United States District Court, D. South Carolina, Charleston Division
C. NORTON, UNITED STATES DISTRICT JUDGE.
following matter is before the court on defendant
Pennsylvania National Mutual Casualty Insurance Company's
(“Penn National”) motion to realign parties, ECF
No. 8, and plaintiff Fenwick Commons Homeowners Association,
Inc.'s (“Fenwick HOA”) motion to remand, ECF
No. 9. For the reasons set forth below, the court
GRANTS Penn National's motion to realign
and DENIES Fenwick HOA's motion to
remand without prejudice.
case is an insurance coverage dispute that arises out of an
underlying tort action. On September 18, 2018, Fenwick HOA
brought a construction defect action in state court against
several defendants, including Portrait Homes-South Carolina,
LLC and Portrait Homes-Fenwick Commons, LLC (collectively,
“Portrait entities”), as well as JJA
Construction, Inc. d/b/a JJA Framing, JJA Construction, Inc.
d/b/a JJA Framing Company, Jose Castillo d/b/a JJA Framing,
and Jose Castillo d/b/a JJA Framing Company (collectively,
“JJA entities”). Fenwick Commons Homeowners
Association, Inc. v. Portrait Homes - South Carolina, LLC et
al., Civil Action No. 2018-CP-10-330, pending in the
Court of Common Pleas, Charleston County, South Carolina (the
“Underlying Action”). ECF No. 1-2. Penn National
was not named as a defendant in the Underlying Action. On
November 27, 2018, Fenwick HOA brought the current
declaratory judgment action in state court against Penn
National, the JJA entities, and the Portrait entities (the
“Declaratory Judgment Action”). ECF No. 1-1. On
January 7, 2019, Penn National removed the Declaratory
Judgment Action to federal court on diversity jurisdiction
grounds and moved to realign the parties. ECF Nos. 1, 8.
Fenwick HOA moved to remand this action. ECF No. 9.
Underlying Action, Fenwick HOA alleges that the JJA entities
and the Portrait entities were involved in the construction
of a townhome community known as Fenwick Commons located in
Charleston, South Carolina. ECF No. 1-2. Fenwick HOA has
asserted several claims against these defendants that arise
out of alleged construction defects of the townhome
community. Id. In the current Declaratory Judgment
Action, Fenwick HOA alleges that Penn National issued certain
commercial general liability policies to the JJA entities and
named the Portrait entities as additional insureds. ECF No.
1-1 ¶¶ 11-12. Fenwick HOA asserts that these
policies were intended to cover the type of damage alleged in
the Underlying Action. Id. ¶ 14. While the
Underlying Action remains pending in state court, Fenwick HOA
seeks a declaration that Penn National is obligated to insure
and indemnify the JJA entities and the Portrait entities
against the claims in the Underlying Action. Id.
¶¶ 15-18, 23. In the alternative, Fenwick HOA asks
the court to reform the policies to cover those claims.
Id. ¶ 22.
court first addresses Penn National's motion to realign
the JJA entities and Portrait entities as plaintiffs to avoid
the requirement that these defendants consent to removal. The
court next considers whether to abstain from exercising its
jurisdiction over this case, per Fenwick HOA's motion to
Realignment of Parties
National has removed this case based on diversity
jurisdiction. Because Penn National has not received consent
from the other defendants to remove the case as required,
Penn National asks the court to realign JJA entities and
Portrait entities as plaintiffs to avoid the consent
requirement. The court grants the request to realign.
burden of demonstrating jurisdiction and therefore the
propriety of removal rests with the removing party.”
Hartford Fire Ins. Co. v. Harleysville Mut. Ins.
Co., 736 F.3d 255, 259 (4th Cir. 2013). Removal pursuant
to 28 U.S.C. § 1441(a) provides that a “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 the defendants.”
“[A]ll defendants who have been properly joined and
served must join in or consent to the removal of the
action.” 28 U.S.C. § 1446(2)(A). “The
Supreme Court has construed these statutes to require all
defendants in the case to join in or consent to
removal.” Hartford Fire Ins. Co., 736 F.3d at
259. However, federal courts have recognized exceptions to
this requirement, such as through a realignment of defendants
as plaintiffs. Wayne J. Griffin Elec., Inc. v. Travelers
Prop. Cas. Co. of Am., 2014 WL 842983, at *2 (M.D. N.C.
Mar. 4, 2014). When a court decides to realign defendants as
plaintiffs, a defendant's lack of consent for removal can
be deemed immaterial. Id. at *6; see also
Scottsdale Ins. Co., 811 F.Supp.2d 1220, 1222 n. 2 (E.D.
Va. 2011) (“[D]efendants are not required to consent to
removal given the realignment . . . as plaintiffs for
jurisdictional purposes.”); Gurney's Inn Resort
& Spa Ltd. v. Benjamin, 743 F.Supp.2d 117, 126
(E.D.N.Y. 2010) (“[R]ealignment … excus[es]
[removing defendant's] failure to comply with the rule of
unanimity.”); Universal Concrete Prod. Corp. v.
Peerless Ins. Co., 2008 WL 4104171, at *3 n.5 (D. Md.
Aug. 21, 2008) (“parties aligned in interest with the
plaintiff are not required to join or consent to the
removal” (quoting Smilgin v. New York Life Ins.
Co., 854 F.Supp. 464 (S.D. Tex. 1994))).
the JJA entities and the Portrait entities have not appeared
in this action or consented to the removal of this action,
Penn National contends that consent is not required because
the interests of the JJA entities and the Portrait entities
are aligned with Fenwick HOA. Therefore, Penn National asks the
court to realign the JJA entities and the Portrait entities
to be plaintiffs with Fenwick HOA to remove this case without
the required consent. The Fourth Circuit applies the two-step
principal purpose test to determine whether parties are
properly aligned in a lawsuit. The first step requires the
court to “determine the primary issue in the
controversy.” U.S. Fid. & Guar. Co. v. A &
S Mfg. Co., 48 F.3d 131, 133 (4th Cir. 1995). The
primary issue in the Declaratory Judgment Action is whether
Penn National has a duty to provide coverage under its
policies to the JJA entities and the Portrait entities for
the claims asserted against them in the Underlying Action.
the court should align the parties according to their
positions with respect to the primary issue.”
Id. In a declaratory judgment action involving an
insurance company's policy coverage, the parties'
interests are generally aligned based on whether they believe
there is coverage of the damages that might underlie the
claims for insurance. See Crout v. United Fin. Cas. Co.,
No. CIV.A. 1:10-649, 2010 WL 2998500, at *2 (D.S.C. July
28, 2010) (realigning insured defendant with the plaintiff in
a declaratory judgment seeking reformation of insurance
company's policy when defendant had an interest in the
insurance company reforming the policy to cover a greater
amount of damages); Marsh v. Cincinnati Ins. Co.,
2008 WL 4614289, at *2 (D.S.C. Oct. 15, 2008) (realigning
defendants with the insured plaintiff in a declaratory
judgment action seeking insurance coverage when the
defendants had an interest in establishing that the plaintiff
was covered by the insurance policy). Thus, the court must
consider whether defendants JJA entities and Portrait
entities have an interest similar to Fenwick HOA's
interest in having the court delcare that Penn National's
insurance policies provide coverage for the claims in the
the principal purpose test to the facts at hand, the court
first finds that the JJA entities and the Portrait entities
have been named by Fenwick HOA as defendants in the
Underlying action, as well as in the current Declaratory
Judgment Action. Despite the JJA entities and Portrait
entities being in an adverse position to Fenwick HOA in the
Underlying Action, those three parties have the same interest
in the current action- namely in establishing that the
policies issued to the JJA entities and Portrait Entities by
Penn National provide coverage for the claims brought against
them by Fenwick HOA in the Underlying Action. Further,
Fenwick HOA does not bring any claims against the JJA
entities and the Portrait entities in the current action and
does not seek any relief from them. Rather, Fenwick HOA asks
the court to “issue a Declaratory Judgment that Penn
National is obligated to insure [the Portrait entities] and
[the JJA entities] for the claims made by Plaintiff . .
.” in the Underlying Action. ECF No. 1-1 ¶ 23.
There is simply nothing to indicate why the JJA entities and
the Portrait entities would be named as defendants in this
action. Thus, the court realigns them as plaintiffs along
with Fenwick HOA and finds that Penn National need not obtain
their approval to remove the matter. The court grants Penn
National's motion to realign and finds that removal was