Opinion
CIVIL 3:23-CV-450
06-05-2023
DEBRA MCCARTHY, et al., Plaintiffs, v. MINNESOTA LAWYERS MUTUAL INS. CO. and RAUL JAUREGUI, Defendants.
(Judge Mariani)
REPORT AND RECOMMENDATION
MARTIN C. CARLSON, UNITED STATES MAGISTRATE JUDGE
I. Statement of Facts and of the Case
This case, which comes before us for consideration of a motion to remand, (Doc. 5), is a state court declaratory judgment action which seeks a judgment regarding the scope of Attorney Raul Jauregui's insurance coverage under a policy issued by Minnesota Lawyers Mutual Insurance Company. (Doc. 1-1). This state court litigation, in turn, was inspired by a prior federal lawsuit brought by the same plaintiffs against Jauregui and another defendant arising out of claims of litigation misconduct which played out against the backdrop of a highly charged, emotionally divisive issue: sexual violence on a college campus. McCarthy, et al., v. Boye, et al., Civil No. 3:21-CV-1759.
The plaintiffs filed this lawsuit in state court on February 13, 2013 as part of an apparent effort to determine scope of Minnesota Lawyers' insurance coverage in this separate federal case. Consistent with state declaratory judgment practice, the plaintiffs named both the insurance company, Minnesota Lawyers, and the insured, Raul Jauregui, a Pennsylvania resident, in the complaint which they filed in the Court of Common Pleas of Luzerne County. (Id.) Minnesota Lawyers then promptly removed this case to federal court, (Doc. 1), and the plaintiffs have filed a motion to remand, (Doc. 5), which argues that removal was improvident and inappropriate. This motion to remand is fully briefed, (Docs. 6, 12, and 16). Accordingly, the matter is now ripe for resolution.
In the meanwhile, a welter of other motions have been filed in this case, including two motions to dismiss (Docs. 8 and 19), and a motion for sanctions. (Doc. 24). The proliferation of these pleadings presents us with two interlocking questions: First, in what order should we address these various motions, and second, if we take up the motion to remand in the first instance, should this case be remanded to state court?
For the reasons set forth below, upon consideration of these issues it is recommended that we first address the motion to remand, and it is further recommended that this motion be granted. Finally, in light of this recommendation, we recommend that the court refrain from addressing any other pending motions.
II. Discussion
A. This Court Should First Address the Motion to Remand Before Addressing Motions to Dismiss or for Sanctions.
The constellation of motions before us call upon the court to engage in two separate legal exercises. Initially, the plaintiff's motion to remand challenges whether this case should be in federal court in the first instance. Additionally, the motions to dismiss and for sanctions seek merits determinations from us regarding the underlying claims in this case. When presented with this combination of motions, the threshold matter we must consider is the proper ordinal approach to addressing these motions; namely, whether we should first consider questions of jurisdiction or examine the underlying merits of this dispute. In this regard, both caselaw and the text of the removal statutes suggest that we should first address the jurisdictional questions before foraying into any merits analysis.
This conclusion stems from the language of the statutes governing removal and remand, specifically, 28 U.S.C. § 1447, which directs that: “If 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). Given the mandatory nature of Section 1447(c)'s command that the court shall remand lawsuits when subject matter jurisdiction is lacking, it has been held that:
[A] federal court must remand for lack of subject matter jurisdiction notwithstanding the presence of other motions pending before the court. See, e.g., Marathon Oil, 145 F.3d at 220 (holding that district court
should have considered motion to remand for lack of subject matter jurisdiction before it addressed motion to dismiss for want of personal jurisdiction); Toumajian v. Frailey, 135 F.3d 648, 655 (9th Cir. 1998) (holding that district court should have remanded for lack of subject matter jurisdiction and should not have dismissed on grounds of ERISA preemption); Avitts v. Amoco Prod. Co., 53 F.3d 690, 693 (5th Cir. 1995) (per curiam) (holding that district court had no jurisdiction to order interim costs and attorneys' fees where action should have been immediately remanded for lack of subject matter jurisdiction); Smith, 23 F.3d at 1139 (holding that district court had no authority to dismiss removed claim without subject matter jurisdiction); In re Bear River Drainage Dist., 267 F.2d 849, 851 (10th Cir. 1959) (holding that motion to remand for lack of subject matter jurisdiction necessarily precedes motion to dismiss); Nichols v. Southeast Health Plan of Ala., Inc., 859 F.Supp. 553, 559 (S.D. Ala. 1993) (same).Univ. of S. Alabama v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir. 1999). The rationale for this requirement that we first address the question of our subject matter jurisdiction before considering merits issues has been aptly explained. Thus, “[b]ecause lack of jurisdiction would make any decree in the case void and the continuation of the litigation in federal court futile, the removal statute should be strictly construed [when implicating questions of federal jurisdiction] and all doubts resolved in favor of remand.” Yellen v. Teledne Cont'l Motors, Inc., 832 F.Supp.2d 490, 495 n.8 (E.D. Pa. 2011) (quoting Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996) and Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985)) (internal quotations omitted).
Accordingly, in the first instance we will consider the plaintiffs' motion to remand before addressing any other pending motions.
B. The Motion to Remand Should Be Granted.
Removal of cases to federal court is governed by 28 U.S.C. § 1446, which provides as follows:
(a) Generally.-A defendant or defendants desiring to remove any civil action from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.28 U.S.C. § 1446(a).
In this case, removal of this state declaratory judgment action is premised upon this court's diversity jurisdiction. That jurisdiction is outlined in 28 U.S.C. § 1332, which confers federal court jurisdiction over disputes between citizens of two different states and provides that: “district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between-(1) citizens of different States.” 28
U.S.C. § 1332(a)(1).
When removal jurisdiction is premised upon diversity of citizenship, an additional statutory consideration comes into play. In this setting, Section 1441(b)(2) of Title 28, United States Code provides that:
A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if
any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.28 U.S.C. § 1441 (b)(2).
Section 1441(b)(2) codifies what is colloquially referred to as the “forum defendant” rule. As the United States Supreme Court has explained in describing the “forum defendant” rule: “When a plaintiff files in state court a civil action over which the federal district courts would have original jurisdiction based on diversity of citizenship, the defendant or defendants may remove the action to federal court, 28 U.S.C. § 1441(a), provided that no defendant ‘is a citizen of the State in which such action is brought,' ” Caterpillar Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 472, 136 L.Ed.2d 437 (1996). Thus, where a properly joined named defendant in a state court lawsuit is a citizen of the state in which the action is brought, removal of that lawsuit to federal court is generally forbidden unless it can be shown that the joinder of the named in-state defendant was somehow fraudulent.
It is well settled that “[t]he removal statutes ‘are to be strictly construed against removal and all doubts should be resolved in favor of remand.'” Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990) (quoting Steel Valley Auth. v. Union Switch and Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987)). Further, it is clearly established that “[t]he party asserting jurisdiction bears the burden of showing that at all stages of the litigation the case is properly before the federal court.” Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 396 (3d Cir. 2004).
Therefore, in a removal setting, that burden rests with the defendant, the party who has sought the federal forum. Moreover, where “it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).
This burden applies with particular force to efforts to overcome the “forum defendant” prohibition on removal by asserting that the joinder of the instate defendant was fraudulent. In such instances, the party seeking to remove the lawsuit faces a heavy burden of proof and persuasion and:
Joinder is fraudulent [only] if “there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment.” In re Briscoe, 448 F.3d 201, 216 (3d Cir.2006) (quoting Abels v. State Farm, 770 F.2d 26, 32 (3d Cir.1985)). But, “if there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that joinder was proper and remand the case to state court.” Boyer v. Snap-On Tools Corp, 913 F.2d 108, 111 (3d Cir.1990) (quoting Coker v. Amoco Oil Co., 709 F.2d 1433, 1440-41 (11th Cir.1983)). Because a party who urges jurisdiction on a federal court bears the burden of proving that jurisdiction exists, a removing party who charges that a plaintiff has fraudulently joined a party to destroy diversity of jurisdiction has a “heavy burden of persuasion.” Boyer, 913 F.2d at111 (citing Steel Valley Author. v. Union Switch & Signal Div., 809 F.2d 1006, 1012 n. 6 (3d Cir.1987)); see also Batoff v. State Farm Ins. Co., 977 F.2d 848, 851 (3d Cir.1992) (the burden of persuasion on a defendant asserting fraudulent joinder is “heavy”).Dietz v. Avco Corp., 168 F.Supp.3d 747, 758 (E.D. Pa. 2016).
Judged against these legal guideposts, we conclude that Minnesota Lawyers has not carried its heavy burden of showing that the joinder of Raul Jauregui in this state court declaratory judgment action was fraudulent. Quite the contrary, under state practice, the Pennsylvania Supreme Court has consistently held that the insured person or entity is an indispensable party in a declaratory judgment action on the issue of coverage between the insured and the insurance carrier. Vale Chem. Co. v. Hartford Acc. & Indem. Co., 512 Pa. 290, 293, 516 A.2d 684, 686 (1986). The rationale for this state court rule can be simply stated: “Clearly, an insured has an interest in a declaratory judgment action where the insurer seeks to limit his amount of coverage as he does in an action where the declaration is sought to deny coverage.” Erie Ins. Grp. v. Cavalier, 380 Pa. Super. 601, 606, 552 A.2d 705, 707 (1989).
As we have observed, the controlling legal standards governing removal practice in cases involving forum defendants provides that: “If there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that joinder was proper and remand the case to state court” Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990). Moreover, in making this assessment we “must resolve all contested issues of substantive fact in favor of the plaintiff and must resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff.” Id. Given this guidance which sets an extraordinarily high standard for parties seeking to remove “forum defendant” cases, and recognizing the settled body of state case law which deems insured parties to be indispensable to state court insurance coverage declaratory judgment actions, we find that Minnesota Lawyers Mutual Insurance Company has not carried its heavy burden of proving that the joinder of Raul Jauregui in this state court lawsuit was fraudulent. Therefore, the forum defendant rule applies here and § 1441(b)(2) bars removal of this action to federal court. The motion to remand should be granted.
III. Recommendation
For the foregoing reasons, IT IS RECOMMENDED THAT the plaintiff's motion to remand (Doc. 5), should be GRANTED. In light of this recommendation, IT IS FURTHER RECOMMENDED THAT the court refrain from addressing the other pending motions to dismiss or for sanctions. (Docs. 8, 19, and 24).
The parties are further placed on notice that pursuant to Local Rule 72.3:
Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses or recommit the matter to the magistrate judge with instructions.