566 F. App'x 796
11th Cir.2014Background
- PMI and PMI Delaware insured under Lexington’s Employment Practices Liability Policy; BCBS sued PMI for payment, triggering PMI’s coverage claim.
- Yoohoo, during due diligence for acquiring PMI, sought assurances Lexington would cover BCBS costs and any judgment; Lexington indicated potential coverage after supervisor review.
- Lexington denied coverage; PMI and PMI Delaware (Counts I–II) and Yoohoo (Count III) sued Lexington for breach of contract, declaratory judgment, and negligent misrepresentation.
- Lexington removed to federal court on diversity grounds; PMI Delaware’s status and Yoohoo’s citizenship raised potential nondiversity issues.
- Court raised and analyzed jurisdiction sua sponte; determined jurisdiction defects likely exist and require remand for fact-finding.
- Remand limited to (a) determining whether PMI Delaware can be dismissed without prejudice and (b) establishing Yoohoo’s citizenship; summary judgment vacated pending cure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the district court have subject matter jurisdiction? | PMI and Yoohoo argue diverse parties remain after considering PMI Delaware and Yoohoo. | Lexington contends PMI Delaware may be dispensable; Yoohoo’s citizenship must be clarified to preserve diversity. | Jurisdictional defects likely; remanded to cure with limited fact-finding. |
| Is PMI Delaware a real party in interest or dispensable for diversity? | PMI Delaware is a real party; its dismissal would prejudice PMI and related interests may remain. | PMI Delaware is nominal/formal; dismissal under Rule 21 cures diversity issues with no prejudice. | PMI Delaware probably dispensable; remand for fact-finding on prejudice and insured status under policy. |
| Who would receive payment under the Lexington Policy if Lexington pays a covered loss? | If insureds are treated collectively, PMI Delaware may recover as an insured. | Plaintiffs have not shown PMI Delaware would benefit from a payment; may be paid to PMI only. | Remand to resolve whether PMI Delaware is an insured and how payment would be allocated. |
| Is Yoohoo diverse from Lexington for purposes of federal jurisdiction? | Yoohoo’s citizenship includes PMI and PMI Delaware; could destroy diversity if both are Delaware. | All three Yoohoo members may be citizens of Georgia; record incomplete on member citizenship. | Deficiencies in Yoohoo citizenship must be corrected on remand; amending removal notice allowed. |
| Should the district court retain or reenter summary judgment if defects are cured? | If jurisdiction cured, merits could be resolved on the existing record. | Court should await cure of jurisdictional defects before ruling on merits. | Vacate and remand; if defects cured, court should reenter summary judgment. |
Key Cases Cited
- Navarro Sav. Ass’n v. Lee, 446 U.S. 458 (1980) (diversity depends on real and substantial parties, not nominal ones)
- Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (1989) (district court removal issues; discretion to dismiss dispensable nondiverse parties)
- Tri-Cities Newspapers, Inc. v. Tri-Cities Printing Pressman & Assistants’ Local 349, 427 F.2d 325 (5th Cir. 1970) (test for dispensability and final equitable relief considerations)
- Broyles v. Bayless, 878 F.2d 1400 (11th Cir. 1989) (dispensable party; prejudice assessment and control over litigation)
- Carden v. Arkoma Assocs., 494 U.S. 185 (1990) (diversity requires citizenship of all members of an LLC)
- Mallory & Evans Contractors & Eng’rs, LLC v. Tuskegee Univ., 663 F.3d 1304 (11th Cir. 2011) (amendments to jurisdictional allegations permissible on remand)
- Grouo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567 (2004) (preserving diversity; when objecting party’s citizenship matters)