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Hambelton v. State Farm Fire & Casualty Co.

United States District Court, E.D. Kentucky, Northern Division, Ashland

July 2, 2018




         This matter is before the Court on its own motion based on the Court's inherent power and duty to insure the requirements for subject matter jurisdiction are satisfied in all cases.

         Notice of Removal [Docket No. 1] in the above-styled action states that this Court may exercise subject matter jurisdiction over this matter pursuant to 28 U.S.C. §1332. Upon review of the Notice, this Court found that a serious question existed as to whether it may properly exercise jurisdiction over this matter. Specifically, in setting forth the basis for removal, Defendants maintain that Lindsey Patton has been fraudulently joined as parties so as to defeat federal jurisdiction This Court directed the parties to submit briefs in this regard [Docket No. 4]. Having reviewed the parties' submissions [Docket Nos. 5 and 6], as well as the record herein, the Court finds that Defendants have not met the stringent requirements for establishing fraudulent joinder, and, as such, remand is warranted


         On February 7, 2018, a six-foot portion of the cinderblock foundation of the Hambeltons' home collapsed. [Complaint, Docket No, 1-1, ¶ 10]. At all relevant times, the Hambeltons had insurance coverage for their home through Defendant State Farm, Policy Number 17-BY-G955-1. Id. at ¶¶6-9.

         On February 13, State Farm's adjuster, Defendant Linsdey Patton, inspected the home and indicated to Plaintiffs that "there was nothing that could have been done to prevent it," that he was not qualified to handle the claim, and that he would have someone more qualified look into the matter. Id. at ¶¶ 17-19. One week later, the Hambeltons received a letter from Patton stating, that the collapse had been caused by the "expansion of the adjacent soil from the hydrostatic pressure placed on it from the heavy rains, and soil saturation we have in the area currently." Patton added that "based on the information we currently have and the policy language noted above, we are unable to assist you with this loss." Id. at ¶¶ 20-21.

         The Hambeltons filed this lawsuit against State Farm as well as Lindsey Patton in Greenup Circuit Court alleging that State Farm breached its contract of insurance and violated Kentucky's Consumer Protection Act, KRS.367.110 et seq. [Docket No. 1-1, Counts 1 and VI]. Plaintiffs also allege the following claims against both State Farm and its adjuster, Linsdey Patton: negligence and bad faith, under both common law and Kentucy's Unfair Settlement Practices Act ("UCSPA"), KRS.304.12-230 and 304.12-235. Id., Counts II, III, IV, and V. Plaintiffs seek compensatory and punitive damages.

         Defendants filed a Notice of Removal alleging jurisdiction pursuant to 28 U.S.C. § 1332, which provides, in pertinent part:

The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between... citizens of different States;

28 U.S.C. § 1332 (a)(1). The requisite amount in controversy does not appear in dispute, as the policy at issue has limits of $75, 400 for the dwelling with dwelling extension costs, $56, 550 for personal property and actual loss for loss of use. [Docket No. 1].

         With regard to citizenship, in its Notice of Removal Defendants state that Plaintiffs are citizens of Kentucky, State Farm is a citizen and domiciliary of the State of Illinois, where it maintains its principal place of business and that Lindsey Patton is a citizen of Kentucky. Id. at ¶¶ 10-12.

         Defendants acknowledge that absence of diversity of citizenship but claims that the non-diverse Defendant Lindsey Patton was fraudulently joined as a defendant for the specific purpose of defeating federal jurisdiction. They contend that, as Patton was fraudulently joined, his citizenship is not relevant to the jurisdiction inquiry and that this Court may properly exercise jurisdiction over this matter.


         The "party seeking to bring a case into federal court carries the burden of establishing diversity jurisdiction." Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999) (internal citation and quotation marks omitted). There must be complete diversity such that no plaintiff is a citizen of the same state as any defendant. V&M Star, LP v. Centimark Corp., 596 F.3d 354, 355 (6th Cir. 2010) (citing Lincoln Prop. Co. v. Roche,546 U.S. 81, 89 (2005)). However, fraudulent joinder of a non-diverse party does not defeat removal on diversity grounds. Alexander v. Elec. Data Sys. Corp.,13 F.3d 940, 948-49 (6th Cir. 1994). The relevant inquiry is whether the plaintiff had at least a colorable cause of action against the defendant in state court. Jerome-Duncan, Inc. v. Auto-By-Tel, LLC, 176 F.3d 904, 907 (6th Cir. 1999), A colorable cause of action exists if there is "arguably a reasonable basis for predicting that the state law might impose liability on the facts involved." Alexander, 13 F.3d at 949. This is a less searching inquiry than that triggered by a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Gibson v. Am. Min. Ins. Co., No. 08-118-ART, 2008 WL 4602747, *5 (E.D. Ky. Oct. 16, 2008) (citing Batoff v. State Farm Ins. Co.,977 F.2d 848, 852 (3d Cit. 1992)). "If there is a colorable basis for predicting that a plaintiff could recover against the ...

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