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Atlantic Specialty Insurance Co. v. Webster County

United States District Court, N.D. Mississippi, Aberdeen Division

July 11, 2014

ATLANTIC SPECIALTY INSURANCE COMPANY, Plaintiff,
v.
WEBSTER COUNTY, MISSISSIPPI, Defendant.

MEMORANDUM OPINION

SHARION AYCOCK, District Judge.

Before the Court is Defendant's Motion to Dismiss [6]. Upon due consideration of the motion, response, and authorities, the Court finds as follows:

Factual and Procedural Background

On February 10, 2014, Plaintiff Atlantic Specialty Insurance Company ("Atlantic Specialty") filed an action in this Court against Defendant Webster County, Mississippi ("Webster County"), seeking a declaration of rights, duties, and liabilities arising from an insurance policy ("Policy") dispute between the parties. However, instead of responding to the Complaint, Defendant filed its own suit against Plaintiff in the Circuit Court of Webster County, Mississippi, on March 6, 2014, based on the same subject matter and insurance dispute as Atlantic Specialty's federal declaratory judgment suit. On March 14, 2014, Defendant filed a Motion to Dismiss the federal declaratory action, based on lack of subject matter jurisdiction, governmental immunity, and both Colorado River and Declaratory Judgment abstention. In response, on March 21, 2014, Plaintiff removed the state court action to this Court and filed a response to Defendant's Motion to Dismiss, denying lack of subject matter jurisdiction, contending that governmental immunity does not apply in this matter, and asserting that neither Colorado River abstention nor Declaratory Judgment abstention weigh in favor of dismissal.

Standard

"Federal courts are courts of limited jurisdiction; without jurisdiction conferred by statute, they lack the power to adjudicate claims." In re FEMA Trailer Formaldehyde Prods. Liab. Litig. , 668 F.3d 281, 286 (5th Cir. 2012) (citing Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). As such, "a case is properly dismissed for lack of subject-matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case." Home Builders Ass'n v. City of Madison , 143 F.3d 1006, 1010 (5th Cir. 1998).

A factual attack under Rule 12(b)(1) for lack of subject matter jurisdiction may occur at any stage, and "the plaintiff bears the burden of proof that jurisdiction does in fact exist." Menchaca v. Chrysler Credit. Corp. , 613 F.2d 507, 511 (5th Cir. 1980). In ruling on a Rule 12(b)(1) motion, the Court must "take the well-pled factual allegations of the complaint as true and view them in the light most favorable to the plaintiff." Lane v. Halliburton , 529 F.3d 548, 557 (5th Cir. 2008). Moreover, "a motion to dismiss for lack of subject matter jurisdiction should be granted only if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle plaintiff to relief." Ramming v. United States , 281 F.3d 158 (5th Cir. 2001).

Analysis and Discussion

A. Subject Matter Jurisdiction

Original federal diversity jurisdiction exists "where the matter in controversy exceeds the sum or value of $75, 000.00, exclusive of interest and costs, and is between... citizens of different States." 28 U.S.C. ยง 1332(a). Therefore, federal diversity jurisdiction is satisfied if the amount-in-controversy exceeds $75, 000 and there is diversity of citizenship between the parties.

Upon review of the Complaint, the Court finds the first prong of federal diversity jurisdiction is satisfied, as the amount-in-controversy clearly exceeds $75, 000. The subject matter of the dispute is a Commercial Property & Liability Policy between the parties. The Policy provides property coverage for ten separate locations, with a policy limit of $6, 193, 000. After a fire damaged a portion of the properties, Atlantic Specialty paid Webster County a total of $2, 319, 539.41. However, after retaining the services of a public adjuster, Scott Favre, Webster County submitted requests for additional payment of $1, 629, 299.31. In response, Atlantic Specialty filed this action to obtain a declaration of the respective rights, duties, and liabilities of each party under the Policy. Because the monetary value of the subject matter in dispute exceeds $75, 000, the amount-in-controversy requirement is satisfied.

Although the first prong is satisfied, Webster County contends the second prong, diversity of citizenship, fails in this case. Webster County argues that it is not a citizen of Mississippi for diversity purposes. In support of its position, Webster County cites Tradigrain, Inc. v. Mississippi State Port Authority, which provides that "a state is not a citizen for purposes of diversity jurisdiction. 701 F.2d 1131, 1132 (5th. Cir. 1983) (emphasis added). However, Webster Country's reliance on this precedent is erroneous, as Webster County itself is not a State but rather a political subdivision of Mississippi. Therefore, this authority does not support Webster County's contention.

The Supreme Court has held that while a State itself is not a citizen of that State, a "political subdivision of a State, unless it is simply the arm or alter ego of the State, ' is a citizen of the State for diversity purposes." Moor v. County of Alameda , 441 U.S. 693, 717, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973). In addition, the Fifth Circuit and this Court have similarly held that political subdivisions, including counties, are citizens of the State for diversity purposes. See Sherwin-Williams Co. v. Holmes Cnty. , 343 F.3d 383 (5th Cir. 2003) (recognizing the existence of federal diversity jurisdiction in an action between a paint manufacturer and Mississippi counties and school districts); Boston v. Titan Indem. Co. , 34 F.Supp.2d 419, 420 (N.D. Miss. 1999) (stating "[f]or purposes of diversity, a county is considered a citizen of the state in which it is located). Relying on this settled precedent, the Court finds that Defendant Webster County is a Mississippi citizen for diversity purposes, as it is a political subdivision of the State.

According to the Complaint, Atlantic Specialty is a New York corporation with its principal place of business in Minnesota. Therefore, because Plaintiff, a Mississippi citizen, and Defendant, a New York and Minnesota citizen, are completely diverse, diversity of citizenship is satisfied for federal diversity jurisdiction purposes, thus satisfying the second prong of federal diversity jurisdiction. Whereas the amount-in-controversy ...


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