United States District Court, S.D. Mississippi, Northern Division
JOHN DOE AND JANE DOE, NATURAL PARENTS, NEXT FRIEND AND DULY-APPOINTED GUARDIANS OF JAMES DOE, A MINOR PLAINTIFF
KELLY PEOPLES, ADAM PEOPLES, PEOPLES CONSTRUCTION CORPORATION, THE TRAVELERS, NATIONWIDE PROPERTY AND CASUALTY INSURANCE COMPANY AND UNKNOWN INSURANCE COMPANIES 1-10 DEFENDANTS
MEMORANDUM OPINION AND ORDER
LEE, UNITED STATES DISTRICT JUDGE
2017, plaintiffs John and Jane Doe, parents of the minor
James Doe, filed suit in the Circuit Court of Rankin County,
Mississippi, against Kelly Peoples and Peoples Construction
Company seeking damages under various legal theories based on
allegations that in October 2016, Kelly Peoples, then a
forty-year-old adult, had sex with the fourteen-year-old
James Doe. In March 2018, the Does filed the present action
in the Circuit Court of Rankin County seeking a declaratory
judgment that the homeowners' insurance policy issued by
Nationwide Property and Casualty Insurance Company
(Nationwide) to Kelly Peoples, and a commercial automobile
policy issued by The Travelers/The Charter Oak Fire Insurance
Company (Charter Oak) to Peoples Construction Company,
provide coverage for the allegations and claims in the
underlying action. In this declaratory judgment action, the
Does, in addition to naming Nationwide and Charter Oak as
defendants, named Kelly Peoples, Adam Peoples and Peoples
Construction Company as defendants. Nationwide and Charter
Oak removed the case to this court and have now separately
moved for summary judgment. Plaintiffs John and Jane Doe and
each of the other named defendants have filed separate
responses in opposition to these motions. The court, having
considered the parties' submissions and memoranda, first
concludes that it has subject matter jurisdiction based on
diversity of citizenship as the Peoples defendants are
properly regarded as and should be realigned as plaintiffs in
this cause; and second, the court concludes that both
insurers' summary judgment motions are well-taken and
should be granted.
Does are citizens of Mississippi, as are Kelly Peoples, Adam
Peoples and Peoples Construction Company (the Peoples
defendants). Nationwide and Charter Oak are nonresident
insurers. Thus, from the face of the complaint, it
would appear that complete diversity of citizenship is
lacking. See 28 U.S.C. § 1332 (district courts
have jurisdiction where amount in controversy exceeds $75,
000 and the matter is between citizens of different states);
McLaughlin v. Miss. Power Co., 376 F.3d 344, 353
(5th Cir. 2004) (§ 1332 requires “complete
diversity” which “requires that all persons on
one side of the controversy be citizens of different states
than all persons on the other side.”) (citation
omitted). In their notice of removal, however, Nationwide and
Charter Oak assert that the Peoples defendants should be
realigned as plaintiffs as their sole interest in this
declaratory judgment action is adverse to that of the
insurers and the same as that of the named plaintiffs, i.e.,
establishing coverage under the subject policies for the
claims in the underlying lawsuit. See Griffin v.
Lee, 621 F.3d 380, 388 (5th Cir. 2010) (generally
accepted test of proper alignment in this circuit
“‘is whether the parties with the same
“ultimate interests” in the outcome of the action
are on the same side.'”) (quoting Lowe v.
Ingalls Shipbuilding, A Div. of Litton Sys., Inc., 723
F.2d 1173, 1178 (5th Cir. 1984) (citation omitted)); Zurn
Indus., Inc. v. Acton Constr. Co., 847 F.2d 234, 236
(5th Cir. 1988) (parties' alignment for jurisdictional
purposes “has to be determined from the
‘principal purpose of the suit,' and the
‘primary and controlling matter in
dispute.'”) (quoting City of Indianapolis v.
Chase Nat'l Bank, 314 U.S. 63, 62 S.Ct. 15, 86 L.Ed.
47 (1941)). None of the parties herein disputes that the Doe
plaintiffs and the Peoples defendants have the same
“ultimate interests” in the outcome of this case
or questions the propriety of the proposed realignment.
However, “[s]ubject-matter jurisdiction cannot be
created by waiver or consent, ” Howery v. Allstate
Ins. Co., 243 F.3d 912, 919 (5th Cir. 2001), and thus,
regardless of whether any party has objected, the court has
an independent duty to examine its jurisdiction, Simon v.
Wal-Mart Stores, Inc., 193 F.3d 848, 850 (5th Cir.
1999). Here, the court has done so, and having fully
considered the matter, finds that realignment of the Peoples
defendants as plaintiffs is proper, both as a matter of
procedure and substance.
courts are not bound by the labels the parties give
themselves in the pleadings”, Ashford v. Aeroframe
Servs, L.L.C., 907 F.3d 385, 387 (5th Cir. 2018) (citing
Zurn Indus., 847 F.2d at 236); instead, courts must
“‘look beyond the pleadings, and arrange the
parties according to their sides in the dispute, '”
id. (quoting City of Indianapolis, 314 U.S.
at 69, 62 S.Ct. 15). Moreover, “[a]ny realignment of
parties should take place before jurisdiction is
decided.” Id. (citing Peters v. Standard
Oil Co. of Tex., 174 F.2d 162, 163 (5th Cir. 1949)).
principles obviously apply to a case that is originally
brought in federal court. However, many of the the district
judges in this circuit - maybe even a majority - have
rejected the use of realignment of parties to create
diversity jurisdiction in a removed case. See Jackson
Cty., Miss. v. Singing River Health Sys., No.
1:18CV237-LG-RHW, 2018 WL 4183216, at *3 (S.D.Miss. Aug. 31,
2018) (observing that post-removal “[r]ealignment is
currently disfavored among courts within the Fifth
Circuit....”); Thompson v. Gen. Motors LLC,
No. 416CV00026DMB-JMV, 2016 WL 7471328, at *4 n.3 (N.D. Miss.
Dec. 28, 2016) (noting that despite a variance in views among
district judges in this circuit as to when, if ever,
post-removal realignment to create diversity is permissible,
“‘in a more recent trend, courts in our circuit
consistently disfavor realignment after removal.'”)
(quoting Bilyeu v. Wells Fargo Ins. Servs., USA,
Inc., No. 1:16-cv-23, 2016 WL 5721060, at *7 (W.D. La.
Aug. 8, 2016)); Huntsman Corp. v. Int'l Risk Ins.
Co., No. CIV.A. H-08-1542, 2008 WL 4453170, at *6 (S.D.
Tex. Sept. 26, 2008) (stating that “the trend in this
circuit disapproves of using realignment after removal to
cure a defect in removal jurisdiction.”).
Fifth Circuit has not expressly endorsed realignment after
removal to create diversity, but so far as the undersigned is
aware, neither has it expressed disapproval of post-removal
realignment. See Ashford v. Aeroframe Servs., LLC,
No. 2:14-CV-992, 2015 WL 2089994, at *3 (W.D. La. May 4,
2015) (“The Fifth Circuit has remained silent as to
whether realignment of the parties is proper in a removal
action. Therefore, it cannot be said that a realignment of
the parties would be contrary to law per
se.”). Nearly all of the circuit courts that
have directly addressed the issue have approved of
post-removal realignment of parties to create diversity
jurisdiction. Commentators have also found post-removal
realignment to be permissible. See 14C Charles Alan
Wright & Arthur R. Miller, Federal Practice and
Procedure § 3723 (4th ed., updated Apr. 2019)
(“Before determining removability under Section 1441(b)
on the basis of diversity-of-citizenship jurisdiction, a
district court will realign the parties according to their
true interests in the outcome of the litigation, as it would
were the case originally brought in the federal
court.”); id. (stating that while the law of
the forum state will provide the substantive rules to govern
decision in a diversity suit, “it is well-settled that,
for purposes of removal, federal law determines who is a
plaintiff and who is a defendant.”).
there are surely contexts in which post-removal realignment
would be improper, in the undersigned's view, there is no
warrant for wholesale rejection of the device. Moreover, the
court is persuaded that in the circumstances of the present
case, realignment is proper, as it was in Doe v.
Sharma, No. CIVA307CV172HTWLRA, 2008 WL 3339942, at *4
(S.D.Miss. Aug. 6, 2008) (removed declaratory judgment action
brought by tort claimant to establish insurance coverage for
underlying claim in which court realigned alleged tortfeasors
as plaintiffs as they would benefit, just as would the
plaintiff, if the defendant insurers were found liable for
coverage for the claims in the underlying state court suit),
and in Jackson HMA, Inc. v. Saint Paul Fire & Marine
Ins. Co., 246 F.Supp.2d 535, 537 (S.D.Miss. Jan. 27,
2003) (removed declaratory judgment action by decedent's
medical provider concerning insurance coverage in which court
realigned wrongful death claimants as plaintiffs as they
shared the medical provider's interest in receiving
insurance payments related to wrongful-death claims).
Consequently, the court concludes it has diversity
jurisdiction over the present action.
Facts and the Underlying Lawsuit
to the allegations of the underlying complaint, on July 16,
2016, James Doe, the John and Jane Does'
fourteen-year-old son, broke up with Kelly and Adam
Peoples' minor daughter and blocked her on Snapchat.
Following the break-up, Kelly, who was forty at the time,
began following James on Snapchat and communicating with him
via Snapchat and cell phone. She sent him nude photographs of
herself by Snapchat and cell phone and convinced him to send
her nude photos of himself in return. Before long, Kelly
pursued a sexual relationship with James. She picked him up
from school one day and drove him to a self-storage facility
near his home where she made out with him in her vehicle.
Then, on three subsequent occasions, she had sex with him.
The first time, she picked him up near his home and took him
to her home, where she had sex with him; the second, she had
him meet her at midnight at his neighborhood pool, where she
picked him up, drove him to a secluded area and had sex with
him in her car; and the third, she again picked him up near
his home and drove him to her home, where she drank heavily,
gave him shots of vodka and had sex with him. On October 16,
Kelly paid James $1, 000 to delete the nude photos of her
from his cell phone. On October 31, 2016, James's parents
confronted him, and he admitted to having had sex with Kelly.
was indicted on January 19, 2017 for statutory rape, in
violation of Mississippi Code Annotated § 97-3-65(1)(a).
On October 3, 2017, she pled guilty to the charge and was
given a fifteen-year suspended sentence. On October 27,
2017, John and Jane Doe filed suit in the Circuit Court of
Rankin County, Mississippi against Kelly Peoples, and against
Peoples Construction Company. As to Kelly Peoples, the Does
asserted one count for negligent infliction of emotional
distress and three counts for negligence per se
based on alleged violations of Mississippi Code Annotated
§ 97-3-65 (statutory rape/gratification of lust), and
Mississippi Code Annotated § 97-5-49 (serving alcohol
to/allowing consumption of alcohol by, minor). The Does sued
Peoples Construction Company (PCC) for negligent entrustment,
charging that during Kelly's illicit activities with
James, she drove a vehicle owned by PCC with the
company's permission and consent, notwithstanding that it
knew or should have known of her illicit activities.
February 2, 2018, the Does then filed the present action in
the Circuit Court of Rankin County seeking a declaratory
judgment that insurance policies issued by Nationwide and
Charter Oak provide coverage for their claims in the
Nationwide Policy: Prior to October 2016, Nationwide issued
to Kelly Peoples a homeowners' policy that was in effect
in October 2016. Adam Peoples is a named insured under the
policy. Nationwide's policy includes personal liability
coverage, providing in relevant part as follows:
We will pay damages an Insured is legally obligated to pay
due to an occurrence resulting from negligent personal acts
or negligence arising out of the ownership, maintenance or
use of real or personal property. We will provide a defense
at our expense by counsel of our choice. ...
policy defines “occurrence” as “bodily
injury or property damage resulting from an accident,
including continuous or repeated exposure to the same general
condition.” The policy excludes from coverage bodily
a) caused intentionally by or at the direction of an insured,
including willful acts the result of which the Insured knows
or ought to know will follow ...