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Seaman v. Safe Auto Insurance Co.

United States District Court, W.D. Kentucky, Louisville

June 25, 2015

CHRISTOPHER SEAMAN, ET AL., Plaintiffs,
v.
SAFE AUTO INSURANCE COMPANY, Defendant.

MEMORANDUM OPINION

CHARLES R. SIMPSON, III, Senior District Judge.

This matter is before the Court on Plaintiffs Christopher Seaman and Francis D. Hagan's motion to remand (DN 7) and Defendant Safe Auto Insurance Co.'s ("Safe Auto") motion for leave to file a surreply (DN 14). Plaintiffs first urge the Court to decline to entertain this action as it involves claims for declaratory relief. In the alternative, they argue that the case constitutes a direct action falling outside of the Court's subject matter jurisdiction. For the following reasons, the Court will deny Plaintiffs' motion to remand (DN 7), and it will grant Safe Auto's motion for leave to file a surreply (DN 14).[1]

I. BACKGROUND

On May 30, 2012, Hagan injured Seaman in a motor vehicle collision. (Compl., DN 1-1, ¶ 5.) When the collision occurred, Hagan allegedly held insurance coverage under a policy issued by Safe Auto. (Compl., DN 1-1, ¶ 7.) Safe Auto, however, asserted that Hagan's policy was not in effect, and it denied coverage for Seaman's injuries. (Compl., DN 1-1, ¶ 10.)

Seaman brought suit against Hagan to recover for his injuries in Nelson County Circuit Court. (Compl., DN 1-1, ¶¶ 20-21.) On September 3, 2014, the state court entered a judgment against Hagan in which he stipulated to liability and damages. (Judgment, DN 12-2.) The judgment entitles Seaman to $57, 889.21 for medical expenses; $15, 000.00 for lost income; and $525, 000.00 for pain and suffering. (Judgment, DN 12-2.)

On October 27, 2014, Seaman and Hagan filed this lawsuit against Safe Auto in Nelson County Circuit Court. (Compl., DN 1-1.) Plaintiffs allege that Safe Auto's denial of insurance coverage amounted to breach of contract; bad faith; and violations of the Kentucky Consumer Protection Act, the Kentucky Unfair Claims Settlement Practices Act, and the Kentucky Motor Vehicle Reparations Act. (Compl., DN 1-1, ¶ 14.)

Safe Auto removed the action to this Court, citing diversity of citizenship as the sole ground for subject matter jurisdiction. (Notice of Removal, DN 1, ¶ 7.) Plaintiffs now move to remand based on the Court's discretion to hear claims for declaratory relief, or in the alternative, they argue that the case is a direct action over which subject matter jurisdiction does not exist.

II. DISCUSSION

A. Direct Action

Plaintiffs contend that this case involves a direct action under 28 U.S.C. § 1332(c)(1), eliminating the diversity of citizenship necessary for subject matter jurisdiction. Though raised as an alternative, Plaintiffs' direct-action argument casts doubt on the Court's authority to hear the case and pronounce the law. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). As a threshold matter, the Court will resolve that jurisdictional doubt before considering its discretion to entertain requests for declaratory relief. See id.

The general removal statute allows the defendant or defendants to remove a civil action from state court to federal district court when that action could have been brought originally in federal district court. 28 U.S.C. § 1441(a). As the removing defendant, Safe Auto bears the burden of establishing subject matter jurisdiction. Jerome-Duncan, Inc. v. Auto-By-Tel, L.L.C., 176 F.3d 904, 907 (6th Cir. 1999). If subject matter jurisdiction is lacking, this removed action must be remanded to state court. 28 U.S.C. § 1447(c). "All doubts as to the propriety of removal are resolved in favor of remand." Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999).

Safe Auto asserts that the Court holds subject matter jurisdiction based on diversity of citizenship. Diversity jurisdiction exists in 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." Id. § 1332(a). The language of § 1332(a) requires complete diversity of citizenship, meaning the statute "applies only to cases in which the citizenship of each plaintiff is diverse from the citizenship of each defendant." Caterpillar Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996); accord Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267, 2 L.Ed. 435 (1806). At first glance, Plaintiffs and Safe Auto share no common state citizenship. Seaman and Hagan are citizens of Kentucky, [2] and Safe Auto is an Ohio corporation with its principal place of business "in a state other than Kentucky."[3] (Notice of Removal, DN 1, ¶ 4-5.)

But Plaintiffs attack complete diversity by arguing that their lawsuit comes within the direct-action provision of 28 U.S.C. § 1332(c)(1). The direct-action provision states that,

in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of... ...

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