United States District Court, E.D. Kentucky, Southern Division, London
ORDER AND OPINION
K. CALDWELL, CHIEF JUDGE UNITED STATES DISTRICT COURT
matter is before the Court on Plaintiff Lawrence Gorman's
motion to remand the action back to state court. [DE 6.] For
reasons set forth below, the Court will DENY
Gorman's motion. [DE 6.]
1989, Plaintiff Lawrence Gorman bought a life insurance
policy through the Hazard Insurance Agency
(“HIA”). The policy was issued by Fidelity and
Guaranty Life Insurance Company (“Fidelity”). In
2017, Gorman sought information from Fidelity regarding the
status of his policy. When he did not receive a response, he
hired a lawyer, who wrote to Fidelity requesting a status
report. Fidelity responded that it had no records of
Gorman's policy which suggested that the policy had
either lapsed or been cancelled before 2004. Fidelity further
stated that unless Gorman could produce evidence to the
contrary, the policy would be treated as expired. Gorman then
sought records from HIA but found that it was no longer in
business and had filed articles of dissolution back in 2014.
filed suit in the Perry Circuit Court against Fidelity, HIA,
and HIA's unknown successor. In his Complaint, Gorman
seeks an accounting from all Defendants and a declaration of
rights under the alleged policy. He also asserts common law
bad-faith claims against Fidelity and alleges that the
insurance company violated Kentucky's Unfair Claims
Settlement Practices Act.
December 14, 2018, Fidelity removed the action to this Court.
Gorman asserts that this Court lacks jurisdiction because
both he and Defendant HIA are citizens of the Commonwealth of
Kentucky. Fidelity concedes that the lack of complete
diversity would ordinarily destroy diversity. However, it
maintains that removal was proper because HIA was
fraudulently joined to the action.
Courts have jurisdiction over civil matters between citizens
of different states in which the amount in controversy
exceeds $75, 000, exclusive of interests and costs. 28 U.S.C.
§ 1332(a). This requires complete diversity, meaning no
plaintiff may share citizenship with any defendant.
Caudill v. N. Am. Media Corp., 200 F.3d 914, 916
(6th Cir. 2000). The burden of establishing diversity
jurisdiction is on the removing party. Coyne ex rel. Ohio
v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999).
contends that the Court's jurisdiction over the matter is
proper because once the citizenships of HIA and its unknown
successor are set aside, complete diversity exists among the
parties. Fidelity further asserts that the
amount-in-controversy requirement has been satisfied,
pointing to the death benefit of the policy, its likely
surrender value, and Gorman's bad-faith claims for an
unspecified value. [DE 1, at 8.] It is well settled that the
citizenship of a fictitious defendant, in this case HIA's
unknown successor, cannot be considered for the purposes of
determining diversity jurisdiction. 28 U.S.C. §
1441(b)(1); Shaffer v. DaVita Sw. Ohio Dialysis, No.
3:13-CV-232, 2013 WL 5366090, at *1 (S.D. Ohio Sept. 24,
2013). The Court also finds by a preponderance of the
evidence that the amount in controversy here exceeds $75,
000, exclusive of interests and costs. 28 U.S.C. §
1446(c)(2)(B). The only remaining question then is what to do
with HIA's non-diverse citizenship.
parties here do not dispute that HIA filed articles of
dissolution in 2014. It is unclear, though, what the current
status of the corporation is and whether it has been fully
wound up. Nevertheless, because Fidelity does not argue
otherwise, the Court will assume that HIA can still be sued
under the laws of Kentucky. See Ky. Rev. Stat. Ann.
§ 271B.14-050(2)(e); Bear, Inc. v. Smith, 303
S.W.3d 137, 145 (Ky. Ct. App. 2010) (“Generally, for
the purpose of being sued, a corporation is deemed to exist
until its debts are paid.”).
instead focuses on its argument that HIA's citizenship
should be ignored because it was fraudulently joined to the
action. Fraudulent joinder is an exception to the complete
diversity requirement for federal removal jurisdiction.
Howard v. Allstate Ins. Co., No. CIV.A.
5:14-173-DCR, 2014 WL 5780967, at *3 (E.D. Ky. Nov. 5, 2014).
To prove fraudulent joinder, Fidelity must present sufficient
evidence that Gorman cannot establish a cause of action
against HIA under Kentucky law. Coyne, 183 F.3d at
493. If Gorman has stated a colorable basis for predicting
that he may recover against HIA, then this Court must remand
the matter back to state court. Id. The test,
however, is not whether Gorman added the non-diverse HIA to
defeat removal but “whether there is arguably a
reasonable basis for predicting that the state law might
impose liability on the facts involved.” Bobby
Jones Garden Apartments, Inc. v. Suleski, 391 F.2d 172,
176 (5th Cir. 1968)).
determination cannot be made from the face of the complaint,
the Court may consider evidence outside the pleadings.
Walker v. Philip Morris USA, Inc., 443 Fed.Appx.
946, 953 (6th Cir. 2011) (internal quotation marks omitted).
The Court must be careful to confine its inquiry to the
threshold issue of jurisdiction and must resolve all disputed
questions of fact and legal ambiguities in favor of the
nonremoving party. In re Darvocet, Darvon &
Propoxyphene Prod. Liab. Litig., 889 F.Supp.2d 931, 937
(E.D. Ky. 2012).
specifically asserts that Gorman has no possibility of
recovering against HIA because there is no “arguable
basis” that HIA could owe Gorman an equitable
accounting under Kentucky law. This is so, Fidelity argues,
because the Kentucky Supreme Court has made clear that
independent insurance agents do not owe fiduciary
duties to insureds.
Kentucky, a plaintiff must establish either a contractual or
fiduciary relationship to proceed on an accounting claim.
Gentry v. Coffey, No. 2006-CA-002293-MR, 2007 WL
4465573, at *1 (Ky. Ct. App. Dec. 21, 2007). Gorman appears
to concede that there is no contract between him and HIA that
would require an accounting. Rather, Gorman bases his demand
for an equitable accounting on the supposed fiduciary
relationship that ...