Nat'Lass'N v. Am. Safety Risk Retention Grp., Inc.

KEYBANK NAT'L ASS'N as Executor of the Est. of Adele Hackenberger, Plaintiff, v. AMERICAN SAFETY RISK RETENTION GROUP, INC., Defendant.

CIVIL ACTION NO. 3:18-CV-424 (JCH)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

MAY 21, 2018

RULING RE: REMAND TO STATE COURT

I. INTRODUCTION

On March 9, 2018, the defendant, American Safety Risk Retention Group, Inc. ("ASRRG"), removed this action from Connecticut Superior Court by filing a Notice of Removal in this court. See Notice of Removal (Doc. No. 1). On March 20, 2018, the court ordered ASSRG to show cause why this action should not be remanded to state court for lack of federal subject matter jurisdiction. See Order to Show Cause (Doc. No. 13). ASSRG responded to the Order to Show Cause on April 10, 2018, arguing that this court has federal question jurisdiction over the underlying Complaint and, in the alternative, has diversity jurisdiction over the Complaint. See generally Response to Order to Show Cause ("Def.'s Response") (Doc. No. 14). On April 20, 2018, the plaintiff, KeyBank National Association ("KeyBank"), replied to the defendant's Response, arguing that this court does not have subject matter jurisdiction to hear the Complaint filed in Connecticut Superior Court. See generally Plaintiff's Response re Response to Order to Show Cause ("Pl.'s Reply") (Doc. No. 17). On April 27, 2018, ASRRG moved for leave to file a Sur-Reply, which Motion is hereby granted. See Motion for Leave to File Sur-Reply (Doc. No. 18); Defendant's Sur-Reply to Reply to Response ("Def.'s Sur-Reply") (Doc. No. 18-1).

For the reasons set forth below, this case is remanded to state court.

II. BACKGROUND

On February 9, 2018, KeyBank initiated an action against ASRRG in Connecticut Superior Court as executor of the Estate of Adele Hackenberger, a resident of Connecticut. See Complaint (Doc. No. 1-1) at 3. In the two-count Complaint, KeyBank alleges violations of Connecticut General Statutes sections 38a-321 and 42-110a et seq. Id. at 3-5. In brief, KeyBank alleges that it has obtained a judgment in the amount of $271,252.46 from a third-party, Tankworks Removal and Replacement, LLC ("Tankworks"), a business incorporated in Connecticut, as the result of a negligent act committed by Tankworks. Id. at 3. KeyBank further alleges that ASRRG insured Tankworks at the time of the judgment, and that ASRRG and Tankworks wrongfully attempted to cancel or annul the policy after Tankworks committed the negligent act in order to deprive KeyBank of a source of payment of the judgment. Id. at 4-5.

III. LEGAL STANDARD

Under title 28 section 1441 of the United States Code, "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant . . . to the district court of the United States for the district . . . embracing the place where such action is pending." 28 U.S.C. § 1441(a). The party removing a case to federal court bears the burden of showing that removal is appropriate. See United Food & Commercial Workers Union, Local 919 v. Centermark Props., 30 F.3d 298, 301 (2d Cir. 1994). "[R]emoval statutes are to be strictly construed against removal and all doubts should be resolved in favor of remand." Bell v. Doe, No.3:18-cv-376 (VAB), 2018 WL 2016855, at *2 (D. Conn. May 1, 2018) (quoting Fallstrom v. L.K. Comstock & Co., No. 3:99-cv-952 (AHN), 1999 WL 608835, at *1 (D. Conn. July 13, 1999)).

IV. DISCUSSION

In its Notice of Removal, ASRRG makes two primary arguments in support of federal subject matter jurisdiction. First, ASRRG argues that the court has federal question jurisdiction pursuant to title 28 section 1331 of the United States Code because "the Complaint raises the federal question whether there can be a private right of action against foreign risk retention groups" under the Liability Risk Retention Act ("LRRA"), title 15 section 3901 et seq. of the United States Code. See Notice of Removal at 3-4. Second, ASRRG argues that the LRRA completely preempts the state law claims alleged by KeyBank such that federal question jurisdiction is created. Id. at 4-8. In its Response to the Order to Show Cause, ASRRG reiterates these claims and also argues, in a footnote, that this court has diversity jurisdiction pursuant to title 28 section 1332 of the United States Code. See Def.'s Response at 2 n.1.

The court addresses each of ASRRG's arguments in turn.

A. Claims Raised in the Complaint

ASRRG urges the court to find that KeyBank's Complaint arises under federal law such that this court has federal question jurisdiction over the claims in the Complaint. See Def.'s Response at 3. Federal question jurisdiction typically attaches when federal claims are asserted in a complaint. See, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Manning, 136 S. Ct. 1562, 1569 (2016). However, in a "special and small category of cases . . . a federal court has jurisdiction of a state-law claim" that "necessarily raise[s] a stated federal issue, actually disputed and substantial, which afederal forum may entertain without disturbing any congressionally approved balance of federal and state power." Id. at 1569-70 (internal quotations and citations omitted). For example, in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, the Supreme Court concluded that the plaintiff's complaint arose under federal law because the plaintiff "premised its superior title claim on a failure by the IRS to give it adequate notice, as defined by federal law." 545 U.S. 308, 314-15 (2005). On these facts, the Supreme Court held that adequate notice within the meaning of a federal statute was "an essential element of [the plaintiff's] quiet title claim." Id. at 315.

KeyBank argues that its Complaint does not "arise under" federal law because the LRRA is pertinent only, if at all, as a defense to its Complaint. See Pl.'s Reply at 2-3. "Under the longstanding well-pleaded complaint rule . . . a suit 'arises under' federal law 'only when the plaintiff's statement of his own cause of action shows that it is based upon [federal law].'" Vaden v. Discover Bank, 556 U.S. 49, 60 (2009) (quoting Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 152 (1908)). "Federal jurisdiction cannot be predicated on an actual or anticipated defense." Id.

The court has reviewed the arguments ASRRG has raised in its Notice of Removal, Response, and Sur-Reply as to the nature of the claims raised in KeyBank's Complaint and finds none of those arguments persuasive. KeyBank's Complaint alleges two causes of action, both of which are plainly state statutes. This case is distinguishable from, for example, Grable, in which the definition of proper notice under the federal tax law was "an essential element" of the state claim at issue. Grable, 545 U.S. at 315.

To illustrate, the court notes that, if ASRRG elected not to raise the LRRA in response to KeyBank's Complaint, the Connecticut Superior Court Judge deciding the state case would not be obligated to interpret the LRRA or any other federal statute. Therefore, unlike the complaint before the court in Grable, which necessarily raised the question of proper notice under federal tax law irrespective of what defenses, if any, were raised in that case, KeyBank's well-pleaded allegations do not "necessarily raise" federal law questions. In its Sur-Reply, ASRRG argues that "any court resolving the claim under the [Connecticut] direct action statute will need to answer the question whether a non-domiciliary risk retention group is subject to regulation by a state through its direct action statute." Def.'s Sur-Reply at 1. However, ASRRG has provided no argument or authority to explain why a state court would be compelled to consider the LRRA (absent ASRRG raising the LRRA as a defense), and the court knows of none.

ASRRG makes much of the Second Circuit opinion Wadsworth v. Allied Professionals Insurance Company, 748 F.3d 100 (2d Cir. 2014), in which the Second Circuit concluded that the LRRA created a defense to liability for risk retention groups under a New York statute.¹ See, e.g., Def.'s Response at 1-2, 4-5. Assuming, without deciding, that Wadsworth is directly applicable to the facts and law at issue in this case, that ruling goes only to the strength of a defense that ASRRG may raise, not to the existence of a federal question. To conclude otherwise would be to ignore the distinction that has repeatedly and emphatically been made in opinions constituting binding precedent on this court, including Supreme Court opinions. See, e.g., Vaden,556 U.S. at 60 ("Federal jurisdiction cannot be predicated on an actual or anticipated defense"); Duke Power Co. v. Carolina Environmental Study Grp., Inc., 438 U.S. 59, 97 (1978) (Rehnquist, J., concurring) ("It has long been established that the mere anticipation of a possible federal defense to a state cause of action is not sufficient to invoke the federal-question jurisdiction of the district courts.").

ASRRG cites the court to Restoration Risk Retention Group, Inc. v. Gutierrez, 880 F.3d 339 (7th Cir. 2018), and asserts that, like Gutierrez, "the complaint here raises a federal question concerning the applicability of the [LRRA]." Def.'s Response at 1. As the court noted in its Order to Show Cause, however, Gutierrez is materially distinguishable because that case was brought by a risk retention group under the LRRA. See Gutierrez, 880 F.3d at 345-46 (distinguishing Restoration Risk's assertion of "a federal right to operate within Wisconsin free from the restrictions of state regulation" on the face of its complaint from cases in which a party seeks federal subject matter jurisdiction "by simply anticipating an affirmative defense of preemption"). Despite giving ASRRG the opportunity to persuade the court that Gutierrez does apply in this case, see Order to Show Cause ("ASRRG is invited to submit argument as to the applicability of Gutierrez in this case"), ASRRG...