United States District Court, D. New Hampshire
Karen M. Weinhold, et al.
The Phoenix Insurance Company, et al.
MEMORANDUM AND ORDER
BARBADORO UNITED STATES DISTRICT JUDGE
Weinholds and the State of New Hampshire
(“State”) jointly filed this insurance
declaratory judgment case in New Hampshire Superior Court
pursuant to Section 491:22 of the New Hampshire Revised
Statutes. The defendants removed the action to federal court,
invoking this court's jurisdiction pursuant to 28 U.S.C.
§ 1332 and § 1441(a) on the basis that there is
complete diversity of citizenship between the parties and the
amount of controversy exceeds $75, 000. The issue before me
is whether there is diversity jurisdiction over the case
given that the State is a party to the action.
Weinholds obtained a jury verdict against the State and two
other defendants in the underlying state tort action. The
State's share of the verdict totaled $3.6 million,
exclusive of interest. Its liability, however, is subject to
a statutory cap that limits the State's tort liability to
the greater of $475, 000 or the amount of available insurance
coverage. See N.H. Rev. Stat. Ann. § 541-B:14, I. The
State maintains that its share of the verdict is covered in
full under three policies that its contractor, Audley
Construction, Inc., obtained from Travelers for the benefit
of the State.
State's contract with Audley required Audley to secure
owner's protective liability coverage for the benefit of
the State, a commercial general liability policy that names
the State as an additional insured, and a commercial umbrella
policy. Audley procured three different policies from
Travelers: an owner's protective liability policy with $2
million in coverage per occurrence and $3 million in
aggregate (“Owner's Policy”), a commercial
general liability policy with $1 million in coverage per
occurrence and $2 million in aggregate (“CGL
Policy”), and a commercial excess liability policy with
$10 million in coverage (“Umbrella Policy”).
the jury verdict in the underlying action, Travelers agreed
that the State is covered under the Owner's Policy, which
has $1.85 million in coverage remaining. Travelers,
however, took the position that the CGL Policy and the
Umbrella Policy do not cover the State's liability.
Weinholds and the State jointly sued Travelers in New
Hampshire Superior Court, seeking a declaratory judgment that
the State is covered as an additional insured under the CGL
Policy and the Umbrella Policy. Travelers removed the case to
federal court based on diversity of citizenship, alleging
that the State and the Weinholds are citizens of New
Hampshire and that the Travelers entities sued are citizens
of Connecticut. See Doc. No. 2.
subsequently raised the question whether removal was improper
because it appeared that the State's presence as a real
party in interest destroyed complete diversity of
citizenship. See Doc. No. 26. During a telephone conference
held on October 9, 2018, the Weinholds and Travelers argued
that the State is a nominal party whose presence can be
disregarded for the purpose of diversity jurisdiction. The
State disagreed and argued that it is a real party to the
action. I directed the parties to file briefs presenting
their respective positions on this issue.
STANDARD OF REVIEW
courts of limited jurisdiction, federal courts have a duty to
inquire sua sponte into the existence of their own
subject-matter jurisdiction. McCulloch v. Velez, 364
F.3d 1, 5 (1st Cir. 2004). When jurisdiction is questioned,
“the party invoking the jurisdiction of a federal court
carries the burden of proving its existence.” Murphy v.
United States, 45 F.3d 520, 522 (1st Cir. 1995) (internal
quotation marks omitted). Thus, if a plaintiff sues in
federal court, the burden to establish jurisdiction is on the
plaintiff. See Id. When the plaintiff instead files
suit in state court and the defendant removes the action to
federal court, the onus shifts to the defendant to
demonstrate that federal jurisdiction exists. Danca v.
Private Health Care Sys., Inc., 185 F.3d 1, 4 (1st Cir.
1999). If federal jurisdiction is challenged after removal is
accomplished, however, the burden is assigned to the party
asserting jurisdiction at that time. See DaimlerChrysler
Corp. v. Cuno, 547 U.S. 332, 342 n.3 (2006); Culhane
v. Aurora Loan Servs. of Neb., 708 F.3d 282, 289 (1st
Travelers removed this case to federal court, neither the
State nor the Weinholds challenged the propriety of removal.
Once I inquired into the existence of complete diversity of
citizenship, the State challenged subject-matter
jurisdiction, and the Weinholds and Travelers asserted that
it exists. Accordingly, it is incumbent on the Weinholds and
Travelers to demonstrate that the court has jurisdiction over
the relevant facts are undisputed, the existence of
subject-matter jurisdiction is a question of law. See
Skwira v. United States, 344 F.3d 64, 72 (1st Cir.
jurisdiction requires complete diversity of citizenship
between all plaintiffs on one side and all defendants on the
other side. Caterpillar Inc. v. Lewis,519 U.S. 61,
68 (1996). A state is not a citizen of a state for
jurisdictional purposes; it is instead considered a stateless
entity. Moor v. Alameda Cty.,411 U.S. 693, 717
(1973); Petroleum Expl. v. Pub. Serv. Comm'n of
Ky.,304 U.S. 209, 217 (1938); U.S.I. Props. Corp.
v. M.D. Constr. Co.,230 F.3d 489, 499 (1st Cir. 2000).
As a result, when it is a real party in interest, a
“[s]tate's presence as a party will destroy
complete diversity.” Miss. ex rel. Hood v. AU
Optronics Corp.,571 U.S. 161, 174 (2014). A state's
presence as a real party to the controversy spoils diversity
jurisdiction even if there are otherwise diverse parties on
the same side of the lawsuit as the State. See
Newman-Green, Inc. v. Alfonzo-Larrain,490 U.S. 826, 829
(1989) (presence of “stateless” party destroyed
complete diversity even though remaining parties were
completely diverse); D.B. Zwirn Special Opportunities
Fund, L.P. v. Mehrotra,661 F.3d 124, 126 (1st Cir.
2011) (no diversity jurisdiction if any member of plaintiff
LLC was “a stateless person, or an entity treated like
a stateless person”; noting by analogy that
“states are not ‘citizens' ...