United States District Court, E.D. Louisiana
DONNIE LANDRY, ET AL.
COVINGTON SPECIALTY INSURANCE COMPANY, ET AL.
ORDER AND REASONS
filed a motion to remand for lack of subject matter
jurisdiction. Rec. Doc. 9. Defendants timely filed opposition
memoranda. Rec. Docs. 14, 15. Plaintiffs then sought, and
were granted leave, to file a reply. Rec. Doc. 31. For the
reasons discussed below, IT IS ORDERED that
the motion to remand (Rec. Doc. 9) is
BACKGROUND AND PROCEDURAL HISTORY
February 3, 2015, Plaintiffs executed a contract with Robert
Dinger d/b/a Dinger's Outdoors and R&N Pool Service,
Inc. for the construction of a custom swimming pool and
related amenities in Plaintiffs' yard. See Rec.
Doc. 1-2 at 11-12. Plaintiffs were not satisfied with
Dinger's work and, in February 2017, sent a letter
alleging that Dinger “ha[d] breached several provisions
within the contract and most importantly, caused major damage
to the Landrys' residence by performing inadequate and
defective work.” Id. at 13-15. Plaintiffs
demanded over $200, 000 in damages. See id.
January 2018, Plaintiffs filed suit in Louisiana state court
against three of Dinger's insurance companies because
Dinger had declared bankruptcy. See Id. at 2-7,
9-10. Plaintiffs sought to proceed directly against the
insurance companies under Louisiana's direct action
statute. See Id. at 2 (citing La. Rev. Stat. §
22:1269). The complaint states that it “is an action on
a contract” and alleges that Dinger “performed
the work specified under the contract in an improper,
negligent and unworkmanlike manner.” Id. at 3.
Plaintiffs seek damages for physical damage to their yard and
home, as well as for emotional distress. See Id. at
March 2018, Defendants removed the case on the basis of
diversity jurisdiction, stating that no Defendant is a
citizen of Louisiana. See Rec. Doc. 1. Later that
same month, Plaintiffs moved to remand, arguing that there is
no diversity of citizenship because, as insurers, Defendants
assume their insured's citizenship. See Rec.
Doc. 9 (citing 28 U.S.C. § 1332(c)(1)). Defendants argue
that they do not assume their insured's citizenship
because Plaintiffs' claim sounds in contract, not in
tort, as is required under Louisiana's direct action
statute. See Rec. Docs. 14, 15.
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 defendants, to the district
court of the United States for the district and division
embracing the place where such action is pending.” 28
U.S.C. § 1441(a). However, “[i]f at any time
before final judgment it appears that the district court
lacks subject matter jurisdiction, the case shall be
remanded.” Id. § 1447(c). The
above-captioned matter was removed from Louisiana state court
on the basis of diversity jurisdiction. See Rec.
Doc. 1 at 3-6 (citing 28 U.S.C. § 1332). There is no
dispute that the amount in controversy exceeds seventy-five
thousand dollars. See Rec. Doc. 1-2 at 13-15.
diversity jurisdiction is only present when “the
citizenship of each plaintiff is diverse from the citizenship
of each defendant.” Caterpillar Inc. v. Lewis,
519 U.S. 61, 68 (1996). Here, Plaintiffs are citizens of
Louisiana. See Rec. Doc. 1-2 at 2. Defendants are
corporate entities. See Id. Normally, “a
corporation . . . [is] a citizen of every State . . . by
which it has been incorporated and of the State . . . where
it has its principal place of business.” 28 U.S.C.
§ 1332(c)(1). “[E]xcept that in any direct action
against the insurer of a policy . . . to which action the
insured is not joined as a party-defendant, such insurer
shall [also] be deemed a citizen of every State . . . of
which the insured is a citizen.” Id. §
filed the instant case in state court as a direct action
against Dinger's insurers. See Rec. Doc. 1-2 at
2 (citing La. Rev. Stat. § 22:1269). The parties agree
that Dinger is a citizen of Louisiana. See Id. at 3.
Therefore, if Louisiana's direct action statute is
applicable, Defendants are citizens of Louisiana.
See 28 U.S.C. § 1332(c)(1)(a). If Defendants
are citizens of Louisiana, there is incomplete diversity and
an absence of subject matter jurisdiction. See
Caterpillar, 519 U.S. at 68. But Defendants argue that
Louisiana's direct action statute is inapplicable because
Plaintiffs' claims sound in contract, not tort. The
outcome of the instant motion turns on the merit of this
Louisiana Direct Action Statute applies only to torts and not
to contract disputes.” Holland Am. Ins. Co. v.
Succession of Roy, 777 F.2d 992, 994-95 (5th Cir. 1985)
(internal citation omitted); see also Green v. Auto Club
Grp. Ins. Co., 2008-2868, p. 3 (La. 10/28/09); 24 So.3d
182, 184 (“The Direct Action Statute was enacted to
give special rights to tort victims, not to insureds with
contract claims against a defendant.”). Plaintiffs
concede that their claims against Defendants are intimately
tied to the contract Plaintiffs executed with Dinger for the
construction of the pool in their yard. See Rec.
Doc. 31 at 5. But, as Plaintiffs correctly observe, the
violation of a contract can potentially give rise to claims
in contract and in tort. See Mentz Const.
Servs., Inc. v. Poche, 2011-1474, pp. 5-8 (La.App. 4
Cir. 3/14/12); 87 So.3d 273, 276-78.
in this case, Plaintiffs' claims sound only in contract
and Louisiana's direct action statute is inapplicable.
See Id. “The main distinction between an
action on a contract and a tort action is that the former
flows from the breach of a special obligation contractually
assumed by the obligor, whereas the latter flows from the
violation of a general duty owed to all persons.”
Id. at 276-77. In Metz, Louisiana's
Fourth Circuit Court of Appeal held that Louisiana's
direct action statute did not apply to a homeowner's
claims against a contractor for shoddy work and failure to
supervise employees because the claims, even those that
“sound[ed] in tort, ” “ar[o]se from duties
set forth in the contract between the parties.”
Id. at 277. The court further explained that
“implicit in every construction contract is the
requirement that the work be performed in a good, workmanlike
manner, suitable for its intended purpose and free from
defects in material or workmanship.” Id. at
277-78. The court then held that claims based on implicit
contractual terms are also excluded from the direct action
statute. See id.
facts of the instant case are indistinguishable from those in
Metz. The “negligent acts/omissions”
alleged in Plaintiffs' complaint all relate to
Dinger's construction of the pool, which was governed by
the contract between Plaintiffs and Dinger. See Rec.
Doc. 1-2 at 3-4, 11-12. Specifically, Plaintiffs' claims
address the location of the pool, the manner in which the
pool was constructed, the quality of the finished product,
and Dinger's actions while constructing the pool. See
Id. at 3-4. The contract contains terms governing these
same issues, and is further augmented by the implied duties
of workmanlike performance. See Id. at 11-12.
Because “[t]he alleged duties that were breached . . .
are both explicitly and implicitly set forth in the contract
between the parties, ” and “there are no general
tort duties alleged which do not arise as a result of the
existence of the contract, ” the direct action statute
does not apply. Mentz, 87 So.3d at 278. Therefore,
Defendants do not assume Dinger's citizenship and there
is complete diversity. See 28 U.S.C. §
1332(c)(1); Caterpillar, 519 U.S. at 68.
attempts to show that they have actually brought a tort
action are unavailing, not least because Plaintiffs have made
no attempt to distinguish Metz. Plaintiff cites a
series of cases for the proposition that negligent breach of
a contractual obligation can give rise to an action in
tort.See Rec. Doc. 31 at 2-5.
While that is true, the mere fact that a plaintiff alleges
negligence does not mean that Louisiana's direct action
statute applies. See Metz, 87 So.3d at 276-77.
Rather, the direct action statute only applies when the
alleged negligence relates to a general duty, not a ...