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Crosthwait Planting Co. v. Snipes

United States District Court, N.D. Mississippi, Greenville Division

September 18, 2018

CROSTHWAIT PLANTING COMPANY, and A.E. CROSTHWAIT FARMING AND PLANTING INC. PLAINTIFFS
v.
CHARLES E. SNIPES, and ARMTECH INSURANCE SERVICES, INC. DEFENDANTS

          ORDER AND MEMORANDUM OPINION

          SHARION AYCOCK, JUDGE,

         Plaintiffs Crosthwait Planting Company, and A.E. Crosthwait Farming and Planting Inc. originally filed this case in the Circuit Court of Washington County, Mississippi. The Defendants, Charles E. Snipes and Armtech Insurance Services, Inc. removed the case to this Court premising federal jurisdiction on the basis of diversity of citizenship. See Notice of Removal [1]. The Parties are not diverse. Both of the Plaintiffs are citizens of Mississippi, and Defendant Snipes is also a citizen of Mississippi. Despite this lack of diversity, the Defendants nevertheless claim removal is proper, arguing that Defendant Snipes was improperly joined for the express purpose of defeating diversity jurisdiction. Now before the Court is the Plaintiffs' Motion to Remand [5] this case to the Circuit Court, and two separate Motions to Dismiss Armtech [9], and Snipes [12]. The issues are fully briefed and ripe for review. The Court will take up the jurisdictional issue first, and then proceed to the motions to dismiss if necessary.

         Diversity Jurisdiction & Improper Joinder

         “Improper joinder can be established in two ways: (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.” Davidson v. Georgia-Pac., L.L.C., 819 F.3d 758, 765 (5th Cir. 2016) (citing Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 401 (5th Cir. 2013) (internal quotations and alteration omitted)). Only the second situation is an issue in this case. The applicable 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.” Davidson, 819 F.3d at 765 (citing Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc)).

         “Smallwood sets out the procedure for determining whether, in the absence of actual fraud, a nondiverse defendant was improperly joined.” Davidson, 819 F.3d at 765; see Mumfrey, 719 F.3d at 401. “First, a court looks at the allegations contained in the complaint. See Id. If a plaintiff can survive a Rule 12(b)(6) challenge for failure to state a claim, there is ordinarily no improper joinder.” Davidson, 819 F.3d at 765 (citing Mumfrey, 719 F.3d at 401; Smallwood, 385 F.3d at 573). When “a complaint states a claim that satisfies 12(b)(6), but has ‘misstated or omitted discrete facts that would determine the propriety of joinder . . . the district court may, in its discretion, pierce the pleadings and conduct a summary inquiry.'” Id. (quoting Smallwood, 385 F.3d at 573). “[T]he decision regarding the procedure necessary in a given case must lie within the discretion of the trial court.” Id.

         “The burden of persuasion on those who claim [improper] joinder is a heavy one.” Davidson, 819 F.3d at 765 (citing Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003)). With that in mind, the Court views “all unchallenged factual allegations, including those alleged in the complaint, in the light most favorable to the plaintiff” and resolves “[a]ny contested issues of fact and any ambiguities of state law” in the plaintiff's favor. Davidson, 819 F.3d at 765. It “is insufficient that there be a mere theoretical possibility of recovery; to the contrary, there must at least be arguably a reasonable basis for predicting that state law would allow recovery in order to preclude a finding of fraudulent joinder.” Walton v. Tower Loan of Miss., 338 F.Supp.2d 691, 692-93 (N.D. Miss. 2004) (citing Travis, 326 F.3d at 648; Badon v. RJR Nabisco Inc., 224 F.3d 382, 386 (5th Cir. 2000) (internal quotations omitted)). Moreover, the Court must “take into account the ‘status of discovery' and consider what opportunity the plaintiff has had to develop its claims against the non-diverse defendant.” Davidson, 819 F.3d at 765 (citing McKee v. Kan. City S. Ry. Co., 358 F.3d 329, 334 (5th Cir. 2004) (quoting Travis, 326 F.3d at 649)).

         Discussion and Analysis

         The Plaintiffs in this case are corporations engaged in cotton growing. In crop year 2013, the Plaintiffs acquired Multi-Peril Crop Insurance policies through Defendant insurance provider Armtech. During that crop year, the Plaintiffs allege that they sustained losses to their cotton crops in excess of $400, 000.00. The Plaintiffs filed claims with Armtech for these losses. In January of 2014, Armtech informed the Plaintiffs that their claims were being treated as “controversial claims”, and gave the Plaintiffs an opportunity to provide additional information and documentation about the crop which the Plaintiffs provided. Armtech subsequently informed the Plaintiffs that it was retaining independent expert Charles Snipes to assist in the evaluation of the Plaintiffs' claims. The Plaintiffs' claims were eventually denied for failure to “employ good farming practices in the care, maintenance, and husbandry of the insured crop.”

         In their Complaint [1-1], the Plaintiffs assert claims for fraud, civil conspiracy, fraudulent misrepresentation, gross negligence, malice, and misrepresentation against Snipes. The Plaintiffs allege that Snipes failed to discharge his duties in accordance with any applicable standard, was grossly negligent in the preparation of his report, conspired with Armtech to falsify his report in order to ensure that the claims were denied, and fraudulently represented that he did not have a business relationship with Armtech. The Plaintiffs further allege that Snipes made false representations and conspired with Armtech to deny the claims for his own personal financial benefit.

         The Defendants assert two arguments in opposition to remand. First, they argue that there is no basis in Mississippi law for a claim or liability against Defendant Snipes. Second, the Defendants argue that even if there was a basis for liability, the Plaintiffs failed to allege specific facts sufficient to support a claim against him.

         The Mississippi Supreme Court, and this Court, have addressed this issue on several occasions. Starting with Bass v. California Life Ins. Co., and continuing to Gallagher Bassett Servs., Inc. v. Jeffcoat, the Supreme Court has held that

an insurance adjuster, agent or other similar entity may not be held independently liable for simple negligence in connection with its work on a claim. Such an entity may be held independently liable for its work on a claim if and only if its acts amount to any one of the following familiar types of conduct: gross negligence, malice, or reckless disregard for the rights of the insured.

Gallagher Bassett Servs., Inc. v. Jeffcoat, 887 So.2d 777, 784 (Miss. 2004) (citing Bass v. California Life Ins. Co., 581 So.2d 1087 (Miss. 1991)).

         This standard of course raises the question of who qualifies as a “similar entity”. “The Fifth Circuit has generally applied the standard from Gallagher to professionals with whom the insurance company has a paid or contractual relationship” including independent engineers, physicians, and experts. Chapman v. Coca-Cola Bottling Co., No. 4:08-CV-49-HTW, 2011 WL 13192698, at *7 (S.D.Miss. Aug. 31, 2011). In a factually similar case directly on point, LC Farms,Inc. v. McGuffee, this Court found a reasonable basis upon which plaintiff might be able to support a finding of liability against an ...


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