Herndon v. Buffin
5:14-cv-00398
| E.D. Ky. | Feb 19, 2015Background
- On Jan. 15, 2010, minor plaintiff M.L. (through her mother Angela Herndon) was injured as a passenger; both were insured by Shelter Mutual.
- Shelter paid medical bills and adjuster Rachel Buffin provided a one-page “Indemnifying Release (Minors)” and $500 for the minor’s benefit; Buffin told Herndon acceptance would bar future claims.
- No court approval for the minor settlement was sought or obtained; Plaintiff alleges she was not informed that court approval was required under KRS § 387.280.
- Plaintiff sued in Bourbon Circuit Court in Sept. 2014 asserting claims against Shelter and Buffin (negligence/gross negligence, fraud in inducement, fraud by omission, intentional infliction of emotional distress, negligent misrepresentation).
- Defendants removed to federal court asserting diversity jurisdiction and claiming Buffin was fraudulently joined (Plaintiff and Buffin are Kentucky citizens). Plaintiff moved to remand and sought fees for improper removal.
- The District Court found a colorable basis for at least some claims against Buffin under Kentucky law and remanded; it denied attorney’s fees because removal was objectively reasonable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Buffin was fraudulently joined, permitting federal diversity jurisdiction | Buffin can be liable on asserted claims; removal improper | Buffin cannot be personally liable under Kentucky law, so joinder was fraudulent | Remand: fraudulent joinder not shown; colorable claims against Buffin exist |
| Whether negligence claims can lie against insurer/adjuster (vs. only bad-faith) | Plaintiff asserts negligence or negligent misrepresentation theories against Buffin | Defendants contend Kentucky law limits liability to bad-faith only (no negligence claim) | Court: even if negligence alone may be limited, fraud and negligent misrepresentation remain colorable under Kentucky law |
| Viability of fraud / negligent misrepresentation claims based on settlement statements/releases | Plaintiff contends Buffin made false/omissive statements inducing release without court approval | Defendants argue authority precludes individual liability or that claims fail as a matter of law | Court: Kentucky precedent (Abney) treats such claims on the merits; defendants failed to show these claims cannot succeed — colorable basis exists |
| Award of attorney's fees for improper removal under 28 U.S.C. § 1447(c) | Plaintiff requests fees arguing removal was improper | Defendants argue removal was reasonable given ambiguous Kentucky law | Denied: removal was objectively reasonable given unsettled law on adjuster liability |
Key Cases Cited
- Lincoln Prop. Co. v. Roche, 546 U.S. 81 (federal removal principles)
- Coyne v. Am. Tobacco Co., 183 F.3d 488 (6th Cir. 1999) (fraudulent-joinder standard favoring remand)
- Caudill v. N. Am. Media Corp., 200 F.3d 914 (6th Cir. 2000) (complete diversity requirement)
- Casias v. Wal-Mart Stores, Inc., 695 F.3d 428 (6th Cir. 2012) (colorable-claim standard in joinder context)
- Martin v. Franklin Capital Corp., 546 U.S. 132 (attorney-fee standard for improper removal)
- Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437 (Ky. 1999) (bad-faith versus negligence in insurance settlement context)
- Harvin v. United States Fid. & Guar. Co., 428 S.W.2d 213 (Ky. 1968) (requiring bad faith for insurer liability)
- Georgia Cas. Co. v. Mann, 46 S.W.2d 777 (Ky. 1932) (historical Kentucky precedent on insurer liability)