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Ring's Crossroads Market Inc. v. Cincinnati Indemnity Co.

United States District Court, W.D. Kentucky, Bowling Green Division

August 3, 2015

RING'S CROSSROADS MARKET INC., Plaintiff,
v.
CINCINNATI INDEMNITY COMPANY and REBECCA CLACK, Defendants.

MEMORANDUM OPINION AND ORDER

DAVID J. HALE, District Judge.

On September 29, 2013, fire destroyed Ring's Crossroads Market (RCM), a convenience store in Smiths Grove, Kentucky. RCM subsequently filed a claim for insurance coverage with its carrier, Cincinnati Indemnity Company (CIC). After CIC essentially denied the claim, RCM filed suit against CIC in Edmonson Circuit Court. RCM also sued Rebecca Clack, an insurance adjuster who worked for CIC on RCM's claim. Despite the fact that Clack is a Kentucky resident, she and CIC removed the case to this court on the basis of diversity jurisdiction, arguing that Clack had been fraudulently joined to prevent removal. Clack moved for judgment on the pleadings (Docket No. 8), asserting that Plaintiff's claims against her are foreclosed by Kentucky law. RCM denies that its claims against Clack are prohibited and has moved for remand to Edmonson Circuit Court (DN 10), citing lack of diversity. Because the Court finds that Clack was fraudulently joined, the Motion to Remand will be denied. And because Kentucky law forecloses any possibility of recovery against Clack, Clack's Motion for Judgment on the Pleadings will be granted, and Clack will be dismissed as a defendant.

I. BACKGROUND

The parties agree that Clack was the insurance adjuster for CIC and that at all times relevant to the current dispute, she was acting on behalf of CIC. (DN 1-1 Page ID # 10 at ¶ 24; DN 7 Page ID# 58 at ¶ 24) However, RCM alleges that a "pattern of delay and obfuscation" in Clack's evaluation of the fire amounts to common law negligence or gross negligence; a violation of Kentucky's Unfair Claims Settlement Practices Act (UCSPA), Ky. Rev. Stat. § 304.12-230; and a violation of the Kentucky Consumer Protection Act, Ky. Rev. Stat. § 367, et seq. (DN 1-1 PAGE ID # 9, 10-11 at ¶¶ 13, 20-25, 30-36) Clack counters that Kentucky law forecloses any recovery on these claims against an individual insurance adjuster.

RCM filed suit in the Edmonson County Circuit Court on July 28, 2014. (DN 1) The parties agree that RCM and Clack are citizens of Kentucky, while CIC is a citizen of Ohio. (DN 1-1 ¶ 7-9, Page ID # 8; DN 7 Page ID# 56 at ¶ 7-9) However, Clack and CIC removed the action to this court on August 15, 2014, claiming that Clack's citizenship should be disregarded for purposes of diversity because RCM has stated no colorable cause of action against Clack. (DN 1 Page ID # 2 at ¶ 7) Thereafter, Clack filed her motion for judgment on the pleadings and RCM filed a motion for remand.

II. STANDARD

A. Motion for Judgment on the Pleadings

"[T]he legal standards for adjudicating Rule 12(b)(6) and Rule 12(c) motions are the same." Lindsay v. Yates, 498 F.3d 434, 437 n.5 (6th Cir. 2007). In order to overcome such motions, a plaintiff must allege facts that, if accepted as true, are sufficient to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief." Top Flight Entm't, Ltd. v. Schuette, 729 F.3d 623, 630 (6th Cir. 2013) (alteration in original and internal quotation marks omitted) (quoting Iqbal, 556 U.S. at 679). "The pleading standard Rule 8 announces does not require detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 544). "A pleading that only offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do.'" Id. (quoting Twombly, 550 U.S. at 555).

B. Jurisdiction and Joinder

"[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction may be removed by... the defendants." 28 U.S.C. § 1441(a). The burden to establish jurisdiction is on the removing party. Coyne v. Am. Tobacco Co., 183 F.3d 488, 494 (6th Cir. 1999). Despite Clack's Kentucky citizenship, Defendants claim diversity jurisdiction under 28 U.S.C. § 1332 on the ground that Clack is fraudulently joined. Fraudulent joinder is "a judicially created doctrine that provides an exception to the requirement of complete diversity." Coyne, 183 F.3d at 493 (quoting Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998)). "A party who removes a case involving non-diverse parties to federal court on diversity grounds will defeat a motion to remand if it can show that the non-diverse parties were fraudulently joined." Walker v. Philip Morris USA, Inc., 443 F.Appx. 946, 951 (6th Cir. 2011) (citing Saginaw Hous. Comm'n v. Bannum, Inc., 576 F.3d 620, 624 (6th Cir. 2009); Coyne, 183 F.3d at 493; Probus v. Charter Comm., LLC, 234 F.Appx. 404, 406 (6th Cir. 2007)).

Fraudulent joinder exists where "it [is] clear that there can be no recovery under the law of the state on the cause alleged or on the facts in view of the law." Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994). "However, if there is a colorable basis for predicting that a plaintiff may recover against non-diverse defendants, this Court must remand the action to state court." Coyne, 183 F.3d at 493. "[A] claim is colorable if the state law might impose liability on the resident defendant under the facts alleged.'" Kent State Univ. Bd. of Trs. v. Lexington Ins. Co., 512 F.Appx. 485, 489 (6th Cir. 2013) ( citing Filla v. Norfolk S. Ry. Co., 336 F.3d 806, 810 (8th Cir. 2003)). In deciding whether a defendant has been fraudulently joined, the district court must resolve "all disputed questions of fact and ambiguities in the controlling... state law in favor of the nonremoving party.'" Coyne, 183 F.3d at 493 (omission in original) (quoting Alexander, 13 F.3d at 949).

The standard required for proving fraudulent joinder is more substantial than the motion to dismiss standard under Fed.R.Civ.P. 12(b)(6) and 12(c). See Walker, 443 F.Appx. at 953-54 (internal citations omitted) (discussing the development of fraudulent joinder law). Even under this heavy burden, Clack has demonstrated that there is no colorable claim against her, that she was fraudulently joined, and that she is entitled to judgment on the pleadings.

III. DISCUSSION

While ambiguities in the controlling state law must be construed in the non-removing party's favor, Coyne, 183 F.3d at 494, no such ambiguities are present in this case. Each of RCM's allegations against Clack is fatally ...


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