Cook v. Employers Mutual Casualty Company
1:20-cv-00055
D. Mont.Nov 4, 2020Background
- Plaintiffs are Montana homeowners who sued for declaratory relief under Montana’s Uniform Declaratory Judgment Act, seeking a coverage determination under commercial liability policies issued by Employers Mutual Casualty Company (EMC).
- Plaintiffs named Helgeson entities (Montana corporations that built the homes) and EMC; Plaintiffs allege Helgeson has potential liability and EMC is defending under a reservation of rights.
- EMC previously sued Helgeson in federal court (related Kramer matter) for a coverage declaration; Plaintiffs attempted to intervene but EMC opposed; Plaintiffs then filed this separate state declaratory action.
- EMC removed the state action to federal court, asserting diversity jurisdiction and arguing Helgeson was fraudulently joined to defeat diversity.
- The magistrate judge concluded Helgeson is a necessary interested party under Montana’s DJA, EMC failed to prove fraudulent joinder, complete diversity is lacking, and recommended remand to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent joinder of Helgeson | Helgeson is an interested/necessary party to a coverage declaration | Helgeson joined only to defeat diversity; cannot be liable here | Joinder not fraudulent; plausible state-law interest exists for Helgeson |
| Requirement to intervene before filing separate state action | Plaintiffs were not required to intervene when EMC objected | Plaintiffs should have intervened rather than file new suit | No authority requires intervention; filing separate action permissible |
| Whether Helgeson must be named as defendant vs. co-plaintiff | Helgeson is an affected party under Mont. Code Ann. §27-8-301 and may be joined as defendant | Helgeson could have been joined as plaintiff, not defendant | Act does not mandate co-plaintiff status; being a defendant is proper |
| Complete diversity and remand | Plaintiffs are Montana citizens; Helgeson Montana citizens | EMC argued Helgeson is fictitious or fraudulently joined | Complete diversity lacking; case remanded to state court |
Key Cases Cited
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) (federal courts are courts of limited jurisdiction)
- Grancare, LLC v. Thrower by and through Mills, 889 F.3d 543 (9th Cir. 2018) (fraudulent joinder standard; remand if possibility of state claim)
- Morris v. Princess Cruises, Inc., 236 F.3d 1061 (9th Cir. 2001) (complete diversity requirement explained)
- Weeping Hollow Ave. Trust v. Spencer, 831 F.3d 1110 (9th Cir. 2016) (presumption against fraudulent joinder; defendant bears heavy burden)
- Hunter v. Philip Morris USA, 582 F.3d 1039 (9th Cir. 2009) (fraudulent joinder burden discussion)
- Hamilton Materials, Inc. v. Dow Chemical Corp., 494 F.3d 1203 (9th Cir. 2007) (fraudulent joinder must be proven by clear and convincing evidence)
- St. Paul Fire & Marine Ins. Co. v. Cumiskey, 665 P.2d 223 (Mont. 1983) (purpose of joinder under Montana’s declaratory judgment scheme)