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Howard v. Direct General Insurance Co.

United States District Court, Fifth Circuit

September 27, 2013

EMMA HOWARD, Plaintiff,


SHARION AYCOCK, District Judge.

Presently before the Court are the Direct General Defendants' Motion to Dismiss [39] and Defendant Nation Safe's Motion for Judgment on the Pleadings [45]. Because the Court sua sponte determines that it has no subject matter jurisdiction over the present matter, this case is remanded to the Circuit Court of Leflore County, Mississippi.


The Plaintiff in this action is a Mississippi domicilliary who purchased an automobile insurance policy from Direct General. Specifically, Howard obtained a Direct General policy in 2004 and has maintained her coverage with Direct General from that time to the present. Howard purchased the policy at the Direct General Insurance Agency office in Greenville, Mississippi. Each of the Plaintiff's policies were serviced by Direct General Agent Levar Hill. Contemporaneously with the purchase of those automobile insurance policies, Plaintiff also purchased a number of add-on products or automobile club services. Those products, the Roadside Assistance Program and Auto Protection Plan, were not Direct General products, but were instead underwritten by Nation Safe Drivers (Nation Safe).

Contending that she was fraudulently induced to purchase those add-on products, that the products were worthless, unreasonably priced, and were sold in violation of state law, Plaintiff filed the present action in the Circuit Court of Leflore County, Mississippi. Defendant Nation Safe thereafter removed the action to this Court on grounds of purported diversity jurisdiction. In its notice of removal, Nation Safe alleged that although Direct General Insurance Company of Mississippi and Direct General Insurance Agency Inc. (Direct Defendants) were non-diverse defendants, those parties should be overlooked under the theory of fraudulent misjoinder or improper joinder.


Federal courts are courts of limited jurisdiction and, as such, are called to presume that a suit lies outside their jurisdictional limits. Kokkonen v. Guardian Life Ins. Co. of America , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Howery v. Allstate Ins. Co. , 243 F.3d 912, 916 (5th Cir. 2001). When a case is removed under the premise of the court's diversity jurisdiction, it "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b). Thus, when there is a single defendant who is a citizen of the forum state present, removal on the basis of diversity jurisdiction is barred. Similarly, in a case with multiple plaintiffs or multiple defendants, complete diversity is required.

Significantly, the party removing the case bears the burden of showing that jurisdiction is proper in federal court. Guillory v. PPG Indus., Inc. , 434 F.3d 303, 309 (5th Cir. 2005). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. 28 U.S.C. § 1447(c). The removal statute is to be strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand. Gasch v. Hartford Acc. & Indem. Co. , 491 F.3d 278, 281 (5th Cir. 2007).


In the case at hand, it is undisputed that the Plaintiff is a domicilliary of the forum state. Similarly, Defendants Direct General Mississippi and Direct General Agency Inc. are also domicilliaries of Mississippi. Defendant Nation Safe, however, contends that diversity jurisdiction is nonetheless proper under either a fraudulent misjoinder or improper joinder theory, while the Direct Defendants argue that diversity jurisdiction is proper under only improper joinder.

Fraudulent Misjoinder

The concept of fraudulent misjoinder was first articulated by the Eleventh Circuit in Tapscott v. MS Dealer Serv. Corp. , 77 F.3d 1353 (11th Cir. 1996), abrogated on other grounds, Cohen v. Office Depot, Inc. , 204 F.3d 1069 (11th Cir. 2000). Previously, fraudulent joinder provided the sole basis for disregarding the citizenship of a non-diverse party. However, in Tapscott, the Eleventh Circuit articulated that "[m]isjoinder may be just as fraudulent as the joinder of a resident defendant against whom a plaintiff has no possibility of a cause of action." Id. at 1360. Therefore, at least where the joinder of defendants constitutes an "improper and fraudulent joinder, bordering on a sham, " the Eleventh Circuit has instructed that the presence of such non-diverse defendants should not destroy federal jurisdiction. In other words, "a defendant's right of removal cannot be defeated by a fraudulent joinder of a resident defendant having no real connection with the controversy.'" Id. at 1359 (quoting Wilson v. Republic Iron & Steel Co. , 257 U.S. 92, 97, 42 S.Ct. 35, 66 L.Ed. 144 (1921)).

Although the Fifth Circuit has seemingly endorsed the theory of fraudulent misjoinder, the court has provided limited instruction on how the doctrine should be applied. See In re Benjamin Moore & Co. , 309 F.3d 296, 298 (5th Cir. 2002) (noting that "it might be concluded that misjoinder... should not be allowed to defeat diversity jurisdiction."); Jackson v. Truly , 307 F.Supp.2d 818, 823 (N.D. Miss. 2004) ("This Court concludes that the Fifth Circuit has adopted, at least in principle, the doctrine of fraudulent misjoinder."). Federal district courts within this state, however, have first looked to the Mississippi Rules of Civil Procedure in order to evaluate a party's ...

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