1997 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-6-1997

Bromwell v. Michigan Mutual Ins

Precedential or Non-Precedential:

Docket 96-3181

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Recommended Citation

"Bromwell v. Michigan Mutual Ins" (1997). 1997 Decisions. Paper 121.

http://digitalcommons.law.villanova.edu/thirdcircuit_1997/121
Filed June 6, 1997 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

NO. 96-3181 

WILLIAM DAVID BROMWELL, Personal Representative of 

the Estate of ELIZABETH NAOMI BROMWELL, Deceased; 

JOHN DARROW, SR., Personal Representative of the 

Estate of JOHN DARROW, JR., Deceased; and ORMAND 

KEITH ADAMS and MITCHELL J. CORNWELL, Personal 

Representatives of the Estate of BRIAN KENT ADAMS, 

Deceased; and PETE L. WURM, 

Appellants 

v. 

MICHIGAN MUTUAL INSURANCE COMPANY and 

MICHIGAN AUTOMOBILE INSURANCE PLACEMENT 

COMPANY, 

Appeal from a Memorandum Order of the 

United States District Court 

for the Western District of Pennsylvania 

Civil Action No. 94-1696 

Argued January 10, 1997 

Before: COWEN, ALITO, and ROSENN, Circuit Judges 

Filed June 6, 1997 
William A. Loftus, Esq. (Argued) 

Shrager, McDaid, Loftus, Flum & 

 Spivey 

2001 Market Street 

32nd Floor, Two Commerce Square 

Philadelphia, PA 19103 

Daniel M. Berger, Esq. 

Berger Law Firm 

Frick Building 

Suite 912 

Pittsburgh, PA 15219 

Counsel for Appellants 

L. John Argento, Esq. 

Michael F. Nerone, Esq. 

Stephen R. Mlinac, Esq. (Argued) 

Dickie, McCamey & Chilcote 

Two PPG Place 

Suite 400 

Pittsburgh, PA 15222-5402 

Counsel for Appellees 

OPINION OF THE COURT 

ROSENN, Circuit Judge. 

This appeal, having wended a tortured procedural path to 

arrive finally at this court, raises an interesting issue 

concerning the extent of a federal court's jurisdiction: 

whether a federal district court, having previously

dismissed an action for lack of subject-matter jurisdiction, 

could properly exert jurisdiction over an identical state 

court action removed to that federal court by the 

defendants on diversity grounds. Having considered the 

jurisdictional limitations imposed on a federal court by 

statutory law and the doctrine of res judicata, we hold that 

the district court is precluded from exercising further 

jurisdiction over that claim and must remand the case to 

the state court from which it was removed. 

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I. 

The current litigation arose out of a tragic accident that 

occurred at the Breezewood Interchange of the 

Pennsylvania Turnpike on June 17, 1990. A tractor-trailer 

owned by Ralph Meyers Trucking, Inc. ("Meyers Trucking") 

and operated by David A. Stacey "rear-ended" a motorcycle 

operated by Brian Kent Adams, on which Elizabeth Naomi 

Bromwell was a passenger, and then "rear-ended" a second 

motorcycle operated by John Darrow, Jr. Stacey's truck 

pushed the two motorcycles into the rear of another

tractor-trailer, driven by Pete L. Wurm. The three 

motorcyclists, Adams, Bromwell, and Darrow, were killed in 

the collision and Wurm suffered serious physical and 

psychological injuries. 

Representatives of the estates of the three deceased 

motorcyclists individually brought actions against Meyers 

Trucking and Stacey for wrongful death and negligence; 

Wurm brought an action against Meyers Trucking and 

Stacey for negligence. These actions were filed in the United 

States District Court for the Western District of 

Pennsylvania and were consolidated into a single case, with 

jurisdiction premised on diversity grounds pursuant to 28 

U.S.C. § 1332. Both Meyers Trucking and Stacey are 

citizens of Michigan, Wurm is a citizen of Missouri, and the 

three decedents were citizens of Maryland. 

On January 27, 1992, the district court granted a motion 

for partial summary judgment filed by the estate 

representatives and Wurm (hereinafter collectively referred 

to as "Appellants") on the issue of liability. The Appellants 

subsequently entered into a settlement agreement and 

release with Meyers Trucking's insurers, Michigan Mutual 

Insurance Company and Michigan Automobile Insurance

Placement Facility (hereinafter referred to collectively as 

"Appellees"). The terms of the settlement agreement are, in 

pertinent part: 

 For and in consideration of the sum of Seven 

Hundred and Fifty Thousand Dollars ($750,000.00) 

plus whatever other liability insurance coverage that 

may be declared available by judgment of any Court as 

the result of any Declaratory Judgment action now 

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pending or to be filed . . . hereby fully and forever 

release, acquit and discharge Ralph Meyers Trucking, 

Inc. and David Stacey to the full extent of their 

personal and/or corporate liability (while at the same 

time preserving our rights to pursue to the full extent 

possible the limits of insurance coverage available to 

either David Stacey and/or Ralph Meyers Tucking, Inc. 

pursuant to policies of insurance issued by Michigan 

Mutual and Michigan Automobile Insurance Placement 

Facility, the extent of said coverage having been placed 

at issue in the U.S. District Court for the Western

District of Pennsylvania at Civil Actions Nos. 92-0183 

and 92-1172 and/or which may be placed in issue in 

another court of competent jurisdiction) from any and 

all actions . . . by John Darrow, Jr., Elizabeth Naomi 

Bromwell, Pete L. Wurm, and Brian Kent Adams or our

property sustained or received on or about the 17th

day of June, 1990 when a vehicular accident occurred 

in the vicinity of the Breezewood Interchange of the 

Pennsylvania Turnpike for which injuries, losses and 

damages we claim Ralph Meyers Trucking, Inc. and 

David Stacey to be legally liable and on account of

which suit was brought in the United States District 

Court for the Western District of Pennsylvania at Civil 

Actions Nos. 90-1120, 90-1608, and 91-1154, it being 

understood and agreed that the acceptance of said sum 

is in full accord and satisfaction of a disputed claim 

and that the payment of said sum is not an admission 

of liability by Ralph Meyers Trucking, Inc. and David 

Stacey. 

The agreement further addressed the pending declaratory 

judgment action brought by the Appellants against the 

Appellees, stating: 

 It is further agreed and understood that this release 

and settlement agreement is not intended to 

compromise, reduce or in any way affect the continued 

prosecution or outcome of the Declaratory Judgment 

Actions filed by us and Michigan Mutual Insurance 

Company/Michigan Automobile Insurance Placement 

Facility at Nos. 92-0183 and 92-1172 in the United 

States District Court for the Western District of 

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Pennsylvania or of any other Declaratory Judgment 

action that may be filed or of any appeals that may be 

taken therefrom. It is further agreed and understood by 

the parties hereto that the within Settlement 

Agreement and Release will not be raised as a defense 

in any Declaratory Judgment action. It is also 

acknowledged that all parties hereto retain their right 

to appeal any judgment reached in any Declaratory 

Action. 

The district court entered an order on August 13, 1993, 

approving this settlement agreement and dismissing the 

action "without prejudice to any claims which may arise 

under the settlement agreement." No order was issued with 

regard to the district court's previous grant of summary 

judgment in favor of the Appellants on the issue of liability. 

At the time the district court dismissed this matter, two 

additional actions were pending in federal court. The 

Appellants had filed a complaint in the United States 

District Court against Meyers Trucking and Stacey, seeking 

a declaratory judgment pursuant to the Federal Declaratory 

Judgment Act, 28 U.S.C. § 2201. In this action, the

Appellants sought a declaration that the incident which 

occurred on June 17, 1990, constituted three separate 

accidents, and therefore the available liability insurance 

coverage would be $2,250,000 and not the $750,000 

available for a single accident. The district court dismissed 

this action against Meyers Trucking and Stacey for lack of 

subject-matter jurisdiction. The action concerned only the 

scope of the available insurance coverage and thus 

realigned Meyers Trucking and Stacey with the Appellants 

against the Appellees. Since Meyers Trucking, Stacey, and 

the Appellees are all Michigan residents, the realignment 

destroyed diversity of citizenship. No other basis for federal 

court jurisdiction existed in that action. 

The Appellees brought the second action against the

Appellants, Meyers Trucking, and Stacey. This complaint 

purported to raise a federal question but the gravamen of 

the declaratory judgment action was the interpretation of 

the term "accident" in the insurance policy. The district 

court dismissed this action for lack of subject-matter 

jurisdiction, concluding that the Appellees were precluded 

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from bringing this action because there was no underlying 

judgment of liability, a prerequisite to the only possible 

claim under federal law. 

Following the dismissal of their action, the Appellants 

filed a Motion to Reconsider, which the district court 

denied. The court concluded that the error in pleadings 

that led to the initial dismissal had not been corrected. 

Additionally, the court stated that "[i]f this Court has 

subject matter jurisdiction over the parties' dispute, one or 

more of the parties must have an action for coercive relief-- 

damages in this case--against the others." Darrow v. Ralph

Meyers Trucking, Inc., C.A. No. 92-183, mem. order at 3 

(W.D. Pa. Sept. 3, 1993). The court then granted the 

Appellants leave to amend the complaint. The Appellants 

chose, however, to file a second declaratory judgment 

action in the federal district court. 

The Appellants filed this second declaratory judgment 

action against only the Appellees; Meyers Trucking and 

Stacey were not parties to the action. The Appellants 

premised jurisdiction on diversity grounds, and diversity 

was not defeated due to a realignment of the parties, as 

had occurred in the previous action. The district court 

again dismissed the action without prejudice, however, this 

time for failure to allege a "case or controversy" sufficient to 

invoke the federal court's subject-matter jurisdiction under 

the Federal Declaratory Judgment Act. The court concluded 

that both "the claim and counterclaim in the present action 

do not contain within them a justiciable controversy." 

Bromwell et al. v. Michigan Mutual Insur. Co. et al. , C.A. No. 

93-1602, mem. op. at 16 (W.D. Pa. Mar. 28, 1994). Again, 

the district court focused on the absence of an underlying 

judgment as the main bar to prosecution of this complaint 

and the accompanying counterclaims. Thus, the court

dismissed the Appellants' complaint and the Appellees' 

counterclaims without prejudice. 

Rather than appeal the district court's decision to

dismiss their complaint without prejudice, the Appellants 

filed an action in the Court of Common Pleas of Bedford 

County, Pennsylvania. This complaint repled the same 

request for declaratory relief concerning the definition of the 

term "accident" in the insurance policy as was raised in the 

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federal district court. Additionally, this state law action 

sought a declaration that there was separate liability 

coverage on both the tractor and on the trailer. The 

Appellants later dropped their first contention that there 

were three separate accidents under the terms of the 

insurance policy. They proceeded only on their claim that 

the tractor and the trailer were separate vehicles under 

both the insurance policy and federal law and that 

therefore each was covered for $750,000 under the terms of 

the policy, and each injured party was entitled to a total of 

$1,500,000.00. 

The Appellees removed this case to the United States 

District Court for the Western District of Pennsylvania and 

moved to dismiss the action for failure to state a claim on 

which relief could be granted pursuant to Rule 12(b)(6) of 

the Federal Rules of Civil Procedure. The Appellantsfiled a 

motion to remand the matter back to state court. 

Magistrate Judge Francis X. Caiazza issued a Report and 

Recommendation advising the district court to deny the 

motion to remand and to determine the justiciability of the 

claim under the Federal Declaratory Judgment Act. District 

Court Judge Robert J. Cindrich adopted the Report and 

Recommendation as the opinion of the district court. 

Judge Caiazza issued a second report and 

recommendation on the matter, recommending that the

Appellees' motion to dismiss should be granted for lack of 

subject-matter jurisdiction. The court adopted this report 

and recommendation as the opinion of the court and 

ordered that the Appellants' complaint be dismissed. The 

court also held there was no subject matter jurisdiction for 

a Pennsylvania court under the Pennsylvania Declaratory 

Judgments Act. The Appellants brought this timely appeal, 

arguing that the district court lacked jurisdiction over this 

case as a matter of res judicata and that the court therefore 

had no power to dismiss the Appellants' complaint. 

II. 

This court exercises plenary review over jurisdictional 

issues. Anthuis v. Colt Indus. Operating Corp. , 971 F.2d 

999, 1002 (3d Cir. 1992). In the present matter, the 

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Appellants assert that the district court erred in exercising 

jurisdiction over the removed complaint, originallyfiled in 

state court, because the federal court had previously 

determined that it lacked subject-matter jurisdiction over 

an identical claim brought by the Appellants in the federal 

court. Additionally, the Appellants assert that the district 

court erred when, upon concluding that it lacked subjectmatter jurisdiction over the removed state court action, it 

dismissed the action rather than remand it to the state 

court. The Appellants first propose that the district court 

erred in its March 28, 1994, order dismissing their

complaint for failing to raise a justiciable claim. The 

correctness of the district court's order is not properly 

before this court at the present time. The Appellants failed 

to file a timely appeal of this decision, choosing instead to 

bring a new, albeit identical, claim in state court. Therefore, 

the district court's decision is final and the matter cannot 

now be challenged as part of this appeal. 

The gravamen of the Appellants' reviewable argument is 

that the district court improperly exercised jurisdiction over 

their state law claim when the Appellees removed the 

matter to the federal court, and that the district court 

further erred by not remanding the matter to the state 

court once it concluded that it lacked subject-matter 

jurisdiction over the dispute. The existence of subjectmatter jurisdiction over an action is a prerequisite to its 

removal to federal court. 28 U.S.C. § 1441; Brown v.

Francis, 75 F.3d 860, 864-65 (3d Cir. 1996). Section 1441 

states that "any civil action brought in a State court of 

which the district courts of the United States have original 

jurisdiction, may be removed . . . to the district court of the 

United States for the district and division embracing the 

place where such action is pending." In its March 28, 1994 

order, the district court dismissed the Appellants' action 

after concluding that the Appellants had not presented a 

justiciable claim under the Federal Declaratory Judgment 

Act. 

Once the court determined that it lacked jurisdiction over 

the matter in its March 28, 1994 order, that determination 

had a preclusive effect. "A dismissal for lack of subjectmatter jurisdiction, while `not binding as to all matters 

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which could have been raised,' is, however, conclusive as to 

matters actually adjudged." Equitable Trust Co. v.

Commodity Futures Comm'n, 669 F.2d 269, 272 (5th Cir. 

1982) (quoting Acree v. Airline Pilot Ass'n, 390 F.2d 199, 

203 (5th Cir.), cert. denied, 393 U.S. 852, 89 S. Ct. 88, 21 

L.Ed.2d 122 (1968)). In the present matter, the issue of 

whether a justiciable claim was presented under the

Federal Declaratory Judgment Act had previously been 

adjudicated in the March 28, 1994 order. The facts 

underlying the state law claim are identical to those 

underlying the previously dismissed federal court action. 

The Appellants had not obtained any judgment of liability 

in the interim, the lack of which presented the basis for the 

district court's original determination that there was no 

subject-matter jurisdiction to hear the case. Once the 

matter was removed to the federal district court by the 

Appellees, the Federal Declaratory Judgment Act again 

governed the justiciability of the Appellants' claim. The 

district court, having previously determined that it lacked 

subject-matter jurisdiction over the Appellants' case, was 

precluded by the principles of res judicata from exercising 

jurisdiction over this matter once it was removed by the 

Appellees. Thus, the district court simply could not exercise 

jurisdiction over the matter. 

Upon a determination that a federal court lacks subjectmatter jurisdiction over a particular action, the plain 

language of 28 U.S.C. § 1447(c) mandates that the matter 

be remanded to the state court from which it was removed. 

Section 1447(c) states: "If at any time beforefinal judgment 

it appears that the district court lacks subject matter 

jurisdiction, the case shall be remanded." The language of 

this section is mandatory -- once the federal court

determines that it lacks jurisdiction, it must remand the 

case back to the appropriate state court. International

Primate Protection League v. Administrators of Tulane Educ.

Fund, 500 U.S. 72, 87 (1991); Maine Assoc. of

Interdependent Neighborhoods v. Commissioner, Maine Dep't

of Human Svcs., 876 F.2d 1051, 1054 (1st Cir. 1989). 

Therefore, the district court erred when it dismissed the 

matter rather than remand it to the state court. 

The Appellees contend that the district court did not err 

in dismissing the matter under the "futility exception" to 

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§ 1447(c), which allows a district court to dismiss an action 

rather than remand it to the state court when remand 

would be futile because the state court also would lack 

jurisdiction over the matter. This court has never 

recognized the futility exception, and the Supreme Court 

has, in dicta, expressed a reluctance to recognize such 

discretion under the removal statute. See International

Primate, 500 U.S. at 89 (noting that literal words of 

§ 1447(c) grant district court no discretion to dismiss 

matter). Thus, we turn to the case law of other circuits to 

consider the merits of this proposed exception. 

This proposed "futility exception," a relatively new 

concept, has been recognized only by the Fifth and Ninth 

Circuits. See Bell v. City of Kellog, 922 F.2d 1418, 1425 

(9th Cir. 1991) (ruling that dismissal was appropriate where 

remand was futile); Arasco, Inc. v. Glenara, Ltd., 912 F.2d 

784, 787 (5th Cir. 1990) (permitting dismissal where 

remand would be futile because federal court's 

determination that state court lacked jurisdiction bound 

state court). However, the Fourth and Seventh Circuits 

have both expressly rejected the existence of this futility 

exception. See Roach v. West Virginia Reg'l Jail &

Correctional Facility Auth., 74 F.3d 46, 49 (4th Cir. 1996) 

(noting that "the futility of a remand to the West Virginia 

state court does not provide an exception to the plain 

meaning of § 1447(c)"); Smith v. Wisconsin Dep't of

Agriculture, 23 F.3d 1134, 1139 (7th Cir. 1994) (citing 

International Primate and stating that Supreme Court has 

"squarely rejected" any futility exception to§ 1447(c)). The 

Tenth Circuit has also expressly rejected this proposed 

exception in an unpublished opinion. Jepsen v. Texaco,

Inc., 68 F.3d 483, 1995 WL 607630, at *3 (10th Cir. 1995) 

(noting that Supreme Court has expressly rejected futility 

exception in International Primate). Additionally, the First 

Circuit, while not expressly refusing to adopt the futility 

exception, stated that "the fact that we believe a certain 

legal result unlikely, as a matter of state law, is not 

sufficient grounds for reading an exception into the 

absolute statutory words "shall be remanded." Maine Ass'n, 

876 F.2d at 1055 (emphasis in original). Even the Second 

Circuit, which once indicated that it might consider the 

futility exception, Mignogna v. Sair Aviation, Inc., 937 F.2d 

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37, 41 (2d Cir. 1991), has recently recognized that such an 

exception probably does not exist in light of the Supreme 

Court's opinion in International Primate. Barbara v. New

York Stock Exchange, 99 F.3d 49, 56 n.4 (2d Cir. 1996). 

In light of the express language of § 1447(c) and the 

Supreme Court's reasoning in International Primate, we 

hold that when a federal court has no jurisdiction of a case 

removed from a state court, it must remand and not 

dismiss on the ground of futility. Having concluded that no 

such exception exists, it is unnecessary for us to address 

the Appellees' argument that remand would be futile

because the Appellants have also failed to raise a justiciable 

claim under state law. Once the district court determined 

that it lacked subject-matter jurisdiction over the

Appellants' claim, the district court was obligated to 

remand the matter to the state court under the express 

language of § 1447(c). Whether the matter is justiciable 

under state law is a matter for the state court to decide. 

III. 

The order of the district court dismissing the Appellants' 

complaint is vacated and the matter is remanded to the 

district court with instructions to remand the case to the 

Court of Common Pleas of Bedford County, Pennsylvania. 

Each side to bear its own costs. 

A True Copy: 

Teste: 

Clerk of the United States Court of Appeals

for the Third Circuit

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