Facts
- John S. Clark Company, Inc. (Clark), a North Carolina building contractor, was involved in a construction project for a parish life center and renovations at Saint Therese Catholic Church in Mooresville, North Carolina.
- Clark obtained insurance from Travelers Indemnity Company of Illinois (Travelers) for the project, including coverage for damage arising from subcontractor work and for costs to replace or repair project damage.
- Clark subcontracted masonry work to Herrera Masonry, Inc., and to Ignacio Herrera and Marina Herrera (collectively, the Herrera Defendants) under an agreement containing warranties against defective work and an indemnification provision in Clark’s favor.
- Portions of the project collapsed, which Clark attributed to deficiencies and defects in the Herrera Defendants’ masonry work.
- Clark repaired and rebuilt the collapsed portions and also addressed other allegedly defective portions of the work.
- Clark sued Travelers and the Herrera Defendants in North Carolina state court seeking payment/coverage from Travelers and indemnity and related relief from the Herrera Defendants for project damage and repair costs.
- Travelers removed the case to the U.S. District Court for the Middle District of North Carolina, asserting diversity jurisdiction.
- Clark and the Herrera Defendants filed separate motions to remand, arguing that complete diversity was absent because Clark and the Herrera Defendants were all North Carolina citizens.
- Travelers, seeking to keep the case in federal court, moved to dismiss (drop) the Herrera Defendants under Rules 19 and 21 so that Clark’s claims against Travelers could proceed in federal court while Clark pursued Herrera separately in state court.
Issues
- Whether the federal court had diversity jurisdiction after removal when the plaintiff (Clark) and several defendants (the Herrera Defendants) were citizens of North Carolina.
- Whether the court should dismiss or drop the nondiverse Herrera Defendants under Federal Rules of Civil Procedure 19 and/or 21 to create complete diversity and retain jurisdiction over Clark’s claims against Travelers.
- Whether the case should be remanded due to removal defects, including the absence of consent to removal from all properly joined and served defendants.
- Whether Clark was entitled to costs and attorney’s fees under 28 U.S.C. § 1447(c) upon remand.
Decision
- The court granted Clark’s motion to remand.
- The court granted the Herrera Defendants’ motion to remand.
- The court granted Clark’s request for costs and attorney’s fees under 28 U.S.C. § 1447(c).
- The court denied Travelers’ motion to dismiss the Herrera Defendants as moot.
Legal Principles
- Diversity jurisdiction under 28 U.S.C. § 1332 requires complete diversity: every plaintiff must be a citizen of a different state than every defendant.
- A removing defendant bears the burden to establish federal subject-matter jurisdiction; doubts are resolved in favor of remand.
- When nondiverse defendants are properly joined and are not nominal parties, their citizenship is counted for diversity purposes and defeats removal based on § 1332.
- Federal Rules of Civil Procedure 19 and 21 do not provide a routine method to reconfigure a properly joined state-court action solely to manufacture diversity jurisdiction after removal.
- Removal generally requires unanimity: all properly joined and served defendants must join in or consent to removal.
- Under 28 U.S.C. § 1447(c), a court may award the non-removing party costs and attorney’s fees incurred due to an improper removal.
Conclusion
Because Clark and the Herrera Defendants were all North Carolina citizens, complete diversity was lacking and the federal court lacked subject-matter jurisdiction over Travelers’ diversity removal; the court therefore remanded the case to state court, awarded Clark costs and attorney’s fees under § 1447(c), and denied Travelers’ request to dismiss the Herrera Defendants as moot.