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J.D. v. Riley

United States District Court, Eastern District of Kentucky, Central Division, Lexington

March 17, 2015

J.D. and M.D., minor children, by and through their parent and next friend, KIM DE GIOVANNI, Plaintiffs,



This matter is before the Court on Plaintiffs’ motion to remand. (DE 3). The plaintiffs, Kentucky residents, brought this action in Mercer Circuit Court alleging that Shelter Mutual Insurance Company (“Shelter”), a Missouri corporation, and claims adjustor Dennis Riley, a Kentucky resident, unlawfully settled claims with J.D. and M.D., minor children. The defendants assert that the plaintiffs fraudulently joined Riley simply to defeat diversity jurisdiction.

The Court will grant the plaintiffs’ motion for the following reasons.


On November 13, 2009, seventeen-year-old Lyssa De Giovanni was driving the family pickup truck on Jackson Pike. Jackson Pike is a winding, unmarked roadway. (4-2 Riley Notes, at 3.) The roadway is wide enough for two trucks to pass one another; however, both trucks must move to the edges of the road to pass. (4-2 Riley Notes, at 1, 3.) Sixteen- year-old Andrew Rechis sat in the front seat, and Lyssa’s brothers, J.D. and M.D., sat in the back seat. (4-2 Riley Notes, at 1.) No one was wearing a seat belt. (4-2 Riley Notes, at 3.)

Lyssa was startled when their truck and another truck simultaneously crested a hill. (4-2 Riley Notes, at 3.) She moved to the right side of the road and avoided the oncoming vehicle, but the truck swerved, collided with a tree, and rolled over on the driver’s side. (3-5 Police Report, at 2.) All four occupants were ejected from the vehicle. (3-5 Police Report, at 2.) Andrew was flown to UK Hospital in an air ambulance, and J.D. and M.D. were driven to Haggin Hospital in an ambulance. (3-5 Police Report, at 2.)

Shelter insured the family truck, and on November 16, 2009, Dennis Riley contacted the plaintiffs to discuss the accident and J.D.’s and M.D.’s injuries. (DE 4 Defs.’ Resp. in Opp’n, at 2–3.) Riley continued to monitor J.D.’s and M.D.’s medical claims and, as of March 2, 2010, noted that Personal Injury Protection (“PIP”) payments totaled $8, 126.67 and $5, 931.70 for J.D. and M.D. respectively. (DE 4-2 Riley Notes, at 8.) Riley also noted that the policy had Bodily Injury (“BI”) reserves of $50, 000 for Andrew, $25, 000 for J.D., and $25, 000 for M.D. (DE 4-2 Riley Notes, at 8.)

On April 2, 2010, Kim De Giovanni-J.D. and M.D.’s mother-asked Riley to proceed with the settlement of Andrew’s claim. (DE 4-2 Riley Notes, at 9.) Kim did not, however, discuss J.D.’s or M.D.’s BI claim. Shelter authorized a $50, 000 settlement of Andrew’s BI claim and Riley noted that the settlement “requir[ed] court approval [because Andrew was a] minor.” (DE 4-2 Riley Notes, at 10, 12.)

On May 5, 2010, Riley sent unsolicited offers to settle J.D.’s and M.D.’s BI claims. (DE 4-7 Cover Letters, at 1–2.) Riley offered to settle each BI claim for $5, 000.00 and included an “Indemnifying Release (Minors)” (“Release”) form with each child’s settlement offer. (See DE 4-7 Cover Letters, at 1–2; DE 4-8 Releases, at 1–2.) Riley and the plaintiffs discussed the proposed settlements throughout the following months, but Riley never told the plaintiffs that the settlements would require court approval despite continuously noting that Andrew’s settlement was a “minor claim which requires court approval.” (DE 4-2 Riley Notes, at 10–12.) Ultimately, the plaintiffs signed the Releases and settled J.D.’s and M.D.’s BI claims in August 2010. (DE 4-2 Riley Notes, at 11–12; DE 4-8 Releases, at 1–2.) Shelter, however, never sought court approval of these settlements.

Plaintiffs then filed this suit in Mercer Circuit Court. (DE 1-1 Compl.) They allege five causes of action solely against Shelter. Plaintiffs also allege the following causes of action against both Shelter and Riley: (1) negligence/gross negligence; (2) fraud in the inducement; (3) fraud by omission; (4) intentional infliction of emotional distress; and (5) negligent misrepresentation. (DE 1-1 Compl., at ¶¶ 55–88.) Specifically, the plaintiffs allege that Riley and Shelter acted with gross negligence in representing information concerning the Releases and J.D.’s and M.D.’s rights; that Riley and Shelter knowingly concealed information from the plaintiffs; that Riley and Shelter committed fraud to induce the plaintiffs to sign the Releases; and that Riley and Shelter violated duties created by Kentucky’s Unfair Claims Settlement Practices Act, the Kentucky Consumer Protection Act, and KRS § 387.280. (DE 1-1 Compl., at ¶¶ 56, 58, 64, 73, 74, 85.) In particular, the plaintiffs assert that KRS § 387.280 creates a statutory obligation for a court to approve any proposed settlement in order to protect the interests of the minor children but that Riley neither informed the plaintiffs of this right nor sought court approval after the plaintiffs signed the settlement offers. (DE 1-1 Compl., at ¶ 56.)

The defendants filed a notice of removal in this Court based upon federal diversity jurisdiction. (DE 1 Notice of Removal, at 2.) They acknowledge that the plaintiffs and Defendant Riley are Kentucky citizens; however, the defendants assert that the Court should ignore Riley’s citizenship because the plaintiffs fraudulently joined him to this suit. (DE 1 Notice of Removal, at 2–3.) The defendants claim, inter alia, that the only standard of care applicable to insurance companies-and, relatedly, to their adjusters-is bad faith. (DE 4 Defs.’ Resp. in Opp’n, at 9, 12.) The plaintiffs did not assert any bad faith claims against Riley; therefore, the defendants argue that “there is ‘no colorable basis’ for a claim” against Riley. (DE 1 Notice of Removal, at 2.) The defendants also assert that they have met their burden of proving a sufficient amount in controversy to satisfy diversity jurisdiction. (DE 4 Defs.’ Resp. in Opp’n, at 15.)

The plaintiffs filed a motion to remand this action to Mercer Circuit Court. (DE 3). They contend that Kentucky law recognizes more than simply bad faith claims against insurance companies and their adjusters and, accordingly, assert that they have alleged colorable claims against Riley. (DE 3-1 Mem. in Supp., at 10.) The plaintiffs also argue that the defendants have not met their burden in demonstrating that the amount in controversy exceeds $75, 000.00. (DE 3-1 Mem. in Supp., at 12.)


A civil action may be removed from state court if the federal court has original jurisdiction. 28 U.S.C. § 1441(a). A federal court has original jurisdiction over actions where the amount in controversy exceeds $75, 000.00 and the action is between citizens of different States. Id. § 1332(a). In removal, the defendant bears the burden of establishing the federal court’s original jurisdiction, Warthman v. Genoa Twp. Bd. of Trs., 549 F.3d 1055, 1063 (6th Cir. 2008), and, when an action is removed based upon diversity jurisdiction, complete diversity of citizenship between the plaintiffs and defendants must exist at the time of removal. Bishop v. Wal-Mart Stores, Inc., 24 F. App’x 236, 237 ...

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