Kemp et al v. Hudgins

Filing 20

MEMORANDUM AND ORDER denying 10 Motion for Leave to File Sur-Reply; denying 12 Motion to Remand; denying 17 Motion for Hearing. Signed by District Judge Julie A. Robinson on 6/12/2013. (mb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

JOHN KEMP, individually and as Special
Administrator of The Estate of
TERESA LEANN KEMP,
Plaintiff,
v.
KASTON HUDGINS,
Defendant,
v.
DAIRYLAND INSURANCE COMPANY,
Garnishee.

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Case No. 12-CV-2739-JAR

MEMORANDUM AND ORDER
This matter comes before the Court on Plaintiff John Kemp’s Motion to Remand
(Doc. 12) and Garnishee Dairyland Insurance Company’s Motion for Leave to File Sur-Reply
(Doc. 10). Garnishee Dairyland Insurance Company has also filed a Motion for Hearing
(Doc. 17), requesting a hearing on Plaintiff’s Motion to Remand. The Court finds that a hearing
would not assist the Court and therefore denies the request for hearing. The remaining matters
are fully briefed and the Court is prepared to rule. For the reasons set forth in more detail below,
Plaintiff’s Motion to Remand is denied and Dairyland’s Motion for Leave to File Sur-Reply is
denied.

I.

Background
Plaintiff John Kemp, individually and as Special Administrator of the Estate of Teresa

LeAnn Kemp (“Plaintiff”) brought a wrongful death action in the District Court of Cherokee
County, Kansas, Case No. 10CV17, against Defendant Kaston Hudgins (“Hudgins”). Following
a trial, the District Court of Cherokee County entered Judgment in favor of Plaintiff against
Hudgins on Count I of Plaintiff’s First Amended Petition for the wrongful death of Teresa Kemp
in the amount of $3,232,604.67 and on Count II for the wrongful death of Taylor Kemp in the
amount of $2,090,561.40, plus costs.1 The state court also entered Judgment for Plaintiff on
Count III of Plaintiff’s First Amended Petition for personal injuries to Teresa Kemp and punitive
damages, against Hudgins in the amount of $438,142.94 for actual damages and $5,406.00 for
punitive damages, plus costs.2
Plaintiff, as judgment creditor, filed a Request for Garnishment on October 18, 2012,
naming Hudgins as the Judgment Debtor and Dairyland Insurance Company (“Dairyland”),
Hudgin’s insurer, as the Garnishee.3 The court issued an Order of Garnishment4 and Dairyland
filed its Answer, claiming that it held no money for and was not indebted to the judgment
debtor.5 On November 15, 2012, Plaintiff filed a Reply to Dairyland’s Answer, disputing that
Dairyland was not indebted to Hudgins; alleging that Dairyland acted negligently and/or in bad
faith; and seeking judgment against Dairyland in the amount of $5,766,715.01, plus interest,
1

Doc. 1–1 at 71–72.

2

Id. at 69–70.

3

Id. at 67.

4

Id. at 56.

5

Id. at 21.

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costs and attorneys’ fees.6 On November 21, 2012, Dairyland filed its Notice of Removal to this
Court.7 On December 12, 2012, Plaintiff filed the instant Motion to Remand.
II.

Standard
Federal courts are required to remand a case to state court “[i]f at any time before final

judgment it appears that the district court lacks subject matter jurisdiction.”8 To avoid remand, a
defendant must show that the action satisfies the requirements for federal jurisdiction.9 Because
federal courts “are courts of limited jurisdiction, there is a presumption against federal
jurisdiction.”10 Therefore, courts must resolve doubtful cases in favor of remand.11 Defendant
bears the burden of proving facts sufficient to establish jurisdiction.12
Remand is improper if the defendant properly removed a case to federal court that the
plaintiff could have originally filed in federal court.13 Federal courts are courts of limited
jurisdiction, and as such they must have a statutory or constitutional basis to exercise jurisdiction

6

Id. at 9.

7

Doc. 1.

8

28 U.S.C. § 1447(c).

9

See Montoya, 296 F.3d at 955 (“The burden of establishing subject-matter jurisdiction is on the party
asserting jurisdiction.”).
10

Frederick & Warinner v. Lundgren, 962 F. Supp. 1580, 1582 (D. Kan. 1997) (citing Basso v. Utah Power
& Light Co., 495 F.2d 906, 909 (10th Cir. 1974)).
11

Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995).

12

McPhail v. Deere & Co., 529 F.3d 947, 953 (10th Cir. 2008); Martin v. Franklin Capital Corp., 251 F.3d
1284, 1290 (10th Cir. 2001).
13

Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987).

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over any controversy.14 There are two statutory bases for federal subject matter jurisdiction.
First, under 28 U.S.C. § 1332(a), federal district courts have original jurisdiction of civil actions
where complete diversity of citizenship and an amount in excess of $75,000 (exclusive of
interest and costs) in controversy exists. Second, under 28 U.S.C. § 1331, federal district courts
“have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of
the United States.” In addition, if the Court has federal question or diversity jurisdiction of some
claims, it may exercise supplemental jurisdiction over state law claims.15
In this removal action, federal jurisdiction is premised on diversity of citizenship under
28 U.S.C. § 1332. Federal jurisdiction under § 1332 requires complete diversity of citizenship
between the plaintiff and defendants and an amount in controversy exceeding $75,000.16 “The
courts must rigorously enforce Congress’ intent to restrict federal jurisdiction in controversies
between citizens of different states.”17 The presumption is thus against removal jurisdiction,18
and courts must refrain from exercising jurisdiction in all cases where such jurisdiction does not
affirmatively appear on the record.19 Statutes conferring both diversity and removal jurisdiction

14

Montoya v. Chao, 296 F.3d 952, 955 (10th Cir. 2002); see also United States v. Hardage, 58 F.3d 569,
574 (10th Cir. 1995) (“Federal courts have limited jurisdiction, and they are not omnipotent. They draw their
jurisdiction from the powers specifically granted by Congress, and the Constitution, Article III, Section 2, Clause 1.”
(internal quotation omitted)).
15

28 U.S.C. § 1367.

16

28 U.S.C. § 1332.

17

Miera v. Dairyland Ins. Co., 143 F.3d 1337, 1339 (10th Cir. 1998) (citing St. Paul Mercury Indem. Co. v.
Red Cab Co., 303 U.S. 283, 288 (1938)).
18

Frederick & Warinner v. Lungren, 962 F. Supp. 1580, 1582 (D. Kan. 1997) (citing Basso v. Utah Power
& Light Co., 495 F.2d 906, 909 (10th Cir. 1974)).
19

Ins. Corp of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982).

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are to be strictly construed,20 and “[d]oubtful cases must be resolved in favor of remand.”21
III.

Discussion
Federal law governs the characterization of garnishment proceedings for purposes of

removal, and provides that the bad faith claim made pursuant to the garnishment proceeding
created a new action separate from the underlying litigation.22 The case law makes it clear that
such actions are removable as separate actions.
The court in Smotherman v. Caswell, addressed the same issue involved in this
case—whether the court has subject matter jurisdiction where the garnishee removed the case on
the basis of diversity of citizenship.23 The case involved facts very similar to the instant case. In
Smotherman, the plaintiffs obtained a judgment against the defendant and then instituted
garnishment proceedings against defendant’s insurers. The garnishee insurance companies
denied liability and in their reply the plaintiffs alleged that the insurance companies were guilty
of bad faith and negligence in representing defendant and were therefore liable to plaintiffs for
the full amount of the judgment entered against the defendant.24 The court held that “the
characterization of garnishment actions for the purposes of removal should be a matter of federal

20

28 U.S.C.A. §§ 1332(a), 1447.

21

Thurkill v. Menninger Clinic, Inc., 72 F. Supp. 2d 1232, 1234 (D. Kan. 1999) (citing Laughlin v. Kmart
Corp., 50 F.3d 871, 873 (10th Cir. 1995)).
22

See McIntosh v. Scottsdale Ins. Co., Case No. 91-1344-K, 1991 WL 228344, at *3 (D. Kan. Oct. 9, 1991)
(agreeing that federal law rather than state law governs the characterization of garnishment proceedings for removal
purposes; finding that the garnishment proceeding was a new and independent civil action requiring litigation on the
existence of a new liability; and finding that since jurisdictional requirements were met the garnishment action was a
properly removable “civil action.”).
23

Smotherman v. Caswell, 755 F. Supp. 346, 347–48 (D. Kan. 1990).

24

Id. at 347.

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law rather than a matter to be determined by construing individual state garnishment statutes.”25
The court then concluded that under federal law the garnishment action is a distinct civil action
for the purposes of 28 U.S.C. § 1441(a) because it is separate and distinct from the underlying
wrongful death action and involves “a new party litigating the question of a new liability.”26 The
court further found that even under Kansas law, it would reach the same conclusion.27
Plaintiff argues that a determination that the garnishment is a “separate civil action”
should not be determinative, and that there is a requirement that the action be capable of being
originally filed in federal court. Plaintiff then argues that Kansas law requires an assignment to
bring a separate action against the insurer and because Plaintiff did not receive an assignment
from Hudgins, a garnishment proceeding was the only available avenue.28 Plaintiff then argues
that he could not have filed this action in federal court because without a federal judgment, there
can be no garnishment in federal court. Plaintiff asserts that none of the other cases address this
argument.
Plaintiff’s argument is unpersuasive. The case law focuses on substance over form, and
finds that for purposes of removal, where a separate civil action is found, sufficient subject
matter jurisdiction depends on the Court’s determination of whether diversity jurisdiction exists,

25

Id. at 348 (citing Chicago, Rock Island & Pacific RR Co. v. Stude, 346 U.S. 574, 74 S. Ct. 290, (1954);
Bridges v. Bentley, 716 F. Supp. 1389, 1391 (D. Kan. 1989)).
26

Id.

27

Id. at 348–49.

28

See King v. Am. Family Ins. Co., 874 P.2d 691, 694–95 (Kan. Ct. App. 1994) (finding that absent an
assignment of insured’s policy rights, plaintiff’s only remedy is to file a garnishment against insurer to enforce the
judgment she previously obtained against insured.).

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based on the parties and the amount in controversy.29
The courts examine the diversity question from the perspective of the bad faith claim as a
separate action.30 Although the state court’s characterization of the action may be a relevant
factor for the court to consider when determining whether an action is separate for purposes of
removal, labels are not dispositive. In Nungesser v. Bryant, the court noted that “[w]hatever case
label one may attach to the current post-judgment petition, one thing is clear: the Supreme Court
required the bad faith claim to be brought as a separate action.”31 The court found that a
distinction between a claim by the insured or by the judgment creditor via garnishment, “is one
of form but not substance insofar as removal is concerned.”32 The court held that:
in determining whether removal jurisdiction is proper, the court is
not bound by the labels attached by state practice. Congress
intended the removal statute to be uniform in its nationwide
application, and the removal statute thus sets its own criteria,
irrespective of local practice, for determining what suits may be
removed.33
This focus on substance over form likewise defeats Plaintiff’s remaining arguments:
1) that no diversity of citizenship exists; and 2) that Hudgins’ failure to consent to removal

29
See Nungesser v. Bryant, Case No. 07-1285-WEB, 2007 WL 4374022, at *5 (D. Kan. Dec. 7, 2007) (“The
disposition of the instant motion boils down to a rather simple question: is Bryant’s bad faith claim against
EMCASCO part of the same ‘civil action’ as Nungesser’s tort action against Bryant?”).
30

Id. at *8; see also Adriaenssens v. Allstate Ins. Co., 258 F.2d 888, 890 (10th Cir. 1958) (“And, being
original and independent actions of that kind with diversity of citizenship and the requisite sum in controversy, they
were open to removal.”); Brockmann v. Bd. of Cnty. Com’rs of Cnty. of Shawnee, Case No. 07-4103-EFM, 2009 WL
175069, at *7 (D. Kan. Jan. 12, 2009) (Where garnishment action in state court was removed to federal court based
on diversity jurisdiction, court held that it had jurisdiction pursuant to 28 U.S.C. § 1332 and the action was a
separate and independent claim from the state court action and was properly before the court.).
31

Nungesser, 2007 WL 4374022, at *7.

32

Id.

33

Id. at *6.

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requires remand.
A.

Diversity of citizenship

Plaintiff argues that because Plaintiff and Defendant Hudgins are both residents of
Kansas, no diversity of citizenship exists to serve as a basis for removal. Dairyland argues that
diversity of citizenship exists because although Plaintiff and Hudgins are both citizens of
Kansas, Hudgins should either be realigned as a plaintiff or regarded as a nominal party.
The Court must once again focus on substance over form. “Diversity jurisdiction cannot
be conferred upon the federal courts by the parties’ own determination of who are plaintiffs and
who defendants. It is our duty . . . to ‘look beyond the pleadings and arrange the parties
according to their sides in the dispute.’”34 In Dodson Aviation, Inc. v. HLMP Aviation Corp., the
court noted that:
the Tenth Circuit stated that “[i]n determining the question
whether diversity of citizenship requisite to jurisdiction exists, a
court looks to the citizenship of the real parties in interest; and
where there is a complete diversity between them, the presence of
a nominal party with no real interest in the controversy will be
disregarded.” The Court stated that the defendant was merely a
“formal party” because it was not necessary to the complete
adjudication of the controversy between the parties and therefore,
its citizenship was irrelevant when determining whether
jurisdiction existed.35
In this case, Hudgins’ presence is not necessary to the complete adjudication of the
controversy raised by Plaintiff’s reply in the garnishment proceeding, nor is Plaintiff seeking
relief from Hudgins pursuant to that action. Under facts similar to the present case, the court in

34

Id. at *8 (quoting Northbrook Nat. Ins. Co. v. Brewer, 493 U.S. 6, 8, n.5 (1989)).

35
Dodson Aviation, Inc. v. HLMP Aviation Corp, Case No. 08-4102-EFM, 2009 WL 1036123, at *2 (D.
Kan. Feb. 12, 2009) (citing Hann v. City of Clinton, Okla., 131 F.2d 978, 981 (10th Cir. 1942)).

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Bridges v. Bentley, rejected the argument that diversity of citizenship did not exist, holding that:
The garnishment action filed against the garnishee is not joined by
any claim or cause of action against the defendant. The plaintiff’s
cause of action against the defendant has already been resolved in
his favor in state court. The petition for garnishment is directed
only toward the garnishee and not the defendant.36
Despite the fact that the garnishment proceeding is not against Hudgins and that Hudgins
is not necessary to the complete adjudication of that proceeding, Plaintiff argues that Hudgins
may be affected economically by the outcome of the garnishment. Plaintiff argues that a
judgment in Plaintiff’s favor against Dairyland will relieve Hudgins of all or most of his liability
to Plaintiff. However, under similar circumstances courts have aligned defendants with the
judgment creditor for purposes of determining diversity. “In garnishment actions, where a
garnishee has denied liability to the judgment debtor, the judgment creditor’s and judgment
debtor’s interests are aligned on the same side for purposes of determining diversity of
citizenship.”37 Thus, plaintiff and defendant “are aligned on one side and garnishee . . . on the
other for the purpose of determining diversity of citizenship jurisdiction.”38 Plaintiff is actually
asserting Hudgins’ bad faith claim against his insurer, alleging that Dairyland wronged Hudgins.
B.

Defendant Hudgins failure to consent to removal

Plaintiff argues that Hudgins’ failure to consent to the removal requires remand under the
unanimity rule, which requires consent to removal from all defendants.39 Because the Court has

36

Bridges v. Bentley, 716 F. Supp. 1389, 1390 (D. Kan. 1989).

37

Smotherman v. Caswell, 755 F. Supp. 346, 348 (D. Kan. 1990) (citations omitted).

38

Id.

39
See 28 U.S.C. § 1446(b)(2)(A) (“When a civil action is removed solely under section 1441(a), all
defendants who have been properly joined and served must join in or consent to the removal of the action.”).

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already found that Hudgins is a nominal party or should be realigned as plaintiff for purposes of
removal, this argument is likewise without merit.40 “[T]he failure of a merely nominal or formal
defendant to join in removal does not defeat the requirement of unanimity among defendants.”41
Plaintiff acknowledges the case law dealing with nominal parties, but questions the
viability of the nominal party exception in light of Congress’ failure to specifically list the
exception in the statute when it codified the “unanimity rule” in 28 U.S.C. § 1446(b)(2)(A) and
(B) in December, 2011. In light of the fact that circuit courts are still applying the exception, the
Court declines to accept Plaintiff’s argument.42
IV.

Motion to file sur-reply
Dairyland answered the underlying garnishment, claiming that it held no money for and

was not indebted to the judgment debtor. Plaintiff filed a reply, disputing that Dairyland was not
indebted to Hudgins; alleging that Dairyland acted negligently and/or in bad faith; and seeking
judgment against Dairyland in the amount of $5,766,715.01, plus interest, costs and attorneys’
fees. Dairyland’s answer consisted of a form and without the benefit of a sur-reply the last
pleading would be the Plaintiff’s reply— the document asserting for the first time the claim of
bad faith failure to settle. Plaintiff argues that the Kansas garnishment statutes set forth specific
required pleadings and do not provide for the filing of a sur-reply. Dairyland’s concern is that it

40

See Liebau v. Columbia Cas. Co., 176 F. Supp. 2d 1236, 1243 (D. Kan. 2001) (Finding that the court’s
alignment of class defendants as plaintiffs in the case also eliminates the requirement that the class defendants must
consent or join in the removal.).
41

Smotherman, 755 F. Supp. at 349 (citations omitted) (finding that defendant was a nominal party in the
dispute between the plaintiff and garnishee insurer).
42

See, e.g., Brazell v. Waite, No. 12-4047, 2013 WL 2398893 (10th Cir. June 4, 2013); Johnson v.
SmithKline Beecham Corp., ___ F.3d ___, 2013 WL 2450651, at *15 (3rd Cir. June 7, 2013); Bates v. Mortg. Elec.
Registration Sys., Inc., 694 F.3d 1076, 1080 (9th Cir. 2012); Cascades Dev. of Minn., LLC v. Nat’l Specialty Ins.,
675 F.3d 1095, 1098 (8th Cir. 2012).

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needs to file a sur-reply to preserve its denials and affirmative defenses. The Court finds that
Dairyland is not required to file a sur-reply to preserve its denials and affirmative defenses and it
does not risk deemed admission or waiver of argument due to its lack of a responsive pleading in
the underlying garnishment. As such, a sur-reply is unnecessary and Dairyland’s motion is
denied.
IT IS THEREFORE ORDERED BY THE COURT that Dairyland’s Motion for
Hearing (Doc. 17) is DENIED.
IT IS FURTHER ORDERED BY THE COURT that Plaintiff’s Motion to Remand
(Doc. 12) is DENIED.
IT IS FURTHER ORDERED BY THE COURT that Dairyland’s Motion for Leave to
File Sur-Reply (Doc. 10) is DENIED.
IT IS SO ORDERED.
Dated: June 12, 2013
S/ Julie A. Robinson
JULIE A. ROBINSON
UNITED STATES DISTRICT JUDGE

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