United States District Court, E.D. Louisiana
NAG, LTD., et al.
v.
CERTAIN UNDERWRITERS AT LLOYDS OF LONDON
SECTION
“G” (3)
ORDER
NANNETTE JOLIVETTE BROWN UNITED STATES DISTRICT JUDGE
This
litigation arises out of Plaintiffs NAG, Ltd., Ben Sah, Inc.,
and Meir Chee Shawl, Ltd.'s (collectively,
“Plaintiffs”) claims for breach of an insurance
policy against Defendants Certain Underwriters at
Lloyd's, London Subscribing to Certificate No. LPS14-024
(“Defendants”).[1] Plaintiff originally filed this
action in state court, but Defendants removed the case to
this Court, asserting diversity jurisdiction pursuant to 28
U.S.C. § 1332.[2] Before the Court is Plaintiffs'
“Motion to Remand.”[3] Having considered the motion, the
notice of removal, Defendants' supplemental briefing, the
record, and the applicable law, the Court will grant the
motion in part and remand the case to the Civil District
Court for the Parish of Orleans, State of Louisiana.
I.
Background
A.
Factual and Procedural Background
In this
litigation, Plaintiffs allege a breach of a commercial
property insurance policy by Defendants, who are the
underwriters of Plaintiffs' insurance
policy.[4] Plaintiffs claim that their insurance
policy covered physical damage to two of their commercial
properties following the collapse of an adjacent building on
October 21, 2014.[5] In their state court petition, Plaintiffs
seek damages for the losses they incurred, as well as
penalties and attorney's fees pursuant to Louisiana
Revised Statutes §§ 22:1973 and
22:1892.[6]
On
October 11, 2016, Plaintiffs filed this action in Civil
District Court for the Parish of Orleans, State of
Louisiana.[7] On November 30, 2016, Defendants removed
the case to this Court, asserting diversity jurisdiction
pursuant to 28 U.S.C. § 1332.[8] In their notice of removal,
Defendants allege that the citizenship of each defendant is
diverse from Plaintiffs' citizenship and assert that
Plaintiffs have alleged damages that exceed $75,
000.[9]
On December 22, 2016, the Court issued an Order reviewing
subject matter jurisdiction in the case and determining that
the citizenship of the parties was unclear and that it was
not facially apparent that the amount in controversy exceeds
$75, 000.[10] The Court ordered that Defendants, who
bear the burden of proof as the removing parties,
[11]
clarify the citizenship of the parties and submit evidence
regarding the amount in controversy at the time of
removal.[12] On December 22, 2016, Plaintiffs filed
the instant motion to remand to state court.[13] Defendants
filed supplemental briefing regarding the citizenship of the
parties and the amount in controversy on January 5,
2017.[14]
B.
Structure of Lloyd's of London Insurance
Market
Before
turning to the parties' arguments, it is useful to
explain the nature and structure of the Lloyd's of London
insurance market (“Lloyd's”), because
Lloyd's “presents a unique structure for
jurisdictional analysis.”[15] Lloyd's is not an
insurance company, but rather a self-regulating entity which
operates and controls an insurance market.[16] Lloyd's
provides a market for the buying and selling of insurance
risk among its members who collectively make up Certain
Underwriters at Lloyd's.[17] The members (or investors) who
collectively make up Lloyd's are called
“Names” and are the individuals and corporations
that finance the insurance market and ultimately insure
risks.[18] Each Name is exposed to personal
liability for his, her, or its proportionate share of the
loss on a particular policy that the Name has subscribed to
as an underwriter.[19]
Names
do not operate independently. Rather, each is severally
liable on the policies to which it subscribes only for his,
her, or its proportion of each risk.[20] Typically, hundreds of
Names will subscribe to a single policy.[21] Although
Names do not actively participate in the business, they
provide capital to the market through their participation in
“syndicates.”[22] Generally, a Lloyd's
policy has multiple syndicates that are collectively
responsible for all of the coverage provided by a
policy.[23] A syndicate bears no liability for the
risk on a Lloyd's policy, however, because all liability
falls to the individual Names who belong to the various
syndicates that have subscribed to a policy.[24]
II.
Parties' Arguments
A.
Defendants' Notice of Removal
In
their notice of removal, Defendants aver that Plaintiffs
indicated in their petition that their damages exceed the
$50, 000 threshold required for a jury trial.[25] Given that
the penalties could be as much as 50% of the amount awarded
under the policy, Defendants argue, the amount in controversy
will “more likely than not” exceed the $75, 000
jurisdictional amount in controversy
requirement.[26] Defendants also note that the combined
policy limits for the buildings at issue are $1.3
million.[27]
Defendants
assert in their notice of removal that Plaintiffs are
“domestic corporations licensed to do and doing
business in the Parish of Orleans, State of
Louisiana.”[28] Defendants represent that Lloyd's
insurance market is a self-regulating industry that operates
and controls an insurance market and that the individual and
corporate members of Lloyd's are called
“Names.”[29]Because Lloyd's is an unincorporated
group of underwriting members, Defendants assert that its
citizenship is determined by the citizenship of its
members.[30] Defendants assert that a representative
of Lloyd's has examined the list of members subscribing
to the policy at issue and that to the best of her knowledge,
none of the participating members are located in
Louisiana.[31]Thus, Defendants assert that the Court
has original jurisdiction pursuant to 28 U.S.C. §
1332.[32]
B.
Plaintiffs' Arguments in Support of the Motion to
Remand
In
their motion to remand, Plaintiffs assert that when
underwriters, sometimes called “Names, ”
subscribing to a policy held by Lloyd's are sued in or
removed to federal court, the party asserting federal
jurisdiction must establish that all underwriters are diverse
from all adverse parties and that the claim against each
individual underwriter meets the $75, 000 amount in
controversy requirement.[33] Plaintiffs contend that the
requirements for federal jurisdiction are not apparent on the
face of Plaintiffs' petition, because it does not allege
the citizenship of each of the underwriters at Lloyd's,
who are anonymous by their own design.[34] According to
Plaintiffs, even assuming an award of the full policy limits
of $1.3 million, the required amount in controversy
requirement for each individual anonymous underwriter would
not be met, because underwriters subscribing to Lloyd's
policies typically number in the thousands.[35] Plaintiffs
contend that the lack of affirmative evidence to establish
the jurisdictional threshold for each individual Name results
in a lack of diversity jurisdiction.[36]
Plaintiffs
next argue that Defendants have not alleged affirmative
evidence demonstrating the individual citizenship of each of
the Names.[37] Plaintiffs contend that the broad
declaration by Defendants of the purported identities of the
syndicates is for “the 2014 year, ” but that the
time of removal was November 2016.[38] Plaintiffs further
contend that the affidavit of the head of market services for
Defendants is insufficient to establish the citizenship of
each Name, because she simply states in the affidavit that to
the best of her knowledge, none of the participating members
are located in Louisiana.[39] Because it is impossible to
conclude whether the Court has subject matter jurisdiction,
Plaintiffs argue that the Court should remand this matter to
state court.[40]Finally, Plaintiffs argue that the Court
should award them attorneys' fees and costs, because
Defendants have no objectively reasonable ground to believe
that removal is legally proper in this case without an
affirmative showing of citizenship and amount in controversy
as to each member of the syndicate.[41] Plaintiffs also request
that the Court certify its Order as immediately appealable if
it should deny their motion to remand.[42]
C.
Defendants' Supplemental Briefing on Diversity and the
Amount in Controversy
Defendants
argue that at the time of removal, based on a construction
cost estimate submitted to Defendants by Plaintiffs,
Plaintiffs' damages total at least $286,
708.37.[43] Defendants again note that Plaintiffs
have also asserted claims for penalties and attorneys'
fees under Louisiana law.[44] Defendants aver that
Plaintiffs are all citizens of Louisiana for purposes of
federal diversity jurisdiction, because they are all
corporations that are incorporated in and have their
principal places of business in Louisiana.[45] Defendants
assert that Plaintiffs' insurance policy was issued in
July of 2014, so the relevant question concerning
Defendants' diversity is “whether any of the
underwriting members who participated in those certain
syndicates in July 2014 were citizens of Louisiana at the
time of removal.”[46]
Defendants
note that the head of market services at Lloyd's found
that no members of the insurance policy were shown as having
an address in Louisiana and that to her knowledge, none of
the participating members were located in
Louisiana.[47] Because none of the members have
addresses in Louisiana or are located in Louisiana,
Defendants argue, none of the members who participated in the
policy have a principal place of business in
Louisiana.[48] Thus, Defendants argue that the members
subscribing to the certificate are all foreign insurers who
are completely diverse from Plaintiffs.[49]
III.
Law and Analysis
A.
Legal Standard
A
defendant may remove a state civil court action to federal
court if the federal court has original jurisdiction over the
action.[50] A federal court has subject matter
jurisdiction over an action “where the matter in
controversy exceeds the sum or value of $75, 000” and
the action “is between citizens of different
states.”[51] “When removal is based on
diversity of citizenship, diversity must exist at the time of
removal.”[52] The removing party bears the burden of
demonstrating that federal jurisdiction exists by a
preponderance of the evidence.[53] Subject matter jurisdiction
cannot be waived by the parties' conduct or
consent.[54] “If at any time before final
judgment it appears that the district court lacks subject
matter jurisdiction, the case shall be
remanded.”[55]
In
assessing whether removal was appropriate, the Court is
guided by the principle, grounded in notions of comity and
the recognition that federal courts are courts of limited
jurisdiction, that “removal statute[s] should be
strictly construed in favor of remand.”[56] Remand is
appropriate if the Court lacks subject matter jurisdiction,
and “doubts regarding whether removal jurisdiction is
proper should be resolved against federal
jurisdiction.”[57] A removing defendant's burden of
showing that the amount in controversy is sufficient to
support federal jurisdiction differs depending on whether the
plaintiff's complaint alleges a specific amount of
monetary damages.[58] When the plaintiff alleges a damages
figure in excess of the required amount in controversy,
“that amount controls if made in good
faith.”[59] If the plaintiff pleads damages less
than the jurisdictional amount, this figure will also
generally control, barring removal.[60]
Nevertheless,
Louisiana law ordinarily does not allow a plaintiff to plead
a specific amount of damages.[61] When, as here, the plaintiff
has alleged an indeterminate amount of damages, the Fifth
Circuit requires the removing defendant to prove by a
preponderance of the evidence that the amount in controversy
exceeds $75, 000.[62] A defendant satisfies this burden either
“(1) by demonstrating that it is facially apparent that
the claims are likely above $75, 000, or (2) by setting forth
facts in controversy-preferably in the removal petition, but
sometimes by affidavit-that support a finding of the
requisite amount.”[63] “[T]he [fact] that the removing
party bears the burden of proving the amount in controversy
does not mean that the removing party cannot ask the court to
make common-sense inferences about the amount put at stake by
the injuries the plaintiffs claim.”[64]
“Removal, however, cannot simply be based on conclusory
allegations.”[65] The defendant must do more than point to
a state law that might allow the plaintiff to recover more
than the jurisdictional minimum; the defendant must submit
evidence that establishes that the actual amount in
controversy exceeded $75, 000 at the time of
removal.[66]
Although
the Fifth Circuit has not expressly ruled on the issue,
courts in the Eastern District of Louisiana and other circuit
courts have found that when determining the diversity of
citizenship of the parties in a case involving Lloyd's,
the citizenship of all of the Names subscribing to a policy
must be taken into consideration.[67] Moreover, a Fifth Circuit
opinion and numerous decisions from the Eastern District of
Louisiana affirm that the amount in controversy must be
established as to each Name subscribing to the
policy.[68]
C.
Analysis
In
their motion, Plaintiffs argue that this case should be
remanded because: (1) Defendants have not established
complete diversity as to each Name; and (2) Defendants have
not established the amount in controversy as to each Name
subscribing to the policy at issue.[69] Defendants argue that
there is complete diversity, because Plaintiffs are citizens
of the state of Louisiana for purposes of diversity
jurisdiction and none of the Names participating in the
policy at issue are citizens of Louisiana.[70] Defendants
further argue that the amount in controversy requirement is
met, because an estimate submitted by Plaintiffs indicates
that Plaintiffs' total claimed damages are at least $286,
708.37.[71] The Court will first consider whether
Defendants have established that the jurisdictional amount in
controversy requirement is met in this case.
To
support their contention that the amount in controversy
requirement is met in this case, Defendants offer an
affidavit from an insurance adjuster who estimates that
Plaintiffs' damages total approximately $575, 000 and
that a total of $288, 291.63 has been tendered to Plaintiffs
in connection with the property damages at issue in this
case.[72] According to Defendants, the amount in
controversy is therefore at least $286, 708.37, or the
balance of the $575, 000 in estimated damages less the
previously tendered amount of $288, 291.63.[73] As the Court
stated supra, however, the amount in controversy
requirement must be met as to each Name subscribing to the
policy at issue.[74]
Although
Defendants have offered evidence to demonstrate the extent of
the total damage to Plaintiffs' property, Defendants have
not offered any evidence to establish that the amount in
controversy requirement has been met as to each Name
subscribing to the policy.[75] The Court notes, for example,
that the policy at issue has not been filed into the record
before the Court. Therefore, the Court cannot determine how
many Names are underwriters for the policy at issue or the
proportion of risk for which each of the Names is
responsible. As the Fifth Circuit has recognized,
“[t]ypically hundreds of names will subscribe to a
single policy, and the liability among the Names is several,
not joint.”[76]
As the
removing parties, Defendants bear the burden of establishing
jurisdiction by a preponderance of the evidence, and
“[a]ny ambiguities are construed strictly against
removal because the removal statute should be strictly
construed in favor of remand.”[77] Despite the requirement
that Defendants prove that the amount in controversy is met
as to each Name subscribing to the policy, Defendants have
failed to prove that the jurisdictional amount in controversy
is established with respect to any individual
Name.[78] Thus, remand to state court is
appropriate. Because Defendants have not provided sufficient
evidence to establish that the amount in controversy
requirement has been met with respect to each Name, the Court
need not address whether complete diversity has been
established.[79]
Finally,
the Court notes that Plaintiffs request attorney's fees
and costs, because according to Plaintiffs, there is no
objectively reasonable basis for removal.[80] Pursuant to
28 U.S.C. § 1447(c), “an order remanding the case
may require payment of just costs and any actual expenses,
including attorney fees, incurred as a result of the
removal.” The decision to award attorney's fees
under Section 1447(c) is in the sound discretion of the
Court, and should “recognize the desire to deter
removals sought for the purpose of prolonging litigation and
imposing costs on the opposing party, while not undermining
Congress' basic decision to afford defendants a right to
remove as a general matter, when the statutory criteria are
satisfied.”[81] Toward that end, the “mere
determination that removal was improper” does not
automatically entitle a plaintiff to an award of
fees.[82] Rather, in the absence of “unusual
circumstances, ” this Court may award attorney's
fees under Section 1447(c) “only where the removing
party lacked an objectively reasonable basis for seeking
removal.”[83] Although the Court has found that
Defendants have not meet their burden to establish the
requisite amount in controversy as to each Name, it does not
find that Defendants lacked an objectively reasonable basis
for seeking removal. Accordingly, the Court will not award
fees or costs here.[84]
IV.
Conclusion
Considering
all of the evidence of the amount in controversy at the time
that the notice of removal was filed, the Court finds that
Defendants have put forth insufficient evidence to
demonstrate by a preponderance of the evidence that the
jurisdictional amount in controversy is established with
respect to each Name. Therefore, the Court cannot determine
whether it has subject matter jurisdiction, and remand to
state court is proper.
Accordingly,
IT IS HEREBY ORDERED that Plaintiffs'
“Motion to Remand”[85] is GRANTED IN
PART to the extent that the case is remanded to
state court and DENIED IN PART to the extent
that Plaintiffs request an award for costs and expenses,
including attorney's fees.
IT
IS FURTHER ORDERED that the case is remanded to the
Civil District Court for Parish of ...