Crosthwait Planting Company et al v. Snipes et al

Filing 22

ORDER AND MEMORANDUM OPINION granting 5 Motion to Remand to State Court, Circuit Court of Washington County, Mississippi. Case Closed. Case to be forwarded to Circuit Court Washington County, Mississippi within 10 days.. Signed by District Judge Sharion Aycock on 9/18/18. (tab)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
GREENVILLE DIVISION
CROSTHWAIT PLANTING COMPANY, and
A.E. CROSTHWAIT FARMING AND
PLANTING INC.
V.

PLAINTIFFS

CIVIL ACTION NO. 4:17-CV-141-SA-JMV

CHARLES E. SNIPES, and
ARMTECH INSURANCE SERVICES, INC.

DEFENDANTS

ORDER AND MEMORANDUM OPINION
Plaintiffs Crosthwait Planting Company, and A.E. Crosthwait Farming and Planting Inc.
originally filed this case in the Circuit Court of Washington County, Mississippi. The Defendants,
Charles E. Snipes and Armtech Insurance Services, Inc. removed the case to this Court premising
federal jurisdiction on the basis of diversity of citizenship. See Notice of Removal [1]. The Parties
are not diverse. Both of the Plaintiffs are citizens of Mississippi, and Defendant Snipes is also a
citizen of Mississippi. Despite this lack of diversity, the Defendants nevertheless claim removal is
proper, arguing that Defendant Snipes was improperly joined for the express purpose of defeating
diversity jurisdiction. Now before the Court is the Plaintiffs’ Motion to Remand [5] this case to
the Circuit Court, and two separate Motions to Dismiss Armtech [9], and Snipes [12]. The issues
are fully briefed and ripe for review. The Court will take up the jurisdictional issue first, and then
proceed to the motions to dismiss if necessary.
Diversity Jurisdiction & Improper Joinder
“Improper joinder can be established in two ways: (1) actual fraud in the pleading of
jurisdictional facts, or (2) inability of the plaintiff to establish a cause of action against the nondiverse party in state court.” Davidson v. Georgia-Pac., L.L.C., 819 F.3d 758, 765 (5th Cir. 2016)
(citing Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 401 (5th Cir. 2013) (internal quotations

and alteration omitted)). Only the second situation is an issue in this case. The applicable test “is
whether the defendant has demonstrated that there is no possibility of recovery by the plaintiff
against an in-state defendant, which stated differently means that there is no reasonable basis for
the district court to predict that the plaintiff might be able to recover against an in-state defendant.”
Davidson, 819 F.3d at 765 (citing Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir.
2004) (en banc)).
“Smallwood sets out the procedure for determining whether, in the absence of actual fraud,
a nondiverse defendant was improperly joined.” Davidson, 819 F.3d at 765; see Mumfrey, 719
F.3d at 401. “First, a court looks at the allegations contained in the complaint. See id. If a plaintiff
can survive a Rule 12(b)(6) challenge for failure to state a claim, there is ordinarily no improper
joinder.” Davidson, 819 F.3d at 765 (citing Mumfrey, 719 F.3d at 401; Smallwood, 385 F.3d at
573). When “a complaint states a claim that satisfies 12(b)(6), but has ‘misstated or omitted
discrete facts that would determine the propriety of joinder . . . the district court may, in its
discretion, pierce the pleadings and conduct a summary inquiry.’” Id. (quoting Smallwood, 385
F.3d at 573). “[T]he decision regarding the procedure necessary in a given case must lie within the
discretion of the trial court.” Id.
“The burden of persuasion on those who claim [improper] joinder is a heavy one.”
Davidson, 819 F.3d at 765 (citing Travis v. Irby, 326 F.3d 644, 649 (5th Cir. 2003)). With that in
mind, the Court views “all unchallenged factual allegations, including those alleged in the
complaint, in the light most favorable to the plaintiff” and resolves “[a]ny contested issues of fact
and any ambiguities of state law” in the plaintiff’s favor. Davidson, 819 F.3d at 765. It “is
insufficient that there be a mere theoretical possibility of recovery; to the contrary, there must at
least be arguably a reasonable basis for predicting that state law would allow recovery in order to

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preclude a finding of fraudulent joinder.” Walton v. Tower Loan of Miss., 338 F. Supp. 2d 691,
692–93 (N.D. Miss. 2004) (citing Travis, 326 F.3d at 648; Badon v. RJR Nabisco Inc., 224 F.3d
382, 386 (5th Cir. 2000) (internal quotations omitted)). Moreover, the Court must “take into
account the ‘status of discovery’ and consider what opportunity the plaintiff has had to develop its
claims against the non-diverse defendant.” Davidson, 819 F.3d at 765 (citing McKee v. Kan. City
S. Ry. Co., 358 F.3d 329, 334 (5th Cir. 2004) (quoting Travis, 326 F.3d at 649)).
Discussion and Analysis
The Plaintiffs in this case are corporations engaged in cotton growing. In crop year 2013,
the Plaintiffs acquired Multi-Peril Crop Insurance policies through Defendant insurance provider
Armtech. During that crop year, the Plaintiffs allege that they sustained losses to their cotton crops
in excess of $400,000.00. The Plaintiffs filed claims with Armtech for these losses. In January of
2014, Armtech informed the Plaintiffs that their claims were being treated as “controversial
claims”, and gave the Plaintiffs an opportunity to provide additional information and
documentation about the crop which the Plaintiffs provided. Armtech subsequently informed the
Plaintiffs that it was retaining independent expert Charles Snipes to assist in the evaluation of the
Plaintiffs’ claims. The Plaintiffs’ claims were eventually denied for failure to “employ good
farming practices in the care, maintenance, and husbandry of the insured crop.”
In their Complaint [1-1], the Plaintiffs assert claims for fraud, civil conspiracy, fraudulent
misrepresentation, gross negligence, malice, and misrepresentation against Snipes. The Plaintiffs
allege that Snipes failed to discharge his duties in accordance with any applicable standard, was
grossly negligent in the preparation of his report, conspired with Armtech to falsify his report in
order to ensure that the claims were denied, and fraudulently represented that he did not have a
business relationship with Armtech. The Plaintiffs further allege that Snipes made false

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representations and conspired with Armtech to deny the claims for his own personal financial
benefit.
The Defendants assert two arguments in opposition to remand. First, they argue that there
is no basis in Mississippi law for a claim or liability against Defendant Snipes. Second, the
Defendants argue that even if there was a basis for liability, the Plaintiffs failed to allege specific
facts sufficient to support a claim against him.
The Mississippi Supreme Court, and this Court, have addressed this issue on several
occasions. Starting with Bass v. California Life Ins. Co., and continuing to Gallagher Bassett
Servs., Inc. v. Jeffcoat, the Supreme Court has held that
an insurance adjuster, agent or other similar entity may not be held
independently liable for simple negligence in connection with its
work on a claim. Such an entity may be held independently liable
for its work on a claim if and only if its acts amount to any one of
the following familiar types of conduct: gross negligence, malice, or
reckless disregard for the rights of the insured.
Gallagher Bassett Servs., Inc. v. Jeffcoat, 887 So. 2d 777, 784 (Miss. 2004) (citing Bass v.
California Life Ins. Co., 581 So. 2d 1087 (Miss. 1991)).
This standard of course raises the question of who qualifies as a “similar entity”. “The Fifth
Circuit has generally applied the standard from Gallagher to professionals with whom the
insurance company has a paid or contractual relationship” including independent engineers,
physicians, and experts. Chapman v. Coca-Cola Bottling Co., No. 4:08-CV-49-HTW, 2011 WL
13192698, at *7 (S.D. Miss. Aug. 31, 2011). In a factually similar case directly on point, LC Farms,
Inc. v. McGuffee, this Court found a reasonable basis upon which plaintiff might be able to support
a finding of liability against an insurance adjuster that allegedly falsified a report resulting in the
denial of a crop insurance claim. No. 2:12-CV-165-SA, 2012 WL 5879433, at *5 (N.D. Miss. Nov.
21, 2012).
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The Defendants attempt to distinguish LC Farms by arguing that “implicit in the Bass
holding was the Court’s recognition that the administrator in that case had the authority to pay or
deny claims without the prior approval of the insurer.” This Court reads no such holding, express
or implied, in Bass, or any of the other cases interpreting the standard. The Court also notes that
“all ambiguities in the controlling state law are resolved in favor of the non-removing party.” Int’l
Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 204 (5th Cir. 2016).
As to the relevant factual allegations, as noted above the Plaintiffs allege Snipes was
grossly negligent in the preparation of his report, conspired with Armtech to falsify his report in
order to ensure that the claims were denied, and fraudulently represented that he did not have a
business relationship with Armtech. The Plaintiffs further allege that Snipes made false
representations and conspired with Armtech to deny the claims for his own personal financial
benefit. These are precisely the types of intentional conduct contemplated by the standard
articulated in Bass and Gallagher. In addition, the Plaintiffs support these arguments with at least
some evidence that Snipes review and analysis of their claims was flawed, and that an independent
review of their claims by the Jackson Regional Office of the USDA not only reached the opposite
result, but indicated that there were problems with Snipes’ review. The Plaintiffs have also brought
forth evidence that Snipes’ investigation failed to meet basic industry requirements. This evidence
when coupled with evidence that Snipes potentially gained financially from the denial of the claims
could lead a reasonable jury to conclude that Snipes’ actions were not merely negligent.
In light of the above precedents, and given these allegations viewed “in the light most
favorable to the plaintiff” the Court finds that there is “arguably a reasonable basis for predicting
that state law would allow recovery” without deciding whether the Plaintiff might ultimately

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prevail on the merits. Davidson, 819 F.3d at 765; Walton, 338 F. Supp. 2d at 692–93; (citing Travis,
326 F.3d at 648; Badon, 224 F.3d at 386).
Because the removing defendants failed to carry their “heavy burden” of persuasion as to
improper joinder, the Court finds that Defendant Snipes was not improperly joined, the Parties are
not diverse in this case, and remand to the Circuit Court is appropriate. See Davidson, 819 F.3d at
765 (citing Travis, 326 F.3d at 649).
Conclusion
For all of the reasons fully discussed above, the Plaintiffs’ Motion to Remand [5] is
GRANTED, and the Clerk of Court is directed to take all steps necessary to REMAND this case
to the Circuit Court of Washington County, Mississippi. This CASE is CLOSED.
It is so ORDERED on this the 18th day of September, 2018.
/s/ Sharion Aycock
UNITED STATES DISTRICT COURT JUDGE

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