Free Order on Motion to Vacate - District Court of Delaware - Delaware

Case 1 :04-cv—00865-GIVIS Document 14 Filed 10/05/2005 Page 1 of 3
IN THE UNITED STATES DISTRICT COURT
' FOR THE DISTRICT OF DELAWARE
4 CAPITOL CLEANERS AND )
LAUNDERERS, INC. )
)
Plaintiff, )
)
v. )
) C.A. No. 04-865 (GMS)
CNA INSURANCE COMPANIES, INC., )
CNA INSURANCE GROUP, INC., and )
TRANSCONTINENTAL INSURANCE )
COMPANY, )
)
- Defendants. )
ORDER
This case was originally filed in Delaware Superior Count by plaintiff Capitol Cleaners and
Launderers, Inc. ("Capitol") against CNA Insurance Companies, Inc. and CNA Insurance Group, Inc.
(collectively "the CNA Defendants"), and against Transcontinental Insurance Co. ("TIC"). The
defendants removed the case to this court pursuant to 28 U.S.C. § 1441 (1994). (D.I. 1.) Capitol
subsequently moved to remand the case back to state court, pursuant to 28 U.S.C. § 1447 (1994).
(D.I. 3.) On March 24, 2005, the court denied Capitol’s motion because the CNA Defendants had
not been properly served. (D.I. 9.) However, on March 31, Capitol served the CNA Defendants
through the Secretary of State of Delaware (D.I. 10, Ex. A), pursuant to Delaware’s corporate service
statute, which reads in relevant part:
In case the officer whose duty it is to serve legal process cannot by due diligence
serve the process in any manner provided for by subsection (a) of this section, it shall
be lawful to serve the process against the corporation upon the Secretary of State, and
such service shall be as ejj'ectual for all intents and purposes as f made in any ofthe
ways provided for in subsection (a) hereof
Del. Code Arm. tit. 8, § 321(b) (2001) (emphasis added). Since TIC does not contend that Capitol _

Case 1 :04-cv—00865-GIVIS Document 14 Filed 10/05/2005 Page 2 of 3
could have served process on the CNA Defendants in any marmer provided for in § 32 l (a), service
has been made proper, and therefore, the underlying rationale for the court’s order of March 24 is
no longer valid. Hence, Capitol has moved the court to vacate its prior order and remand the case
back to state court. (D.I. l0.) For the following reasons, the court will grant Capitol’s motion.
The CNA Defendants are Delaware corporations that are no longer in good standing for
failure to pay their franchise taxes. Consequently, the CNA Defendants’ charters have been declared
` void, pursuant to Del. Code Ann. tit. 8, § 510 (2001). (D.I. ll, Ex. A at 4-5.) However, under
Delaware law, "[n]o corporation shall be dissolved or merged under this chapter until all franchise
taxes due to or assessable by the State . . . have been paid by the corporation." Del. Code Ann. tit.
8, § 277 (2001). Moreover, even after a corporation is dissolved, it remains subject to civil suit for
three years alter dissolution. Del. Code Ann. tit. 8, § 278 (2001). Thus, regardless of the fact that
the CNA Defendants have had their charters declared void, because they remain undissolved
corporations, they are corporate citizens ofthe State of Delaware who may be named as defendants
in a civil action. As such, the court no longer has subject matter jurisdiction, which was based on
diversity of citizenship, because Capitol is a corporate citizen of the same state.
Furthermore, TIC’s argument that the addition of the CNA Defendants is a transparent and
impermissible scheme to defeat diversity jurisdiction is unconvincing. The questions of (1) whether
it is impossible for the CNA Defendants to be liable in this action given their respective dates of
incorporation relative to the dates ofthe disputed insurance policies held by Capitol, and (2) whether
the CNA Defendants carmot be liable because TIC merely used their name as a registered service
mark, are factual matters that the court is unable to resolve at this stage of the litigation.
Therefore, because the court is without jurisdiction, this action must be remanded back to
2

Case 1:04-cv—00865-G|\/IS Document 14 Filed 10/05/2005 Page 3 of 3
state court. 28 U.S.C. § 1447(c).
IT IS HEREBY ORDERED THAT:
1. Capito1’s motion to vacate (D.I. 10) be GRANTED;
2. The court’s order of March 24, 2005 (D.I. 9), be VACATED;
3. Capitol’s motion to remand (D.I. 3) be GRANTED; and
4. The entire action be REMANDED to Delaware Superior Court.
Dated: October 5 , 2005 ~
EDS ATES DISTRI JUDG
3