Ace Property and Casualty Insurance Company v. McKesson Corporation
- Jacquelyn Corley
- 3:20-cv-09356
- U.S. District Court · Northern District of California
- 15
In Ace Property v. McKesson, Judge Corley denied remand, allowing insurers to be aligned with ACE for diversity jurisdiction.
ACE, McKesson, and the remaining insurer defendants; the case remained in federal court, and the order did not decide the insurers’ coverage obligations.
What happened
Ace Property and Casualty Insurance Company v. McKesson Corporation concerns ACE’s request for a declaration that it did not have to defend or pay McKesson’s opioid-related lawsuits. McKesson moved the case from state court to federal court, relying on diversity jurisdiction.
ACE asked the federal court to send the case back to state court, arguing that McKesson’s removal was defective and that the other insurers had not all agreed to removal. The court ruled that the insurers’ main shared interest was determining whether they owed McKesson insurance coverage, while disputes among the insurers were secondary.
Judge Corley ruled that ACE and the remaining insurers should be treated as plaintiffs for jurisdictional purposes, with McKesson on the other side. She denied ACE’s motion to remand and did not address ACE’s other removal objections because the realignment resolved the jurisdiction issue.
The detailed version
- Ace Property and Casualty Insurance Company v. McKesson Corporation · No. 3:20-cv-09356
- Jacquelyn Corley
- Mar. 10, 2021
Background
ACE filed the case in Orange County Superior Court seeking declarations that it had no duty to defend or indemnify McKesson in lawsuits alleging that McKesson contributed to and profited from the opioid epidemic. ACE also named other insurers that had insured McKesson and sought declarations about those insurers’ possible defense and indemnity obligations.
McKesson removed the case to federal court based on diversity jurisdiction. ACE moved to remand, arguing that the removal notice was facially and procedurally defective and that McKesson could not use party realignment to cure those defects. National Fire supported ACE’s motion and argued that McKesson had not obtained its consent to removal.
Court’s Analysis
Federal diversity jurisdiction generally requires complete diversity between opposing parties and an amount in controversy above $75,000. The court explained that parties must be aligned according to their actual interests in the main dispute, rather than simply according to the labels in the complaint. This process is called realignment.
The court rejected ACE’s argument that realignment could not be used when it created diversity jurisdiction. Ninth Circuit precedent allowed courts to realign parties according to their ultimate interests whether realignment conferred or denied jurisdiction. The court also concluded that realignment could be considered after removal.
Applying the Ninth Circuit’s “primary purpose” test, the court identified the main dispute as whether ACE owed McKesson a duty to defend or indemnify it. ACE’s claims concerning the other insurers’ obligations depended on whether ACE had any coverage obligation and, if so, the extent of that obligation. The court therefore found that ACE and the insurer defendants shared a primary purpose and should be aligned as plaintiffs opposite McKesson.
Because the realignment established diversity jurisdiction, the court held that the insurers’ consent to removal was unnecessary. The court did not reach ACE’s separate arguments about alleged facial or procedural defects in the removal notice.
Disposition
The court held that realignment of the parties and removal to federal court were proper. Judge Jacquelyn Corley denied ACE’s motion to remand. The order did not decide whether ACE or any other insurer actually had a duty to defend or indemnify McKesson.
Read the full 15-page opinion on CourtListener, the free public archive maintained by the Free Law Project.