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King v. Hammet

United States District Court, S.D. Mississippi, Northern Division

September 29, 2019

TYLER S. KING PLAINTIFF
v.
JON HAMMET; JON HAMMET, INC.; and ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY. DEFENDANTS

          ORDER

          HENRY T. WINGATE UNITED STATES DISTRICT COURT JUDGE

         BEFORE THIS COURT is plaintiff's Motion to Remand [Docket no. 14]. Plaintiff Tyler S. King asks this court to enter an order remanding this lawsuit to the Madison County, Mississippi, Circuit Court from which it originated. Plaintiff's lawsuit urges claims against the defendants herein for: bad faith refusal to pay claims by Allstate Property and Casualty Insurance Company; gross negligence by all defendants; negligence by all defendants; and fraud by all defendants.

         In addition to Allstate Property and Casualty Insurance Company, plaintiff is suing Jon Hammet and Jon Hammet, Inc., who are the insurance agent and insurance agency that sold plaintiff the contested homeowner's insurance policy. Filed in state court on August 31, 2018, this lawsuit was removed from there by defendant Allstate Property and Casualty Insurance Company on ground of diversity of citizenship, Title 28 U.S.C. § 1332[1" name="FN1" id= "FN1">1]. All parties herein acknowledge that plaintiff Tyler S. King and Allstate Property and Casualty Insurance Company are diverse in citizenship, while the other two defendants, as plaintiff, are citizens of the State of Mississippi. This circumstance prompts plaintiff to contend that this court lacks subject matter jurisdiction because complete diversity of citizenship between all of the parties is lacking.

         Defendants, in opposing the remand motion, responds that plaintiff has fraudulently joined the two (2) Mississippi resident defendants in an effort to defeat diversity of citizenship jurisdiction. Once the court reaches this finding, say the defendants, the court will have to dismiss the two non-diverse parties from this action and proceed only with plaintiff and Allstate Property and Casualty Insurance Company.

         This court has studied the arguments, for the reasons following, this court finds that plaintiff's motion to remand must be denied.

         I. PROCEDURAL HISTORY

         Plaintiff Tyler King filed his lawsuit in the Circuit Court of Madison County, Mississippi on August 31, 2018. Plaintiff's complaint lists the following parties: plaintiff, an adult resident of the State of Mississippi; defendant Allstate Property and Casualty Insurance Company (hereinafter referred to as “APCIC”), an insurance company incorporated under the laws of the State of Illinois; defendant Jon Hammet, an adult resident of the State of Mississippi; and Jon Hammet, Inc., a corporation incorporated under the laws of the State of Mississippi.

         APCIC filed its notice of removal on September 27, 2018, alleging that complete diversity of citizenship exists between the proper parties. APCIC says this court should disregard the citizenship of the Hammet defendants - Jon Hammet and Jon Hammet, Inc. (hereinafter referred to as the “Hammet defendants”) - because they were fraudulently joined. The Hammet defendants do not appear to have consented to removal, but under a theory of fraudulent joinder, are not required to do so. See Rico v. Flores, 1 F.3d 234');">481 F.3d 234, 239 (5th Cir. 2007) (Citing Jernigan v. Ashland Oil Inc., 12');">989 F.2d 812, 815 (5th Cir. 1993).

         Plaintiff's complaint alleges the following causes of action: bad faith refusal to pay claims by APCIC; gross negligence by all defendants; negligence by all defendants; and fraud by all defendants.

         II. FACTUAL BASIS

         Prior to May, 2018, plaintiff had bought several policies from the Hammet defendants in May, 2011, which included homeowners' insurance. The Hammet defendants allegedly told plaintiff that plaintiff should buy the Deluxe Plus Homeowner's Insurance policy because that policy would cover “actual, and full, ‘replacement costs'”.

         Plaintiff's complaint herein arises out of an insurance claim relating to water damage he allegedly discovered in his personal residence on May 27, 2018. According to plaintiff, on May 27, 2018, plaintiff returned home after a holiday weekend and noticed water standing in two (2) bedrooms of his home - located at 209 Northshore Boulevard, Madison, Mississippi (hereinafter referred to as the “covered property”). Plaintiff says he contacted the Hammet defendants and informed them of the issue and that, meanwhile, plaintiff would be contacting a contractor to determine the source of the water.

         After various demolitions to the walls of the covered property, the contractor determined that the water leak was coming from water pipes in the middle of the room adjacent to the walls the contractor had demolished. The contractor billed plaintiff $970.00 for the work. Plaintiff next contacted the Hammet defendants to inform them what the contractor had done and what he had found. The Hammet defendants instructed plaintiff to contact Wright Plumbing to inspect the damage. Plaintiff contacted Wright Plumbing and arranged for an inspection.

         Wright Plumbing arrived the next day, Monday, May 28, 2018, Memorial Day, and conducted its inspection. “CJ”, the Wright Plumbing inspector, determined that the water leak source was a water pipe inside the concrete in the middle of the room. According to plaintiff, CJ informed him that the most cost-effective repair would involve terminating the leaking pipe and installing a new pipe through the attic. Wright Plumbing gave plaintiff an estimate of $2, 551.95 to complete the repairs.

         Plaintiff then contacted the Hammet defendants to inform them of the estimate. The Hammet defendants approved said estimate and told plaintiff that a different contractor - Rainbow International - would place dehumidifiers throughout the house to assist with the flood damage.

         CJ returned to the covered property on May 29, 2018, and, while at the property, completed the repair. Plaintiff paid the invoice from CJ who recommended another contractor, Ken Simmons, to repair the flood damage. Plaintiff sent the invoice to the Hammet defendants on the same date. Plaintiff also informed the Hammet defendants that he would be calling other contractors to complete the flood damage repairs. Allegedly, the Hammet defendants informed plaintiff that he needed to start the repair process and that effort would begin the claims process under his homeowner's policy.

         Plaintiff called Ken Simmons (hereinafter referred to as “Simmons”) on Tuesday, May 29, 2018, who informed plaintiff that Simmons would conduct an inspection on the following day, Wednesday, May 30, 2018.

         Kevin Akin (hereinafter referred to as “Aiken”), an employee of Rainbow International, came to the covered property on May 29, 2018, to set up dehumidifiers throughout the house. While at the covered property, Aiken tested the sheetrock and baseboards. Aiken's inspection revealed flood damages in various areas of the covered property. Aiken returned on May 30, 2019, and discovered that one of the dehumidifiers had failed and leaked water which had caused further damage to the floors and baseboards of the home. Before he left the residence, Aiken removed the broken dehumidifier and replaced it with a new dehumidifier. He left at the house all the dehumidifiers for an additional night to assist in the repairs.

         On May 29, 2018, the Hammet defendants submitted plaintiff's claim to APCIC.

         On May 30, 2018, Simmons arrived at the covered property to conduct an inspection of the flood damage. On that same date, Simmons provided plaintiff with an estimate to perform the repair work. According to plaintiff, Simmons stated that damage to the covered property included: demolished concrete; demolished brick work; demolished landscaping; damaged baseboards; damaged sheetrock; damaged paint; damaged wall studs; damaged baseplates; and damaged floor stains. Plaintiff forwarded Simmons' estimate to the Hammet defendants who approved the estimate and told plaintiff to commence the repairs. Simmons told plaintiff he would begin repairs on June 4, 2018.

         On the same date, May 30, 2018, APCIC informed plaintiff that it would send an insurance adjuster to the residence on June 1, 2018. On that same date, Bill Raphael (hereinafter referred to as “Raphael”), APCIC's insurance adjuster, came and toured the residence. After Raphael had left, plaintiff sent an email to Raphael with the estimate provided by Simmons. Raphael responded with a telephone call to plaintiff saying that APCIC would place the money in plaintiff's bank account that evening if plaintiff would sign some forms which offered an amount less than the alleged “replacement costs of the damages incurred”. Plaintiff refused to sign the forms and then forwarded the offer of settlement to the Hammet defendants.

         Simmons began repairs at the home on June 4, 2018, and completed them that week. After Simmons had completed the repairs, plaintiff met with Simmons to inspect and approve the workmanship. Finding the work satisfactory, plaintiff paid Simmons $5, 203.41.

         During the week that Simmons was completing the repairs, Raphael met with Simmons, and then offered an adjusted settlement offer to plaintiff which was “still below actual replacement costs.” In an email to the Hammet defendants, plaintiff asked them to call plaintiff about the settlement offer and about Raphael. The Hammet defendants called later the same evening and informed plaintiff that the Hammet defendants would call APCIC to find out the status of the claim.

         The following week, around June 13, 2018, Raphael again called plaintiff to discuss the claim. During that conversation, Raphael urged plaintiff to settle for the adjusted amount, which was still less than the amount plaintiff had paid to Simmons. Plaintiff refused again and Raphael said he would have someone come out to inspect the repairs to determine if he could increase the amount of the settlement offer.

         On or around June 19, 2018, Aikens called plaintiff and informed plaintiff that Raphael had asked Aikens to inspect the damage and provide an estimate. Plaintiff waited for a week and contacted Aikens on June 26, 2018, asking when Aikens would be coming to the home to conduct his inspection. Aikens then agreed to come out on June 27, 2018. Aikens, though, cancelled on June 27, 2018, and said he would come out the next day. During the course of conversations, Aikens told plaintiff that Aikens did not need to conduct an inspection because the repairs already had been completed.

         The following week, Raphael contacted plaintiff and informed him that APCIC had someone come to the residence and inspect the property again. Additionally, Raphael said that APCIC would not increase the amount of its settlement offer. Plaintiff informed Raphael that no one had inspected the property a second time. Raphael seemed surprised and said he would check into the allegation. Again, Raphael urged plaintiff to take the settlement offer, which plaintiff refused. Plaintiff then informed Raphael that if APCIC would not pay the full repair amount, then he would cancel his policies and pursue legal action. Raphael said that APCIC would not pay the full amount of repairs.

         On July 10, 2018, plaintiff emailed the Hammet defendants cancelling his policies because of APCIC's alleged default, and requesting payment of all funds under his home-owner's deluxe policy.

         III. ANALYSIS

         a. Fraudulent Joinder/ Fraudulent Misjoinder

         APCIC filed its Notice of Removal on September 27, 2018. [Docket no. 1]. In its Notice of Removal, APCIC acknowledged that complete diversity of citizenship does not exist between the parties as the lawsuit presently read because of the presence of the Hammet defendants, who as plaintiffs, are Mississippi citizens. APCIC, though, asks this court to find that plaintiff named the Hammet defendants as defendants only as an effort to prevent removal from state court to this federal forum - an effort deemed “fraudulent joinder”. Alternatively, says APCIC, this court should find that the Hammet defendants were “fraudulently misjoined”.

         Fraudulent Joinder and Fraudulent Misjoinder are two related, but slightly different doctrines which expand upon and explain how courts should view lack of complete diversity of citizenship when reviewing whether the court possesses subject matter jurisdiction under § 1332. Fraudulent joinder examines whether the plaintiff named a defendant in a lawsuit to avoid removal from state court to federal court. The district court, to which the action has been removed, must look at the pleadings to determine if one of two situations exist: “(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.” Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 571 (5th Cir. 2004)(en banc)(hereinafter referred to as “Smallwood II”)(quoting Travis v. Irby, 326 F.3d 644, 646-47 (5th Cir. 2003)).

         Fraudulent misjoinder[2], on the other hand, examines whether the plaintiff has included causes of action which are not related to each other in an effort to avoid diversity subject matter jurisdiction. “[The court] considers whether, based on the unique circumstances at issue, there is a reasonable possibility that a Mississippi court would find that Plaintiffs' claims against [some named non-diverse defendants] were properly joined with their claims against [a diverse defendant].” Feldman v. Rite Aid HDQTRS Corp., No. 517CV00009DCBMTP, 2017 WL 1508184, at *2 (S.D.Miss. Apr. 26, 2017).

         Plaintiff disagrees with APCIC and persists in asking this court to remand this litigation to the state court from which it originated, that is, the Circuit Court of Madison County, Mississippi. According to plaintiff, his claims against the Hammet defendants, the two (2) non-diverse defendants, are viable and belong in this lawsuit, a circumstance which would destroy diversity of citizenship in this court.

         “Federal courts are courts of limited jurisdiction.” Save the Bay, Inc. v. U.S. Army, 1100');">639 F.2d 1100, 1102 (5th Cir. 1981) (citing Louisville & Nashville R.R. v. Mottley, 11 U.S. 149');">211 U.S. 149, 29 S.Ct. 42, 126');">53 L.Ed. 126 (1908)). Removal of an action under diversity of citizenship is permitted when the district court has subject matter jurisdiction predicated on complete diversity of citizenship ...


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