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Craige v. Government Employees Insurance Co.

United States District Court, M.D. North Carolina

October 1, 2019




         Before the court are the motions of Plaintiffs Tamika Craige and Jeremiah Thomas to remand this action to the Superior Court of Durham County, North Carolina (Doc. 14), and to stay proceedings pending resolution of that motion (Doc. 17). The motions are fully briefed and ready for decision. For the reasons set forth below, the motion to remand will be denied on the merits, and the motion to stay proceedings will be denied as moot.

         I. BACKGROUND

         The complaint alleges that Plaintiffs, two North Carolina citizens, were injured in an automobile accident and obtained judgment against the offending vehicle's driver, James Rigsbee, in the total amount of $268, 250. (Doc. 3 at 3.) Thereafter, Plaintiffs brought this declaratory judgment action against Defendants Government Employees Insurance Company (“GEICO”) and Nationwide Affinity Insurance Company of America (“Nationwide”) in state court, alleging that Rigsbee was a resident of households covered by Defendants' insurance policies at the time of the accident and that, as a result, Defendants are legally responsible for Plaintiffs' damages reflected in the judgment. (Id.) Plaintiffs seek a declaratory judgment that Defendants are responsible for satisfying Plaintiffs' personal injury judgment and request recovery from Defendants for the judgment amount. (Id. at 4.)

         Defendants removed this action to this court, alleging complete diversity between Plaintiffs and Defendants. (Doc. 1.) Plaintiffs now move to remand the case, arguing that it is a direct action against the insurers under 28 U.S.C. § 1332(c)(1)(A) that requires the court to align the citizenship of Defendants with that of Rigsbee, a North Carolina citizen, so as to defeat diversity. (Doc. 14.) Pending resolution of their motion, Plaintiffs also seek a stay of all proceedings. (Doc. 17.)

         II. ANALYSIS

         Under 28 U.S.C. § 1441(a), a defendant may remove “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” Here, Defendants removed the action alleging diversity of citizenship of the parties, invoking subject matter jurisdiction under 28 U.S.C. § 1332(a)(1). (Doc. 1.) That requires a showing that the controversy is between citizens of different states and exceeds the sum of $75, 000. 28 U.S.C. § 1332(a). The complaint alleges that Plaintiffs, who seek to enforce a $268, 250 judgment, are citizens of North Carolina, GEICO is incorporated in the state of Maryland and has its principal place of business in Chevy Chase, Maryland, and Nationwide is incorporated in the state of Ohio with it principal place of business in Columbus, Ohio. (Doc. 3 at 1-3.) Thus, on the face of the complaint, diversity jurisdiction exists.

         Plaintiffs argue, however, that their present complaint is a “direct action” under 28 U.S.C. § 1332(c)(1)(A), which provides:

For the purposes of this section and section 1441 of this title --
(1) a corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business, except 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--
(A) every State and foreign state of which the insured is a citizen . . . .

         Thus, in a direct action against an insurer, the insurer has not only its normal citizenship, but also that of its insured. Indiana Gas Co., Inc. v. Home Ins. Co., 141 F.3d 314, 317 (7th Cir. 1998). Plaintiffs contend that because the present action seeks damages which have been imposed against Rigsbee, Defendants' alleged insured, it is a direct action within the meaning of § 1332(c)(1)(A), and Rigsbee's North Carolina citizenship destroys diversity. (Doc. 16 at 4.) Any doubt in that regard, Plaintiffs posit, should be resolved in favor of remand. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941) (noting that removal statutes are to be construed strictly).

         Under Article III of the United States Constitution, this court's jurisdiction is limited, and as Plaintiffs point out, the burden is on Defendants to demonstrate that removal is proper. Barbour v. Int'l Union, 640 F.3d 599, 605 (4th Cir. 2011) (en banc) abrogated on other grounds by 28 U.S.C. § 1446(b)(2)(B). Defendants contend that even a strict construction of the removal statute cannot rewrite an act of Congress and Plaintiffs' declaratory judgment action is not a direct action within the meaning of the statute. They are correct.

         “[A] ‘direct action' under § 1332(c)(1) refers to ‘a tort claim in which the insurer essentially stands in the shoes of its legally responsible insured . . . .'” Elliot v. Am. States Ins. Co., 883 F.3d 384, 395 (4th Cir. 2018) (quoting Rosa v. Allstate Ins. Co., 981 F.2d 669, 677 (2d Cir. 1992)). It has uniformly referred to “those cases in which a party suffering injuries or damage for which another is legally responsible is entitled to bring suit against the other's liability insurer without joining the insured or first obtaining a judgment against him.” Forstonv. St. Paul Fire and Marine Ins. Co., 751 F.2d 1157, 1159 (11th Cir. 1985) (quoting Beckham v. Safeco Ins. Co. of Am., 691 F.2d 898, 901-02 (9th Cir. 1982)); accord Corn v. Precision Contracting, Inc., 226 F.Supp.2d 780, 783 (W.D. N.C. 2002) (contrasting “cases in which the injured party ‘seeks to hold the insurer responsible for breaching the terms of its insurance policy or for its independent tortious acts.'”) (internal citations omitted). Section 1332(c)(1) was designed to eliminate diversity jurisdiction for “suits on certain tort claims in which ...

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