Opinion
C. A. 3:21-4086-DCC
10-20-2022
Peter D. Protopapas, as the Receiver for Payne & Keller Company, Plaintiff, v. Zurich American Insurance Company; Travelers Casualty & Surety Company, formerly known as Aetna Casualty & Surety Company; Continental Insurance Company; National Union Fire Insurance Company of Pittsburgh, PA; Medmarc Casualty Insurance Company; Berkshire Hathaway Specialty Insurance Company, formerly known as Stonewall Insurance Company; Lexington Insurance Company; Certain Underwriters at Lloyd's of London and Various London Market Companies; South Carolina Property and Casualty Insurance Guaranty Association; R.L. Jarrett Underwriting Agency, Inc.; U.S. Risk, LLC; First State Insurance Company; and Birmingham Fire Insurance Company, Defendants.
REPORT AND RECOMMENDATION ON PLAINTIFF'S MOTION TO REMAND
PAIGE J. GOSSETT, UNITED STATES MAGISTRATE JUDGE
Plaintiff Peter D. Protopapas is the Receiver for Payne & Keller Company, a defunct corporation facing personal injury suits by non-party claimants who allegedly were exposed to asbestos. The Receiver filed this insurance case in the Richland County Court of Common Pleas- the same court that appointed him as Receiver for Payne & Keller-seeking a declaration of rights and damages against numerous insurance companies he believes may be contractually liable to defend Payne & Keller and cover the asbestos plaintiffs' claims. Defendant Travelers Casualty & Surety Company (“Travelers”) removed the action to this court on December 20, 2021. Upon referral from the Honorable Donald C. Coggins, United States District Judge, this matter is now before the court for a Report and Recommendation on Plaintiff's motion to remand. (ECF No. 24.) The motion has been extensively briefed. (See ECF Nos. 47, 48, 49, 50, 52, 118, 141, 142, 144, 145, 150.) The court also heard oral argument on Plaintiff's motion on October 4, 2022. Having carefully considered the twelve filings and over two hours of oral argument, the court concludes that Plaintiff's motion should be granted because, although the court has subject matter jurisdiction, the statutory conditions for removal are not met.
This case was reassigned to Judge Coggins in August of 2022. He referred the instant motion for a Report and Recommendation on September 1, 2022.
Defendant Travelers filed memoranda opposing Plaintiff's motion. Defendants Zurich American Insurance Company, Medmarc Casualty Insurance Company, and U.S. Risk, LLC joined Traveler's opposition. (ECF Nos. 48, 49, & 50.) The court clumsily but with precision refers to these Defendants as the “Defendants Opposing Remand.” Most other defendants did not weigh in on the issue, but Peter M. McCoy, Jr., Esquire, a third party who serves as a receiver in unrelated cases, filed a memorandum supporting Plaintiff's motion. (Amicus Br., ECF No. 147.) And, although Defendant Guaranty Association filed a memorandum in response to Plaintiff's motion (ECF No. 52), it took no position as to the merits of Plaintiff's motion and did not elect to appear at the October 4 hearing. (Minute Entry, ECF No. 163.)
BACKGROUND
In removing this case, Travelers relies on the court's diversity jurisdiction under 28 U.S.C. § 1332. The notice of removal indicates that Travelers obtained the consent of all of the diverse defendants who had been served. Travelers expressly asserted that the citizenship of Defendant South Carolina Property and Casualty Insurance Guaranty Association (“Guaranty Association”) should be disregarded because the Guaranty Association was fraudulently joined. (ECF No. 1.)
Defendants First State Insurance Company and Birmingham Fire Insurance Company had not been named or served prior to removal.
Following removal, Plaintiff filed an Amended Complaint seeking a declaratory judgment: (1) directing the defendants to provide relevant insurance policies and documents; and (2) containing numerous specific findings as to the existence and interpretations of the coverage of these various policies. Plaintiff's Amended Complaint further alleges breach of contract, seeks an accounting of past claims, and prays for damages, fees, and costs.
Plaintiff further alleges that Defendant R.L. Jarrett (Underwriting) Agency, Inc., or in the alternative Defendant U.S. Risk, LLC, failed to procure insurance for Plaintiff. Defendant R.L. Jarrett has not yet made any appearance in this case.
DISCUSSION
A. Removal Generally
A defendant may remove any civil action brought in a state court of which the federal district court has original jurisdiction, 28 U.S.C. § 1441(a); but the court must remand the case at any time before the final judgment if it appears that the federal court lacks subject matter jurisdiction, 28 U.S.C. § 1447(c); Eilenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 196 (4th Cir. 2008). “Removal statutes, in particular, must be strictly construed, inasmuch as the removal of cases from state to federal court raises significant federalism concerns.” Barbour v. Int'l Union, 640 F.3d 599, 605 (4th Cir. 2011) (en banc) (abrogated in part on other grounds by statute) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941)). “Doubts about the propriety of removal should be resolved in favor of remanding the case to state court.” Id. (citing Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004)).
Where removal is challenged, the defendant bears the burden of establishing jurisdiction by a preponderance of the evidence. See Mulcahey v. Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir. 1994); Chau v. Air Cargo Carriers, LLC, 425 F.Supp.3d 658, 661 (S.D. W.Va. 2019). “[T]he jurisdiction of the court depends upon the state of things at the time of the action brought.... [The time-of-filing rule] measures all challenges to subject-matter jurisdiction premised upon diversity of citizenship against the state of facts that existed at the time of filing-whether the challenge be brought shortly after filing, after the trial, or even for the first time on appeal.” Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 570-71 (2004) (internal quotation marks and citations omitted). At issue here is diversity jurisdiction, 28 U.S.C. § 1332(a), which requires complete diversity of parties and an amount in controversy in excess of $75,000. Complete diversity of parties in a case means that no party on one side may be a citizen of the same state as any party on the other side. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 372-74 nn.13-16 (1978).
B. Plaintiff's Motion
Plaintiff seeks remand to state court for three independent reasons: (1) Defendant Guaranty Association is properly joined and is a citizen of South Carolina, so diversity jurisdiction is lacking; (2) the Barton doctrine demands that this action be litigated in the court that appointed the receiver; and (3) several of the defendants contracted away their right to consent to removal, so the statutory rule of unanimity is not met. The parties appear to agree that the first two arguments implicate the court's subject matter jurisdiction. The third presents a question of whether statutory prerequisites are met for removal such that the case can continue to be litigated in a federal forum.
1. Fraudulent Joinder
“[T]he fraudulent joinder doctrine ‘effectively permits a district court to disregard, for jurisdictional purposes, the citizenship of certain nondiverse defendants, assume jurisdiction over a case, dismiss the nondiverse defendants, and thereby retain jurisdiction.' ” Johnson v. Am. Towers, LLC, 781 F.3d 693, 704 (4th Cir. 2015) (quoting Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir. 1999)). “The party alleging fraudulent joinder bears a heavy burden-it must show that the plaintiff cannot establish a claim even after resolving all issues of law and fact in the plaintiff's favor.” Johnson, 781 F.3d at 704 (quoting Hartley v. CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999)). “This standard is even more favorable to the plaintiff than the standard for ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6).” Hartley, 187 F.3d at 424. The party seeking to establish fraudulent joinder must demonstrate “either that the plaintiff committed outright fraud in pleading jurisdictional facts, or that there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court.” Weidman v. Exxon Mobile Corp., 776 F.3d 214, 218 (4th Cir. 2015) (internal quotation marks and citation omitted). Stated differently, a plaintiff need establish “only a slight possibility of a right to relief” or a “glimmer of hope” for relief to defend a claim of fraudulent joinder. Mayes, 198 F.3d at 464 (internal quotation marks and citations omitted).
No party has asserted outright fraud in the pleading of jurisdictional facts, so that avenue of establishing fraudulent joinder is not at issue here.
The Defendants Opposing Remand advance two separate reasons why the court should find that the Receiver has no possibility of relief from the non-diverse Defendant Guaranty Association. First, these defendants argue that there are no “covered claims” being asserted against the Guaranty Association. Second, the defendants argue that no claim against the Guaranty Association can possibly lie because all claims are time barred by the applicable statute of repose.
The second argument is dispositive of the fraudulent joinder issue. The Guaranty Association is a creature of state statute created in 1971 “to provide a safety net for insurance consumers if their insurance company becomes insolvent and is no longer able to meet its obligations.” https://www.scguaranty.com/about.html (last accessed on Oct. 19, 2022); see also S.C. Code Ann. § 38-31-40 (explaining that “[t]here is created a nonprofit unincorporated legal entity to be known as the South Carolina Property and Casualty Insurance Guaranty Association” and providing for “member insurers” who “are members of the association as a condition of their authority to transact insurance in this State”). Pertinent here, based on the state statutory scheme, the Guaranty Association would step into the shoes of two insolvent insurers, Reliance Insurance Company (“Reliance”) and Highlands Underwriters Insurance Company (“Highlands”). See Buchanan v. S.C. Prop. & Cas. Ins. Guar. Assn, 819 S.E.2d 124, 126 (S.C. 2018) (“When an insurer becomes insolvent, the Guaranty steps into the shoes of the insurer ‘to the extent of its obligation on the covered claims.' ”) (quoting S.C. Code Ann. § 38-31-60(b)).
But the South Carolina General Assembly imposed a deadline to bring covered claims to the Guaranty Association. That deadline is the earlier of (1) “the final date set by a court for the filing of claims against the liquidator or receiver of an insolvent insurer,” or (2) within “eighteen months after the declaration of insolvency.” S.C. Code Ann. § 38-31-60(a)(iv)(2). As Plaintiff acknowledges, Reliance was liquidated as insolvent on October 3, 2001. The statutory deadline to present claims against Reliance to the Guaranty Association therefore ran on April 3, 2003. Similarly, the Texas court administering the liquidation of Highlands set a deadline of March 30, 2007 for all claims. Thus, the deadline for presenting claims to the Guaranty Association based on Highlands's insolvency has also expired.
Another judge in this district recently applied the statutory deadline in § 38-31-60(a)(iv)(2) in concluding that claims against the Guaranty Association were time barred and that the Guaranty Association was therefore fraudulently joined. See Pipe & Boiler Insulation, Inc. by & through Protopapas v. Cont'l Ins. Co., No. CV 3:21-3033-MGL, 2022 WL 1157242, at *5 (D.S.C. Apr. 19, 2022). Because the claims were time barred, the court held the plaintiff's claims against the Guaranty Association had no possibility of success. Id. Other courts have similarly found even the deferential standard for fraudulent joinder to be met when a plaintiff's claims against a non-diverse defendant are time barred. See, e.g., Vogt v. Macys Retail Holdings, Inc., No. 3:20-CV-122, 2020 WL 13094072, at *5 (N.D. W.Va. Dec. 10, 2020); Flores v. Ethicon, Inc., No. 2:14CV-24748, 2018 WL 3130421, at *6 (S.D. W.Va. June 25, 2018) (collecting numerous cases nationally supporting “a statute of limitations defense as a basis for finding fraudulent joinder”). Only where the statute of limitations issue is “difficult to determine” have courts found that the doctrine of fraudulent joinder is not appropriate and the case should be remanded to the state court. See Miller v. Huntington Nat'l Bank, N.A., No. 3:12-CV-114, 2013 WL 3878742, at *5 (N.D. W.Va. July 26, 2013) (collecting cases).
Plaintiff here argues that his claims against the Guaranty Association have a glimmer of hope for two reasons. First, he contends that the Guaranty Association itself expressly stated that it could not rule out the possibility of valid claims against it. (See Def. Guaranty Ass'n Resp., ECF No. 52 at 3) (stating that “no claims have been submitted to the Association and therefore the Association cannot in good faith preclude any possibility it could be responsible for one or more claims that might be presented to it as part of this litigation”). But the Guaranty Association's opinion about the viability of Plaintiff's claims cannot override clear state law. Accord Pipe & Boiler Insulation, Inc., 2022 WL 1157242, at *5 (rejecting the Guaranty Association's “inexplicabl[e]” change in position suggesting “the claims against it might not be time barred after all”).
Second, Plaintiff contends that his claims have a glimmer of hope because he has arguments against application of the statute here: namely, that the statute should be equitably tolled, and that applying the statute in this case would violate the Equal Protection Clause. These arguments are misplaced, however. Based on South Carolina law, the provision at issue is a statute of repose. See Capco of Summerville, Inc. v. J.H. Gayle Const. Co., 628 S.E.2d 38, 41 (S.C. 2006) (“A statute of repose creates a substantive right in those protected to be free from liability after a legislatively determined period of time.”). This provision bars suits that are brought after a “specified time since the defendant acted . . . even if this period ends before the plaintiff has suffered a resulting injury.” Id. (quoting Black's Law Dictionary 1451 (8th ed. 2004)) (emphasis added). And state law is clear that statutes of repose are not subject to equitable defenses such as tolling. Capco of Summerville, Inc., 628 S.E.2d at 41 (“A statute of repose is typically an absolute time limit beyond which liability no longer exists and is not tolled for any reason because to do so would upset the economic balance struck by the legislative body.”). “Statutes of repose by their nature impose on some plaintiffs the hardship of having a claim extinguished before it is discovered, or perhaps before it even exists.” Id.
Further, Plaintiff's constitutional argument-though undeveloped-appears to rest on purported disparate treatment either toward asbestos claimants who did not become aware of their injury from exposure until after the statutory deadline already lapsed, or on behalf of Reliance and Highlands who cannot now receive the benefit of the Guaranty Association's coverage. But, as the Defendants Opposing Remand point out, the Plaintiff Receiver does not have standing to assert a constitutional claim or argument on behalf of these third parties.
Several federal district courts have recently faced the issue of fraudulent joinder in the context of cases removed by defendants in a case brought in state court by a court-appointed receiver in asbestos cases. Plaintiff relies on three of those cases where the court, applying the deferential standard that applies to fraudulent joinder, concluded that issues of fact precluded a determination that there was no possibility of recovery against the allegedly fraudulently joined defendant. See, e.g., Starr Davis Co., Inc. v. Hartford Accident & Indem. Co., C/A No.: 3:19-3481-JFA, ECF No. 43 (D.S.C. Jan. 30, 2020) (Anderson, J.) (finding that, among others, issues of fact as to the discovery rule precluded a determination that Mr. Protopapas's claims as the receiver for Starr Davis against its former insurance broker were barred by the applicable statute of limitations); Finch v. U.S. Fidelity & Guaranty Co., C/A No. 3:19-01827, 2020 WL 2988944 (D.S.C. June 4, 2020) (Hendricks, J.) (finding that fact issues as to the plaintiff's novel claim that the defendant law firm was the alter ego of the co-defendant insolvent corporation precluded a finding that the plaintiff had no possibility of relief against the law firm, so the law firm was not fraudulently joined); Covil Corp. by Protopapas v. Pa. Nat'l Mut. Cas. Ins. Co., C/A No.: 3:20-1979-BHH, 2021 WL 1186590 (D.S.C. Mar. 30, 2021) (finding that issues of fact precluded a determination that the receiver's complaint presented no glimmer of hope against the Guaranty Association and crediting the Guaranty Association's concession that it could not in good faith say that the plaintiff had no possibility for success on his claims).
However, the court here agrees with the Defendants Opposing Remand that those cases are distinguishable. A recent decision of the Honorable Mary Geiger Lewis, United States District Judge, is most squarely on point with the case at bar. See Pipe & Boiler Insulation, Inc. by & through Protopapas v. Cont'l Ins. Co., No. CV 3:21-3033-MGL, 2022 WL 1157242, at *5 (D.S.C. Apr. 19, 2022). There, as here, Mr. Protopapas, as the receiver for a different insolvent corporation also facing exposure to asbestos claims, named the Guaranty Association in the state court complaint. There, as here, one of the defendant insurance companies removed the case, contending that the Guaranty Association was fraudulently joined because the receiver had no possibility of relief against the Guaranty Association under the identical statutory time bar at issue in this case. And there, Judge Lewis explained why the receiver's claims against the Guaranty Association were incontrovertibly precluded by S.C. Code Ann. § 38-31-60(a)(iv)(2). Judge Lewis concluded they were barred even though the Guaranty Association, as it has here, “inexplicably” conceded that the receiver's claims against it might ultimately be valid. As Judge Lewis observed, the pertinent question to determine timeliness was when the defunct corporation filed its claim with the Guaranty Association, not when its claims arose. That is the same question presented here and, under controlling South Carolina law, it demands the same answer.
Notably, the Guaranty Association also asserts in its response that the receiver has not yet filed a claim on behalf of Payne & Keller against the Guaranty Association. (ECF No. 52 at 3.)
Because the Receiver's claims against the insolvent insurers cannot be brought against the Guaranty Association under the applicable statute of repose, Plaintiff has no possibility of recovery against the Guaranty Association. The Guaranty Association is fraudulently joined. Diversity jurisdiction exists.
2. The Barton Doctrine
Independent from the diversity jurisdiction issue, Plaintiff also challenges this court's subject matter jurisdiction over this case pursuant to Barton v. Barbour, 104 U.S. 126 (1881).According to Plaintiff, the Barton doctrine bars a party from litigating a claim of or against a court-appointed receiver without first obtaining leave of the appointing court. See Porter v. Sabin, 149 U.S. 473, 479 (1893); McDaniel v. Blust, 668 F.3d 153, 157 (4th Cir. 2012). Specifically, Plaintiff relies on the following language in Porter:
Because both sides treat the Barton doctrine as an issue of subject matter jurisdiction, the court does so as well. However, the court is far from convinced that any judge appointing a receiver-whether the court be a federal bankruptcy court, a state court of general jurisdiction, or a local probate court-wields the discretion to strip a federal court of subject matter jurisdiction when the U.S. Constitution or Congress otherwise confers it. Because the court concludes that the Barton doctrine does not apply here, however, it need not resolve the question of whether the Barton doctrine implicates the court's subject matter jurisdiction or rather should be viewed as a prudential limitation on the court's exercise of its jurisdiction. Cf, e.g., Warth v. Seldin, 422 U.S. 490, 498-99 (1975) (discussing, in the context of a party's standing to sue, the difference between constitutional limitations on federal court jurisdiction and prudential limitations on its exercise); (Pl.'s Reply to Suppl. at 5, ECF No. 145 at 5) (arguing that the Barton doctrine “is a longstanding federal-law doctrine that, to promote federalism, appropriately withholds federal jurisdiction when a state receivership court is exercising exclusive jurisdiction”).
The Plaintiff cites McDaniel for the proposition that Barton covers “claims filed by and against” the receiver. (Pl.'s Suppl. Br. at 1, ECF No. 143 at 1). However, McDaniel addressed claims against a trustee and does not mention claims filed by a trustee or receiver.
When a court exercising jurisdiction in equity appoints a receiver of all the property of a corporation, the court assumes the administration of the estate It is for that court, in its discretion, to decide whether it will determine for itself all claims of or against the receiver, or will allow them to be litigated elsewhere....
The whole property of the corporation within the jurisdiction of the court which appointed the receiver, including all its rights of action, . . . remains in its custody, to be administered and distributed by it. Until the administration of the estate has been completed, and the receivership terminated, no court of the one government can, by collateral suit, assume to deal with rights of property or of action constituting part of the estate within the exclusive jurisdiction and control of the courts of the other.Porter, 149 U.S. at 479-80 (emphasis added). However, since the pronouncement of Barton in 1893, no precedential authority has extended the doctrine to the vast expanses Plaintiff suggests. And no American court has apparently applied it in the manner urged by Plaintiff here. Rather, the doctrine has consistently been applied to protect receivers or trustees from liability for conduct undertaken in their court-appointed capacities. See, e.g., McDaniel, 668 F.3d 15; In re VistaCare Group, LLC, 678 F.3d 218 (3d Cir. 2012) (applying it to trustees and collecting cases); In re Crown Vantage, Inc., 421 F.3d 963 (9th Cir. 2005) (same). While one may conceive of instances where a receiver could face such liability even though the action was initiated by him or her, no precedential authority has actually applied the Barton doctrine to foreclose claims brought by a receiver in pursuit of his official duties to affirmatively collect potential assets for an insolvent corporation.
To the contrary, the United States Court of Appeals for the Fourth Circuit has explained why the Barton doctrine bars litigation regarding the action of the receiver (or agents employed by the receiver) acting in his official capacity. McDaniel, 668 F.3d at 156-57. The McDaniel Court explained that the appointing court has a strong interest in protecting the receiver or trustee “from unjustified personal liability for acts taken within the scope of his official duties,” and the doctrine “also enables bankruptcy courts to monitor the work of the trustees they have appointed so that the courts may be fully informed when they make future appointments.” Id. at 157 (citations omitted). Importantly, to determine whether the Barton doctrine applies, courts are directed to “consider the nature of the function that the trustee or his counsel was performing during commission of the actions for which liability is sought.” Id. Thus, underpinning this test is the premise that Barton applies to actions where liability is being sought against the trustee or receiver; leave is required for such claims when trustees or receivers are acting within their role of recovering assets for the estate. See also In re Crown Vantage, Inc., 421 F.3d at 970 (explaining that pursuant to the Barton doctrine, leave must be obtained from the appointing court before a party (1) “initiates an action in another forum”; (2) against a trustee, other appointed officer, or receiver; (3) “for acts done in the officer's official capacity”). Those requirements are not met here.
Furthermore, courts applying the Barton doctrine have done so out of concern that collateral litigation could potentially diminish the available assets of the defunct corporation or affect the priority of claims against it. See, e.g., In re VistaCare Group, LLC, 678 F.3d 218. Again, those concerns are not implicated by this action. The Supreme Court itself has recognized, postPorter, a distinction between claims affecting the distribution of assets of an insolvent corporation versus proof and allowance of claims on its behalf. See Morris v. Jones, 329 U.S. 545, 548 (1947) (“One line of cases holds that where a statutory liquidator or receiver is appointed, the court taking jurisdiction of the property draws unto itself exclusive control over the proof of all claims. But the notion that such control over the proof of claims is necessary for the protection of the exclusive jurisdiction of the court over the property is a mistaken one.”); see also In re CitX Corp., 302 B.R. 144, 152-53 (Bankr. E.D. Pa. 2003) (discussing the two components to a receivership court's supervision of property and noting that the Supreme Court has explained that the Barton doctrine is designed to protect only the distribution component). Finally, even further removing the instant litigation from the umbrella of the Barton doctrine is that the right of action ostensibly sought to be liquidated by the Receiver has not yet been declared. Thus, the instant litigation appears to be beyond the scope of Barton even were the court to accept Plaintiff's expansive reading of Porter.
Because no precedential authority requires application of the Barton doctrine to this case and both the Supreme Court and the Fourth Circuit have indicated that it in fact does not apply here, Plaintiff's motion to remand should not be granted on this basis.
3. Service of Suit/Forum Selection Clauses in Some Defendants' Policies
Finally, the court must address Plaintiff's third ground for seeking remand: that the requirements of the applicable removal statutes have not been satisfied. Specifically, Plaintiff contends that the so-called “rule of unanimity” found in 28 U.S.C. § 1446(b)(2)(A) is not and cannot be met here. That subsection states: “When a civil action is removed solely under section 1441(a) [permitting removal of civil actions of which the federal district courts have original jurisdiction], all defendants who have been properly joined and served must join in or consent to the removal of the action.” Id.; see also Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255, 259 (4th Cir. 2013).
Here, Plaintiff has shown that at least one properly joined and served Defendant is apparently bound by a “service of suit” or forum selection clause. For example, the clause in the policy of Defendant Berkshire Hathaway Specialty Insurance Company, formerly known as Stonewall Insurance Company (“Berkshire Hathaway”), provides:
It is agreed that in the event of the failure of the company hereon to pay any amount claimed to be due hereunder, the company hereon, at the request of the insured, will submit to the jurisdiction of any court of competent jurisdiction within the United States of America and will comply with all requirements necessary to give such court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such court.
(ECF No. 141-1 at 9.)
This provision, or substantially similar language, is common in the insurance industry and has been widely litigated. Courts have characterized the provision in various ways, but the bulk of cases considering the language at issue have concluded that it effects a waiver of an insurer's right to remove a case from the specific forum selected by the plaintiff. See C3 Inv. of N.C., Inc. v. Ironshore Specialty Ins. Co., No. 2:19-cv-2609-DCN, 2020 WL 705172, at *4 (D.S.C. Feb. 12, 2020) (collecting cases). Many courts have found that insurers may contract away their right to remove a case to federal court, and that this language effectively does so. Id. The court concludes similarly here.
The Defendants Opposing Remand advance several reasons why the case should not be remanded based on the service-of-suit clause. None of them is persuasive. First, they argue that Defendants Certain Underwriters at Lloyd's of London and Various London Market Companies (“the Lloyds Defendants”) deny that they issued any policy to Payne & Keller, and that Berkshire Hathaway's policy post-dated Payne & Keller's business activity in South Carolina. But in the current procedural posture of the case, these disputed defenses must be viewed with an eye toward remand. (See Compl. ¶ 11, ECF No. 1-1 at 8-9) (alleging the existence of a policy); see also Barbour, 640 F.3d at 615 (“[A]ny doubt about the propriety of removal should be resolved in favor of remanding the case to state court.”).
Next, the Defendants Opposing Remand argue that the language of the service of suit provision has not been triggered because the Defendants whose policies contain them have not failed to pay “any amount claimed to be due.” (See, e.g., Berkshire Hathaway Policy, ECF No. 141-1 at 9.) But this argument again disregards Plaintiff's allegations. (See, e.g., Compl. ¶¶ 34, 44, ECF No. 1-1 at 16, 18 (expressly alleging that the Lloyds Defendants and Defendant Berkshire Hathaway have “failed to fully acknowledge or accept their insuring obligations”); Compl., ECF No. 1-1 at 27-30 (seeking damages against all defendants); see also Am. Compl. ¶¶ 47, 66(g), ECF No. 23 at 16, 20.)
Finally, the Defendants Opposing Remand argue that Travelers obtained the necessary consents prior to removal, so its removal was proper. The court cannot agree because, viewing the disputed facts in the light most favorable to Plaintiff and resolving all doubts against removability, the consents of the Lloyds Defendants and Berkshire Hathaway that Travelers obtained were invalid. Travelers has failed to carry its burden to show that the statutory requirements for removal are met, so remand is warranted. See, e.g., Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255, 259 (4th Cir. 2013) (“The burden of demonstrating . . . the propriety of removal rests with the removing party.”); Russell Corp. v. Am. Home Assur. Co., 264 F.3d 1040, 1046-50 (11th Cir. 2001) (finding a lack of unanimous consent where one of more defendants had contracted away the right to consent to removal based on similar language, resulting in a defect in the removal process), abrogated on other grounds by Overlook Gardens Prop., LLC v. ORIX USA, L.P., 927 F.3d 1994 (11th Cir. 2019).
RECOMMENDATION
Although the court has diversity jurisdiction and the Barton doctrine does not apply, Plaintiff's motion to remand should be granted because not all properly joined and served Defendants validly joined in or consented to removal as required by 28 U.S.C. § 1446(b)(2)(A).
Notice of Right to File Objections to Report and Recommendation
The parties are advised that they may file specific written objections to this Report and Recommendation with the District Judge. Objections must specifically identify the portions of the Report and Recommendation to which objections are made and the basis for such objections. “[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must ‘only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.' ” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310 (4th Cir. 2005) (quoting Fed.R.Civ.P. 72 advisory committee's note).
Specific written objections must be filed within fourteen (14) days of the date of service of this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); see Fed.R.Civ.P. 6(a), (d). Filing by mail pursuant to Federal Rule of Civil Procedure 5 may be accomplished by mailing objections to:
Robin L. Blume, Clerk
United States District Court
901 Richland Street
Columbia, South Carolina 29201
Failure to timely file specific written objections to this Report and Recommendation will result in waiver of the right to appeal from a judgment of the District Court based upon such Recommendation. 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140 (1985); Wright v. Collins, 766 F.2d 841 (4th Cir. 1985); United States v. Schronce, 727 F.2d 91 (4th Cir. 1984).