United States District Court, N.D. Illinois, Eastern Division
VELSICOL CHEMICAL LLC and TRANSPORTATION INSURANCE COMPANY, INC., Plaintiffs,
MAGNETEK, INC., Defendant.
MEMORANDUM OPINION AND ORDER
Z. Lee United States District Judge.
Velsicol Chemical LLC (“Velsicol”) and
Transportation Insurance Company, Inc. (“TIC”)
filed a declaratory judgment action against Defendant
Magnetek, Inc. (“Magnetek”) in Illinois state
court, seeking a declaration that Magnetek is not entitled to
coverage under TIC's insurance policies. Soon after
Plaintiffs filed suit, Magnetek removed the case to federal
court on the basis of diversity jurisdiction. Plaintiffs have
now moved to remand the case to state court on the ground
that diversity jurisdiction is lacking. For the reasons
stated herein, Plaintiffs' motion to remand is granted.
case is several decades in the making. The relevant facts
begin in the early 1970s and involve the business operations
of Universal Manufacturing Corporation (“UMC”).
UMC manufactured fluorescent light fixtures and ballasts.
Compl. ¶ 6, ECF No. 1-2. Among the ingredients in
UMC's products were polychlorinated biphenyls.
Id. ¶ 7. Throughout the 1970s, UMC purchased
polychlorinated biphenyls from Monsanto Company
(“Monsanto”). Id. In 1972, UMC and
Monsanto entered into an agreement in which UMC promised to
indemnify Monsanto for liabilities and expenses arising from
UMC's use of the polychlorinated biphenyls it purchased.
Id. ¶¶ 8-9.
originally a subsidiary of Northwest Industries, Inc.
(“Northwest”). Id. ¶ 6. In January
1986, however, Northwest sold UMC to Magnetek. Id.
¶ 14. As part of the sale agreement, Northwest promised
to indemnify Magnetek for any environmental pollution and
toxic tort claims arising from UMC's pre-sale activities.
Id. ¶ 15. In exchange, Northwest purportedly
retained all insurance rights with respect to such claims
under a set of four insurance policies that Northwest had
purchased between 1978 and 1986. Id. ¶¶
15-17. The insurance policies had been issued by TIC.
Id. ¶ 13.
the next several years, Northwest tendered numerous insurance
claims to TIC arising from UMC's pre-sale activities.
Id. ¶ 18. Many of the claims were disputed and
resulted in lengthy insurance coverage litigation.
Id. ¶ 19. In November 1999, to resolve some of
these disputed claims, TIC entered into a settlement
agreement with Velsicol. Id. Under this settlement
agreement, Velsicol agreed to indemnify TIC for certain
claims against it. Id. ¶ 1.
various individuals filed lawsuits against Monsanto's
successors and affiliates, alleging personal injuries caused
by pollution from the polychlorinated biphenyls that Monsanto
had manufactured. Id. ¶ 11. On August 31, 2016,
Monsanto's successors and affiliates tendered an
indemnity demand (“the 2016 Demand”) on Magnetek,
seeking indemnification for these individuals'
personal-injury claims. Id. ¶ 12. According to
Monsanto's successors and affiliates, the 1972
indemnification agreement between Monsanto and UMC obligated
Magnetek, as the purchaser of UMC, to indemnify them for the
2016 Demand. Id.
September 7, 2016, Magnetek tendered notice of the 2016
Demand to TIC. Id. ¶ 13. According to Magnetek,
TIC is obligated to provide insurance coverage for the 2016
Demand pursuant to the four insurance policies that TIC
issued to Northwest between 1978 and 1986. Id. In
turn, TIC then tendered the 2016 Demand to Velsicol pursuant
to the 1999 settlement agreement in which Velsicol agreed to
indemnify TIC. Id. ¶ 1.
February 14, 2017, Velsicol and TIC filed suit against
Magnetek in the Circuit Court of Cook County, Illinois.
Velsicol and TIC seek a declaration that Magnetek is not
entitled to insurance coverage for the 2016 Demand under the
insurance policies that TIC issued to Northwest. Id.
On March 16, 2017, Magnetek removed the case to federal court
on the basis of diversity jurisdiction. Velsicol and TIC have
moved to remand the case to state court on the ground that
diversity jurisdiction is lacking. Velsicol is a citizen of
Delaware, and TIC is a citizen of Illinois. Notice of Removal
¶¶ 9, 11, ECF No. 1. Magnetek is a citizen of
Delaware and Wisconsin. Id. ¶ 8.
courts are courts of limited jurisdiction. They possess only
that power authorized by Constitution and statute, which is
not to be expanded by judicial decree.'” United
States v. Wahi, 850 F.3d 296, 299 (7th Cir. 2017)
(quoting Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994)). One basis of federal jurisdiction
is diversity jurisdiction, which gives federal courts
authority to adjudicate civil actions “where the matter
in controversy exceeds the sum or value of $75, 000 . . . and
is between citizens of different States.” 28 U.S.C.
§ 1332(a)(1). For a civil action to fall within federal
courts' diversity jurisdiction, there must be complete
diversity, meaning that no plaintiff in the action is a
citizen of the same state as any defendant. Krueger v.
Cartwright, 996 F.2d 928, 931 (7th Cir. 1993) (citing
Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267
plaintiff files a civil action in state court, the defendant
may remove the action to federal court as long as the federal
court would have had jurisdiction to hear the case at the
time the plaintiff originally filed it. 28 U.S.C. §
1441(a); Schur v. L.A. Weight Loss Ctrs., Inc., 577
F.3d 752, 758 (7th Cir. 2009). A defendant seeking to remove
a case to federal court bears the burden of establishing
federal jurisdiction. Tri-State Water Treatment, Inc. v.
Bauer, 845 F.3d 350, 352 (7th Cir. 2017);
Schur, 577 F.3d at 758 (citing Doe v.
Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993)).
If a federal court lacks jurisdiction over a case removed
from state court, the case must be remanded. 28 U.S.C. §
1447(c); Walton v. Bayer Corp., 643 F.3d 994, 998
(7th Cir. 2011). Courts “interpret the removal statute
narrowly and presume that the plaintiff may choose his or her
forum.” Doe, 985 F.2d at 911. Accordingly,
“any doubts about the propriety of removing a
particular action should be resolved against allowing
removal.” Wirtz Corp. v. United Distillers &
Vintners N. Am., Inc., 224 F.3d 708, 715 (7th Cir.
2000); accord Schur, 577 F.3d at 758.
seeking to maintain this action in federal court, Magnetek
does not dispute that diversity jurisdiction is lacking,
given that Velsicol (a plaintiff) and Magnetek (the
defendant) are both citizens of Delaware. It argues, however,
that the Court should disregard Velsicol's citizenship
for purposes of ascertaining diversity jurisdiction because
Velsicol was fraudulently joined to this action and is merely
a nominal party. In the alternative, Magnetek argues that the
Court should realign ...