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Gorman v. Fidelity & Guaranty Life Insurance Company, Inc.

United States District Court, E.D. Kentucky, Southern Division, London

May 23, 2019




         This 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.]


         In 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.

         Gorman 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.

         On 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.


         Federal 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).

         Fidelity 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.

         The 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.”).

         Fidelity 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)).

         If the 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).

         Fidelity 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.

         In 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 ...

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