Opinion
CIVIL ACTION FILE NO. 1:19-CV-1182-MHC
2019-07-09
J. Michael ROBISON and Kristine M. Robison, Plaintiffs, v. Jada CASTEEL a/k/a Jada Loveless, Jada LVLS, LLC, Bankers Standard Insurance Company, and Scottsdale Insurance Company, Defendants. Bankers Standard Insurance Company, Counterclaim Plaintiff, v. J. Michael Robison, and Kristine M. Robison, Counterclaim Defendants.
Adam Gajadharsingh, James J. Leonard, Barnes & Thornburg LLP, Atlanta, GA, for Plaintiffs. Bruce P. Brown, Bruce P. Brown Law, Alycen A. Moss, Danielle Corin Le Jeune, Cozen O'Connor, Atlanta, GA, Nathan A. Huff, Phelps Dunbar, Raleigh, NC, for Defendants.
Adam Gajadharsingh, James J. Leonard, Barnes & Thornburg LLP, Atlanta, GA, for Plaintiffs.
Bruce P. Brown, Bruce P. Brown Law, Alycen A. Moss, Danielle Corin Le Jeune, Cozen O'Connor, Atlanta, GA, Nathan A. Huff, Phelps Dunbar, Raleigh, NC, for Defendants.
ORDER
MARK H. COHEN, United States District Judge
This case comes before the Court on Plaintiffs' Motion to Remand [Doc. 11], Defendants Jada Casteel and Jada LVLS, LLC ("Casteel Defendants")'s Motion to Dismiss [Doc. 18], and Plaintiffs' Request for Leave to File Notice of Supplemental Authority [Doc. 21].
I. BACKGROUND
In January 2017, the Casteel Defendants filed an action against Plaintiffs J. Michael Robison and Kristine M. Robison (collectively, "Plaintiffs") for, inter alia , defamation (the "Defamation Action"). Compl. [Doc. 1-1 at 7-15] ¶ 7. At the time the Defamation Action was filed in the Superior Court of Fulton County, Georgia, Plaintiffs were insured by Defendants Bankers Standard Insurance Company ("Bankers Standard") and Scottsdale Insurance Company ("Scottsdale"). Id. ¶¶ 8-9. Plaintiffs allege that both insurance companies accepted the Defamation Action under a reservation of rights and have not issued an outright denial of coverage. Id. ¶ 12. Plaintiffs allege that this obligates the insurance companies to provide a full defense to the Defamation Action and neither has fulfilled its contractual obligations. Id.
Plaintiffs, citizens of Georgia, initiated the above-styled action in February 2019 in the Superior Court of Fulton County, Georgia, alleging breach of contract against both Bankers Standard and Scottsdale and seeking a "declaratory judgment from this Court determining the rights and obligations of the parties herein such that the decision of this Court will be binding upon all parties hereto, including Defendants Jada Casteel a/k/a Jada Loveless and Jada LVLS, LLC." Id. ¶ 14.
After receiving service of Plaintiffs' complaint, Bankers Standard removed this action to this Court pursuant to 28 U.S.C. § 1441 based on diversity jurisdiction under 28 U.S.C. § 1332. Notice of Removal [Doc. 1] ¶ 10. In the notice of removal, Bankers Standard concedes that the Casteel Defendants are Georgia citizens, which would otherwise defeat diversity jurisdiction in this case. Id. ¶ 17. However, Bankers Standard argues that the Casteel Defendants have been fraudulently joined in this action and, therefore, the Court should disregard their citizenship for jurisdictional purposes. Id. ¶¶ 16-22.
II. LEGAL STANDARD
An action may be removed from state court only where it "originally could have been filed in federal court." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) ; see also 28 U.S.C. § 1441(a) (governing the removal of state court actions to federal district court, stating that a case is removable from state to federal court when it contains a claim over which the federal district court has original jurisdiction). "[W]hen an action is removed from state court, the district court first must determine whether it has original jurisdiction over the plaintiff's claims." Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999) (citation omitted). Removal jurisdiction is construed narrowly and any doubts regarding the existence of federal jurisdiction are resolved in favor of the non-removing party. Scimone v. Carnival Corp., 720 F.3d 876, 882 (11th Cir. 2013) ; see also Univ. of S. Ala., 168 F.3d at 411 ("A presumption in favor of remand is necessary because if a federal court reaches the merits of a pending motion in a removed case where subject matter jurisdiction may be lacking it deprives a state court of its right under the Constitution to resolve controversies in its own courts."). On a motion to remand a removed case, the removing party "bears the burden of proof regarding the existence of federal subject matter jurisdiction." City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313 n.1 (11th Cir. 2012) (citation omitted).
The district courts have original jurisdiction of all civil actions arising under the Constitution, laws, or treatises of the United States (federal question jurisdiction). 28 U.S.C. § 1331. In addition to federal question jurisdiction under § 1331, federal courts have diversity jurisdiction over civil actions between citizens of different states where the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332. "The party wishing to assert diversity jurisdiction bears the burden of establishing that diversity exists." Duff v. Beaty, 804 F. Supp. 332, 334 (N.D. Ga. 1992) (citing Cameron v. Hodges, 127 U.S. 322, 8 S.Ct. 1154, 32 L.Ed. 132 (1888) ); Ray v. Bird & Son & Asset Realization Co., 519 F.2d 1081, 1082 (5th Cir. 1975) ("The burden of pleading diversity of citizenship is upon the party invoking federal jurisdiction, and if jurisdiction is properly challenged, that party also bears the burden of proof.") (citation omitted). "Diversity jurisdiction requires complete diversity; every plaintiff must be diverse from every defendant." Flintlock Const. Servs., LLC v. Well-Come Holdings, LLC, 710 F.3d 1221, 1224 (11th Cir. 2013). When a defendant removes an action to federal court on diversity grounds, a court must remand the matter to state court if complete diversity is lacking between the parties or if any of the properly served defendants are citizens of the state in which the suit was filed. Florence v. Crescent Res., LLC, 484 F.3d 1293, 1297 (11th Cir. 2007).
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted as binding precedent all decisions of the former Fifth Circuit issued before October 1, 1981.
As stated above, generally when a case is removed to federal court pursuant to 28 U.S.C. § 1441 under diversity jurisdiction, the case must be remanded to state court if complete diversity of citizenship between the plaintiff and the named defendants is lacking. Toskich v. J.H. Inv. Servs., Inc., 806 F. Supp. 2d 1224, 1226 (M.D. Fla. 2011) (citing Florence v. Crescent Res., LLC, 484 F.3d 1293, 1297 (11th Cir. 2007) ). However, as an exception to this general rule, a district court must ignore the presence of any nondiverse defendant that the plaintiff has named "solely in order to defeat federal diversity jurisdiction." Henderson v. Wash. Nat'l Ins. Co., 454 F.3d 1278, 1281 (11th Cir. 2006). Where a plaintiff is found to have named a nondiverse defendant to defeat diversity jurisdiction, the plaintiff "is said to have effectuated a ‘fraudulent joinder.’ " Id. To properly establish that diversity jurisdiction exists through fraudulent joinder, the removing party must provide "clear and convincing evidence" that "(1) there is no possibility the plaintiff can establish a cause of action against the resident defendant; or (2) the plaintiff has fraudulently pled jurisdictional facts to bring the resident defendant into state court." Stillwell v. Allstate Ins. Co., 663 F.3d 1329, 1332 (11th Cir. 2011) (citation omitted). The removing party's burden to establish fraudulent joinder is a "heavy one." Id. (quotation and citation omitted).
In determining whether a cause of action against a nondiverse defendant is possible, "federal courts are not to weigh the merits of a plaintiff's claim beyond determining whether it is an arguable one under state law." Id. at 1333 (quotation and citation omitted). Therefore, "[i]f there is even a possibility that a state court would find that the complaint states a cause of action against any one of the [nondiverse] defendants, the federal court must find that the joinder was proper and remand the case." Id. (quotation and citation omitted). "In other words, the plaintiff need not have a winning case against the allegedly fraudulent defendant; he need only have a possibility of stating a valid cause of action in order for the joinder to be legitimate." Id. (quotation and internal punctuation omitted) (quoting Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998) ).
III. ANALYSIS
Plaintiffs' Complaint includes a count for a declaratory judgment in which Plaintiffs seek a Court order regarding insurance coverage of the Defamation Action that determines "the rights and obligations of the parties herein such that the decision of this Court will be binding upon all parties hereto, including Defendants Jada Casteel a/k/a Jada Loveless and Jada LVLS, LLC." Compl. ¶ 14. Bankers Standard maintains that the Casteel Defendants were fraudulently joined, arguing that Plaintiffs have no viable cause of action against the Casteel Defendants and the Casteel Defendants have no interest in this case and are not necessary parties. Def. Bankers Standard Insurance Company's Resp. in Opp'n to Pls.' Mot. for Remand [Doc. 16] ("Resp. in Opp'n") at 9-17. The Court will address these arguments seriatim.
Bankers Standard argues that Plaintiffs' Complaint neither asserts any allegations against nor brings a cause of action against the Casteel Defendants. Resp. in Opp'n at 9-12. Bankers Standard contends that because Plaintiffs are unable to establish liability or obtain declaratory relief against the Casteel Defendants, Plaintiffs fraudulently joined these defendants. Id.
Bankers Standard's additional argument that Plaintiffs' Motion to Remand fails because they have not identified "any evidence to support a viable claim" against the Casteel Defendants is misplaced. Resp. in Opp'n at 9-10 (citing Wylly Island Homeowners' Ass'n v. State Farm Fire & Cas. Co., No. CV417-244, 2018 WL 1705425, at *3 (S.D. Ga. Apr. 9, 2018) ). A plaintiff is required to submit evidence to support a viable claim in support of its motion to remand only if the removing defendant submits sworn testimony establishing that the plaintiff could not recover against the non-diverse Defendant. See Legg v. Wyeth, 428 F.3d 1317, 1323 (11th Cir. 2005) ("When the Defendants' affidavits are undisputed by the Plaintiffs, the court cannot then resolve the facts in the Plaintiffs' favor based solely on the unsupported allegations in the Plaintiffs' complaint.... [T]he Defendants submitted sworn affidavits that were undisputed and, in such a case, a court cannot resolve the question of fraudulent joinder by refusing to consider the defendants' submissions."). Bankers Standard has not presented any sworn testimony in opposing Plaintiffs' Motion to Remand. Therefore, it is not incumbent upon Plaintiffs to present any evidence in support of their Motion to Remand and it remains Bankers Standard's heavy burden to establish the fraudulent joinder of the Casteel Defendants.
Plaintiffs maintain that the Casteel Defendants are proper party defendants to their declaratory judgment action under Georgia law. Br. Supp. Pls.' Mot. for Remand [Doc, 11-1] ("Pls.' Br.") at 10-14. The Court agrees with Plaintiffs. Georgia law is clear that the plaintiffs in a lawsuit seeking damages against an insured are proper parties to a declaratory judgment action between the insurance company and the insured. See Saint Paul Fire & Marine Ins. Co. v. Johnson, 216 Ga. 437, 439, 117 S.E.2d 459 (1960) (holding that a third-party seeking to recover damages from an insured is a proper party to a declaratory judgment action brought by an insurance company against its insured); U-Haul Co. of Ariz. v. Rutland, 348 Ga. App. 738, 744 n.4, 824 S.E.2d 644 (2019) (ruling that tort victim was a proper party to declaratory judgment action between insured and insurer); Stinson v. Allstate Ins. Co., 204 Ga. App. 420, 421, 419 S.E.2d 509 (1992) (holding that a third-party seeking to recover damages from an insured is a proper party to a declaratory judgment action between the insured and its insurer); see also Allstate Prop. & Cas. Ins. Co. v. Haslup, 502 F. App'x 845, 846 n.2 (11th Cir. 2012) (recognizing that tort victims were proper parties to the declaratory judgment action between an insured and its insurer citing Johnson, 216 Ga. 437, 117 S.E.2d 459 ); Am. Safety Cas. Ins. Co. v. Condor Assocs., Ltd., 129 F. App'x 540, 542 (11th Cir. 2005) (internal punctuation and citation omitted) ("[A]bsent tort claimants were indispensable parties to the insurer's declaratory judgment action against the insured because, were the case allowed to proceed without them, the claimants' interests would be prejudiced.").
Bankers Standard argues that the Casteel Defendants are not necessary parties to this case because Plaintiffs' declaratory judgment action is limited to the insurance carriers' duty to defend Plaintiffs in the Defamation Action, not the duty to indemnity Plaintiffs for any harm they have caused the Casteel Defendants. Resp. in Opp'n at 12-17. Under Georgia law, it is clear that a third-party seeking to recover from an insured is a proper party to a declaratory judgment action between an insured and the insurer. See, e.g., Stinson, 204 Ga. App. at 421, 419 S.E.2d 509. In fact, the Georgia Supreme Court's ruling in Johnson is squarely at odds with the argument made by Bankers Standard as it involved a declaratory judgment action seeking to determine the insurer's duty to defend:
Where, as here, the insurance company presents a justiciable controversy with its insured, wherein it seeks determination of the question of whether, under the facts alleged and the terms of its policy, it is required to defend the insured in damage suit actions, an adjudication of that question will determine the company's liability to pay any judgment obtained by the plaintiffs; but, if the plaintiffs are not parties to the declaratory-judgment action they will not be bound thereby.
Johnson, 216 Ga. at 439, 117 S.E.2d 459 (emphasis added). The Johnson court held that "not only does there exist a justiciable controversy within the meaning of the Declaratory Judgment Act, but the plaintiffs in the damage suit are proper parties to the declaratory-judgment action brought by the insurance company against its insured." Id. Bankers Standard has not cited any Georgia case which has held otherwise.
Because the Casteel Defendants are proper parties to the present lawsuit, the Court finds that Bankers Standard has failed to carry its heavy burden of establishing that the Casteel Defendants were fraudulently joined in this case. For that reason, complete diversity does not exist and this Court does not have subject matter jurisdiction over this action. Accordingly, this action must be remanded to the Superior Court of Fulton County, Georgia, pursuant to 28 U.S.C. § 1447(c).
IV. ATTORNEYS' FEES
Plaintiffs also seek attorneys' fees pursuant to 28 U.S.C. § 1447(c) in connection with filing the motion to remand. Pls.' Br. at 14-15. Bankers Standard asserts that because it had an objectively reasonable basis for removing the case, the Court should decline to award attorneys' fees. Resp. in Opp'n at 16-17.
"An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1147(c). the awarding of attorneys' fees is in the discretion of the trial court. Graham Commercial Realty, Inc. v. Shamsi, 75 F. Supp. 2d 1371, 1373 (N.D. Ga. 1998) (noting further that the court need not find bad faith or improper purpose in order to award fees). The United States Supreme Court provides the principle guiding this discretion: "the standard for awarding fees should turn on the reasonableness of the removal. Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal." Martin v. Franklin Capital Corp., 546 U.S. 132, 141, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005). Conversely, courts should deny fees when there is an objectively reasonable basis for seeking removal. Id.
The Court agrees with Bankers Standard and finds that there was an objectively reasonable basis to remove this case. Bankers Standard acknowledged that complete diversity did not exist but asserted that the Casteel Defendants were fraudulently joined. Notice of Removal ¶¶ 16-22. Although Bankers Standard failed to carry its burden to show that the Casteel Defendants were fraudulently joined, it had an objectively reasonable basis for removing the case. Accordingly, the Court declines to exercise its discretion to award attorneys' fees.
V. CONCLUSION
For the foregoing reasons, it is hereby ORDERED that Plaintiffs' Motion to Remand [Doc. 11] is GRANTED. This case is REMANDED to the Superior Court of Fulton County.
It is further ORDERED that Defendants Jada Casteel and Jada LVLS, LLC's Motion to Dismiss [Doc. 18] and Plaintiffs' Request for Leave to File Notice of Supplemental Authority [Doc. 21] are DENIED AS MOOT.
IT IS SO ORDERED this 9th day of July, 2019.