Opinion
CASE NO. 20-CIV-20910-RAR
05-31-2020
BIG LEAGUE VENTURES, LLC, Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, Defendant.
Adam Marc Friedman, Jose Pete Font, Amf Law, LLC / Font Nelson, PLLC., Fort Lauderdale, FL, Caroline Marie Carollo, Barakat Legal, Coral Gables, FL, for Plaintiff. Illon Ryan Kantro, William S. Berk, Austin Jay North, Berk, Merchant & Sims, PLC, Coral Gables, FL, for Defendant.
Adam Marc Friedman, Jose Pete Font, Amf Law, LLC / Font Nelson, PLLC., Fort Lauderdale, FL, Caroline Marie Carollo, Barakat Legal, Coral Gables, FL, for Plaintiff.
Illon Ryan Kantro, William S. Berk, Austin Jay North, Berk, Merchant & Sims, PLC, Coral Gables, FL, for Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
RODOLFO A. RUIZ II, UNITED STATES DISTRICT JUDGE
THIS CAUSE comes before the Court upon Defendant's Motion to Dismiss Plaintiff's Amended Complaint [ECF No. 12] ("Motion") filed on April 13, 2020. The Court conducted a telephonic hearing to discuss the Motion on May 21, 2020 [ECF No. 28]. For the reasons stated on the record, and being otherwise fully advised, it is hereby
The Motion is fully briefed. See Plaintiff's Response in Opposition [ECF No. 14] ("Response"); Defendant's Reply [ECF No. 19] ("Reply").
ORDERED AND ADJUDGED that the Motion [ECF No. 12] is GRANTED .
BACKGROUND
At issue here is whether a plaintiff who sues syndicates of insurance underwriters doing business in the international marketplace of Lloyd's of London ("Lloyd's") must show it has a claim for more than $75,000 against each underwriting member of the syndicate to establish diversity jurisdiction under 28 U.S.C. section 1332. Invoking the Court's diversity jurisdiction, Plaintiff's First Amended Complaint [ECF No. 11] ("Amended Complaint") avers a single cause of action for statutory bad faith pursuant to section 624.155 of the Florida Statutes. See generally , Am. Compl. Plaintiff named only one Defendant: Certain Underwriters at Lloyd's, London. Id.
Defendant moves to dismiss the Amended Complaint for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure and, alternatively, for failure to state a claim upon which relief can be granted under Rule 12(b)(6). Mot. at 1. Specifically, Defendant maintains that the Court lacks subject matter jurisdiction because—after considering the unique nature of the Lloyd's insurance marketplace—Plaintiff's claim cannot possibly meet the amount in controversy requirement under section 1332. Id. Defendant also contends that the Amended Complaint should be dismissed as premature and duplicative of a related state court suit. Id.
In opposition, Plaintiff argues that it has satisfied the amount in controversy requirement under section 1332 because its claim arises from a statute—rather than an insurance contract. Resp. at 2-3. Plaintiff maintains this statutory basis entitles it to sue Lloyd's as an entity without regard for the contractual liability of the underwriters responsible for the relevant insurance policy. Id. However, Plaintiff's argument is misguided. As further explained herein, the Court lacks subject matter jurisdiction over Plaintiff's claim and the Amended Complaint warrants dismissal.
Consequently, the Court need not address the alternative relief requested by Lloyd's.
LEGAL STANDARD
A motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) may present either a "facial" or a "factual" challenge to the complaint. See McElmurray v. Consol. Gov't. , 501 F.3d 1244, 1251 (11th Cir. 2007). In a facial challenge, a court is required only to determine if the plaintiff has "sufficiently alleged a basis for subject matter jurisdiction." Id. at 1251. Furthermore, "the court must consider the allegations in the plaintiff's complaint as true." Williamson v. Tucker , 645 F.2d 404, 412 (5th Cir. 1981). By contrast, a factual attack "challenge[s] ‘the existence of subject matter jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings ... are considered.’ " McElmurray , 501 F.3d at 1251 (quoting Lawrence v. Dunbar , 919 F.2d 1525, 1529 (11th Cir. 1990) ). In a factual attack—as is the case here—"no presumptive truthfulness attaches to [a] plaintiff's allegations," Lawrence , 919 F.2d at 1529 (citation and internal quotation marks omitted), and the plaintiff bears the burden to prove the facts sufficient to establish subject matter jurisdiction. See OSI, Inc. v. United States , 285 F.3d 947, 951 (11th Cir. 2002).
The Eleventh Circuit has adopted as binding precedent all decisions of the former Fifth Circuit rendered before October 1, 1981. Bonner v. City of Prichard , 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).
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ANALYSIS
As the party seeking to invoke the Court's jurisdiction, Plaintiff "bears the burden of proving, by a preponderance of the evidence, facts supporting the existence of federal jurisdiction." McCormick v. Aderholt , 293 F.3d 1254, 1257 (11th Cir. 2002). "For federal diversity jurisdiction to attach, all parties must be completely diverse, and the amount in controversy must exceed $75,000." Underwriters at Lloyd's, London v. Osting-Schwinn , 613 F.3d 1079, 1085 (11th Cir. 2010) (internal citations omitted). Here, the parties disagree over whether Plaintiff has met its burden. Plaintiff maintains that because its suit is based on a statute, it can meet the amount in controversy requirement without regard for the contractual liability of the underwriters in the syndicate. Defendant argues that the Court should look beyond the syndicates’ fictitious structure to decipher if Plaintiff has established the amount in controversy requirement as to each syndicate member. Indeed, "in order to properly assess whether subject matter jurisdiction exists, we must detour briefly to examine the peculiar institutional structure of Lloyd's of London, the underwriters and syndicates that use it to broker insurance, and the structure of liability that it creates." Osting-Schwinn , 613 F.3d at 1082.
A. Lloyd's of London
As a preliminary matter, "[t]he Society of Lloyd's, London, is not an insurance company, but rather a British organization that provides infrastructure for the international insurance market." Id. at 1083. Importantly, "Lloyd's itself does not underwrite insurance. Rather, Lloyd's operates as a marketplace where large numbers of individual investors buy and sell insurance risks." Humm v. Lombard World Trade , 916 F. Supp. 291, 293 (S.D.N.Y. 1996). "Individual underwriters, known as ‘Names’ or ‘members,’ assume the risk of the insurance loss. Names can be people or corporations ... [who] sign up for certain percentages of various risks across several policies." Osting-Schwinn , 613 F.3d at 1083 ; see also Chase Manhattan Bank, N.A. v. Aldridge , 906 F. Supp. 870, 872 (S.D.N.Y. 1995). "Names underwrite insurance through administrative entities called syndicates, which cumulatively assume the risk of a particular policy." Id. Syndicates are fictitious administrative structures that bear no risk on the policies they underwrite—all of the risk is borne by the constituent Names who assume individual percentages of the total risk. Id. ; see also Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 858 (5th Cir. 2003) (concluding that "a policy holder insures at Lloyd's but not with Lloyd's."); Team One Props., LLC v. Certain Underwriters at Lloyd's, London , No. CIV.A. 07-4493 C(, 2007 WL 4365)392, at *2-4 (E.D. La. Dec. 10, 2007), aff'd sub nom. Team One Props. LLC v. Certain Underwriters at Lloyds London , 281 F. App'x 323 (5th Cir. 2008) (explaining the Lloyd's insurance market).
Paramount to the issue at hand, each Name's liability is several and not joint. Id. ; see also Lloyd's Act, 1982, c.14, § 8(1) (providing that an "underwriting member shall be a party to a contract of insurance underwritten at Lloyd's only if it is underwritten with several liability, each underwriting member for his own part and not one for another, and if the liability of each underwriting member is accepted solely for his own account."). Through contractual agreement, Names that are members of the underwriting syndicates on the policy remain liable for their proportional share of any adverse judgments. Osting-Schwinn , 613 F.3d at 1084. Put simply, "the legal relationship between the Names and the insured is a vertical one: it is the individual Names, not the syndicate, who are directly liable in the event of loss, as if each Name had a contract with the insured." Id.
B. Plaintiff cannot establish subject matter jurisdiction over every Name.
Given Lloyd's unique structure, Plaintiff must establish—by a preponderance of the evidence—that its claim against each Name subscribing to the subject policy equals or exceeds $75,000.00. In Osting-Schwinn , the Eleventh Circuit held that syndicates, as unincorporated associations, had to plead the citizenship of each of their Names to establish diversity jurisdiction. See Osting-Schwinn , 613 F.3d at 1093. The Court also noted that it lacked the requisite evidence to determine if each Name met the amount in controversy requirement, because the record did not reflect the exact composition of the subscribing syndicates and the amount of the subject policy's risk assumed by any one Name. Id. at 1093 n.7. Accordingly, the Eleventh Circuit remanded the case to the district court with specific instructions to "consider whether ... the Underwriters have met the amount in controversy requirements under 28 U.S.C. § 1332(a)." Id. at 1093.
When addressing the marketplace structure of Lloyd's, various courts have recognized that diversity jurisdiction is destroyed if the plaintiff cannot prove it has a claim against each Name subscribing to the subject policy that equals or exceeds $75,000.00. See , e.g., E.R. Squibb & Sons, Inc. v. Accident & Cas. Ins. Co. , 160 F. 3d 925, 933 (2d Cir. 1998) (noting, as severally liable defendants, that each Name would still have to satisfy the jurisdictional minimum required by 28 U.S.C. § 1332 ); Aldridge , 906 F. Supp. at 876 (dismissing case for lack of subject matter jurisdiction where no claim against individual Names could satisfy the jurisdictional amount requirement of 28 U.S.C. § 1332 ); Humm , 916 F. Supp. at 299 (dismissing case for lack of subject matter jurisdiction because aggregation of claims against severally liable Names is impermissible and, consequentially, the requisite amount in controversy was not met under 28 U.S.C. § 1332 ); Team One Props., LLC , 2007 WL 4365392, at *2-4 (dismissing case for lack of subject matter jurisdiction where it was "inconceivable that the jurisdictional minimum could be satisfied against the more than 4,000 Names that have underwritten the policy in question."); Rips, LLC v. Underwriters at Lloyd's London , No. CIV.A. 14-1969, 2015 WL 2452339, at *1 (E.D. La. May 21, 2015) (holding the Court lacked subject matter jurisdiction under 28 U.S.C. § 1332 because claims against individual Names cannot be aggregated and the complaint did not plead that the $75,000 jurisdictional minimum was met for each Name); Int'l Ins. Co. v. Certain Underwriters at Lloyd's London , No. 88 C 9838, 1991 WL 349907, at *9 (N.D. Ill. Sept. 16, 1991) ("If the syndicates are not to be treated as entities, IIC's claim against each syndicate member must meet the minimum jurisdictional amount, $10,000 at the time suit was filed.").
The Eastern District of Louisiana was faced with an almost identical situation in Rips . There, defendants brought a motion to dismiss under Rule 12(b)(1), arguing that plaintiff failed to adequately allege diversity jurisdiction by neglecting to prove that the jurisdictional minimum was met for each individual Name subscribing to the applicable insurance policy. Rips , 2015 WL 2452339, at *1. The Rips court granted the motion to dismiss, noting that the plaintiff "may not aggregate its claims against individual Names, and therefore must plead that the $75,000 jurisdictional amount is met for each Name." Id. at *3.
Like in Rips , Plaintiff has not—and cannot—establish that its claims against each individual Name subscribing to the policy at issue equals or exceeds the $75,000.00 minimum required to invoke this Court's diversity jurisdiction under section 1332. Defendants attached the sworn declaration of Laura Probyn, managing agent for one of the syndicates that underwrote the underlying insurance policy. See Declaration of Laura Probyn [ECF No. 12-1]. Therein, Ms. Probyn breaks down the percentage risk carried by each syndicate underwriting the policy and the percentage risk carried by each individual Name in those syndicates. Id. The declaration confirms that even if Plaintiff were found to be entitled to the entire $750,000.00 amount demanded in its Civil Cover Sheet, none of the Names sharing the risk held by syndicate 0623 and/or syndicate 0318 could possibly bear responsibility for an amount equal to, or exceeding, $75,000.00. Id. at ¶ 13. Indeed, syndicate 0623 holds 5.1429% of the policy's risk and syndicate 0318 holds 9.5238% of the policy's risk. Id. at ¶ 6. Further, the 5.1429% of the policy's risk borne by syndicate number 0623 is shared by 1,679 Names, while the 9.5238% risk borne by syndicate number 0318 is shared by 389 Names. Id. at ¶ 19. In fact, Plaintiff's demand would have to exceed $112,000,000,000.00 before each subscribing Name could be held liable to Plaintiff for an amount equal to, or exceeding, $75,000. Accordingly, Plaintiff is unable to establish diversity jurisdiction against Defendant.
CONCLUSION
As discussed at the Hearing, Plaintiff may be able to establish diversity jurisdiction over those individual Names whose percentage risk would expose them to the requisite damages. However, the current iteration of the Amended Complaint warrants dismissal as Plaintiff has failed to prove facts sufficient to establish federal jurisdiction by a preponderance of the evidence. Thus, for the foregoing reasons, it is hereby
ORDERED AND ADJUDGED as follows:
1. Defendant's Motion to Dismiss [ECF No. 12 ] is GRANTED .
2. This case is DISMISSED with prejudice as to Defendant Certain Underwriters at Lloyd's London.
3. Any pending motions are DENIED as moot .
DONE AND ORDERED in Fort Lauderdale, Florida, this 31st day of May, 2020.