Opinion
7:21-cv-01508-DCC-JDA
09-02-2021
Priscilla M. McCoy, Plaintiff, v. Liberty Mutual Insurance, Travelers Property Casualty, Chasity Carroll Blackwell, Carson Michelle Blackwell, Walter McBrayer Wood, Defendants.
REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE
JACQUELYN D. AUSTIN, UNITED STATES MAGISTRATE JUDGE
This matter is before the Court on Defendant Liberty Mutual Insurance's (“Liberty”) motion to sever. [Doc. 5.] Pursuant to the provisions of 28 U.S.C. § 636(b) and Local Civil Rule 73.02(B) (D.S.C.), the undersigned Magistrate Judge is authorized to review all pretrial proceedings in this matter and to provide a report and recommendation to the District Court. For the reasons explained below, the undersigned concludes that this Court lacks subject matter jurisdiction over this action, that the action should be remanded to the state court, and that Liberty's motion to sever should be denied.
BACKGROUND
Factual Background
This action stems from an automobile accident involving Priscilla M. McCoy (“Plaintiff”) and Chasity Carroll Blackwell and Carson Michelle Blackwell (together the “Blackwells”); a subsequent insurance coverage dispute between Plaintiff, Liberty, and Travelers Property Casualty (“Travelers”); and a dispute between Plaintiff and Walter McBrayer Wood (“Wood”), an attorney with the Law Office of James Scott Farrin, related to Wood's legal representation in connection with the automobile accident. [Doc. 1-3 at 22-29.] The Court will refer to Liberty and Travelers together as the “insurance Defendants” and to the Blackwells and Wood together as the “individual Defendants.”
Plaintiff maintained certain insurance policies with Liberty. [Doc. 1-2.]
The Blackwells maintained certain insurance policies with Travelers. [Doc. 16-1.]
Specifically, Plaintiff was involved in an automobile accident on November 5, 2019, when Defendant Carson Michelle Blackwell failed to yield the right of way to Plaintiff and struck her vehicle. [Id. at 9-10.] As a result of the accident, Plaintiff suffered a head injury that caused loss of consciousness, loss of movement or sensation in her limbs, memory issues, headaches, dizziness, confusion, cognitive changes, numbness and tingling, difficulty balancing and coordinating, slurred speech, and other injuries. [Id. at 10-11, 21.] An accident report indicated that Carson Michelle Blackwell was responsible for the accident. [Id. at 11.]
On November 11, 2019, Plaintiff retained Wood to represent her in her claims arising from the automobile accident. [Id.] Plaintiff alleges Wood's representation was “grossly inadequate” because he scheduled a phone interview between Plaintiff and the investigating officer for the purpose of changing the initial accident report, even though Plaintiff was incompetent for such an interview. [Id. at 12-16.]
At the time of the accident, Plaintiff maintained certain automobile insurance policies with Liberty that contained a provision for uninsured motorist (“UM”) coverage. [Id. at 9, 21.] Plaintiff contends her injuries and losses fall within the scope of coverage of these policies but Liberty and Travelers failed to indemnify her. [Id. at 22.] Plaintiff paid the required premiums in full for her insurance policies and satisfied all other conditions to coverage or is excused from doing so. [Id.]
Plaintiff asserts at least three causes of action in her Complaint. First, Plaintiff asserts a claim against the insurance Defendants for declaratory relief as to a duty to defend. [Id. at 22-23.] Second, Plaintiff asserts a claim for declaratory relief as to a duty to indemnify, alleging the insurance Defendants were obligated under the policies noted above to indemnify Plaintiff for the entire amount of losses incurred as a result of the accident, but they have failed to do so. [Id. at 23-24.] Third, Plaintiff asserts a claim for breach of contract against the insurance Defendants. [Id. at 24-28.]
The undersigned concludes that, based on the required liberal construction of the pro se Complaint, it appears that Plaintiff intends to assert tort claims against the individual Defendants in addition to the causes of action noted above.
Procedural History
Plaintiff commenced this action on April 20, 2021, by filing a pro se Complaint in the Cherokee County Court of Common Pleas at case number 2021-CP-11-0265. [Doc. 1-3 at 1.] On May 20, 2021, Liberty removed the action to this Court, with the consent of Travelers, purportedly on the basis of diversity jurisdiction under 28 U.S.C. § 1332. [Docs. 1; 1-1.] It does not appear that the individual Defendants consented to the removal, and Liberty contends their consent is unnecessary because they were improperly joined in this action. [Doc. 1 at 2, 4-5.] Liberty also filed a motion to sever on May 20, 2021, asking the Court to (1) sever Plaintiff's claims against the insurance Defendants from her claims against the individual Defendants, (2) remand Plaintiff's claims against the individual Defendants to the state court for lack of jurisdiction, and (3) retain the claims against the insurance Defendants pursuant to the Court's diversity jurisdiction. [Doc. 5 at 1.] Plaintiff has not filed a response to Liberty's motion. Liberty's motion to sever is ripe for review.
The undersigned notes that Liberty filed a motion to dismiss on May 20, 2021 [Doc. 6], Travelers filed a motion to dismiss on May 24, 2021 [Doc. 16], the Blackwells filed a motion to dismiss on May 24, 2021 [Doc. 19], and Wood filed a motion to dismiss on May 27, 2021 [Doc. 24]. Plaintiff has not filed a response to any of these motions. The Court will not consider these motions at this time.
APPLICABLE LAW
Liberal Construction of Pro Se Complaint
Plaintiff is proceeding in this action pro se, which requires the Court to liberally construe her pleadings. Estelle v. Gamble, 429 U.S. 97, 106 (1976); Haines v. Kerner, 404 U.S. 519, 520 (1972); Loe v. Armistead, 582 F.2d 1291, 1295 (4th Cir. 1978); Gordon v. Leeke, 574 F.2d 1147, 1151 (4th Cir. 1978). Plaintiff's pro se pleadings are held to a less stringent standard than formal pleadings drafted by attorneys. Haines, 404 U.S. at 520. The mandated liberal construction means only that if the Court can reasonably read the pleadings to state a valid claim on which a litigant could prevail, it should do so. Barnett v. Hargett, 174 F.3d 1128, 1133 (10th Cir. 1999). A court may not construct a litigant's legal arguments for her. Small v. Endicott, 998 F.2d 411, 417-18 (7th Cir. 1993). Nor should a court “conjure up questions never squarely presented.” Beaudett v. City of Hampton, 775 F.2d 1274, 1278 (4th Cir. 1985).
Diversity Jurisdiction
Federal courts are courts of limited jurisdiction that possess only that power authorized by the Constitution or federal statute. Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). Because federal courts are courts of limited jurisdiction, “constrained to exercise only the authority conferred by Article III of the Constitution and affirmatively granted by federal statute, ” a federal court is required to determine if a valid basis for its jurisdiction exists, “and to dismiss the action if no such ground appears.” In re Bulldog Trucking, Inc., 147 F.3d 347, 352 (4th Cir. 1998); see also Fed. R. Civ. P. 12(h)(3). Although the absence of subject matter jurisdiction may be raised at any time during the case, determining jurisdiction at the outset of the litigation is the most efficient procedure. Lovern v. Edwards, 190 F.3d 648, 654 (4th Cir. 1999). There is no presumption that a federal court has jurisdiction over a case, Pinkley, Inc. v. City of Frederick, 191 F.3d 394, 399 (4th Cir. 1999), and a litigant must allege facts essential to show jurisdiction in his pleadings, McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936).
A federal district court has original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000 and is between citizens of different states. 28 U.S.C. § 1332(a). In cases in which the district court's jurisdiction is based on diversity of citizenship, the party invoking federal jurisdiction has the burden of proving the jurisdictional requirements for diversity jurisdiction. See Strawn v. AT & T Mobility LLC, 350 F .3d 293, 298 (4th Cir. 2008). Section 1332 requires complete diversity of all parties, which exists where “no party shares common citizenship with any party on the other side.” Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir. 1999).
Removal and Remand
A defendant may remove to federal district court any civil action brought in a state court of which the district courts of the United States have original jurisdiction. 28 U.S.C. § 1441(a). Because federal courts have limited jurisdiction and removal jurisdiction raises federalism concerns, there is no presumption that the District Court has jurisdiction and the Court must strictly construe the removal statute. Willy v. Coastal Corp., 503 U.S. 131, 136-37 (1992); see also Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941). Strict construction of the removal statute results in any doubts about federal jurisdiction being resolved against removal, with the case being remanded to state court. Cheshire v. Coca-Cola Bottling Affiliated, Inc., 758 F.Supp. 1098, 1102 (D.S.C. 1990). This is so because a federal court's jurisdiction under the removal statutes essentially amounts to an infringement upon state sovereignty. See Shamrock, 313 U.S. at 108-09. “Consequently, the statutory provisions regulating removal must be strictly applied. A federal court should not extend its jurisdiction beyond the boundaries drawn by those provisions.” Mason v. IBM, 543 F.Supp. 444, 445 (M.D. N.C. 1982). To insure that federal courts do not overstep constitutional bounds and delve into matters that are purely state law, federal precedent “scrupulously confine[s]” removal jurisdiction. Shamrock Oil, 313 U.S. at 109. In fact, the Fourth Circuit maintains that “remand is necessary” where any doubt exists for removal jurisdiction. Mulcahey v. Columbia Organic Chem. Co., 29 F.3d 148, 151 (4th Cir. 1994). As such, subject matter jurisdiction cannot be conferred by the parties, nor can a defect in subject matter jurisdiction be waived by the parties. See United States v. Cotton, 535 U.S. 625, 630 (2002). Further, any doubt as to whether a case belongs in federal or state court should be resolved in favor of state court. See Auto Ins. Agency, Inc. v. Interstate Agency, Inc., 525 F.Supp. 1104, 1106 (D.S.C. 1981).
DISCUSSION
As noted, Liberty removed this action from state court, purportedly on the basis of diversity jurisdiction, without the consent of the individual Defendants and despite the fact that Plaintiff, the Blackwells, and Wood all share South Carolina citizenship. As such, because the diversity statute requires complete diversity of the parties, this Court does not have jurisdiction unless it finds that Plaintiff's claims against the individual Defendants were improperly joined in this action and should be severed and remanded to the state court.
The Parties' Arguments
Liberty contends that removal of this action was proper because there is complete diversity between Plaintiff and the insurance Defendants and because the amount-in-controversy threshold is met. [Doc. 5 at 2.] According to Liberty, the Court should disregard the citizenship of the individual Defendants because Plaintiff improperly joined them in this action. [Id. at 3-4.] Specifically, Liberty argues the individual Defendants are nominal parties because Plaintiff's claims against them have nothing to do with her claims against the insurance Defendants. [Id. at 3.] Additionally, relying primarily on Cramer v. Walley, No. 5:14-cv-03857-JMC, 2015 WL 3968155 (D.S.C. June 30, 2015), Liberty argues that Plaintiff's claims against Defendants are improperly joined under either the “fraudulent joinder” doctrine or the “fraudulent misjoinder” doctrine. [Id. at 4-5, 9-11.] Liberty asks the Court to sever Plaintiff's claims against the individual Defendants pursuant to Rules 20 and 21 of the Federal Rules of Civil Procedure and remand those claims to the state court for lack of jurisdiction. [Id. at 1, 4.] Liberty further asks the Court to retain the claims against the insurance Defendants pursuant to the Court's diversity jurisdiction. [Id. at 11.]
As noted, Plaintiff has not responded to Liberty's motion. However, Wood addresses Liberty's motion to sever in his motion to dismiss. Specifically, Wood contends that Plaintiff's claims against him
were properly joined with Plaintiff's causes of action against Liberty and Travelers, because they “aris[e] out of the same transaction, occurrence, or series of transactions or occurrences, ” and it is likely that “any question of law or fact common to [those] [D]efendants will arise in the action.” Fed.R.Civ.P. 20(a). Although Plaintiff's assertions are vague and speculative, it is plausible that Liberty's liability under Plaintiff's contract claims and Wood's liability under Plaintiff's attempted claims against Wood could both be resolved out of the same nexus of facts: Plaintiff's mental competence following the traffic accident at issue here.[Doc. 24 at 3-4.]
The Citizenship of the Parties
Before addressing Liberty's arguments, the undersigned will evaluate the citizenship of the parties. As noted, the diversity statute requires complete diversity of citizenship for the Court to have jurisdiction. “In diversity cases, the determination of the citizenship of the parties is a preliminary question of fact to be decided by the trial court.” Mitchell v. Monongahela Power Co., 602 F.Supp. 756, 758 (S.D. W.Va. 1985). “It is well established that the party removing a case to federal court bears the burden of establishing the court's subject-matter jurisdiction over the case.” Bartels by & through Bartels v. Saber Healthcare Grp., LLC, 880 F.3d 668, 680 (4th Cir. 2018). “[T]he district court may inquire sua sponte whether it has subject matter jurisdiction and impose on the defendants the burden of demonstrating jurisdiction.” Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 200 (4th Cir. 2008). Although “a removing party's notice of removal [may] sufficiently establish jurisdictional grounds for removal by making jurisdictional allegations in the same manner” as the jurisdictional pleading requirements for a complaint under Rule 8, “on a challenge of jurisdictional allegations, ‘[t]he party seeking removal bears the burden of demonstrating that removal jurisdiction is proper.'” Id. (citation omitted).
Plaintiff and the individual Defendants
In the Complaint, Plaintiff alleges that she is a citizen and resident of South Carolina and that the Blackwells are citizens and residents of South Carolina. [Doc. 1-3 at 5-6.] Plaintiff also appears to allege that Wood is a citizen of South Carolina, and Wood acknowledges he is a citizen of South Carolina. [Id. at 6; Doc. 24 at 2 (noting Wood is a citizen of South Carolina).] Neither Liberty nor the other Defendants dispute that Plaintiff, the Blackwells, and Wood are all citizens of South Carolina for purposes of diversity jurisdiction.
Plaintiff further alleges that she is a citizen and resident of both North Carolina and South Carolina. [Doc. 1-3 at 5.] Plaintiff's address listed on the Complaint is in Sharon, South Carolina. As such, Plaintiff appears to be a citizen of South Carolina.
The insurance Defendants
In the Complaint, Plaintiff alleges that Liberty is “a corporation duly organized and existing under the laws of the State of South Carolina licensed to do business and doing[ b]usiness as an insurer and issuing insurance [p]olicies in the state of South Carolina, with its principal place of business” in Boston, Massachusetts. [Doc. 1-3 at 5-6.] Similarly, Plaintiff alleges that Travelers is “a corporation duly organized and existing under the laws[] of the State of South Carolina, licensed to do business and actually doing[ ] business as an insurance agent for insurance [p]olicies issued in the state of South Carolina, with its principal place of business” in Hartford, Connecticut. [Id. at 6.] On the other hand, Liberty, in its Notice of Removal, asserts that it “is a corporation created under the laws of the Commonwealth of Massachusetts and having its principal place of business in the Commonwealth of Massachusetts” and that Travelers “is a corporation created under the laws of Connecticut and having its principal place of business in Connecticut.” [Doc. 1 at 2.]
“[A] corporation is deemed a citizen of both the state in which it is incorporated and the state where it has its principal place of business.” Cesil v. Liberty Mut. Fire Ins. Co., No. 2:20-cv-00008-M, 2020 WL 2128636, at *1 (E.D. N.C. May 5, 2020) (citing 28 U.S.C. § 1332(c)(1)). Here, the parties appear to agree that Liberty's principal place of business is in Massachusetts and Travelers' principal place of business is in Connecticut. Thus, Liberty is a citizen of Massachusetts and Travelers is a citizen of Connecticut. The parties appear to disagree, however, as to whether Liberty and Travelers are both incorporated under the laws of South Carolina, which would also make both of them citizens of South Carolina. Although Liberty's allegations in its Notice of Removal satisfy the pleading standards of Rule 8, its allegations regarding the state of incorporation for both Liberty and Travelers are in conflict with Plaintiff's allegations in her Complaint. Liberty has not provided any additional proof to the Court to support its allegations. And, while such additional proof is unnecessary at the pleading stage, the undersigned is unable to make a determination of the true state of incorporation for Liberty and Travelers based on the conflicting pleadings before the Court. If Plaintiff's allegations are true, then Liberty and Travelers are citizens of South Carolina, defeating diversity jurisdiction. In any case, because the Court finds for other reasons explained below that diversity jurisdiction is not present in this case even if Liberty's allegations are true, the Court need not resolve this conflict at this time. However, if the Court were to resolve the other issues discussed below in favor of Liberty, the Court would sua sponte question Liberty's jurisdictional facts pled in its Notice of Removal and require Liberty to offer proof that its state of incorporation is not South Carolina, as pled by Plaintiff in her Complaint. See Ellenburg, 519 F.3d at 200.
Analysis
The Court therefore turns to the question of whether it has jurisdiction over this action, assuming neither Liberty nor Travelers are citizens of South Carolina. As noted, Plaintiff, the Blackwells, and Wood all share the same citizenship. Therefore, the Court must determine whether Plaintiff's claims against the insurance Defendants were improperly joined with her claims against the individual Defendants in one action, such that this Court should sever and remand the claims against the individual Defendants to the state court for lack of jurisdiction and retain only the claims against the insurance Defendants under the Court's diversity jurisdiction. Thus, this action can proceed in federal court only if the Court concludes either that the individual Defendants are nominal parties whose presence is excused from the jurisdictional requirements of the diversity statute or they were improperly joined in this action and should be severed.
Nominal Party Exception
Liberty first contends the individual Defendants are nominal parties whose citizenship should be disregarded for jurisdictional purposes. [Doc. 5 at 3.] The Court disagrees.
The “nominal party exception, ” which provides that a nominal party need not consent to removal, is a long-recognized exception to the diversity statute's rule of unanimity that “ensures that only those parties with a palpable interest in the outcome of a case, and not those without any real stake, determine whether a federal court can hear a case.” Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255, 259 (4th Cir. 2013). “Nominal means simply a party having no immediately apparent stake in the litigation either prior or subsequent to the act of removal. In other words, the key inquiry is whether the suit can be resolved without affecting the non-consenting nominal defendant in any reasonably foreseeable way.” Id. at 260. “Determining nominal party status is a practical inquiry, focused on the particular facts and circumstances of a case.” Id.
Courts within this district have followed a four factor test . . . to help determine whether a party has a sufficient stake in the litigation. The factors to consider are: (1) the level of control that the party retains over the litigation; (2) the weightiness of the party's interest in the litigation; (3) whether the party has retained counsel; and (4) whether the party has given a statement or a deposition. In applying these factors, courts have found that a party's lack of financial risk in the litigation weighs heaviest in favor of finding that a party is a nominal party.Fraser Constr. Co. v. Action Insulation Co., No. 9:16-cv-2488-DCN, 2017 WL 11440831, at *4 (D.S.C. Aug. 8, 2017) (citation and internal quotation marks omitted) (quoting Hill v. Kinloch, No. 2:15-cv-00864-DCN, 2015 WL 1943771, at *2 (D.S.C. Apr. 29, 2015)).
Here, the undersigned cannot conclude that the individual Defendants are nominal parties having no palpable interest in the outcome of the case or no apparent stake in the litigation. Liberty appears to hang its hat on the fact that the specific causes of action listed in the Complaint relate only to the contractual obligations of the insurance Defendants arising out of Plaintiff's insurance policies. [Doc. 1 at 2.] However, Plaintiff clearly alleges in her Complaint that the Blackwells negligently caused her injuries and that Wood failed to perform his duties according to professional standards. [Doc. 1-3 at 10, 16.] As to the Blackwells, Plaintiff alleges Carson Michelle Blackwell struck her vehicle. [Id. at 10.] Plaintiff alleges that she hit her head and suffered a contusion and other injuries. [Id. at 10-11.] Plaintiff alleges Carson Michelle Blackwell was “responsible for the accident” due to careless driving. [Id. at 11.] Plaintiff alleges that Carson Michelle Blackwell is responsible for the damages incurred by Plaintiff because he was negligent in causing her injuries. [Id. at 18-19.]
Further, as to Wood, Plaintiff contends she retained him to represent her in her claims arising from the automobile accident. [Id. at 11.] Plaintiff alleges Wood failed to investigate her mental competence, which she contends is relevant to the claims against the insurance Defendants and the Blackwells. [Id. at 12-15.] Plaintiff alleges Wood's performance in representing her was “‘grossly inadequate.'” [Id. at 16.] Specifically, Plaintiff asserts that, in January 2020, Wood scheduled a phone interview with a South Carolina highway patrol officer “for the purpose of changing the first accident report.” [Id.] Plaintiff contends this was improper, given her mental incompetence. [Id. at 17.] Plaintiff further contends Wood's conduct violated her due process rights. [Id.]
Because Plaintiff is proceeding pro se, the Court must give liberal construction to the allegations in her Complaint. It therefore appears to the Court that, based on the allegations summarized above, Plaintiff is asserting tort claims in her Complaint against the individual Defendants. As such, the individual Defendants have an interest in the outcome of the case, inasmuch as Plaintiff has asserted claims against them, even if those claims are not related to the claims against the insurance Defendants.
It may be that Plaintiff's allegations fail to state a claim against the individual Defendants or that her claims are subject to some other defect. However, for the Court to test the legal sufficiency of Plaintiff's allegations against the individual Defendants at this initial stage of the proceedings when the Court must first decide whether it has jurisdiction would be to put the merits cart before the jurisdictional horse. See, e.g., Sipe v. Equifax Info. Servs., LLC, No. 3:16-cv-6103, 2017 WL 253157, at *4 (S.D. W.Va. Jan. 20, 2017) (explaining a court should not determine the merits of the case before the jurisdictional issue of standing is determined); Tyler v. Berger, No. 6:05-cv-00030, 2005 WL 2596164, at *3 n.7 (W.D. Va. Oct. 13, 2005) (“Defendants cannot put the cart before the horse by alleging that their counterclaims are compulsory under Fed.R.Civ.P. 13(a) and therefore count towards the amount in controversy, when a proper showing of removal jurisdiction must be established before the federal rules even apply.”).
Therefore, considering the factors noted above, the individual Defendants are more than nominal defendants based on their interest in the litigation, their retention of counsel, and their financial risk in the litigation. Clearly, the individual Defendants will be affected by the outcome of the case. Because the individual Defendants are not nominal, their consent was required to remove the action to federal court, and their citizenship must be considered for purposes of diversity jurisdiction. The individual Defendants failed to consent to removal, and the Blackwells, Wood, and Plaintiff are all citizens of South Carolina, thereby destroying complete diversity. Therefore, unless the Court finds that the individual Defendants have been improperly joined in this action and should be severed, the case must be remanded to state court.
Fraudulent Joinder
Next, the Court turns to Liberty's argument that the individual Defendants were improperly joined in this action under either the fraudulent joinder doctrine or the fraudulent misjoinder doctrine. [Doc. 5 at 4.] After a careful review of Liberty's arguments and the relevant cases addressing these doctrines, the undersigned concludes that Liberty has failed to satisfy the requirements of either doctrine to demonstrate that the individual Defendants were improperly joined in this action with the insurance Defendants.
The doctrine of fraudulent joinder is well established and applies “when a plaintiff files a frivolous or illegitimate claim against a non-diverse defendant solely to prevent removal.” In re Prempro Prods. Liab. Litig., 591 F.3d 613, 620 (8th Cir. 2010); see also Mayes, 198 F.3d at 461 (“The ‘fraudulent joinder' doctrine permits removal when a non-diverse party is (or has been) a defendant in the case.” (footnote omitted)). The doctrine allows the court to dismiss a non-diverse defendant and disregard that defendant's citizenship in determining whether diversity jurisdiction exists. See Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993). The Fourth Circuit has described the analysis for the fraudulent joinder doctrine as follows:
To show fraudulent joinder, the removing party must demonstrate either “outright fraud in the plaintiff's pleading of jurisdictional facts” or that “there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court.” . . . The party alleging fraudulent joinder bears a heavy burden-it must show that the plaintiff cannot establish a claim even after resolving all issues of law and fact in the plaintiff's favor. This standard is even more favorable to the plaintiff than the standard for ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6).Hartley v. CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999) (citations omitted) (emphasis in original). In Hartley, the Fourth Circuit concluded that the removing defendant failed to make either showing. Id. at 424-25. Indeed, the Fourth Circuit emphasized, regarding the second showing, that “[t]here need be only a slight possibility of a right to relief” and, “[o]nce the court identifies this glimmer of hope for the plaintiff, the jurisdictional inquiry ends.” Id. at 426. Further, the Court explained,
[i]n all events, a jurisdictional inquiry is not the appropriate stage of litigation to resolve these various uncertain questions of law and fact. Allowing joinder of the [non-diverse] defendants is proper in this case because courts should minimize threshold litigation over jurisdiction. Jurisdictional rules direct judicial traffic. They function to steer litigation to the proper forum with a minimum of preliminary fuss. The best way to advance this objective is to accept the parties joined on the face of the complaint unless joinder is clearly improper. To permit extensive litigation of the merits of a case while determining jurisdiction thwarts the purpose of jurisdictional rules.Id. at 425 (citations omitted).
Here, Liberty has failed to satisfy the “heavy burden” of showing fraudulent joinder. Hartley, 187 F.3d at 424. As to the first showing, Liberty has not suggested that the jurisdictional facts in the Complaint are falsely pled. And, the Court concludes on its own review of the pleadings that Plaintiff's allegations do not constitute outright fraud.
As to the second showing, Liberty has not demonstrated that there is no possibility that Plaintiff could establish a cause of action against the individual Defendants in state court. As noted, Plaintiff's Complaint, liberally construed, pleads a claim for negligence against Carson Michelle Blackwell. Relying on Cramer, 2015 WL 3968155, at *4-8, Liberty argues that the claims against the Blackwells are misjoined with the claims against the insurance Defendants because a plaintiff is barred from bringing a bad faith action against its uninsured motorist carrier and a negligence action against the at-fault driver in the same lawsuit in South Carolina. [Doc. 5 at 7, 9-11.] However, the fact that the misjoinder of claims may violate the applicable joinder rules, it is not a basis for application of the fraudulent joinder doctrine. See, e.g., Pollock v. Goodwin, No. 3:07-cv-3983-CMC, 2008 WL 216381, at *5 (D.S.C. Jan. 23, 2008) (finding the fraudulent joinder doctrine did not apply even where the plaintiff misjoined claims against the tortfeasor and the insurer in the same action). As discussed below, although Cramer instructs that the misjoinder of these claims might satisfy the fraudulent misjoinder test, the reasoning of that case is not applicable in an analysis under the fraudulent joinder test, and the Court is constrained to follow the sound reasoning of Pollock. See Oglesby v. Miller, No. 3:08-cv-127-JFA, 2008 WL 11462941, at *2 (D.S.C. Mar. 11, 2008) (“The present case is on all fours with Pollock . . . [because] although . . . the claims against the insurer were improperly joined to the negligence claims against the nondiverse defendants . . ., the misjoinder did not rise to the level of fraudulent misjoinder required under Fourth Circuit precedent.”).
Additionally, the undersigned finds the same reasoning applies to Plaintiff's claims against Wood, as Liberty has failed to show that it would be impossible for Plaintiff to establish a cause of action against Wood in state court. Therefore, Liberty has failed to satisfy the requirements of the fraudulent joinder test.
Although some courts refer to fraudulent misjoinder as “procedural misjoinder, ” see, e.g., Fraser, 2017 WL 11440831, at *5 n.6; Allen v. Pfizer, Inc., No. 2:15-cv-3170-RMG, 2016 WL 7338595, at *1 n.1 (D.S.C. Jan. 15, 2016), the undersigned refers to the doctrine as fraudulent misjoinder.
Next, the Court considers whether Plaintiff's claims were improperly joined under the fraudulent misjoinder doctrine.
As an initial matter, the undersigned notes that “fraudulent misjoinder has thus far not been widely recognized in the federal courts.” Cty. of Anderson v. Rite Aid of S.C., Inc., No. 8:18-cv-1947-BHH, 2018 WL 8800188, at *4 (D.S.C. Aug. 20, 2018). “The Fourth Circuit Court of Appeals has not addressed this issue, and while some district courts in South Carolina have applied it, other district courts in South Carolina have declined to adopt it.” Id. (collecting cases); Fraser, 2017 WL 11440831, at *5 n.7 (“The Fourth Circuit has not expressly adopted the doctrine of fraudulent misjoinder.”). Indeed, “‘[n]ot only are district courts split on whether to recognize and apply the doctrine of [fraudulent] misjoinder, they are also split on what standard applies in order to show misjoinder, and what result should be reached under the doctrine if it is applied.'” Cty. Of Anderson, 2018 WL 8800188, at *4 (quoting In re Lipitor (Atorvastatin Calcium) Mktg. Sales Pracs. & Prod. Liab. Litig., No. 2:14-MN-2502-RMG, 2016 WL 7373887, at *19 (D.S.C. July 14, 2016)).
Despite the inconsistent application of the fraudulent misjoinder doctrine in this District, Judge Gergel has summarized the doctrine and its test as follows:
The doctrine of fraudulent misjoinder is a “more recent, somewhat different and novel” doctrine. In re Prempro, 591 F.3d at 620. It asserts that while all the claims pled may be viable, the claims of a non-diverse plaintiff (or against a non-diverse defendant) are so unrelated to the remaining causes of action that they cannot be joined in a single suit under Fed.R.Civ.P. 20 or a similar state rule. Wyatt, 651 F.Supp.2d at 496; see also In re Prempro, 591 F.3d at 620 (stating that fraudulent misjoinder occurs “when a plaintiff sues a diverse defendant in state court and joins a viable claim involving a nondiverse party . . . even though the plaintiff has no reasonable procedural basis to join them in one action because the claims bear no relation to each other.”).
The doctrine asserts that these claims must be severed and only the claims of the nondiverse plaintiff (or against the non-diverse defendant) be remanded.
In re Lipitor (Atorvastatin Calcium) Mktg., Sales Pracs. & Prod. Liab. Litig., No. 2:14-MN-02502-RMG, 2016 WL 7339811, at *1-2 (D.S.C. Oct. 24, 2016). In evaluating a claim of fraudulent misjoinder, the Court must apply the procedural law of the state. Id. at *4. Further, the applicable test is “analogous to the fraudulent joinder standard in the Fourth Circuit, ” which requires that “the removing party must show (1) outright fraud or (2) that there is no possibility that plaintiffs would be able to properly join the claims involving a non-diverse party in state court.” Id. at *6 (emphasis in original).
Against this backdrop, the Court turns to the present case. “Although . . . how and even whether this doctrine is to be applied is unsettled, it is not necessary for the Court to decide the viability of the [fraudulent] misjoinder doctrine under the facts presented in this case, as even assuming that the Fourth Circuit would recognize the doctrine, ” it would not defeat remand of this case at this time because Liberty has failed to satisfy its heavy burden of showing that joining Wood as a party to this action was improper. In re Lipitor, 2016 WL 7373887, at *19.
As before, with regard to the first factor, Liberty has not suggested that the jurisdictional facts in the Complaint are falsely pled, and the Court concludes that Plaintiff's allegations do not constitute outright fraud.
Likewise, as to the second factor, Liberty has not demonstrated that there is no possibility that Plaintiff could properly join her claims against Wood with the claims against the insurance Defendants in the state court. Indeed, although Liberty explains why Plaintiff is not permitted to join her claims against the Blackwells, Liberty does not explain why Plaintiff would be unable to properly join the claims against Wood in her lawsuit against Liberty. Wood, on the other hand, urges the Court to find that Plaintiff's claims against him are properly joined with the claims against the insurance Defendants because those claims all arise from the same transaction and occurrence and that resolution of Plaintiff's claims involve the same nexus of facts. [Doc. 24 at 3-4.] The Court concludes that there is at least a possibility-a “glimmer of hope”-that the claims were properly joined. Hartley, 187 F.3d at 424.
As noted, with regard to the Blackwells, Liberty argues that a plaintiff is barred from bringing a bad faith action against its uninsured motorist carrier and a negligence action against the at-fault driver in the same lawsuit in South Carolina. See, e.g., Cramer, 2015 WL 3968155, at *4-8 (finding plaintiff's tort claims were improperly joined with claims against the insurer, severing the claims against the non-diverse tortfeasor, and remanding those claims to the state court); Black v. Safeco Ins. Co. of Am., No. 3:18-cv-02479-JMC, 2019 WL 4565047, at *5 (D.S.C. Sept. 20, 2019) (same); but see Solomon v. Sims, No. 4:07-cv-1324-RBH, 2007 WL 2080516, at *2 (D.S.C. July 16, 2007) (“While it is not clear whether the South Carolina Supreme Court would hold that a plaintiff can bring a bad faith action against its own underinsured/uninsured motorist carrier and a negligence action against the at-fault driver in the same lawsuit, this court will not create diversity jurisdiction by accepting [defendant's] removal of a case with non-diverse defendants, then grant [defendant's] request to sever and remand the Plaintiff's claims against the in-state defendant.”). Although Liberty may be able to satisfy the fraudulent misjoinder doctrine as to the Blackwells under the reasoning of Cramer, Liberty has failed to satisfy that standard as to Wood. Thus, the Court need not separately evaluate Liberty's argument as to the Blackwells.
Although the allegations in the Complaint are difficult to decipher, Plaintiff appears to allege that Wood's performance as her attorney was inadequate in regard to his handling of her claims related to the automobile accident and insurance disputes at issue in this case. In evaluating whether Plaintiff's claims against Wood are properly joined with her claims against the insurance Defendants, the Court must evaluate Rule 20 of the South Carolina Rules of Civil Procedure, which provides as follows with regard to permissive joinder:
All persons may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurrence, or series of occurrences and if any question of law or fact common to all defendants will arise in the action.S.C. R. Civ. P. 20; see also Fraser, 2017 WL 11440831, at *5-6. Here, Plaintiff's claims against Wood at least arguably arise from the same transaction or occurrence as her claims against Liberty and involve common questions of fact. Specifically, Plaintiff's claims against both Defendants arise from her attempt to recover under her insurance policy for her losses related to the automobile accident with the Blackwells. Common questions of fact may be found to exist because determining whether Wood's performance as her attorney was negligent may also involve factual determinations as to whether Liberty engaged in bad faith or breached the contract in failing to defend and/or indemnify Plaintiff.
For example, Plaintiff appears to allege that Wood was negligent in scheduling an interview between Plaintiff and a highway patrol officer for the purpose of changing the accident report, which might have influenced Liberty's refusal to cover Plaintiff's claims. For that reason, Liberty has failed to satisfy its heavy burden of showing it is impossible for Plaintiff to properly join her claims against Wood and Liberty together in state court.
Remand
Based on the foregoing, this action should be remanded to the state court as the Court lacks subject matter jurisdiction. Although none of the parties to this action have filed a motion to remand or challenged this Court's jurisdiction, the Court should remand a case sua sponte when it lacks jurisdiction to hear the case. See Ellenburg, 519 F.3d at 196. Here, there is not complete diversity among the parties under 28 U.S.C. § 1332 because Plaintiff, Wood, and the Blackwells are all citizens of South Carolina. See Owens-Illinois, Inc. v. Meade, 186 F.3d 435, 440 (4th Cir.1999) (“In order to establish diversity jurisdiction, the parties must be completely diverse; none of the plaintiffs may share citizenship with any of the defendants.”). Therefore, this action should be remanded to the Cherokee County Court of Common Pleas.
Liberty removed this action on the basis of diversity jurisdiction and has not argued that the Court has federal question jurisdiction under 28 U.S.C. § 1331. Further, it does not appear to the Court that any federal question is raised on the face of the Complaint.
Because the lack of diversity of the parties is dispositive, the Court does not consider whether the amount in controversy is met in this case.
Severance
Additionally, having concluded that neither the nominal party exception, the fraudulent joinder doctrine, nor the fraudulent misjoinder doctrine would justify ignoring the citizenship of the individual Defendants or to sever Plaintiff's claims, Liberty's motion to sever should be denied.
CONCLUSION AND RECOMMENDATION
For the reasons explained above, it is recommended that Liberty's motion to sever [Doc. 5] be DENIED and that this action be REMANDED to the Cherokee County Court of Common Pleas for lack of jurisdiction.
IT IS SO RECOMMENDED.