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LANCE INT'L v. AETNA CAS. & SUR. CO.

February 9, 1967

LANCE INTERNATIONAL, INC., a Debtor in Possession, Plaintiff,
v.
The AETNA CASUALTY AND SURETY COMPANY et al. and Export-Import Bank of Washington, Defendants


Mansfield, District Judge.


The opinion of the court was delivered by: MANSFIELD

MANSFIELD, District Judge.

The principal question raised by plaintiff's motion is whether all 29 defendants may remove the case to this Court where the principal defendant (Export-Import Bank) would have had the right to remove if it had been sued alone, and where the facts and issues are substantially identical as to all. The background is as follows:

 On September 23, 1966, the plaintiff, a New York corporation, brought its suit for damages in the New York State Supreme Court against all defendants for breach of an export credit insurance policy under which the Export-Import Bank of Washington and each of the other defendants as co-insurers purported to agree to indemnify the plaintiff against nonpayment for goods sold and shipped by it to certain purchasers in Hong Kong and Okinawa. The complaint alleges that pursuant to the policy, which was issued on May 29, 1963, the plaintiff shipped construction materials to purchasers in Hong Kong and Okinawa which were not paid for by the purchasers within six months after invoices became due, with the result that plaintiff is owed the sum of $124,326.48 under the policy.

 The Export-Import Bank of Washington, which assumed 50% of the coverage provided by the policy in question, is a federal corporation, wholly owned by the Government of the United States, and created by Congress in 1947 pursuant to Title 12 U.S.C. § 635, which grants it broad authority to issue credit insurance for the purpose of promoting the export trade of the United States. Among the powers and functions granted to it are the right to join with private insurers in co-insuring exporters, to employ such private insurers as its agents in the issuance, servicing and adjustment of claims under such policies, to enter into joint ventures for the purpose of providing export credit insurance to American exporters, and "to sue and to be sued, to complain and defend in any court of competent jurisdiction".

 The defendants other than the Export-Import Bank of Washington are American insurance companies of national reputation, many of them having their principal offices in the State of New York - a fact which bars them from seeking removal on diversity grounds.

 On October 20, 1966, the suit was removed to this Court pursuant to a petition filed by all defendants, in which they claimed the right to remove pursuant to Title 28 U.S.C. § 1441(b) on the ground that this is a civil action over which the Court has original jurisdiction under 28 U.S.C. § 1331(a), and alternatively on the ground that the defendant Export-Import Bank of Washington, as an agency of the United States, may remove the action pursuant to 28 U.S.C. § 1442. Plaintiff now seeks to remand the case to the state court pursuant to 28 U.S.C. § 1447(c).

 If this action were limited to the Export-Import Bank, there could be no question about the latter's right to remove the suit against it to this Court pursuant to 28 U.S.C. § 1441(b), since it would be an action over which this Court would have original jurisdiction founded on a claim or right arising under the laws of the United States. 28 U.S.C. § 1331(a). The statute creating the Export-Import Bank expressly provides: "There is created a corporation with the name Export-Import Bank of Washington, which shall be an agency of the United States of America." (12 U.S.C. § 635) It was long ago established by the Supreme Court that district courts have original jurisdiction over suits against federal corporations, such actions being deemed to arise under the laws of the United States. Pacific R.R. Removal Cases (Union Pacific R. Co. v. Myers), 115 U.S. 1, 5 S. Ct. 1113, 29 L. Ed. 319 (1885); see Federal Intermediate Credit Bank etc. v. Mitchell, 277 U.S. 213, 48 S. Ct. 449, 72 L. Ed. 854 (1928); Texas & Pac. Ry. v. Bigger, 239 U.S. 330, 36 S. Ct. 127, 60 L. Ed. 310 (1915); In re Dunn, 212 U.S. 374, 29 S. Ct. 299, 53 L. Ed. 558 (1909). Federal jurisdiction over such suits was further affirmed by Congress when it, in 1948, restricted the removal of such cases by adoption of 28 U.S.C. § 1349, which provides:

 
" Corporation organized under federal law as party
 
"The district courts shall not have jurisdiction of any civil action by or against any corporation upon the ground that it was incorporated by or under an Act of Congress, unless the United States is the owner of more than one-half of its capital stock. June 25, 1948, c. 646, 62 Stat. 934."

 The suggestion that a suit against the Export-Import Bank is exclusively within the jurisdiction of the Court of Claims (see Harlem River Produce Co., Inc. v. Aetna Cas. & Sur. Co., 257 F. Supp. 160 (S.D.N.Y. 1965)) appears to be fully answered by the previously quoted express statutory authorization to it "to sue and to be sued * * * in any court of competent jurisdiction." Furthermore, the Supreme Court has tacitly approved suits against similar corporations in forums other than the Court of Claims. Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381, 59 S. Ct. 516, 83 L. Ed. 784 (1939); see Federal Housing Administration, etc. v. Burr, 309 U.S. 242, 60 S. Ct. 488, 84 L. Ed. 724 (1939); Garden Homes, Inc. v. Mason, 249 F.2d 71 (1st Cir. 1957), cert. denied, 356 U.S. 903, 78 S. Ct. 562, 2 L. Ed. 2d 580 (1958).

 Although the action, if brought against the Export-Import Bank alone, would be removable, the attempt to remove the entire case under Title 28 U.S.C. § 1441 faces an insurmountable stumbling block in the joinder of 28 co-defendants against whom no claim is stated that would be removable under that section. The removing parties must carry the burden of proof. See Carson v. Dunham, 121 U.S. 421, 7 S. Ct. 1030, 30 L. Ed. 992 (1887). Although the petition states that the claim against the insurance companies is based on "a claim arising under the laws of the United States", the complaint and papers submitted on the present motion reveal no claim or issue arising under, or involving interpretation or construction of, federal law. Plaintiff does not claim a remedy granted by federal statute. Its claim is based solely on an alleged breach by each of the insurers of its contract obligation to make payment in accordance with the terms of the insurance agreement entered into by it, which expressly states that each insurer obligates itself "severally and not jointly" with the Export-Import Bank or any other obligor. Although we do not presently have the particulars of the claim or defenses before us, there is no indication of the presence of any substantial question of federal law or problem of federal statutory construction. In fact, no reliance on federal law, direct or indirect, is suggested with respect to the claim against the insurance companies. On the contrary, it is apparent that aside from issues of fact, the questions of interpretation, if any, will relate to the provisions of the insurance policy and not to federal law.

 Since the suits against the insurance companies do not fall within this Court's original jurisdiction, and diversity is neither alleged nor claimed, the action is not removable under 28 U.S.C. §§ 1441(a) and (b). At first blush 28 U.S.C. § 1441(c) might appear to offer a basis for removal, although it has not been invoked by the defendants. It provides that "[whenever] a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise nonremovable claims or causes of action, the entire case may be removed * * *" It is now well established that where, as here, the plaintiff asserts the same basic claim against two or more defendants, even though he charges them only with liability severally, the joinder is not one of a "separate and independent claim or cause of action" within the meaning of § 1441(c). Hafif v. Caledonian-American Ins. Co. of N.Y., 127 F. Supp. 639 (S.D.N.Y.1955); Harrisville Co. v. Home Ins. Co., 129 F. Supp. 300 (S.D.N.Y.1954); see American Fire & Cas. Co. v. Finn, 341 U.S. 6, 71 S. Ct. 534, 95 L. Ed. 702 (1951); Fair Oaks Transp. Co. v. Central Mfrs' Mut. Ins. Co., 127 F. Supp. 507 (S.D.N.Y.1954); Kopitko v. J. T. Flagg Knitting Co., 111 F. Supp. 549 (S.D.N.Y.1953); Chason Bros., Inc. v. Insurance Company of North America, 102 F. Supp. 803 (S.D.N.Y.1952); see also "Multi-Party, Multi-Claim Removal Problems: The Separate and Independent Claim Under Section 1441(c)" by James William More and William VanDercreek, 46 Iowa L.Rev. p. 489 at 493, 502 and 504. Section 1441(c) does not, therefore, permit removal of the present case.

 In reaching the conclusion that this case is not removable under 28 U.S.C. § 1441, the Court is aware of the recent decision of Judge Palmieri of this Court in Rosenthal & Rosenthal, Inc. v. Aetna Cas. & Sur. Co., 259 F. Supp. 624 (S.D.N.Y.1966), in which the Court assumed original jurisdiction in a similar suit over the Export-Import Bank and the Foreign Credit Insurance Association. That case may be distinguished from the present one, however, on the ground that different issues were presented there, which led the Court to conclude that they might "require construction of the federal statutes conferring insurance functions on Exim Bank * * *" and that there was a "strong likelihood of a dominant federal interest in the unique type of insurance involved."

 In contrast, the present case involves no questions of federal statutory construction, and no substantial likelihood of questions involving any of those provisions that might be considered to involve a federal interest, e.g., protection against political risks abroad. The parties anticipate that the principal legal issue will be whether written notice of claims and proof of loss was given in accordance with the terms of the policy, which presents a garden-variety type of contract law question, as to which no difference between state and federal law seems likely. Thus, although the Export-Import Bank's obligations may be construed according to federal common law, see Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S. Ct. 573, 87 L. Ed. 838 (1943), the question of whether there is a sufficient overriding federal interest to displace the doctrine of Erie R.R. v. Tompkins remains in doubt. See Friendly, "In Praise of Erie and of the New Federal Common Law," Vol. 19 Record of the Bar Association of the City of New York, p. 64 (1964). Furthermore, the obligations of the insurance companies would not necessarily be determined according to ...


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