Opinion
Case No. 22-00503-CV-W-GAF
2023-01-06
Sean NULL, Plaintiff, v. STATE FARM AND CASUALTY COMPANY and Melanie Shutt, Defendants.
Nickolas Cruz Templin, Schmitt Law Firm LLC, Kansas City, MO, for Plaintiff. Brian G. Boos, Katy L. Houchin, Kelvin John Fisher, Sr., Litchfield Cavo LLP, Kansas City, MO, for Defendants.
Nickolas Cruz Templin, Schmitt Law Firm LLC, Kansas City, MO, for Plaintiff. Brian G. Boos, Katy L. Houchin, Kelvin John Fisher, Sr., Litchfield Cavo LLP, Kansas City, MO, for Defendants. ORDER GARY A. FENNER, JUDGE
Now before the Court is Plaintiff Sean Null's ("Plaintiff") Motion to Remand. (Doc. # 10). Defendants State Farm and Casualty Company ("State Farm") and Melanie Shutt (collectively "Defendants") oppose. (Doc. # 17). For the following reasons, Plaintiff's Motion to Remand is GRANTED.
Defendants moved for an extension of time to file suggestions in opposition to Plaintiff's Motion to Remand. (Doc. # 12). That motion is GRANTED. Defendants' suggestions in opposition are deemed filed, and said suggestions were considered in rendering this opinion.
Consistent with this ruling, Defendants' Motion to Dismiss (Doc. # 2) and an extension request to issue a reply to the same (Doc. # 13) are DENIED as moot.
DISCUSSION
I. Relevant Allegations and Background
In March of 2021, Plaintiff, a Missouri citizen, discovered that a number of items had been stolen from his automobile, including United States Currency and three necklaces. (Doc. # 1-4 ("Petition"), ¶¶ 1, 6-7). The necklaces ("Property") were insured for $84,600.00 by State Farm, a corporation with Illinois citizenship, through Policy Number 25L834518 ("Policy"). (Id. at ¶ 8; Doc. # 1, ¶ 16). The Policy was in effect when the theft occurred, and Plaintiff made all required payments under the Policy. (Petition, ¶¶ 10-11). However, State Farm did not pay Plaintiff for the Property loss on submission of a claim under the Policy. (Id. at ¶ 14). Shutt, a Missouri citizen, was the State Farm claims specialist handling Plaintiff's claim. (Id. at ¶ 26; Doc. # 1, ¶ 17).
On March 25, 2022, Plaintiff filed a lawsuit against Defendants in the Circuit Court of Jackson County, Missouri seeking costs and fees related to Defendants' failure to pay. (See generally Petition). In his Petition, Plaintiff contends denial of his claim by State Farm and its agents "relied on baseless suspicion" that Plaintiff "had intentionally concealed or misrepresented material facts of the claim for his own financial gain." (Id. at ¶ 16). Plaintiff further contends that Shutt caused State Farm to commit an unjustifiable breach of the Policy by "intentionally publish[ing] to State Farm false statements regarding Plaintiff and his alleged fraudulent behavior." (Id. at ¶ 27).
The Petition asserts two counts against State Farm—Vexatious Refusal (Count I) and Breach of Contract (Count II); one count against Shutt—Tortious Interference with Contract (Count III); and one count against "All Defendants"—Defamation (Count IV). (Id. at pp. 3-6). On August 4, 2022, Defendants removed the matter to this Court citing 28 U.S.C. §§ 1332, 1441, and 1446. (Doc. # 1). In their Notice of Removal, Defendants assert Shutt's citizenship must be ignored because she was fraudulently joined. (Id. at ¶ 17). On August 31, 2022, Plaintiff filed the pending Motion to Remand asserting lack of complete diversity. (Doc. # 10).
II. LEGAL STANDARDS
Federal courts are courts of limited jurisdiction. Ark. Blue Cross & Blue Shield v. Little Rock Cardiology Clinic, P.A., 551 F.3d 812, 816 (8th Cir. 2009). A federal district court may exercise removal jurisdiction only where the court would have had original jurisdiction had the action initially been filed there. Krispin v. May Dep't Stores Co., 218 F.3d 919, 922 (8th Cir. 2000) (citing 28 U.S.C. § 1441(b)). "The basic statutory grants of federal-court subject-matter jurisdiction are contained in 28 U.S.C. §§ 1331 [federal question jurisdiction] and 1332 [diversity jurisdiction]." Arbaugh v. Y&H Corp., 546 U.S. 500, 513, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006). To invoke the Court's diversity jurisdiction, the parties must be citizens of different states and the amount in controversy must exceed $75,000. 28 U.S.C. § 1332(a).
Removal statutes are strictly construed, and any doubts about the correctness of removal are resolved in favor of state court jurisdiction. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 85 L.Ed. 1214 (1941); In re Bus. Men's Assurance Co. of Am., 992 F.2d 181, 183 (8th Cir. 1993). A party seeking removal and opposing remand carries the burden of establishing federal subject-matter jurisdiction by a preponderance of the evidence. In re Prempro Prods. Liab. Litig., 591 F.3d 613, 620 (8th Cir. 2010). A court must resolve all doubts about federal jurisdiction in favor of remand to state court. Id.; Filla v. Norfolk So. Ry., 336 F.3d 806, 811 (8th Cir. 2003).
A party seeking removal based on fraudulent joinder bears the heavy burden of proving the alleged fraud. See Parnas v. Gen. Motors Corp., 879 F. Supp. 91, 94 (E.D. Mo. 1995). "Joinder is fraudulent 'when a plaintiff files a frivolous or illegitimate claim against a non-diverse defendant solely to prevent removal.' " Junk v. Terminix Int'l Co., 628 F.3d 439, 445 (8th Cir. 2010) (quoting Prempro, 591 F.3d at 620. In determining whether fraud exists, the district court has the limited task of determining whether a plaintiff has alleged a "colorable" cause of action. Filla, 336 F.3d at 810-811. If "there is a 'colorable' cause of action - that is, if the state law might impose liability on the resident defendant under the facts alleged - then there is no fraudulent joinder." Id. at 810. (emphasis in original).
Consequently, a defendant's burden on removal is more onerous than the plausibility standard for dismissal under Federal Rule of Civil Procedure 12(b)(6), which looks to whether a party has sufficiently pleaded its claim. Knudson v. Sys. Painters, Inc., 634 F.3d 968, 980 (8th Cir. 2011); Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Under a "colorable" pleading standard, a removing defendant must go a step further by showing that that the claim asserted has no reasonable basis in law or fact. Knudson, 634 F.3d at 980 ("By requiring the defendant to prove that the plaintiff's claim against the non-diverse defendant has no reasonable basis in law and fact, we require the defendant to do more than merely prove that the plaintiff's claim should be dismissed pursuant to a Rule 12(b)(6) motion."). If joinder is determined to be fraudulent, "a court may ignore the citizenship of parties fraudulently joined." Parnas, 879 F. Supp. at 92 (citing § 1441(b); Anderson v. Home Ins. Co., 724 F.2d 82, 84 (8th Cir. 1983)).
III. ANALYSIS
Plaintiff does not allege claims arising under federal law. (See generally Petition). Thus, for this Court to have jurisdiction, Plaintiff must be a citizen of a state different from all properly joined defendants, and the amount in controversy must exceed $75,000. 28 U.S.C. § 1332(a). On the face of the Petition, the parties are not diverse as both Plaintiff and Shutt are Missouri citizens. (Petition, ¶¶ 1, 4). However, as noted above, Defendants assert complete diversity is met due to the fraudulent joinder of Shutt. (Doc. # 1, ¶ 17). Specifically, they contend Plaintiff has failed to plead a colorable claim of defamation against Shutt under Missouri law because Plaintiff "has set forth no facts identifying the damage to his reputation." (Doc. # 17, p. 3). Plaintiff argues the matter should be remanded because Shutt was properly joined and the matter is non-removable under 28 U.S.C. § 1332(a). (Doc. # 11). On review, the Court finds that Plaintiff has made a colorable claim against Shutt. 1. Damage to Reputation
Defendants argue that the tortious interference claim against Shutt fails because it depends on the defamation.
A defamation in Missouri consists of the following elements: "1) publication, 2) of a defamatory statement, 3) that identifies the plaintiff, 4) that is false, 5) that is published with the requisite degree of fault, and 6) damages the plaintiff's reputation." Overcast v. Billings Mut. Ins. Co., 11 S.W.3d 62, 70 (Mo. 2000) (en banc). Defendants rely on King v. Union Station Holdings, LLC to attack the reputation element of Plaintiff's pleadings. (Doc. # 17, pp. 4-5) (citing King, No. 4:12CV696SNLJ, 2012 WL 5351598, at *4-5 (E.D. Mo. Oct. 30, 2012)).
Defendants do not contest the other elements of Plaintiff's defamation claim. (See generally Doc. # 17).
In King, the United States District Court for the Eastern District of Missouri dismissed a complaint pursuant to Rule 12(b)(6) for lack of specificity where a plaintiff alleged a security guard made a false report to her employer regarding the plaintiff using marijuana on work premises. Id. at *2-5. The King plaintiff pled "implications of these accusations, however false, could ultimately endanger [the plaintiff's] employment, future promotions/assignments and therefore lead to future financial damage." Id. at *4. She also pled "pain of mind and body, shock, emotional distress, physical manifestations of emotional distress, embarrassment, loss of self-esteem, humiliation, loss of enjoyment of life, damage to reputation." Id.
The Eastern District deemed these allegations "conclusory" and "speculative" because the plaintiff could not prove actual reputational harm stemming from the alleged defamation—such as quantifiable personal or professional injury (e.g., interference with job performance), or emotional distress that went beyond potential future consequences and "formulaic claims." Id. at *2-3, 5. The Eastern District explained that "[p]roof of actual harm to the plaintiff's reputation is an absolute prerequisite in a defamation action" under Missouri law. Id. at *5 (citing Cockram v. Genesco, Inc., 680 F.3d 1046, 1053-54 (8th Cir. 2012); Kenney v. Wal-Mart Stores, Inc., 100 S.W.3d 809, 817 (Mo. 2003) (en banc)).
Defendants argue Plaintiff's alleged reputational damages are "substantially less" than those alleged in King and are speculative in nature because one of the alleged damages centers on Plaintiff's future insurable status. (Doc. # 17, pp. 4-5). However, unlike in King, the alleged harm pled does not center solely on possible future consequences. Plaintiff pleads that "Defendant Shutt intentionally published to State Farm false statements regarding Plaintiff and his alleged fraudulent behavior" and as a result of Shutt's conduct, Plaintiff "has been caused to suffer damage in failing to receive the benefit of the contract of insurance for which he has paid premiums." (Petition, ¶¶ 27, 31). Plaintiff further pleads, "[State Farm] and its agents relied on baseless suspicion to deny Plaintiff's claim under the policy, falsely alleging that he had intentionally concealed or misrepresented material facts of the claim for his own financial gain." (Petition, ¶ 16).
Essentially, Plaintiff is pleading he was damaged because his standing as an insurable individual was sullied by Shutt's "false statements" to State Farm, and as a result of the statements perpetuated by Shutt and State Farm, he was denied a payout of $84,600.00 under the Policy. Taking these allegations as true, actual damages stemming from Shutt's statements have been realized. Moreover, Defendants' argument confuses the Rule 12(b)(6) plausibility standard applied in King with the colorable claim standard applicable to fraudulent joinder analysis—which does allow for speculation if there is some reasonable basis in law or fact for the claim. See Filla, 336 F.3d at n.10 (explaining that the "colorable euphemism" can be understood to encompass causes of action that are "reasonable, but speculative").
Even if Plaintiff's pleadings can be read as only imputing Plaintiff's future insured status (e.g., inability to be insured by other companies due to denial of State Farm's claim and purportedly false statements stemming therefrom) rather than realized harm, the Missouri Supreme Court has found similar facts compatible with defamation. For example, in Overcast, a jury verdict for defamation was upheld where a claim handler advised an insurer that a house fire was caused by arson and the insurer subsequently denied a claim submitted by the insured even though other evidence indicated no foul play. 11 S.W.3d at 64-65, 73. In reaching this conclusion, the Overcast court noted that defamatory statements in a denial letter could constitute reputational damage by negatively impacting future insurance contracts. Id. at 71. The reputation element is sufficiently pled under the applicable standard. 2. Defamatory Language
Defendants contend removal is nonetheless warranted because Plaintiff failed to plead the exact words purportedly employed by Shutt. (Doc. # 17, pp. 5-9). However, a Plaintiff need not produce the exact defamatory language where oral statements form the basis of a defamation claim because such a requirement " 'is strictly applicable only to libel and not to slander.' " Davis v. Palumbo, No. 4:19-00686-CV-RK, 2019 WL 6915949, at *4 (W.D. Mo. Dec. 19, 2019) (quoting Nazeri v. Mo. Valley Coll., 860 S.W.2d 303, 313 (Mo. 1993) (en banc)). "All that is required is that there 'be certainty as to what is charged' as the slander." Nazeri, 860 S.W.2d at 313 (quoting Lorenz v. Towntalk Pub. Co., 261 S.W.2d 952, 954 (Mo. 1953)).
On reply, Plaintiff implies his defamation claim sounds in slander. (Doc. # 20, p. 4). However, the Court does not consider this argument because it was raised for the first time in his reply brief.
Defendants correctly note that the Petition is ambiguous as to the form of publication (i.e., oral or written) by Shutt. (Doc. # 17, pp. 8-9; Petition). As such, they argue this Court cannot make a determination because it is unclear whether the requirements for libel or slander apply. (Doc. # 17, pp. 8-9). The Court agrees, however, if the sufficiency of a petition is at issue, "the better practice is for the federal court not to decide the doubtful question in connection with a motion to remand but simply to remand the case and leave the question for the state courts to decide." Filla, 336 F.3d at 811 (quotation omitted). The Court's task at this juncture is to determine whether any colorable claim exists that might impose liability on Shutt at the state level. Because some reasonable basis in law and fact exists for satisfying all elements of a defamation claim against Shutt, fraudulent joinder cannot serve as a basis for establishing diversity on removal.
Defendants attempt to revive the argument by contending that absent specificity of the alleged "false information" provided by Shutt, "the Court is unable to determine if the 'false information' is merely subjective opinion or an objective statement that can be proven as false." (Doc. # 17, p. 9). The distinction between opinion and provable fact is important because opinions are protected speech under the First Amendment and cannot form the basis of an actionable defamation. Topper v. Midwest Div., Inc., 306 S.W.3d 117, 128 (Mo. Ct. App. 2010); Pujols v. Pujols Fam. Found., No. 4:16-CV-1644 CAS, 2017 WL 4310436, at *4 (E.D. Mo. Sept. 28, 2017), aff'd, 721 F. App'x 567 (8th Cir. 2018). "The test for an ostensible opinion is whether a reasonable factfinder could conclude that the statement implies an assertion of objective fact." Topper, 306 S.W. 3d at 128 (quotation omitted). "Opinions . . . become facts if they can be verified." Clinch v. Heartland Health, 187 S.W.3d 10, 18 (Mo. Ct. App. 2006).
Defendants rely on Pujols to support their stance that Shutt's statements cannot be verified absent specificity (Doc. # 17, p. 9), but Pujols is distinguishable. In Pujols, the United States District Court for the Eastern District of Missouri was called upon to determine if a plaintiff was defamed where it was stated that he "ruined many young lives." 2017 WL 4310436 at *5. The Pujols court concluded that the statement "ruined many young lives" is not provable as false because "[w]hat constitutes ruining a life is subjective." Id. By contrast, the question of whether Plaintiff provided false information when he submitted an insurance claim is capable of objective ascertainment. Either his vehicle was burglarized and Shutt published false statements accusing Plaintiff of insurance fraud or Plaintiff did commit insurance fraud.
As explained by the Supreme Court of Missouri, when a speaker (e.g. Shutt) accuses another (e.g. Plaintiff) of lying, that accusation implies a "knowledge of facts" that the accused told an untruth. In re Westfall, 808 S.W.2d 829, 833 (Mo. 1991) (en banc). "Even if the speaker states the facts upon which he bases his opinion, if those facts are either incorrect or incomplete, or if his assessment of them is erroneous, the statement may still imply a false assertion of fact." Id. To the extent this question of factual verification is debatable, the Court must err in favor of remand. See Filla, 336 F.3d at 811.
CONCLUSION
Based on allegations in Plaintiff's Petition and the applicable law, the Court finds a reasonable basis exists to predict Missouri law might impose liability against Shutt. Because Plaintiff and Shutt are citizens of Missouri, diversity of citizenship is lacking. For these reasons and those stated above, Plaintiff's Motion to Remand is GRANTED. The Clerk of the Court is ORDERED to remand the case to the Circuit Court of Jackson County, Missouri.
IT IS SO ORDERED.