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Praetorian Insurance Company v. First Class Group, Inc.

United States District Court, N.D. Illinois, Eastern Division

May 18, 2017

PRAETORIAN INSURANCE COMPANY, Plaintiff,
v.
FIRST CLASS GROUP, INC. and, AILEEN CHAN, Defendants.

          MEMORANDUM OPINION AND ORDER

          Robert M. Dow, Jr.United States District Judge

         Before the Court is Plaintiff Praetorian Insurance Company's motion to remand [9] this case to the Circuit Court of Cook County, Illinois pursuant to 28 U.S.C. § 1447(c) for lack of federal diversity jurisdiction. For the reasons stated below, Plaintiffs' motion to remand is granted.

         I. Background

         On or around March 1, 2001, Plaintiff and Defendant First Class Group, Inc. (“First Class”) entered into a Program Administrator Agreement (“PAA”) by which First Class was to solicit, underwrite, and bind Plaintiff's commercial business insurance policies and to collect and remit net premiums to Plaintiff. On October 7, 2015, Plaintiff filed a complaint against First Class and Aileen Chan, the president and owner of First Class, in the Circuit Court of Cook County for breach of the PAA, breach of fiduciary duty, conversion, fraud, an accounting of First Class's deposits into and disbursements from its premium and other accounts, and other state and common law causes of action.

         On November 16, 2015, Chan removed the lawsuit to this Court. See [2-2] (Notice of Removal in Praetorian Ins. Co. v. First Class Group, Inc., No. 15-cv-10357 (N.D. Ill.)). Plaintiff moved to remand, and Judge Shah granted the motion, finding that Defendants' filings did not establish a reasonable probability of diversity of citizenship and that Defendants, through statements that discovery on citizenship may be required, had conceded that they did not have an adequate basis for removal at that time. See [2-3] at 3-4. After conducting discovery in state court, Defendants filed a second notice of removal to this Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332 and 1446(a) on October 6, 2016. See [2].

         Plaintiff again has moved to remand the case. Plaintiff does not challenge the timeliness of the notice of removal[1] or that the amount in controversy exceeds $75, 000. In addition, the parties do not dispute that Plaintiff's state of incorporation is Pennsylvania or that Defendants are both citizens of New York. Plaintiff seeks remand on the basis that it has its principal place of business in New York, thereby defeating any claim of complete diversity between the parties. In response, Defendants argue that jurisdiction-related discovery supports the conclusion that Plaintiff's principal place of business is located in Wisconsin.

         II. Legal Standard

         “The federal removal statute permits a defendant to remove a civil action from state court when a district court has original jurisdiction over the action.” Micrometl Corp. v. Tranzact Techs., Inc., 656 F.3d 467, 470 (7th Cir. 2011) (citing 28 U.S.C. § 1441(a)). In this case, Defendants assert that the Court has jurisdiction based on diversity of citizenship. See 28 U.S.C. § 1332(a). In order for jurisdiction to be founded on diversity of citizenship, there must be complete diversity of citizenship-i.e., no plaintiff can be a citizen of the same state as any defendant. See LM Ins. Corp. v. Spaulding Enters. Inc., 533 F.3d 542, 546 n.1 (7th Cir. 2008) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806)). For cases that reach the federal court by removal, diversity must exist both at the time of the original filing in state court and at the time of removal. Altom Transp., Inc. v. Westchester Fire Ins. Co., 823 F.3d 416, 420 (7th Cir. 2016). The Court considers the entire record in evaluating the existence of diversity jurisdiction. See Harmon v. OKI Sys., 115 F.3d 477, 479-80 (7th Cir. 1997).

         For the purpose of determining citizenship, a corporation is a citizen of “any State by which it has been incorporated and of the State where it has its principal place of business.” 28 U.S.C. § 1332(c). The Supreme Court has interpreted the phrase “principal place of business” to mean the place where a corporation's officers direct, control, and coordinate the corporation's activities. Hertz Corp. v. Friend, 559 U.S. 77, 93 (2010). In practice, this “should normally be the place where the corporation maintains its headquarters-provided that the headquarters is the actual center of direction, control, and coordination, i.e., the ‘nerve center.'” Id.; see also Wis. Knife Works v. Nat'l Metal Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986). A corporation's nerve center is where its “brain” is-that is, the principal place of corporate management. Wis. Knife Works, 781 F.2d. at 1282; see Chamberlain Mfg. Corp. v. Maremont Corp., 828 F.Supp. 589, 592 (N.D. Ill. 1993) (factors which deal with the brains of the organization should be considered for the “nerve center” test and factors dealing with “day-to-day operating responsibilities” should be disregarded). The burden of persuasion for establishing diversity jurisdiction is on the party who asserts jurisdiction, and that party must support its jurisdictional allegations with “competent proof.” Hertz Corp., 559 U.S. at 96-97; see Schimmer v. Jaguar Cars, Inc., 384 F.3d 402, 404 (7th Cir. 2004) (a removing defendant must demonstrate “reasonable probability that subject-matter jurisdiction exists”). Thus, the removing Defendants bear the burden in this case.

         In deciding whether to remand a case, the Court assumes the truth of the factual allegations of the complaint. Sheridan v. Flynn, 2003 WL 22282378, at *3 (N.D. Ill. Sept. 30, 2003). Further, a plaintiff's choice of forum is presumed valid, and the Court must resolve any doubts about jurisdiction in favor of remand. See, e.g., Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d 752, 758 (7th Cir. 2009); Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993) (“Courts should interpret the removal statute narrowly and presume that the plaintiff may choose his or her forum”); Schmude v. Sheahan, 198 F.Supp.2d 964, 966 (N.D. Ill. 2002) (“Generally, the removal statute is strictly construed, with an eye towards limiting federal jurisdiction”).

         III. Analysis

         A. Praetorian's Principal Place of Business

         In this case, Plaintiff's state court complaint alleges that its principal place of business is at 88 Pine Street, New York, New York. See [2-1] at ¶ 1. Defendants have also submitted the transcript and exhibits from the October 2016 deposition of Plaintiff's corporate representative, who was designated to have knowledge about its principal place of business. See [2-4]. The following facts are taken from the deposition.

         Plaintiff is an insurance company owned by QBE North America (“QBE”), and Plaintiff maintains an office in New York at the Pine Street address. Id. at 2-3.[2] Although Plaintiff does not have any employees, it has officers and directors, who typically also serve as officers and directors of QBE. Id. at 2, 4-6. Plaintiff's President, Chief Executive Officer, Chief Actuary, Chief Human Resources Officer, Chief Operating Officer, Chief Accounting Officer, Treasurer, Executive Vice Presidents and others all had their offices in New York at the Pine Street ...


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