United States District Court, E.D. Virginia, Richmond Division
EULERIC EVANS, by his Assignee, CRAIG L. COLES Plaintiff,
GEICO GENERAL INSURANCE COMPANY, et al., Defendants.
JAMES R. SPENCER, Senior District Judge.
THIS MATTER is before the Court on a Motion to Remand ("Motion") filed by Plaintiff Euleric Evans ("Evans"), by his assignee, Craig L. Coles ("Coles"). ECF No. 4. Defendants Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company, GEICO Casualty Company, GEICO Advantage Insurance Company, and GEICO Choice Insurance Company (collectively "GEICO"), Eric Rappaport, Tony Parkes (collectively the "Nondiverse Defendants"),  and Jesse Jones ("Jones") oppose the Motion. Also before the Court are two Motions to Dismiss-one filed by GEICO, ECF No. 8, and one filed by the Nondiverse Defendants, ECF No. 8. A hearing was held on December 18, 2014 regarding the Motion to Remand.
For the reasons stated from the bench along with those set forth herein, the Court will DENY the Motion to Remand because diversity jurisdiction is present where the Nondiverse Defendants have been fraudulently joined. Accordingly, the Motion to Dismiss filed by the Nondiverse Defendants will be GRANTED. ECF No. 8. Finally, the Court will GRANT IN PART and DENY IN PART the Motion to Dismiss filed by GEICO. ECF No. 8.
I. FACTUAL AND PROCEDURAL BACKGROUND
This action arises out of a motor vehicle accident on April 9, 2010, involving both Coles and Evans. As a result of the collision, Coles sustained serious bodily injury.
Evans purchased an automobile liability insurance policy from GEICO. See ECF No. 1 Ex. 1 Complaint ("Compl.") ¶ 1; see also id. Ex. L ("Assignment"). On October 8, 2010, Coles filed suit against Evans in the Circuit Court of Henrico County seeking compensation for the injuries he sustained in the crash. See Compl. ¶ 14. Prior to trial, Coles attempted to settle his claims against Evans through negotiations with several GEICO adjusters- i.e., the Nondiverse Defendants and Jones- who have been individually named in the instant lawsuit. Compl. ¶¶ 15-16. 20, 22-31. On March 20, 2012, the case was tried on damages and the jury returned a verdict of $275, 000.00. Compl. ¶ 32. On October 7, 2013, Evans assigned and transferred his rights, claims, and causes of actions against "GEICO General Insurance Company, " Compl. Ex. L. ("Assignment"), "to the [p]laintiff in the instant action, Craig L. Coles, " Compl. ¶ 33.
Then, on August 25, 2014, Coles filed a Complaint in the Circuit Court for the City of Richmond, Virginia, against GEICO, the Nondiverse Defendants, and Jones seeking to collect on an insurance policy GEICO issued to Evans. Memorandum in Opposition to Motion to Remand ("Defs.' Mem. Opp'n Mot. Remand") at 1. The Complaint, essentially arising out of the $275, 000.00 jury verdict, alleges multiple claims. In Count I, Coles alleges a breach of contract claim against GEICO. In Count II, Coles alleges a breach of the implied covenant of good faith and fair dealing against GEICO and its adjusters, including the Nondiverse Defendants and Jones. In Count III, Coles alleges unfair claim settlement practices against GEICO, the Nondiverse Defendants, and Jones under Va. Code Ann. § 38.2-510. In Count IV, Coles alleges bad faith failure to pay a motor vehicle insurance claim of more than $3, 500.00 under Va. Code Ann. § 8.01-66.1(D)(1) against GEICO. To be clear, in Counts II and III, Coles alleges claims against the Nondiverse Defendants and Jones both in their individual and representative capacities. Coles requests damages in the amount determined by a jury, but no less than $6, 400, 000.00. Specifically, pursuant to sections 38.2-209 and 8.01-66.1, he requests (a) $1, 200, 000.00 in compensatory damages (b) attorneys' fees; (c) costs incurred in connection with this action; (d) prejudgment and post-judgment interest from September 7, 2010 at the maximum rate allowed by law; (e) direct and consequential damages that "include collection damages and forseeable losses for GEICO's breach of the duty of good faith"; and (f) such other relief as is just and proper. See Compl. at 15-16. GEICO and the other defendants were served with the Complaint on September 2, 2014 and September 3, 2014, respectively.
On September 25, 2014, GEICO, the Nondiverse Defendants, and Jones removed the above-captioned matter to this Court. See ECF No. 1 ("Notice of Removal"). Coles filed a Motion to Remand on October 10, 2014. ECF No. 4. Together, GEICO, the Nondiverse Defendants, and Jones filed an Opposition to Coles' Motion to Remand on October 17, 2014. ECF No. 9. Coles filed his Reply on October 22, 2014. ECF No. 14.
Coles is a citizen of Virginia. He maintains that the Nondiverse Defendants are each citizens of Virginia, who work or worked for GEICO. Jones reportedly is a citizen of the State of Texas. Defendants Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company, and GEICO Casualty Company are Maryland corporations, with their principal places of business in Chevy Chase, Maryland. Defendants GEICO Advantage Insurance Company and GEICO Choice Insurance Company are Nebraska corporations, with their principal places of business in Chevy Chase, Maryland.
II. STANDARD OF REVIEW
a. Motion to Remand
"Federal courts are courts of limited jurisdiction... [and] possess only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Federal district courts have original jurisdiction over civil actions that arise under the Constitution, laws, or treaties of the United States pursuant to 28 U.S.C. § 1331, and where the amount in controversy exceeds $75, 000 and the matter is between citizens of different states pursuant to 28 U.S.C. § 1332. Federal diversity jurisdiction only exists under § 1332 where there is complete diversity, that is, "when no party shares common citizenship with any party on the other side." Mayes v. Rapport, 198 F.3d 457, 461 (4th Cir. 1999) (internal citations omitted). A court exercising diversity jurisdiction applies the substantive law of the forum state. Erie R.R. v. Tompkins, 304 U.S. 64, 78-79 (1938). The "removal statute, " 28 U.S.C. § 1441, provides that a case filed in state court may be removed to federal court when it is shown by the defendant that the federal court has original jurisdiction. See Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994). A defendant may remove a case from state to federal court if the federal court has original jurisdiction over the matter, but if a case is removable based solely on diversity jurisdiction, the case may not be removed if any of the defendants is a citizen of the state where the action was brought. 28 U.S.C. §§ 1441(a), (b).
The party seeking removal has the burden of establishing federal jurisdiction. Mulcahey, 29 F.3d at 151; see Jackson v. Nationwide Ins. Co. of Am., No. CIV.A. 4:14-945-BHH, 2014 WL 4349738, at *1 (D.S.C. Sept. 2, 2014) (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 291 (1938)) (confirming that the party removing an action bears the burden of demonstrating that jurisdiction properly rests with the court at the time the petition for removal is filed). Because removal of a case from state court implicates "significant federalism concerns, " removal jurisdiction must be strictly construed, and "if federal jurisdiction is doubtful, a remand is necessary." Mulcahey, 29 F.3d. at 151. If at any time before final judgment it appears the district court lacks jurisdiction, the court must remand the case. 28 U.S.C. § 1447(c).
When a defendant has been fraudulently joined, however, complete diversity is not required to create federal jurisdiction premised upon § 1332. Under the fraudulent joinder doctrine, a federal court may assume jurisdiction over a case where there is not complete diversity and dismiss the in-state defendants if it finds that the nondiverse defendants were fraudulently joined in order to destroy the court's federal diversity jurisdiction. Mayes, 198 F.3d at 461. Therefore, the doctrine of fraudulent joinder allows "a district court to disregard, for jurisdictional purposes, the citizenship of certain nondiverse defendants, assume jurisdiction over a case, dismiss the nondiverse defendants, and thereby retain jurisdiction." Id. "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.'" Hartley v. CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999) (quoting Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993)) (internal quotation marks omitted). "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)." Id. (internal citations omitted).
"In order to determine whether an attempted joinder is fraudulent, the court is not bound by the allegations of the pleadings, but may instead consider the entire record, and determine the basis of joinder by any means available.'" AIDS Counseling & Testing Centers v. Group W Television, Inc., 903 F.2d 1000, 1004 (4th Cir. 1990) (internal citations omitted). The Court may consider affidavits and deposition transcripts submitted by the parties, and "[i]n this respect, the proceeding appropriate for resolving a claim of fraudulent joinder is similar to that used for ruling on a ...