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Baker Roofing Co. v. American Guarantee and Liability Insurance Co.

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

February 23, 2017

Baker Roofing Company, Plaintiff,
v.
American Guarantee and Liability Insurance Company, Zurich American Insurance Company, and Builders Premier Insurance Company, Defendants.

          ORDER

          PATRICK MICHAEL DUFFY United States District Judge.

         This case is before the Court on Plaintiff Baker Roofing Company's motion to remand pursuant to 28 U.S.C. § 1447(c) (ECF No. 10). Baker argues, inter alia, that Defendants American Guarantee and Liability Insurance Company and Zurich American Insurance Company improperly removed the case to federal court without Defendant Builders Premier Insurance Company's consent. Baker seeks an award of costs and attorney's fees. For the reasons set forth herein, the Court grants Baker's motion for remand but denies its request for attorney's fees.

         BACKGROUND AND PROCEDURAL HISTORY

         This is an insurance-coverage dispute. It stems from a construction-defect lawsuit pending against Baker in South Carolina state court. Baker seeks primary liability coverage from Builders Premier, which issued Baker a commercial general liability policy with a coverage period of July 1, 2013 to July 1, 2014, and from Zurich, which issued Baker a commercial general liability policy covering the succeeding one-year period. Baker seeks excess coverage from American Guarantee under two successive umbrella policies with a combined coverage period of July 1, 2013 to July 1, 2015. Without admitting its policy provides coverage, Builders Premier has agreed to defend Baker. Zurich and American Guarantee, however, have refused to provide coverage.

         In the present lawsuit, Baker seeks a declaratory judgment that all three insurers must provide it defense and indemnity coverage in the construction-defect litigation. It has also asserted claims against Zurich and American Guarantee for breach of contract and insurance bad faith. All three defendants deny that their policies afford Baker defense or indemnity coverage.

         On November 30, 2016, Zurich and American Guarantee removed the case to this Court. Builders Premier neither joined in their notice of removal nor consented to removal. On December 21, Baker moved to remand, arguing removal was improper because inter alia, the defendants did not unanimously agree to removal. The motion has been fully briefed; Builders Premier supports it, while Zurich and American Guarantee oppose it. The matter is therefore ripe for consideration.

         DISCUSSION

         For the following reasons, the Court finds that Zurich and American Guarantee's removal was defective and that remand is necessary. However, the Court finds that an award of attorney's fees and costs is not warranted.

         I. Lack of Unanimity Among Defendants

         28 U.S.C. § 1441(a) allows “the defendant or defendants” named in certain types of state-court cases to remove the case to federal district court. The “defendant or defendants” accomplish removal by filing a notice that contains a short and plain statement of the grounds for removal. 28 U.S.C. § 1446(a). Courts have construed the “defendant or defendants” language in those statutes as requiring that all defendants in a case join in or consent to removal. Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255, 259 (4th Cir. 2013). That requirement is called the “rule of unanimity.” Id. Failure to comply with the rule renders the removal defective and is grounds to remand the case to state court. See Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 203 (4th Cir. 2006) (holding the failure of all defendants to join in the removal petition is a nonjurisdictional defect in the removal); Palmetto Automatic Sprinkler Co. v. Smith Cooper Int'l, Inc., 995 F.Supp.2d 492, 495 (D.S.C. 2014) (“[O]rdinarily, the failure of any defendant to consent to removal renders the removal improper and requires remand.”)

         Builders Premier neither joined nor consented to Zurich and American Guarantee's removal notice. Thus, it appears the unanimity rule has not been satisfied.

         No so fast, say Zurich and American Guarantee, for an exception to the rule applies here. A nominal defendant-one with “no immediately apparent stake in the litigation” either before or after removal-need not join in or consent to removal. Hartford Fire Ins. Co., 736 F.3d at 259, 260. Zurich and American Guarantee contend Builders Premier is a nominal defendant because it has agreed to provide Baker defense coverage.

         The nominal-defendant exception is meant to “ensure[] that only those parties with a palpable interest in the outcome of a case, and not those without any real stake, determine whether a federal court can hear a case.” Hartford Fire Ins. Co., 736 F.3d at 259. Analyzing whether the exception applies is straightforward: the court decides whether the non-removing defendant “has an interest in the outcome of the case.” Id. at 261; see also Id. at 260 (“[T]he key inquiry is whether the suit can be resolved without affecting the non-consenting . . . defendant in any reasonably foreseeable way.”).

         Builders Premier clears that threshold. Baker has been sued by a plaintiff seeking more than $20 million in actual damages alone. In asserting its declaratory judgment claim against Builders Premier, Baker asks this Court to hold that Builders Premier must pay lawyers to defend Baker in that suit and must pay at least some part of any judgment the plaintiff might obtain. The Court cannot ...


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