John S. Pierce, Lincoln, Neb., for plaintiff.
William Zastera, Nebraska City, Neb., Otto Wellensiek, Syracuse, and James W. Hewitt, Lincoln, Neb., for defendants.
MEMORANDUM
URBOM, Chief Judge.
This matter is here on a motion of the plaintiff to remand the action to the District Court of Holt County, Nebraska, on the ground that common citizenship of the plaintiff and defendant Universal Surety Co., Inc. operates to destroy jurisdiction.
By virtue of 28 U.S.C. § 1441(b) removal of this action, which is for breach of contract, may be had only if none of the defendants is a citizen of Nebraska. The defendant Universal Surety Co., Inc. is a citizen of Nebraska, but the defendants argue that removal is justifiable because Universal Surety Co., Inc. is merely a nominal or formal party whose presence may be ignored for diversity purposes.
It is correct that the presence of a nominal or formal party will not defeat jurisdiction, Bradley v. Maryland Casualty Company, 382 F.2d 415 (C.A. 8th Cir. 1967), but the rule does not fit the present case because Universal Surety Co., Inc. is not merely a nominal or formal party. It is a surety on an indemnity bond and the action is one which, if the
allegations of the complaint are accurate and true, will place liability upon both the principal and the surety.
The early case of Mutual Reserve Fund Life Association v. Farmer, 77 F. 929 (C.A. 8th Cir. 1896), is authority directly opposed to the defendants' position. The court said:
One of the consequences of a surety's presence in a case as a defendant with its principal is that judgment against the principal may be a prima facie showing against the surety of the principal's breach of obligation. Becker v. Koza, 53 F.R.D. 416 (U.S.D.C.Neb.1971). Such a holding would be inconsistent with the surety's being merely a formal or nominal party.
The cases cited by the defendants are not in point and, if they were, would not take a place of primacy in this circuit over the Mutual Reserve case. Fidelity & Casualty Co. of New York v. Wilson, 105 F.Supp. 454 (U.S.D.C.S.C.1952) was an interpleader action commenced by the surety as a disinterested stakeholder. Stonybrook Tenants Association, Inc. v. Alpert, 194 F.Supp. 552 (U.S.D.C.Conn.1961) dealt with the effect of two inactive corporations as parties defendant where the corporations had no interest in the claims asserted in the action and had no capacity to respond in damages or in affording equitable relief. The surety in the present case is not a disinterested stakeholder, may be liable on the claims, and, at least ostensibly, has the capacity to respond.
An order remanding the case will be entered today.