Opinion
CIVIL ACTION No. 03-0253, SECTION: 1/4
November 17, 2003
ORDER AND REASONS
This matter is before the court on a motion, filed on behalf of plaintiffs, Joseph Grefer, Camile Grefer, Rose Marie refer Haase and Henry Grefer, to remand this action to the 24th Judicial District Court for the Parish of Jefferson. Defendants, Essex Insurance Company ("Essex") and Colony Insurance Company ("Colony"), oppose this motion. After consideration of the motion, the memoranda of law and the facts, this Court is of the opinion that plaintiffs' motion to remand should be GRANTED.
Rec. Doc. No. 6.
See Rec. Doc. Nos. 9, 15, 32, 34, defendants memoranda in opposition to remand.
BACKGROUND
Plaintiffs are owners of certain property in Harvey, Louisiana (the "Grefer Tract"). In August, 1997, plaintiffs instituted a lawsuit against several entities, including Intracoastal Tubular Services, Inc. ("ITCO"), alleging that the Grefer Tract had been contaminated by naturally occurring radioactive materials as a result of oilfield pipe cleaning operations conducted by ITCO and others on the Grefer Tract and adjacent property. That lawsuit, entitled Joseph Grefer, et al., v. Alpha Technical et al., 1999-C-15004 in the Orleans Parish Civil District Court, resulted in a judgment in favor of plaintiffs for damages in excess of $56,000,000.
Rec. Doc. No. 1, Ex. B, Petition to Collect Judgment Against Debtors Under Insurance Contracts, ¶ VI.
See id., at ¶ VI-VIII.
Id., at ¶ XL
On September 17, 2001, plaintiffs filed an action in the 24th Judicial District Court for the Parish of Jefferson against various insurers of ITCO to collect the damages awarded in the Grefers' lawsuit against ITCO. Subsequently, plaintiffs filed a first supplemental and amending petition that named ITCO, a Louisiana corporation, and another non-diverse defendant in the collection action. Thereafter, the Grefers were named as defendants in numerous lawsuits arising from their ownership of the Grefer Tract. Among the lawsuits filed against the Grefers is a class action filed in Orleans Parish Civil District Court which alleges that the Grefers, along with ITCO and other co-defendants, are liable for damages arising from the contamination of the Grefer Tract. Plaintiffs filed a second supplemental and amending petition which added plaintiffs' insurers, Essex, Colony, Travelers Insurance Company (f/k/a Aetna Casualty and Surety Company)("Travelers") and Scottsdale Insurance Company ("Scottsdale") (collectively the "Grefer insurers"). In the second supplemental and amending petition, plaintiffs alleged a breach of contract and sought a declaratory judgment with respect to the Grefer insurers' obligation to provide a defense and to indemnify plaintiffs for loss incurred in connection with the pending lawsuits. All of the Grefer insurers named as defendants in the second supplemental and amending petition are diverse from plaintiffs.
Id.
See Rec. Doc. No. 1, Ex. C, ¶ XVI.
Rec. Doc. No. 1, Ex. A, PL second supplemental and amending petition ("PL Second Amending Petition"), ¶ 11; see, Rec. Doc. No. 1, Ex. H, class action complaint, Willy Williams, et al. v. Exxon Mobile Corp., 2001-18230, Orleans Parish Civil District Court, ¶ 3.
See PL Second Amending Petition, ¶¶ 17-21.
See Rec. Doc. No. 1, at 4.
In response to plaintiffs' second supplemental and amending petition, several Grefer insurers filed various exceptions to that petition in state court, including an exception of improper cumulation of actions. Prior to the hearing on the exceptions, Travelers agreed to provide a defense to the Grefers subject to a reservation of rights with respect to their alleged indemnity obligation. At some later point, Scottsdale also agreed to provide a defense to the Grefers subject to a reservation of rights. On January 6, 2003, the state court conducted a hearing on the exceptions. Prior to argument on the exceptions, plaintiffs informed the state court that they agreed with defendants' exception of improper cumulation of actions and plaintiffs requested that the state court "sever" the declaratory judgment and breach of contract claims brought against the Grefer insurers from the claims filed against the ITCO insurers regarding the collection of damages awarded in the previous litigation. On January 16, 2003, the state court entered a consent judgement whereby the claims alleged in the second supplemental and amending petition were "severed" from the claims against ITCO and its insurers and the claims against Travelers and Scottsdale were stayed. Additionally, the state court stayed all of defendants' exceptions.
Rec. Doc. No. 1, Exs. D E, exceptions of Travelers, Essex, and Colony.
See Rec. Doc. No. 1, Ex. F, partial transcript of hearing conducted on January 6, 2003, in Joseph Grefer, et al. v. Travelers Ins. Co., et al, No. 572-152, Division "G" of the 24th Judicial District Court for the Parish of Jefferson, at 7-9.
Rec. Doc. No. 6, Pl. motion in support of remand, at 2 n. 1. Since the filing of the notice of removal, plaintiffs filed motions in this Court dismissing the claims against Travelers and Scottsdale in their capacity as insurers of plaintiffs. See Rec. Doc. No. 13 (dismissing claims against Travelers); Rec. Doc. No. 24 (dismissing claims against Scottsdale).
See id. The following exchange occurred during the hearing on the exceptions:
[Counsel for Colony and Essex:]
I'm a little confused as to where we are, but Judge, this is the same set of actions that they've now agreed to sever and stay as to Travelers. Travelers, and certainly Colony and Essex, and maybe a couple of other insurance companies, perhaps Scottsdale, were property insurers for the Grefers' during the period of time at which these activities took place on the Grefer tract, over by the canal. [Counsel for the Grefers:]
We don't have a problem with severing Colony and Essex from the principle demand, and perhaps we could discuss staying it later, with [counsel for Travelers.]
But as far as — we agree to their exception of improper cumulation, and we would ask the Court to sever that claim.
Rec. Doc. No. 1, Ex. G. at 2.
Id. at 3.
On January 24, 2003, Essex and Colony filed a notice of removal, to which Travelers and Scottsdale consented, removing only the claims alleged in the second and supplemental petition. Essex and Colony argue that this Court has subject matter jurisdiction over the "severed and decumulated portion of the described and captioned lawsuit" because complete diversity exists with respect to the claims alleged in the second and supplemental petition. On February 21, 2003, plaintiffs timely filed the instant motion to remand this action. Plaintiffs argue that the second and supplemental petition does not constitute an independent lawsuit and, therefore, removal is improper.
Rec. Doc. Nos. 1, 2, 4.
Rec. Doc. No. 1.
LAW AND ANALYSIS
Pursuant to 28 U.S.C. § 1441 (a), "any civil action brought in a State court" may be removed to federal court if the action is one over which the federal court would have original jurisdiction. The federal district courts have original jurisdiction "of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States." 28 U.S.C. § 1332(a). To determine whether federal jurisdiction exists, this Court must consider the claims in the state court petition as they existed at the time of removal. Cavellini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256. 264 (5th Cir. 1994).
Section 1441(a) provides in pertinent part:
Except as otherwise expressly provided by Act of Congress, any 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, to the district court Zof the place where such action is pending. . . .
The burden of establishing federal jurisdiction is on the party seeking removal. Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th Cir. 1993) (citing Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42); Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988)). However, removal jurisdiction is to be strictly construed as its application "deprives a state court of a case properly before it and thereby implicates important federalism concerns" Frank v. Bear Stearns Co., 128 F.3d 919, 922 (5th Cir. 1997). Accordingly, any ambiguities are construed against removal and in favor of remanding the case to state court. Manguno v. Prudential Prop, and Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citing Acuna v. Brown Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000)).
Because the phrase "civil action" in § 1441 "denotes the entirety of the proceedings in question," the removability of such civil action "is determined as to its entirety, not as to particular claims or parties." Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1376 (5th Cir. 1980). Therefore, the general effect of a defendant's removal of a civil action from state to federal court is that the "removal `ends the power of the state court . . . because the entire case is then removed as to all parties whether joined in the petition or not." Farias v. Bexar County Bd. of Trustees for Mental Health Mental Retardation Servs., 925 F.2d 866, 873 (5th Cir. 1991) (quoting Allman v. Hanley, 302 F.2d 559, 562 (5th Cir. 1962) and rejecting defendant's argument that the federal district court's jurisdiction upon removal extends only to removing defendants).
"In federal practice, the terms `case' and `action' refer to the same thing, i.e., the entirety of a civil proceeding." Nolan v. Boeing Co., 919 F.2d 1058, 1066 (5th Cir. 1990); see Jenkins v. First Tennessee Nat'l Bank, 1999 WL 33537174 *1 (N.D. Miss.)(Biggers, Chief J.) (holding that a diverse defendant may not remove only a portion of a diversity action pursuant to 28 U.S.C. § 1441(c) and noting that "[n]o statutory provision, including [§ 1441(c)] . . . authorizes removal of only part of a case").
In this case, it is uncontested that when the state court case is viewed in its entirety, complete diversity does not exist between plaintiffs and the joined defendants. Therefore, this court lacks subject matter jurisdiction unless the consent judgment "severing" the second and supplemental petition resulted in two separate and distinct lawsuits such that the the second supplemental and amending petition is a "civil action" that may be removed pursuant to § 1441(a).
In the case of Phillips v. Unijax, Inc., 625 F.2d 54, 56 (5th Cir. 1980), the Fifth Circuit considered whether a state court order granting a plaintiff's motion for separate trials created two independent lawsuits, one of which was removable pursuant to § 1441(a) on the basis of diversity jurisdiction. Id. The Phillips Court, applying Alabama state law, drew a distinction between a state court order granting separate trials, which does not result in two distinct lawsuits, and a state court order resulting in "entirely independent actions to be tried, and judgment entered thereon, independently." Id. (citations omitted). In the latter case, the Fifth Circuit stated that an argument for removal "might have merit." Id.
In light of Phillips, district courts confronting the issue of whether a "severed" claim results in an independent lawsuit have focused the inquiry on whether the state court intended to merely separate a plaintiff's claims for trial purposes or whether the state court proceedings prior to removal resulted in a true separation of claims into two distinct lawsuits. Compare Miller v. Fulton, 113 F. Supp.2d 1035, 1039 (S.D.Miss. 2000) (applying Mississippi law and granting remand on the ground that although the state court ordered that plaintiffs claims be "severed," the defendant had not satisfied its burden of establishing that the state court intended to separate the claims into two lawsuits as opposed to merely ordering separate trials) with Johnson v. Snapper Div. of Fuqua Indus., Inc., 825 F. Supp. 127, 130-31 (E.D.Tex. 1993) (denying remand and exercising jurisdiction over "severed" claims where an agreed order of severance explicitly provided that the severed claims would be separately numbered and captioned lawsuits that would result in separate final judgments which could each be separately appealed).
It is undisputed that the consent judgment entered by the state court resolved defendants' exception of improper cumulation of actions. Therefore, this Court assumes, for purposes of the jurisdictional inquiry, that the claims stated in plaintiff's second and supplemental petition were improperly cumulated with various claims against non-diverse parties. However, this fact does not end the inquiry. Under Louisiana law, an improper cumulation of action may be corrected by a trial court in three different ways.
See Rec. Doc. No. 35, minute entry dated November 6, 2003.
The exception of improper cumulation of actions is dilatory in nature. La.C.C.P. art. 926 A(7). As such, its function merely is to retard the progress of the action, but not to defeat the action. La.C.C.P. art. 923. Where the trial court does not lack jurisdiction and venue is proper, the trial court should allow the plaintiff to amend his suit or to file a new suit to correct the improper cumulation, or to order separate trials of the actions. La.C.C.P. art. 464. See Asbestos Plaintiffs v. Borden, Inc., 607 So.2d 564 (La. 1992).Zenon v. Delchamps, Inc., 727 So.2d 542, 544 (La.App. 4th Cir. 1998) (emphasis supplied).
The consent judgment upon which defendants rely to remove the decumulated portion of this case states that plaintiffs' "claims" alleged in the second and supplemental petition "be and hereby are, severed from this action" and it stays the claims with respect to Travelers and Scottsdale "until further notice from this Court." The consent judgment also stays all of defendants' exceptions to the second and supplemental petition. The consent judgment sustaining defendants' exception of improper cumulation of actions does not order separate trials, nor does it order plaintiffs to correct the improper cumulation of actions by either amending the state court petition or filing a new lawsuit. Because these options are available to the state court, and because the consent judgment is wholly silent as to its intended effect, the Court finds that the consent judgment is ambiguous as to whether the "severance" resulted in two separate lawsuits, each of which would result in a separate judgment independently appealable, or merely one lawsuit with the claims stated in the second and supplemental petition being separately tried.
Rec. Doc. No. 1, Ex. G, at 2.
Id. at 3.
The Fifth Circuit has noted that a distinction between a true severance and a severance for purposes of trial, "clear enough in theory, is often obscured in practice since at times the courts talk of `separate trial' and `severance' interchangeably." Phillips, 625 F.3d at 56 (citation omitted). Federal district courts have therefore held that a defendant does not carry the burden of establishing federal jurisdiction where jurisdiction is predicated on a state court order that merely states that plaintiff's claims are to be "severed" from claims against non-diverse defendants. See Miller, 113 F. Supp.2d at 1039; Caldwell v. Alfa Ins. Corp., 806 F. Supp. 623, 625 (S.D.Miss. 1992).
The district court in Caldwell reasoned:
This Court, recognizing that Defendant carries the burden of establishing jurisdiction and acknowledging the confusion concerning use of the terms "severance" and "separate trial," agrees with the determination of the United States Court of Appeals for the Fourth Circuit in Compagnie France Film v. Vertex, Ltd., 4 Fed. Rules Serv.3d 864 (4th Cir. 1985) [782 F.2d 1034 (table)] where that court, applying Rules 21 and 42(b) of the Federal Rules of Civil Procedure, found that "[u]se of the word `severed' is insufficient, in itself, to establish a Rule 21 severance, given a widely-recognized looseness in usage of the language." Id. 4 Fed. Rules Serv.3d at 865.
Although, unlike Mississippi law, the Louisiana Code of Civil Procedure articles governing the effect of an improper cumulation of actions is not modeled on the federal rules of civil procedure, the principle of federal law, i.e., that a severance of claims for separate trials does not constitute an independent lawsuit removable pursuant to § 1441(a), is applicable in the present case.
The removal statute is "intended to have uniform nationwide application." Grubbs v. Gen. Electric Credit Corp., 405 U.S. 699, 705, 92 S.Ct. 1344, 1349, 31 L.Ed.2d 612 (1972). Therefore, it is "unaffected by local law definition or characterization of the subject matter to which it is to be applied. . . . [The removal statute establishes] its own criteria, irrespective of local law, for determining in what instances suits are to be removed from the state to the federal courts." Shamrock Oil Gas Corp. v. Sheets, 313 U.S. 100, 104, 61 S.Ct. 868, 870, 85 L.ed 1214 (1941). Accordingly, this court has held that "construction of the removal statute is a question of federal law." Paxton v. Weaver, 553 F.2d 936, 940 (5th Cir. 1977).Brown v. Demco Inc., 792 F.2d 478, 480 (5th Cir. 1986).
It may be that the state court intended to effect a true severance of the claims against the Grefer insurers from the claims against ITCO and its insurers because, as defendants contend, plaintiffs' claims against their insurers for defense and indemnity do not involve the collection of the judgment against ITCO and its insurers. Equally possible is that the state court intended that plaintiffs' claims remain part of the state court lawsuit because, as plaintiffs contend, all of the claims against ITCO, its insurers and plaintiffs' own insurers arise from the contamination of the Grefer tract. Because doubt exists as to whether the second supplemental petition created a separate "civil action" removable pursuant to § 1441(a), defendants have not earned their burden of establishing diversity jurisdiction and remand is required. See Caldwell, 806 F. Supp. at 625 ("Because the Court finds that the language of the state court order fails to demonstrate adequately an intent to sever pursuant to [applicable state law], it is unnecessary, and indeed unwise, to examine the nature of the claims in an attempt to render a guess as to the intentions of the state court.").
Accordingly, for the above and foregoing reasons,
IT IS ORDERED that the motion of plaintiffs, Joseph Grefer, et al., to remand this action is GRANTED and, pursuant to 28 U.S.C. § 1447(c), this action is REMANDED to the 24th Judicial District Court for the Parish of Jefferson for lack of complete diversity.