Macklin v. Lexington Insurance Company

Background

Tameake Macklin brought the action individually and as the assignee of Happy Child Transportation LLC, All Star Bus Service Co., LLC, and Levander Polk. She sued Lexington Insurance Company and Sparta Insurance Company in New York state court, alleging that the insurers had failed to pay the remainder of a personal-injury judgment against their insureds.

Macklin had been injured in a 2014 school-bus collision. After a liability trial, a jury assigned 85 percent of the fault to Altfest Auto Leasing Inc., Happy Child, All Star, and Polk, and 15 percent to Jasmine Williams. The state court later entered a judgment for $6,031,745. Progressive Insurance Company paid $1,000,000 on behalf of Altfest, Happy Child, All Star, and Polk. Happy Child, All Star, and Polk later assigned Macklin their rights to claims against insurance companies.

Lexington had issued a commercial umbrella liability policy to Happy Child. Sparta had issued a package insurance policy that included business auto liability coverage. The defendants removed the case to federal court based on diversity jurisdiction. They alleged that Sparta was incorporated and had its principal place of business in Connecticut, Lexington was incorporated in Delaware and had its principal place of business in Massachusetts, and Macklin was a citizen of New York.

Issue

Macklin moved to remand, meaning to return the case to state court. She argued that complete diversity was absent because Lexington’s principal place of business was actually in New York. She also argued that Lexington should be judicially estopped, or barred from taking a position inconsistent with one it had previously taken in court, because Lexington had identified New York as its principal place of business in earlier New York lawsuits.

Court’s analysis

For diversity jurisdiction, every plaintiff must be a citizen of a different state from every defendant. A corporation is generally a citizen of its state of incorporation and its principal place of business. The principal-place-of-business inquiry uses the “nerve center” test, which focuses on where the corporation’s officers direct, control, and coordinate its activities.

The court found that Macklin had adequately raised a question about Lexington’s principal place of business. Macklin submitted 21 complaints filed by Lexington in New York state court. Five identified Lexington’s principal place of business as New York, and the other 16 stated that venue was based on Lexington’s residence at a New York address. Macklin also pointed to the locations or phone numbers of seven of Lexington’s ten senior-most executives and to a Delaware insurance examination report identifying Lexington’s “statutory home office” as New York.

The court nevertheless found that Lexington supplied competent proof that its principal place of business was Massachusetts. Lexington submitted affirmations from attorneys who said that the earlier New York allegations were mistakes, a declaration from an AIG corporate analyst, and a secretary’s certificate identifying Lexington’s principal place of business as an address in Boston, Massachusetts. The court concluded that this evidence supported the defendants’ assertion of diversity jurisdiction.

The court also rejected Macklin’s judicial-estoppel argument. It stated that estoppel principles do not apply to questions of subject-matter jurisdiction. The court added that, even if judicial estoppel were considered, the doctrine would not apply because Lexington provided convincing evidence that its earlier statements were mistaken. The court stated that judicial estoppel does not apply to good-faith mistakes or unintentional errors.

Ruling and disposition

Judge Edgardo Ramos denied Macklin’s motion to remand. The court held that Lexington was not barred from asserting that its principal place of business was in Massachusetts and that the evidence allowed the federal court to exercise diversity jurisdiction. The court directed the parties to appear for a telephonic conference and directed the clerk to terminate the motion.