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J. ARON & CO. v. CHOWN

August 3, 1995

J. ARON & COMPANY, Plaintiff, -v.- RICHARD CHOWN, et al., Defendants.

Milton Pollack, Senior United States District Judge


The opinion of the court was delivered by: MILTON POLLACK

MILTON POLLACK, Senior District Judge:

 This is a removed action purportedly sounding in admiralty but which the plaintiff elected to commence as a common law action in state court. Defendants have moved pursuant to Fed.R.Civ.P. 12(h)(3) for dismissal of this action on the ground that the Court lacks subject matter jurisdiction. The plaintiff's election to commence this action as a common law action cannot be undone. Consequently, it appears that this Court lacks subject matter jurisdiction and that the removal was a nullity. The case will be remanded to the New York Supreme Court, New York County, from whence it was removed.

 Background

 Plaintiff J. Aron & Co. ("Aron") commenced the instant action ("Chown") in New York Supreme Court on April 27, 1994, seeking a judgment of at least $ 45 million for breach of an insurance policy underwritten by the defendants in this action ("the Chown Policy") that allegedly provided coverage for the misappropriation of crude oil and refined products belonging to Aron while they were in storage or undergoing processing at a refinery in Newfoundland. Under the terms of a processing agreement between Aron and two entities not a party to this action, Cumberland Crude Processing ("CCP") and Gulf Oil, Aron shipped crude oil to the refinery for processing, and CCP and Gulf Oil would purchase the resulting products from Aron. The Chown Policy contains four sections that cover a variety of marine and non-marine risks associated with the refinery. The sections and their titles are: Section I (Marine cargo, stock & transit), Section II (Conditions applicable to charterers and/or cargo owners legal liability), Section III (Physical damage/business interruption), and Section IV (Hull and machinery). The Chown Policy was originally issued in 1989 to Newfoundland Processing Limited, the owner of the refinery. Aron was subsequently added as an additional insured.

 The Chown Defendants removed Chown to this Court on May 17, 1994. Aron did not move to remand Chown. The instant action was eventually consolidated for trial with Americas Insurance Company v. J. Aron & Co. et al., 93 Civ. 2503, a declaratory judgment action commenced in this district by a different insurer whose policy allegedly also covers Aron's losses at the refinery. Although the underlying losses on which the insurance claims are predicated are the same in both actions, Chown and Americas involve claims under distinct insurance policies employing different insuring language, and each insurer has asserted defenses to coverage unique to itself. By the time Chown had been removed, Judge Mukasey, who formerly presided over both actions, had ruled that Americas was within the court's admiralty jurisdiction, but Judge Mukasey had no occasion to determine whether he had subject matter jurisdiction over Chown.1

 The Chown Defendants have reconsidered their decision to remove Chown and now contend that the Court lacks subject matter jurisdiction over the action. In opposition to the motion, Aron has proposed only two bases of subject matter jurisdiction: admiralty jurisdiction pursuant to 28 U.S.C. § 1333(1) and supplemental jurisdiction pursuant to 28 U.S.C. § 1367. The Chown Defendants claim that diversity jurisdiction is unavailable, and Aron has not alleged diversity.

 Discussion

 I. Aron's election to commence Chown under the Saving to Suitors Clause deprives the Court of original jurisdiction over the action.

 Assuming arguendo that Aron could have brought an admiralty action against the Chown Defendants, Aron has made an irrevocable election to proceed at common law rather than in admiralty by filing Chown in state court pursuant to the Saving to Suitors Clause of 28 U.S.C. § 1333(1). The effect of this election was to deprive this Court of admiralty jurisdiction over Chown, even though Chown could have been pleaded as an action in admiralty rather than a common law action. Consequently, unless some other basis for federal subject matter jurisdiction exists, Chown must be remanded to the New York Supreme Court, from which it was improperly removed.

 The Saving to Suitors Clause is part of the statutory grant of admiralty jurisdiction:

 
The district courts shall have original jurisdiction, exclusive of the courts of the States, of:
 
(1) Any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled.
 
It is beyond question that a federal district court cannot maintain jurisdiction over an action commenced as a state law tort claim absent diversity between the parties or some other basis of federal jurisdiction. Therefore, even though the [plaintiffs] could have been pleaded [sic] their case as a maritime tort falling within the admiralty jurisdiction of the federal courts, their choosing ...

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