MEMORANDUM OPINION AND ORDER
THIS MATTER comes before the Court on the Plaintiffs Motion for Remand, filed July 24, 2013 (Doc. 10)(“Motion to Remand”). The Court held a hearing on November 14, 2013. The primary issues are: (i) whether Defendant Safeway Insurance Company has established that Plaintiff Betty Ullman’s claims exceed the jurisdictional minimum for conventional diversity jurisdiction; (ii) whether Ullman fraudulently joined nondiverse Defendant Richard Bailey; (in) whether Ullman procedurally misjoined Bailey to defeat federal diversity jurisdiction; and (iv) whether Ullman is entitled to attorney’s fees. The Court concludes that, because Ullman’s claims exceed $75,000.00, the amount in controversy requirement is satisfied, and the Court may exercise supplemental jurisdiction over the remaining putative class members’ claims if they satisfy the other requirements of diversity jurisdiction, but, because it also concludes that the Ullman did not fraudulently join or procedurally misjoin Bailey and the claims against him, there is not complete diversity, and the Court does not have subject-matter jurisdiction over the case. The Court will, therefore, grant the Motion to Remand in part and remand the case to state court, but it will deny Ullman’s request for attorney’s fees.
FACTUAL BACKGROUND
The Court takes its facts from the Class Action Complaint for Breach of Statutory, Common Law, and Contractual Duties, and for Injunctive and Delaratory [sic] Relief and for Personal Injuries, filed in state court May 23, 2013, filed in federal court June 27, 2013 (Doe. 1 at ^(“Complaint”). The dispute arises from uninsured/underinsured motorist (“UM/UIM”) coverage provisions in Safeway Insurance policies issued to Ullman and others similarly situated.
On May 3, 2012, Bailey struck the passenger side of Ullman’s vehicle, injuring Ullman and totaling her vehicle; Bailey fled the scene, but a witness reported Bailey’s license plate number to the police, who then arrested him at his home. See Complaint ¶¶ 12-17, at 13-14. Bailey was
PROCEDURAL BACKGROUND
Ullman alleges that Safeway Insurance improperly denied benefits under the UM/ UIM insurance coverage to her and other similarly situated. See Complaint ¶ 1, at 12. She alleges, for herself and others similarly situated, eight insurance bad faith counts against Safeway Insurance, including: (i) violation of the New Mexico Unfair Trade Practices Act, N.M. Stat. Ann. §§ 57-12-1 to -22, see Complaint ¶¶ 48-52, at 21-22; (ii) violation of the New Mexico Trade Practices and Frauds Act, N.M. Stat. Ann. §§ 59A-16-1 to -30, see Complaint ¶¶ 53-57, at 23-24; (in) denial of uninsured motorist benefits, see Complaint ¶¶ 58-60 at 24; (iv) breach of the implied covenant of good faith and fair dealing, see Complaint ¶¶ 61-63, at 24; (v) breach of contract, see Complaint ¶¶ 64-67, at 25; (vi) injunctive relief, see Complaint ¶¶ 68-70, at 25; (vii) declaratory judgment, see Complaint ¶¶ 71-74, at 25-26; (viii) and punitive damages, see id. ¶¶ 75-77, at 26. See also Notice of Removal to the United States District Court for the District of New Mexico ¶ 7, at 2, filed June 27, 2013 (Doc. l)(“Notice of Removal”). Ullman also alleges three personal injury counts against Bailey and Safeway Insurance, including: (i) negligence, see Complaint ¶¶ 78-83, at 28-29; (ii) negligence per se, see Complaint ¶¶ 84-98, at 29-31; and (iii) punitive damages, see id. ¶¶ 99-103, at 31. See also Notice of Removal ¶ 8, at 2. Ullman asserts that Safeway Insurance “is liable for damages recovered
Safeway Insurance removed the case to federal court based on diversity jurisdiction: Ullman is a New Mexico citizen, and Safeway Insurance is incorporated in Illinois with its principal place of business in Illinois. See Notice of Removal ¶ 2, at 1; id. ¶ 4, at 2. Safeway Insurance does not admit that Ullman and the class may recover any specific amount, but contends that it has a good-faith basis to assert that the amount in controversy exceeds the jurisdictional minimum, because the Complaint prays for general, punitive, and treble damages, and stacked coverage of the reformed policies, and because “the cost of reforming policies to liability limits for the
Safeway Insurance argues that Ullman cannot state a claim against it for negligence; it says it is liable to Ullman for her personal injuries “through a contractual basis and only if the Court finds that Plaintiff did not properly reject UM/UIM coverage.” Notice of Removal ¶ 17, at 4. Safeway Insurance maintains that it does not have a duty to indemnify Bailey and was not responsible for Bailey’s actions while he drove the vehicle; instead, Safeway Insurance argues that it is in privity with Ullman to bring claims against Bailey pursuant to the insurance policy, and that Ullman must preserve and protect its “right to subrogate” against Bailey. Notice of Removal ¶ 17, at 4-5.
Bailey was a New Mexico citizen.
Safeway Insurance further asserts that Ullman misjoined Bailey under rule 20(a)(2) of the Federal Rules of Civil Procedure, because Ullman’s claims against Safeway Insurance “require different questions of law and fact[ ] than the questions of law and fact required for Plaintiffs negligence claims against Bailey,” and arise out of different transactions or occurrences. Notice of Removal ¶¶ 22-24, at 6-7. Safeway Insurance asserts that, although the Court may find that it has a duty to provide uninsured motorist coverage, it did not cause the car accident, and it has no relationship with Bailey that would require it “to indemnify, subrogate to, or be in privity with Defendant Bailey”; thus,' the insurance bad faith claims against it “require different questions of law and fact, than the questions of law and fact required for Plaintiffs negligence claims against Bailey.” Notice of Removal ¶ 23, at 7. In Safeway Insurance’s view, the claims against it arise out of different transactions or occurrences than the claims against Bailey, because, “[although the circumstances that initiated Plaintiffs claim against Safeway were Plaintiffs accident with Bailey, the alleged proximate cause of Plaintiff and the class’s bad faith claim against Safeway is their insurance agreement with Safeway, not a car accident.” Notice of Removal ¶ 24, at 7. Safeway Insurance reiterates that the other putative class members do not have claims against Bailey for negligence. See Notice of Removal ¶ 24, at 7-8.
Safeway Insurance notes that, “[a]s a possible alternative basis for removal,” the Court “may have subject matter jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(4)(A).” Notice of Removal ¶ 28, at 9.
Ullman, for herself and all other similarly situated, brings the Motion to Remand under 28 U.S.C. § 1447 to request that the Court remand this matter to New Mexico state court. See Motion to Remand at 1. She states that “[tjhere are two bases for federal subject matter jurisdiction over class actions not arising under federal law: conventional diversity class actions and class actions removed under the Class Action Fairness Act (‘CAFA’).” Motion to Remand at 1. Ullman argues that Safeway Insurance bears the burden to show that the Court has jurisdiction under CAFA, but that it did not argue that the Court has jurisdiction under CAFA, did not state the elements, and did not “provide any evidence whatsoever of any of the elements necessary to remove on CAFA grounds, which is its burden.” Motion to Remand at 1 n. 2. “Because Defendant Safeway has presented no affidavits or other evidence whatsoever on the elements that must be proven under CAFA, Defendant’s Notice must be examined solely on conventional diversity grounds.” Motion to Remand at 9.
Ullman asserts that Safeway Insurance’s “sole argument” for federal jurisdiction is that she improperly joined Bailey. Motion to Remand at 1-2. See id. at 8. Ullman asserts that she did not improperly join Bailey, because “[njaming Bailey is the most judicially efficient and economical means of pursuing the claims and issues in this case.” Motion to Remand at 2. Ullman alleges that she has a direct claim against Bailey, or Bailey’s estate if he is deceased, and that she is protecting Safeway Insurance’s subrogation interest by naming Bailey in this action. See Motion to Remand at 2. Ullman contends that, to prove fraudulent joinder, Safeway Insurance “must demonstrate by clear and convincing evidence that there is no possibility” that she “would be able to establish a viable cause of action” against Bailey.
ignores that it is responsible for damages found against Defendant Bailey up to the limits of Plaintiff Ullman’s UM/ UIM coverage under her policy of insurance with Safeway. New Mexico law unequivocally provides that UM/UIM coverage is for the purpose of and for the protection of insureds “who are legally entitled to recover damages from owners or operators of uninsured motor vehicles.”
Motion to Remand at 10 (quoting N.M. Stat. Ann. § 66-5-301). Safeway Insurance argues that Ullman is not likely to recover from Bailey; Ullman argues that she has viable direct claims against Bailey and that she, as the Plaintiff, is the “master of her complaint,” and that her motivation and Bailey’s suspected wealth or poverty does not affect the removal inquiry as long as the claims against him are color-able. Motion to Remand at 11. She asserts that Bailey “has claims and interests potentially affected by the outcome of this suit,” because she will have a right to collect damages from him or his estate “for any damages she incurred over and above the amount of UM/UIM coverage she purchased from Defendant Safeway.” Motion to Remand at 11. In Ullman’s view, she may join Bailey as a party under rule 20 of the Federal Rules of Civil Procedure, because relief is joint and several, and there are questions of law and fact common to Bailey and Safeway Insurance. See Motion to Remand at 11-12. “For example, as Defendant Safeway is liable for damages which may be found against Defendant Bailey, the legal claims and facts [for negligence and negligence per se] are common to both Defendants.” Motion to Remand at 12. Although the putative class members cannot seek relief from Bailey, Ullman asserts that fact is not an obstacle to joining Bailey and is not relevant in evaluating diversity jurisdiction. See Motion to Remand at 12. “The proper analysis for diversity purposes is not on the claims of the members of the putative plaintiff class[;] the focus is on the diversity of the defendant to the named plaintiff. ...” Motion to Remand at 12 (citing Triggs v. John Crump Toyota, Inc.,
Ullman asserts that she is entitled to attorneys’ fees pursuant to 28 U.S.C. § 1447(c), because, in her view, Safeway Insurance did not have an objectively reasonable basis for seeking removal. See Motion to Remand at 16. Ullman explains that, before filing the Motion to Remand, her counsel called Safeway Insurance’s counsel regarding the problems with the fraudulent joinder argument and requested Safeway Insurance to withdraw its Notice of Removal; Safeway Insurance’s counsel did not. See Motion to Remand at 16. “Because New Mexico law explicitly allows for a private right of action against Defendant Bailey, and Defendant Safeway’s Notice provides no evidence or law to the contrary, Defendant Safeway lacked an objectively reasonable basis for seeking removal.” Motion to Remand at 16. Ullman contends that the Court has discretion to award attorneys’ fees and costs under 28 U.S.C. § 1447(c). See Motion to Remand at 17.
Safeway Insurance responds that it satisfied its burden to establish that the Court has diversity jurisdiction under 28 U.S.C. § 1332, and that Ullman fraudulently joined Bailey and “misjoined the personal injury causes of action to the insurance bad faith class action for the purpose of defeating diversity jurisdiction.” Defendant Safeway’s Response in Opposition to Plaintiffs Motion to Remand at 4, filed August 8, 2013 (Doc. ll)(“Response”). Safeway Insurance explains that federal courts have recognized three categories of fraudulent joinder:
(1) where a plaintiff cannot plead a cause of action against the non-diverse defendant, Rogers v. Hartford Accident & Indemnity Co.,133 F.3d 309 , 315 (5th Cir.1998); (2) where a plaintiffs pleading of jurisdictional facts is outright fraudulent, Gottlieb v. Westin Hotel Co.,990 F.2d 323 , 327 (7th Cir.1993); or (3) where a plaintiff joins a diverse defendant with a non-diverse defendant as to whom no joint, several, or alternative liability exists, and where plaintiffs claim against the non-diverse defendant has no real connection to the claim against the diverse defendant, Triggs v. John Crump Toyota, Inc.,154 F.3d 1284 , 1287 (11th Cir.1998). Couch v. Astec Indus., Inc.,71 F.Supp.2d 1145 , 1147 (D.N.M.1999).
Response at 6-7. Safeway Insurance argues that Ullman fraudulently joined Bailey under the third category of fraudulent joinder, because, in Safeway Insurance’s view, it does not have joint, several, or alternative liability with Bailey, and Ullman’s claims against it do not have a connection to Ullman’s claims against Bailey. See Response at 7. Safeway Insurance agrees with Ullman that she has “legiti
Safeway Insurance argues that Ullman’s personal injury claims against Bailey do not have a “real connection” to the insurance bad faith claims; it admits that Bailey was negligent in the car accident and that he was an uninsured driver, but says the remaining controversy is whether Ullman is legally entitled to UM/UIM coverage, a question unconnected to the personal injury claims against Bailey. Response at 8-9.
The alleged improper waiver of UM/ UIM coverage occurred when the parties entered into the insurance contract on November 12, 2011, while the automobile collision between Plaintiff and Defendant Bailey occurred on May 3, 2012. Plaintiffs alleged improper waiver of UM/UIM did not stem from the automobile collision, and inversely, the collision did not stem from the alleged improper waiver. Regardless of the automobile collision facts, Plaintiffs automobile insurance policy with Defendant Safeway was in effect before the collision and before Plaintiff made an UM/ UIM coverage claim with Defendant Safeway.
Response at 9. Although Ullman argues that permissive joinder under rule 20 is appropriate in this case, Safeway Insurance argues that joinder is not appropriate. Safeway Insurance explains that a plaintiff may join multiple defendants if “ ‘any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out the same transaction, occurrence, or series of transactions or occurrences,’ ” Response at 10 (quoting Fed.R.Civ.P. 20(2)(A)), but argues that “the bad faith insurance class action and the personal injury action” do not meet that requirement, Response at 10. “[MJisjoinder under Rule 21 ‘occurs when there is no common question of law or fact or when ... the event that gives rise to the plaintiffs claims against defendants do not stem from the same transaction.’ ” Response at 10 (quoting Nasious v. City & Cnty. of Denver-Denver Sheriffs Dept.,
Safeway Insurance reiterates that the putative class does not have claims against Bailey, which it argues violates the requirements for class actions. See Response at 11. It argues that Triggs v. John Crump Toyota, Inc. is inapposite,
In the Plaintiffs Motion for Remand Reply, filed August 19, 2013 (Doc. 12)(“Re-ply”), Ullman argues that, although Safeway Insurance “continues to incorrectly state” that she is seeking to i'ecover damages from Safeway Insurance and not from Bailey, she has demonstrated direct claims against Bailey, and, thus, she did not fraudulently join Bailey to defeat diversity jurisdiction. Reply at 1-2. She asserts that her claims against Safeway Insurance and Bailey “arise out of the same car collision and share a common question of law and fact.” Reply at 2. Ullman argues that she named Bailey to preserve her direct claims against him and that, by including him in the same case, she is protecting Safeway Insurance’s subrogation interests. See Reply at 2. Although Safeway Insurance admits that Bailey was negligent in the car accident, Ullman points out that Bailey, or Bailey’s estate, will likely disagree, and his or his estate’s interests will be “directly affected by determination of his liability and the damages he owes.” Reply at 2. Ullman argues that Safeway Insurance has “failed to establish that there is no reasonable possibility of a colorable claim under New Mexico law against” Bailey, and thus, it cannot show that Ullman fraudulently joined Bailey. Reply at 3.
Ullman asserts that Safeway Insurance’s sole remaining basis for removal is procedural misjoinder, which she argues the Tenth Circuit has not adopted; even if the Tenth Circuit recognized the doctrine, she argues that she did not misjoin Bailey in this case. See Reply at 3. She explains that the Eleventh Circuit adopted procedural misjoinder in Tapscott v. MS Dealer Serv. Corp.,
The Court held a hearing on November 14, 2013, in which Safeway Insurance and Ullman attended; the Court noted that Bailey did not have counsel and was not present at the hearing. See Transcript of Hearing at 2:5-14 (Vargas, Johansen, Court, Romero)(taken November 14, 2013)(“Tr.”).
Ullman said that procedural misjoinder is currently “an anomaly limited to the Eleventh Circuit,” that “the Fifth, Eighth, and Ninth Circuits have expressly rejected it,” and that some courts within the Tenth Circuit have rejected it. Tr. at 6:21-7:2 (Vargas). Ullman agreed with the Court that the issue in this case boils down to the rule 20 and 21 analysis; she explained that, in New Mexico, “an uninsured motorist carrier stands in the shoes of the ... uninsured tortfeasor for purposes of defenses,” and that, to obtain uninsured motorist benefits, a plaintiff must prove the existence of the policy as well as the tortfeasor’s duty, breach, and damages. Tr. at 7:13-25 (Vargas). Ullman asserted that, like “hundreds” if not “thousands” of cases pending in New Mexico, she chose to “join the underlying tort case with the uninsured motorist carrier case because those same proofs will be required in both cases.” Tr. at 8:1-5 (Vargas). She explained that, if the Court were to bifurcate the cases, she would have to prove Bailey’s negligence as well as her damages, including whether the medical bills were reasonable and necessary; further, Safeway Insurance could argue that, because it would not be present in the bifurcated case against Bailey, it would not be bound by collateral estoppel or res judicata, and thus,. Ullman would have to relitigate the same issues. See Tr. at 8:12-18 (Vargas). The only additional proof, Ullman explained, is the existence of a policy in the uninsured motor carrier case. See Tr. at 8:19-21 (Vargas). “In short Your Honor, these are appropriately joined claims because they ... necessarily include the same proofs, the same witnesses, the same damage inquiry and bifurcating the two in fact risks inconsistent results.” Tr. at 9:1-4 (Vargas). Ullman argued that, although most of the putative class members do not have claims against Bailey, that does not destroy the joinder analysis; the related transactions arise under Safeway Insurance’s conduct. See Tr. at 9:9-19 (Vargas). Ullman argued that, although Safeway Insurance states that the amount in controversy requirement is met for Ullman by aggregating her uninsured motorist policy benefits plus the costs in administering the injunctive relief, Safeway Insurance has not met its burden to establish that each putative class member’s claim exceeds $75,000.00. See Tr. at 10:3-18 (Vargas)(citing Lovell v. State Farm Mut. Auto. Ins. Co.,
Safeway Insurance explained that it did not pursue federal jurisdiction based on
Turning to the rule 20 analysis, Safeway Insurance argued that there is no joint or alternative liability in this case, and that the putative class’ contractual case against Safeway Insurance for the rejection of uninsured motorist benefits is separate
Regarding the amount in controversy, Safeway Insurance said that it asked Ullman to stipulate that her case was worth less than $75,000.00, which she would not do, and so it believed that it had a good-faith basis for removing; the Court questioned whether every putative plaintiff would also have to meet the $75,000.00 jurisdictional requirement. See Tr. at 29:16-30:7 (Johansen, Court). Safeway Insurance said it was unsure, but if that question concerned the Court, the Court could order additional briefing on the issue. See Tr. at 30:8-12 (Johansen).
Ullman explained that the claims against Safeway for herself and the putative class are not “just reformation claims,” as Safeway Insurance stated, but are also claims for damages for each putative class mem
The Court explained that it would further analyze rule 20, because these issues are becoming more common. See Tr. at 39:24-40:21 (Court). The Court said that rule 20 is very broad, and that it was still inclined to reject the Eleventh Circuit’s “egregious” standard; the Court said it was inclined to grant the Motion to Remand, because the underlying car accident connects the claims. Tr. at 40:22-41:20 (Court); id. at 42:7.
LAW REGARDING DIVERSITY JURISDICTION
“Subject-matter jurisdiction under 28 U.S.C. § 1332(a)(1) requires: (i) complete diversity among the parties; and (ii) that ‘the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.’ ” Thompson v. Intel Corp., No.
1. Diversity of Citizenship.
For diversity jurisdiction purposes, citizenship is determined by a person’s domicile. See Crowley v. Glaze,
2. Amount in Controversy.
The existence of diversity jurisdiction must be established by a preponderance of the evidence. See McPhail v. Deere & Co.,
In McPhail v. Deere & Co., the Tenth Circuit relied on the Seventh Circuit’s decision in Meridian Secs. Ins. Co. v. Sadowski, in which the Honorable Frank H. Easterbrook, Circuit Judge, explained how a removing defendant asserting diversity jurisdiction in the face of a complaint silent about damages might proceed:
[T]he removing defendant, as proponent of federal jurisdiction, must establishwhat the plaintiff stands to recover. We have suggested several ways in which this may be done — by contentions, interrogatories or admissions in state court; by calculation from the complaint’s allegations^] by reference to the plaintiffs informal estimates or settlement demands!;] or by introducing evidence, in the form of affidavits from the defendant’s employees or experts, about how much it would cost to satisfy the plaintiffs demands. The list is not exclusive; any given proponent of federal jurisdiction may find a better way to establish what the controversy between the parties amounts to, and this demonstration may be made from either side’s viewpoint (what a judgment would be worth to the plaintiff, or what compliance with an injunction would cost the defendant). Once the estimate has been made — and contested factual allegations that support the estimate have been established in a hearing under Rule 12(b)(1) by admissible evidence ... then ... the case stays in federal court unless it is legally certain that the controversy is worth less than the jurisdictional minimum.
Meridian eliminates the double standard that would come from misunderstanding what “preponderance of the evidence” requires. The proponent of federal jurisdiction must prove contested facts; and because a defendant has no control over the complaint, he cannot put a large sum of money in controversy simply by demanding it, as a plaintiff often can. But once those underlying facts are proven, a defendant (like a plaintiff) is entitled to stay in federal court unless it is “legally certain” that less than $75,000 is at stake.
McPhail v. Deere & Co.,
As this Court has previously explained, “[i]n the absence of an explicit demand for more than $75,000.00, the defendant must show how much is in controversy through other means.” Salazar v. GEICO Ins. Co., No. CIV 10-0118 JB/RLP,
An example of an amount-in-controversy which is not legally certain to reach $75,000.00 is seen in Martin v. Franklin Capital Corp.,
LAW REGARDING CAFA
CAFA jurisdiction exists when the proposed class contains at least one-hundred persons, the amount in controversy exceeds $5,000,000.00, and there is minimal diversity. See Valdez v. Metro. Prop. & Cas. Ins. Co.,
1. Amount in Controversy.
The amount-in-controversy requirement is “an estimate of the amount that will be put at issue in the course of the litigation.” McPhail v. Deere & Co., 529 F.3d 947, 956 (10th Cir.2008).
The Senate Report also provides that, “in assessing the jurisdictional amount in declaratory relief cases, the federal court should include in its assessment the value of relief and benefits that would logically flow from the granting of the declaratory relief sought.” S.Rep. No. 109-14 at 42-43,
In determining the value of litigation which increases insurance coverage, several courts have held that the proper measure of the amount in controversy is the increase in coverage limits of the policy. In Whitehead-Rojas v. American Family Mutual Ins. Co., No. 08-0103,
Federal courts have also held that a court can calculate the defendants’ costs associated with the relief sought to determine the amount in controversy. The Seventh Circuit has held that, where an insurer-defendant would either have to “stop charging a premium or change the terms so that policyholders receive indemnity more frequently, it will suffer a financial loss” and that the $1,500,000.00 in lost premiums was part of the amount in controversy. Keeling v. Esurance Ins. Co.,
In Standard Fire Insurance Co. v. Knowles, — U.S. -,
2. Local-Controversy Exception.
Congress created an exception to CAFA for those cases that “consist of primarily local, intrastate matters, which it characterized as the ‘Local Controversy Exception.’ ” Coffey v. Freeport McMoran Copper & Gold,
(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;
(II) at least 1 defendant is a defendant—
(aa) from whom significant relief is sought by members of the plaintiff class;
(bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and
(cc) who is a citizen of the State in which the action was originally filed; and
(III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed....
28 U.S.C. § 1332(d)(4)(A)®. A plaintiff must also show that, during the three years preceding the filing of the class action, no other class action was filed asserting the same or similar allegations against any of the defendants. See 28 U.S.C. § 1332(d)(4) (A) (ii).
In Coffey v. Freeport McMoran Copper & Gold, the Tenth Circuit upheld the district court’s interpretation of 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) that the significant relief requirement of the local-controversy exception is satisfied where the complaint “claims that every potential plaintiff is entitled to recover from [the local defendant] and the proposed class seeks to recover damages from all defendants jointly and severally.”
With respect to subsection (bb), the United States Court of Appeals for the Fifth Circuit, in Opelousas General Hospital Authority v. FairPay Solutions, Inc.,
LAW REGARDING REMOVAL AND REMAND
If a civil action filed in state court satisfies the requirements for original federal jurisdiction, the defendant may invoke 28 U.S.C. § 1441(a) to remove the action to the federal district court “embracing the place where such action is pending.” 28 U.S.C. § 1441(a). See Huffman v. Saul Holdings Ltd. P’ship,
To remove a case based on diversity, the diverse defendant must demonstrate that all of the prerequisites of diversity jurisdiction contained in 28 U.S.C. § 1332 are satisfied. “It is well-established that statutes conferring jurisdiction upon the federal courts, and particularly removal statutes, are to be narrowly construed in light of our constitutional role as limited tribunals.” Pritchett v. Office Depot, Inc.,
1. The Presumption Against Removal.
Federal courts are courts of limited jurisdiction; thus, there is a presumption against removal jurisdiction, which the defendant seeking removal must overcome. See Laughlin v. Kmart Corp.,
2. Procedural Requirements for Removal.
Section 1446 of Title 28 of the United States Code governs the procedure for removal. “Because removal is entirely a statutory right, the relevant procedures to effect removal must be followed.” Thompson v. Intel Corp.,
Section 1446(a) of Title 28 of the United States Code provides that a party seeking removal of a matter to federal court shall file a notice of removal in the district and division where the state action is pending, “containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.” Such notice of removal is proper if filed within thirty days from the date when the case qualifies for federal jurisdiction. See Caterpillar Inc. v. Lewis,
3. Amendment of the Notice of Removal.
.In Caterpillar, Inc. v. Lewis, the Supreme Court held that a defect in subject-matter jurisdiction cured before entry of judgment did not warrant reversal or remand to state court. See
The Tenth Circuit has allowed defendants to remedy defects in their petition or notice of removal. See Jenkins v. MTGLQ Investors,
There are limits to the defects which may be cured by an amended notice of removal, however, as Professors Charles Alan Wright and Arthur R. Miller explain:
[A]n amendment of the removal notice may seek to accomplish any of several objectives: It may correct an imperfect statement of citizenship, state the previously articulated grounds more fully, or clarify the jurisdictional amount. In most circumstances, however, defendants may not add completely new grounds for removal or furnish missing allegations, even if the court rejects the first-proffered basis of removal, and the court will not, on its own motion, retain jurisdiction on the basis of a ground that is present but that defendants have not relied upon.
14 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 3733, at 651-659 (4th ed. 2009)(footnotes omitted). Professor Moore has similarly recognized: “[A]mendment may be permitted after the 30-day period if the amendment corrects defective allegations of jurisdiction, but not to add a new basis for removal jurisdiction.” 16 J. Moore et al., Moore’s Federal Practice § 107.30[2][a][iv], at 107-317 to - 18 (3d ed. 2013). Thus, where diversity jurisdiction is asserted as a basis for removal of an action to federal court, the district court may permit the removing defendant to amend its removal notice, if necessary, to fully allege facts which satisfy the requirements of diversity jurisdiction by a preponderance of the evidence.
4. Consideration of Post-Removal Evidence.
As the Court explained in Thompson v. Intel Corp., the Tenth Circuit looks to both evidence in the complaint, and submitted after the complaint, in determining whether the criteria necessary for removal are met. See Thompson v. Intel Corp.,
5. Consent to Removal.
“When a civil action is removed solely under section 1441(a), all defendants who have been properly joined and served must join in or consent to the removal of the action.” 28 U.S.C. § 1446(b)(2)(A). The last-served rule provides that each defendant has a right to remove within thirty days of service. See 28 U.S.C. § 1446(b)(2)(B). Remand is required if all of the defendants fail to consent to the petition for removal within the thirty-day period. See Bonadeo v. Lujan,
The Tenth Circuit has held that a defendant’s consent to removal was not necessary where he had not been served at the time another defendant filed its notice of removal. See Sheldon v. Khanal,
The Court has stated: “[W]hile the federal courts strictly construe the removal statutes and there is a presumption against removal, the Court should not use these rules of construction to manufacture rules that Congress did not require, that are not necessary to enforce the statutes, and are contrary to normal federal practice.” Roybal v. City of Albuquerque, No. CIV 08-0181 JB/GBW,
In Tresco, Inc. v. Cont’l Cas. Co., the plaintiff filed suit against defendants National Union Fire Insurance Company of Pittsburgh, Pennsylvania (“National Union”) and Continental Casualty Company (“CNA”).
“[F]ederal courts often rely on the representations of counsel about other parties. ... [PJarties frequently submit unopposed motions, stating that the other parties do not oppose. Rarely is there any problem, and if there is, a federal court has an abundant reservoir of powers to remedy misrepresentations. Representations by counsel, signed under rule 11, are sufficient to deal with the primary concern animating the judicial creation of restrictions on removal.”
6. Fraudulent Joinder.
“‘[A] fraudulent joinder analysis [is] a jurisdictional inquiry.’ ” Bio-Tec Envtl., LLC v. Adams,
The party asserting fraudulent joinder bears the burden of proof. See Montano v. Allstate Indemnity Co.,
Before 2013, the most recent published Tenth Circuit decision to state the burden of proof for demonstrating fraudulent joinder was issued over forty years earlier in Smoot v. Chicago, Rock Island & Pacific Railroad Co.,
In recent unpublished decisions, the Tenth Circuit has adopted different articulations of the burden of proof for fraudulent joinder, two of which are from the United States Court of Appeals for the Fifth Circuit. In Montano v. Allstate Indemnity Co., the Tenth Circuit quoted favorably Hart v. Bayer Corp.,
To prove their allegation of fraudulent joinder [the removing parties] must demonstrate that there is no possibility that [plaintiff] would be able to establish a cause of action against [the joined party], in state court. In evaluating fraudulent joinder claims, we must initially resolve all disputed questions of fact and all ambiguities in the controlling law in favor of the non-removing party. We are then to determine whether that party has any possibility of recovering against the party whose joinder is questioned.
Montano v. Allstate Indemnity Co.,
In Nerad v. AstraZeneca Pharms., Inc., the Tenth Circuit adopted a different articulation of the burden of proof. The Tenth Circuit stated that, where fraudulent joinder is claimed, “the court must decide whether there is a reasonable basis to believe the plaintiff might succeed in at least one claim against the non-diverse defendant.” Nerad v. AstraZeneca Pharms., Inc.,
The Fifth Circuit recognized the inconsistencies in the standard for fraudulent joinder and directly addressed the problem in Travis v. Irby,
Neither our circuit nor' other circuits have been clear in describing the fraudulent joinder standard. The test has been stated by this court in various terms, even within the same opinion. For example, the Griggs [v. State Farm Lloyds,181 F.3d 694 (5th Cir.1999),] opinion states, “To establish that a non-diverse defendant has been fraudulently joined to defeat diversity, the removing party must prove ... that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the non-diverse defendant in state court.”181 F.3d at 699 [citations omitted]. The Griggs opinion later restates that test as follows — “Stated differently, we must determine whether there is any reasonable basis for predicting that [the plaintiff] might be able to establish [the non-diverse defendant’s] liability on the pleaded claims in state court.”181 F.3d at 699 [citations omitted]. Similarly, in summing up federal law, Moore’s Federal Practice states at one point: “To establish fraudulent joinder, a party must demonstrate ... the absence of any possibility that the opposing party has stated a claim under state law.” 16 Moore’s Federal Practice § 107.14[2][c][iv][A] (emphasis added). It then comments: “The ultimate question is whether there is arguably a reasonable basis for predicting that state law might impose liability on the facts involved.” Id. (emphasis added). Although these tests appear dissimilar, “absolutely no possibility” vs. “reasonable basis,” we must assume that they are meant to be equivalent because each is presented as a restatement of the other.
the test for fraudulent joinder is whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an instate defendant.
Smallwood v. Ill. Cent. R.R. Co.,
In Zufelt v. Isuzu Motors America, L.C.C.,
[T]his District has consistently adopted the “possibility” standard when assessing fraudulent joinder claims. See Allen v. Allstate Ins. Co., No. Civ. 08-0733,2008 WL 6045497 , at *4,2008 U.S. Dist. LEXIS 108948 , at *14 (D.N.M. Oct. 31, 2008) (Browning, J.)(holding that the claims asserted against the non-diverse defendant were “possibly viable under New Mexico law, and ... sufficient to preclude federal jurisdiction”);Baeza v. Tibbetts, 2006 WL 2863486 , at *4,2006 U.S. Dist. LEXIS 95317 , at *11 (stating that “[r]emand is required if anyone of the claims against [the defendant] is possibly viable”); Provencio v. Mendez, No. Civ. 05-623,2005 WL 3662957 , at *9,2005 U.S. Dist. LEXIS 39012 , at *25 (D.N.M. Sept. 29, 2005) (Browning, J.)(stating that “there must be no possibility the [plaintiffs have a claim against [the non-diverse defendant].”); Couch v. Astee Indus., Inc.,71 F.Supp.2d at 1147 (stating that, to defeat removal jurisdiction, “[t]he plaintiff need only demonstrate the possibility of the right to relief.”). This Court, in Couch v. Astee Inds., Inc., noted with approval the language of the United States Court of Appeals for the Eleventh Circuit, which states that “if there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court.” Couch v. Astec Indus., Inc.,71 F.Supp.2d at 1147 (quoting Triggs v. John Crump Toyota, Inc.,154 F.3d 1284 , 1287 (11th Cir.1998))(emphasis in original).
Zufelt v. Isuzu Motors America, L.C.C.,
In Brazell v. Waite,
In 2013, the Tenth Circuit published its first opinion since 1946 regarding the burden of proof for demonstrating fraudulent joinder: “ ‘To establish fraudulent joinder, the removing party must demonstrate either: (1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.’ ” Dutcher v. Matheson,
that does not mean that the plaintiffs have stated a valid claim against Matheson and his law firm. Or even that Matheson and his law firm are not somehow fraudulently joined. But the defendants needed to clear a high hurdle toprove something they have yet to prove, i.e. fraudulent joinder.
The Tenth Circuit did not elaborate on the defendant’s burden to show fraudulent joinder, except to say that it is “a high hurdle.”
Under the second way, the test is “whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against an in-state defendant, which stated differently means that there is no reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant.” [Smallwood v. Ill. Cent. R.R. Co.,385 F.3d at 573 .] If there is no reasonable basis of recovery, then the court can conclude that the plaintiffs decision to join the in-state defendant was indeed improper, unless that showing compels the dismissal of all defendants. There is no improper joinder if the defendants’ showing compels the same result for the resident and nonresident defendants, because this simply means that the plaintiffs case is ill founded as to all of the defendants. Such a defense is more properly an attack on the merits of the claim, rather than an inquiry into the propriety of the joinder of the in-state defendant.
Cuevas v. BAC Home Loans Servicing, LP,
An order to remand by a district court based on a finding of fraudulent joinder is not reviewable by the Tenth Circuit. See Nerad v. AstraZeneca Pharms., Inc.,
7. Procedural Misjoinder.
Rule 20 provides:
(a) Persons Who May Join or Be Joined.
(1) Plaintiffs. Persons may join in one action as plaintiffs if:
(A) they assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and
(B) any question of law or fact common to all plaintiffs will arise in the action.
(2) Defendants. Persons — as well as a vessel, cargo, or other property subject to admiralty process in rem — may be joined in one action as defendants if:
(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and
(B) any question of law or fact common to all defendants will arise in the action.
(3) Extent of Relief. Neither a plaintiff nor a defendant need be interested in obtaining or defending against all the relief demanded. The court may grant judgment to one or more plaintiffs according to their rights, and against one or more defendants according to their liabilities.
Fed.R.Civ.P. 20(a).
“Procedural misjoinder,” also known as “fraudulent misjoinder,” is a recent development that is related to fraudulent joinder, but distinct from it. As Professor E. Farish Percy of the University of Mississippi School of Law has explained:
Fraudulent misjoinder occurs when a plaintiff sues a diverse defendant in state court and joins a non-diverse or instate defendant even though the plaintiff has no reasonable procedural basis to join such defendants in one action. While the traditional fraudulent joinder doctrine inquires into the substantive factual or legal basis for the plaintiffs claim against the jurisdictional spoiler, the fraudulent misjoinder doctrine inquires into the procedural basis for the plaintiffs joinder of the spoiler. Most state joinder rules are modeled after the federal joinder rule that authorizes permissive joinder of parties when the claims brought by or against them arise “out of the same transaction, occurrence, or series of transactions or occurrences” and give rise to a common question of law or fact. Thus, in a case where the joined claims are totally unrelated, a federal district court may find removal jurisdiction pursuant to the fraudulent misjoinder doctrine even though the plaintiff has a reasonable substantive basis for the claim against the jurisdictional spoiler.
E. Farish Percy, Defining the Contours of the Emerging Fraudulent Misjoinder Doctrine, 29 Harv. J.L. & Pub. Pol’y 569, 572 (2006)(footnotes omitted).
The Eleventh Circuit formulated the doctrine in Tapscott v. MS Dealer Service Corp. and explained its purpose as follows:
Misjoinder may be just as fraudulent as the joinder of a resident defendant against whom a plaintiff has no possibility of a cause of action. A defendant’s “right of removal cannot be defeated bya fraudulent joinder of a resident defendant having no real connection with the controversy.” Wilson v. Republic Iron & Steel Co., 257 U.S. 92 , 97,42 S.Ct. 35 ,66 L.Ed. 144 (1921).
Tapscott v. MS Dealer Serv. Corp.,
The district court concluded that there was no allegation of joint liability or conspiracy, and that the claims involved in the car-sales class action were “wholly distinct from the alleged transactions involved in the” retail-products class action.
Although certain putative class representatives may have colorable claims against resident defendants in the putative “automobile” class, the'se resident defendants have no real connection with the controversy involving [the retail-products plaintiffs and] Lowe’s in the putative “merchant” class action. We hold that the district court did not err in finding an attempt to defeat diversity jurisdiction by fraudulent joinder. We do not hold that mere misjoinder is fraudulent joinder, but we do agree with the district court that Appellants’ attempt to join these parties is so egregious as to constitute fraudulent joinder.
The procedural misjoinder doctrine’s reach outside the Eleventh Circuit is unclear. The Tenth Circuit recently described the doctrine’s status as follows:
It appears that the Fifth Circuit may also accept procedural misjoinder. See Crockett v. R.J. Reynolds Tobacco Co.,436 F.3d 529 , 532-33 (5th Cir.2006); In re Benjamin Moore & Co.,309 F.3d 296 , 298 (5th Cir.2002). No circuit has rejected the doctrine, but the district courts and the commentators are split. Compare Percy, 29 Harv. J.L. & Pub. Pol’y at 572; Laura J. Hines and Steven S. Gensler, Driving Misjoinder: The Improper PaHy Problem in Removal Jurisdiction, 57 Ala. L.Rev. 779, 780 (2006)(advocating adoption of the doctrine), and Greene v. Wyeth,344 F.Supp.2d 674 , 684 (D.Nev.2004); Burns v. W.S. Life Ins. Co.,298 F.Supp.2d 401 , 402-03 (S.D.W.Va.2004) (applying the doctrine), with Ronald A. Parsons, Jr., Should the Eighth Circuit Recognize Procedural Misjoinder?, 53 S.D. L.Rev. 52, 53 (2008)(urging the circuit court to decline to recognize the doctrine), andRutherford v. Merck & Co., Inc., 428 F.Supp.2d 842 , 851-52 (S.D.Ill.2006) (rejecting the doctrine).
Lafalier v. State Farm Fire and Cas. Co.,
The Court partially adopted the procedural misjoinder doctrine in Flores-Duenas v. Briones, No. CIV 13-0660 JB/CG, 2Q13 WL 6503537 (D.N.M. Dec. 1, 2013) (Browning, J.), explaining that it would likely apply the doctrine only in cases “where the allegedly procedurally misjoined nondiverse defendant is also a citizen of the state in which the plaintiff brought the state court action.”
The key phrase is in [28 U.S.C.] section 1441(b)(2): “properly joined.” That phrase indicates that, when determining whether it has removal jurisdiction over a purported diversity case, the Court may — indeed, must — inquire into whether the plaintiff properly joined a defendant who resides in the State in which the plaintiff brought the action. The alternative reading of the statute would render the word “properly” without meaning, which would contravene one of the most basic statutory-construction principles: the surplusage canon. See United States v. Butler,297 U.S. 1 ,56 S.Ct. 312 ,80 L.Ed. 477 (1936) (“These words cannot be meaningless, else they would not have been used.”); Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 174 (2012)(“If possible, every word and every provision is to be given effect (verba cum effectu sunt accipienda). None should be ignored. None should needlessly be given an interpretation that causes it ... to have no consequence.” (footnote omitted)). If a party is properly joined, its citizenship is relevant; if a party is not properly joined, its citizenship is irrelevant. That Congressional directive is sufficient to justify and require the Court’s application of the procedural misjoinder doctrine in cases like this one, where a procedurally misjoined nondiverse defendant is also a resident defendant.
In sum, the Court adopts the procedural misjoinder doctrine in cases where the nondiverse defendant is also a citizen of the state in which the plaintiff brought the state court action. The Court rejects the “egregiousness” standard, and instead concludes that the proper standard is simply whether the parties are improperly joined. Though this case does not squarely present the question, the Court believes that it is appropriate to apply the federal joinder standard. In the unusual case where parties are misjoined, the Court will drop the nondiverse party.
NEW MEXICO LAW REGARDING NEGLIGENCE
Generally, a negligence claim requires the existence of a duty from a defendant to a plaintiff, breach of that duty, 'which is typically based on a standard of reasonable care, and the breach being a cause-in-fact and proximate cause of the plaintiffs damages. See Coffey v. United States,
New Mexico courts have stated that foreseeability alone does not end the inquiry into whether the defendant owed a duty to the plaintiff. See Herrera v. Quality Pontiac,
“As a general rule, an individual has no duty to protect another from harm.” Grover v. Stechel,
“[T]he responsibility for determining whether the defendant has breached a duty owed to the plaintiff entails a determination of what a reasonably prudent person would foresee, what an unreasonable risk of injury would be, and what would constitute an exercise of ordinary care in light of all the surrounding circumstances.” Herrera v. Quality Pontiac,
“A proximate cause of an injury is that which in a natural and continuous sequence [unbroken by an independent intervening cause] produces the injury, and without which the injury would not have occurred.” Herrera v. Quality Pontiac,
NEW MEXICO LAW REGARDING NEGLIGENCE PER SE
To establish a negligence per se claim, a plaintiff must prove: (i) that there is a statute which prescribes certain actions or defines a standard of conduct, either explicitly or implicitly; (ii) that the defendant violated the statute; (iii) that the plaintiff must be in the class of persons that the statute seeks to protect; and (iv) that the harm or injury to the plaintiff 'must generally be that which the Legislature, through the statute, sought to prevent. See Rimbert v. Eli Lilly & Co.,
There [was a] [were] statute[s] in force in this state, at the time of the occurrence in question, which provided that:(Quote or paraphrase the applicable part of the statute in question. If more than one statute is in question, list each statute separately)
If you find from the evidence that _ (party) violated [this] [any one of these] statute[s], then __’s conduct constitutes negligence as a matter of law, [unless you further find that such violation was excusable or justified].
[To legally justify or excuse a violation of a statute, the violator must sustain the burden of showing that [s]he did that which might reasonably be expected of a person of ordinary prudence, acting under similar circumstances, who desired to comply with the law.]
N.M.R.A. Civ. UJI 13-1501. This instruction appears in Chapter Fifteen, Statutes and Ordinances, not Chapter Sixteen, Tort Law — Negligence. The “Directions for Use” for UJI 13-1501 notes that “UJI 13-1503 should be used in addition to this instruction when there is an issue of proximate cause.” N.M.R.A., Civ. UJI 13-1501, Directions for Use. N.M.R.A., Civ. UJI 13-1503 provides:
Negligence resulting from a violation of a[n] [statute] [or] [ordinance] is no different in effect from that resulting from other acts or omissions constituting negligence. In each case the negligence is of no consequence unless it was a cause of or contributed to, an injury found by you to have been suffered by the plaintiff.
N.M.R.A., Civ. UJI 13-1503.
SUPREME COURT OF NEW MEXICO CASES ON UNINSURED MOTORIST COVERAGE
N.M.S.A.1978, § 66-5-30KA) and (C), in relevant part, state:
A. No motor vehicle or automobile liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person and for injury to or destruction of property of others arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in New Mexico with respect to any motor vehicle registered or principally garaged in New Mexico unless coverage is provided therein or supplemental thereto in minimum limits for bodily injury or death and for injury to or destruction of property as set forth in Section 66-5-215 NMSA 1978 and such higher limits as may be desired by the insured, but up to the limits of liability specified in bodily injury and property damage liability provisions of the insured’s policy, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, and for injury to or destruction of property resulting therefrom, according to the rules and regulations promulgated by, and under provisions filed with and approved by, the superintendent of insurance.
‡ ‡ *
C. [T]he named insured shall have the right to reject uninsured motorist coverage as described in Subsections A and B of this section; provided that unless the named insured requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured has rejected the coverage in connection with a policy previously issued to him by the same insurer.
N.M. Stat. § 66-5-301(A) & (C)(emphasis added). Regulation 13.12.3.9, which elaborates § 66-5-301, provides: “The rejection of the provisions covering damage caused by an uninsured or unknown motor vehicle as required in writing by the provisions of Section 66-5-301 NMSA 1978 must be en
The Supreme Court of New Mexico has recognized that § 66-5-301 “embodies a public policy of New Mexico to make uninsured motorist coverage a part of every automobile liability insurance policy issued in this state, with certain limited exceptions,” and that the statute is “intended to expand insurance coverage and to protect individual members of the public against the hazard of culpable uninsured motorists.” Romero v. Dairyland Ins. Co.,
[Regulation 13.12.3.9] ensure[s] that the insured has affirmative evidence of the extent of coverage. Upon further reflection, consultation with other individuals, or after merely having an opportunity to review one’s policy at home, an individual may well reconsider his or her rejection of uninsured motorist coverage. Providing affirmative evidence of the rejection of the coverage comports with a policy that any rejection of the coverage be knowingly and intelligently made. Any individual rejecting such coverage should remain well informed as to that decision. We find that the regulation of the superintendent of insurance furthers a legislative purpose to provide for the inclusion of uninsured motorist coverage in every automobile liability policy unless the insured has knowingly and intelligently waived such coverage.
Romero v. Dairyland Ins. Co.,
In Montano v. Allstate Indemnity Co.,
[I]n a multiple-vehicle policy insuring three cars, the insurer shall declare the premium charge for each of the three [uninsured or underinsured motorist] coverages and allow the insured to reject, in writing, all or some of the offered coverages. Thus, hypothetically, in the case of a $25,000 policy, if the premium for one [uninsured or underinsured motorist] coverage is $65, two coverages is an additional $60, and three coverages $57, the insured who paid all three (for a total premium of $182) would be covered up to $75,000 in [uninsured or underinsured motorist] bodily injury coverage. However, the insured may reject, in writing, the third available coverage and pay $125 for $50,000 of uninsured motorist coverage; or the insured may reject, in writing, the third available coverage and pay $65 for $25,000 of [uninsured or underinsured motorist] coverage; or the insured may reject all three [uninsured or underinsured motorist] coverages. In any event, the coverage would not depend on which vehicle, if any, was occupied at the time of the injury. Thus, the insured’s expectations will be clear, and an insured will only receive what he or she paid for.
Montano v. Allstate Indem. Co.,
In Marckstadt v. Lockhead Martin Corp.,
in the affirmative the question, certified to us by the United States Court of Appeals for the Tenth Circuit, of whether election by an insured to purchase [uninsured or underinsured motorist] coverage in an amount less than the policy limits constitutes a rejection of the maximum amount of [uninsured or underinsured motorist] coverage permitted under Section 66-5-301.
In Jordan v. Allstate Ins. Co.,
In order to honor these requirements effectively, insurers must provide the insured with the premium charges corresponding to each available option for [uninsured or underinsured motorist coverage] so that the insured can make a knowing and intelligent decision to receive or reject the full amount of coverage to which the insured is statutorily entitled. If an insurer fails to obtain a valid rejection, the policy will be reformed to providing [uninsured or underinsured motorist] coverage equal to the limits of liability.
Jordan v. Allstate Ins. Co.,
When issuing an insurance policy, an insurer must inform the insured that he or she is entitled to purchase [uninsured or underinsured motorist] coverage in an amount equal to the policy’s liability limits and must also provide the corresponding premium charge for that maximum amount of [uninsured or underinsured motorist] coverage. The premium cost for the minimum amount of [uninsured or underinsured motorist] coverage allowed by Section 66-5-301(A) must also be provided, as well as the relative costs for any other levels of [uninsured or underinsured motorist] coverage offered to the insured. The insured must be informed that he or she has a right to reject [uninsured or underinsured motorist] coverage altogether. Providing the insured with a menu of coverage options and corresponding premium costs will enable the insured to make an informed decision....
Jordan v. Allstate Ins. Co.,
In State Farm Mutual Automobile Insurance Co. v. Safeco Insurance Co.,
A was a passenger in a vehicle driven by B, which was struck by a vehicle negligently driven by C. A sustains $500,000 in damages. C has liability coverage of $100,000. B has $100,000 in UIM coverage with XYZ Insurance Co. Because A was a passenger in the vehicle insured by XYZ, A is a Class II insured under the XYZ policy, and XYZ is the primary insurer because it insured the vehicle involved in the collision — the car closest to the risk. A also has UIM coverage under three other policies, with policy limits of $100,000, $50,000, and $25,000, respectively. A is a Class I insured under the three policies because A is a named insured in each policy. Because these policies did not insure the vehicle involved in the collision, the insurers who issued the policies are considered to be secondary insurers. Therefore, A has $100,000 in primary UIM coverage, plus $175,000 in secondary UIM coverage, for a total of $275,000 in UIM coverage.
The primary UIM insurer pays its entire $100,000, leaving the secondary UIM insurers obligated to pay a prorated portion of $75,000. One secondary insurer pays $42,857.14, which is 4/7ths (100,000/175,000) of $75,000; one pays $21,428.57, which is 2/7ths (50,000/175,-000) of $75,000; and the remaining secondary insurer pays $10,714.29, which is l/7th (25,000/175,000) of $75,000. In no case will the insured receive more than the limits of the insured’s UIM coverage minus the tortfeasor’s liability payment or more than the insured’s damages minus the tortfeasor’s liability payment, whichever is less.
ANALYSIS
Safeway Insurance fails to meet its burden to establish that all of the prerequisites of diversity jurisdiction in 28 U.S.C. § 1332 are satisfied. The amount in controversy exceeds the jurisdictional minimum for Ullman, but Bailey has not been fraudulently joined or procedurally misjoined, and thus, there is not complete diversity among the named parties. Accordingly, the Court will remand this class action to First Judicial District Court.
I. ULLMAN’S CLAIMS SATISFY THE AMOUNT-IN-CONTROVERSY REQUIREMENT, ALLOWING THE COURT TO EXERCISE SUPPLEMENTAL JURISDICTION OVER THE PUTATIVE CLASS MEMBERS’ CLAIMS IF THEY SATISFY THE OTHER DIVERSITY JURISDICTION REQUIREMENTS.
In the Notice of Removal, Safeway Insurance asserts that the amount in controversy exceeds the jurisdictional minimum of $75,000.00:
Although Defendant Safeway does not admit that Plaintiff and the class may recover damages in any specific amount against Defendant Safeway, given the allegations in the Complaint there is a good faith basis to assert that the amount in controversy exceeds the $75,000 requirement of this Court. Plaintiffs Complaint prays for general, [Complaint, ¶¶52, 57, 67, 77(B), 83, 98] punitive, [Complaint, ¶¶ 63, 77(B), 103] and treble damages, [Complaint, ¶¶ 77(E) ] and stacked coverage of the reformed policies [Complaint, ¶ 60]. Plaintiff also includes costs and expenses of the action, and attorneys’ fees and costs in the Complaint. [Complaint, ¶ 77(H)-(J), 103]. Plaintiff contends she is entitled to an award of actual damages and punitive damages in an amount to be determined at trial. Plaintiffs damages may potentially include policy limits of $50,000. In Allsup’s Convenience Stores, Inc. v. N River Ins. Co.,1999-NMSC-006 , ¶49,127 N.M. 1 ,976 P.2d 1 , the New Mexico Supreme Court held that punitive damages that are 7.4 times compensatory damages were not violative of the Fourteenth Amendment to the United States Constitution. In sum, the cost of reforming policies to liability limits for the entire class would far exceed $75,000, as would the administrative costs that Defendant Safeway would have to bear.
Notice of Removal ¶ 25, at 8.
In Lovell v. State Farm, Mutual Automobile Insurance Co., the named plaintiffs brought a putative class action lawsuit against State Farm Mutual Automobile Insurance Company; they alleged that State Farm knowingly violated a Colorado statute, which required insurers to provide “diminished value compensation through collision insurance,” by failing to pay diminished value compensation
The Honorable William P. Johnson, United States District Judge for the District of New Mexico, sitting by designation on the Tenth Circuit, explained that, when plaintiffs seek declaratory and injunctive relief, it follows the “either viewpoint rule,” which permits courts to consider “either the value to the plaintiff or the cost to defendant of injunctive and declara
In this case, each putative class members’ claims arise from separate contracts, and so, as in Lovell v. State Farm Mutual Automobile Insurance Co., the claims may not be aggregated to meet the amount in controversy requirements. A significant difference between that case and this one, however, is that, in this case, the parties agree that Ullman’s claims exceed $75,000.00; Safeway Insurance has not established that every putative class members’ claims exceed the jurisdictional minimum amount, but it does not need to, because the Court may exercise supplemental jurisdiction over the other claims. Before 2005, the Tenth Circuit rejected applying supplemental jurisdiction in this context, where the class representative met the jurisdictional amount but the other class members did not, see Martin v. Franklin Capital Corp.,
In Exxon Mobil Corp. v. Allapattah Services, Inc.,545 U.S. 546 [125 S.Ct. 2611 ,162 L.Ed.2d 502 ] (2005), the Supreme Court held that the supplemental jurisdiction statute, 28 U.S.C. § 1367, abrogated the long-standing rule of Zahn v. International Paper Co.414 U.S. 291 [94 S.Ct. 505 ,38 L.Ed.2d 511 ] (1973), [superseded by statute, 28 U.S.C. § 1367, as recognized in Exxon Mobil Corp. v. Allapattah Servs., Inc.,545 U.S. 546 ,125 S.Ct. 2611 ,162 L.Ed.2d 502 (2005) ] that, in a diversity-only class action — such as an indirect purchaser class action brought under state antitrust laws — each class member must individually satisfy the amount-in-controversy requirement of the diversity jurisdiction statute. See Exxon Mobil Corp. v. Allapattah Sews., Inc.,545 U.S. at 558-59 [125 S.Ct. 2611 ]. The Court held that so long as the other elements of diversity jurisdiction are present and at least one named plaintiff has claims sufficient to meet the required jurisdictional amount, § 1367 authorizes the exercise of supplementaljurisdiction over the related claims of additional plaintiffs — including named and unnamed class members — even if those claims do not independently satisfy the jurisdictional minimum. See id. at 559 [ 125 S.Ct. 2611 ].
Trujillo v. Reynolds, CIV 07-1077 JB/ RLP,
II. ULLMAN DID NOT FRAUDULENTLY JOIN BAILEY, BECAUSE THERE IS A POSSIBILITY THAT ULLMAN WILL RECOVER FROM BAILEY.
The parties initially argued over whether Ullman fraudulently joined Bailey, because she did not intend to seek relief from him. Safeway Insurance argued that Ullman is seeking damages from it rather than Bailey and that, by attempting to reform the insurance policy to include the UWUIM coverage, Ullman had not asserted a basis to recover from Bailey. See Notice of Removal ¶ 18, at 5. Further, Safeway Insurance argued that it is unlikely Ullman can recover anything from Bailey, because he passed away sometime after the accident and “it is virtually impossible that Plaintiff would recover damages from the estate of Defendant Bailey.” Notice of Removal ¶ 19, at 5. Safeway Insurance all but deserted these arguments by the time of the hearing, and for good reason — it is clear that, even if Bailey is impoverished, and even if Ullman intends to ultimately collect from Safeway Insurance under the UM/UIM coverage, Ullman can maintain a claim against Bailey for negligence and negligence per se. “To establish fraudulent joinder, the removing party must demonstrate either: (1) actual fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the non-diverse party in state court.” Dutcher v. Matheson,
III. ULLMAN’S CLAIMS AGAINST BAILEY AND AGAINST SAFEWAY INSURANCE ARE NOT PROCEDURALLY MISJOINED.
Safeway Insurance has attempted to invoke conventional diversity grounds, rather than CAFA, as the basis for federal jurisdiction; thus, Safeway Insurance must establish complete diversity among the named parties. See 7A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure, § 1755, at 70 (3d ed. 2008)(ex-plaining that only the citizenship of the named representatives in a class is considered for jurisdictional purposes, because “[r]ule 23 would be completely unworkable in the diversity context and its value sig
Party joinder under rule 20(a) has only “minimal requirements.” In re Thornburg Mortg., Inc. Sec. Litig.,
Such joinder only requires (i) that the claims by or against the party to be joined arise from the same transaction, occurrence, or series of transactions or occurrences underlying the claims by or against the party with which it seeks to join; and (ii) the claims by or against the party to be joined share at leas[t] one question of law or fact with the claims by or against the party with which it seeks to join.
In re Thornburg Mortg., Inc. Sec. Litig.,
The Court substantially agrees with the Briones Defendants that Hanna v. Gravett’s reasoning is persuasive:
On February 18, 2001, plaintiff Kim Hanna (“Hanna”) was injured when a vehicle driven by Michael C. Gravett (“Gravett”) collided with the rear end of Hanna’s car on Interstate 64 in Hampton, Virginia. Hanna suffered permanent injuries, and claims damages in the amount of $150,000. Gravett’s insurance coverage was limited to $25,000 at the time of the accident, thereby making him an underinsured motorist. Hanna, on the other hand,was covered by a policy issued by State Farm Mutual Automobile Insurance Company (“State Farm”) which included underinsured motorist coverage (“UIM”). Gravett’s liability carrier offered to settle with Hanna for the full amount of Gravett’s policy limits; it also notified State Farm of this settlement offer. State Farm refused to consent to acceptance of the settlement offer and paid to Hanna the limits of Gravett’s policy but has refused to pay more.
262 F.Supp.2d at 644 . The Honorable Rebecca Beach Smith, United States District Judge for the Eastern District of Virginia, concluded that the parties were properly joined:
In the case at bar, plaintiff has asserted a right to relief as to both defendants arising out of the same “series of transactions or occurrences.” See Rule 20(a). Further, there are facts common to both defendants. The legal obligations of both defendants are based upon a factual showing of Gravett’s negligence. Finally, the extent of Hanna’s damages will have a bearing on the extent of each defendant’s liability.... There is simply no need to relitigate the issue of Gravett’s negligence in a second suit against State Farm.
262 F.Supp.2d at 647-48 . As in Hanna v. Gravett, here, each defendant’s legal obligations depend on a factual showing of Hoch’s negligence in the underlying car accident and any damages FloresDuenas sustained as a result. There are, therefore, “enough ultimate factual concurrences” between the claims that it is fair for the Court to require USAA Casualty and the Briones Defendants to litigate the issue in the same case. Further, trying the car-accident facts only a single time serves rule 20’s purpose to limit litigation costs. This approach accords with the weight of similar authority. See 7 C. Wright, A. Miller & M. Kane, supra § 1657, at 84-85 n. 13 (Supp.2013)(citing Hanna v. Gravett with approval and collecting cases joining “an insurer with other defendants in a variety of actions”).
As Ullman argues, and as the reasoning behind Hanna v. Gravett supports, Ullman’s claims against Bailey and Safeway Insurance are properly joined; although Safeway Insurance admits that Bailey was negligent, there remain questions regarding the extent of Ullman’s damages, and the risk of inconsistent results if a case against Bailey were to proceed separately from the case against Safeway Insurance. Further, as the Court noted in FloresDuenas v. Briones, that case was “one step further removed from the coverage claims” in Hanna v. Gravett, and yet, the Court concluded the claims were properly joined. Flores-Duenas v. Briones,
Both parties cite Triggs v. John Crump Toyota, Inc., but disagree as to how it should affect the Court’s analysis: Ullman asserts that .the case demonstrates that, even if a majority of the putative class members do not have a claim against the nondiverse defendant, the nondiverse defendant is not misjoined if at least the named plaintiff has properly joined the nondiverse defendant in the action, see Tr. at 9:10-22 (Vargas), while Safeway Insurance argues that the putative class mem
In Triggs v. John Crump Toyota, Inc., David Triggs, the named plaintiff and an Alabama resident, filed a class action fraud suit against World Omni Financial Corp., a Florida corporation, and John Crump Toyota, an Alabama corporation, alleging that Crump Toyota and other dealerships engaged in a scheme with World Omni where the dealerships sold the ears at inflated prices to World Omni, who then leased the cars to the plaintiff class and passed the excess costs on to them. See
Tapscott is readily distinguishable from the ease at bar. Unlike Tapscott, the instant ease does not involve two distinct classes that have “no real connection” to each other. To the contrary, there is only one class in the instant case and one named plaintiff, Triggs. Triggs and all the members of the putative class have claims for relief which would impose joint liability upon Omni and the particular dealership involved. Among the dealerships involved was the named defendant, Crump, the dealership through whom the named plaintiff, Triggs, dealt with Omni. Focusing on the only named plaintiff there is clearly no reason to bifurcate the class.
Triggs v. John Crump Toyota, Inc.,
there is nothing to support this precedent in the standards for permissive joinder as provided in Rule 20. To the contrary, the express language of Rule 20 indicates that all plaintiffs need not seek relief against all defendants. Finally, Arnold and its progeny are inconsistent with the well established rule that, in a class action context, courts should look to named parties in evaluating the complete diversity requirement.
While Ullman and Safeway Insurance can both point to language in Triggs v. John Crump Toyota, Inc. to support their arguments, Ullman’s argument reflects the Eleventh Circuit’s reasoning more fully. Several times, the Eleventh Circuit focused on whether the named plaintiffs claims were properly joined and reiterated that rule 20 does not require every plaintiff to seek relief from every defendant. Flores-Duenas v. Briones and Hanna v. Gravett demonstrate that Ullman’s claims against Safeway Insurance and Bailey are properly joined, and Triggs v. John Crump Toyota, Inc. demonstrates that the Court may narrow its focus on Ullman as the named plaintiff, even though the other putative class members will not have a claim against Bailey. Bailey has not been misjoined, and as such, his presence in the
IV. THE COURT WILL NOT AWARD ULLMAN ATTORNEY’S FEES.
In her motion to remand, Ullman also requests an award of attorney’s fees and costs under 28 U.S.C. § 1447(c), which provides that an order remanding a removed case to state court “may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). “The standard for awarding fees should turn on the reasonableness of the removal. Absent unusual circumstances, courts may award attorney’s fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be denied.” Martin v. Franklin Capital Corp.,
The Court will not award Ullman attorney’s fees. This case does not present those unusual circumstances in which the Court should award attorney’s fees. Safeway Insurance removed this case partially on the basis of a novel doctrine— procedural misjoinder — the contours of which are still developing. These circumstances materially differ from those cases in which the Court has awarded fees, e.g., where the defendant “offered no specific factual support for its assertion that the amount in controversy exceeded $75,000.00.” Wiatt v. State Farm Ins. Companies,
IT IS ORDERED that the Plaintiffs Motion for Remand, filed July 24, 2013 (Doc. 10), is granted in part and denied in part; the Court will remand the case to the First Judicial District Court, County of Santa Fe, State of New Mexico, but will not award Plaintiff Betty Ullman attorney’s fees.
Notes
. The Court believes Ullman intends to assert that Safeway Insurance is liable for any judgment she secures against Bailey.
.Although Safeway Insurance states in the Notice of Removal that it requested Ullman to stipulate that “she will be claiming more than $75,000 in damages,” it references the Stipulation of Fact, filed June 27, 2013 (Doc. 1 at 70), which indicates that it asked Ullman to stipulate that she will not be claiming more than $75,000.00 in damages. The Stipulation of Fact, which Ullman did not sign, states:
Plaintiff, on behalf of herself and others similarly situated, will not demand or accept a total recovery or verdict in excess of Seventy-Five Thousand Dollars and No/100 ($75,000.00), including compensatory damages, punitive damages and attorney fees, for all damages associated with the facts and claims identified in Plaintiffs Class Action Complaint for Breach of Statutory, Common Law, and Contractual Duties, and for Injunctive and Declaratory Relief' and for Personal Injuries.
Stipulation of Fact at 70.
. The parties indicate that Bailey may have passed away since the accident. See Notice of Removal ¶ 19, at 5.
. Safeway Insurance cites pages 631-32, but did not specify the edition; the Court updated the citation to the most recent edition and corresponding page numbers for the statement Safeway Insurance references.
. Although Safeway Insurance says that Ullman relies on rule 18, the Court has not been able to identify where in the Motion to Remand Ullman referenced rule 18.
. The Court's citations to the transcript of the hearing refer to the court reporter's original, unedited version. Any final transcript may contain slightly different page and/or line numbers.
. Lafalier v. State Farm Fire & Casualty Co. is an unpublished opinion, but the Court can rely on an unpublished opinion to the extent its reasoned analysis is persuasive in the case before it. See 10th Cir. R. 32.1(A) (“Unpublished opinions are not precedential, but may be cited for their persuasive value.”). The Tenth Circuit has stated:
In this circuit, unpublished orders are not binding precedent, ... and we have generally determined that citation to unpublished opinions is not favored. However, if an unpublished opinion or order and judgment has persuasive value with respect to a material issue in a case and would assist the court in its disposition, we allow a citation to that decision.
United States v. Austin,
. The Court relies upon several cases discussing the amount-in-controversy requirement in the context of a traditional diversity jurisdiction analysis. The Court found no cases suggesting that these cases would be inapplicable to CAFA, but found several cases, from other circuits and from within the Tenth Circuit, where a federal court cited a traditional diversity case to determine whether CAFA's amount-in-controversy requirement was met. See Rolwing v. Nestle Holdings, Inc.,
. Congress recently clarified removal jurisdiction and procedures in the Federal Courts Jurisdiction and Clarification Act of 2011, Pub. L. No. 112-63, 125 Stat. 758 (2011). See Thompson v. Intel Corp., No. CIV-0620 JB/ LFG,
. The Court has found that the language in McPhail v. Deere & Co., to some extent, con
McPhail v. Deere & Co. appears to conflict with the Tenth Circuit's previous decisions in Laughlin v. Kmart Corp., and Martin v. Franklin Capital Corp. In Laughlin v. Kmart Corp., the Tenth Circuit held that "Kmart's economic analysis of Laughlin’s claims for damages prepared after the motion for removal and purporting to demonstrate the jurisdictional minimum does not establish the existence of jurisdiction at the time the motion was made."50 F.3d at 873 . In Martin v. Franklin Capital Corp., the Tenth Circuit held that the defendant's summary of the allegations and the requested relief "[did] not provide the requisite facts lacking in the complaint.”251 F.3d at 1291 .
Aranda v. Foamex Int’l,
. The Court refers to the doctrine as “procedural misjoinder,” rather than “fraudulent misjoinder,” because of the confusion that the word “fraudulent” has caused in the fraudulent joinder context. As the Honorable Martha A. Vasquez, then-Chief District Judge for the United States District Court for the District of New Mexico, once explained: "Fraudulent joinder is a term of art. It does not reflect on the integrity of plaintiff or counsel, but rather exists regardless of the plaintiff's motives when the circumstances do not offer any other justifiable reason for joining the defendant.” Baeza v. Tibbetts, No. 06-0407 MV/ WPL,
. The Tenth Circuit certified Federated Serv. Ins. Co. v. Martinez,
. Citing the split among the district judges in the United States District Court for the District of New Mexico, the Tenth Circuit certified, in Progressive Northwestern Ins. Co. v. Weed Warrior Services,
. Although Safeway Insurance referenced CAFA as an "alternative basis for removal,” Notice of Removal ¶ 28, at 9, it stated at the hearing that it is not pursuing removal under CAFA, because it does not believe the amount in controversy exceeds CAFA's requirement of $5,000,000.00, see Tr. at 13:4-9 (Court, Johansen). CAFA also requires at least 100 class members, see 28 U.S.C. § 1332(d)(5)(B), and the parties have not indicated the number of putative members; Ullman defines the putative class to include only New Mexico policyholders, see Complaint V 38, at 17, and alleges only that "[t]he members of the class are so numerous that joinder of all members of the class is impracticable,” Complaint ¶ 44, at 19. For CAFA, "the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs.” 28 U.S.C. § 1332(d)(6). The Court recognizes that, if there are 100 members, CAFA’s amount-in-controversy requirement could be met if each member seeks reformation of his or her policy to include at least $50,000.00 UM/UIM coverage. See Valdez v. Metro. Prop. & Cas. Ins. Co.,
. "Diminished value insurance claims allow car owners to recover the difference between a car’s pre-accident value and its value after repairs.” How to malee a diminished value claim, NASDAQ (Sept. 19, 2012, 01:24:00 PM), http://www.nasdaq.com/article/how-tomake-a-diminished-value-clairn-cml74744.
. In 2007, rule 20 was “amended as part of the general restyling of the Civil Rules,” but the changes were “intended to be stylistic only.” Fed.R.Civ.P. 20 advisory committee's note to the 2007 Amendment. This portion of the rule is now in rule 20(a)(3) of the Federal Rules of Civil Procedure, and states: “Extent of Relief. Neither a plaintiff nor a defendant need be interested in obtaining or defending against all the relief demanded. The court may grant judgment to one or more plaintiffs according to their rights, and against one or more defendants according to their liabilities.” Fed.R.Civ.P. 20(a)(3) (emphasis in original).