Gardner v. Hardy et al

Filing 16

MEMORANDUM AND ORDER denying as moot 3 Motion for Leave to File Sur-Reply and Suggestions in Support; denying 4 Motion for Default Judgment; denying 7 Motion to Remand to State Court. Signed by District Judge Daniel D. Crabtree on 5/25/2017. (ht)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

LISA GARDNER,
Judgment Creditor,
and
CHERYLE HARDY,
Judgment Debtor,
v.
Case No. 16-cv-4175-DDC-JPO
FOREMOST INSURANCE
COMPANY GRAND RAPIDS,
MICHIGAN,
Garnishee.

MEMORANDUM AND ORDER
This matter comes before the court on Judgment Creditor Lisa Gardner’s Motion to
Remand (Doc. 7) and Motion for Default Judgment (Doc. 4). After considering the parties’
arguments, the court denies Ms. Gardner’s Motion to Remand and the Motion for Default
Judgment. The court denies Foremost’s Motion for Leave to File Surreply (Doc. 3) as moot.
I.

Factual and Procedural Background
The following facts come from Ms. Gardner’s Reply to Answer of Garnishee, which she

filed in in the District Court of Lyon County, Kansas on October 26, 2016 (Doc. 1-1 at 34–47),
and the parties’ briefs.
This lawsuit arises from injuries Ms. Gardner suffered from Ms. Hardy’s dog. Ms.
Gardner sued Ms. Hardy for her injures in the District Court of Lyon County, Kansas, and on
December 7, 2015, the court entered a final judgment against Ms. Hardy for $899,293.70. On
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August 29, 2016, Ms. Gardner filed her Request for Garnishment. Foremost was served with the
garnishment action on September 16, 2016.
Ms. Gardner filed a Motion for Default Judgment on October 25, 2016, alleging that
Foremost failed to Answer the Garnishment Action within the time allowed under Kan. Stat.
Ann. § 40-218. In her Motion for Default Judgment, Ms. Gardner concedes that Foremost had
filed its Answer with the court on October 21, 2016, but she contends this was improper, and
Foremost should have sent its Answer to her and her attorney. In its Answer, Foremost denies
that it possessed any property, funds, credits or other indebtedness belonging to Ms. Gardner.
Ms. Gardner filed a Reply to Foremost’s Answer on October 26, 2016, in state court. Foremost
filed a Notice of Removal on November 16, 2016, and removed the case to our court. Ms.
Gardner now asks the court to remand the case to the state court because Foremost failed to file a
timely Notice of Removal.
II.

Legal Standard
“Federal courts are courts of limited jurisdiction; they must have a statutory basis for

their jurisdiction.” Dutcher v. Matheson, 733 F.3d 980, 984 (10th Cir. 2013) (quoting Rural
Water Dist. No. 2 v. City of Glenpool, 698 F.3d 1270, 1274 (10th Cir. 2012)). Under 28 U.S.C. §
1441, a defendant may remove to federal court “any civil action brought in a State court of which
the district courts of the United States have original jurisdiction.” 28 U.S.C. § 1441.
The federal removal statutes require a defendant to remove an action “within 30 days
after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading
setting forth the claim for relief upon which such action or proceeding is based . . . .” 28 U.S.C.
§ 1446(b)(1). But, “if the case stated by the initial pleading is not removable,” the defendant
must remove the action to federal court “within 30 days after receipt . . . of a copy of an amended

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pleading, motion, order or other paper from which it may first be ascertained that the case is one
which is or has become removable.” 28 U.S.C. § 1446(b)(3).
The Tenth Circuit has explained that “[t]he failure to comply with these express statutory
requirements for removal can fairly be said to render the removal ‘defective’ and justify a
remand.” Huffman v. Saul Holdings Ltd. P’ship, 194 F.3d 1072, 1077 (10th Cir. 1999) (quoting
Snapper, Inc. v. Redan, 171 F.3d 1249, 1253 (11th Cir. 1999)); see also Farm City Ins. Co. v.
Johnson, 190 F. Supp. 2d 1232, 1236 (D. Kan. 2002) (explaining that “the 30-day time
requirement for removal is mandatory” but “not jurisdictional”); Wichita Fed. Savings & Loan
Assoc. v. Black, No. 89-1089-K, 1989 WL 60141, at *1 (D. Kan. May 10, 1989) (“The time
limitations established by § 1446(b) are mandatory and must be strictly applied.”)
III.

Analysis
The court first determines whether this case is properly in federal court. In its Notice of

Removal, Foremost alleges diversity jurisdiction exists under 28 U.S.C. §1332(a). Although Ms.
Gardner and Ms. Hardy are Kansas citizens, Foremost contends that the court should align their
interests on the same side of the caption for purposes of the diversity analysis. This is correct.
See Smotherman v. Caswell, 755 F. Supp. 346, 348 (D. Kan. 1990) (“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.” (citation omitted)). So, the court views Ms. Gardner and Ms. Hardy both as
plaintiffs. Foremost is incorporated under the laws of Michigan and has its principal place of
business in Michigan. Doc. 1 at 3. Foremost thus is a Michigan citizen for diversity purposes.
28 U.S.C. § 1332(c)(1). Because Foremost is not a citizen of Kansas for diversity jurisdiction

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purposes, and the amount placed in controversy by the garnishment claim places more than
$75,000 at issue, diversity jurisdiction exists.
Ms. Gardner does not dispute that diversity jurisdiction exists. Instead, she contests the
timeliness of Foremost’s removal under 28 U.S.C. § 1446(b). Section 1446 of Title 28 of the
United States Code requires a party to remove an action to federal court within 30 days “after the
receipt by the defendant . . . of a copy of the initial pleading setting forth the claim for relief
upon which such action or proceeding is based” if the case is removable when it is filed. 28
U.S.C. § 1446(b)(1). If a case is not initially removable, but later becomes removable, §
1446(b)(3) governs the procedure. It provides: “if the case stated by the initial pleading is not
removable, a notice of removal may be filed within 30 days after receipt by the defendant . . . a
copy of an amended pleading, motion, order or other paper from which it may first be
ascertained that the case is one which is or has become removable.” 28 U.S.C. § 1446(b)(3).
For § 1446(b)(1) purposes, Ms. Gardner contends that Foremost “received . . . a copy of
the initial pleading” when it received the Order of Garnishment on September 16, 2016, and that
the 30-day clock began to run on that date. But Foremost contends the 30-day clock did not
begin to run until October 25 and 26, 2016, when Ms. Gardner filed her Motion for Default
Judgment and Reply. See Doc. 14 at 2–3. Foremost relies on Farm & City Ins. Co. v. Johnson,
190 F. Supp. 2d 1232 (D. Kan. 2002) to support its position.
In Johnson, the plaintiff obtained a default judgment against the defendant for $1,725.
Johnson, 190 F. Supp. 2d at 1234. Plaintiff then sought to garnish defendant’s wages from her
employers, id., and issuing orders to pay were served on defendant’s two employers, on
December 11, 2000 and on July 2, 2001. On October 15, 2001, plaintiff filed motions for
judgment against the two employers, who, for brevity, are referred to as “Garnishees.”

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Garnishees then filed a Notice of Removal on November 16, 2011. Id. Plaintiff asserted this
removal was untimely, claiming that the removal clock began to run when Garnishees received
their orders to pay—not when plaintiff had filed her motions for judgment. Id. But our court
agreed with Garnishees and held that the clock had begun to run when plaintiff filed her motion
for judgment. The court reasoned that the garnishees’ status shifted from that of mere
stakeholders to real parties in interest when plaintiff filed her motions for judgment.
Johnson’s garnishees relied on 28 U.S.C. § 1442(a)(1) for removal. It provides:
A civil action . . . that is commenced in a State court and that is
against or directed to any of the following may be removed by
them to the district court of the United States for the district and
division embracing the place wherein it is pending:
The United States or any agency thereof or any officer (or any
person acting under that officer) of the United States or of any
agency thereof, in an official or individual capacity, for or relating
to any act under color of such office or on account of any right,
title or authority claimed under any Act of Congress for the
apprehension or punishment of criminals or the collection of the
revenue.
28 U.S.C. § 1442(a)(1). Johnson recognized that § 1442(a)(1) is an “incident of federal
supremacy” designed to “provide federal officials with a federal forum in which to raise defenses
arising from their official duties.” Johnson, 190 F. Supp. 2d at 1235. It also concluded that the
“garnishees’ compliance with or opposition to [the plaintiff’s] motion for judgment against the
agencies” could affect the operation of the federal government or prevent federal officers from
performing their official duties. Id.
Importantly, our court found that controversies at issue in Johnson were not removable
before plaintiff’s motion for judgment, because, before plaintiff filed that, no threat to the federal
officer’s official duties had existed. Id. Relying on a Fifth Circuit case, our court concluded that
§ 1442(a)(1) does not authorize the removal of a case where the United States is only a
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stakeholder. Id. (citing Murray v. Murray, 621 F.2d 103, 106–108 (5th Cir. 1980)). Also,
Johnson concluded that the United States was merely a stakeholder until the motions for
judgment because the orders for garnishment did not impact garnishees’ obligation to pay
defendant. Id. When plaintiff filed the motions for judgment in state court “for an amount in
excess” of the amount of the order of garnishment, the nature of the garnishees’ interest changed
from that of a stakeholder to one where garnishees became a “real party in interest.” Id.
Johnson held Garnishees were on notice that the case had become removable when they received
their motions for judgment against them. Id. at 1236. The court thus found that Garnishees
timely removed the case under § 1446(b)(3). Id.
Here, Foremost contends that it occupies the same position as the garnishees in Johnson.
Foremost asserts it was merely a stakeholder until Ms. Gardner filed her Motion for Default
Judgment and Reply on October 25 and 26, 2016. But Foremost’s argument ignores a material
difference between this case and Johnson. In Johnson, removal depended on § 1442(a)(1),
which provides removal for state court actions against United States agencies. Section
1442(a)(1) does not apply here, of course, because Foremost is not the “United States or any
agency thereof.” 28 U.S.C. § 1442(a)(1). Instead, removal is proper here under § 1332(a)
because diversity jurisdiction exists. So, to determine when the 30-day clock began to run, the
court must determine when the case became removable under § 1332(a).
Diversity jurisdiction existed once Foremost denied liability. See Smotherman, 755 F.
Supp. at 348 (“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.”). Foremost filed its Answer denying liability
on October 21, 2016. The case thus became removable on that date, and the deadline for

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removing the case came 30 days later on November 20, 2016. Foremost filed its Notice of
Removal on November 16, 2016, well within the 30-day deadline imposed by § 1446(b)(3).
Foremost’s removal was timely, so Ms. Gardner’s Motion to Remand is denied.
IV.

Motion for Default Judgment
Ms. Gardner had moved for default judgment while the case was still spending in state

court. She refiled her Motion for Default Judgment in federal court on November 16, 2016.
Doc. 4. In her Motion, Ms. Gardner asserts that Foremost failed to answer or otherwise respond
to the Order of Garnishment within the 40 days allotted by Kan. Stat. Ann. § 40-218. This
statute provides: “The summons or order of garnishment . . . shall require the defendant or
garnishee to answer or otherwise respond by a certain day, not less than 40 days from the date
the summons or order of garnishment is served on the commissioner.” Foremost was served on
September 12, 2016. The deadline for Foremost to respond was 40 days later, October 22, 2016.
Ms. Gardner alleges Foremost failed to Answer timely because it filed its Answer on
October 21, 2016. Ms. Gardner asserts that Kansas law required her to serve the Answer on Ms.
Hardy and Ms. Gardner’s attorney. Kan. Stat. Ann. § 60-738(b)(1) provides that within 40 days:
[T]he garnishee shall send the completed answer to the judgment
creditor’s attorney at the address listed on the answer form or, if
the judgment creditor does not have an attorney, to the judgment
creditor and judgment debtor at the addresses listed on the answer
form.
Id. Foremost contends that this subsection does not apply, and instead, subsection (b)(2) of § 60738. This part of the statute provides:
If the garnishee does not have assets of the judgment debtor, the
garnishee shall send the completed answer to the judgment
creditor’s attorney at the address listed on the answer form or, if
the judgment creditor does not have an attorney, to the judgment
creditor at the address listed on the answer form.

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Foremost is correct. Foremost’s Answer asserted that it had no assets of Ms. Hardy. So,
Foremost complied with Kan. Stat. Ann. § 40-218 when it sent its Answer to Ms. Gardner’s
attorney and filed it with the court on October 21, 2016. Ms. Gardner’s Motion for Default
Judgment thus is denied.
IT IS THEREFORE ORDERED BY THE COURT THAT Judgment Creditor Lisa
Gardner’s Motion to Remand (Doc. 7) is denied.
IT IS FURTHER ORDERED THAT Judgment Creditor Lisa Gardner’s Motion for
Default Judgment (Doc. 4) is denied.
IT IS FURTHER ORDERED THAT Garnishee Foremost Insurance Company’s
Motion for Leave to File Surreply (Doc. 3) is denied as moot.
IT IS SO ORDERED.
Dated this 25th day of May, 2017, at Topeka, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge

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