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Garcia v. Century Surety Co.

United States District Court, D. Colorado

April 7, 2015

LORENA GARCIA, for herself and as the Personal Representative of the Estate of Reyes Garcia, Plaintiff,


MICHAEL J. WATANABE, Magistrate Judge.

This case is before the Court on District Judge Raymond P. Moore's Order of Reference (Docket No. 22) and Order Reassigning Magistrate Judge (Docket No. 40). There is one motion pending: Plaintiff's Motion for Remand. (Docket No. 18, referred by Docket No. 23.)


William Smith and Schneider Energy Services operated a gas well in Weld County, Colorado. In 2007, the well exploded in flames-burning and ultimately killing Reyes Garcia. Garcia's widow sued in state court for wrongful death, winning a multimillion-dollar jury verdict well in excess of Smith's and Schneider Energy's insurance coverage.

Smith's insurance company, Century Surety, defended Smith and Schneider Energy in that lawsuit-under a reservation of rights. See Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1089 (Colo. 1991). Century Surety has since sued for declaratory judgment, disclaiming coverage. That case was brought in this Court and is docketed as Case No. 14-cv-00947.

Garcia then filed her own declaratory judgment action, in state court. Century Surety removed this second declaratory action, and it is now docketed in this Court as Case No. 14-cv-03196. Garcia has moved to remand to state court.

Motion to Remand

Garcia makes two arguments: first, that this Court lacks removal jurisdiction because she named non-diverse defendants; second, that Century Surety has waived its right to remove.

I. Subject-Matter Jurisdiction

Century Surety removed this case under 28 U.S.C. ยง 1441(a), alleging diversity jurisdiction under 28 U.S.C. ยง 1332. The party invoking federal jurisdiction bears the burden of proving that such jurisdiction exists. Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002). Here, the parties dispute only one jurisdictional element. Garcia argues that Century Surety cannot show "complete diversity"-the rule that no plaintiff may be from the same state as any defendant, see Lincoln Prop. Co. v. Roche, 546 U.S. 81 (2005)-because Defendants Smith and Schneider Energy are Coloradoans, like her. Century Surety responds that, for purposes of diversity jurisdiction, Smith and Schneider Energy should be realigned as plaintiffs according to their true interest in this action. See City of Indianapolis v. Chase Nat. Bank of City of New York, 314 U.S. 63, 69 (1941) ("Diversity jurisdiction cannot be conferred upon the federal courts by the parties' own determination of who are plaintiffs and who defendants. It is our duty... to look beyond the pleadings, and arrange the parties according to their sides in the dispute.").

The Court agrees with Century Surety. In this declaratory action, Garcia's interests align completely with Smith's and Schneider Energy's: all three would like to see Century Surety foot as much of the bill for the wrongful-death verdict as possible. In similar coverage disputes, federal courts routinely realign the parties to place the injured third party on the same side of the caption as the tortfeasing insured, as against the insurer. Cornella Bros. v. Liberty Mut. Fire Ins. Co., No. 13-cv-00558-CMA-MEH, 2013 WL 1876770, at *1-2 (D. Colo. May 3, 2013); see also Hulliung Gymnastics, Inc. v. Philadelphia Indem. Ins. Co., 2014 WL 3400549, at *2 (S.D. Ill. July 9, 2014); Scott v. State Farm Fire & Cas. Co., 2014 WL 3054784, at *5 (E.D. Mich. July 7, 2014); Wayne J. Griffin Elec., Inc. v. Travelers Prop. Cas. Co. of Am., 2014 WL 842983, at *4 (M.D. N.C. Mar. 4, 2014); Lark v. Nationwide Ins. Co. of Am., 2013 WL 5918310, at *3 (W.D. Va. Oct. 31, 2013); Lott v. Scottsdale Ins. Co., 811 F.Supp.2d 1220, 1224 (E.D. Va. 2011); Earnest v. State Farm Fire & Cas. Co., 475 F.Supp.2d 1113, 1117 (N.D. Ala. 2007); Liebau v. Columbia Cas. Co., 176 F.Supp.2d 1236, 1243 (D. Kan. 2001).

Garcia's arguments to the contrary are unpersuasive. First, Garcia relies heavily on the argument that, in a declaratory action, the insured is a necessary party. But that point is undisputed-indeed, Century Surety named both Smith and Schneider Energy as defendants in its own declaratory action-and has nothing to do with aligning interests for purposes of diversity jurisdiction. Second, Garcia argues that as the judgment-creditor in the underlying negligence case, her interests are "obviously" adverse to those of the judgment-debtors, Smith and Schneider Energy. But no one denies that Garcia, Smith, and Schneider Energy have adverse interests as to the underlying negligence action. The question is whether they have adverse interests as to this coverage action-and they do not. Indeed, it is worth noting that Smith and Schneider Energy have both filed Answers in this case in which they admit the material allegations, allege that Century Surety is liable, and deny nothing of any real relevance to the case. ( See Docket Nos. 13, 33-1.) And further, in the first-filed declaratory judgment action (Case No. 14-cv-00947), there are no cross-claims at all between Garcia, Smith, and Century Surety. Finally, Garcia relies on Hildebrand v. National Fire & Marine Insurance Co., Case No. 09-cv-00899-MSK-KLM, 2010 WL 455240 (D. Colo. 2010), in which Chief Judge Krieger declined to realign the parties because (as here) both the judgment-creditor and judgment-debtor argued that they still had material disputes between them. But in Hildebrand, there was no indication that the parties to the underlying lawsuit had entered into Bashor -type agreements, as have the parties here. To the extent the Garcia, Smith, and Schneider Energy have any further conflicts ahead of them, it is only if they breach their settlement agreements-which would be a separate transaction or occurrence, not properly part of this coverage dispute.

Accordingly, applying the analysis from City of Indianapolis v. Chase Nat. Bank of City of New York, 314 U.S. 63, 69 (1941), the Court concludes that it has ...

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