United States District Court, E.D. Kentucky, Southern Division, Pikeville
MEMORANDUM OPINION & ORDER
AMUL R. THAPAR, District Judge.
In the immortal words of Yogi Berra, "It's dejà vu all over again." The defendants in this removal case invoke diversity jurisdiction based on fraudulent joinder, forcing the Court to confront-for the third time-a stubbornly difficult question of Kentucky law: whether a plaintiff can sue an insurance adjuster for bad faith. But there is no sign that Kentucky courts have resolved this question since the Court's last survey of the debate. Until they do, the Court cannot say that the plaintiff fraudulently joined defendant Allen Parker. As a result, the case must be remanded back to the Johnson Circuit Court.
On January 22, 2013, a fire burned down plaintiff Talmadge Cantrell's business in Johnson County, Kentucky. R. 1-1 at 1. Cantrell had insured his business through a policy with defendant Owners Insurance Co. ("Owners"). Id. at 2. After Owners denied his claim, Cantrell sued the insurer and its claims adjuster, Allen Parker, in Johnson Circuit Court for breach of contract and for violating Kentucky's Unfair Claims Settlement Practices Act ("UCSPA"), KRS § 304.12-230. Id. at 2-3. Cantrell specifically alleges that Owners and Parker "willfully and maliciously" breached their duty to investigate and pay his claim. Id. at 3. The defendants filed a notice of removal on December 20, 2013, invoking federal diversity jurisdiction. R. 1. The notice acknowledges that Cantrell and Parker are both Kentucky citizens. Id. at 2. Owners and Parker contend, however, that Parker's citizenship should be ignored for diversity purposes because Cantrell fraudulently joined him to this action. Id. at 2-3. Among their arguments, the defendants maintain that Kentucky law does not allow Cantrell to assert bad-faith claims against an insurance adjuster like Parker. Id. at 3. Cantrell moved to remand for lack of jurisdiction, and for attorney's fees. R. 4.
The Court has seen this movie before, and not much has changed but the characters' names. Twice now the Court has surveyed Kentucky law and rejected allegations of fraudulent joinder based on bad-faith claims against insurance adjusters. Collins v. Montpelier U.S. Ins. Co., No. 11-166-ART, 2011 WL 6150583 (E.D. Ky. Dec. 12, 2011); Gibson v. Am. Mining Ins. Co., No. 08-118-ART, 2008 WL 4602747 (E.D. Ky. Oct. 16, 2008). The Court remanded in both cases. Id. Although the third installment of the trilogy features some new twists, it has the same ending.
I. Fraudulent Joinder
Fraudulent joinder is a (questionable) judicially created exception to the normal rule requiring complete diversity, designed to prevent plaintiffs from using procedural shenanigans to defeat removal. See Murriel-Don Coal Co., Inc. v. Aspen Ins. UK Ltd., 790 F.Supp.2d 590, 594-97 (E.D. Ky. 2011). The test for proving fraudulent joinder is a high hurdle: the removing defendants must show that there is not even a "colorable basis" to predict that the plaintiff "may recover" against one of the nondiverse defendants. Casias v. Wal-Mart Stores, Inc., 695 F.3d 428, 433 (6th Cir. 2012) (internal quotation marks omitted); see also Eastman v. Marine Mech. Corp., 438 F.3d 544, 549 (6th Cir. 2006) (party seeking removal has burden to prove jurisdiction). A claim is colorable if "there is arguably a reasonable basis for predicting that state law might impose liability on the facts involved." Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994) (internal quotation marks omitted). All ambiguities of state law are thus resolved in favor of remand, against fraudulent joinder. Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999).
Frustrating as the persistent uncertainty in Kentucky law may be, there is still no basis for concluding that Cantrell fraudulently joined Parker. As the Court most recently explained a little over two years ago, "Kentucky law is still ambiguous" about whether badfaith claims may lie against insurance adjusters. Collins, 2011 WL 6150583, at *2. And since the defendants do not offer a single new case suggesting that Kentucky courts have resolved this ambiguity, they have failed to carry their burden of demonstrating that there is no "reasonable basis for predicting that state law might impose liability" on Parker. Alexander, 13 F.3d at 949 (internal quotation marks omitted). The lingering ambiguity of Kentucky law weighs against fraudulent joinder. Coyne, 183 F.3d at 493. As such, for the reasons detailed in Collins and Gibson, there is no basis to find fraudulent joinder here. Whatever Kentucky's ultimate answer might be, the Court cannot say Cantrell's claims against Parker are totally baseless. Diversity jurisdiction over this case is therefore lacking.
II. Alternatives to Remand
Without jurisdiction, the unavoidable result is immediate remand to state court, but the defendants say otherwise. They maintain the Court has two options short of remand: (1) hold the case in abeyance and certify the question of adjuster liability to the Kentucky Supreme Court, or (2) reach the merits and certify the question for interlocutory appeal. See R. 9 at 2-13. Remand is required when it "appears" the Court lacks jurisdiction. 28 U.S.C. 1447(c). This case does not satisfy that condition, the defendants maintain, because the ambiguity in Kentucky law makes it equally likely that the Court has jurisdiction as that it does not. R. 9 at 4. Jurisdiction here, they say, is like Schrödinger's cat from quantum mechanics-both alive and dead at the same time. Id.; see also TKO Equip. Co. v. C & G Coal Co., 863 F.2d 541, 545 (7th Cir. 1988) (explaining the significance of Schrödinger's cat). Since the Court cannot definitively rule out jurisdiction, the argument goes, it cannot "appear" that jurisdiction is lacking.
The defendants get points for originality, but their argument is too clever by half. The analogy to Schrödinger's cat is fundamentally flawed. There is simply no doctrinal equivalent to quantum superposition,  where jurisdiction simultaneously exists and does not exist: "Federal jurisdiction is a binary choice. The switch is either on or off." May v. Wal-Mart Stores, Inc., 751 F.Supp.2d 946, 951 (E.D. Ky. 2010); see also Kusay v. United States, 62 F.3d 192, 194 (7th Cir. 1995) ("Jurisdiction is unlike quantum mechanics. Elementary particles can both exist and not exist at the same time, with uncertainty resolved only by the act of observation.... Judicial power needs a more predictable basis."). Indeed, the Court presumes it lacks jurisdiction until the defendants show otherwise. See May, 751 F.Supp.2d at 950 (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). The defendants' argument based on uncertainty gets that presumption precisely backwards. Since Owners and Parker cannot overcome the presumption that the Court lacks jurisdiction, it necessarily "appears" that jurisdiction is absent. That is the default state of the Court's power.
But there is a more basic problem with the defendants' Schrödinger's cat analogy: its necessary assumption of intractable jurisdictional uncertainty just isn't true, since fraudulent joinder does not hinge on a plaintiff's ultimate success. The defendants conclude that the odds of jurisdiction are dead even because either Cantrell states a claim against Parker or he does not: if he does state a claim, they reason, then the suit clearly must be remanded, and if he does not, then clearly it must not. See R. 9 at 4. But the conclusion does not follow from the premise. A claim against a particular party may ultimately fail, but that does not make joinder of that party fraudulent. That is not how fraudulent joinder works. The test for fraudulent joinder is "more lenient, " from the plaintiff's perspective, than for a motion to dismiss. Casias, 695 F.3d at 433. If there is at least a "colorable basis" to predict that the plaintiff "may recover" against a nondiverse defendant there is no fraudulent joinder, and hence no diversity jurisdiction. Id. (internal quotation marks omitted). Uncertainty about state law thus does not translate into uncertainty about fraudulent joinder. Quite the opposite actually: if state law is uncertain, the Court must remand. See Coyne, 183 F.3d at 493. Because it is clear that there is at least a colorable basis for Cantrell's claim against Parker, there is no question that the Court completely lacks jurisdiction over this case. If the cat in the defendants' analogy is jurisdiction, the cat is most definitely -not just possibly-dead.
Retaining jurisdiction to certify a legal question to the Supreme Court of Kentucky is thus not an option. Like ordering jurisdictional discovery about the amount in controversy, holding the case in abeyance without a basis for jurisdiction "is anathema to the limited nature of federal jurisdiction and the need to respect the authority of state courts." May, 751 F.Supp.2d at 949. And besides, if the defendants want an answer from Kentucky, they were already in the right forum before removal. Nothing is stopping them from litigating this case in the Kentucky courts and appealing all the way to the state's Supreme Court if they lose below. Exercising federal jurisdiction just to certify a tough question back to the Kentucky courts thus makes little sense. Certification at this stage is also particularly offensive to federalism because it would short circuit Kentucky's normal appellate process. It makes much more sense to leave the case in the state courts, who are experts on questions of state law. See, e.g., Tafflin v. Levitt, 493 U.S. 455, 465 (1990) (recognizing that "state courts presumably have greater expertise" at evaluating "violations of state law"); Davis v. Mich. Dep't of Treasury, 489 U.S. 803, 818 (1989) (recognizing that "question[s] of state law ...