Opinion
Civil No. 12-1155 (RCL)
01-29-2015
UNDERWRITERS AT LLOYD'S, SYNDICATE 1036, Plaintiff, v. COASTAL PRODUCTION SYSTEMS, LLC, et al., Defendants.
MEMORANDUM AND ORDER
After considering the issue of subject matter jurisdiction on its own motion, the Court tentatively concludes that plaintiff has failed to sufficiently allege diversity of citizenship among the parties. Therefore, for the reasons set forth below, the Court expects to dismiss this case without prejudice for lack of subject matter jurisdiction, unless plaintiff shows cause within 10 days of this date why the case should not be dismissed.
I. BACKGROUND
This suit was brought by Underwriters at Lloyd's, Syndicate 1036 ("Underwriters"). According to plaintiff's complaint, Underwriters is a "foreign insurance syndicate." Compl. ¶ 1, ECF No. 1. A brief detour into the world of insurance is warranted to illuminate the nature of plaintiff's existence. Lloyd's of London is an insurance market place where different individuals and entities, called "Names," buy and sell insurance risk. Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857-58 (5th Cir. 2003). Names serve as underwriters on insurance policies issued through Lloyd's. Id. at 858. For the purpose of administrative convenience, Names typically form "syndicates." Id. A syndicate, through an appointed managing agent, decides which insurance policies to underwrite on behalf of the Names that make up that syndicate. Id. Nonetheless, it is important to remember that "a Syndicate, being only a grouping of Names, has no contractual relationship with the insured." Id. at 859. Instead, "all liability is born by the individual Names who belong to the various Syndicates that have subscribed to a policy." Id. at 858.
II. DISCUSSION
A. Legal Standard
1. Subject matter jurisdiction
Requirements that underlie a court's subject matter jurisdiction must be considered sua sponte. Gonzalez v. Thaler, 132 S.Ct. 641, 648 (2012). The parties cannot waive or forfeit defects in subject matter jurisdiction. Id. Plaintiff's complaint states that subject matter jurisdiction in this case is based on diversity of citizenship among the parties. 28 U.S.C. § 1332; Compl. ¶ 5. Thus, the Court is obligated to consider whether plaintiff meets the requirements of the diversity jurisdiction statute.
Diversity jurisdiction requires complete diversity of citizenship between the parties, meaning that the citizenship of every plaintiff must be different from that of every defendant. Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1258 (5th Cir. 1988) (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267 (1806)). The party invoking a court's diversity jurisdiction has the burden of proving the existence of complete diversity. Id. at 1259. In this case, that burden falls on Underwriters. Underwriters has the obligation to specifically allege each party's citizenship. Stafford v. Mobil Oil Corp., 945 F.2d 803, 804-05 (5th Cir. 1991). "Failure adequately to allege the basis for diversity jurisdiction mandates dismissal." Id.
2. Diversity jurisdiction and Lloyd's insurance syndicates
A Lloyd's of London insurance syndicate is treated like an unincorporated association for purposes of assessing diversity jurisdiction. See Corfield, 355 F.3d at 858 (approvingly citing authority for the proposition that syndicates have "no independent legal identity"); Underwriters at Lloyd's, London v. Osting-Schwinn, 613 F.3d 1079, 1088-89 (11th Cir. 2010) (holding that "[b]oth legally and structurally, the Lloyd's syndicates are classic examples of unincorporated associations"); Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314, 319 (7th Cir. 1998) ("the underwriting syndicates must be treated like partnerships when determining their citizenships"). Therefore, like all unincorporated associations, the citizenship of a Lloyd's syndicate for purposes of diversity jurisdiction is determined by the citizenship of its constituent members. See Royal Ins. Co. v. Quinn-L Capital Corp., 960 F.2d 1286, 1292 (5th Cir. 1992) (citing Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990)) (stating the rule that the citizenship of an unincorporated association is determined by the citizenship of its members). That would be the Names that make up the syndicate.
B. Application
Underwriters' complaint states simply that "Underwriters at Lloyd's is a foreign insurance syndicate." Compl. ¶ 1. This allegation is insufficient to properly allege diversity of citizenship. As set forth above, insurance syndicates organized through the marketplace at Lloyd's of London are treated like unincorporated associations for purposes of diversity jurisdiction. Therefore, Underwriters must specifically allege the citizenship of each person or entity that makes up the syndicate. Underwriters has failed to do so. In the absence of a sufficient allegation of citizenship, the Court must dismiss this lawsuit without prejudice for failure to adequately plead subject matter jurisdiction. Cf. Osting-Schwinn, 613 F.3d at 1092 (requiring remand where citizenship of the various parties who were underwriters on a Lloyd's insurance policy was not shown); NL Indus., Inc. v. OneBeacon Am. Ins. Co., 435 F. Supp. 2d 558, 564 (N.D. Tex. 2006) (same).
Therefore, for the reasons set forth above it is hereby
ORDERED that plaintiff respond to this proposed disposition within 10 days of this date: and it is further
ORDERED that if plaintiff fails to respond, plaintiff's suit will be dismissed without prejudice for lack of subject matter jurisdiction and all pending motions will be denied as moot.
It is SO ORDERED this 29th day of January 2015.
/s/_________
ROYCE C. LAMBERTH
United States District Judge