Court Opinion

ID: 3192848
Source: CourtListenerOpinion
Date Created: 2016-04-12 03:04:22.700317+00
Date Added: 2024-06-11T14:47:01.955560
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 14-1944

THE TRAVELERS INDEMNITY COMPANY OF AMERICA,

                Plaintiff – Appellant,

           v.

PORTAL HEALTHCARE SOLUTIONS, L.L.C.,

                Defendant – Appellee.

------------------------------

AMERICAN INSURANCE ASSOCIATION; COMPLEX INSURANCE CLAIMS
LITIGATION ASSOCIATION,

                Amici Supporting Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge. (1:13-cv-00917-GBL-IDD)

Argued:   March 24, 2016                    Decided:    April 11, 2016

Before KING, DIAZ, and HARRIS, Circuit Judges.

Record supplemented   and   judgment   affirmed   by   unpublished   per
curiam opinion.

ARGUED:     G. Eric Brunstad, Jr., DECHERT LLP, Hartford,
Connecticut, for Appellant.    John Janney Rasmussen, INSURANCE
RECOVERY LAW GROUP, PLC, Richmond, Virginia, for Appellee.   ON
BRIEF: Kate M. O’Keeffe, DECHERT LLP, Hartford, Connecticut;
John Becker Mumford, Jr., Kathryn Elizabeth Kasper, HANCOCK,
DANIEL, JOHNSON & NAGLE, P.C., Glen Allen, Virginia, for
Appellant.   Laura A. Foggan, Matthew W. Beato, WILEY REIN LLP,
Washington, D.C., for Amici Curiae.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

      The Travelers Indemnity Company of America appeals from an

order entered in the Eastern District of Virginia directing it

to   defend   its    insured,     Portal          Healthcare   Solutions,        L.L.C.,

against a civil lawsuit pending in New York state court.                               As

explained below, we are satisfied to supplement the record on

appeal and affirm the judgment on the reasoning of the district

court.     See Travelers Indem. Co. of Am. v. Portal Healthcare

Sols.,     L.L.C.,    35   F.    Supp.     3d       765    (E.D.    Va.    2014)      (the

“Opinion”).

                                          I.

      On April 18, 2013, Dara Halliday and Teresa Green filed a

class-action complaint in New York on behalf of themselves and

others     (the     “class-action        complaint”).              The     class-action

complaint alleges that Portal and others engaged in conduct that

resulted in the plaintiffs’ private medical records being on the

internet for more than four months.                  During the alleged tortious

conduct, Portal was the insured under two insurance policies

issued by Travelers, one that spanned the period from January

2012 to January 2013, and another that ran from January 2013 to

January 2014 (together, the “Policies”).

      On   July   30,   2013,    Travelers          sued   Portal    in    the   Eastern

District    of    Virginia,     seeking       a    declaration      that    it   is   not

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obliged to defend Portal against the claims in the class-action

complaint.     That is so, Travelers maintains, because the class-

action    complaint      fails    to     allege       a    covered    publication        by

Portal.     Travelers and Portal each moved for summary judgment on

the duty-to-defend issue.              On July 17, 2014, the district court

ruled from the bench that Travelers is duty bound under the

Policies to defend Portal against the class-action complaint.

It   thus    granted     summary       judgment       in    favor     of   Portal,       as

memorialized in its Opinion.             This appeal ensued, and we possess

jurisdiction pursuant to 28 U.S.C. § 1291.

                                          II.

     Although      not   raised     in    the       district      court,   we    noted    a

potential     defect      in     the     declaratory         judgment      proceedings

concerning subject matter jurisdiction.                      In its complaint for

declaratory relief, Travelers avers that it is a Connecticut

corporation    and     that    Portal     is     a    limited      liability     company

organized    and   existing       under     the      laws    of    Nevada,      with   its

principal     place      of    business        in    Virginia.          According        to

Travelers,     the       district        court       possessed       subject      matter

jurisdiction pursuant to 28 U.S.C. § 1332, based on diversity of

citizenship.

     Because Portal is a limited liability company rather than a

corporation, however, its citizenship for purposes of diversity

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jurisdiction turns not on its place of formation or principal

place of business, but on the citizenship of Portal’s members.

See Cent. W. Va. Energy Co. v. Mountain State Carbon, L.L.C.,

636 F.3d 101, 103 (4th Cir. 2011); accord Johnson v. Columbia

Props.    Anchorage,       L.P.,       437 F.3d 894,    899        (9th     Cir.    2006)

(collecting rulings of various courts of appeals that limited

liability     companies         possess      citizenship       of    their       members     for

purposes    of      diversity          jurisdiction).              Neither         Travelers’s

complaint     nor    the        original      record      on       appeal    revealed        the

citizenship of Portal’s members.                    Accordingly, on March 9, 2016,

our   Clerk      asked      the        parties      to      address        subject        matter

jurisdiction at oral argument.

      On March 21, 2016, three days prior to oral argument, the

parties    sought     to     supplement         the      record      on     appeal    with       a

Stipulation,     pursuant         to    Federal      Rule     of    Appellate        Procedure

10(e), identifying Portal’s three members and stipulating that

one was a citizen of Virginia and that the two others were

foreign    nationals       when    Travelers         filed     its    complaint.           As    a

result, Travelers and Portal agreed that they are completely

diverse for purposes of § 1332 jurisdiction.                               Consistent with

the   statutory      prescription            that    “[d]efective           allegations         of

jurisdiction      may      be    amended,       upon      terms,      in     the     trial      or

appellate courts,” see 28 U.S.C. § 1653, we hereby grant the

Rule 10(e) motion to supplement the record on appeal.                                     We are

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now also satisfied that Travelers and Portal have adequately

established diversity jurisdiction.           See Trans Energy, Inc. v.

EQT Prod. Co., 743 F.3d 895, 901 (4th Cir. 2014). *

                                     III.

     Turning to the substance of Travelers’s appeal, we commend

the district court for its sound legal analysis.                  The court

correctly explained that it was required under Virginia law to

“follow   the    ‘Eight   Corners’    Rule”   by   looking   to   “the   four

corners   of    the   underlying   [class-action]    complaint”    and   “the

four corners of the underlying insurance policies” to determine

whether Travelers is obliged to defend Portal.               See Travelers,
35 F. Supp. 3d at 769 (relying on Fuisz v. Selective Ins. Co.,

61 F.3d 238, 242 (4th Cir. 1995)).            The court also made clear

     *  It is not uncommon that litigants and trial courts fail
to identify and litigate jurisdictional issues.      See, e.g.,
Stahle v. CTS Corp., ___ F.3d ___, No. 15-1001, 2016 WL 806087,
at *2 n.1 (4th Cir. Mar. 2, 2016).       In such circumstances,
certain of our sister circuits remand “for further development
of the jurisdictional record.” See Siloam Springs Hotel, L.L.C.
v. Century Sur. Co., 781 F.3d 1233, 1239 (10th Cir. 2015);
Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374
F.3d 1020, 1020-21 (11th Cir. 2004) (per curiam). We encourage
litigants and their counsel — as well as the district courts —
to resolve jurisdictional omissions promptly, before addressing
other aspects of disputes that the federal courts may lack the
power to decide. See United States v. Wilson, 699 F.3d 789, 793
(4th Cir. 2012) (explaining that, absent subject matter
jurisdiction, “a court can only decide that it does not have
jurisdiction”).

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that,   “[u]nder     Virginia     law,    an    insurer’s     duty    to    defend   an

insured ‘is broader than its obligation to pay’ or indemnify an

insured,” see id. (quoting Brenner v. Lawyers Title Ins. Corp.,

397 S.E.2d 100, 102 (Va. 1990)), and that the insurer must “use

‘language clear enough to avoid . . . ambiguity’ if there are

particular types of coverage that it does not want to provide,”

see id. (quoting St. Paul Fire & Marine Ins. Co. v. S.L. Nusbaum

& Co., 316 S.E.2d 734, 736 (Va. 1984) (per curiam)).

       Applying    the    foregoing      principles,    the    Opinion      concluded

that    the     class-action      complaint      “at    least    potentially         or

arguably” alleges a “publication” of private medical information

by Portal that constitutes conduct covered under the Policies.

See Travelers, 35 F. Supp. 3d at 771 (internal quotation marks

omitted).          Such     conduct,      if    proven,       would     have    given

“unreasonable publicity to, and disclose[d] information about,

patients’ private lives,” because any member of the public with

an internet connection could have viewed the plaintiffs’ private

medical   records        during   the    time    the   records       were   available

online.       See id. at 772 (internal quotation marks omitted and

alteration in original).

       Put succinctly, we agree with the Opinion that Travelers

has a duty to defend Portal against the class-action complaint.

Given the eight corners of the pertinent documents, Travelers’s

efforts    to     parse    alternative      dictionary      definitions        do    not

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absolve it of the duty to defend Portal.         See Seals v. Erie Ins.

Exch., 674 S.E.2d 860, 862 (Va. 2009) (observing that the courts

“have been consistent in construing the language of [insurance]

policies, where there is doubt as to their meaning, in favor of

that   interpretation    which   grants   coverage,    rather   than   that

which withholds it” (quoting St. Paul Fire & Marine Ins. Co.,
316 S.E.2d at 736)).

       Having   carefully   assessed    the   record   and   the   written

submissions, together with the argument of counsel, we discern

no error.       We are therefore content to affirm the judgment on

the reasoning of the district court.

                            RECORD SUPPLEMENTED AND JUDGMENT AFFIRMED

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