Bromwell v. Michigan Mutual Ins , 115 F.3d 208 ( 1997 )

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
6-6-1997
Bromwell v. Michigan Mutual Ins
Precedential or Non-Precedential:
Docket 96-3181
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1997
Recommended Citation
"Bromwell v. Michigan Mutual Ins" (1997). 1997 Decisions. Paper 121.
http://digitalcommons.law.villanova.edu/thirdcircuit_1997/121
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1997 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
Filed June 6, 1997
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. 96-3181
WILLIAM DAVID BROMWELL, Personal Representative of
the Estate of ELIZABETH NAOMI BROMWELL, Deceased;
JOHN DARROW, SR., Personal Representative of the
Estate of JOHN DARROW, JR., Deceased; and ORMAND
KEITH ADAMS and MITCHELL J. CORNWELL, Personal
Representatives of the Estate of BRIAN KENT ADAMS,
Deceased; and PETE L. WURM,
Appellants
v.
MICHIGAN MUTUAL INSURANCE COMPANY and
MICHIGAN AUTOMOBILE INSURANCE PLACEMENT
COMPANY,
Appeal from a Memorandum Order of the
United States District Court
for the Western District of Pennsylvania
Civil Action No. 94-1696
Argued January 10, 1997
Before: COWEN, ALITO, and ROSENN, Circuit Judges
Filed June 6, 1997
William A. Loftus, Esq. (Argued)
Shrager, McDaid, Loftus, Flum &
Spivey
2001 Market Street
32nd Floor, Two Commerce Square
Philadelphia, PA 19103
Daniel M. Berger, Esq.
Berger Law Firm
Frick Building
Suite 912
Pittsburgh, PA 15219
Counsel for Appellants
L. John Argento, Esq.
Michael F. Nerone, Esq.
Stephen R. Mlinac, Esq. (Argued)
Dickie, McCamey & Chilcote
Two PPG Place
Suite 400
Pittsburgh, PA 15222-5402
Counsel for Appellees
OPINION OF THE COURT
ROSENN, Circuit Judge.
This appeal, having wended a tortured procedural path to
arrive finally at this court, raises an interesting issue
concerning the extent of a federal court's jurisdiction:
whether a federal district court, having previously
dismissed an action for lack of subject-matter jurisdiction,
could properly exert jurisdiction over an identical state
court action removed to that federal court by the
defendants on diversity grounds. Having considered the
jurisdictional limitations imposed on a federal court by
statutory law and the doctrine of res judicata, we hold that
the district court is precluded from exercising further
jurisdiction over that claim and must remand the case to
the state court from which it was removed.
2
I.
The current litigation arose out of a tragic accident that
occurred at the Breezewood Interchange of the
Pennsylvania Turnpike on June 17, 1990. A tractor-trailer
owned by Ralph Meyers Trucking, Inc. ("Meyers Trucking")
and operated by David A. Stacey "rear-ended" a motorcycle
operated by Brian Kent Adams, on which Elizabeth Naomi
Bromwell was a passenger, and then "rear-ended" a second
motorcycle operated by John Darrow, Jr. Stacey's truck
pushed the two motorcycles into the rear of another
tractor-trailer, driven by Pete L. Wurm. The three
motorcyclists, Adams, Bromwell, and Darrow, were killed in
the collision and Wurm suffered serious physical and
psychological injuries.
Representatives of the estates of the three deceased
motorcyclists individually brought actions against Meyers
Trucking and Stacey for wrongful death and negligence;
Wurm brought an action against Meyers Trucking and
Stacey for negligence. These actions were filed in the United
States District Court for the Western District of
Pennsylvania and were consolidated into a single case, with
jurisdiction premised on diversity grounds pursuant to 28
U.S.C. § 1332. Both Meyers Trucking and Stacey are
citizens of Michigan, Wurm is a citizen of Missouri, and the
three decedents were citizens of Maryland.
On January 27, 1992, the district court granted a motion
for partial summary judgment filed by the estate
representatives and Wurm (hereinafter collectively referred
to as "Appellants") on the issue of liability. The Appellants
subsequently entered into a settlement agreement and
release with Meyers Trucking's insurers, Michigan Mutual
Insurance Company and Michigan Automobile Insurance
Placement Facility (hereinafter referred to collectively as
"Appellees"). The terms of the settlement agreement are, in
pertinent part:
For and in consideration of the sum of Seven
Hundred and Fifty Thousand Dollars ($750,000.00)
plus whatever other liability insurance coverage that
may be declared available by judgment of any Court as
the result of any Declaratory Judgment action now
3
pending or to be filed . . . hereby fully and forever
release, acquit and discharge Ralph Meyers Trucking,
Inc. and David Stacey to the full extent of their
personal and/or corporate liability (while at the same
time preserving our rights to pursue to the full extent
possible the limits of insurance coverage available to
either David Stacey and/or Ralph Meyers Tucking, Inc.
pursuant to policies of insurance issued by Michigan
Mutual and Michigan Automobile Insurance Placement
Facility, the extent of said coverage having been placed
at issue in the U.S. District Court for the Western
District of Pennsylvania at Civil Actions Nos. 92-0183
and 92-1172 and/or which may be placed in issue in
another court of competent jurisdiction) from any and
all actions . . . by John Darrow, Jr., Elizabeth Naomi
Bromwell, Pete L. Wurm, and Brian Kent Adams or our
property sustained or received on or about the 17th
day of June, 1990 when a vehicular accident occurred
in the vicinity of the Breezewood Interchange of the
Pennsylvania Turnpike for which injuries, losses and
damages we claim Ralph Meyers Trucking, Inc. and
David Stacey to be legally liable and on account of
which suit was brought in the United States District
Court for the Western District of Pennsylvania at Civil
Actions Nos. 90-1120, 90-1608, and 91-1154, it being
understood and agreed that the acceptance of said sum
is in full accord and satisfaction of a disputed claim
and that the payment of said sum is not an admission
of liability by Ralph Meyers Trucking, Inc. and David
Stacey.
The agreement further addressed the pending declaratory
judgment action brought by the Appellants against the
Appellees, stating:
It is further agreed and understood that this release
and settlement agreement is not intended to
compromise, reduce or in any way affect the continued
prosecution or outcome of the Declaratory Judgment
Actions filed by us and Michigan Mutual Insurance
Company/Michigan Automobile Insurance Placement
Facility at Nos. 92-0183 and 92-1172 in the United
States District Court for the Western District of
4
Pennsylvania or of any other Declaratory Judgment
action that may be filed or of any appeals that may be
taken therefrom. It is further agreed and understood by
the parties hereto that the within Settlement
Agreement and Release will not be raised as a defense
in any Declaratory Judgment action. It is also
acknowledged that all parties hereto retain their right
to appeal any judgment reached in any Declaratory
Action.
The district court entered an order on August 13, 1993,
approving this settlement agreement and dismissing the
action "without prejudice to any claims which may arise
under the settlement agreement." No order was issued with
regard to the district court's previous grant of summary
judgment in favor of the Appellants on the issue of liability.
At the time the district court dismissed this matter, two
additional actions were pending in federal court. The
Appellants had filed a complaint in the United States
District Court against Meyers Trucking and Stacey, seeking
a declaratory judgment pursuant to the Federal Declaratory
Judgment Act, 28 U.S.C. § 2201. In this action, the
Appellants sought a declaration that the incident which
occurred on June 17, 1990, constituted three separate
accidents, and therefore the available liability insurance
coverage would be $2,250,000 and not the $750,000
available for a single accident. The district court dismissed
this action against Meyers Trucking and Stacey for lack of
subject-matter jurisdiction. The action concerned only the
scope of the available insurance coverage and thus
realigned Meyers Trucking and Stacey with the Appellants
against the Appellees. Since Meyers Trucking, Stacey, and
the Appellees are all Michigan residents, the realignment
destroyed diversity of citizenship. No other basis for federal
court jurisdiction existed in that action.
The Appellees brought the second action against the
Appellants, Meyers Trucking, and Stacey. This complaint
purported to raise a federal question but the gravamen of
the declaratory judgment action was the interpretation of
the term "accident" in the insurance policy. The district
court dismissed this action for lack of subject-matter
jurisdiction, concluding that the Appellees were precluded
5
from bringing this action because there was no underlying
judgment of liability, a prerequisite to the only possible
claim under federal law.
Following the dismissal of their action, the Appellants
filed a Motion to Reconsider, which the district court
denied. The court concluded that the error in pleadings
that led to the initial dismissal had not been corrected.
Additionally, the court stated that "[i]f this Court has
subject matter jurisdiction over the parties' dispute, one or
more of the parties must have an action for coercive relief--
damages in this case--against the others." Darrow v. Ralph
Meyers Trucking, Inc., C.A. No. 92-183, mem. order at 3
(W.D. Pa. Sept. 3, 1993). The court then granted the
Appellants leave to amend the complaint. The Appellants
chose, however, to file a second declaratory judgment
action in the federal district court.
The Appellants filed this second declaratory judgment
action against only the Appellees; Meyers Trucking and
Stacey were not parties to the action. The Appellants
premised jurisdiction on diversity grounds, and diversity
was not defeated due to a realignment of the parties, as
had occurred in the previous action. The district court
again dismissed the action without prejudice, however, this
time for failure to allege a "case or controversy" sufficient to
invoke the federal court's subject-matter jurisdiction under
the Federal Declaratory Judgment Act. The court concluded
that both "the claim and counterclaim in the present action
do not contain within them a justiciable controversy."
Bromwell et al. v. Michigan Mutual Insur. Co. et al. , C.A. No.
93-1602, mem. op. at 16 (W.D. Pa. Mar. 28, 1994). Again,
the district court focused on the absence of an underlying
judgment as the main bar to prosecution of this complaint
and the accompanying counterclaims. Thus, the court
dismissed the Appellants' complaint and the Appellees'
counterclaims without prejudice.
Rather than appeal the district court's decision to
dismiss their complaint without prejudice, the Appellants
filed an action in the Court of Common Pleas of Bedford
County, Pennsylvania. This complaint repled the same
request for declaratory relief concerning the definition of the
term "accident" in the insurance policy as was raised in the
6
federal district court. Additionally, this state law action
sought a declaration that there was separate liability
coverage on both the tractor and on the trailer. The
Appellants later dropped their first contention that there
were three separate accidents under the terms of the
insurance policy. They proceeded only on their claim that
the tractor and the trailer were separate vehicles under
both the insurance policy and federal law and that
therefore each was covered for $750,000 under the terms of
the policy, and each injured party was entitled to a total of
$1,500,000.00.
The Appellees removed this case to the United States
District Court for the Western District of Pennsylvania and
moved to dismiss the action for failure to state a claim on
which relief could be granted pursuant to Rule 12(b)(6) of
the Federal Rules of Civil Procedure. The Appellantsfiled a
motion to remand the matter back to state court.
Magistrate Judge Francis X. Caiazza issued a Report and
Recommendation advising the district court to deny the
motion to remand and to determine the justiciability of the
claim under the Federal Declaratory Judgment Act. District
Court Judge Robert J. Cindrich adopted the Report and
Recommendation as the opinion of the district court.
Judge Caiazza issued a second report and
recommendation on the matter, recommending that the
Appellees' motion to dismiss should be granted for lack of
subject-matter jurisdiction. The court adopted this report
and recommendation as the opinion of the court and
ordered that the Appellants' complaint be dismissed. The
court also held there was no subject matter jurisdiction for
a Pennsylvania court under the Pennsylvania Declaratory
Judgments Act. The Appellants brought this timely appeal,
arguing that the district court lacked jurisdiction over this
case as a matter of res judicata and that the court therefore
had no power to dismiss the Appellants' complaint.
II.
This court exercises plenary review over jurisdictional
issues. Anthuis v. Colt Indus. Operating Corp. , 971 F.2d
999, 1002 (3d Cir. 1992). In the present matter, the
7
Appellants assert that the district court erred in exercising
jurisdiction over the removed complaint, originallyfiled in
state court, because the federal court had previously
determined that it lacked subject-matter jurisdiction over
an identical claim brought by the Appellants in the federal
court. Additionally, the Appellants assert that the district
court erred when, upon concluding that it lacked subject-
matter jurisdiction over the removed state court action, it
dismissed the action rather than remand it to the state
court. The Appellants first propose that the district court
erred in its March 28, 1994, order dismissing their
complaint for failing to raise a justiciable claim. The
correctness of the district court's order is not properly
before this court at the present time. The Appellants failed
to file a timely appeal of this decision, choosing instead to
bring a new, albeit identical, claim in state court. Therefore,
the district court's decision is final and the matter cannot
now be challenged as part of this appeal.
The gravamen of the Appellants' reviewable argument is
that the district court improperly exercised jurisdiction over
their state law claim when the Appellees removed the
matter to the federal court, and that the district court
further erred by not remanding the matter to the state
court once it concluded that it lacked subject-matter
jurisdiction over the dispute. The existence of subject-
matter jurisdiction over an action is a prerequisite to its
removal to federal court. 28 U.S.C. § 1441; Brown v.
Francis, 75 F.3d 860, 864-65 (3d Cir. 1996). Section 1441
states that "any civil action brought in a State court of
which the district courts of the United States have original
jurisdiction, may be removed . . . to the district court of the
United States for the district and division embracing the
place where such action is pending." In its March 28, 1994
order, the district court dismissed the Appellants' action
after concluding that the Appellants had not presented a
justiciable claim under the Federal Declaratory Judgment
Act.
Once the court determined that it lacked jurisdiction over
the matter in its March 28, 1994 order, that determination
had a preclusive effect. "A dismissal for lack of subject-
matter jurisdiction, while `not binding as to all matters
8
which could have been raised,' is, however, conclusive as to
matters actually adjudged." Equitable Trust Co. v.
Commodity Futures Comm'n, 669 F.2d 269, 272 (5th Cir.
1982) (quoting Acree v. Airline Pilot Ass'n, 390 F.2d 199,
203 (5th Cir.), cert. denied, 393 U.S. 852, 89 S. Ct. 88, 21
L.Ed.2d 122 (1968)). In the present matter, the issue of
whether a justiciable claim was presented under the
Federal Declaratory Judgment Act had previously been
adjudicated in the March 28, 1994 order. The facts
underlying the state law claim are identical to those
underlying the previously dismissed federal court action.
The Appellants had not obtained any judgment of liability
in the interim, the lack of which presented the basis for the
district court's original determination that there was no
subject-matter jurisdiction to hear the case. Once the
matter was removed to the federal district court by the
Appellees, the Federal Declaratory Judgment Act again
governed the justiciability of the Appellants' claim. The
district court, having previously determined that it lacked
subject-matter jurisdiction over the Appellants' case, was
precluded by the principles of res judicata from exercising
jurisdiction over this matter once it was removed by the
Appellees. Thus, the district court simply could not exercise
jurisdiction over the matter.
Upon a determination that a federal court lacks subject-
matter jurisdiction over a particular action, the plain
language of 28 U.S.C. § 1447(c) mandates that the matter
be remanded to the state court from which it was removed.
Section 1447(c) states: "If at any time beforefinal judgment
it appears that the district court lacks subject matter
jurisdiction, the case shall be remanded." The language of
this section is mandatory -- once the federal court
determines that it lacks jurisdiction, it must remand the
case back to the appropriate state court. International
Primate Protection League v. Administrators of Tulane Educ.
Fund, 500 U.S. 72, 87 (1991); Maine Assoc. of
Interdependent Neighborhoods v. Commissioner, Maine Dep't
of Human Svcs., 876 F.2d 1051, 1054 (1st Cir. 1989).
Therefore, the district court erred when it dismissed the
matter rather than remand it to the state court.
The Appellees contend that the district court did not err
in dismissing the matter under the "futility exception" to
9
§ 1447(c), which allows a district court to dismiss an action
rather than remand it to the state court when remand
would be futile because the state court also would lack
jurisdiction over the matter. This court has never
recognized the futility exception, and the Supreme Court
has, in dicta, expressed a reluctance to recognize such
discretion under the removal statute. See International
Primate, 500 U.S. at 89 (noting that literal words of
§ 1447(c) grant district court no discretion to dismiss
matter). Thus, we turn to the case law of other circuits to
consider the merits of this proposed exception.
This proposed "futility exception," a relatively new
concept, has been recognized only by the Fifth and Ninth
Circuits. See Bell v. City of Kellog, 922 F.2d 1418, 1425
(9th Cir. 1991) (ruling that dismissal was appropriate where
remand was futile); Arasco, Inc. v. Glenara, Ltd., 912 F.2d
784, 787 (5th Cir. 1990) (permitting dismissal where
remand would be futile because federal court's
determination that state court lacked jurisdiction bound
state court). However, the Fourth and Seventh Circuits
have both expressly rejected the existence of this futility
exception. See Roach v. West Virginia Reg'l Jail &
Correctional Facility Auth., 74 F.3d 46, 49 (4th Cir. 1996)
(noting that "the futility of a remand to the West Virginia
state court does not provide an exception to the plain
meaning of § 1447(c)"); Smith v. Wisconsin Dep't of
Agriculture, 23 F.3d 1134, 1139 (7th Cir. 1994) (citing
International Primate and stating that Supreme Court has
"squarely rejected" any futility exception to§ 1447(c)). The
Tenth Circuit has also expressly rejected this proposed
exception in an unpublished opinion. Jepsen v. Texaco,
Inc., 68 F.3d 483, 1995 WL 607630, at *3 (10th Cir. 1995)
(noting that Supreme Court has expressly rejected futility
exception in International Primate). Additionally, the First
Circuit, while not expressly refusing to adopt the futility
exception, stated that "the fact that we believe a certain
legal result unlikely, as a matter of state law, is not
sufficient grounds for reading an exception into the
absolute statutory words "shall be remanded." Maine Ass'n,
876 F.2d at 1055 (emphasis in original). Even the Second
Circuit, which once indicated that it might consider the
futility exception, Mignogna v. Sair Aviation, Inc., 937 F.2d
1037, 41 (2d Cir. 1991), has recently recognized that such an
exception probably does not exist in light of the Supreme
Court's opinion in International Primate. Barbara v. New
York Stock Exchange, 99 F.3d 49, 56 n.4 (2d Cir. 1996).
In light of the express language of § 1447(c) and the
Supreme Court's reasoning in International Primate, we
hold that when a federal court has no jurisdiction of a case
removed from a state court, it must remand and not
dismiss on the ground of futility. Having concluded that no
such exception exists, it is unnecessary for us to address
the Appellees' argument that remand would be futile
because the Appellants have also failed to raise a justiciable
claim under state law. Once the district court determined
that it lacked subject-matter jurisdiction over the
Appellants' claim, the district court was obligated to
remand the matter to the state court under the express
language of § 1447(c). Whether the matter is justiciable
under state law is a matter for the state court to decide.
III.
The order of the district court dismissing the Appellants'
complaint is vacated and the matter is remanded to the
district court with instructions to remand the case to the
Court of Common Pleas of Bedford County, Pennsylvania.
Each side to bear its own costs.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
11