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Intra American M S, Inc. v. Certain Underwriters at Lloyd's London

United States District Court, S.D. Indiana, Indianapolis Division

February 7, 2014




This cause is before the Court on Plaintiff Intra American M s, Inc.'s Motion to Remand to State Court, filed on August 14, 2013 pursuant to 28 U.S.C. § 1447(c). For the reasons set forth below, the Defendant is ORDERED TO SHOW CAUSE by February 14, 2014 why this action should not be remanded to state court, given its failure to establish diversity of citizenship jurisdiction in this Court. If Defendant is unable to establish the complete diversity of citizenship necessary for this Court to exercise jurisdiction over the matter, Plaintiff's Motion to Remand will be granted.

Factual and Procedural Background

This litigation owes its origins to a contract dispute. Plaintiff Intra American M s, Inc. ("Intrametco") is an Indiana corporation engaged in the trading of m s. Compl. ¶ 1. Between May and July 2008, Intrametco entered into a total of six sales contracts with Lane Tone International Material, Inc. ("Lane Tone") that called for Intrametco to deliver 95 shipments of non-ferrous m s for a price of $3, 123, 580. Id. at ¶ 4. After Lane Tone failed to pay for thirteen shipments made pursuant to the contract and rejected the 82 remaining shipments, Intrametco sued Lane Tone for breach of contract and anticipatory breach of contract in Hamilton County Superior Court in Indiana. Id. at ¶¶ 4-5.[1] On February 22, 2011 and June 21, 2012, the Hamilton County Superior Court entered judgments in favor of Intrametco in amounts totaling $937, 566.17. See Docket No. 12 at 4.[2] Lane Tone failed to satisfy the judgments. Id. at ¶ 16.

At times relevant to that breach of contract action, Lane Tone was insured by a commercial general liability policy; the policy, bearing certificate number OME000038, was issued by the Defendant, Certain Underwriters at Lloyd's of London.[3] Docket No. 12 at 1. On July 9, 2009, an attorney of the law firm Wilson, Elser, Moskowitz, Edelman & Dicker, LLP ("WEMED")-retained by Defendant-appeared as insurance defense counsel in the breach of contract suit on behalf of Lane Tone. Compl. ¶ 6. Lloyd's representatives never issued a "reservation of rights letter, " and Lane Tone made several requests in 2009 and 2010 that WEMED engage in a more proactive discovery effort pursuant to its putative obligation to defend Lane Tone in the contract suit. Id. at ¶ 7. However, in January 2010 Lloyd's informed Lane Tone that it was revoking its coverage and defense of the action, asserting that Lane Tone's insurance policy did not extend to Lane Tone's alleged breach of contract; WEMED accordingly withdrew as insurance counsel on February 23, 2010. Id. at ¶¶ 7-8.

After insurance counsel's withdrawal, Lane Tone filed suit against its insurers at Lloyd's in Hamilton County Superior Court on June 15, 2010, seeking a declaratory judgment that the insurance policy obligated the insurers to defend Lane Tone in the contract suit and to indemnify Lane Tone for any resulting liabilities. See Docket No. 12 at 3.[4] On July 20, 2010, the Lloyd's insurers removed that case to our court on the basis of diversity jurisdiction; however, on June 4, 2012, Judge Magnus-Stinson issued an order of remand based on the failure of the Lloyd's insurers to adequately establish complete diversity of citizenship among the parties. See Cause No. 1:10-cv-00922-JMS-TAB, Docket No. 52. Because of its interest in that declaratory judgment suit, Intrametco sought, and received, a garnishment order from the court that had entered judgment on its behalf in the contract suit, decreeing that "any proceeds, recoveries, funds or the like that may be become due and payable from [Lloyd's] to [Lane Tone]... shall be paid to Intrametco." Compl. ¶ 18. Lane Tone and the Lloyd's insurers subsequently reached a settlement agreement-one that Intrametco believes did not adequately recognize Intrametco's interest in the dispute. See Docket No. 12 at 5.

Claiming that "the Settlement Agreement between Lane Tone and Lloyd's does not extinguish Intrametco's rights to enforce the policy in its entirety as the injured party, " Intrametco now seeks a declaratory judgment holding as follows: (1) that the insurance policy applies to the underlying contract claims against Lane Tone, (2) that Lloyd's is estopped from asserting that any exclusions in the policy apply to bar coverage of Intrametco's contract claims against Lane Tone, and (3) that Lloyd's is therefore liable to indemnify Intrametco for the full amount which Lane Tone has been adjudged liable to Intrametco for its breach of contract. See Compl. ¶¶ 26-28.

Legal Analysis

Standard of Review

Plaintiff's motion to remand alleges that we lack subject matter jurisdiction over the matter before us under 28 U.S.C. § 1332 because Defendant has failed to establish that the parties are completely diverse. In a case that has been removed from state court, federal law mandates that, "[i]f 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). Courts therefore have an obligation to inquire into the existence of jurisdiction, whether on the motion of a party or sua sponte. See generally Heinen v. Northrop Grumman Corp., 671 F.3d 669 (7th Cir. 2012).

When a party seeks to remove a case to federal court based on diversity jurisdiction, that party bears the burden of establishing the parties' complete diversity of citizenship. See Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993); Chase v. Shop N Save Warehouse Foods, Inc., 110 F.3d 424, 427 (7th Cir. 1997). Federal courts are tribunals of limited jurisdiction; as the United States Supreme Court has repeatedly stated, the diversity jurisdiction of the federal courts over state-law matters is to be strictly construed. See Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 377 (1978) (citing Thomson v. Gaskill, 315 U.S. 442, 446 (1942)). Therefore, any doubt regarding jurisdiction should be resolved in favor of remanding to state court jurisdiction. See Doe, 985 F.2d at 911.


This case presents a thorny complication of federal courts' diversity jurisdiction: the plural citizenship of unincorporated business organizations. The jurisdictional challenge is rendered particularly complex here by the unusual organizational structure of the ...

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