Travelers Indemnity Company v. Portal Healthcare Solutions , 644 F. App'x 245 ( 2016 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1944
THE TRAVELERS INDEMNITY COMPANY OF AMERICA,
Plaintiff – Appellant,
v.
PORTAL HEALTHCARE SOLUTIONS, L.L.C.,
Defendant – Appellee.
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AMERICAN INSURANCE ASSOCIATION; COMPLEX INSURANCE CLAIMS
LITIGATION ASSOCIATION,
Amici Supporting Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge. (1:13-cv-00917-GBL-IDD)
Argued: March 24, 2016 Decided: April 11, 2016
Before KING, DIAZ, and HARRIS, Circuit Judges.
Record supplemented and judgment affirmed by unpublished per
curiam opinion.
ARGUED: G. Eric Brunstad, Jr., DECHERT LLP, Hartford,
Connecticut, for Appellant. John Janney Rasmussen, INSURANCE
RECOVERY LAW GROUP, PLC, Richmond, Virginia, for Appellee. ON
BRIEF: Kate M. O’Keeffe, DECHERT LLP, Hartford, Connecticut;
John Becker Mumford, Jr., Kathryn Elizabeth Kasper, HANCOCK,
DANIEL, JOHNSON & NAGLE, P.C., Glen Allen, Virginia, for
Appellant. Laura A. Foggan, Matthew W. Beato, WILEY REIN LLP,
Washington, D.C., for Amici Curiae.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
The Travelers Indemnity Company of America appeals from an
order entered in the Eastern District of Virginia directing it
to defend its insured, Portal Healthcare Solutions, L.L.C.,
against a civil lawsuit pending in New York state court. As
explained below, we are satisfied to supplement the record on
appeal and affirm the judgment on the reasoning of the district
court. See Travelers Indem. Co. of Am. v. Portal Healthcare
Sols., L.L.C., 35 F. Supp. 3d 765 (E.D. Va. 2014) (the
“Opinion”).
I.
On April 18, 2013, Dara Halliday and Teresa Green filed a
class-action complaint in New York on behalf of themselves and
others (the “class-action complaint”). The class-action
complaint alleges that Portal and others engaged in conduct that
resulted in the plaintiffs’ private medical records being on the
internet for more than four months. During the alleged tortious
conduct, Portal was the insured under two insurance policies
issued by Travelers, one that spanned the period from January
2012 to January 2013, and another that ran from January 2013 to
January 2014 (together, the “Policies”).
On July 30, 2013, Travelers sued Portal in the Eastern
District of Virginia, seeking a declaration that it is not
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obliged to defend Portal against the claims in the class-action
complaint. That is so, Travelers maintains, because the class-
action complaint fails to allege a covered publication by
Portal. Travelers and Portal each moved for summary judgment on
the duty-to-defend issue. On July 17, 2014, the district court
ruled from the bench that Travelers is duty bound under the
Policies to defend Portal against the class-action complaint.
It thus granted summary judgment in favor of Portal, as
memorialized in its Opinion. This appeal ensued, and we possess
jurisdiction pursuant to 28 U.S.C. § 1291.
II.
Although not raised in the district court, we noted a
potential defect in the declaratory judgment proceedings
concerning subject matter jurisdiction. In its complaint for
declaratory relief, Travelers avers that it is a Connecticut
corporation and that Portal is a limited liability company
organized and existing under the laws of Nevada, with its
principal place of business in Virginia. According to
Travelers, the district court possessed subject matter
jurisdiction pursuant to 28 U.S.C. § 1332, based on diversity of
citizenship.
Because Portal is a limited liability company rather than a
corporation, however, its citizenship for purposes of diversity
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jurisdiction turns not on its place of formation or principal
place of business, but on the citizenship of Portal’s members.
See Cent. W. Va. Energy Co. v. Mountain State Carbon, L.L.C.,
636 F.3d 101, 103 (4th Cir. 2011); accord Johnson v. Columbia
Props. Anchorage, L.P., 437 F.3d 894, 899 (9th Cir. 2006)
(collecting rulings of various courts of appeals that limited
liability companies possess citizenship of their members for
purposes of diversity jurisdiction). Neither Travelers’s
complaint nor the original record on appeal revealed the
citizenship of Portal’s members. Accordingly, on March 9, 2016,
our Clerk asked the parties to address subject matter
jurisdiction at oral argument.
On March 21, 2016, three days prior to oral argument, the
parties sought to supplement the record on appeal with a
Stipulation, pursuant to Federal Rule of Appellate Procedure
10(e), identifying Portal’s three members and stipulating that
one was a citizen of Virginia and that the two others were
foreign nationals when Travelers filed its complaint. As a
result, Travelers and Portal agreed that they are completely
diverse for purposes of § 1332 jurisdiction. Consistent with
the statutory prescription that “[d]efective allegations of
jurisdiction may be amended, upon terms, in the trial or
appellate courts,” see 28 U.S.C. § 1653, we hereby grant the
Rule 10(e) motion to supplement the record on appeal. We are
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now also satisfied that Travelers and Portal have adequately
established diversity jurisdiction. See Trans Energy, Inc. v.
EQT Prod. Co., 743 F.3d 895, 901 (4th Cir. 2014). *
III.
Turning to the substance of Travelers’s appeal, we commend
the district court for its sound legal analysis. The court
correctly explained that it was required under Virginia law to
“follow the ‘Eight Corners’ Rule” by looking to “the four
corners of the underlying [class-action] complaint” and “the
four corners of the underlying insurance policies” to determine
whether Travelers is obliged to defend Portal. See Travelers,
35 F. Supp. 3d at 769 (relying on Fuisz v. Selective Ins. Co.,
61 F.3d 238, 242 (4th Cir. 1995)). The court also made clear
* It is not uncommon that litigants and trial courts fail
to identify and litigate jurisdictional issues. See, e.g.,
Stahle v. CTS Corp., ___ F.3d ___, No. 15-1001, 2016 WL 806087,
at *2 n.1 (4th Cir. Mar. 2, 2016). In such circumstances,
certain of our sister circuits remand “for further development
of the jurisdictional record.” See Siloam Springs Hotel, L.L.C.
v. Century Sur. Co., 781 F.3d 1233, 1239 (10th Cir. 2015);
Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374
F.3d 1020, 1020-21 (11th Cir. 2004) (per curiam). We encourage
litigants and their counsel — as well as the district courts —
to resolve jurisdictional omissions promptly, before addressing
other aspects of disputes that the federal courts may lack the
power to decide. See United States v. Wilson, 699 F.3d 789, 793
(4th Cir. 2012) (explaining that, absent subject matter
jurisdiction, “a court can only decide that it does not have
jurisdiction”).
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that, “[u]nder Virginia law, an insurer’s duty to defend an
insured ‘is broader than its obligation to pay’ or indemnify an
insured,” see id. (quoting Brenner v. Lawyers Title Ins. Corp.,
397 S.E.2d 100, 102 (Va. 1990)), and that the insurer must “use
‘language clear enough to avoid . . . ambiguity’ if there are
particular types of coverage that it does not want to provide,”
see id. (quoting St. Paul Fire & Marine Ins. Co. v. S.L. Nusbaum
& Co., 316 S.E.2d 734, 736 (Va. 1984) (per curiam)).
Applying the foregoing principles, the Opinion concluded
that the class-action complaint “at least potentially or
arguably” alleges a “publication” of private medical information
by Portal that constitutes conduct covered under the Policies.
See Travelers, 35 F. Supp. 3d at 771 (internal quotation marks
omitted). Such conduct, if proven, would have given
“unreasonable publicity to, and disclose[d] information about,
patients’ private lives,” because any member of the public with
an internet connection could have viewed the plaintiffs’ private
medical records during the time the records were available
online. See id. at 772 (internal quotation marks omitted and
alteration in original).
Put succinctly, we agree with the Opinion that Travelers
has a duty to defend Portal against the class-action complaint.
Given the eight corners of the pertinent documents, Travelers’s
efforts to parse alternative dictionary definitions do not
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absolve it of the duty to defend Portal. See Seals v. Erie Ins.
Exch., 674 S.E.2d 860, 862 (Va. 2009) (observing that the courts
“have been consistent in construing the language of [insurance]
policies, where there is doubt as to their meaning, in favor of
that interpretation which grants coverage, rather than that
which withholds it” (quoting St. Paul Fire & Marine Ins. Co.,
316 S.E.2d at 736)).
Having carefully assessed the record and the written
submissions, together with the argument of counsel, we discern
no error. We are therefore content to affirm the judgment on
the reasoning of the district court.
RECORD SUPPLEMENTED AND JUDGMENT AFFIRMED
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