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Wright Construction Services, UNC. v. Liberty Mutual Insurance Co.

United States District Court, E.D. Missouri, Eastern Division

July 17, 2018

WRIGHT CONSTRUCTION SERVICES, UNC., et al., Plaintiffs,
v.
LIBERTY MUTUAL INSURANCE COMPANY, et al., Defendants.

          OPINION, MEMORANDUM AND ORDER

          HENRY EDWARD AUTREY, UNITED STATES DISTRICT JUDGE.

         This removed matter is before the Court on Plaintiffs' Motion to Remand, [Doc. No. 25]. For the following reasons, the Motion will be granted. The Court concludes that it lacks subject matter jurisdiction. The matter will be remanded to state court.

         Background

         Plaintiffs filed suit in the Circuit Court of St. Charles County, Missouri, on February 6, 2018. The Petition sets forth eight counts as follows: Count I against Liberty for Breach of Indemnity Agreement; Count II against Liberty for Breach of Covenant of Good Faith and Fair Dealing (General Agreement of Indemnity); Count III against Liberty for Breach of Performance Bond; Count IV against Liberty for Breach of Covenant of Good Faith and Fair Dealing (Performance Bond); Count V against Liberty for Tortious Interference with Business Expectancy; Count VI against Liberty and St. Charles for Negligence; Count VII against Liberty for Fraudulent Misrepresentation; and Count VIII against Liberty for Negligent Misrepresentation. In Count VI of Plaintiffs' Petition, Plaintiffs allege Defendant Saint Charles Insurance Agency, (“SCIA“), (as well as Liberty Mutual) was negligent in failing to communicate to Wright Construction that the State of North Carolina required all general contractors to be licensed in North Carolina prior to entering into North Carolina construction contracts. Plaintiffs allege that this conduct was below the applicable standard of care for a broker.

         Defendant Liberty filed its Notice of Removal on March 30, 2018, based on the Court's diversity of citizenship jurisdiction, 28 U.S.C. § 1332. Although SCIA and Plaintiffs share the same citizenship, (both are citizens of Missouri), Liberty claims that SCIA was not properly joined and therefore should not be considered for the purposes of removal, under the doctrine of fraudulent joinder.

         Plaintiffs filed a motion to remand on the basis that this Court does not have subject matter jurisdiction over this matter because there is not complete diversity as SCIA is a Missouri citizen and is not fraudulently joined.

         Discussion

         Liberty argues that SCIA was fraudulently joined because Plaintiffs failed to state a colorable claim against SCIA in the petition. The Court disagrees for the following reasons.

         Federal district courts have original jurisdiction over all civil actions which are “between citizens of different States and where the matter in controversy exceeds $75, 000. 28 U.S.C. § 1332. The party seeking the federal forum based on diversity has the burden of pleading diversity of the citizenship of the parties. Walker v. Norwest Corp., 108 F.3d 158, 161 (8th Cir. 1997). The burden of establishing diversity jurisdiction is by a preponderance of the evidence. Sheehan v. Gustafson, 967 F.2d 1214, 1215 (8th Cir. 1992); Yeldell v. Tutt, 913 F.2d 533, 537 (8th Cir. 1990); Russell v. New Amsterdam Cas. Co., 325 F.2d 996, 997 (8th Cir. 1964).

         The court in Iowa Public Service Co. v. Medicine Bow Coal Co., 556 F.2d 400, 406 (8th Cir. 1977) held, in regard to diversity that:

[I]n a case where there are plural plaintiffs and plural defendants a federal court does not have diversity jurisdiction unless there is diversity between all plaintiffs and all defendants.... [I]f the “nondiverse” plaintiff is not a real party in interest, and is purely a formal or nominal party, his or its presence in the case may be ignored in determining jurisdiction.

556 F.2d 400, 403-404 (8th Cir. 1977) (internal citations omitted).

         Fraudulent joinder of a non-diverse party does not prevent removal. Anderson v. Home Ins. Co., 724 F.2d 82, 84 (8th Cir. 1983). See also, BP Chemicals Ltd. v. Jiangsu Sopo Corp, 285 F.3d 677, 685 (8th Cir. 2002) (holding that a defendant's right of removal based on diversity of citizenship may not be defeated by fraudulently joining a non-diverse party). The Eighth Circuit holds that “[j]oinder is fraudulent and removal is proper when there exists no reasonable basis in fact and law” to support a claim against the defendant whose joinder would preclude removal. Wiles v. Capitol Indem, Corp., 280 F.3d 868, 871 (8th Cir. 2002). “Conversely, if there is a reasonable basis in fact and law supporting the claim, the joinder is not fraudulent.” Filla v. Norfolk Southern Ry. Co., 336 F.3d 806, 810 (8th Cir. 2003).

         Where applicable state precedent precludes the existence of a cause of action against a defendant, joinder is fraudulent. “[I]t is well established that if it is clear under governing state law that the complaint does not state a cause of action against the non-diverse defendant, the joinder is fraudulent and federal jurisdiction of the case should be retained.” Iowa Public Service Co., 556 F.2d at 406 (emphasis added). However, if there is a “colorable” cause of action-that is, if the state law might impose liability on the resident defendant under the ...


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