## United States Court of App eals

F O R T H E E I G H T H

C I R C U I T

__ __ __ __ __ _ No. 1 1- 14 29

__ __ __ __ __ _ Cas cad es Deve lo pm en t o f Mi nn es ot a, * LLC, do in g b us in es s as Anytim e * Fi tn es s, In c.; As so ci at ed Ins ur an ce * Age nt s, In c.; Ni ch ol as Newto n; * W es tp or t In su ran ce Co rp or at io n, *

* Pl ai nt iff s - Ap pe ll an ts , *

* App eal fro m

th e Uni te d S ta te s
v. * Dis tri ct Co ur t fo r th e
* Dis tri ct of M in ne so ta

. Nati on al Sp eci al ty Ins ur an ce, al so * kn own as NSI ; J ad e Ja ni na Ben so n, *

an d h er l eg al gu ard ia ns Jef frey Arthu r * Ben so n a nd Jan in a Faye Ben so n; W es t * Ben d In su ran ce Co m

pa ny, *

* Defen da nt s - Ap pe ll ees

. *

__ __ __ __ __ _ Su bm it te d: Nov em

be r 15 , 20 11 Fi le d: Apri l 4 , 20 12

__ __ __ __ __ _ Befo re WOL LMAN, MURPHY, an d B ENTON, Ci rcu it Ju dg es

.

__ __ __ __ __ _ BENTON, Circu it Ju dg e.

N i ch ol as Newto n, Cas cad es Dev el op m en t of Mi nn es ot a, LLC, Ass oc ia te d
In su ran ce Age nt s, In c., an d W es tp or t In su ran ce Co rp

. su ed W es t Ben d In su ran ce Co

.
an d Nati on al Sp eci al ty In su ran ce , se ek in g in de m ni fic at io n an d refo rm at io n of awor ke rs ’ co m pe ns at io n in su ran ce po l ic y

. The di st ric t co ur t gr an te d su m m ary jud gm en t to th e de f

en da nt s. Bec au se th e di st ric t co ur t la ck ed su bjec t m at te r juri sd ic ti on , th is co ur t v acat es an d re m an ds

.

The juri sd ic ti on al fact s are no t in di sp ut e. Cas cad es Dev el op m en t op erat ed a fit ne ss f a c i l i t y in In ve r Gro ve Heig ht s, Mi nn es ot a. In Sep te m be r 20 06 , i t ob ta in ed

wor ke rs ’ co m

pe ns a t i o n i ns ur an ce fro m Nati on al Sp eci al ty In su ran ce (a di vi si on of
W es t Ben d In su ran ce), th ro ug h a lo cal ag en cy , Ass oc ia te d In su ran c e A ge nt s. Nich ol as Newto n was an in su ran ce ag en t wit h Ass oc ia te d, bu t al so th e br ot he r of on e of Ca sc ad es ’ pr in ci pa ls

. Newto n pr om is ed hi s br ot he r to be gi n th e in su ran ce on Sep te m be r 1, b ut th e p ol ic y

di d n ot go in to effe ct un ti l Se pt em be r 20

.

An em pl oyee of Cas cad es was pe rm an en tl y di sa bl ed i n a c a r acci de nt on Sep te m be r 18

– b e f

o r e th e po li cy ’s effe ct iv e da te

. W es t Ben d refu se d to pa y th e

wor ke rs ’ co m

pe ns at io n cl ai m

. Paym en t was m ad e by Ass oc ia te d In su ran ce Age nt s’

erro r s

- a n d- om is si on s carr ie r, W es tp or t In su ran ce, whi ch ag reed to be a de fact o

wor ke rs ’ co m

pe ns at io n i ns ur er.

At th e sa m e ti m e, Cas cad es as si gn ed it s rig ht to in de m ni fic at io n ag ai ns t W es t Ben d to Newto n, Ass oc ia te d In su ra n c e A g en ts , an d W es tp or t In su ran ce. The

as si gn m en t s ta te s:

Cas cad es Dev el op m en t po ss es se s a rig ht s of in de m ni ty fo r
wor ke r s ’ co m

pe ns at io n cl ai m s an d de fen se co st s ag ai ns t W es t Ben d (“ Cl ai m ”) for the po te nt ia l li ab il it y to whi ch Cas cad es Dev el op m en t is

ex po se d be cau se of [th e em pl oyee]’ s wor ke rs ’ co m

pe ns at io n cl ai m

. Cas cad es Dev el op m en t as si gn s i ts Cl ai m to AIA, Nick Newto n an d W es tp or t.

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-It d oe s n ot li st an y sp eci fic co ns id erat io n p ro vi de d b y Newto n fo r th e as si gn m en t. 1

In Mar ch 20 09 , Cas cad es an d W es tp or t In su ran ce se tt le d th e em pl oyee’s cl ai m ag ai ns t Ca sc ad es , in cl ud in g an on go in g com pe ns at io n pl an

. Acco rd in g t o Newt on , he ha s n ot in cu rred an y

ou t-o f-p oc ke t l os s fr om

th e em pl oyee’s in

jury.

In Sep te m

be r 20 09 , Newto n, Cas cad es , Ass oc ia te d In su ran ce A g e n t s , an d
W es tp or t In su ran ce su ed W es t Ben d in st at e co ur t. The y so ug ht refo rm at io n of th e 2

wor ke rs ’ co m

pe ns at io n po li cy to refl ect an effe ct iv e da te of Sep te m be r 1, 20 07 , an d in de m ni fic at io n un de r th e re-f

or m ed co nt ract

. The y co nt en d th at Newto n’s pr om is e
to hi s br ot he r bo un d W es t Ben d to in su re Cas cad es effe ct i v e S e p t e m be r 1. W es t Ben d rem ov ed th is cas e to fed eral co ur t un de r 28 U.S.C. § 14 41 , as se rti ng di ve rs it y juri sd ic ti on un de r 28 U.S.C. § 1 33 2.

The pl ai nt iff

s di d no t ch al le n g e s u b

je ct m at te r juri sd ic ti on at th e ti m e of

rem ov al

. On it s own , th e di st ric t co ur t or de red W es t Ben d to sh ow cau se fo r di ve rs it y juri sd ic ti on , no ti ng th at th e p le ad in gs di d n ot rev eal th e ci ti zen sh ip of t he m em be rs of Cas cad es

. Bo t h p l a i n t iff Newto n an d de fen da nt W es t Ben d are ci ti zen s of
W is co ns in

. Howev er, th e di st ric t co ur t ret ai ne d juri sd ic ti on , fin di ng th at W es tp or t

– a Mi ss ou ri co rp or at io n – is th e real pa rty in in te res t an d th at Newto n’s pr es en ce di d

no t de st ro y di ve rs it y be cau se he is a no m in al pa rty. The di st ric t co ur t gr an te d W es t Ben d’s m ot io n fo r su m

m ary jud gm en t, d is m is si ng all cla im s o n t he m eri ts

.

The ag reem en t reci te s th e co ns id erat io n fo r th e as si gn m en t as “ th e as su m pt io n 1 of th e ob li ga ti on to de fen d an d i n d e mnif y Cas cad es Dev el op m en t fo r th e [em pl oyee’s] work ers ’ co m

pe ns at io n c la im

un de rta ke n b y

AIA and W es tp or t.”

The co m pl ai nt al so li st s as de fen da nt s th e em pl oyee an d he r le ga l gu ard ia ns , 2 who ha ve no t part ic ip at ed in th is cas e, an d Nati on al Sp eci al ty In su ran ce, whi ch is a di vi si on of West Ben d.

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-The th res ho ld is su e is whe th er th e di st ric t co ur t ha d su bjec t m at te r juri sd ic ti on

.

Thi s co ur t rev ie ws su bjec t m at te r juri sd ic ti on de no vo

. Sl at er v. Rep ub li c-V

an gu ar d
I n s . C o . , 65 0 F.3 d 11 32 , 11 34 (8 th Ci r. 20 11 ). “ If th e di st ric t co ur t di d no t h a v e

o r i gi na l juri sd ic ti on whe n th e cas e was rem ov ed
, rem an d to st at e co ur t is req ui red
,
ev en aft er fi na l ju dg m en t . . . .” Id

.

Div ers it y juri sd ic ti on req ui res “ co m pl et e di ve rs it y , th at is ‘w he re no de fen da nt ho ld s ci ti zen sh ip in th e sa m e st at e whe re an y p l a in ti ff ho ld s ci ti zen sh ip .’ ” Ju nk v. Term in ix In t’l Co

. , 62 8 F.3 d 43 9, 44 5 (8 th Ci r. 20 10 ), cer t. d e n i e d
, 1 3 2 S. Ct

. 94 (2 01 1)
, qu ot in g In re Prem pr o Pro ds

. Lia b. Lit

ig

. , 59 1 F.3 d 61 3, 62 0 (8 th Ci r.), cer t. de ni ed
, 13 1 S. Ct

. 47 4 (2 01 0)

. “ Howev er, if th e ‘non d i v e r s e’ pl ai nt iff is no t a real
pa rty in in te res t, a n d i s pu rel y a fo rm al or no m in al pa rty, hi s or it s pr es en ce in th e

cas e m ay be ig no red in de te rm in in g juri sd ic ti on .” Io wa Pub. Ser v. Co

. v. Med ic in e Bo w Co al Co

. , 55 6 F.2 d 40 0, 40 4 (8 th Ci r. 19 77 ), ci ti ng Sa le m Trus t C o . v . Ma nufa ct ur er

s’ Fin . Co. , 26 4 U.S. 1 82 (19 24 ).

A “ ‘real pa rty in in te res t’ is th e pe rs on who
, un de r go ve rn in g su bs ta nt iv e la w, is en ti tl ed to en fo rce th e rig ht as se rte d.” Id

. In th i s di ve rs it y cas e, th e go ve rn in g

su bs ta nt iv e la w i s th e la w o f M in ne so ta

. Se e Er ie R.R. Co . v . To m pk in s , 3 04 U.S. 64 , 78 (1 93 8)

. Cas cad es arg ue s th at it as si gn ed it s cl ai m s un de r th e po li cy to Newto n,

an d he is th eref

or e en ti tl ed to en fo rce it s rig ht s to in de m ni fic at io n ag ai ns t W es t Ben d

an d t o re fo rm at io n o f th e in su ran ce p ol ic y

.

Cas cad es ’ gr at ui to us as si gn m en t to Newto n is va li d un de r Mi nn es ot a la w. Se e Mi nnes ot a Mut

. Life In s. Co

. v. And

er so n , 50 4 N.W .2d 28 4, 28 7 (Mi nn

. Ct

. App

. 19 93 ), ci ti ng Bo wen v. Wi ll ar d , 28 1 N.W

. 25 6, 25 9 (Mi nn

. 19 38 ). “ Und er Mi nn es ot a la w, no pa rti cu la r fo rm of wor ds is req ui red fo r an as si gn m en t, bu t th e as si gn or m us t

m an ife st an in te nt t o tra ns fer an d m us t no t ret ai n an y co nt ro l or an y po wer of

rev oc at io n.” Id

. at 28 6, ci ti ng Gua ra nt

y St at e Ba n k o f S t

. Paul v. Lind

qu is t , 30 4
N.W .2d 27 8, 28 0- 81 (Mi nn

. 19 80 ). “ [A] gr at ui to us as si gn m en t is irr ev oc ab le if ‘the

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-as si gn m en t is in a writ in g ei th er si gn ed or un d er se al th at is de li ve red by th e

as si gn or .’ ” Lans in g v. Co ncr et e Des ig n Sp eci al

ti es , In c. , No. A05 -1 54 3, 20 06 W L 12 29 63 8, at *6 (Mi nn . Ct. Ap p. May 9, 2 00 6) (un pu bl is he d)
, qu ot in g Res ta tement (Sec on d) of Con tra cts § 33 2 (1 98 1)

. The as si gn m en t in th is cas e is va li d, as it is in writ in g, s ig ne d b y

Cas cad es , and de li ve red to Newto n.

W es t Ben d arg ue s th at Newto n – de sp it e th e va li d as s i g n men t – is st il l no t

en ti tl ed to en fo rce an y rig ht to in de m ni fic at io n ag ai ns t W es t Ben d, be cau se he ha s no t in cu rred “ an y lo ss ari si ng fro m [th e em pl oyee]’ s acci de nt .” True , “ [t]he do ct rin e of in de m ni ty is ba se d up on th e id ea th at whe n on e is co m pe ll ed to pa y m on ey whi ch in jus ti ce an ot he r ou gh t to pa y , th e fo rm er m ay reco ve r of th e la tt er th e am ou nt act ua ll y p a i d un le ss ba rred by th e fo rm er’s wro ng fu l co nd uc t.” Geld er t v. Am er ic an Nat ’l
Ba nk , 50 6 N.W .2d 22 , 29 (Mi nn

. Ct

. App

. 19 93 ), ci ti ng Lund er be rg v. Bi er m an , 63 N.W .2d 35 5, 35 9 (Mi nn

. 19 54 ). Howe ve r, “ [a]n as si gn m en t op erat es to pl ace th e

as si gn ee in th e sh oe s of the as si gn or , an d pro vi de s th e as si gn ee with th e sa me le ga l
ri gh ts as th e as si

gn or ha d be

fo re a s s i g nme nt .” Il

li no is Fa rm er

s In s. Co

. v. Gla ss Ser v. Co

. , 68 3 N.W.2d 7 92 , 80 3 (M in n. 2 00 4) (em ph as is ad de d)

.

W he n A as si gn s it s rig h t t o i nd em ni fic at io n to B , B rece iv es th e rig ht to rei m bu rs em en t fro m C fo r A ’s lo ss as as si gn or , no t B ’s lo ss as as si gn ee

. Se e Geld er t , 50 6 N.W .2d at 28 -2 9. In Geld er t , th e pa y ee of se ve ral st ol en ch eck s se tt le d wit h th e pa y or ba nk in ex ch an ge fo r $5 ,00 0 an d an as si gn m en t of th e pa y or ba nk ’s rig ht to in de m ni fic at io n ag ai ns t th e de po si ta ry an d co ll ect io n ba nk s. Id

. at 24

. The pa y ee

su ed th e de po si ta ry an d co ll ect io n ba nk s. The Mi nn es ot a Co ur t of App eal s he ld th at th e pa y ee’s reco ve ry un de r th e as si gn ed rig ht to in de m ni fic at io n was de te rm in ed by th e pa yo r ba nk /a ss ig no r’

s lo ss

. Id

. at 29

. The pa y ee/ as si gn ee’s lo ss was irr el ev an t. Id

.

The ke y in th is cas e is to id en ti fy th e rei m bu rs ab le lo ss fro m th e pe rs pe ct iv e of Cas cad es (th e as si gn or ), no t fro m th e pe rs pe ct i v e o f Newto n (th e as si gn ee).

-5

-Thro ug h it s se tt le m en t wit h th e in jure d em pl oyee, Cas cad es ’ li ab il it y was se t an d it s rig ht to in de m

ni fic at io n a ro se

. Se e Al

te rm at t v. Ar la n’s Dep’ t St or es , 16 9 N.W.2d 23 1, 23 2 (Mi nn

. 19 69 ) (p er cu ria m ) (“ [A] rig ht of in d e mn i t y a r i s es whe re th e on e

se ek in g in de m

ni ty ha s in cu rred li ab il it y be cau se of a br each of du ty owe d to hi m by th e on e so ug ht to be ch arg ed [an d] th e rig ht to reco ve r in de m ni ty is no t lo st by reas on of an y se tt le m en t wit h th e cl ai m an t.” (in te rn al qu ot at io n m ark s om it te d) ). Cas cad es

va li dl y as si gn ed it s rig ht to in de m ni fic at io n ag ai ns t W es t Ben d to Newto n. Newto n is th eref or e en ti tl ed to en fo rce t he ass ig ne d ri gh t t o i nd em ni ty.

Newto n is al so en ti tl ed to en fo rce th e as se rte d rig ht to refo rm at io n of th e in su ran ce po li cy

. “ An in su ran ce po li cy

. . . may b e refo rm ed by t he co ur ts if it can be pr ov ed th at : ‘(1) th ere was a va li d ag reem en t be twee n th e pa rti es ex pr es si ng th ei r real in te nt io ns ; (2) th e writ te n i ns tru m en t fa il ed to ex pr es s th e real in te nt io ns of th e pa rti es ; an d (3 ) th is fai lu re was du e to a m ut ua l m is ta ke of th e pa rti es , or a un il at eral

m is ta ke acco m

pa ni ed by frau d or in eq ui ta bl e co nd uc t by t h e o t h er pa rty.’ ”
Lea m in gt on Co

. v. Non

pr of it s’ In s. As s’ n , 61 5 N.W .2d 3 4 9 , 35 4 (Mi nn

. 20 00 ),

qu ot in g Nich ol

s v. Sh el ar d Na t’l Ba nk , 29 4 N.W.2d 7 30 , 73 4 (M in n. 1 98 0)

.

W es t Ben d m ai nt ai ns th at N e w t o n is no t a pa rty to th e in su ran ce po li cy an d th eref or e m ay no t se ek it s refo rm at io n. Howev er, pa rti es in pr iv it y wit h th e or ig in al
pa rti es to a co nt ract are en ti tl ed to refo rm at io n. Se e 66 Am

. Ju r. 2d Refo rm at io n of
In st ru m ent s § 60 (2 01 1) (“ Refo rm at io n m ay be ha d no t on ly by th e or ig in al pa rti es
to th e in st ru m en t bu t al so by th e fo ll owi ng : a real pa rty in in te res t cl ai m in g pr iv it y to th e in st ru m en t su ch as

. . . an a ss ig ne e .

. . .”); Res ta tement (Sec on d) of Con tra cts § 15 5 cm t. e (1 98 1) (“ Refo rm at io n m ay be gr an te d at th e req ue st of an y pa rty to th e

co nt ract

. . . or of a pa rty’ s su c c e s s o r in in te res t.”) ; cf

. Ma nd er fel d v. Kr ov it

z , 53 9
N.W .2d 80 2, 80 5 (Mi nn

. Ct

. App

. 19 95 ) (“ Refo rm at io n is ge ne ral ly al lo wed ag ai ns t th e or ig in al pa rti es to an in st ru m en t an d th os e in pr iv it y wit h th e im m ed ia te pa rti es .” (em ph as is ad de d) ). As an as si gn ee of Cas cad es ’ r i g h t s a s a n or ig in al pa rty to th e

co nt ract , Newto n i s i n p riv it y wit h t he ori gi na l part ie s and m ay see k re fo rm at io n o f

-6

-th e po li cy

. Se e La M o u r e a v. Rhud

e , 29 5 N.W

. 30 4, 30 7 (Mi nn

. 19 40 ) (“ A, by 3

co nt ract , se cu res a pr om is e fro m B. A m ay tra ns fer hi s rig ht of en fo rcem en t to C. C th ereb y su ccee ds to A’ s rig ht of act io n, an d, in co ns eq ue n ce, co m es in to th e rel at io ns hi p wit h A an d B whi ch we cal l pr iv it y of co nt ract .”); 76 C.J.S. Refo rm at io n of Ins tr um ent

s § 6 5 (2 01 1) (“ Ass ig ne es in pri vi ty wit h th e or ig in al pa rti es su ccee d

to th e rem ed y

of r efo rm at io n.” ).

Newto n – as Cas cad es ’ as si gn ee

– i s e n t it le d to en fo rce bo th th e rig ht to in de m ni fic at io n an d th e rig ht to refo rm at io n. He is a real pa rty in in te res t, de st ro y in g di ve rs it y juri sd ic ti on

. The di st ric t co ur t la ck ed su bjec t m at te r juri sd ic ti on an d sh ou ld ha ve rem an de d b ack to th e st at e co ur t.

* * * * * * *

The jud gm en t is va cat ed
, an d th e cas e rem an de d to th e di st ric t co ur t fo r rem an d
to st at e co ur t.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

In it s br ie f, W es t Ben d as su m es th at W es tp or t m ay as se rt t h e r i g h t to 3 refo rm at io n. W es tp or t – li ke Newto n – was no t an ori gi na l p art y to th e po li cy , a nd

– li ke Newto n – it s ab il it y to en fo rce th e rig ht to refo rm at io n ari se s fro m it s st at us as Cas cad es ’ as si gn ee.
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