Ullman v. Safeway Insurance
995 F. Supp. 2d 1196
D.N.M.2013Background
- On May 3, 2012 Betty Ullman was injured when Richard Bailey (an alleged uninsured New Mexico driver) struck her car; Ullman holds two Safeway Insurance policies with liability limits of $25,000/$50,000 and alleges UM/UIM was not properly offered/waived.
- Ullman filed a putative New Mexico class action (bad-faith, declaratory/injunctive relief, reformation/stacking of UM/UIM coverage) and personal-injury claims against Bailey; Safeway removed to federal court asserting diversity jurisdiction.
- Safeway (Illinois citizen) contended the amount in controversy exceeds $75,000 and argued Bailey (New Mexico citizen) was fraudulently or procedurally misjoined to defeat diversity.
- Ullman resisted remand, arguing (i) she has viable claims against Bailey (or his estate) and properly joined him to preserve subrogation and common proof, and (ii) Safeway failed to invoke CAFA and did not show CAFA elements.
- The court found Ullman’s individual claim exceeds $75,000 (so supplemental jurisdiction over class claims could be available) but held Bailey was neither fraudulently joined nor procedurally misjoined, so complete diversity was lacking and remand was required.
- The court denied Ullman’s request for attorneys’ fees under 28 U.S.C. § 1447(c), finding Safeway had an objectively reasonable (though ultimately unsuccessful) basis to remove given unsettled law on procedural misjoinder.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether amount in controversy meets $75,000 for diversity | Ullman concedes her own claim exceeds $75,000 but argues Safeway cannot aggregate each class member’s claims; CAFA not invoked by Safeway | Safeway claimed Ullman’s claims (including reformation/stacking and punitive/treble damages and administrative costs) create a good-faith basis that $75,000 is in controversy | Held: Ullman’s individual claims exceed $75,000 so amount-in-controversy satisfied for her; court may exercise supplemental jurisdiction over class claims if other requirements met |
| Whether Bailey was fraudulently joined | Ullman: she has colorable negligence/negligence-per-se claims against Bailey (or his estate) and thus joinder is legitimate | Safeway: Bailey’s joinder is a sham because recovery will be against Safeway via policy reformation; Bailey’s estate unlikely to pay | Held: No fraudulent joinder — Safeway did not show there was no possibility Ullman could recover against Bailey |
| Whether Bailey was procedurally misjoined under Rule 20 (fraudulent misjoinder) | Ullman: joinder is proper because insurer’s obligations and tort liability arise from the same accident; common proofs, witnesses, and risk of inconsistent rulings justify joining Bailey | Safeway: personal-injury claims involve different legal issues (tort) than the class insurance contract claims, so Bailey is improperly joined to defeat diversity; court should sever or drop Bailey | Held: No procedural misjoinder — claims arise from same transaction and share common questions; Bailey properly joined, so his citizenship destroys complete diversity; remand required |
| Whether plaintiff is entitled to attorneys’ fees under 28 U.S.C. § 1447(c) | Ullman: Safeway lacked objectively reasonable basis to remove because New Mexico law clearly permits UM/UIM claims against tortfeasors | Safeway: removal reasonable given unsettled procedural misjoinder doctrine and amount-in-controversy questions | Held: Fees denied — Safeway had an objectively reasonable basis to remove given unsettled law on procedural misjoinder and related issues |
Key Cases Cited
- Dutcher v. Matheson, 733 F.3d 980 (10th Cir. 2013) (clarifies fraudulent-joinder standard and requires high showing to establish fraudulent joinder)
- Triggs v. John Crump Toyota, Inc., 154 F.3d 1284 (11th Cir. 1998) (named-plaintiff focus in class actions; nondiverse defendant not fraudulently joined if named plaintiff has a possibility of recovery)
- McPhail v. Deere & Co., 529 F.3d 947 (10th Cir. 2008) (defendant bears burden to prove by a preponderance that jurisdictional amount may be in controversy; post-removal evidence may be considered)
- Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (U.S. 2013) (class representative’s pre-certification stipulation about aggregate class damages not binding for CAFA amount-in-controversy analysis)
- Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353 (11th Cir. 1996) (formulation of fraudulent misjoinder doctrine; misjoinder can be as fraudulent as joinder of a sham resident defendant)
- Jordan v. Allstate Ins. Co., 149 N.M. 162 (N.M. 2010) (New Mexico Supreme Court rules on required disclosures, premiums, and written policy-level rejection for UM/UIM coverage; failure to comply leads to reformation)