Sonya Hubbard v. Federated Mutual Insurance Co.
2015 U.S. App. LEXIS 15915
| 8th Cir. | 2015Background
- Federated Mutual (Minnesota) insured property owned by Missouri citizen Sonya Hubbard; tenants McKees (Missouri) claimed an interest after a fire.
- Federated filed an interpleader in federal court (Federated I), deposited $40,980.95, and the district court dismissed Hubbard’s vexatious-refusal-to-pay counterclaim for failure to state a claim.
- Hubbard later sued Federated and the McKees in Missouri state court (Federated II), again asserting a vexatious-refusal claim and seeking a declaration about the McKees’ interest.
- Federated removed Federated II to federal court based on diversity; Hubbard moved to remand, arguing lack of federal jurisdiction.
- District court found the McKees were fraudulently joined, denied remand, dismissed the McKees, and (relying on res judicata given the interpleader proceedings) dismissed Hubbard’s vexatious-refusal claim; this Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether remand was required because of nondiverse defendants | Hubbard argued McKees were proper defendants and removal was improper | Federated argued McKees were fraudulently joined to defeat diversity | Court held McKees were fraudulently joined and remand denied |
| Whether Hubbard could maintain a vexatious-refusal claim after interpleader | Hubbard asserted she needed a separate state action to declare McKees’ interest and pursue damages | Federated argued interpleader resolved competing claims and res judicata barred relitigation | Court held res judicata barred Hubbard’s vexatious-refusal claim and dismissed it |
| Adequacy of evidence for fraudulent joinder | Hubbard relied on counsel’s stated interest-declaration purpose for joining McKees | Federated pointed to Hubbard’s earlier counsel email resolving McKee claim and conceding no further claim | Court found no reasonable basis to sue McKees; joinder was fraudulent |
| Whether lack of a final judgment in Federated I at time of dismissal was reversible error | Hubbard argued res judicata application was premature before final interpleader judgment | Federated and court argued any error was harmless because Federated I later produced a final judgment | Court held any error was harmless; final judgment in Federated I now exists and affirmation is proper |
Key Cases Cited
- Junk v. Terminix Int’l Co., 628 F.3d 439 (8th Cir. 2010) (removal and subject-matter jurisdiction standards)
- Thompson v. R.J. Reynolds Tobacco Co., 760 F.3d 913 (8th Cir. 2014) (standard for fraudulent joinder review)
- Knudson v. Sys. Painters, Inc., 634 F.3d 968 (8th Cir. 2011) (fraudulent-joinder analysis and presumption favoring remand)
- Lynch v. Nat’l Prescription Adm’rs, Inc., 787 F.3d 868 (8th Cir. 2015) (de novo review of res judicata application)
- Laase v. Cnty. of Isanti, 638 F.3d 853 (8th Cir. 2011) (use of law of forum rendering first judgment for preclusion analysis)
- Morgan v. State Farm Fire & Cas. Co., 344 S.W.3d 771 (Mo. Ct. App. 2011) (Missouri res judicata principles)
- Noble v. Shawnee Gun Shop, Inc., 316 S.W.3d 364 (Mo. Ct. App. 2010) (trial-court judgment considered final for preclusion even while appeal pending)