Bowen v. Atlantic Casualty Insurance Company, Inc. et al

Filing 13

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Plaintiffs Motion to Remand 9 is GRANTED. This matter shall be remanded to the Twenty Second Circuit of Missouri in City of St. Louis, Missouri for further proceedings. An order of remand accompanies this Order. Signed by District Judge John A. Ross on 11/25/13. (ARL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

DOUGLAS BOWEN,
Plaintiff,
v.
ATLANTIC CASUALTY INSURANCE
COMPANY, INC. et al.,
Defendants.

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No. 4:13-CV-1919 JAR

MEMORANDUM AND ORDER
This matter is before the Court on Plaintiff’s Motion to Remand (ECF No. 9). This matter
is fully briefed and ready for disposition.
LEGAL STANDARD
Removal statutes are strictly construed, and any doubts about the correctness of removal
are resolved in favor of state court jurisdiction and remand. See Shamrock Oil & Gas Corp. v.
Sheets, 313 U.S. 100, 108-09 (1941); In re Bus. Men’s Assurance Co. of Am., 992 F.2d 181, 183
(8th Cir. 1993); Manning v. Wal-Mart Stores East, Inc., 304 F. Supp. 2d 1146, 1148 (E.D. Mo.
2004) (citing Transit Cas. Co. v. Certain Underwriters at Lloyd’s of London, 119 F.3d 619, 625
(8th Cir. 1997)). The party seeking removal and opposing remand has the burden of establishing
jurisdiction. Cent. Iowa Power Coop. v. Midwest Indep. Transmission Sys. Operator, 561 F.3d
904, 912 (8th Cir. 2009); City of Univ. City, Missouri v. AT & T Wireless Services, Inc., 229 F.
Supp. 2d 927, 929 (E.D. Mo. 2002).

A civil action brought in state court may be removed to the proper district court if the
district court has original jurisdiction of the action. 28 U.S.C. § 1441(a). Federal district courts
have original jurisdiction in all civil actions between citizens of different states if the amount in
controversy exceeds $75,000.00, exclusive of interest and costs. Manning, 304 F.Supp.2d at
1148 (citing 28 U.S.C. § 1332(a)(1)).
BACKGROUND
On or around December 29, 2012, Plaintiff Douglas Bowen (“Bowen”) filed a cause of
action against Bharat Saheba and Kashev Kalindi, LLC in the Circuit Court of Callaway County
for personal injuries (“the underlying case”). Bowen alleged that he suffered injuries while he
was a guest in the Westwood Motel, which was owned and operated by defendants Saheba and
Keshav Kalindi, LLC (Amended Petition, ECF No. 4, ¶7).1 At the time of Bowen’s injuries,
defendants Saheba and Keshav Kalindi, LLC were insured by a policy issued by Atlantic
Casualty Insurance Company, Inc. (“ACI”). (Id., ¶8). ACI refused to defend or indemnify
Saheba and Keshav Kalindi, LLC in the underlying case. (Id., ¶9). On June 21, 2013, Bowen,
Saheba and Keshav Kalindi, LLC entered into a §537.065 agreement,2 whereby “[Bowen] agreed

1

On or around August 19, 2012, Bowen was injured while attempting to unclog a drain in his
motel room using liquid drano given to him by motel staff. (Amended Petition, ¶7; ECF No. 101, ¶9). Kashev Kalindi, LLC is Saheba’s LLC. See Plaintiff’s Reply Memorandum of Law in
Support of Motion to Remand (“Reply”), ECF No. 12, p. 1.
2
Section 537.065 provides, in relevant part, “Any person having an unliquidated claim for
damages against a tort-feasor, on account of bodily injuries or death, may enter into a contract
with such tort-feasor or any insurer in his behalf or both, whereby, in consideration of the
payment of a specified amount, the person asserting the claim agrees that in the event of a
judgment against the tort-feasor, neither he nor any person, firm or corporation claiming by or
through him will levy execution, by garnishment or as otherwise provided by law, except against
the specific assets listed in the contract and except against any insurer which insures the legal
liability of the tort-feasor for such damage and which insurer is not excepted from execution,
garnishment or other legal procedure by such contract. Execution or garnishment proceedings in
aid thereof shall lie only as to assets of the tort-feasor specifically mentioned in the contract or
the insurer or insurers not excluded in such contract.”
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to levy execution of any Judgment he might obtain in the underlying case only against any
insurer which insures the legal liability of Defendants Saheba and Keshav Kalindi, LLC, and
whereby they assigned to [Bowen] any action or claim they may have against Defendant ACI or
any other insurance company.” (Id., ¶10).3 After trial, a Judgment was entered on July 8, 2013,
in favor of Bowen and against Saheba and Keshav Kalindi, LLC in the amount of $6,000,000.00
for Bowen’s personal injuries. (Id., ¶11). ACI has refused to pay the policy limits despite a
demand to do so. (Id., ¶12).
On August 15, 2013, Bowen filed this action in the Circuit Court of the City of St. Louis,
alleging a claim for equitable garnishment under §379.200, R.S. Mo.4 against defendants ACI,
Saheba, and Keshav Kalindi, LLC; a claim for vexatious refusal to defend and to pay under
§§375.296 and 375.420, R.S. Mo. against ACI; and a claim for breach of contract duty to defend
against ACI. In this action, Bowen alleges that, under §379.200, R.S. Mo., he is the judgment
creditor of defendants Saheba and Keshav Kalindi, LLC and is entitled to have the Judgment
satisfied by ACI under the insurance policy issued to Saheba and Keshav Kalindi, LLC.
(Amended Petition, ¶13).
ACI removed this action to this Court on September 27, 2013, asserting diversity
jurisdiction pursuant to 28 U.S.C. §§1332, 1446. (Notice of Removal, ECF No. 1). ACI
contends that, at the time of the filing of the underlying action, Bowen was a citizen of Missouri
3

The Court notes that this agreement only affects Count I of the Amended Petition at issue in
this case. See Notice of Removal, ¶4.
4
Section 379.200 provides, “Upon the recovery of a final judgment against any person, firm or
corporation by any person, including administrators or executors, for loss or damage on account
of bodily injury or death, or damage to property if the defendant in such action was insured
against said loss or damage at the time when the right of action arose, the judgment creditor shall
be entitled to have the insurance money, provided for in the contract of insurance between the
insurance company, person, firm or association as described in section 379.195, and the
defendant, applied to the satisfaction of the judgment, and if the judgment is not satisfied within
thirty days after the date when it is rendered, the judgment creditor may proceed.”
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(id., ¶8), ACI was a North Carolina corporation with its principal place of business in North
Carolina (id., ¶9), and defendants Saheba and Kalindi were residents the State of Missouri (id.,
¶10).5 ACI maintains that this action is between citizens of different states and the amount in
controversy exceeds $75,000, exclusive of interests and costs. ACI suggests that defendants
Saheba and Keshav Kalindi, LLC have been fraudulently joined to this suit as co-defendants and
their citizenship should not be considered for purposes of determining diversity jurisdiction. (Id.,
¶4). ACI asserts that, because Saheba and Keshav Kalindi, LLC assigned their claims to ACI,
Bowen joined Saheba and Keshav Kalindi, LLC as defendants solely to prevent removal of this
action. Therefore, ACI asks this Court not to consider the citizenship of Saheba and Keshav
Kalindi, LLC when determining whether diversity jurisdiction exists. In the alternative, ACI
contends that this action should be removed based upon realignment of the parties. (Id., ¶5).
ACI asserts that Bowen’s interest is the same as Saheba and Keshav Kalindi, LLC’s interest
because Bowen waived and assigned his claims in favor of defendants Saheba and Keshav
Kalindi, LLC. (Id.). Finally, in the alternative, ACI asks this Court to sever Count I and retain
jurisdiction of Counts II and III.
DISCUSSION
Defendant ACI removed this action asserting diversity jurisdiction. The parties do not
dispute that the amount in controversy is in excess of $75,000 and, thus, satisfies the
jurisdictional amount. The only issue for the Court is whether complete diversity of the parties
exists.

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Notably, ACI does not state that Saheba and Kashev Kalindi, LLC are/were citizens of the State
of Missouri. (Notice of Removal, ¶10). Citizenship, not residency, is the proper inquiry in
determining diversity jurisdiction. See 28 U.S.C. §1332.
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As stated, ACI claims that there is complete diversity because Saheba and Keshav
Kalindi, LLC are not necessary parties to this action. In the alternative, ACI asserts that the
parties should be realigned such that Bowen, Saheba and Keshav Kalindi, LLC would be
“plaintiffs,” so that there would be complete diversity between the parties.
I.

Saheba and Keshav Kalindi, LLC are necessary parties

ACI claims that Saheba and Keshav Kalindi, LLC are not necessary parties, but are
pretensively joined (Memorandum in Opposition to Plaintiff’s Motion to Remand
(“Opposition”), ECF No. 11, p. 5). ACI claims that a defendant insured in an underlying action
is not a necessary party in the following equitable garnishment action under §379.200, R.S. Mo.,
brought by the judgment creditor against the insurance company. Id., p. 5 (citing Mazdra v.
Selective Ins. Co., 398 S.W.2d 841, 845-46 (Mo. 1966); Ingram v. Shelter Mut. Ins. Co., 922
S.W.2d 854 (Mo. Ct. App. 1996). ACI asserts that Saheba and Keshav Kalindi, LLC are not
proper defendants in this action because judgment has been entered against them, and there is no
relief that Bowen could be afforded against them, other what was obtained in the original
judgment. ACI further argues that federal precedent deeming the policy holders necessary
parties in the subsequent equity action is incorrect. (Opposition, p. 6)(noting the use of “may,”
which is not an imperative, and contending that “and” actually means “or” in §379.200, R.S.
Mo.). In sum, ACI asserts that the §537.065 agreement and the prior Judgment renders Saheba
and Keshav Kalindi, LLC unnecessary parties because there is no basis for predicating liability
against them.
In his Reply, Bowen maintains that the insureds, Saheba and Keshav Kalindi, LLC, are
necessary parties under relevant Eighth Circuit and Eastern District of Missouri case law.
(Reply, pp. 1-2). These Courts have held that § 379.200, R.S. Mo. “requires that the plaintiff

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“proceed in equity against the defendant and the insurance company.” Demann v. Liberty Mut.
Fire Ins. Co., 4:12CV00990 ERW, 2012 WL 3939827, at *2 (E.D. Mo. Sept. 10, 2012); Glover
v. State Farm Fire & Cas. Co., 984 F.2d 259, 261 (8th Cir. 1993)(“Because the insurer is entitled
… to assert any defenses it has against the insured, the Missouri legislature had good reason to
require that the judgment debtor be joined in the statutory action, even if that action does not
expose the judgment debtor to any risk of additional liability.”)6; Kendall v. N. Assur. Co. of
Am., 09-0539-CV-W-GAF, 2009 WL 2632757, at *2 (W.D. Mo. Aug. 25, 2009)(“Courts have
consistently held that §379.200 requires plaintiffs to join the judgment debtor in an equitable
garnishment action filed pursuant to this statute.”). Further, Bowen states that Saheba and
Keshav Kalindi, LLC are necessary and proper party defendants because they remain obligated
to Bowen under Missouri law. (Reply, p. 3)(citing Sexton v. Omaha Prop. & Cas. Ins. Co., 231
S.W.3d 844, 850 (Mo. Ct. App. 2007), which rejected the insurer’s argument that because the
insured entered into a § 537.065 agreement with the judgment creditor, then the insured is only
legally obligated for the damages provided in the agreement).
Under relevant and applicable Eighth Circuit and Eastern District of Missouri precedent, as
well as the clear language of §379.200, the Court finds that Saheba and Keshav Kalindi, LLC are
necessary parties to this action. See Demann, 2012 WL 3939827, at *2; Glover, 984 F.2d at 261;
Kendall, 2009 WL 2632757, at *2; Fleming v. Liberty Surplus Ins. Corp., 4:12-CV-1478 CDP,
2012 WL 6200526, at *2 (E.D. Mo. Dec. 12, 2012)(the “statutory text [of §379.200] requires
6

The Glover court also distinguished Mazdra as a procedural case because, for the first time on
appeal, the Mazdra defendant insurance company objected to the insured’s absence from the suit.
The Mazdra court held that the insurer could not first raise that issue on appeal. The Eighth
Circuit doubted whether Mazdra stood for “the general proposition that the Missouri courts will
ignore the plain statutory command that the judgment debtor be joined in an action under §
379.200.” Glover, 984 F.2d at 261.

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joinder of the insured as a defendant”). The Court believes that Saheba and Keshav Kalindi,
LLC are not fraudulently joined and their citizenship as party defendants must be considered for
purposes of diversity jurisdiction.
II.

Realignment as Party Plaintiffs

In the alternative, ACI asserts that Saheba and Keshav Kalindi, LLC should be realigned as
party-plaintiffs because at the commencement of this action, they were released of personal
liability by Bowen and they assigned any claims they had against ACI to Bowen. (Opposition,
pp, 3-4, p. 9 (citing §537.065 Contract, ECF No. 1-3, pp. 116-120)). ACI contends that the Court
should consider Saheba and Keshav Kalindi, LLC as party-plaintiffs for purposes of determining
diversity jurisdiction.
ACI also asserts that if this Court realigned Saheba and Keshav Kalindi, LLC as partyplaintiffs, then the Court would not have to consider ACI to be a constructive citizen of Missouri
pursuant to 28 U.S.C. §1332(c)(1) because the §379.200 claim is not a “direct action.” Section
1332(c)(1) provides that, “in any direct action against the insurer of a policy or contract of
liability insurance, whether incorporated or unincorporated, to which action the insured is not
joined as a party-defendant, such insurer shall be deemed a citizen of every State and foreign
state of which the insured is a citizen[.]” ACI contends that “direct action” statutes allow the
insured to pursue the actual causes of action against the insurance company. (Opposition, p. 8).
ACI asserts that this is not a “direct action” because the injured plaintiff was required to pursue
the tortfeasors prior to pursuing the insurance company. (Id.). As such, ACI suggests that
§1332(c)(1) does not apply and ACI cannot be deemed a constructive citizen of Missouri.
Because it maintains that this is not a direct action, ACI argues that the Court should retain this

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case by dismissing Saheba and Keshav Kalindi, LLC as fraudulently joined (as discussed above)
or realigning them as party-plaintiffs. (Opposition, p. 9).
In Reply, Bowen states that federal courts have rejected this argument on numerous
occasions. (Reply, pp. 3-4). A Court in this district has held that “[t]his case is an equitable
garnishment action brought under R.S. Mo. § 379.200. Such a suit is a ‘direct action’ against an
insurer for purposes 28 U.S.C. § 1332(c)(1).” Am. States Ins. Co. v. Gates Corp., 4:07CV932
RWS, 2008 WL 163588, at *3 (E.D. Mo. Jan. 17, 2008)(citing Prendergast v. Alliance Gen. Ins.
Co., 921 F.Supp. 653, 655 (E.D.Mo.1996)). Bowen further argues that, if Saheba and Keshav
Kalindi, LLC were realigned as party-plaintiffs then ACI should be deemed a citizen of Missouri
under the operation of 28 U.S.C. §1332(c)(1). See Am. States Ins. Co., 2008 WL 163588, at *3
(“If [the insured] is realigned as a plaintiff … then it would no longer be a party-defendant in this
matter. The result would be that an insured is not a party-defendant in the matter and [the
insurer] would be deemed to be a citizen of Missouri by operation of § 1332(c)(1).”); Fleming,
2012 WL 6200526, at *1 (“An equitable garnishment action under Mo.Rev.Stat. § 379.200 is a
direct action, … and [insured] Wright was not named as a defendant, so Liberty Surplus is
deemed to be a citizen of Illinois. Because plaintiff Wright and defendant Liberty Surplus are
both citizens of Illinois, complete diversity does not exist on the face of the complaint.”). Thus,
Bowen argues that even if Saheba and Keshav Kalindi, LLC were realigned as party-plaintiffs
and are no longer considered party-defendants in this matter, then there would still not be
complete diversity. The result would be that ACI would be deemed to be a citizen of Missouri by
operation of 28 U.S.C. §1332(c)(1). That is, Bowen, Saheba and Keshav Kalindi, LLC and ACI
would all be citizens of Missouri, the complete diversity requirement of §1332(a) would not be
met, and the matter would be remanded. In other words, because “in a direct action against an

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insurer, the insurer is deemed to be a citizen of the same state as its insured if the insured is not
joined as a party-defendant” Am. States Ins. Co., 2008 WL 163588, at *3, realignment would not
result in diversity of the parties.
The Court agrees that realignment of Saheba and Keshav Kalindi, LLC is improper and,
furthermore, that it would not result in this Court retaining jurisdiction under 28 U.S.C. §1332.
“Given the Court’s previous rulings and the plain statutory command of § 379.200, realignment
of [Saheba and Keshav Kalindi, LLC] is improper because they are ‘necessary party defendant[s]
to the action under Mo.Rev.Stat. § 379.200.’” Kendall, 2009 WL 2632757, at *2 (W.D. Mo.
Aug. 25, 2009)(citing Haines v. Sentinel Ins., Co., No. 08–00981–CV–W–FJG, 2009 WL
648894, at *2 (W.D.Mo. March 11, 2009)). Further, even if they were realigned, this case would
still be remanded because the Court would deem ACI to be a Missouri citizen under operation of
28 U.S.C. §1332.
III.

Sever

Alternatively, ACI states that the Court should sever the Petition and maintain its original
jurisdiction over Bowen’s claims in Counts II and III against ACI. (Opposition, p. 10). ACI
suggests that this Court can sever and remand Bowen’s equitable garnishment count and
maintain jurisdiction over the breach of contract and vexatious refusal counts “[i]n a fashion
similar to the process found in 28 U.S.C. §1441(c).” (Opposition, p. 5).
In Reply, Bowen suggests that this Court cannot have jurisdiction over his claims because
there is not complete diversity, which is required under 28 U.S.C. §1332. Bowen states that
“ACI cannot be nondiverse for part of the case, which destroys diversity, yet simultaneously be
diverse for another part of the case so that this Court would somehow have jurisdiction. That
would not be complete diversity.”

(Reply, p. 7)(emphasis in original).

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Further, Bowen

maintains that the claims in this case are not “separate and independent” claims that can be tried
in two tribunals. (Id.). Bowen asserts that all of the claims for equitable garnishment, breach of
contract and vexatious refusal, “turn on the question of coverage under ACI’s policy” and must
be resolved in one hearing for purposes of consistency and economy. (Id.).
The Court agrees that Bowen’s claims all arise out of a single, underlying harm. The Court
declines to split Bowen’s claims to allow ACI to have a federal forum for the breach of contract
and vexatious refusal claims when the equitable garnishment claim will involve the same
underlying facts. The Court finds that it would not be in the interest of justice or judicial
economy to sever the breach of contract and vexatious refusal claims.
CONCLUSION
The Court grants Plaintiff’s Motion to Remand because the parties to this action are not
completely diverse.

The Court finds that Saheba and Keshav Kalindi, LLC are proper

defendants to Bowen’s § 379.200 claim and that they cannot be realigned as party-plaintiffs.
Further, even if they could be realigned, there would not be complete diversity of the parties
because ACI would be deemed a citizen of Missouri by operation of 28 U.S.C. §1332(c)(1).
Finally, the Court refuses to sever Counts II and III because it would result in splitting Bowen’s
claims and potentially inconsistent verdicts.
Accordingly,
IT IS HEREBY ORDERED that Plaintiff’s Motion to Remand [9] is GRANTED. This
matter shall be remanded to the Twenty Second Circuit of Missouri in City of St. Louis, Missouri
for further proceedings. An order of remand accompanies this Order.

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Dated this 25th day of November, 2013.

JOHN A. ROSS
UNITED STATES DISTRICT JUDGE

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