UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAFAYETTE DIVISION MEMORANDUM RULING

Transcription

1 Tipton et al v. Hudson Specialty Insurance Co et al Doc. 16 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAFAYETTE DIVISION EUGENE TIPTON AND MILDRED TIPTON VERSUS KEITH LANDEN, ET AL. CIVIL ACTION NO. 6:15-cv JUDGE DRELL MAGISTRATE JUDGE HANNA MEMORANDUM RULING Currently pending is e motion to remand (Rec. Doc. 9), which was filed by e plaintiffs, Eugene and Mildred Tipton. The motion is opposed. (Rec. Doc. 13). Oral argument was heard on February 29, Considering e evidence, e law, and e arguments of e parties, and for e reasons fully explained below, e motion is granted. BACKGROUND On August 24, 2014, Eugene and Mildred Tipton allegedly were e invited guests Kei and Noel Landen at a camp in Grand Isle, Louisiana. As Mr. Tipton was loading luggage into e elevator on e second floor of e camp, e elevator allegedly dropped to e first floor, trapping Mr. Tipton s arm and leg between e first and second floors of e elevator shaft. Mr. Tipton allegedly hung upside down for approximately an hour before he was freed. The plaintiffs alleged at is Dockets.Justia.com

2 resulted in severe injuries and permanent disability to Mr. Tipton and loss of consortium damages to Mrs. Tipton. Mr. and Mrs. Tipton sued Kei and Noel Landen and Grand Isle Rental 1 Properties, LLC, e alleged owners of e camp, as well as eir insurers, Lexington Insurance Company and Hudson Specialty Insurance Company. The suit was filed in e 16 Judicial District Court, St. Mary Parish, Louisiana. On October 13, 2015, Mr. and Mrs. Tipton, e Landens, and Lexington 2 entered into a settlement agreement, by which e full amount of Lexington s policy would be paid to e plaintiffs in exchange for e dismissal of Lexington from e lawsuit wi prejudice. Under e settlement agreement, e Landens were not released from all liability; instead, e plaintiffs reserved eir claims against e Landens to e extent of any insurance coverage ey might have in excess of at afforded by Lexington s policy. Additionally, e plaintiffs agreed not to execute on any judgment obtained against e Landens except to e extent of e coverage afforded by any excess insurance policy. The settlement agreement also stated at 1 Alough it has been established at Kei and Noel Landen are e sole members of Grand Isle Rental Properties, LLC (Rec. Doc. 1-4 at 6), e plaintiffs counsel stated during oral argument at, because discovery remains in its infancy, he does not know wheer e camp is owned by Landens individually or by eir company. 2 The settlement agreement was filed in e record under seal. Therefore, it will not be directly quoted here but will only be paraphrased. -2-

3 e Landens are to remain in is lawsuit as nominal defendants. Such a procedure was utilized in Gasquet v. Commercial Union Insurance Company, 391 So.2d 466 (La. App. 4 Cir. 1980), writs denied, 296 So.2d 921, 922 (La. 1981), and such an arrangement is referred to in Louisiana jurisprudence as a Gasquet settlement. The dismissal order in e state-court action dismisses Lexington wi prejudice while specifically reserving unto Plaintiffs any and all rights and causes of action against all oer parties not dismissed herein, including KEITH LANDEN, NOEL LANDEN, GRAND ISLE RENTAL PROPERTIES, LLC[,] and HUDSON SPECIALTY INSURANCE COMPANY. 3 Defendant Hudson, e Landens alleged excess insurance carrier, removed e case to is forum, arguing at e Gasquet settlement made is case removable. The plaintiffs responded wi e instant motion to remand. CONTENTIONS OF THE PARTIES The plaintiffs argue at removal was improper and at remand is necessary because removal of is action would violate e forum defendant rule. The forum defendant rule is a statutory provision at precludes removal on e basis of diversity jurisdiction when one or more defendants in e suit is a citizen of e forum state. It reads as follows: 3 Rec. Doc. 1-1 at

4 A civil action oerwise removable solely on e basis of e jurisdiction under section 1332(a) of is title may not be removed if any of e parties in interest properly joined and served as defendants is a citizen of e State in which such action is brought. 4 The plaintiffs contend at Kei Landen, Noel Landen, and Grand Isle Properties, LLC were properly joined and served as defendants and are Louisiana citizens, precluding removal. Hudson argues at e forum defendant rule does not apply because e Gasquet settlement made Kei Landen, Noel Landen, and Grand Isle Properties, LLC nominal parties against whom a judgment cannot be obtained, making eir citizenship irrelevant. ANALYSIS Federal district courts are courts of limited jurisdiction, possessing only e 5 power auorized by e Constitution and by statute. Accordingly, federal courts have subject-matter jurisdiction only over civil actions presenting a federal question 6 and ose in which e amount in controversy exceeds $75,000 exclusive of interest 4 28 U.S.C. 1441(b)(2). 5 See, e.g., Griffin v. Lee, 621 F.3d 380, 388 (5 Cir. 2010); Halmekangas v. State Farm Fire and Cas. Co., 603 F.3d 290, 292 (5 Cir. 2010); Howery v. Allstate Ins., Co., 243 F.3d 912, 916 (5 Cir. 2001) U.S.C

5 7 and costs and e parties are citizens of different states. For at reason, a suit is presumed to lie outside a federal court's jurisdiction until e party invoking federal- 8 court jurisdiction establishes oerwise. [B]ecause e effect of removal is to deprive e state court of an action properly before it, removal raises significant 9 federalism concerns. The removal statute must erefore be strictly construed, and any doubt about e propriety of removal must be resolved in favor of remand and 10 against federal-court jurisdiction. The party invoking subject matter jurisdiction in federal court has e burden 11 of establishing e court s jurisdiction. When an action is removed from state court, as is suit was, e removing party bears e burden of proving at federal 12 jurisdiction exists. Even when a motion to remand is filed, e burden remains wi U.S.C Howery v. Allstate, 243 F.3d at Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5 Cir. 1995). 10 Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, (5 Cir. 2007); Carpenter v. Wichita Falls, 44 F.3d at 366; Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5 Cir. 2000). 11 Howery v. Allstate Ins. Co., 243 F.3d at 919; St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5 Cir. 1998). 12 Shearer v. Souwest Service Life Ins. Co., 516 F.3d 276, 278 (5 Cir. 2008); Manguno v. Prudential Property and Cas. Ins. Co., 276 F.3d 720, 723 (5 Cir. 2002); De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5 Cir. 1995). -5-

6 13 e removing party. Accordingly, Hudson, e removing defendant in is case, has e burden of establishing at e court has subject-matter jurisdiction. A district court is required to remand e case to state court if, at any time 14 before final judgment, it determines at it lacks subject-matter jurisdiction. Indeed, a federal court has an independent duty, at any level of e proceedings, to determine wheer it properly has subject-matter jurisdiction over a case. 15 In is case, Hudson contends at e criteria for diversity jurisdiction are 16 satisfied when e citizenship of e allegedly nominal defendants is disregarded, while e plaintiffs argue at e forum defendant rule precludes removal. 13 See, e.g., Teal Energy USA, Inc. v. GT, Inc., 369 F.3d 873, 878 n. 16 (5 Cir. 2004) ( [T]he party invoking federal jurisdiction bears e burden of proof if diversity is challenged. ; Village Fair Shopping Center Co. v. Sam Broadhead Trust, 588 F.2d 431, 433 (5 Cir. 1979); Ray v. Bird & Son & Asset Realization Co., 519 F.2d 1081, 1082 (5 Cir.1975) ( The burden of pleading diversity of citizenship is upon e party invoking federal jurisdiction, and if jurisdiction is properly challenged, at party also bears e burden of proof (2004). See 28 U.S.C. 1447(c); Groupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 15 Ruhrgas AG v. Maraon Oil Co., 526 U.S. 574, 583 (1999); McDonal v. Abbott Labs., 408 F.3d 177, 182 n.5 (5 Cir. 2005). 16 There is an issue concerning wheer e plaintiffs reserved eir claims only against e Landens and Hudson or reserved eir claims against e Landens, Grand Isle Rental Properties, LLC, and Hudson. Since e Landens and Grand Isle are all Louisiana citizens, is is a distinction wiout a difference for purposes of e pending motion, and is Court will not decide at issue. -6-

7 The citizenship of e parties to is lawsuit is undisputed. The citizenship of 17 a natural person is determined by e state in which he or she is domiciled Therefore, e Tiptons are Florida citizens, and e Landens are Louisiana citizens. A limited liability company is a citizen of every state in which any member of e 20 company is a citizen. Grand Isle Rental Properties, LLC has two members, Mr. and 21 Mrs. Landen. Therefore, it is a Louisiana citizen. A corporation s citizenship is determined by its state of incorporation and e state of its principal place of 22 business. Hudson is a New York company, wi its principal place of business in 23 New York. Therefore, it is a New York citizen. Accordingly, ere is no dispute at ere is complete diversity between e parties, no dispute at e Landens and e limited liability company are Louisiana citizens, and no dispute at e defendants were joined and served before removal. Therefore, e sole issue to be resolved is wheer e forum defendant rule requires remand of is action. 17 Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 571 (5 Cir. 2011) Rec. Doc. 1-1 at 6. Rec. Doc. 1-1 at See, Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5 Cir. 2008) Rec. Doc. 1-4 at U.S.C. 1332(c)(1). Rec. Doc. 1 at

8 The forum defendant rule states at a case cannot be removed on e basis of diversity jurisdiction if a defendant, who was properly joined and properly served, is 24 a citizen of e forum state. In accordance wi e plain language of e statute, is rule applies even if e oer criteria for removal are present. The forum defendant rule is procedural raer an jurisdictional; erefore, a failure to comply 25 wi e rule is a defect in removal procedure at is waived unless an objection is 26 timely filed. In is case, however, e procedural defect was raised in a timely remand motion. Hudson provided no jurisprudential or statutory auority for e proposition at e citizenship of an in-forum defendant can be disregarded if he is a nominal defendant due to a Gasquet settlement. The cases at were cited by Hudson are not directly on point. RSUI Indemnity Co. v. American States Ins. Co., No , 2015 WL (E.D. La. Aug. 26, 2015), was cited by Hudson because it explains what a Gasquet settlement is and states at when such a settlement is reached e insureds remain in e case as nominal defendants. But RSUI was not a removed action. The U.S.C. 1441(b)(2). 25 In re 1994 Exxon Chem. Fire, 558 F.3d 378, 396 (5 Cir. 2009) (quoting In re Shell Oil Co., 932 F.2d 1518, 1528 (5 Cir.1991)). 26 In re 1994 Exxon Chem. Fire, 558 F.3d at 392; In re Shell Oil Co., 932 F.2d at

9 suit originally filed in state court was completed, and en e excess insurer sued e primary level insurer in federal court, arguing at its actions resulted in e excess carrier having to pay more an it should have. The decision reached by e court in RSUI had noing to do wi wheer e presence of in-forum defendants precludes removal or wheer e citizenship of an in-forum defendant can be disregarded. In Hargrove v. Bridgestone, No. 10-cv-0318, 2012 WL (W.D. La. Mar. 2, 2012), a state-court suit was removed to a Louisiana federal court even ough some defendants were Louisiana citizens. However, e Louisiana defendants had all settled even ough no dismissal documents had been filed. The court noted at, alough ey had not been formally dismissed, e settling defendants were not actually present in e lawsuit. The court also said it could find no plausible explanation for plaintiff s failure to dismiss e Louisiana Defendants as required by eir agreement.... The court tolled e one-year deadline for removing a case on e basis of diversity and denied e motion to remand. But e ruling provides no guidance for e situation created by e Gasquet settlement in is case. In Hargrove, e Louisiana defendants had fully settled eir claims and should have been dismissed from e suit but in e instant case, e Louisiana defendants must remain in e lawsuit. The two situations are not equivalent. -9-

10 In Gore v. Robertson, No BAJ-RLB, 2015 WL (M.D. La. Sept. 30, 2015), e lawsuit was filed following a motor vehicle accident, and e plaintiff executed a Gasquet settlement. The suit was en removed more an one year after it was originally filed. The district court denied e motion to remand but not because of any allegedly nominal party remaining in e suit following e Gasquet settlement. The remand motion was decided on e basis of timing. The plaintiff had a claim against e driver at hit him and a claim for a defect in e defendant s vehicle. The first claim was asserted in e original petition, and e second claim was asserted in a later supplemental petition. The claim against e defendant driver was settled, and e claim against e added defendant remained to be litigated. The court did not address wheer e removal was procedurally defective because of e Gasquet settlement but only discussed wheer e removal was timely. The court found at it was timely because e suit was removed less an one year after date on which e supplemental petition at added e new claim was filed. The decision in Gore did not resolve e issue presented here. In Norfolk Souern v. Murphy Broers, No. 10-cv-1503, 2010 WL (W.D. La. Dec. 3, 3010), suit was filed in state court due to a truck-train collision. The suit was not originally removable because ere were Louisiana defendants. A Gasquet settlement was reached, noting e possibility of insurance coverage by -10-

11 Liberty Mutual. The defendants were not dismissed from e suit. Later, e petition was amended to add a claim against Liberty Mutual, and Liberty Mutual removed. Norfolk filed a motion to remand based on e rule prohibiting removal more an one year after suit is filed and also based on e continued presence of Louisiana defendants. The court granted e motion to remand but solely on e basis at e one-year statutory limitation prevented removal. The decision did not permit e citizenship of e in-forum defendants to be disregarded, and e issue presented in e motion now before is Court was not addressed. On e oer hand, e plaintiffs cited Durel v. Howard, No , 2013 WL , at *2 (E.D. La. Dec. 11, 2013), for e opposite proposition. There, e court explained at e settlement signed by e plaintiff in at case was not a Gasquet settlement, and in dicta, stated at [t]he circumstances in Gasquet likely would have precluded removal had it been attempted. For e reasons set for in is ruling, is Court agrees wi at statement. To reiterate, Hudson failed to direct is Court s attention to any jurisprudence reaching e conclusion at Hudson requests is Court to reach, and is Court s own research located no such cases. Hudson did cite cases stating at an insured is 27 only a nominal party after it has executed a Gasquet settlement, but Hudson has not 27 See, e.g., RSUI Indem. Co. v. Am. States Ins. Co., 2015 WL , at *

12 cited a case holding at because an insured executed a Gasquet settlement, its citizenship can be disregarded when e forum defendant rule is applied. Auority was located for e proposition at e citizenship of a defendant may be disregarded when at party has been improperly joined. Improper joinder is 28 a narrow exception to e rule of complete diversity. When e parties are not diverse, e doctrine of improper joinder permits removal and precludes remand when ere is eier actual fraud in e pleading of jurisdictional facts or an inability of e 29 plaintiff to establish a cause of action against a nondiverse party. In at limited situation, e citizenship of a nondiverse party can be disregarded. Because e improper joinder doctrine is a narrow exception to e rule of complete diversity, it permits a court to ignore e citizenship of a nondiverse party when evaluating wheer e parties are diverse in citizenship. Therefore, e improper joinder doctrine is not applicable to a diverse defendant. Since e Louisiana defendants in is action e Landens and eir limited liability company are diverse from e plaintiffs, e improper joinder analysis cannot be utilized as a basis for disregarding eir citizenship. In fact, by its plain language, e forum defendant rule applies only when e in-forum defendants have been properly joined and served. Thus, e forum 28 McDonal v. Abbott Labs., 408 F.3d 177, 183 (5 Cir. 2005). 29 Smallwood v. Illinois Cent. R. Co., 385 F.3d 568, 573 (5 Cir. 2004). -12-

13 defendant rule a procedural standard is totally unrelated to e improper joinder doctrine, and ere is no basis for conflating improper joinder and e forum defendant rule. The settlement agreement at was executed by e Landens does not wholly relieve em of liability in is lawsuit. They are relieved of liability only to e extent of eir insurance coverage, and e plaintiffs contractually agreed not to execute on a judgment against e Landens in any amount greater an e available insurance coverage. In order to reach e Landens insurer, however, e plaintiffs must obtain a judgment against e Landens. It is well-settled in Louisiana jurisprudence at an insurer s liability is contingent upon proof of e negligence or 30 tortious conduct of its insured. Furermore, is is not a situation in which e plaintiffs may proceed directly against e insurer wiout e Landens being parties to e suit. Louisiana s direct action statute permits suit against e insurer wiout joining e insured only when e insured is deceased, bankrupt, insolvent, or cannot be served, when e action is between children and eir parents or between married 30 See, e.g., Brown v. Unknown Driver, (La. App. 4 Cir. 01/18/06), 925 So. 2d 583, 590; Continental Casualty Ins. Co. v. RAS Management Co., Inc., 625 So. 2d 745, 748 (La. App. 1 Cir. 1993); Terrebonne v. State Farm Fire & Casualty Co., 491 So. 2d 73, 75 (La. App. 1 st Cir. 1986); Lucey v. Harris, 490 So. 2d 416, 419 (La. App. 5 Cir. 1986), writ denied 496 So. 2d 327 (La. 1986). -13-

14 31 persons, or when e insurer is an uninsured motorist carrier. It is undisputed at none of ose situations is presented by is lawsuit. More important, e effect of a direct action would not advance Hudson s cause. When an insurer is sued and e insured is not joined as a defendant in e lawsuit, e insurer is deemed to be a citizen of e state in which e insured is a 32 citizen. In is case, a direct action against Hudson would result in it being deemed a citizen of Louisiana, and e forum defendant rule would still preclude removal. Under e traditional rules of statutory interpretation, e first step is to 33 examine e plain meaning of e statutory language. The statute at issue here e forum defendant rule unambiguously states at when a civil action is oerwise removable solely on e basis of diversity jurisdiction, it may not be removed if any properly joined and served defendant is a citizen of e state in which e action was brought. Here, e parties are completely diverse, and e action was originally filed in a Louisiana state court. But for e operation of e forum defendant rule, e action would be removable solely on e basis of diversity. There is no dispute at at least two properly joined and served defendants are Louisiana citizens. Therefore, La. R.S. 22:1269(B). 28 U.S.C. 1332(c)(1). 33 Ybarra v. Dish Network, L.L.C., 807 F.3d 635, 640 (5 Cir. 2015); United States v. Spurlin, 664 F.3d 954, 964 (5 Cir. 2011). -14-

15 e plain language of e statute requires remand of e action. Moreover, Hudson cited no jurisprudential or statutory auority supporting e proposition at e citizenship of a properly joined and served in-state defendant can be disregarded when at defendant has executed a Gasquet settlement but remains in e suit. Accordingly, e motion to remand will be granted. CONCLUSION For e reasons explained above, e plain language of e forum defendant rule found in 28 U.S.C. 1441(b)(2) requires at e plaintiffs motion to remand (Rec. Doc. 9) be granted. A separate remand order will be issued. Signed at Lafayette, Louisiana, on March 8, PATRICK J. HANNA UNITED STATES MAGISTRATE JUDGE -15-