JOHN R. TUNHEIM, Chief Judge
Plaintiff Interlachen Properties, LLC ("the LLC") was the sales agent and real estate manager for a Crow Wing County housing development. Plaintiff Kuepers Construction ("Kuepers") constructed the development. After homeowners discovered design defects, Plaintiff Interlachen Propertyowners Association ("Interlachen"), which represents the homeowners in the development, filed a lawsuit alleging faulty construction. Interlachen eventually won a judgment of over $2 million against Kuepers, and it signed Miller-Schugart agreements with both the LLC and Kuepers, promising to seek the judgment only from Kuepers's insurer, Defendant State Auto Insurance Company ("State Auto").
The LLC, which felt it had also been insured by State Auto, filed a complaint in Crow Wing County in the fall of 2014, alleging that State Auto had breached its contractual obligations to defend the LLC. When the LLC filed its complaint against State Auto, the LLC also named Kuepers and Interlachen as defendants. All three of these entities — the LLC, Kuepers, and Interlachen — are Minnesotan companies (together, the "Minnesota Parties"). State Auto, on the other hand, is an Ohioan company. State Auto immediately removed the case to federal court. State Auto then moved to realign the parties, and argued that the Kuepers and Interlachen had been fraudulently joined as defendants. The LLC moved to remand the case back to state court.
United States Magistrate Judge Leo I. Brisbois subsequently granted State
In November 1997, Kuepers — a Minnesota construction company — began construction on a Common Interest Community in Crow Wing County, Minnesota ("the Project"). (Notice of Removal, Ex. A ("Compl.") ¶¶ 8-9, Oct. 17, 2014, Docket No. 1.) The LLC — also a Minnesota company — was Kuepers's real estate manager and, between 1997 and 2001, it was responsible for the marketing and sale of the residential units that made up the Project. (Id. ¶¶ 5, 10, 12.) Interlachen, a Minnesota non-profit, represented homeowners in the Project. (Id. ¶ 7.)
Kuepers initially completed work on many aspects of the Project in 2001. Nevertheless, Kuepers and the LLC continued to perform additional repair work on the Project through 2010. (Id. ¶ 13.) The LLC continued to operate as Kuepers's real estate manager for the Project until 2010, at which time Kuepers refused to perform further repairs on the Project and Kuepers and the LLC effectively severed ties with the Project. (Id. ¶ 12.)
It is helpful to briefly summarize the additional repairs Kuepers did on the project, between 2001 and 2010. In August 2001, Kuepers installed ridge vents on the roofs of the Project, and replaced rotted roof decking, wet insulation, and damaged shingles. (Id. ¶ 14.) Kuepers conducted a complete change in the roof system as well, labeling all of this work an "extension of the construction project development wide." (Id. ¶ 15.) Kuepers did not notify Interlachen, however, of the damage it found or the extent of the repairs. (Id. ¶ 14.)
In 2004, a series of repairs began involving the Project's siding. Interlachen found problems with the Project's siding in December 2004 and — during 2005 — undertook efforts to repair this damage. (Id. ¶ 16.) Interlachen then declared that "all of the measurements [Kuepers] took were well within the acceptable level for wood." (Id.) Once these repairs were complete, Kuepers and the LLC advised Interlachen that the siding problems had been resolved and that Kuepers "considered the matter closed." (Id. ¶ 17.) Nevertheless, in July 2006, Kuepers performed additional siding work, receiving payment from Interlachen for the work. (Id. ¶ 18.) Kuepers and the LLC then told Interlachen that this set of repairs had addressed Interlachen's concerns with the siding. (Id. ¶ 19.) Finally, Kuepers performed additional siding work on the Project in 2009. (Id. ¶ 20.) Interlachen initially paid Kuepers for this work, but then requested reimbursement under Kuepers's warranty agreements. (Id. ¶ 21.) The LLC was aware of and involved in the August 2001, December 2004, July 2006, and 2009 repairs. (Id. ¶¶ 14, 16, 18, 20.)
In 2010, Kuepers opted not to honor its warranty as to the 2009 repairs. (Id. ¶ 22.) The LLC also discontinued its role as Kuepers's real estate manager. (Id. ¶ 22.) In the fall of 2010, Interlachen retained an expert to do an exhaustive review of damage at the Project. (Id. ¶ 23.) This review revealed several problems: the siding, windows, weather resistive barriers, poly-vapor barrier, and insulation
On November 28, 2011, Interlachen filed this action in Crow Wing County District Court, naming Kuepers and the LLC as defendants. (Id. ¶ 24.) In the lawsuit, Interlachen sought damages against the LLC for property damage caused by the LLC's negligence in the sale and marketing of the Project, and for the LLC's negligence in overseeing the construction and repairs. (Id.) Interlachen also asserted claims against Kuepers for negligence, breach of contract, and breach of warranty. (Id.)
Kuepers and the LLC forwarded notice of the action to their insurer, State Auto, under policy No. PBP 2293305. (Id. ¶ 25.) State Auto is an Ohio corporation. (Id. ¶ 6.) State Auto did not defend the LLC. (Id. ¶ 27.) As a result, the LLC alleged that it was forced to incur significant expenses by retaining its own counsel to defend against Interlachen's claims. (Id. ¶ 28.)
In late 2012, the LLC won summary judgment against Interlachen. (Id. ¶ 29.) Interlachen filed a petition for discretionary review of the summary judgment ruling, but the petition was denied as premature since the case against Kuepers was ongoing. (Id. ¶ 30.) Interlachen also attempted an interlocutory appeal, at the same time as it tried to pierce the corporate veil in an attempt to impose personal liability upon both the LLC and its principals. (Id. ¶ 31.) Interlachen repeatedly expressed its intention to continue to pursue the LLC. (Id.)
On January 30, 2013, some of the parties — excluding the LLC — engaged in a mediation session. (Id. ¶ 32.) At the mediation, Interlachen submitted a joint demand to Kuepers and the LLC of $5,000,000 to resolve all claims. (Id. ¶ 33.) Interlachen's proposed settlement fell within the available policy limits of the State Auto policy. (Id.) The counsel retained by State Auto to defend Kuepers countered with an offer on behalf of Kuepers in the amount of $10,000. (Id.) Although the LLC, fearing continued pursuit by Interlachen, and possible reversal of its summary judgment victory, would have preferred to settle, State Auto did not make any offer of settlement on behalf of the LLC. (Id.) The LLC alleges that State Auto did not request that it contribute to the settlement, never advised it that State Auto would deny coverage for most of the claims, and refused to settle despite Interlachen's suggested settlement amount being within State Auto's policy limits. (Id. ¶¶ 34-35.)
Because settlement negotiations between Kuepers and Interlachen failed, Interlachen's case against Kuepers continued. On February 21, 2014, following a jury trial, the state trial court entered judgment against Kuepers in the amount of $2,147,000. (Id. ¶ 38.) The court also required Kuepers to post a supersedeas bond in the amount of $2,147,000. (Id. ¶ 39.) After the entry of judgment, the parties again engaged in settlement discussions. (Id. ¶ 40.) Interlachen sought the judgment amount, but State Auto refused to settle and ultimately denied coverage to Kuepers. (Id. ¶¶ 40-41.) State Auto also refused to purchase or obtain an appeal bond on behalf of either the LLC or Kuepers. (Id. ¶ 42.)
As a result of State Auto's refusal to obtain the bond, Kuepers began to consider
Despite its loss against the LLC at summary judgment, Interlachen continued to maintain that the LLC was liable for both the $2.5 million judgment, along with additional damages. (Compl. ¶ 45.) Due to the fact that the LLC and Kuepers are related entities with one common principal, the LLC alleges that the judgment against Kuepers and the impending appeals faced by the LLC could have forced the LLC into bankruptcy. (Id. ¶ 46.)
The state trial court approved the Miller-Shugart agreement between Kuepers and Interlachen and, on August 11, 2014, the court administrator entered judgment in the amount of $2,940,875.15 in favor of Interlachen. (Id. ¶ 47.) On August 22, 2014, Interlachen filed an appeal of the summary judgment order in favor of the LLC. (Id. ¶ 49.) Facing the threat of appeal and continued pursuit by Interlachen, and without any representation by State Auto, the LLC negotiated and entered into a Miller-Shugart agreement with Interlachen. (Id. ¶ 54; see also McCollum Aff., Ex. 14.) The agreement stipulated to a $2,059,125 judgment in favor of Interlachen pursuant to its negligence claims against the LLC. (McCollum Aff., Ex. 14 at 3-4.) Interlachen agreed to pursue that judgment from State Auto. On September 24, 2014, the state trial court approved the agreement, concluding it was "fundamentally fair, adequate and reasonable." (Id. ¶ 55.)
The LLC filed this complaint in Crow Wing County District Court on October 8, 2014. (Id. at 18.) Although the complaint was primarily directed at State Auto, the LLC also included Kuepers and Interlachen as defendants. (Id. ¶¶ 7-8.) In Count One, the LLC seeks a declaratory judgment against "all defendants." (Id. ¶¶ 56-61.) The LLC asks the Court to grant a declaratory judgment stating that State Auto owed the LLC a legal defense
In explaining its decision to include Kuepers and Interlachen as defendants, the LLC argues that, as a judgment creditor, Interlachen had an interest in the litigation and was an indispensable party. (Id. ¶ 7.) The LLC also argues that, as a party to the State Auto insurance policy at issue, Kuepers was an indispensable, although nominal, party under Minnesota Statute § 555, et seq. (Id. ¶ 8.)
On October 17, 2014, State Auto removed the action to federal court, asserting that the LLC had fraudulently joined Interlachen and Kuepers as defendants to destroy diversity jurisdiction. (Notice of Removal ¶ 4.) Then, on October 28, 2014, State Auto filed a Motion for Realignment of Parties, seeking to move Kuepers and Interlachen to the plaintiff's side of the litigation. (Mot. for Realignment of Parties, Oct. 28, 2014, Docket No. 4.) State Auto argued that realignment was appropriate because the interests of the LLC, Kuepers, and Interlachen were all aligned.
The LLC subsequently filed a Motion to Remand to State Court. (Mot. to Remand to State Court, Nov. 11, 2014, Docket No. 12.) The LLC argued that remand was appropriate because, like the LLC, Kuepers and Interlachen were Minnesota corporations. Thus, because they were on the defendant's side of the litigation, diversity of citizenship did not exist.
Initially, State Auto was the only defendant who had answered the Complaint filed by the LLC. (State Auto's Answer & Countercl., Oct. 29, 2014, Docket No. 10.) State Auto also filed what it labeled a counterclaim against the LLC and Interlachen, seeking a declaratory judgment. (Id.) On November 12, the Magistrate Judge ordered Kuepers and Interlachen to file responsive pleadings. (Order, Nov. 12, 2014, Docket No. 20.) On November 14, Interlachen and Kuepers both filed their answers; Interlachen also filed a reply to what it labeled State Auto's cross — and not counter — claim. (Interlachen's Answer, Cross-cl., & Countercl., Nov. 14, 2014, Docket No. 27; Interlachen's Reply to State Auto's Cross-cl., Nov. 14, 2014, Docket No. 25; Kuepers's Answer & Cross-cl., Nov. 14, 2014, Docket No. 28.) Interlachen's answer included a cross-claim against State Auto and Kuepers — seeking a declaratory judgment against State Auto and garnishment as to State Auto's policies — and a counterclaim against the LLC, also seeking garnishment as to State Auto's policies implicated in the LLC's claims. Kuepers's answer included a cross-claim against State Auto, seeking a declaratory judgment and asserting other claims. At the same time, the LLC filed its answer to State Auto's counterclaim. (LLC's Answer to State Auto's Countercl., Nov. 14, 2014, Docket No. 26.)
On January 8, 2015, the Magistrate Judge granted State Auto's Motion for Realignment of Parties, ordering that the docket be updated to reflect the new alignment. (Order Granting Def.'s Mot. for Realignment of Parties, Jan. 8, 2015, Docket No. 37.) The LLC timely filed objections to the Magistrate Judge's decision.
The standard of review applicable to an appeal of a Magistrate Judge's order on nondispositive matters is extremely deferential. Roble v. Celestica Corp., 627 F.Supp.2d 1008, 1014 (D.Minn.2007). The Court will reverse such an order only if it is clearly erroneous or contrary to law. See 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); D. Minn. LR 72.2(a).
In order to sustain diversity jurisdiction, "there must exist an actual, substantial, controversy between citizens of different states, all of whom on one side of the controversy are citizens of different states from all parties on the other side." City of Indianapolis v. Chase Nat'l Bank of City of New York, 314 U.S. 63, 69, 62 S.Ct. 15, 86 L.Ed. 47 (1941) (internal citations and quotation marks omitted). The Supreme Court has placed some of the burden of determining jurisdiction on courts, noting that federal courts have a duty "to look beyond the pleadings, and arrange the parties according to their sides in the dispute." Id. (internal quotation marks omitted).
In deciding whether to realign the parties, the Eighth Circuit applies the "actual and substantial conflict" test. Alliance Energy Servs., LLC v. Kinder Morgan Cochin LLC, 80 F.Supp.3d 963, 972-73 (D.Minn.2015) (quoting Universal Underwriters Ins. Co. v. Wagner, 367 F.2d 866, 870-71 (8th Cir.1966)). That test asks whether there is "any actual and substantial conflict existing between the parties as aligned." Id. (internal quotation marks omitted). If such conflict exists, the court should not realign the parties. Id.
"Federal courts are courts of limited jurisdiction and the threshold requirement in every federal case is jurisdiction." Barclay Square Props. v. Midwest Fed. Sav. & Loan Ass'n of Minneapolis, 893 F.2d 968, 969 (8th Cir.1990) (internal quotation marks omitted). 28 U.S.C. § 1441 governs the removal of civil actions, like this one, in which the removing defendant alleges that diversity of citizenship should exist when the properties are properly aligned. The removal statute is construed narrowly and all doubts are construed in favor of remand back to state court. See Transit Cas. Co. v. Certain Underwriters at Lloyd's of London, 119 F.3d 619, 625 (8th Cir.1997).
The LLC's chief argument is that the Magistrate Judge acted contrary to governing law by reaching the realignment issue at all. The LLC contends that, because its state complaint included non-diverse defendants, when State Auto removed the case, this Court had only limited jurisdiction to consider State Auto's contention that the LLC had fraudulently joined Kuepers and Interlachen. See Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 809 (8th Cir.2003) ("When, as here, the respondent has joined a non-diverse party as a defendant in its state case, the petitioner may avoid remand — in the absence of a substantial-federal question —
Specifically, the LLC contends that the Magistrate Judge's conclusion that the Court could consider the realignment issue before addressing fraudulent joinder was contrary to the law, as enunciated in the Eighth Circuit cases cited above. Even though cases like Filla and Murphy only analyzed the fraudulent joinder issue, and not realignment, the LLC argues that their holdings implicitly preclude consideration of realignment in a case involving non-diverse defendants and one defendant attempting to remove the case to federal court. Moreover, the LLC argues that the cases cited by the R & R are inapposite because they are more standard realignment cases not involving a defendant's attempt to establish diversity jurisdiction, or are otherwise distinguishable. See, e.g., City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1312-15 (11th Cir.2012) (in an action by a judgment creditor against a defendant and the defendant's insurer, after securing a judgment against the defendant in state court, realigning the defendant to the plaintiffs' side of the litigation and denying a motion to remand, but not addressing fraudulent joinder).
Despite the LLC's protestations to the contrary, this issue is not one on which courts have spoken with uniformity. Instead, the parties have identified an ongoing debate among federal courts. Indeed, as one court noted, "there is authority supporting both the proposition that realignment may be used to satisfy diversity jurisdiction in removed actions and the proposition that realignment is not appropriate [— and therefore only fraudulent joinder
Many other cases have endorsed a court's decision to realign parties when the
Some of these cases involve courts explicitly considering both fraudulent joinder and realignment arguments, and basing their decision on realignment even if a defendant had not shown fraudulent joinder. See Scott v. State Farm Fire & Cas. Co., No. 1313287, 2014 WL 3054784, at *5 (E.D.Mich. July 7, 2014) (rejecting a fraudulent joinder argument as to one non-diverse defendant, but still concluding diversity jurisdiction existed after realigning the parties); Ryan Envtl., Inc. v. Hess Oil Co., Inc., 718 F.Supp.2d 719, 725-28 (N.D.W.Va.2010) (considering, in response to defendant's attempt to remove a complaint that was not facially diverse, both fraudulent joinder and realignment arguments); Earnest v. State Farm Fire & Cas. Co., 475 F.Supp.2d 1113, 1117 (N.D.Ala.2007) (deciding that two of three non-diverse defendants were fraudulently joined, but finding that a third should be realigned, and consequently concluding that diversity jurisdiction existed); Spring-Ford Area Sch. Dist. v. Genesis Ins. Co., 158 F.Supp.2d 476, 480 (E.D.Pa. 2001) ("If the court finds that the nondiverse party was not fraudulently joined, diversity jurisdiction may still exist if the nondiverse party should be realigned.").
Moreover, many of these cases are directly on point. Many involve a similar fact pattern to this case, in which an injured party obtains a judgment against a defendant/insured, the defendant/insured's insurer denies insurance coverage, and the injured party or defendant/insured files an action against the insurer, often seeking a declaratory judgment that clearly states that the insurer owed a duty to defend and indemnify its insured and breached that duty. And in those cases, courts often realign the parties such that the injured party and defendant/insured are on the plaintiffs' side of the litigation, with the insurer on the defendant's side. See, e.g., Garcia v. Century Sur. Co., No. 14-3196, 2015 WL 1598069, at *1-2 (D.Colo. Apr. 7, 2015).
In Garcia, for example, a magistrate judge stated that, "[i]n similar coverage disputes, federal courts routinely realign the parties to place the injured third party on the same side of the caption as the tortfeasing insured, as against the insurer." Id. at *1. In response to the argument that both the injured party and the insured were necessary parties, and that their interests were necessarily adverse, the court acknowledged that the parties were all necessary. Id. at *2. As to the latter argument, however, the court conceded that the insured's interests were adverse to the injured party's interests in "
Given this split in authority, and the weight of cases that have reached similar decisions to the Magistrate Judge's in this case, the Court concludes that the Magistrate Judge's Order was not contrary to law in determining that the court had jurisdiction to consider the realignment issue, before fraudulent joinder, in considering whether diversity jurisdiction exists in this case. See Erickson v. Colvin, No. 14-74, 2015 WL 3892293, at *4 (N.D.W.Va. June 24, 2015) ("This Court finds that the magistrate judge's use of the harmless error rule was not clearly erroneous or contrary to law as there is a split among the courts at this time.").
Eighth Circuit decisions like Filla and Murphy do not preclude this result; they do not consider realignment. Filla, 336 F.3d at 809-11. And the in-circuit district court decision in JBB Investments LLC v. Fazoli's Franchising Systems LLC, No. 08-03, 2008 WL 2568468 (E.D.Ark. June 25, 2008), which the LLC claims is inapplicable, is actually directly on point. In that case, the plaintiffs sued a company, along with several other Guarantor Defendants. Id. at *1-3. The plaintiffs and Guarantor Defendants were all residents of the same state, with the company being a resident of a different state. Id. at *2. The plaintiffs claimed that the company had accused both the plaintiffs and the Guarantor Defendants of violating guaranty agreements. Id. But the plaintiffs alleged that their duties under the guaranty agreements had been properly excused. Id. The plaintiffs also sought contribution and indemnification from the Guarantor Defendants. Id. The company removed the case to federal court, although complete diversity did not exist, arguing that the Guarantor Defendants should be realigned or were fraudulently joined. Id. at *2-4. The court concluded that realignment was not proper because, while the plaintiffs and Guarantor Defendants agreed on whether the guaranty agreements had been properly discharged, an actual and substantial controversy existed between them as to whether the Guarantor Defendants owed the plaintiffs contribution and indemnity. Id. at *3. The court went on to reject the plaintiffs' fraudulent joinder argument as well. Id. at *4.
The LLC argues that this case is "inapplicable," because the court "declined to apply any theory ... for purposes of establishing diversity jurisdiction." (Objections at 6.) But that characterization of the case is inaccurate. The court
The LLC does not object to the Magistrate Judge's decision to realign the parties, except to the extent it argues that reaching the realignment issue was improper and the only inquiry should have been whether the LLC fraudulently joined Kuepers and Interlachen as defendants. (Objections at 4-9.) But, having decided that it was proper to reach realignment first, the Court need not consider fraudulent joinder if it concludes that the Magistrate Judge did not clearly err or act contrary to law in deciding to realign the parties.
Here, applying the Eighth Circuit's standard for realignment, there is no dispute that no actual and substantial conflict exists between the LLC and Interlachen and Kuepers. The LLC's complaint against State Auto, Interlachen, and Kuepers lists seven counts. But while all are asserted against State Auto, only one is asserted against Interlachen and Kuepers. (Compl. ¶¶ 56-83.) Moreover, that count — a declaratory judgment claim — is focused entirely on State Auto, stating that the LLC is entitled to a declaratory judgment that clarifies State Auto's duty to defend and indemnify the LLC, and declares all relevant parties' rights under the State Auto policy. (Id. ¶¶ 58-60.) Finally, it is relevant that the LLC, Interlachen, and Kuepers are all represented by the same attorneys.
Finally, the LLC argues that, under 28 U.S.C. § 1332(c)(1)(A), and Reko v. Creative Promotions, Inc., 70 F.Supp.2d 998, 1002 (D.Minn.1999), aff'd 70 F.Supp.2d 1005 (ADM/AJB), if the parties are realigned, Interlachen's and Kuepers's cross claims against State Auto would become direct actions against State Auto. As a result, State Auto would take on the citizenship of its insured — Minnesota — which, given that the LLC, Interlachen, and Kuepers are all Minnesota citizens, would consequently defeat diversity jurisdiction.
Section 1332(c)(1)(A) states that
28 U.S.C. § 1332(c)(1)(A) (emphasis added).
In Reko, Minnesota trustees entered into Miller-Shugart settlement agreements with a Minnesota corporation, Creative Promotions Inc. ("CPI"), when CPI's liability insurer ("Atlantic Mutual") refused to defend or provide coverage. Reko, 70 F.Supp.2d at 1000. The trustees then initiated a garnishment action against Atlantic Mutual. Id. In response, Atlantic Mutual, a New York corporation, removed the case. Id. The trustees filed a motion to remand, arguing that, under Section 1332(c)(1), Atlantic Mutual was a citizen of Minnesota. Id. at 1002. Noting that this was an issue of first impression, the court held that the Minnesota garnishment procedure in the context of a Miller-Shugart settlement constituted a direct action under Section 1332(c)(1). Id. at 1003-04. Consequently, Atlantic Mutual was a citizen of Minnesota and diversity was lacking. Id. at 1004.
In Reko, the court stated that:
Id. at 1002 (citing Prendergast v. Alliance Gen. Ins. Co., 921 F.Supp. 653, 655 (E.D.Mo.1996)). The LLC appears to read this portion of the Reko decision as meaning that there is no diversity jurisdiction when an injured party (who is a resident of the same state as the tortfeasor/insured) sues the tortfeasor's insurer, even if the tortfeasor/insured is a party to the litigation and is also asserting claims that allege wrongdoing on the part of the insurer.
Before assessing the LLC's argument, it is helpful to recount the history of Section 1332(c)(1). Enacted in 1964, Section 1332(c)(1) seeks "to prevent suit against an insurer in a federal court when both the injured party and the insured are citizens of the same state." Reko, 70 F.Supp.2d at 1004. The provision was added "in response to Louisiana's `direct action' statute that permitted injured parties to sue a tortfeasor's insurer directly for those damages caused by the insured tortfeasor, without joining the insured tortfeasor as a party." Eltsefon v. State Farm Mut. Auto. Ins. Co., 826 F.Supp.2d 922, 925 (E.D.Va.2011) (citing S.Rep. No. 88-1308, at 4 (1964)). The Louisiana law led to a "sharp increase in diversity cases that
With this history in mind, courts have held that a direct action is one in which a "`person with a claim against the insured sues the insurer directly.'" Cunningham v. Twin City Fire Ins. Co., 669 F.Supp.2d 624, 628 (D.Md.2009) (quoting Corn v. Precision Contracting, Inc., 226 F.Supp.2d 780, 782 (W.D.N.C.2002)). "Courts have uniformly defined the term `direct action' ... as those cases in which a party suffering injuries or damages for which another is legally responsible is entitled to bring suit against the other's liability insurance without joining the insured or first obtaining a judgment against him." State Farm Ins. Co. v. Evans, 712 F.Supp. 57, 58 (E.D.Pa.1989) (citing Beckham v. Safeco Ins. Co. of Am., 691 F.2d 898, 901 (9th Cir.1982)). In other words, "unless the cause of action urged against the insurance company is of such a nature that the liability sought to be imposed could be imposed against the insured, the action is not a direct action." Corn, 226 F.Supp.2d at 782 (internal quotation marks omitted). Section 1332(c)(1) has been limited as described above and "has not been broadened to include suits by insureds against their own insurance companies." Vega-Burgos v. Metro. Life Ins. Co., 843 F.Supp.2d 227, 230 (D.P.R.2012); see also Woodstock Resort Corp. v. Scottsdale Ins. Co., 921 F.Supp. 1202, 1204 (D.Vt.1995) (an indemnification or duty to defend action against one's own insurer is not a "direct action" under 28 U.S.C. § 1332).
With this legislative history and these decisions in mind, it is clear that the LLC's action against State Auto, even with the parties properly aligned, is not a "direct action" under Section 1332(c)(1) — at least as the majority of courts have construed the term.
Because the Court will overrule the LLC's objections to the Magistrate Judge's realignment position, the parties are now properly aligned with the LLC, Kuepers, and Interlachen on the plaintiffs' side of the litigation, and State Auto on the defendant's side. As a result, complete diversity now exists.
Based on the foregoing, and all the files, records, and proceedings herein,
1. The LLC's objection [Docket No. 38] is
2. The LLC's Motion to Remand [Docket No. 12] is