UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

LIBERTY MUTUAL FIRE INSURANCE

COMPANY,

Plaintiff-Appellee,

v.

JEROME HAYES,

Defendant-Appellant,

No. 96-2384

and

RICKY A. CUTHBERT; SOUTH

CAROLINA FARM BUREAU MUTUAL

INSURANCE COMPANY,

Defendants.

Appeal from the United States District Court

for the District of South Carolina, at Beaufort.

Dennis W. Shedd, District Judge.

(CA-95-3687-9-19)

Argued: May 9, 1997

Decided: September 15, 1997

Before MURNAGHAN and NIEMEYER, Circuit Judges, and

FABER, United States District Judge for the

Southern District of West Virginia, sitting by designation.

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Vacated and remanded by unpublished per curiam opinion.

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COUNSEL

ARGUED: Harold Fred Kuhn, Jr., MOSS & KUHN, P.A., Beaufort,

South Carolina, for Appellant. Bert Glenn Utsey, III, SINKLER &

BOYD, P.A., in Charleston, South Carolina, for Appellee.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

On April 16, 1994, Jerome Hayes ("Hayes") borrowed a 1971

Volkswagen from Ricky A. Cuthbert ("Cuthbert") for the purpose of

attending the funeral of his mother. Hayes resided in Atlanta, Georgia, and the funeral was held in Beaufort County, South Carolina.

Leaving the funeral, Hayes developed engine trouble and, as the

Volkswagen slowed, the car was rear-ended by another vehicle driven

by Mary Eldonia Myers ("Myers").

Hayes was injured in the wreck and sued Myers for $150,000.00

in the Court of Common Pleas of Beaufort County. The following

insurance policies were implicated: (1) A policy with liability limits

of $15,000.00 issued by Catawba Insurance Company ("Catawba") to

Myers; (2) a policy issued by South Carolina Farm Bureau Mutual

Insurance Company ("Farm Bureau") which provided $30,000.00 in

underinsured coverage to Hayes; and (3) a policy issued by Liberty

Mutual Insurance Company ("Liberty Mutual") to Cuthbert which

provided $25,000.00 in uninsured/underinsured coverage.

Catawba paid the limits of its policy to Hayes; in return, Hayes

signed a covenant not to execute in favor of Myers and Catawba. This

apparently ended the underlying tort suit in the Beaufort County

Common Pleas Court.

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Liberty Mutual then filed the present action in the United States

District Court for the District of South Carolina under the federal

Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202. Jurisdiction is

based solely on diversity of citizenship. The original defendants were

Hayes, Cuthbert and Farm Bureau. Liberty Mutual sought an order

declaring: (1) that Georgia law governs the interpretation of its policy

covering Cuthbert's automobile; (2) that the Farm Bureau policy provides primary underinsured motorist coverage to Hayes; (3) that the

Liberty Mutual policy provides secondary underinsured motorist coverage to Hayes; (4) that any liability of Liberty Mutual to Hayes

should be reduced by sums received from Myers and Catawba; and

(5) that coverage afforded by Liberty Mutual to Hayes be reduced by

all sums received by Hayes from Farm Bureau.

Liberty Mutual asserted in the complaint that the amount in controversy exceeds $50,000.00. When the district court expressed its concern that the jurisdictional amount was not present, Liberty Mutual

took the position that the full amount of its policy ($25,000.00) and

the full amount of the Farm Bureau policy ($30,000.00) were both in

issue, raising the total amount in controversy to $55,000.00.1 The district court agreed and retained jurisdiction.

Addressing the merits of the action, the district court reasoned that

Georgia law governs the Liberty Mutual policy since the contract of

insurance was formed in Georgia. Under Georgia law, the covenant

not to execute signed by Hayes was deemed to destroy his claim

against the Liberty Mutual policy. Accordingly, the court entered

summary judgment for Liberty Mutual. Prior to the entry of summary

judgment for Liberty Mutual, a settlement was reached with regard to

defendant Farm Bureau. The terms of that settlement are not before

this court.

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1 The district court received very little assistance from the attorneys in

this case with regard to the jurisdictional issue. When the court requested

briefs on this point, the plaintiff filed a cursory brief with little analysis

or authority and the defendant filed no brief at all. Likewise, this court

received very little assistance when it requested specific briefing of the

jurisdictional issue.

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This court need not address the merits of Liberty Mutual's action

nor the propriety of the district court's entry of judgment in its favor.

Although the district court found federal jurisdiction to exist, we do

not. Accordingly, the lower court's entry of judgment in favor of Liberty Mutual was made without authority and must be vacated.

The federal Declaratory Judgment Act does not confer jurisdiction

upon the federal courts. A district court must have independent subject matter jurisdiction over the action, either diversity of citizenship

or federal question. Aetna Cas. & Surety Co. v. Quarles, 92 F.2d 321,

323-24 (4th Cir. 1937). In this case, Liberty Mutual filed its declaratory judgment action on the basis of diversity. In satisfying the jurisdictional amount, Liberty Mutual aggregated the policy limit of its

own coverage at issue, $25,000.00, and the limit of the Farm Bureau

policy, $30,000.00. However, as more fully set forth below, Liberty

Mutual may not aggregate the limits of these two policies to satisfy

the jurisdictional amount.2

The rules of aggregation can be stated fairly simply. If a single

plaintiff sues a single defendant, the plaintiff may aggregate the value

of all claims to satisfy the jurisdictional amount, regardless of

whether the claims have any factual connection. In the case of multiparty litigation, however, claims by or against co-parties generally

may not be aggregated to meet the jurisdictional amount. If several

plaintiffs join together to sue a single defendant, aggregation is

allowed only if the plaintiffs' claims arise from a common and undivided interest. Likewise, if a single plaintiff joins several parties as

defendants, the plaintiff may not aggregate the various claims unless

the defendants' liability is common, undivided or joint. 15 James

Wm. Moore et al., Moore's Federal Practice§§ 102.108(1)-

102.108(3) (3d ed. 1997).

The present action involves an attempt by a single plaintiff to

aggregate claims against multiple defendants. In factually similar

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2 The court notes that this appeal also presents the interesting issue of

the retroactive application of the increase in the jurisdictional amount

from $50,000.00 to $75,000.00. Because plaintiff's declaratory judgment

action fails to meet the lesser requirement, the court does not reach this

issue.

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cases, courts generally have not allowed aggregation of claims when

an insured sues for coverage on a loss or an insurer sues for a declaration of non-coverage. See Metropolitan Life Ins. Co. v. Ditmore, 729

F.2d 1, 8 (1st Cir. 1984) (denying aggregation of health insurer claims

for individual overpayments); Niagara Fire Ins. Co. v. Dyess Furniture Co., 292 F.2d 232, 233 (5th Cir. 1961) (denying aggregation

where three insurance companies issued separate policies on a single

building under which each insurer was required to contribute a specified percentage in the event of a loss); Century Ins. Co. v. Mooney,

241 F.2d 910, 912-13 (10th Cir. 1957) (denying aggregation where

four insurers sought declaratory judgment of non-coverage for casualty loss).

The fact that this is a declaratory judgment action has little significance. As Professor Moore has stated, a determination of the amount

in controversy in a declaratory judgment action is essentially the same

as in other types of litigation requiring a jurisdictional amount. See 12

Moore, § 57.13(2). However, in a declaratory judgment action, the

amount in controversy is not always obvious or certain. Faced with

a declaratory judgment action that does not clearly satisfy the jurisdictional amount requirement, courts should measure the value of the

object of the litigation. Hunt v. Washington Apple Advertising Comm.,

433 U.S. 333, 347 (1976). The Hunt case forms the basis of Liberty

Mutual's argument in favor of jurisdiction. Liberty Mutual contends

that Hayes' claim of entitlement to full recovery of the coverage provided by both Liberty Mutual and Farm Bureau, a sum of $55,000.00,

is the value of the object of the litigation. Thus, Liberty Mutual submits that the jurisdictional amount is satisfied.

Liberty Mutual's argument misses the mark. First, the total value

of the two policies at issue does not represent the total value of the

present declaratory judgment action. In determining the value of the

object of litigation, the majority of courts follows the "plaintiff

approach," in which the court considers only the value of the controversy to the plaintiff. See 12 Moore, § 57.13(2)(d). This court, however, has employed the "either party approach," examining the

potential pecuniary effect that a judgment would have on either party

to the litigation. Government Employees Ins. Co. v. Lally, 327 F.2d

568, 569 (4th Cir. 1964).

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From the perspective of Liberty Mutual, a maximum of $30,000.00

is at issue. Liberty Mutual has sought a declaration that the Farm

Bureau policy provides primary underinsured coverage. Furthermore,

Liberty Mutual contends that any coverage afforded by its policy

should be reduced by any recovery received from both Catawba

Insurance and Farm Bureau. Thus, the amount in controversy according to the plaintiff's viewpoint falls below the jurisdictional amount

of $50,000.00.

Likewise, the value of the litigation from the defendants' perspective also falls short of $50,000.00. The two other insurers, Catawba

and Farm Bureau, have limited stakes in the action due to policy limits of $15,000.00 and $30,000.00, respectively; the stake of each is

therefore well below $50,000.00, and their aggregate stake is only

$45,000.00. Moreover, Hayes' total claimed damages stemming from

the accident are not at issue for purposes of determining the amount

in controversy in this declaratory judgment action. This declaratory

judgment action merely seeks a determination of the interaction of

three policies implicated by the underlying accident. Liberty Mutual's

main contention is that there should be some reduction in its coverage, if it must provide any, due to any sums paid by the other two

insurers.

Lastly, under the basic rules of aggregation, the policy limits

afforded by the three policies cannot be aggregated to satisfy the

jurisdictional requirement. Assuming that Hayes could recover an

amount equal to the total of all three policies' limits, such a sum does

not represent the value of the litigation for the limited purpose of

determining the amount in controversy. Hayes seeks to recover from

each insurer separately. Hayes does not state a joint and several claim

for insurance coverage. Aggregation is keyed to the type of recovery,

not the factual relatedness of the claims.

In Niagara Fire Insurance Company v. Dyess Furniture Company,

Inc., 292 F.2d 232 (5th Cir. 1961), the court confronted a similar

problem. There, each of three insurance companies issued a separate

policy naming the defendants as insureds and insuring them against

all direct loss by windstorm to a certain parcel of property. Defendants made three distinct claims from the insurers. The total amount

claimed from all three insurers exceeded the jurisdictional amount,

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but the amount claimed from any one insurer was insufficient to confer jurisdiction. The United States Court of Appeals for the Fifth Circuit found there was no jurisdiction. "The law has been too long

settled to require extensive discussion that when two or more plaintiffs, having separate and distinct demands, unite in a single suit for

convenience of litigation, their claims cannot be aggregated to make

up the jurisdictional amount." Id. at 233 (citations omitted).

Under the general rules of aggregation, Liberty Mutual cannot

aggregate the policy limits to satisfy the jurisdictional amount. The

fact that the instant case involves insurers on both sides of the ledger

does not alter the outcome. Neither Hayes' total claim for damages,

nor the total of the underinsured motorist policies, may serve to satisfy the jurisdictional amount. Accordingly, the judgment of the district court is vacated and this action is remanded for dismissal

pursuant to Rule 12(h)(3) of the Federal Rules of Civil Procedure.

VACATED AND REMANDED

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