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City of Vista v. General Reinsurance Corporation

United States District Court, S.D. California

April 5, 2018

THE CITY OF VISTA, a chartered California municipality, Plaintiff,
v.
GENERAL REINSURANCE CORPORATION, Defendant. GENERAL REINSURANCE CORPORATION, Counter Claimant,
v.
THE CITY OF VISTA, a chartered California municipality, Counter Defendant.

          ORDER

          HON. WILLIAM Q. HAYES, UNITED STATES DISTRICT COURT.

         The matter before the Court is the motion to remand filed by Plaintiff City of Vista. (ECF No. 7).

         I. BACKGROUND

         On October 25, 2017, Plaintiff City of Vista (“Vista”) filed a complaint in Superior Court of the State of California for the County of San Diego against General Reinsurance Corporation (“GRC”). (ECF No. 1-2). The complaint alleges that Vista is insured under an excess indemnity insurance policy (the “Policy”) issued by GRC. Id. The complaint alleges, “Pursuant to its rights, duties, and obligations arising under law and the Policy, Vista is now entitled to indemnity from [GRC], and all other defendants, arising from a workers' compensation claim brought by Vista's employee, Frank Soper.” Id. at 3.

         The complaint alleges that Frank Soper, a Vista employee, brought a workers' compensation claim against Vista. The parties settled the underlying workers' compensation action. The complaint alleges that under the Policy, GRC is now required “to indemnify a settlement of Mr. Soper's permanent, total disability claim” and that GRC has “refused to participate financially any further than they had participated effective and up to October 20, 2015.” Id. at 1-2.

         Vista brings a single cause of action for declaratory relief pursuant to California Code of Civil Procedure section 1060 with a claim for immediate trial setting under California Code of Civil Procedure section 1062.3. Vista “seeks a binding declaration of its rights under the Policy, along with a binding declaration articulating Defendants' duties” and “a declaration from this court, that Defendants owe Vista a minimum of $1, 030, 000.00 (exact amount subject to proof at the time of trial) plus interest, plus fees, plus costs.” Id. at 5. The complaint alleges that Vista is a municipality in San Diego “properly formed and existing under the laws of the State of California” and that GRC is “a corporation, organized and existing under the laws of the State of Delaware and is authorized to do business within the state of California.” Id. at 3.

         On November 27, 2017, GRC removed the action to this Court pursuant to 28 U.S.C. § 1441(a) on the grounds that this Court has diversity jurisdiction over this action under 28 U.S.C. § 1332(a)(1). (ECF No. 1 at 2-3). The notice of removal states that Vista is a municipality organized under California law and located in San Diego County and therefore is a citizen of California. (ECF No. 1 at 2). The notice of removal states that GRC was incorporated in Delaware and has a principal place of business in Connecticut. Id. Further, the notice of removal states that the amount in controversy is $1, 030, 000 plus interest because Vista seeks a declaration and judgment that it is owed that sum from GRC. Id. at 3.

         On December 14, 2017, GRC filed an answer and counterclaim. (ECF No. 5). GRC brings the following counterclaims: (1) declaratory relief cause of action seeking “a declaration that it is not obligated to indemnify Vista under the Policy for its claimed excess loss” and “a determination that it is entitled to reimbursement of loss and claim expense payments made to Vista in an amount according to proof.”; (2) a cause of action for reimbursement and accounting, and offset; and (3) “breach of contract, including contractual breach of the implied covenant of good faith and fair dealing by Vista.” Id. at 19-22.

         On December 26, 2017, Vista filed a motion to remand to state court. (ECF Nos. 7, 8). On January 12, 2018, GRC filed a response in opposition. (ECF No. 13). On January 22, 2018, Vista filed a reply. (ECF No. 15).

         II. CONTENTIONS

         Vista moves this Court for an Order remanding this action to state court on the grounds that the Court lacks subject matter jurisdiction. Vista contends that GRC has failed to establish that diversity jurisdiction is proper. Vista contends that the parties in this action are not diverse because GRC does business in California and is therefore a citizen of this state. Vista contends that GRC has a corporate nerve center in all states and that there is “no rational basis for diversity jurisdiction based on the location of certain officers and offices out-of-state, particularly where, as here, [GRC] clearly also conducts business in California.” (ECF No. 7-1 at 5). Vista contends that GRC has waived its right to remove this action because it has “availed itself of a State of California judicial process already” by unsuccessfully seeking to intervene in the underlying workers' compensation matter before the California Workers' Compensation Appeal Board. Id. at 5-6. Further, Vista contends that “where the relief sought is equitable in nature, a removed matter can and should be remanded.” (ECF No. 7-1 at 2). Vista contends that “[i]nasmuch as [GRC's] potential counter-claim does not sound in legal damages, either, there is no premise for diversity jurisdiction.” Id. at 4.

         GRC contends that this action was properly removed because this Court has subject matter jurisdiction on diversity grounds. GRC asserts that it is a citizen of Delaware and Connecticut and that the amount in controversy exceeds $75, 000. GRC contends that Vista's argument that diversity is destroyed because GRC does business in California and has a nerve center in all fifty states has no merit and is contradicted by Supreme Court precedent. GRC contends that the Court's exercise of jurisdiction is mandatory because this is “an action for common law damages” rather than declaratory relief. (ECF No. 13 at 8). GRC contends that the Court “must exercise jurisdiction” over its counterclaim for breach of contract and other damages in the amount of $691, 511.71. GRC contends that Vista has failed to demonstrate that the Court could exercise its discretion to decline jurisdiction, even if this case was primarily for declaratory relief. GRC contends that it has not waived its right to litigate in federal court. GRC asserts that it filed only the notice of removal to this court in the state court action and that its unsuccessful petition to intervene in the underlying workers' compensation proceeding was not an attempt to litigate coverage issues.

         III. LEGAL STANDARD

         “Under 28 U.S.C. § 1441, a defendant may remove an action filed in state court to federal court if the federal court would have original subject matter jurisdiction over the action.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1243 (9th Cir. 2009). Federal jurisdiction must exist at the time the complaint is filed and at the time removal is effected. Strotek Corp. v. Air Transp. Ass'n of Am., 300 F.3d 1129, 1131 (9th Cir. 2002). A party can challenge removal based on lack of subject matter jurisdiction through a motion to remand. 28 U.S.C. § 1447. There is a “strong presumption against removal” such that the removing party “always has the burden of establishing that removal is proper.” Gaus v. Miles, Inc., 980 ...


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