Burchfield v. Foremost Insurance Group

          OPINION AND ORDER

          DEBRA M. BROWN UNITED STATES DISTRICT JUDGE.

         Before the Court are: (1) the motion to dismiss of Albert G. Cummins, Jr.; Albert G. Cummins, Jr. Inc.; James Brian Street; and Rural Insurance Agency, Inc. (“Agent Defendants”), Doc. #7; (2) Harvey Burchfield's “Motion to Allow Discovery Prior to Ruling on Motion to Dismiss, ” Doc. #9; (3) the Agent Defendants' motion to strike, Doc. #17; and (4) the “Motion of Foremost Insurance Company Grand Rapids Michigan to Stay Case and Deem Plaintiff's Response to the Non-Diverse Defendants' Motion to Dismiss as a Motion to Remand, ” Doc.#20.

         I Procedural Background

         On May 31, 2016, Burchfield filed suit in the Circuit Court of Sunflower County, Mississippi, against Foremost Insurance Group;^[1] Rural Insurance Agency, Inc.; Albert G. Cummins, Jr. Inc.; Albert Cummins, Jr., individually and in his capacity as agent of Foremost Insurance Group and Rural Insurance Agency, Inc.; and James Brian Street, individually and in his capacity as agent of Foremost Insurance Group and Rural Insurance Agency, Inc. Doc. #2. In his state court complaint, Burchfield alleges claims for negligence, gross negligence, breach of contract, breach of fiduciary duty, and bad faith arising from the denial of his claim for fire insurance benefits after the house on real property he owned sustained a fire loss. Id. at ¶¶ 9-31. On August 4, 2016, Foremost removed the case to this Court pursuant to 28 U.S.C. § 1332, asserting that the Agent Defendants were improperly joined. Doc. #1.

         On August 16, 2016, the Agent Defendants filed a motion seeking dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. #7. On September 19, 2016, Burchfield filed a “Motion to Allow Discovery Prior to Ruling on Motion to Dismiss.” Doc. #9. That same day, Burchfield filed a response to the Agent Defendants' motion to dismiss.^[2] Doc. #10. On September 28, 2016, the Agent Defendants filed a response opposing Burchfield's motion for discovery, a reply in support of their motion to dismiss, and a motion to strike certain matters^[3] in Burchfield's response to their motion to dismiss. Doc. #15; Doc. #16; Doc. #17.

         On October 13, 2016, Foremost filed a “Motion of Foremost Insurance Company Grand Rapids Michigan to Stay Case and Deem Plaintiff's Response to the Non-Diverse Defendants' Motion to Dismiss as a Motion to Remand.” Doc. #20. The same day, Foremost filed a response to Burchfield's motion for discovery, Doc. #22; and a “Memorandum Brief of Foremost Insurance Company Grand Rapids, Michigan in Rebuttal of Plaintiff's Response to the Motion to Dismiss Submitted by the Non-Diverse Defendants and in Opposition to Remand, ” Doc. #23. On October 20, 2016, Burchfield responded to Foremost's motion to stay. Doc. #24. Five days later, on October 25, 2016, Foremost replied. Doc. #25. Also on October 25, the Agent Defendants filed a notice joining Foremost's motion to stay. Doc. #26. On November 3, 2016, Burchfield filed a response to the Agent Defendants' motion to strike. Doc. #27.

         On March 1, 2017, the Court, finding Foremost's conclusory allegations of improper joinder insufficient, issued an order requiring Foremost to show cause why this case should not be remanded due to the lack of diversity jurisdiction. Doc. #30. Foremost filed an “Amendment to Notice of Removal Submitted in Response to Order to Show Cause” on March 6, 2017. Doc.#31.^[4]

         II Removal

         “Under the federal removal statute, a civil action may be removed from a state court to a federal court on the basis of diversity. This is so because the federal court has original subject matter jurisdiction over such cases.” Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 199 (5th Cir. 2016). “The party seeking to remove bears the burden of showing that federal jurisdiction exists and that removal was proper. Any ambiguities are construed against removal and in favor of remand to state court.” Scarlott v. Nissan N. Am., Inc., 771 F.3d 883, 887 (5th Cir. 2014) (internal citations omitted). In this regard, “[i]f 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).

         In its removal notice, Foremost contends that “according to the Complaint, [Burchfield] is an adult resident citizen of … Mississippi;” Foremost “is a foreign corporation organized, existing, and with its principal place of business in Michigan;” and the amount in controversy exceeds $75, 000.^[5] Doc. #1 at ¶¶ 4-5, 10. Regarding the Agent Defendants, however, Foremost alleges they “were improperly joined … for the sole purpose of attempting to avoid and defeat the removal of this action to the jurisdiction of this Court. As there is no reasonable possibility that the Plaintiff can establish h[is] claims against the Non-diverse [Agent] Defendants, their citizenship must be disregarded for purposes of determining jurisdiction.”^[6] Id. at ¶ 9.

         III Diversity Jurisdiction and Fraudulent Joinder

         Diversity jurisdiction requires that there be: (1) complete diversity between the parties; and (2) an amount in controversy in excess of $75, 000. 28 U.S.C. § 1332; Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). “The improper joinder doctrine constitutes a narrow exception to the rule of complete diversity.” McDonal v. Abbot Labs., 408 F.3d 177, 183 (5th Cir. 2005). Under this doctrine, “a district court is prohibited by statute from exercising jurisdiction over a suit in which any party … has been improperly or collusively joined to manufacture federal diversity jurisdiction.” Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 572 (5th Cir. 2004) (emphases omitted). The “heavy” burden of showing improper joinder rests with the removing party. Cuevas v. BAC Home Loans Servicing, LP, 648 F.3d 242, 249 (5th Cir. 2011).

         The Fifth Circuit has recognized two ways to establish improper joinder: “(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.” Travis v. Irby, 326 F.3d 644, 647 (5th Cir. 2003). The latter inquiry centers on “whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff against a [non-diverse] 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 [the] defendant.” Smallwood, 385 F.3d at 573. In resolving this question, “[a] district court should ordinarily ... conduct[] a Rule 12(b)(6)-type analysis. However, in cases where the plaintiff has stated a claim, but ‘misstated or omitted discrete facts' the district court has the discretion to pierce the pleadings and conduct a summary inquiry.” McDonal, 408 F.3d at 183 n.6. “As a corollary, summary judgment-type evidence may be considered in an improper-joinder analysis to the extent the facts ‘clarify or amplify the claims actually alleged in the petition that was controlling when the suit was removed.'” Puente v. Tex. Roadhouse Holdings, LLC, No. 1:13-cv-181, 2014 WL 12617817, at *4 (S.D. Tex. July 15, 2014) (quoting Griggs v. State Farm Lloyds, 181 F.3d 694, 700 (5th Cir. 1999)) (internal alterations omitted).

         The party asserting improper joinder bears the burden at each stage of this inquiry. See Barbee v. Scott, No. H-10-1797, 2010 WL 3257477, at *7 (S.D. Tex. Aug. 17, 2010) (“The court concludes, therefore, that under a Rule 12(b)(6)-type analysis the defendants have failed to meet their burden of establishing improper joinder.”); see also Veritas Consulting Grp. Inc. v. Gasbuddy Org., Inc., No. C-10-147, 2010 WL 2598386, at *3 n.3 (S.D. Tex. June 24, 2010) (“[E]ven if this Court were to pierce the pleadings and consider the summary judgment type evidence, removing Defendants have not met their burden of proving improper joinder.”).

         In the present case, no party has presented summary judgment type evidence regarding the claims against the Agent Defendants. Accordingly, on this record, the Court finds no justification to pierce the pleadings and conduct a summary inquiry.^[7] The Court will therefore analyze Burchfield's complaint under the lenient 12(b)(6) framework.^[8] See Smallwood, 385 F.3d at 573 (“decision regarding the procedure necessary … lie[s] within the discretion of the trial court”).

         IV Discussion

         A. Factual Allegations

         Sometime before February 14, 2014, Burchfield purchased a “dwelling fire insurance” policy from Foremost through its agents Albert Cummings, Jr., Albert Cummings, Jr., Inc., and Rural Insurance Agency, Inc., to cover property he owned in Drew, Mississippi. Doc. #2 at ¶ 9, 11. The policy “provided in general that upon consideration of premiums paid to the Defendants[, ] the Defendants would provide insurance to cover losses of insured in the event of a fire to said premise.”^[9] Id. In September 2013, Burchfield was informed that James Brian Street was his new agent. Id. at ¶ 21.

         On February 14, 2014, the house located on Burchfield's property “sustained a fire that resulted in a total loss of the house.” Id. at ¶ 13. Subsequently, Burchfield filed a fire loss claim with the defendants but the claim was denied on the basis that the insurance coverage on the property was non-renewed as of February 1, 2014. Id. at ¶ 14. Burchfield was never notified by Foremost's agents that the fire policy would be nonrenewed on February 1, 2014. Id. at ¶ 15, 17. Foremost did not mail the notice of cancellation or nonrenewal to Burchfield or Street; rather, Foremost mailed it to Cummins but Cummins never mailed a copy of it to Burchfield. Id. at ¶¶ 22-23.

         B. ...