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Smith v. Nationwide Mutual Fire Insurance Co.

United States District Court, E.D. Virginia, Richmond Division

January 27, 2015

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, and B.X.J., an Infant, who sues through LACHELLE D. GATES, his Mother and Next Friend, Defendants.


HENRY E. HUDSON, District Judge.

This matter is before the Court on a Motion to Remand, filed by Plaintiff Patricia E. Smith ("Smith") on January 7, 2015 (ECF No. 4), and a Motion to Realign the Parties, filed by Defendant Nationwide Mutual Fire Insurance Company ("Nationwide") on January 13, 2015 (ECF No. 6). The pending motions are ripe for disposition, [1] and the Court will dispense with oral argument, pursuant to E.D. Va. Loc. Civ. R. 7(J), finding it unnecessary to aid in the decisional process, as the matters before the Court have been adequately briefed. For the reasons that follow, the Court will deny the Motion to Remand and grant the Motion to Realign the Parties.


This is a declaratory judgment action, originating in the Circuit Court for the City of Petersburg. (Notice of Removal, Attachment 1 ("Compl."), ECF No. 1-1.) The case evolves from an underlying tort suit for injuries and damages that B.X.J., an infant, allegedly suffered resulting from exposure to lead-based paint at a property owned by Smith, and leased by the family of B.X.J. (Id. ¶ 1.) Smith seeks a declaration that Nationwide is obligated, pursuant to an insurance policy issued to Smith by Nationwide, to provide liability coverage and a defense to Smith in the underlying tort action.[2] ( Id. ) In addition to Nationwide, Smith named as a party-defendant "B.X.J., an Infant, who sues through Lachelle D. Gates, his Mother and Next Friend" (hereinafter, "B.X.J"). ( Id. )

Nationwide removed the matter to this Court on December 9, 2014. (Notice of Removal, ECF No. 1.) Smith timely moved to remand the case, asserting that Nationwide's removal is statutorily prohibited, or otherwise defective. Thereafter, Nationwide moved to realign B.X.J, as a party-plaintiff, arguing that Smith and B.X.J, share a common interest in the present litigation. Because the merit of Smith's arguments in her Motion to Remand depends upon B.X.J.'s status as a proper party-defendant, the Court must evaluate Nationwide's Motion to Realign the Parties first.


A. Motion to Realign the Parties

Nationwide removed this matter, asserting the existence of diversity jurisdiction. As the party seeking removal, Nationwide bears the burden of establishing federal jurisdiction. Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994). As applicable here, 28 U.S.C. § 1332 provides that "[t]he district courts shall have original jurisdiction of all civil actions where the amount in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between (1) citizens of different States...." 28 U.S.C. § 1332(a)(1). Diversity must be complete "such that the state of citizenship of each plaintiff must be different from that of each defendant" at the time an action commences. Athena Automotive, Inc. v. DiGregorio, 166 F.3d 288, 290 (4th Cir. 1999).

Nationwide is a corporation formed under the laws of Ohio and also has its principal place of business in Ohio. (Notice of Removal ¶ 1.) Smith and B.X.J., both natural persons, are citizens of Virginia. ( Id. ) In its Notice of Removal, Nationwide asserted that complete diversity exists, despite Smith and B.X.J, sharing common citizenship, because their interests in the dispute are aligned. ( Id. ) For this same reason, Nationwide now requests that this Court realign B.X.J, as a party-plaintiff.

In determining whether to realign parties, the Fourth Circuit applies the "principal purpose" test. Palisades Collections LLC v. Shorts, 552 F.3d 327, 337 (4th Cir. 2008) (citing United States Fid. & Guar. Co. v. A &S Mfg. Co., 48 F.3d 131, 132-33 (4th Cir. 1995)). "First, we determine the primary issue in controversy, and then we align the parties according to their positions with respect to the primary issue." Id. The primary issue in controversy is determined by the plaintiffs principal purpose for filing its suit. Palisades Collections, 552 F.3d at 337. Antagonism between parties is resolved by the pleadings and the nature of the controversy. United States Fid. & Guar., 48 F.3d at 134; see also Smith v. Sperling, 354 U.S. 91, 97 (1957). If the alignment of the parties differs from that in the complaint, the Court must ensure that complete diversity continues to exist. United States Fid. & Guar., 48 F.3d at 133.

Smith's primary purpose in filing the present case is to obtain a declaration that Nationwide is obligated to provide liability coverage and a defense to the injuries and damages alleged by B.X.J, to have resulted from lead-based paint exposure at Smith's Nationwide-insured property. Any dispute between Smith and B.X.J, in the underlying tort action is secondary to the present coverage dispute, and it appears to the Court that both Smith and B.X.J, would benefit from a declaration in Smith's favor.

Moreover, in a prior state court proceeding, Smith and B.X.J, represented in a jointly filed pleading that "Smith's interests are aligned with Infant Plaintiffs interests in seeking insurance coverage and reformation of the insurance contract against Nationwide."[3] (Second Joint Mot. to Amend Mot. for Decl. J., B.X.J, v. Nationwide, et al, No. 730CL14000135-00 (Petersburg Cir. Ct., May 27, 2014), Nationwide Mem. in Support of Mot. to Realign, Ex. A ¶¶ 10, ECF No. 7-1.) As Smith and B.X.J, previously admitted, "Nationwide is the only party that has an interest in proving that the property was not covered by Smith's Nationwide insurance policy." ( Id. at ¶ 8.)

Because B.X.J.'s interest is the same as that of Plaintiff Smith, B.X.J, is more properly aligned as party-plaintiff, rather than a defendant, in the present matter. Aligning B.X.J, as a plaintiff, the Court is satisfied that it retains jurisdiction, as complete diversity ...

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