Surabian Realty Co., Inc. et al v. Cumis Insurance Society, Inc. et al
District Judge Timothy S. Hillman: MEMORANDUM OF DECISION AND ORDER entered denying 4 Motion to Dismiss and ordering that the case be remanded to the Worcester Superior Court. (Castles, Martin)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
SURABIAN REALTY CO., INC. and
MAJA HOSPITALITY CORPORATION
CUNA MUTUAL GROUP and
CUMIS INSURANCE SOCIETY, INC.
Rule 19 Party
MEMORANDUM OF DECISION AND ORDER ON
ASSENTED TO MOTION TO DISMISS RULE 19 PARTY DEFENDANT
March 28, 2017
Plaintiff Surabian Realty Co. and Maja Hospitality (“Plaintiffs”) assert a single claim
against CUNA Mutual Group and CUMIS Insurance Society (“Defendants”) and David A.
L’Ecuyer (“Rule 19 Party” or “Mr. L’Ecuyer”) for unfair settlement practices pursuant to Mass.
Gen. L. c.176D and Mass. Gen. L. c.93A. This Order addresses Defendants’ and Rule 19 Party’s
Assented to Motion to Dismiss Rule 19 Party Defendant (Docket No. 4). For the reasons set forth
below, the motion is denied.
Procedural and Factual Background
On May 2, 2016, the plaintiffs, Surabian Realty Co., Inc. (“Surabian”) and Maja
Hospitality Corporation (“Maja”) (collectively, “Plaintiffs”) filed a Complaint and Demand for
Jury Trial (the “Complaint”) in Worcester Superior Court (Docket No. 16-85CV00638). In the
Complaint, Plaintiffs name the following defendants: 1) “CUNA Mutual Group”; 2) CUMIS
Insurance Society, Inc.; and 3) David A. L’Ecuyer as a Rule 19 defendant. According to
Plaintiffs, Mr. L’Ecuyer is a necessary party under Massachusetts Rule of Civil Procedure 19(a)
because this case, “upon adjudication, may have a preclusive effect on certain rights, duties, and
obligations between him and the Defendants.” The case arises from a judgment previously
obtained against Mr. L’Ecuyer for negligent misrepresentation in Worcester Superior Court on or
about May 13, 2015. That judgment is currently on appeal before the Massachusetts Appeals
Plaintiffs allege that Defendants failed to offer a timely and reasonable settlement offer
for the judgment against Mr. L’Ecuyer. Plaintiffs further allege that liability against Mr.
L’Ecuyer is reasonably clear (notwithstanding the pending appeal), that Defendants deliberately
offered a low and unfair settlement amount in order to force an unfair and unreasonably low
settlement, and have caused the action to be appealed without adequate grounds to do so. On
April 11, 2016, Plaintiffs submitted to CUMIS a “written demand for relief” pursuant to Mass.
Gen. L. c. 93A, Sections 2 and 9 that outlined the basis for Plaintiffs’ beliefs that CUMIS had
violated Mass. Gen. L. c. 176D. In response to Plaintiffs demand for relief, on or about April 21,
2016 CUMIS refused to discuss any settlement of the judgment against Mr. L’Ecuyer and
offered a settlement on behalf of all Defendants at a level that was less than favorable to the
Plaintiffs. Furthermore, CUMIS stated in its response that it was representing Mr. L’Ecuyer in
the Worcester Superior Court case under a reservation of rights. On May 2, 2016, Plaintiff filed
the Complaint for a single count for violation of Mass. Gen. L. c 176D and 93A against
Defendants and added Mr. L’Ecuyer as a Rule 19 party. Defendants filed a notice of removal on
June 13, 2016.
A plaintiff may not impede a defendant’s right of removal by fraudulently joining a nondiverse defendant who has no real connection to the case. See Universal Truck & Equip. Co. v.
Southworth–Milton, Inc., 765 F.3d 103, 108 (1st Cir. 2014); Mills v. Allegiance Healthcare
Corp., 178 F.Supp.2d 1,4 (D.Mass. 2001). “The linchpin of the fraudulent joinder analysis is
whether the joinder of the non-diverse party has a reasonable basis in law and fact.” Mills, 178
F.Supp.2d at 4. Defendants, as the party seeking removal, bear the burden of demonstrating by
clear and convincing evidence “either that there has been outright fraud committed in the
plaintiff's pleadings, or that there is no possibility, based on the pleadings, that the plaintiff can
state a cause of action against the non-diverse defendant in state court.” Id. at 5 (adopting the
Second Circuit test articulated in Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 207 (2nd Cir.
2001) and quoting Whitaker ); see In re New Eng. Mut. Life Ins. Co. Sales Practices Litigation,
324 F.Supp.2d 288, 298 (D.Mass. 2004) (recognizing use of Whitaker test by judges in this
district); see also Universal Truck, 765 F.3d at 108 (observing that “the First Circuit has not
addressed the question” and that “it is generally recognized that, under the doctrine of fraudulent
joinder, removal is not defeated by the joinder of a non-diverse defendant where there is no
reasonable possibility that the state’s highest court would find that the complaint states a cause of
action upon which relief may be granted against the non-diverse defendant”).
In assessing a claim of fraudulent joinder, the Court is not bound by the allegations in the
complaint, and may consider affidavits and other materials that bear on the question of whether
there is a reasonable basis for joinder of a defendant. Mills, 178 F.Supp.2d at 6; see also Badon
v. RJR Nabisco Inc., 236 F.3d 282, 285 n.3 (5th Cir. 2000) (considering “undisputed summary
judgment type evidence” when determining whether any reasonable possibility of recovery under
state law existed); Antony v. Duty Free Americas, Inc., 705 F.Supp.2d 112, 115 (D.Mass. 2010)
(“[T]he fraudulent joinder doctrine provides an exception to the general rule prohibiting courts
from considering evidence extrinsic to the facts in the complaint.” (citing Mills, 178 F.Supp.2d at
6)). In determining whether a plaintiff has the possibility of recovery against a defendant, the
court is to resolve all disputed issues of fact and ambiguities of law in favor of the non-removing
party. Fabiano Shoe Co., Inc. v. Black Diamond Equipment, Ltd., 41 F.Supp.2d 70, 71–72
Defendants’ primary argument is that Mr. L’Ecuyer was joined as a party solely to defeat
diversity jurisdiction. Defendants further contend that, because Mr. L’Ecuyer is not in the
business of insurance, those claims under Massachusetts law regarding insurance settlements
must fail. Here, Plaintiffs also allege facts that involve the duties and obligations of Mr.
L’Ecuyer, CUMIS’s reservation of rights with regard to his entitlement to coverage, and whether
Plaintiffs are entitled to either the jury award or a settlement in their favor. Accordingly, since
the Plaintiffs’ allegations show that joinder of Mr. L’Ecuyer has a reasonable basis in law and
fact, Mills, 178 F. Supp.2d at 6, and Mr. L’Ecuyer has “a real connection to the case,” Universal
Truck, 765 F.3d at 108, the joinder of Mr. L’Ecuyer is not fraudulent.
Realigning the Parties
Defendants argue, in the alternative, that Mr. L’Ecuyer suggests that the Court should not
be bound by the way the parties are formally aligned in the pleadings and instead must realign
the Mr. L’Ecuyer with Plaintiffs so that the parties with the same “ultimate interests” in the
outcome are on the same side. Landmark Bank v. Machera, 736 F. Supp. 375, 378 (D.Mass.
1990). This realignment would also result in complete diversity of the parties. To determine
whether realignment of parties is proper, the Court must determine the primary and controlling
matter in dispute, and then whether an actual collision of interests remains. U.S.I. Properties
Corp. v. M.D. Construction Co., Inc., 860 F.2d 1, 4 (1st Cir. 1988), citing Indianapolis v. Chase
National Bank, 314 U.S. 63, 72, 62 S.Ct. 15, 18-19 (1941).
Defendants’ support for this argument is fundamentally flawed. Defendants contend that
if CUMIS committed unfair business practices in the state court action by not satisfying the
judgment against Mr. L’Ecuyer, his interests must therefore be aligned with the Plaintiffs. That
both Mr. L’Ecuyer as the insured and Plaintiffs have interests adverse to CUMIS does not
assume then that they share ultimate interests. Plaintiffs’ interest is to obtain a prompt and
reasonable settlement against CUMIS. Mr. L’Ecuyer’s interests, presumably, are to maximize his
coverage in an attempt to minimize his losses. Accordingly, there is a collision of interests
between Plaintiffs and Mr. L’Ecuyer and realignment is not warranted.
For the foregoing reasons, Defendants’ Assented to Motion to Dismiss Rule 19 Party
Defendant (Docket No. 4) is denied. Because joinder of Mr. L’Ecuyer is not fraudulent and
realignment is not proper, complete diversity does not exist. Accordingly, the Court lacks subject
matter jurisdiction over this case and orders that the case be remanded to the Worcester Superior
/s/ Timothy S. Hillman
TIMOTHY S. HILLMAN
UNITED STATES DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?