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Sons of Revolution in State of New York, Inc. v. Travelers Indemnity Co. of America

United States District Court, Southern District of New York

December 11, 2014

SONS OF THE REVOLUTION IN THE STATE OF NEW YORK, INC., Plaintiff,
v.
THE TRAVELERS INDEMNITY COMPANY OF AMERICA and CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Defendants.

OPINION AND ORDER

Lorna G. Schofield United States District Judge

This action was removed from New York state court by Defendant The Travelers Indemnity Company of America (“Travelers”). Plaintiff, Sons of the Revolution in the State of New York, Inc., brings this action against Travelers and Consolidated Edison Company of New York, Inc. (“ConEd”) for injury to its business and property at Fraunces Tavern. Plaintiff moves to remand the action to state court. Travelers cross-moves to sever the claims against it from the claims against non-diverse Defendant ConEd, so that Travelers’ claims may proceed in federal court. For the reasons that follow, Plaintiff’s motion is granted, Travelers’ motion is denied, and the case is remanded in its entirety.

I. BACKGROUND

Plaintiff is a not-for-profit organization incorporated in New York with its principal place of business in New York. It owns and maintains several buildings, including the property and business at issue, Fraunces Tavern, an historic restaurant and museum in downtown Manhattan. Fraunces Tavern is supplied gas and electricity by ConEd, a public utilities company incorporated in New York with its principal place of business in New York. Fraunces Tavern is insured under a policy issued by Travelers, a company organized under the laws of Connecticut with its principal place of business in Connecticut.

The policy is an “all-risks policy” and covers “direct physical loss of or damage [to insured property]” and loss of business. Various exclusions and limitations apply if the loss or damage is caused by certain events, including, with certain exceptions, “[t]he failure or fluctuation of power or other utility service supplied to the described premises . . . .” The policy also includes “utility services” coverage, extending to loss or damage to insured property that is “caused by the interruption of service to the [insured property].”.

On October 29, 2012, Sandy hit New York City, flooding the basement and first floor of Fraunces Tavern. Around the same time, ConEd shut off power, leaving Fraunces Tavern without electricity or gas. Electricity was restored shortly after Sandy occurred, but Fraunces Tavern remained without gas for approximately two months and without phone or internet service (supplied by other providers) for approximately three months.

On April 3, 2014, Plaintiff commenced this action against Defendants in New York state court, asserting five causes of action, the first four against Travelers and the fifth against ConEd. Counts One through Four seek a declaratory judgment that the following losses are covered under the Policy: (1) business interruption losses resulting from the interruption of utility services; (2) the cost of demolishing, removing and replacing electrical equipment as required by a directive of the New York City Department of Buildings; (3) property damage losses caused by the interruption of utility services; and (4) the loss of business income and extra expense due to the cutoff of gas by ConEd. Count Five asserts that ConEd negligently shut down electricity and breached its duty to warn customers of the shutdown.

On May 7, 2014, Travelers removed the action to federal court on the basis of federal diversity jurisdiction. Plaintiff then filed a motion to remand and Travelers cross-moved to sever the claims against it from those against ConEd so that the case against Travelers can proceed separately in federal court.

II. STANDARD

Under the removal statute, a defendant may remove an action from state court if it originally could have been brought in federal court. See 28 U.S.C. § 1441(a). Where removal is based on diversity jurisdiction, there must be complete diversity of citizenship between the plaintiff(s) and the defendant(s). See Id. § 1332; Hallingby v. Hallingby, 574 F.3d 51, 56 (2d Cir. 2009).

“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). “It is well-settled that the party asserting federal jurisdiction bears the burden of establishing jurisdiction.” Blockbuster, Inc. v. Galeno, 472 F.3d 53, 57 (2d Cir. 2006) (citation omitted). Accordingly, “[w]here . . . jurisdiction is asserted by a defendant in a removal petition, it follows that the defendant has the burden of establishing that removal is proper.” United Food & Comm. Workers Union v. CenterMark Props. Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994).

III. DISCUSSION

In support of its motion to remand, Plaintiff asserts that Travelers improperly removed this action because Plaintiff and Defendant ConEd are both citizens of New York, and complete diversity is lacking. In opposition to the motion to remand, and in support of its motion to sever, Travelers argues that severance is appropriate under Rule 21 of the Federal Rules of Civil Procedure, which permits a court to sever a non-diverse party that is not indispensable in order to maintain jurisdiction. In the alternative, Travelers asserts that claims against non-diverse Defendant ConEd were fraudulently misjoined in order to defeat removal, warranting severance of the claims against ConEd so that ...


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