Surety – Performance Bonds – Procedural Issues; Jurisdiction, Venue and Forum
In E&T Skyline Construction, LLC v. Talisman Casualty Insurance Company, LLC, 2020 U.S. Dist. Lexis 137834 (S.D. N.Y. July 30, 2020) a prime contractor sued the performance bond surety for a subcontractor alleging diversity jurisdiction. The surety moved to dismiss for lack of jurisdiction and failure to join indispensable parties. The magistrate judge recommended denial of the first motion without prejudice and denial of the second motion. The surety “was formed as a limited liability company on December 16, 2013, pursuant to Articles of Organization filed with the Nevada Secretary of State” and was registered with the Nevada Division of Insurance as “a sponsored captive insurer” The first issue was its citizenship for purposes of federal diversity jurisdiction. It argued that it was not a citizen of any state, because it had no “members”, or was a citizen of the state of each of its “participants,” which included New York companies, and so there was no diversity jurisdiction. The plaintiff argued that the surety was a citizen of Louisiana where its sole “member” was located. The Magistrate Judge recommended denial of the motion to dismiss for lack of jurisdiction without prejudice and that discovery be authorized “on the question of whether Mr. Schaff or any other person or entity was a member of Talisman . . . .”
The Magistrate also recommended denial of the motion to dismiss for failure to join indispensable parties. The alleged indispensable parties were the project owner, bond principal and project lender. Joinder of the project owner and lender were feasible if they were necessary, and the bond principal was not a necessary party.
