Leaphart v. National Union Fire Insurance Company of Pittsburgh, PA
4:15-cv-00106
D. Mont.Jan 7, 2016Background
- Plaintiff W. William Leaphart, as guardian ad litem for Jeremy Vangsnes, sued insurers National Union and Continental Casualty and adjuster Mike McNabb for bad-faith refusal to promptly settle when liability was reasonably clear.
- Defendants removed the action to federal court based on diversity; McNabb is a Montana resident.
- Plaintiff moved to remand, arguing the forum-defendant rule bars removal because McNabb is a local defendant; also sought fees.
- Defendants argued McNabb was fraudulently joined to defeat diversity and moved to dismiss him for failure to state a claim.
- Court considered whether defendants’ removal notice needed factual allegations of fraudulent joinder or whether the record beyond the notice could be considered.
- Court evaluated whether the complaint sufficiently pled a § 33-18-201 unfair-claims-practices claim against an individual adjuster (requiring allegation of a "general business practice").
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether forum-defendant rule bars removal | McNabb is a Montana resident; his presence prohibits removal | McNabb was fraudulently joined to defeat diversity | Forum-defendant rule applies; remand granted |
| Whether notice of removal must plead facts of fraudulent joinder | Notice must contain factual support; defects warrant remand | Notice need only state grounds; court may consider the record beyond the notice | Court may look to later submissions/record; notice defects alone do not require remand |
| Whether joinder of McNabb was fraudulent for failure to state claim | Complaint alleges McNabb acted as adjuster and engaged in a general business practice of bad faith | Complaint fails to plead multiple violations or general business practice required for individual liability | Plaintiff sufficiently alleged a claim; fraudulent joinder not proven |
| Whether plaintiff is entitled to attorneys' fees for improper removal | Fees requested for wrongful removal | Removal was objectively reasonable | Fees denied; defendants had objectively reasonable basis to remove |
Key Cases Cited
- Gaus v. Miles, Inc., 980 F.2d 564 (9th Cir. 1992) (removal statute construed strictly; defendant bears burden to establish removal is proper)
- Spencer v. United States Dist. Court for N. Dist. of Cal., 393 F.3d 867 (9th Cir. 2004) (forum-defendant rule bars diversity removal when a properly joined and served defendant is a forum resident)
- Hunter v. Philip Morris USA, 582 F.3d 1039 (9th Cir. 2009) (fraudulent-joinder exception to forum-defendant rule; court may find joinder fraudulent when plaintiff cannot state a claim against the resident defendant)
- Hamilton Materials, Inc. v. Dow Chem. Corp., 494 F.3d 1203 (9th Cir. 2007) (defendant must prove fraudulent joinder by clear and convincing evidence)
- Otani v. State Farm Fire & Cas. Co., 117 F.3d 1425 (9th Cir. 1997) (court must view complaint in light most favorable to plaintiff when assessing failure-to-state claim in removal context)
- Martin v. Franklin Capital Corp., 546 U.S. 132 (2005) (attorney-fee awards for removal motions are appropriate only when removing party lacked an objectively reasonable basis)
- O'Fallon v. Farmers Ins. Exch., 859 P.2d 1008 (Mont. 1993) (Montana recognizes unfair-claims-practices claims against individual adjusters)
- Cook v. Principal Mut. Life Ins. Co., 784 F. Supp. 1513 (D. Mont. 1990) (examples of proving a general business practice: multiple violations in one claim or same company across different cases)