647 F.Supp.3d 1195
W.D. Okla.2022Background
- Plaintiffs sued State Farm in Oklahoma state court after State Farm denied a hail-damage claim for their unique Davinci/Inspire synthetic slate roof, alleging breach of contract and bad faith and, alternatively, fraud and negligent procurement against State Farm’s agent (Bob Watson Insurance Agency, Inc.) and fraud against State Farm adjuster David Camp.
- Plaintiffs allege Watson represented he would procure coverage that would permit repairs/replacement in accordance with the manufacturer’s guidelines for the specialized roof (including like-kind-and-quality replacement), and that State Farm’s adjustment (via vendor EDT) improperly treated the damage as a spot repair contrary to manufacturer specs and building codes.
- Watson and Camp are Oklahoma citizens; State Farm is diverse, so State Farm removed the case to federal court asserting fraudulent joinder of Watson and Camp to defeat diversity jurisdiction.
- State Farm argued Plaintiffs cannot establish causation or falsity as to Watson (harm resulted from State Farm’s adjustment, and the policy already provides replacement-cost/similar-construction coverage) and that Camp’s alleged misrepresentations fall within the scope of employment.
- The district court evaluated whether there was no possibility Plaintiffs could recover against the nondiverse defendants and concluded State Farm failed to show Watson was fraudulently joined because Plaintiffs plausibly alleged Watson promised coverage tied to manufacturer guidelines (and warranty preservation) and thus could have caused the alleged loss of promised coverage.
- The court denied State Farm’s informal request for jurisdictional discovery, found complete diversity lacking, and remanded the case to Cleveland County District Court, Oklahoma.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent joinder of agent Watson | Watson promised specialized coverage tied to manufacturer repair guidelines; those misrepresentations and negligent procurement caused the loss of promised coverage | No causal link: injury stems from State Farm’s claims adjustment (not agent’s procurement); policy language already provides similar-construction replacement cost | Joinder not fraudulent as to Watson — reasonable possibility of recovery exists; Watson’s citizenship defeats complete diversity; remand required |
| Fraudulent joinder of adjuster Camp | Camp made actionable misrepresentations that misled Plaintiffs during adjustment | Any misrepresentations by Camp are within scope of employment so only the employer is liable | Court did not need to decide Camp’s joinder after ruling on Watson; because Watson remains, remand stands |
| Use of post-removal factual supplementation | Plaintiffs may amplify allegations consistent with the original petition (e.g., manufacturer-guideline promise) | Defendant urges court to ignore post-removal facts that introduce new theories | Court considered plaintiff’s clarifying facts as consistent with the petition and therefore proper to assess joinder possibility |
| Jurisdictional discovery | N/A (Plaintiffs opposed) | State Farm sought opportunity to develop record before remand | Court declined to defer ruling or permit discovery absent a proper motion or persuasive justification |
Key Cases Cited
- Dutcher v. Matheson, 733 F.3d 980 (10th Cir. 2013) (fraudulent joinder standard: removing party must prove plaintiff cannot establish a claim against nondiverse defendant)
- McPhail v. Deere & Co., 529 F.3d 947 (10th Cir. 2008) (burden on removing defendant to establish federal jurisdiction)
- Dodd v. Fawcett Publ’ns, Inc., 329 F.2d 82 (10th Cir. 1964) (courts may pierce pleadings and consider the whole record to test for fraudulent joinder)
- Smoot v. Chicago, Rock Island & Pac. R.R. Co., 378 F.2d 879 (10th Cir. 1967) (nonliability of fraudulently joined defendant must be established with complete certainty)
- Griggs v. State Farm Lloyds, 181 F.3d 694 (5th Cir. 1999) (post-removal filings may not be considered to the extent they present new causes of action or theories)
- Nerad v. AstraZeneca Pharm., Inc., [citation="203 F. App'x 911"] (10th Cir.) (district court may consider whether a plausible amendment could state a claim against nondiverse defendant)