Opinion
CIVIL ACTION NO. 02-0951.
May 16, 2002
ORDER AND REASONS
Before the Court is a Motion to Remand, filed by plaintiff. For the reasons that follow, the motion is GRANTED.
I. BACKGROUND
Plaintiff, Michael D. Landry, commenced this action in state court by filing a petition against Fidelity Deposit Company of Maryland ("Fidelity"), alleging that Fidelity had breached its obligations under a directors and officers liability policy. Specifically, plaintiff alleges that Fidelity is obligated under the policy to reimburse attorneys' fees and defense costs incurred by plaintiff in defending a civil action brought against him by the Federal Deposit Insurance Corporation ("FDIC") when he was an officer of First Guaranty Bank ("First Guaranty"). By amending petition, plaintiff added a claim against First Guaranty, seeking indemnity from the bank in the event the Fidelity policy was found to provide no coverage. Fidelity then removed the matter to this Court on the basis of diversity jurisdiction, asking the Court to disregard the citizenship of First Guaranty (a state-chartered bank in Hammond, Louisiana) on grounds of fraudulent joinder.
II. LAW AND ARGUMENT
"A party invoking the removal jurisdiction of the federal courts bears a heavy burden." Sid Richardson Carbon Gasoline Co. v. Interenergy Resources, Ltd., 99 F.3d 746, 751 (5th Cir. 1996). To defeat diversity using fraudulent joinder, the removing party "must demonstrate `that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court.'" Id. (emphasis added) (quoting Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 259 (5th Cir. 1995)). In making this determination, the court "must evaluate all factual allegations and ambiguities in the controlling state law in favor of the plaintiff." Id. at 751. The Court "should not conduct a full evidentiary hearing on questions of fact, but rather should make a summary determination by resolving all disputed facts in favor of the plaintiff." Id. It is not for the Court to determine" "whether the plaintiff will actually or even probably prevail on the merits of the claim,'" but rather, to "`look only for a possibility that the plaintiff might do so.'" Id. (quoting Burden v. General Dynamics Corp., 60 F.3d 213, 216 (5th Cir. 1995)). "If there is any possibility that the plaintiff has stated a cause of action against any non-diverse defendant, the federal court must conclude that joinder is proper, thereby defeating complete diversity, and the case must be remanded." Id. at 751 (emphasis added).
Plaintiff contends that he has stated at least four causes of action against First Guaranty: (1) breach of an agreement to purchase and maintain an insurance policy that would cover defense costs; (2) breach of a tort duty to act reasonably in carrying out this obligation; (3) mandatory indemnity pursuant to La. R.S. § 6:286(B); and (4) an application for court-ordered indemnity "in view of all the relevant circumstances," pursuant to La. R.S. § 6:286(D)(2). The Court need not address whether there is absolutely no possibility of recovery under any of the first three theories, for the Court finds that there is a possibility of recovery under the fourth.
Louisiana Revised Statute section 6:286(D) provides:
D. Unless limited by a state bank's articles of incorporation, a director of the state bank who is a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of the application, the court . . . may order indemnification if it determines that:
(1) The director is entitled to mandatory indemnification under Subsection (B) [ i.e., he "was wholly successful on the merits"]; or
(2) The director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he met the standard of conduct set forth in Subsection A or was adjudged liable as described in Paragraph A(4), but if he was adjudged so liable, his indemnification is limited to reasonable expenses incurred.
"An officer of the state bank who is not a director is entitled to mandatory indemnification under Subsection B and is entitled to apply for court-ordered indemnification under Subsection D in each case to the same extent as to a director." La. R.S. § 6:286(F)(1).
La. R.S. § 6:286(D). Fidelity argues that applications under this provision must be filed during the pendency of the underlying proceeding and, thus, that plaintiff is now barred from making such an application. According to Fidelity, the basis for this time-bar is the word "is" in the first sentence of the provision. Id. ("a director of the state bank who is a party to a proceeding may apply for indemnification") (emphasis added). The Court disagrees that this present-tense verb necessarily imposes a time-bar on directors seeking indemnification. Subsequent sentences in this same section provide that the court may order indemnification upon application whether or not the director "was adjudged liable" or "was wholly successful on the merits." This language suggests that applications under subsection (D) may be made after the underlying proceeding has terminated. Given the absence of state case law on the issue, this Court is constrained to interpret this ambiguity in plaintiffs favor. See Sid Richardson, 99 F.3d at 751. Accordingly, because there is a possibility that the plaintiff has stated a cause of action against First Guaranty, this case must be remanded.
Section (A) allows a state bank to indemnify a director if, inter alia, he "conducted himself in good faith." La. R.S. § 6:286(A)(1). Paragraph A(4) provides that a state bank may not indemnify a director in connection with a proceeding "in which the director was adjudged liable to the state bank" or "in which he was adjudged liable on the basis that personal benefit was improperly received by him." La. R.S. § 6:286 (A)(4).
The latter is by reference to § 6:286(B). See § 6:286 (D)(1).
III. CONCLUSION
For the foregoing reasons, IT IS ORDERED that plaintiffs Motion to Remand is GRANTED, and this matter is REMANDED to the Twenty-First Judicial District Court, for the Parish of Tangipahoa, State of Louisiana.