United States District Court, E.D. Kentucky, Southern Division, Pikeville
OPINION & ORDER
Gregory F. Van Tatenhove United States District Judge
in this removal action attempt to invoke diversity
jurisdiction based on fraudulent joinder. In doing so, they
ask the Eastern District of Kentucky a question that other
defendants have asked of this Court at least a dozen times:
can a plaintiff in Kentucky seek relief for alleged bad faith
determinations of an insurance adjuster? Kentucky courts have
yet to answer this question, and until such is resolved, this
Court cannot find that Plaintiff Gene Howard fraudulently
joined Defendant George Salyer. Therefore, Plaintiff's
Motion to Remand must be GRANTED and the
case returned to Magoffin Circuit Court.
2016, Plaintiff Gena Howard bought a house in Hazel Green,
Kentucky, for $70, 000. [R. 1-1 at 5.] To insure her new
house, Ms. Howard purchased insurance through Allstate
Vehicle and Property Insurance Company. Id. Ms.
Howard lived in the home for a while and then her son moved
into the home. Id. at 6.
on September 23, 2018, a fire devastated the property,
destroying the home and all its contents. Id. Ms.
Howard submitted a claim through Allstate, who selected
Defendant George Salyer as the adjuster for her claim.
Id. at 6-7. Thereafter, Allstate determined the home
and its contents to be a total loss. Id. However,
through Mr. Salyer, Allstate denied Ms. Howard's claim,
stating that she had violated the policy contract by moving
out of the home. Id. at 7. The parties dispute
whether the contract was violated, but such is not the issue
Howard sued Allstate and Mr. Salyer in Magoffin Circuit Court
on February 5, 2019, asserting various theories of relief,
including bad faith under both common law and the Unfair
Claims Settlement Practices Act (UCSPA), as set forth in
Kentucky Revised Statute § 304.12-230. Id. at
8-12. Allstate removed the action to this Court on February
8, 2019, arguing that the claims against Mr. Salyer had no
colorable basis, and therefore, he was fraudulently joined.
[R. 1 at 3-4.] According to Allstate, Mr. Salyer, as an
individual insurance adjuster, cannot be liable for bad faith
under Kentucky law as set forth in Davidson v. Am.
Freightways, Inc., 25 S.W.3d 94 (Ky. 2000).
Howard challenges the Court's power to decide this case
with a motion to remand. [R. 6.] A defendant may remove a
civil action brought in state court to federal court only if
the action is one over which the federal court could have
exercised original jurisdiction. See 28 U.S.C.
§§ 1441, 1446. This court has original federal
question jurisdiction over civil actions which arise under
the “Constitution, laws, or treaties” of the
United States, 28 U.S.C. § 1331. This Court also has
original “diversity” jurisdiction over all civil
actions when “the matter in controversy exceeds the sum
or value of $75, 000, exclusive of interest and costs, and
the dispute is between” parties who are “citizens
of different states.” See 28 U.S.C. §
federal courts are courts of limited jurisdiction, any doubts
regarding federal jurisdiction should be construed in favor
of remanding the case to state court. Shamrock Oil &
Gas Corp. v. Sheets, 313 U.S. 100, 108-109 (1941);
Cole v. Great Atlantic & Pacific Tea Co., 728
F.Supp. 1305, 1307 (E.D. Ky. 1990) (citations omitted). In
determining the appropriateness of remand, a court must
consider whether federal jurisdiction existed at the time the
removing party filed the notice of removal. Ahearn v.
Charter Twp. of Bloomfield, 100 F.3d 451, 453 (6th Cir.
1996). Furthermore, the removing defendant bears the burden
of showing that removal was proper. Gafford v. Gen. Elec.
Co., 997 F.2d 150, 158 (6th Cir. 1993), rev'd on
other grounds by Hertz Corp. v. Friend, 559 U.S. 77
(2010); Fenger v. Idexx Laboratories, 194 F.Supp.2d
601, 602 (E.D. Ky. 2002) (citations omitted).
general rule regarding removal based on diversity of
citizenship is that there must be complete diversity
“both at the time that the case is commenced and at the
time that the notice of removal is filed” in order to
properly remove the case to federal court. Jerome-Duncan
Inc. v. Auto-By-Tel, LLC, 176 F.3d 904, 907 (6th Cir.
1999) (emphasis added). Here, the matter in controversy
purportedly exceeds $75, 000,  but the complaint does not
satisfy the complete diversity requirement of 28 U.S.C.
§ 1332. Plaintiff Gena Howard is a citizen and resident
of Kentucky. [R. 1-1 at 4.] Defendant Allstate is considered
a resident of Illinois. Id. However, Defendant
George Salyer is also a citizen and resident of Kentucky,
defeating diversity in this matter. Id. at 5.
Regardless of whether the case is remanded or remains before
this Court on the basis of diversity jurisdiction, Kentucky
is the forum state and its substantive law will be followed.
Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521,
526 (6th Cir. 2006). So long as the case remains in federal
court, federal procedural law will govern as applicable,
including in establishing the appropriate standards for
fraudulent joinder and dismissal. Weaver v. Caldwell
Tanks, Inc., 190 Fed.Appx. 404, 408 (6th Cir. 2006).
asserts that Mr. Salyer was fraudulently joined, and his
citizenship should be ignored for purposes of determining
diversity jurisdiction. [R. 1 at 3.] Fraudulent joinder is a
“judicially created doctrine that provides an exception
to the requirement of complete diversity.” Coyne v.
Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999)
(quoting Triggs v. John Crump Toyota, Inc., 154 F.3d
1284, 1287 (11th Cir. 1998)). This doctrine is used by courts
“when the non-removing party joins a party against whom
there is no colorable cause of action.” Saginaw
Housing Comm'n v. Bannum, Inc., 576 F.3d 620, 624
(6th Cir. 2009) (citing Jerome-Duncan Inc. v.
Auto-By-Tel, LLC, 176 F.3d 904, 907 (6th Cir. 1999)).
This doctrine was created to prevent plaintiffs from
asserting claims against nondiverse defendants “for the
sole purpose of preventing removal.” McLeod v.
Cities Serv. Gas Co., 233 F.2d 242, 246 (10th Cir.
1956). If the Plaintiff's claim has no hope of success,
then the “fraudulent joinder of non-diverse defendants
will not defeat removal on diversity grounds.”
Saginaw Housing Comm'n, 579 F.3d at 624 (quoting
Coyne, 183 F.3d at 493).
the removing party, has the burden of proving fraudulent
joinder and must present “sufficient evidence that a
plaintiff could not have established a cause of action
against [the] non-diverse defendants under state law.”
Coyne, 183 F.3d at 493. To resolve a claim of
fraudulent joinder, the district court may “pierce the
pleadings” to consider summary judgmentlike evidence,
but it should evaluate that evidence like it would a Rule
12(b)(6) motion to dismiss. Walker v. Philip Morris USA,
Inc., 43 Fed.Appx. 946, 954 (6th Cir. 2011). Any
contested issues of fact should be construed in the
non-removing party's ...