United States District Court, W.D. Kentucky, Louisville Division
MEMORANDUM OPINION AND ORDER
J. HALE, JUDGE
Brian Sandusky was injured in an accident while riding in a
car owned by his employer. (Docket No. 1-2) As a result,
Sandusky has received payment from the at-fault driver's
insurance company and workers' compensation benefits from
the Kentucky Association of General Insurers Fund.
(Id.) Sandusky brings this action against his
employer's insurer, Acuity, seeking unpaid underinsured
motorist benefits. (Id.) Sandusky also names the
Fund as a defendant, denying the Fund's claimed right to
reimbursement from any settlement or judgment he may receive
as a result of bringing this action. (Id.) Acuity
removed the action to this Court on the basis of diversity of
citizenship (D.N. 1), and Sandusky has filed a motion to
remand, arguing that complete diversity of the parties does
not exist. (D.N. 7) Acuity opposes the motion, arguing that
Sandusky fraudulently joined the nondiverse party, the Fund,
to the case. (D.N. 8) Acuity has also filed an unopposed
motion to bifurcate and stay discovery as to Sandusky's
bad-faith claims. (D.N. 12) For the reasons explained below,
the motion to remand will be denied, and the motion to
bifurcate and stay discovery will be granted.
2016, Sandusky suffered injuries in a car accident while
riding as a passenger in a car owned by his employer. (D.N.
1-2, PageID # 12) Sandusky made a claim against the at-fault
driver, William Goodwin, and his insurer, State Farm.
(Id.) State Farm offered Sandusky what it
represented to be Goodwin's policy limit, and Sandusky
accepted payment from State Farm and released Goodwin's
estate from liability. (Id., PageID # 12-13)
Sandusky's damages exceeded Goodwin's coverage
limits, however, and Sandusky demanded underinsured motorist
benefits from Acuity, his employer's insurance carrier.
(Id., PageID # 12-13) Acuity ultimately offered to
pay Sandusky only a small portion of his claim.
(Id., PageID # 16) Sandusky now asserts claims
against Acuity for breach of contract and bad faith, arguing
that it unreasonably delayed and denied his claim for
underinsured motorist benefits. (Id., PageID #
also received workers' compensation benefits from the
Kentucky Association of General Insurers Fund, which provided
workers' compensation insurance to his employer.
(Id., PageID # 18) According to the complaint, the
Fund notified Sandusky that it would seek reimbursement of
the benefits it paid to him from any settlement or judgment
that may result from this action. (Id.) Sandusky
names the Fund as a defendant in this action, denying the
Fund's claimed right to reimbursement. (Id.)
filed this action in Nelson County Circuit Court.
(Id., PageID # 11-19) Acuity removed the action to
this Court, invoking the Court's diversity jurisdiction.
(D.N. 1) Both Sandusky and the Fund are citizens of Kentucky,
however. (Id., PageID # 3) Sandusky has filed a
motion to remand, arguing that the Court should send this
action back to state court as complete diversity does not
exist. (D.N. 7) Acuity argues that the Court maintains
diversity jurisdiction, because Sandusky fraudulently joined
the Fund against whom it has no colorable cause of
action. (D.N. 8)
filed a motion to bifurcate and stay discovery as to
Sandusky's bad-faith claims. (D.N. 12) Acuity argues that
bifurcation and a stay of discovery as to those claims is
appropriate because Sandusky's contract claims may be
dispositive. (D.N. 12-1) Acuity certified that no party
opposes the motion (D.N. 12, PageID # 100). No. party filed a
response to the motion, and it is therefore deemed unopposed.
See LR 7.1(c).
MOTION TO REMAND
considering a motion to remand, the Court must examine
whether the case was properly removed to federal
court.” Graves v. Standard Ins. Co., 66
F.Supp.3d 920, 922 (W.D. Ky. 2014) (citation and internal
quotations omitted). Removal based on diversity jurisdiction
requires both complete diversity and an amount in controversy
exceeding $75, 000. 28 U.S.C. § 1332(a).
nondiverse party has been joined as a defendant-as here-then
“the removing defendant may avoid remand only by
demonstrating that the non-diverse party was fraudulently
joined.” Casias v. Wal-Mart Stores, Inc., 695
F.3d 428, 432 (6th Cir. 2012) (quoting Jerome-Duncan,
Inc. v. Auto-By-Tel, LLC, 176 F.3d 904, 907 (6th Cir.
1999)). The relevant inquiry for a fraudulent-joinder claim
is whether Sandusky “had at least a colorable cause of
action against” the Fund in Kentucky state courts.
Jerome-Duncan, 176 F.3d at 907. The question, then, “is
whether there is arguably a reasonable basis for predicting
that the state law might impose liability on the facts
involved.” Alexander v. Elec. Data Sys. Corp.,
13 F.3d 940, 949 (6th Cir. 1994) (citation and internal
quotations omitted). If so, then joinder is proper, and the
Court must Bd. of Trustees v. Lexington Ins. Co.,
512 Fed.Appx. 485, 491 n.1 (6th Cir. 2013). And Acuity
clearly relies upon the doctrine of fraudulent joinder in its
notice of removal. (D.N. 1, PageID # 5-6) The Court's
analysis will therefore be limited to fraudulent joinder.
remand the case to state court. See Mason v. Excel
Indus., No. 3:10-CV-175, 2011 WL 847449, at *2 (W.D. Ky.
Mar. 9, 2011) (citing Alexander, 13 F.3d at 949).
standard for determining whether a cause of action is
colorable is more lenient than the Rule 12(b)(6)
motion-to-dismiss standard. Casias, 695 F.3d at 433.
“Therefore, it is possible that a party is not
fraudulently joined, but that the claim against that party
ultimately is dismissed for failure to state a claim upon
which relief may be granted.” Hix v. Affiliated
Computer Servs., No. 5:08-521, 2009 WL 2240548, at *2
(E.D. Ky. July 27, 2009) (quoting Batoff v. State Farm
Ins. Co., 977 F.2d 848, 852 (3d Cir. 1992)).
The Court is permitted to “look to material outside the
pleadings for the limited purpose of determining whether
there are ‘undisputed facts that negate the
claim.'” Walker v. Philip Morris USA,
Inc., No. 3:13-CV-00560-CRS, 2014 WL 1319682, at *5
(W.D. Ky. Mar. 28, 2014) (quoting Casias, 695 F.3d
at 433). But the Court must resolve “all disputed
questions of fact and ambiguities in the controlling . . .
state law in favor of the non removing party.”
Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th
Cir. 1999) (citation and internal quotations omitted).
“All doubts as to the propriety of removal are resolved
in favor of remand.” Id.
complaint makes only limited references to the Fund. The
complaint alleges that the Fund “made payments to
various entities and to [Sandusky] as a result of coverage
through a Kentucky Worker's Compensation Insurance Plan
provided by [Sandusky's] employer” and
“notified [Sandusky] that it [was] making a claim for
subrogation and/or reimbursement from any settlement or
judgment in this claim for any compensation paid under the
Worker's Compensation policy.” ...