James G. Davis Construction Corp. v. Erie Insurance Exchange
953 F. Supp. 2d 607
D. Maryland2013Background
- Davis sues Erie for breach of contract and seeks declaratory relief on attorneys’ fees/indemnification.
- Erie moves to dismiss for lack of subject matter jurisdiction; court treats as Rule 12(b)(1).
- Erie is an unincorporated reciprocal insurance exchange; citizenship theory governs federal diversity.
- Davis argues Erie’s members are policyholders; Erie contends policyholders are customers, not members.
- Court holds Erie’s members include policyholders, so complete diversity between Davis and Erie’s members is required and not present.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is there complete diversity between Davis and Erie’s members? | Davis asserts policyholders are Erie’s members. | Erie argues policyholders are not members; customers. | No complete diversity; diversity jurisdiction lacking. |
| What is Erie’s citizenship for diversity purposes? | Erie’s members include policyholders from multiple states (e.g., VA, MD). | Policyholders are not members; Erie’s citizenship tied to formation state. | Erie’s members include policyholders, making Erie citizen of those states. |
| Should the court accept Erie’s Rule 12(b)(1) challenge and dismiss the case? | Jurisdiction exists if diversity is satisfied. | Lack of complete diversity defeats jurisdiction. | Motion to Dismiss granted for lack of subject matter jurisdiction. |
Key Cases Cited
- Ware v. Jolly Roger Rides, Inc., 857 F. Supp. 462 (D. Md. 1994) (diversity requires complete citizenship among parties)
- Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806) (foundation of complete diversity requirement)
- Axel Johnson, Inc. v. Carroll Carolina Oil Co., Inc., 145 F.3d 660 (4th Cir. 1998) (corporate citizenship rules for diversity)
- Clephas v. Fagelson, Shonberger, Payne & Arthur, 719 F.2d 92 (4th Cir. 1983) (unincorporated associations—citizenship of members)
- Arbuthnot v. State Automobile Insurance Association, 264 F.2d 260 (10th Cir. 1959) (rejected notion unincorporated reciprocal insurers are only citizens of state of formation)
- Davenport Insulation, Inc. v. Erie Insurance Exchange, 616 F. Supp. 2d 578 (D. Md. 2009) (recognizes policyholders as Erie’s members for diversity purposes)
- Royal Insurance Co. of America v. Quinn-L Capital Corp., 3 F.3d 877 (5th Cir. 1993) (distinguishes Lloyd’s plan from reciprocal exchanges)