Roxbury Condominium Ass'n v. Anthony S. Cupo Agency

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
1-8-2003
Roxybury Condominium v. Anthony S Cupo Agcy
Precedential or Non-Precedential: Precedential
Docket 01-4274
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Recommended Citation
"Roxybury Condominium v. Anthony S Cupo Agcy" (2003). 2003 Decisions. Paper 826.
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PRECEDENTIAL
Filed January 8, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-4274
ROXBURY CONDOMINIUM ASSOCIATION, INC.
v.
ANTHONY S. CUPO AGENCY; STEPHEN SUBICK,
Third-party Plaintiffs/Defendants
v.
SELECTIVE INSURANCE COMPANY
Third-party Defendant
Selective Insurance Company,
Appellant
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 01-cv-02294)
District Judge: Honorable Dennis M. Cavanaugh
Argued September 24, 2002
Before: BARRY, AMBRO and COWEN, Circuit Judges
(Opinion filed January 8, 2003)
Charles W. Craven, Esquire
Marshall, Dennehey, Warner,
Coleman & Goggin
1845 Walnut Street
Philadelphia, PA 19103
Gerald J. Nielsen, Esquire (Argued)
Nielsen Law Firm, LLC
2121 Airline Drive, Suite 200
Metairie, Louisiana, 70001
Attorneys for Appellant
Michael S. Karpoff, Esquire (Argued)
Hill Wallack
202 Carnegie Center
Princeton, NJ 08543-5226
Attorney for Appellee
OPINION OF THE COURT
AMBRO, Circuit Judge:
Appellant Selective Insurance Company ("Selective")
appeals an order requiring it to reimburse $13,135.50 in
attorneys’ fees of Appellee Roxbury Condominium
Association, Inc. ("Roxbury"). Under the circumstances of
this case, that award was an abuse of discretion.
I. Background
In 1997, Roxbury approached the Anthony S. Cupo
Agency ("Agency") to obtain condominium flood insurance.
The Agency, acting through its agent, Stephen Subick
("Subick"), procured insurance on Roxbury’s behalf from
Selective, which participates in the National Flood
Insurance Program. While the Agency submitted
information to Selective indicating that the value of the
condominium was $12,731,000, the Agency obtained
coverage of only $1 million. This oversight proved a problem
in September 1999, when the condominium suffered flood
damage. The policy that Selective issued contained a co-
insurance clause that reduced the benefits paid to an
insured if the policy’s coverage amount was less than 80%
of the insured building’s replacement cost. Because of this
co-insurance clause, Selective paid Roxbury only
$36,197.89 for damage that exceeded $400,000.
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Roxbury filed suit in the Superior Court of New Jersey
against the Agency and Subick for malpractice. The Agency
and Subick subsequently filed a third-party complaint
against Selective for indemnification and contribution,
claiming that Selective was negligent and/or breached its
agreement with the Agency by issuing a $1 million policy
despite being informed of the condominium’s higher value.
On May 14, 2001, Selective removed the case under 28
U.S.C. S 1441 to the United States District Court for the
District of New Jersey on the basis that Selective was acting
as an agent for the Federal Emergency Management Agency
("FEMA") and thus any claim against Selective necessarily
arose under the National Flood Insurance Act of 1968, 42
U.S.C. SS 4001 et seq., and implementing regulations. On
July 11, 2001, Roxbury moved to remand the case to state
court, alleging the absence of federal subject matter
jurisdiction. Roxbury also requested that the District Court
award it attorneys’ fees pursuant to 28 U.S.C. S 1447(c).
The District Court granted the motion to remand and
awarded Roxbury attorneys’ fees because "Selective should
have been aware that its basis for removal as a third party
defendant was questionable, especially since the claim for
indemnification was not separate and independent from
Plaintiff ’s negligence claim."
II. Discussion
A. Jurisdiction and Standard of Review
Our Court has jurisdiction under 28 U.S.C. S 1291 to
entertain Selective’s appeal. We review an award of
attorneys’ fees under section 1447(c) for abuse of
discretion. Mints v. Educ. Testing Serv., 99 F.3d 1253, 1260
(3d Cir. 1996). A district court abuses its discretion by
basing its decision on "a clearly erroneous finding of fact,
an erroneous legal conclusion, or an improper application
of law to fact." LaSalle Nat’l Bank v. First Conn. Holding
Group, L.L.C., 287 F.3d 279, 288 (3d Cir. 2002).
B. Merits
A court may award attorneys’ fees under 28 U.S.C.
S 1447(c) as part of a remand order. 28 U.S.C.S 1447(c)
("An order remanding the case may require payment of just
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costs and any actual expenses, including attorney fees,
incurred as a result of the removal."). Remand is warranted
at any time before final judgment if the district court lacks
subject matter jurisdiction. Id. However,"[a] motion to
remand the case on the basis of any defect other than the
lack of subject matter jurisdiction must be made within 30
days after the filing of the notice of removal under section
1446(a)." Id.While 28 U.S.C. S 1447(d) precludes us from reviewing
the District Court’s remand order for purposes of reversing
it,1 "some evaluation of the merits of the remand order is
necessary to review an award of attorney’s fees." Moore v.
Permanente Med. Group, Inc., 981 F.2d 443, 447 (9th Cir.
1992). Because the District Court awarded attorneys’ fees
based on two perceived defects -- (1) that the third-party
claim was not separate and independent within the
meaning of S 1441(c) (the general removal provision used by
Selective in removing this case to federal court) 2 and (2)
that a third-party defendant cannot remove a case under
S 1441(c) -- we evaluate those bases for remand in deciding
whether the attorneys’ fee award was proper.
Section 1441 is a procedural rather than a jurisdictional
statute. See Korea Exch. Bank, N.Y. Branch v. Trackwise
Sales Corp., 66 F.3d 46, 50 (3d Cir. 1995) ("[T]he Supreme
Court clearly suggested, even if it did not directly hold, that
it does not view the removal statute as imposing
independent jurisdictional restrictions on the federal
_________________________________________________________________
1. 28 U.S.C. S 1447(d) provides that "[a]n order remanding a case to the
State court from which it was removed is not reviewable on appeal or
otherwise, except that an order remanding a case to the State court from
which it was removed pursuant to section 1443 of this title shall be
reviewable by appeal or otherwise." Section 1443, which concerns civil
rights cases, does not apply here.
2. Section 1441(c) reads as follows:
Whenever a separate and independent claim or cause of action
within the jurisdiction conferred by section 1331 of this title is
joined with one or more otherwise non-removable claims or causes
of action, the entire case may be removed and the district court may
determine all issues therein, or, in its discretion, may remand all
matters in which State law predominates.
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courts."); see also Am. Fire & Cas. Co. v. Finn, 341 U.S. 6,
19 (1951) ("Mere irregularity in the removal may be waived
where the suit might originally have been brought in the
Federal District Court.") (Douglas, J., dissenting) (citing
Baggs v. Martin, 179 U.S. 206 (1900)). Removal jurisdiction
under section 1441 is therefore wholly derived from original
federal jurisdiction. Korea Exch. Bank, 66 F.3d at 50 ("[I]n
considering whether jurisdictional defects existed, the
relevant inquiry is whether the case could have been filed
originally in federal court."). This interpretation is further
supported by the fact that S 1441 lies outside the portion of
Title 28 entitled "District Courts; Jurisdiction," which
comprises sections 1330 to 1368. Thus, when the District
Court remanded the case back to state court for Selective’s
failure to satisfy S 1441(c)’s "separate and independent
claim" requirement and because of its doubts whether a
third-party defendant may remove an action under
S 1441(c), the remand was for non-jurisdictional reasons.
The District Court certainly had the power to remand the
case if the Agency’s third-party claim did not arise under
federal law. However, it did not have the power to remand
for a procedural defect once the 30-day statutory period
lapsed. In re FMC Corp. Packaging Sys. Div., 208 F.3d 445,
450 (3d Cir. 2000) (stating that the district court"had no
statutory authority to issue the remand order after the 30-
day period because the defect was in the removal procedure
rather than a lack of subject matter jurisdiction, which
could be raised at any time."). Without this power, it follows
that the District Court abused its discretion by imposing
attorneys’ fees under S 1447(c).
Timeliness issues aside, we are nonetheless concerned
that the District Court chose to impose attorneys’ fees
based on Selective’s colorable removal claim in an area of
unsettled law. The Third Circuit has not yet decided
whether an indemnification claim is separate and
independent or whether a third-party defendant may
properly remove under S 1441(c). Other courts disagree on
these questions. Compare Monmouth-Ocean Collection Serv.,
Inc. v. Klor, 46 F. Supp. 2d 385, 394 (D.N.J. 1999) ("[A]ny
third-party claim for indemnification is not a claim
‘separate and independent’ from the main action, and
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therefore is not removable by the third-party defendant
under S 1441."), with Jones v. Petty-Ray Geophysical
Geosource, Inc., 954 F.2d 1061, 1066 (5th Cir. 1991)
(indemnification claims based on a separate contract are
separate and independent); Thomas v. Shelton, 740 F.2d
478, 487-88 (7th Cir. 1984) (third-party defendants may
not remove), with Carl Heck Eng’rs, Inc. v. Lafourche Parish
Police Jury, 622 F.2d 133, 135-36 (5th Cir. 1980)
(authorizing third-party removal if the claim is separate and
independent from the plaintiff ’s original claim). Under
these less than bright-line circumstances, we believe that,
even if Roxbury had timely moved to remand the case, the
District Court would have abused its discretion by
awarding attorneys’ fees. Accordingly, we reverse that
award for this reason as well.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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