Tim Reed, Inc. v. Motorists Mutual Insurance Company
MEMORANDUM OPINION AND ORDER: (1) Plaintiff's Motion to Remand (Doc. # 7 ) is GRANTED; (2) This matter is REMANDED to Pike Circuit Court; and (3) This matter is STRICKEN from Court's active docket. Signed by Judge David L. Bunning on 11/17/2021. (RCB)cc: COR, Pike Circuit Court certified copy w/docket sheet
Case: 7:21-cv-00042-DLB Doc #: 10 Filed: 11/17/21 Page: 1 of 7 - Page ID#: 98
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CIVIL ACTION NO. 21-42-DLB
TIM REED, INC.
MEMORANDUM OPINION AND ORDER
JOHN JOHNSON, et al.
This case involves an insurance contract dispute, originally filed in Pike Circuit
Court by Tim Reed, Inc., an Eastern Kentucky construction company, against Motorists
Mutual Insurance Company (“Motorists”) stemming from repairs of a truck owned by Tim
Reed and insured by Motorists. Motorists has filed a third-party complaint against John
Johnson and Property Damage Appraisers, Inc., (“Third-Party Defendants”), who
Motorists alleges is liable for some or all of the losses claimed by Tim Reed. The ThrdParty Defendants filed a Notice of Removal in Pike Circuit Court, and thereby removed
the case to this Court. (Doc. # 1). Plaintiff Tim Reed now seeks to remand the action,
and the matter is currently before the Court upon Plaintif’s Motion to Remand (Doc. # 7),
which has been fully briefed (Docs. # 8 and 9), and is this ripe for review. For the reasons
stated herein, Plaintiff’s Motion to Remand (Doc. # 7) is granted.
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FACTUAL AND PROCEDURAL BACKGROUND
In December 2018, a Ford pickup truck owned by Tim Reed, Inc. was involved in
an accident with an uninsured motorist in Mingo County, WV. (Doc. # 1-1 ¶ 6). Tim Reed
and its automobiles were insured by Motorists, and Tim Reed filed a claim with Motorists
to initiate repairs to the pickup truck on the same day as the accident. (Id. ¶ 7). However,
repairs to the truck took quite some time, and therein lies the dispute giving rise to this
case. Tim Reed did not receive the fully repaired truck until May 2019, almost five months
later. (Id. ¶ 12). During those five months, Tim Reed alleges that it suffered economic
loss stemming from the truck being out of service. (Id. ¶ 13).
In August 2019, Tim Reed filed this lawsuit in Pike Circuit Court, in which it alleges
that Motorists caused Tim Reed’s economic loss by failing to fulfill the contractual
obligations that Motorists owed to Tim Reed pursuant to the insurance policy entered
between the two parties. (See generally Doc. # 1-1). Tim Reed also alleges violations of
the Kentucky Unfair Claims Settlement Statute (id. ¶ 14), the implied covenant of good
faith and fair dealing (id. ¶ 18, et seq.), and intentional misrepresentation (id. ¶ 27, et
seq.). In July 2020, after discovery had been conducted, Motorists removed the action to
federal court, and this Court later granted a Motion to Remand, sending the case back to
Pike Circuit. See Tim Reed, Inc. v. Motorists Mut. Ins. Co., No. 7:20-CV-106-DLB (E.D.
Ky., filed July 31, 2020), ECF No. 1 and 10. The Order remanding that case was based
upon a lack of subject-matter jurisdiction, in which the Court reasoned that Defendants
had not shown that it was “more likely than not” that damages in the case would exceed
$75,000. Tim Reed, Inc. v. Motorists Mut. Ins. Co., No. 7:20-CV-106-DLB, 2020 WL
7391271, at *3-4 (E.D. Ky. Dec. 16, 2020).
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Then, three months later back in Pike Circuit Court, Motorists filed a third-party
complaint against Property Damage Appraisers, Inc., and its employee, John Johnson.
(Doc. # 1-2). Motorists alleges that the Third-Party Defendants, hired by Motorists to
conduct damage inspections and adjustment services to its clients (such as Tim Reed),
are liable to Motorists for all or part of the damages claimed by Tim Reed. (See id.). More
specifically, Motorists alleges that the Third-Party Defendants caused “any alleged delay
in the investigation and adjustment of the Plaintiff’s claim,” which is the central issue to
Tim Reed’s case against Motorists. (Id. ¶ 9). In May 2021, the Third-Party Defendants
removed the action again, which makes the second time that the underlying case has
been before this Court.
28 U.S.C. § 1441(a) provides for the removal of “any civil action brought in a State
court . . . by the defendant or the defendants, to the district court of the United States for
the district and division embracing the place where such action is pending.” However,
given the limited jurisdiction of the federal judiciary, “the removal statutes must be
narrowly construed,” as they were “adopted in order to restrict rather than expand the
scope of removal from the state courts.” First Nat’l Bank of Pulaski v. Curry, 301 F.3d
456, 464 (6th Cir. 2002). Accordingly, “all doubts as to the propriety of removal are
resolved in favor of remand.” Coyne ex rel. Ohio v. Am. Tobacco Co., 183 F.3d 488, 493
(6th Cir. 1999).
At issue here is § 1441(a)’s reference to “the defendant or the defendants,” and
whether that reference includes third-party defendants such as John Johnson and
Property Damage Appraisers, Inc. These Third-Party Defendants have argued that “[t]he
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question remains as to whether ‘defendant’ . . . includes a party brought into an action to
defend against a claim by the original defendant.” (Doc. # 8 at 3). Unfortunately,
however, the question does not remain, as the Supreme Court has spoken on the issue,
Home Depot, U.S.A., Inc. v. Jackson, 139 S. Ct. 1743, 1746 (2019), adopting a standard
in line with the Sixth Circuit’s longstanding view that “a third-party defendant is not a
‘defendant’ who may remove [an] action to federal court.”
In re Mortgage Elec.
Registration Sys., 680 F.3d 849, 853 (6th Cir. 2012). Accordingly, for the reasons that
follow, Plaintiff’s Motion to Remand is granted and this matter will be remanded back to
Pike Circuit Court.
For many years, federal courts across the country were split as to whether 28
U.S.C. § 1441(a)’s mention of “defendants” included third-party defendants who were not
originally named in the action, but who were instead added as parties by way of impleader
under Rule 14 of the Federal Rules of Civil Procedure. Titled “Third-Party Practice,” Rule
14 refers to impleaded defendants as “third-party defendants.” See Fed. R. Civ. P. 14.
In 2002, the Sixth Circuit outlined these conflicts in Curry, in which the court cited cases,
articles, and treatises far and wide, but settled upon the principle that “third-party
defendants are not ‘defendants’ for purposes of § 1441(a).” 301 F.3d at 462-63.
To be clear, this Court is bound by Sixth Circuit precedent, and Curry has not been
overturned by the Supreme Court. However, the parties in this case have concentrated
their briefings not on Curry, but instead on Home Depot U.S.A., and because of that, the
Court will address that case, which held that “third party counterclaim defendants” (joined
in an action under Rule 13(h)) are not “defendants” for purposes of § 1441. 139 S. Ct. at
1746. Here, Third-Party Defendants argue that the Home Depot U.S.A. holding is limited
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only to counterclaims, and is thus inapplicable here, as the Third-Party Defendants are
not counterclaim defendants under Rule 13(h), but are instead third-party defendants
under Rule 14. (See Doc. # 8). However, a closer look at Home Depot U.S.A. reveals
that its holding is equally applicable to Rule 14 third-party defendants, and the case
certainly does not overturn Curry – in fact, it bolsters it in the Court’s view.
To begin, the Supreme Court made clear that the crux of the Home Depot U.S.A.
holding rests in the fact that Home Depot was not an originally named party to the action.
139 S. Ct. at 1748. Under a plain reading of the phrase “the defendant” as used in §
1441(a), the Court writes, any party not named as the defendant in the original underlying
action is not a “defendant” for removal purposes. Id. Further bolstering the holding’s
application to Rule 14 is that the Court distinguished third-party defendants in Rule 14,
alongside counterclaim defendants in Rule 13, as a specific type of “defendant”
mentioned in the Federal Rules not applicable to “the defendant” in § 1441. Id. at 1749.
The Court also noted that the critical inquiry in evaluating removal and remand is
“whether [the] action could have been brought originally in federal court,” and because
counterclaims have no effect on subject matter jurisdiction, they cannot affect removal.
Id. at 1748 (internal citations omitted). Such is the same with respect to third-party
practice, as it is “not necessary that independent grounds of jurisdiction exist between the
plaintiffs and the third-party defendants, against whom no relief was sought by the
plaintiffs[.]” Stemler v. Burke, 344 F.2d 393, 396 (6th Cir. 1965). Additionally, in the wake
of Home Depot U.S.A., other district courts have applied its reasoning to Rule 14 thirdparty defendants. See, e.g., Jefferson Capital Sys., LLC v. Alveranga, No. 1:20-CV-990,
2020 WL 6685304 (N.D. Ohio Nov. 12, 2020); Axel Royal, LLC v. KLM Grp., LP, No. 19-
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CV-68-CJE-JFJ, 2019 WL 11025882 (N.D. Okla. June 12, 2019). In short, the substantial
similarities between Rule 13 and Rule 14, especially with respect to the specific methods
of reasoning employed by the Supreme Court with respect to Rule 13, broadly support an
application of the holding on in Home Depot U.S.A. to third-party defendants under Rule
Additionally, irrespective of the Home Depot U.S.A. holding, this Court is
nonetheless bound by the Sixth Circuit, which has stated clearly that third-party
defendants are not permitted to remove actions to federal court. See, e.g., Curry, 301
F.3d at 461 (“We hold that third-party defendants are not ‘defendants’ for purposes of §
1441(a).”); Mortgage Elec. Registration Sys., 680 F.3d at 853. Nothing in the Home
Depot U.S.A. decision stands to suggest that circuit-level cases such as Curry are
abrogated or overturned, and the parties here have not argued such, either. While ThirdParty Defendants here have crafted an artful argument raising points of statutory
interpretation (Doc. # 8 at 3), the Court cannot and most certainly will not interpret its way
around clear-cut Sixth Circuit case law. Even though Home Depot U.S.A. dealt with a
slightly different issue, the Supreme Court’s reasoning is directly analogous to the Sixth
Circuit’s holding in Curry, which, if anything, serves only to further strengthen Curry. As
such, Curry is certainly not overturned, and is nonetheless binding on this Court.
Lastly, the Court notes arguendo that even if third-party defendants were able to
remove cases under § 1441, this case would still be remanded for failing to meet the
amount-in-controversy requirement of § 1332.
Almost one year ago, this Court
determined that the underlying case did not meet the amount in controversy requirement,
and it sees no new information beyond the facts presented to it then. (Compare Tim
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Reed, 2020 WL 7391271 with Doc. # 8 at 3-4). As the Court noted in that Order, the
removing party bears the burden of establishing subject matter jurisdiction. Heyman v.
Lincoln Life Nat’l Ins. Co., 781 F. App’x 463, 470 (6th Cir. 2019). Here, not only have the
removing parties failed to meet that burden, but they are prohibited from removal by law,
as third-party defendants are not considered “defendants” for removal purposes in the
Sixth Circuit, and that conclusion is supported by the Supreme Court’s recent decision in
Home Depot U.S.A. For all these reasons, the Plaintiff’s Motion to Remand (Doc. # 7) is
granted and this case is remanded to the Pike Circuit Court.
Plaintiff’s Motion to Remand (Doc. # 7) is GRANTED;
This matter is REMANDED to the Pike Circuit Court; and
This matter is STRICKEN from the Court’s active docket.
This 17th day of November, 2021.
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