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Dream Builders of South Florida Corp. v. Mid-Continent Casualty Co.

United States District Court, S.D. Florida

August 15, 2019

DREAM BUILDERS OF SOUTH FLORIDA CORP, et al., Plaintiffs,
v.
MID-CONTINENT CASUALTY COMPANY, et al., Defendants.

          ORDER

          ROY K. ALTMAN UNITED STATES DISTRICT JUDGE

         THIS MATTER comes before the Court upon (1) the Motion to Remand to State Court (“Motion to Remand”) [ECF No. 49], filed by the Plaintiffs, Dream Builders of South Florida Corporation (“Dream Builders”) and Cristian Schmidt (“Schmidt”); and (2) the Motion to Realign the Parties (“Motion to Realign”) [ECF No. 50], filed by the Defendant, Mid-Continent Casualty Company (“MCC”). Both motions have been fully briefed.[1] Having carefully considered the parties' written submissions, the record, and the applicable law, the Court hereby DENIES the Motion to Realign and GRANTS the Motion to Remand.

         The History

         This action involves an insurance coverage dispute between Dream Builders, a Florida construction corporation with its principal place of business in Florida, and MCC, an Ohio-based insurance corporation with its principal place of business in Oklahoma. See Motion to Remand ¶ 3. Dream Builders initially filed this declaratory judgment action in state court, seeking a declaration, pursuant to Florida Stat. Ch. 86, that MCC had a duty to defend and indemnify it in a separate, state-court suit Cohen filed against it. See MCC's Notice of Removal [ECF No. 1] ¶¶ 1-4. Because, at the time, the state declaratory judgment action involved one Florida plaintiff (Dream Builders) and a non-Florida defendant (MCC), MCC removed the case to this Court on the basis of diversity jurisdiction. See Id. ¶ 10.

         After removal, and after conferring with MCC, Dream Builders amended its complaint to add two indispensable parties: (1) Schmidt, who is a co-defendant in the underlying litigation, as a Plaintiff; and (2) Cohen, the plaintiff in the underlying suit, as a Defendant. See Second Amended Complaint [ECF No. 46]. Because Dream Builders, Schmidt, and Cohen are all Florida residents, the Plaintiffs then moved to remand the case on the ground that the Amended Complaint divested this Court of its diversity jurisdiction. See generally Motion to Remand. In response, MCC filed a motion asking the Court to realign the parties in a way that, in its view, more accurately reflected their respective interests. See generally Motion to Realign. According to MCC, Cohen, the plaintiff in the underlying state-court case, should likewise be a plaintiff-not a defendant-here. Id. Because the relief the two Motions seek-Dream Builders' Motion to Dismiss and MCC's Motion to Realign-are thus intertwined, the Court will adjudicate them both here.

         The Law

         “The district courts shall 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.” See 28 U.S.C. § 1332(a)(1). Diversity jurisdiction requires complete diversity: every plaintiff must be diverse from each defendant. See Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998) (citation omitted).

         The burden of establishing federal jurisdiction falls on the party attempting to invoke the jurisdiction of the federal court. See McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936). “Because removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly.” Univ. of S. Alabama v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941)). “Indeed, all doubts about jurisdiction should be resolved in favor of remand to state court.” Id. (citing Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994)).

         “The parties themselves cannot confer diversity jurisdiction upon the federal courts by their own designation of plaintiffs and defendants.” City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313 (11th Cir. 2012) (citing City of Indianapolis v. Chase Nat'l Bank, 314 U.S. 63, 69 (1941)). “[T]he converse of this principle-that parties cannot avoid diversity by their designation of the parties-is also true.” Id. Instead, federal courts must “look beyond the pleadings, and arrange the parties according to their sides in the dispute.” City of Indianapolis, 314 U.S. at 69 (cleaned up).

         Analysis

         The Plaintiffs' Motion to Remand is straightforward: because, they say, there are now Florida citizens on both sides of this case, this Court no longer has diversity jurisdiction-and, accordingly, the case must be remanded. See generally Motion to Remand. MCC, for its part, argues that Cohen (a Florida resident) should be realigned as a plaintiff, at which point, MCC notes, the Florida litigants will all be on the same side of this dispute. Id. This alignment, MCC says, will leave the Court's diversity jurisdiction undisturbed. Id. Because, in short, the Motion to Realign, if granted, would moot the Motion for Remand, the Court will address it first.

         MCC argues that Cohen should be realigned as a plaintiff because her interests are aligned with the Plaintiff-insureds, Dream Builders and Schmidt-and not with MCC. See Id. at 2 (“Cohen's interests are aligned with Dream Builders' and Schmidt's, as Cohen, Dream Builders, and Schmidt all desire declarations from the Court that there is insurance coverage available for Cohen's claims in the Underlying Action.”). In support, MCC cites a number of cases, including a published opinion from the Eleventh Circuit, for the proposition that “‘the normal alignment of parties in a suit seeking a declaratory judgment of non-coverage is Insurer versus Insured and Injured Party.'” City of Vestavia Hills, 676 F.3d at 1314 (quoting Home Ins. Co. of Illinois v. Adco Oil Co., 154 F.3d 739, 741 (7th Cir. 1998)); see also Motion to Realign at 3 (citing cases).

         Cohen, who opposes realignment, contends that MCC “improperly conflates the two issues that are central to this case” by failing to acknowledge that, on the particular question of realignment, there are salient differences between a state-court plaintiff's interests in (1) a declaratory judgment action in which the duty to indemnify is ripe and (2) a similar action in which only the duty to defend is at issue. Response Opposing Realignment at 1. In recent cases, the Eleventh Circuit has said that the duty to indemnify is typically not ripe until the state-court plaintiff wins the underlying suit. And, as Cohen points out, the federal district courts-including the district court whose judgment was affirmed in Vestavia Hills-have regularly held that, where the question of indemnification is not yet ripe, a Court need not realign the parties in the way MCC requests. See Id. at 8-12 (citing cases).

         The Court agrees with Cohen here. Although the federal courts are admittedly split on this question-whether realignment is appropriate where, as here, the underlying suit is pending[2]- federal courts across the country have routinely accepted the following three propositions (which, together, significantly undermine MCC's position): (1) the parties' interests may differ meaningfully with respect to the insurer's duty to defend on the one hand and its concomitant duty to indemnify on the other; (2) the duty to indemnify does not generally ripen until the state-court plaintiff has obtained a favorable judgment against the insured in the underlying state case; and (3) realignment at the duty to defend stage may not be appropriate-even where, hypothetically speaking, it might one day become appropriate if the insurer's duty to indemnify were to ripen. See, e.g., Sinclair v. Auto-Owners Ins. Co., 22 F.Supp.3d 1257, 1262 (N.D.Ga. 2014) (denying realignment and remanding where, as here, the state-court plaintiff had not yet obtained a judgment in underlying state action); Pearson v. Catlin Specialty Ins. Co., No. CV 514-60, 2015 WL 1224104, at *3 (S.D. Ga. Mar. 17, 2015) (denying realignment where the state-court plaintiff had not yet obtained a favorable judgment in the state action because the duty to defend was the “primary and controlling matter in the dispute”); Scheele v. Fortney, No. 14-81279-CV, 2014 WL 12478006, at *3 (S.D. Fla. Nov. 20, 2014) (denying realignment); Gulf Hauling & Const., Inc. v. QBE Ins. Corp., No. CA 2:13-00083-C, 2013 WL 2179278, at *8 (S.D. Ala. May 20, 2013) (declining to ...


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