Sun Chem. Corp. v. Am. Home Assurance Co.

SUN CHEMICAL CORPORATION, Plaintiff, v. AMERICAN HOME ASSURANCE COMPANY;NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA;LANDMARK INSURANCE COMPANY; andAMERICAN INTERNATIONAL GROUP, INC., Defendants.

Civil Action No. 20-6252 (SRC)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

September 9, 2020

NOT FOR PUBLICATION

OPINION

CHESLER, District Judge

This matter comes before the Court on Plaintiff Sun Chemical Corporation's motion to remand the matter to state court and cross-motion to amend the Complaint, and Defendant American International Group, Inc.'s motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), 12(b)(2) and 12(b)(5), and motion for judicial notice pursuant to Federal Rule of Evidence 201.

The motions have been fully briefed, and the Court has reviewed the papers filed by the parties. It proceeds to rule on the motions without oral argument. See Fed. R. Civ. P. 78(b). For the reasons that follow, the Court will deny Plaintiff's motion to remand, deny Plaintiff's cross- motion to amend the Complaint, grant Defendant American International Group, Inc.'s motion to dismiss on all grounds and grant Defendant's motion for judicial notice.

I. BACKGROUND

a. PROCEDURAL HISTORY

This is a declaratory judgment action that was originally brought by Plaintiff, Sun Chemical Corporation ("Sun Chemical"), in the Superior Court of New Jersey, Essex County, Law Division on April 14, 2020. On May 22, 2020, Defendants American Home Assurance Company ("American Home") and National Union Fire Insurance Company of Pittsburgh, PA ("National Union"), with the consent of all Defendants, removed the action to this Court on the basis of diversity jurisdiction. In their Notice of Removal, Defendants claimed that Defendant American International Group, Inc. ("AIG") was fraudulently joined, and that the inclusion of AIG as a party to the action should be disregarded for the purposes of diversity.

b. FACTUAL BACKGROUND

On December 31, 1986, Sun/DIC Acquisition Corporation acquired assets of the inks and pigments business that were previously operated by the Sequa Corporation. The acquisition of these assets occurred pursuant to a written contract. In connection with the contract, Sun/DIC Acquisition Corporation, which later changed its named to Sun Chemical, continued some of Sequa's inks and pigments operations at various locations in New Jersey. Thereafter, American Home, National Union, and Landmark Insurance Company ("Landmark") issued insurance policies to Sun/DIC Acquisition Corporation.

In 2006, Sun Chemical received a General Notice Letter from the Environmental Protection Agency alleging that it, as well as other potentially responsible parties, was subject to CERCLA liability exposure in connection with the Passaic River and the Berry Creek's StudyArea. Additionally, between October 2017 and July 2018, Sun Chemical was named as a Defendant in several litigation matters related to the Passaic River and Berry Creek's Study Area claims. Sun Chemical is also involved in two confidential mediations related to these environmental claims. Thereafter, Sun Chemical placed American Home, National Union, Landmark, and AIG on notice for "potential claims for environmental costs and fees, including litigation costs and expenses, incurred by Sun Chemical with respect to ongoing environmental matters associated with Sun Chemical's operations in New Jersey." (Plaintiff's Br. 6.) Sun Chemical, in placing these insurance companies on notice, sought coverage under the prior insurance policies that it had with American Home, National Union, and Landmark for the potential claims brought against it. Sun Chemical and the insurance companies, as well as AIG Claims, Inc., acting on behalf of AIG, were unable to agree upon the type and extent of the coverage that would be afforded to Sun Chemical under these policies. Having been unable to come to an agreement, Sun Chemical filed this lawsuit.

In the subject Complaint, Plaintiff seeks judgment declaring that Defendants are obligated to afford Plaintiff with defense and indemnification coverage, as well as reimburse Plaintiff for environmental liabilities under the insurance policies issued by the Defendant insurance companies. There are four separate insurance policies issued to Sun Chemical that are central to this action. The policies at issue are: 1) a general liability policy issued to Sun/DIC Acquisition Corporation on December 31, 1986 by American Home; 2) a general liability policy issued to Sun/DIC Acquisition Corporation on December 31, 1986 by National Union; 3) a general liability policy issued to Sun on August 15, 1987 by National Union; and 4) an umbrella liability policy issued to Sun/DIC Acquisition Corporation on December 31, 1986 by Landmark. The Complaint notes that Sun/DIC Acquisition Corporation is the "entity that acquired certaininks and pigment assets from Sequa and subsequently changed its name to Sun Chemical Corporation." (Compl. ¶ 14.)

Plaintiff Sun Chemical is a Delaware corporation and its principal place of business is located at 35 Waterview Boulevard, Parsippany, New Jersey. Defendant AIG is a Delaware Corporation, Defendant American Home Assurance Company is a New York corporation, Defendant National Union Fire Insurance Company of Pittsburgh, PA is a Pennsylvania corporation, and Defendant Landmark Insurance Company is a Pennsylvania corporation. All four named defendants have a principal place of business located at 175 Water Street, New York, New York. American Home, National Union, and Landmark are member companies of AIG. The Complaint states that Defendant AIG, through its authorized representative, handles the claims for each of its member companies.

II. SUBJECT MOTIONS

On June 19, 2020, Plaintiff filed a motion to remand the matter to the Superior Court of New Jersey, Essex County, Law Division. Plaintiff claims that remand is proper because AIG was not fraudulently joined. Sun Chemical asserts that it has a reasonable basis to pursue its claims against Defendant AIG and therefore seeks a joint judgement against AIG. Plaintiff simultaneously filed a cross-motion to amend the Complaint and add Sequa Corporation as a defendant. Plaintiff claims that Sequa is a necessary and indispensable party to the subject litigation and must be added. The addition of Sequa, a Delaware corporation, as a defendant would destroy diversity and require that the matter be remanded to state court. Defendants oppose both motions.

On June 23, 2020, Defendant AIG filed a motion to dismiss. Defendant argues that the claims against AIG should be dismissed for failure to state a claim pursuant to Federal Rule ofCivil Procedure 12(b)(6), lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), and insufficient process pursuant to Federal Rule of Civil Procedure 12(b)(5). In support of its motion to dismiss, Defendant AIG also filed a motion for judicial notice pursuant to Federal Rule of Evidence 201 and asks the Court to take judicial notice of certain documents. Plaintiff opposes the motion to dismiss and asserts that Sun Chemical brought a valid claim against AIG under the New Jersey Declaratory Judgment Act. Plaintiff further claims that this Court has personal jurisdiction over AIG and disputes the allegation that AIG was improperly served. Defendant's motion for judicial notice is unopposed.

III. DISCUSSION

a. SUN CHEMICAL'S MOTION TO REMAND

Plaintiff Sun Chemical filed a motion to remand the matter to the Superior Court of New Jersey, Essex County, Law Division. Sun Chemical argues that remand is proper because diversity jurisdiction does not exist due to the inclusion of Defendant AIG, a Delaware corporation, as a named defendant. Plaintiff alleges that Defendant AIG was not fraudulently joined and provides two arguments in support of this contention. First, Plaintiff states that AIG is an interested party to the proceeding and therefore, pursuant to the New Jersey Declaratory Judgment Act, AIG must be included as a defendant in the action. Second, Plaintiff claims that it "intends in good faith to prosecute the claim against AIG" and seek a joint judgment. In response, Defendant AIG alleges that AIG was fraudulently joined and that Plaintiff's sole cause of action—for declaratory judgment—cannot be issued against AIG, an insurance holding company and parent company to American Home and National Union, and can only be issued against the insurance companies themselves.

This Court has an obligation to satisfy itself that it has subject matter jurisdiction over a case. Desi's Pizza, Inc. v. City of Wilkes-Barre, 321 F.3d 411, 420 (3d Cir. 2003) (citing Bracken v. Matgouranis, 296 F.3d 160, 162 (3d Cir. 2002)). Pursuant to 28 U.S.C. § 1447(c), the Court must remand a case that has been removed over which the Court lacks subject matter jurisdiction. Plaintiff claims that this Court lacks subject matter jurisdiction over the instant action because Plaintiff and AIG are non-diverse parties. Defendant contends that removal was proper because AIG was fraudulently joined by Plaintiff so as to defeat this Court's diversity jurisdiction.

In the absence of federal question jurisdiction, the Third Circuit has clearly and unequivocally held that a defendant may avoid remand, even where a non-diverse party has been joined as a defendant, by demonstrating that the non-diverse party was fraudulently joined. Batoff v. State Farm Insurance Company, 977 F.2d 848, 851 (3rd Cir. 1992). If a plaintiff fails to state a cause of action against the non-diverse defendant, the Court may dismiss the non-diverse defendant and maintain the action in federal court. See, e.g., Salvaggi v. Prudential Prop. and Cas. Ins. Co., 871 F.Supp. 815, 818 (E.D. Pa. 1995). In Batoff v. State Farm Insurance Company, the Court held that joinder is fraudulent "'where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defenda...