48 F. Supp. 3d 53
D.D.C.2014Background
- WECCO sued eight insurers and Property and Casualty Insurance Guaranty Corporation (PCIGC) in D.C. Superior Court seeking declaratory relief regarding insurance obligations.
- PCIGC and WECCO are Maryland corporations; other defendants are not Maryland citizens.
- Defendants first removed to federal court asserting fraudulent joinder of PCIGC; the district court remanded after finding defendants had not proven fraudulent joinder.
- The Superior Court later dismissed PCIGC for lack of personal jurisdiction (an involuntary dismissal as to PCIGC).
- Remaining defendants removed again; WECCO moved to remand invoking the voluntary-involuntary rule (removal cannot be based on an involuntary dismissal that creates diversity).
- Defendants argued the Superior Court’s dismissal proves PCIGC was fraudulently joined and thus removal is proper; the district court rejected that argument and remanded the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the involuntary dismissal of PCIGC permits federal diversity jurisdiction | The voluntary-involuntary rule bars removal when diversity arises from an involuntary dismissal | The rule doesn’t apply because PCIGC was fraudulently joined so diversity existed from the start | Voluntary-involuntary rule applies; remand required |
| Whether PCIGC was fraudulently joined at the outset | PCIGC could possibly be liable; there was a non-speculative possibility of a claim and jurisdictional questions were close | Superior Court’s dismissal for lack of personal jurisdiction proves fraudulent joinder | Dismissal for lack of jurisdiction does not establish fraudulent joinder; defendants failed to meet heavy burden |
| Burden and standard for proving fraudulent joinder | Plaintiff need only show any possibility of a right to relief against the non-diverse defendant | Defendants bear heavy burden to show no possibility of recovery or fraudulent pleading | Court follows rule that removing party must prove no possibility of plaintiff’s recovery |
| Effect of Superior Court’s jurisdictional ruling on removal | Superior Court’s ruling is an involuntary dismissal and does not create removability | Superior Court’s ruling demonstrates PCIGC’s lack of connection and supports removability via fraudulent joinder exception | Superior Court’s ruling does not compel a finding of fraudulent joinder; remand affirmed |
Key Cases Cited
- Whitcomb v. Smithson, 175 U.S. 635 (1900) (dismissal without plaintiff’s assent does not make case removable)
- Great Northern Railway Co. v. Alexander, 246 U.S. 276 (1918) (case cannot become removable except by plaintiff’s voluntary act)
- American Car & Foundry Co. v. Kettelhake, 236 U.S. 311 (1915) (discontinuance must be voluntary to create removability)
- Chesapeake & Ohio Railway Co. v. Cockrell, 232 U.S. 146 (1914) (fraudulent joinder of resident defendant cannot defeat removal)
- Poulos v. Naas Foods, Inc., 959 F.2d 69 (7th Cir. 1992) (voluntary-involuntary rule survives statutory amendments allowing later removal)
- Insinga v. LaBella, 845 F.2d 249 (11th Cir. 1988) (fraudulent joinder is an exception to the voluntary-involuntary rule)
- Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744 (11th Cir. 2010) (traditional rule that only plaintiff’s voluntary act may convert nonremovable to removable)