the ...


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