Kim et al v. Czerny et al
Filing
24
MEMORANDUM OPINION AND ORDER denying in part and granting in part 12 MOTION to Deny the Joinder of Jurisdiction Defeating Defendants and to Strike Plaintiffs' Improperly Filed First Amended Complaint and granting 5 MOTION to Dismiss for Lack of Jurisdiction by Chief Judge M. Christina Armijo. (vv)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
CHAD KIM AND DANAE KIM,
Plaintiffs,
v.
16-CV-1362 MCA/LF
ZUZANNA A. CZERNY, MAGDALENA Z.
CZERNY, AND PROGRESSIVE ADVANCED
INSURANCE COMPANY,
Defendants.
MEMORANDUM OPINION AND ORDER
THIS MATTER is before the Court on Defendants’ Motion to Deny the Joinder
of Jurisdiction Defeating Defendants and to Strike Plaintiffs’ Improperly Filed First
Amended Complaint [Doc. 12] and Defendants’ Motion to Dismiss for Lack of Personal
Jurisdiction [Doc. 5]. The Court has considered the parties’ submissions, including
Plaintiffs’ First Amended Complaint for Personal Injuries [Doc. 9], and the relevant law,
and is otherwise fully informed.
For the following reasons, the Court DENIES in part and GRANTS in part
Defendants’ Motion to Deny the Joinder of Jurisdiction Defeating Defendants and to
Strike Plaintiffs’ Improperly Filed First Amended Complaint [Doc. 12]. Specifically, the
Court DENIES the Motion to Strike Plaintiffs’ Improperly Filed First Amended
Complaint and GRANTS the Motion to Deny Joinder of Jurisdiction Defeating
Defendants.
Page 1 of 25
Further, the Court GRANTS Defendants’ Motion to Dismiss for Lack of Personal
Jurisdiction [Doc. 5].
I.
Background
After a car accident in Tempe, Arizona in which they were injured, Plaintiffs filed
a Complaint in the Second Judicial District Court on November 4, 2016 alleging that
Zuzanna Czerny negligently operated a vehicle and that Magdalena Czerny negligently
entrusted the vehicle to Zuzanna Czerny. [Doc. 1-1] Defendants removed the matter to
this Court, and then filed a Motion to Dismiss for Lack of Personal Jurisdiction on
December 21, 2016. [Doc. 1; Doc. 5] On January 13, 2017, twenty-three days after the
filing of Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction, Plaintiffs filed
a First Amended Complaint, in which Plaintiffs seek to add as defendants claims adjuster
Britni Vickers (“Vickers”) and John Doe Adjuster Mark (Last Name Unknown)
(“Mark”), as well as new claims for “fraud and misrepresentation” and negligent
misrepresentation. [Doc. 9]
On January 27, 2017, Defendants filed a Motion to Deny the Joinder of
Jurisdiction Defeating Defendants and to Strike Plaintiffs’ Improperly Filed First
Amended Complaint. [Doc. 12] Defendants maintain that the First Amended Complaint
should be stricken because it was improperly filed after the twenty-one-day deadline for
amendments of right under Federal Rule of Civil Procedure 15(a)(1)(b) and without leave
of the Court under Federal Rule of Civil Procedure 15(a)(2). [Doc. 12]
In their Response to Defendants’ Motion to Deny the Joinder of Jurisdiction
Defeating Defendants and to Strike Plaintiffs’ Improperly Filed First Amended
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Complaint, filed on February 21, 2017, Plaintiffs “concede that they did not first seek
leave of the Court in filing their [First] Amended Complaint” and state that they had
“justifiable cause” for this failure. [Doc. 19, pg. 3, n.1] They do not explain what
“justifiable cause” lies behind the tardy filing. They also state that “Plaintiffs intend to
file their Motion for Leave to Amend forthwith.” [Doc. 19, pg. 3 n.1] Plaintiffs have not
yet filed a motion for leave to amend.
In sum, Plaintiffs argue that the joinder of new defendants should be permitted,
that such joinder destroys this Court’s subject matter jurisdiction, and that the matter
should therefore be remanded to state court under 28 U.S.C. § 1447(e) without reaching
the personal jurisdiction question. [Doc. 19] Defendants argue that joinder should be
denied, subject matter jurisdiction retained, and the matter dismissed for lack of personal
jurisdiction. [Doc. 12; Doc. 5]
II.
Discussion
A. Rule 15
Defendants argue that the First Amended Complaint was not filed within the
deadline set forth in Federal Rule of Civil Procedure 15(a)(1)(B), that is, within 21 days
of service of Defendants’ initial Motion to Dismiss. Defendants are correct. Defendants
also correctly argue [Doc. 12, pp. 2-4] that, under these circumstances, the Curt must
decide whether to grant leave to Plaintiffs to file the proposed amended complaint. Fed
R. Civ. P. 15(a)(2). Nonetheless, rather than striking the First Amended Complaint for
Personal Injuries, the Court determines that even if the Court were to consider it as a
proposed amended complaint, the complaint would be futile. See Foman v. Davis, 371
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U.S. 178, 182 (1962) (stating that absent a reason such as futility, the Court should freely
grant leave to amend a complaint). An amendment is futile if it would not survive a
motion to dismiss. See Bradley v. Val-Mejias, 379 F.3rd 892, 901 (10th Cir.2004). As
discussed below, amendment would be futile because Plaintiffs fail to state a claim
against the proposed new defendants, making joinder futile, and even if additional claims
are added against the current defendants, personal jurisdiction is lacking as to them.
B. The Court Will Address Joinder, then Personal Jurisdiction
The next question is whether to consider joinder, which implicates the Court’s
subject matter jurisdiction, or personal jurisdiction first. The district court may exercise
its discretion in deciding which issue to take up first. Cantor Fitzgerald, L.P., v. Peaslee,
88 F.3d 152, 155 (2d Cir. 1996). “Customarily, a federal court first resolves any doubts
about its jurisdiction over the subject matter of a case before reaching the merits or
otherwise disposing of the case.” Id. This approach is grounded in “[a] State’s dignitary
interest.” Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 586 (1999). Thus, “[i]f
personal jurisdiction raises ‘difficult questions of [state] law,’ and subject-matter
jurisdiction is resolved ‘as eas[ily]’ as personal jurisdiction, a district court will ordinarily
conclude that ‘federalism concerns tip the scales in favor of initially ruling on the motion
to remand.’” Id. quoting Allen v. Ferguson, 791 F.2d 611, 616 (7th Cir. 1986).
Here, Plaintiffs’ First Amended Complaint adds two defendants who are allegedly
New Mexico residents. [Doc. 9] Because Plaintiffs are also New Mexico residents,
joinder of these defendants will destroy the diversity of the parties on which this Court’s
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subject matter jurisdiction is based. 28 U.S.C. §1332. Consequently, the Court will first
take up the issues related to joinder, then address personal jurisdiction.
C. The Court Will Not Permit Joinder of New Defendants
Here, the additions to the First Amended Complaint include both claims and
parties, as Plaintiffs seek to add two claims and two defendants. [Doc. 9] Defendants
object to the addition of “diversity destroying defendants,” but do not argue against the
addition of the new claims for fraud/misrepresentation and negligent misrepresentation.
[Doc. 12] Defendants’ arguments are based wholly on 28 U.S.C. § 1447(e) (“If after
removal the plaintiff seeks to join additional defendants whose joinder would destroy
subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the
action to the State court.”). “But because Section 1447(e) is only concerned with the
joinder of non-diverse parties post-removal, it is applicable only in so far as the proposed
amended complaint seeks to join non-diverse parties.” Culver v. Lithia Motors, Inc., No.
CV 15-669 MCA/SCY, 2016 WL 7426587, at *5 (D.N.M. May 12, 2016), report and
recommendation adopted, No. CV 15-669 MCA/SCY, 2016 WL 7447552 (D.N.M. July
19, 2016). “In other words, a court’s review of proposed amendments containing new
allegations regarding current defendants is still governed by Rule 15.” Id.
Despite Plaintiffs’ failure to expressly state their intent, a reading of the proposed
amended complaint as a whole reveals the Plaintiffs intend to add claims against the
Progressive Advanced claims handlers in their capacities as agents of Progressive
Advanced, rather than in their individual capacities. Farm Bureau Prop. & Cas. INS. Co.
v. Hale, No. 1:14-CV-00527-WJ/WPL, 2014 WL 11512598, at *5 (D.N.M. Nov. 14,
Page 5 of 25
2014) (“It is well-settled that insurance agents and adjusters may be sued in their
individual capacity for breach of common law and statutory duties.”); 4 Steven Plitt, et
al., Couch on Ins. § 56:11 (“An insurer is liable for the fraud of its agent when acting
within the scope of his or her actual or apparent authority.”). This is because the
headings for the new claims indicate that they are against Vickers and “Mark.” [Doc. 9]
However, the substantive portions of the new claims do not include any allegations
against Vickers and “Mark” in their individual capacities. [Doc. 9] Instead, Plaintiffs
allege that Vickers and “Mark” were “at all times relevant and material . . . employee[s]
of Defendant Progressive Advanced Insurance Company and interacted with Plaintiffs
Chad and Danae Kim on behalf of Defendants Zuzanna and Magdalena Czerny and
Progressive Advanced Insurance Company.” [Doc. 9, ¶¶ 6, 7] They also allege that
Vickers and “Mark” are “manager[s], agent[s], servant[s], claim representative[s] and/or
employee[s] of Defendant Progressive Advanced” and that they were “acting within the
course and scope of [their] relationship with Defendant Progressive Advanced at all times
herein to perform business for Defendant in the State of New Mexico through the claims
handling of insurance policies in the State of New Mexico.” [Doc. 9, ¶¶ 14-17] Finally,
Plaintiffs allege that Vickers and “Mark” were “acting within the course and scope of
[their] relationship with Defendant Progressive Advanced at all times herein to perform
business for Defendant in the State of New Mexico through the claims handling of
insurance policies in the State of New Mexico, subjecting Defendant Progressive
Advanced to liability under the doctrines of vicarious liability and/or respondeat
superior.” [Doc. 9, ¶¶ 59, 62] Moreover, in their pleadings, Plaintiffs state that the
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claims are “against Progressive Advanced” and that “Progressive Advanced is vicariously
liable” for the conduct of its agents. [Doc. 19, pg. 6]
The Court will therefore construe Plaintiffs’ First Amended Complaint to add new
claims against Progressive Advanced—already a defendant—as well as to add new
defendants. See 27 Fed. Proc., L. Ed. § 62:170 (stating that “a party who has filed an
original claim, . . . may join with such claim as many other claims as he or she has
against the opposing party, regardless of their nature or consistency.”); Rule 18(a) (“A
party asserting a claim, counterclaim, crossclaim, or third-party claim may join, as
independent or alternative claims, as many claims as it has against an opposing party.”).
The Court turns next to the issue of whether Plaintiffs may join new defendants.
Under 28 U.S.C. § 1447(e), a court may deny joinder of a party after removal, or permit
joinder and remand to state court. 28 U.S.C.A. § 1447(e) (“If after removal the plaintiff
seeks to join additional defendants whose joinder would destroy subject matter
jurisdiction, the court may deny joinder, or permit joinder and remand the action to the
State court.”). Although § 1447(e) provides no standards for joinder, Federal Rules of
Civil Procedure 19 and 20 provide some guidance. See McPhail v. Deere & Co., 529
F.3d 947, 951 (10th Cir. 2008) (applying Fed. R. Civ. P. 19 and 20 to analysis of joinder
under § 1447(e)); Pacely v. Lockett, No. 12-CV-152, 2013 WL 12136690, *4 (D.N.M.
Mar. 20, 2013 (same). But see Mayes v. Rapoport, 198 F.3d 457, 462 (4th Cir. 1999)
(“Under Section 1447(e), the actual decision on whether or not to permit joinder of a
defendant under these circumstances is committed to the sound discretion of the district
court; thus, this decision is not controlled by a Rule 19 analysis.”). Thus, if a party is
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indispensable under Rule 19, “Rule 19 requires the court either to join the party, in which
case remand is necessary under § 1447(e), or to deny joinder, in which case Rule 19(b)
also requires that the action be dismissed.” McPhail, 529 F.3d at 951; see Fed. R. Civ. P.
19 (stating that “a person . . . must be joined as a party if: (A) in that person’s absence,
the court cannot accord complete relief among existing parties; or (B) that person claims
an interest relating to the subject of the action and is so situated that disposing of the
action in the person’s absence may: . . . impair or impede the person’s ability to protect
the interest; or . . . leave an existing party subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations because of the interest.”).
If the party is not indispensable, joinder may be permissible under Rule 20(a)(2),
which provides that :
Persons. . . may be joined in one action if:
(A) any right to relief is asserted against them . . . with respect to or
arising out of the same transaction, occurrence, or series of
transactions or occurrences; and
(B) any question of law or fact common to all defendants will arise
in the action.
See Pacely, 2013 WL 12136690, at *4. In considering joinder under Rule 20, “the
district court typically considers several factors including whether the amendment will
result in undue prejudice, whether the request was unduly and inexplicably delayed, and
whether it was offered in good faith.” McPhail, 529 F.3d at 952 (internal quotation
marks, alterations, and citation omitted).
Page 8 of 25
Similarly, when considering whether to permit joinder under § 1447(e), courts
consider “the motivation for the joinder, whether the plaintiff was dilatory in seeking
joinder, prejudice to the existing defendants if the joinder is permitted, prejudice to the
plaintiff if the joinder is not permitted, judicial efficiency and economy, as well as other
equitable concerns.” 14C Wright & Miller, Fed. Prac. & Proc. Juris. § 3739 (4th ed.);
McDaniel v. Loya, 304 F.R.D. 617, 640 (D.N.M. 2015) (“In deciding whether to grant
leave to amend, courts must balance the defendant’s interest in retaining the federal
forum with the plaintiff’s competing interest in avoiding parallel federal and state
litigation. Courts consider whether the purpose of the amendment is to defeat federal
jurisdiction, whether the plaintiff has delayed in requesting amendment, whether the
plaintiff will be significantly injured if amendment is refused, and any other factors
bearing on the equities.” (internal quotation marks and citation omitted)). Thus, the
analysis under § 1447(e) is similar to but broader than the analysis under either Rule 19
or Rule 20.
See Mayes, 198 F.3d at 462 (“Section 1447(e) gives the court more
flexibility than a strict Rule 19 analysis” (internal quotation marks and citation omitted));
Casas Office Machines, Inc. v. Mita Copystar Am., Inc., 42 F.3d 668, 675 (1st Cir. 1994).
The parties dispute whether the concept of “fraudulent joinder” applies to the
analysis under § 1447(e). [Doc. 21, pg. 7; Doc. 19, pg. 8] “Fraudulent joinder is a
judicially created doctrine that provides an exception to the requirement of complete
diversity.” Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998).
“To establish fraudulent joinder, the removing party must demonstrate either: (1) actual
fraud in the pleading of jurisdictional facts, or (2) inability of the plaintiff to establish a
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cause of action against the non-diverse party in state court.” Dutcher v. Matheson, 733
F.3d 980, 988 (10th Cir. 2013) (alteration, internal quotation marks, and citation omitted).
If fraudulent joinder is shown, “a district court can assume jurisdiction over a case
[by]. . . disregard[ing], for jurisdictional purposes, the citizenship of certain nondiverse
defendants, assum[ing] jurisdiction over a case, dismiss[ing] the nondiverse defendants,
and thereby retain[ing] jurisdiction.” Mayes, 198 F.3d at 461. “Since the fraudulent
joinder doctrine justifies a federal court’s initial assumption of diversity jurisdiction, it
has no effect once the district court actually possesses jurisdiction—including after the
case has been removed.” Id. (Emphasis added.); see Pacely, 2013 WL 12136690, *4 n. 1
(noting that the Fourth and Fifth Circuit Courts of Appeal have held that the fraudulent
joinder doctrine does not apply to a Section 1447(e) analysis).
This matter has already been removed to this Court. Hence, Defendant is not
required to demonstrate fraudulent joinder in opposition to Plaintiffs’ proposed joinder.
However, in assessing joinder under § 1447(e), if fraudulent joinder is shown, it “should
be a factor—and perhaps the dispositive factor—that the court considers in deciding
whether a plaintiff may join a nondiverse defendant” after removal. Mayes, 198 F.3d at
463.
Although Plaintiffs invoke Rule 19 by stating that “claim handler[]s Vickers and
‘Mark’ are clearly necessary, and perhaps indispensable, to determining the extent of
Progressive Advanced’s vicarious liability for the conduct of its employees,” [Doc. 19,
pg. 8] Plaintiffs do not address the Rule 19 requirements for parties to be “joined if
feasible.” Instead, Plaintiffs argue that Vickers and “Mark” are “proper” parties under
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Rule 20 because “common question of law and fact arise out of the same series of
transactions or occurrences relating to: the motor vehicle accident; Progressive
Advanced’s New Mexico investigation of the same; and, its claim handlers’ conduct and
representations in administering the New Mexico claim.” [Doc. 19, pg. 7] Defendants
argue to the contrary that the claims “do not arise out of the same transaction [or]
occurrence [because]” the claims against the Czerny defendants and the Progressive
Advanced defendants, including Vickers and “Mark,” “arose at different times, from
wholly different conduct and involved completely distinct causes of action.” [Doc. 21,
pg. 6]
However, Rule 20 provides that defendants may be added “if . . . any right to relief
is asserted against them jointly, severally, or in the alternative.” Thus, “Rule 20 requires
as a precondition to joinder that a right to relief be asserted against the party to be
joined.” Common Cause v. Fed. Election Comm’n, 82 F.R.D. 59, 61 (D.D.C. 1979); 25
Fed. Proc., L. Ed. § 59:187 (stating that “joinder of an additional defendant would be
improper where no right to relief has been asserted against that party in the operative
complaint.”). Here, Plaintiffs’ First Amended Complaint does not state a claim against
Vickers and “Mark” individually. Instead, they are named in their capacity as agents of
Progressive Advanced. Rule 20 is therefore unavailing to Plaintiffs. See Busby v.
Capital One, N.A., 759 F. Supp. 2d 81, 88 (D.D.C. 2011) (stating that “although the
plaintiff represents that she intends to assert certain claims against [the proposed
defendant], the operative complaint does not contain any allegations supporting claims
against that proposed defendant, . . . Accordingly, because no right to relief has been
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asserted against [the proposed defendant] in the operative complaint, joinder would be
improper at this time.”).
Here, the Court concludes that joinder of Vickers and “Mark” should be denied for
the following reasons. First, Plaintiffs’ First Amended Complaint was filed only two
days past the twenty-one day deadline set out in Rule 15. Thus, in this sense it was not
delayed unduly. However, Plaintiffs’ explanation for the delay is that in December 2016
they became aware of “extensive, in-person contact” between the claims handlers and
Plaintiffs. Plaintiffs’ evidence of that contact belies this timeline. Indeed, the email
correspondence between Plaintiffs and the claims handlers appears to have been
forwarded to Plaintiffs’ counsel in September, 2016, almost two months before the
Complaint was filed, and, obviously, Plaintiffs themselves were aware of the
correspondence at the time it occurred beginning in February, 2015 and continuing
through September, 2016. [Doc. 19-1; Doc. 8-7 – 8-12] The email correspondence also
references an in-person meeting with “Mark” in March, 2016.
[Doc. 8-10]
This
evidence indicates that Plaintiffs and their counsel were aware of Vickers and “Mark”
well before Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction, and even
the Complaint, was filed. See State Distributors, Inc. v. Glenmore Distilleries Co., 738
F.2d 405, 416 (10th Cir. 1984) (“Where the party seeking amendment knows or should
have known of the facts upon which the proposed amendment is based but fails to include
them in the original complaint, the motion to amend is subject to denial.”).
Second, Plaintiffs are not prejudiced by a denial of joinder. Plaintiffs argue that
“[j]oinder and remand [are] proper in this case for purposes of efficiency, comity, and to
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avoid prejudice to all parties involved.” [Doc. 19, pg. 5] For instance, they argue,
“[d]enying joinder [of the claims handlers] would require Plaintiffs to litigate their
negligence, fraud, and misrepresentation claims against Progressive Advanced without
the agent-adjusters, by and through which Plaintiffs contend Progressive Advanced is
vicariously liable.” [Doc. 19, pg. 6] As discussed above, the substance of the added
claims indicates that their target is Progressive Advanced, rather than Vickers and
“Mark.” That being the case, Plaintiffs do not explain why it is necessary to name the
adjusters as defendants in order to state a claim against Progressive Advanced, their
alleged employer. See 4 Steven Plitt, et al., Couch on Ins. § 56:11 (“An insurer is liable
for the fraud of its agent when acting within the scope of his or her actual or apparent
authority.”); cf. Neill v. State Farm Fire & Cas. Co., No. CIV-13-627-D, 2015 WL
4629304, at *3 (W.D. Okla. Aug. 3, 2015) (holding that “denial of the amendment will
[not] cause significant injury or prejudice to [the p]laintiffs” because “[t]he same claims
which [the p]laintiffs propose[d] to add against [the new defendant] are presented in their
existing pleading as vicarious liability claims against State Farm. If [the p]laintiffs’
claims are proven in this case, a second suit would be unnecessary because [the p]laintiffs
could not obtain a second recovery of the same damages.”).
Similarly, Plaintiffs contend that “[d]enial of joinder would also, ultimately, result
in Plaintiffs having to refile their claims in [s]tate [c]ourt.” [Doc. 19, pg. 6] However,
this argument conflates joinder of parties with addition of new claims.
Since, as
discussed above, the Court construes the complaint to add new fraud and
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misrepresentation claims against Progressive Advanced, there will be no need to refile
these claims in state court.
Because Plaintiffs’ attempt to add new defendants was not pursued in a timely
manner and appears calculated to destroy diversity, and because denial of joinder would
not prejudice Plaintiffs nor unnecessarily tax judicial resources, the Court will not permit
joinder of defendants Vickers and “Mark.” See Culver, 2016 WL 7426587, at *5 (stating
that factors to consider are “the extent to which the purpose of the amendment is to defeat
federal jurisdiction, whether plaintiff has been dilatory in asking for amendment, whether
plaintiff will be significantly injured if amendment is not allowed, and any other factors
bearing on the equities” (internal quotation marks and citation omitted)). Without joinder
of these defendants, diversity of the parties—and therefore this Court’s subject matter
jurisdiction—is preserved. 28 U.S.C. § 1332.
D. The Court Will Dismiss the Action for Lack of Personal Jurisdiction
Having concluded that subject matter jurisdiction is preserved, the Court turns to
Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction. [Doc. 5] “Personal
jurisdiction is established by the laws of the forum state and must comport with
constitutional due process.” Fireman’s Fund Ins. Co. v. Thyssen Mining Contr. of Can.,
703 F.3d 488, 492 (10th Cir. 2012). “[A] State may authorize its courts to exercise
personal jurisdiction over an out-of-state defendant if the defendant has certain minimum
contacts with the State such that the maintenance of the suit does not offend traditional
notions of fair play and substantial justice.” Daimler AG v. Bauman, 134 S. Ct. 746, 754
(2014) (internal quotation marks, alteration, and citation omitted). Under New Mexico’s
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long arm statute, “[a]ny person, whether or not a citizen or resident of this state, who in
person or through an agent does any of the [following] acts . . . thereby submits
himself . . . to the jurisdiction of the courts of this state as to any cause of action arising
from . . . the transaction of any business within this state; [or] . . . the commission of a
tortious act within this state.” NMSA 1978, § 38-1-16. New Mexico has “construed the
state long-arm statute as being coextensive with the requirements of due process.” Sproul
v. Rob & Charlie’s, Inc., 2013-NMCA-072, ¶ 8, 304 P.3d 18 (citation omitted);
Fireman’s Fund, 703 F.3d at 492-93.
Personal jurisdiction may be either specific or general.
Specific jurisdiction
applies only when the suit “arises out of or relates to the defendant’s contacts with the
forum state.” Daimler AG, 134 S. Ct. at 754 (quoting Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8 (1984)). Put another way, a defendant has
sufficient minimum contacts with the forum state to support the exercise of specific
jurisdiction if two requirements are met: (1) “if the defendant has ‘purposefully directed’
his activities at residents of the forum,” and (2) “the litigation results from alleged
injuries that ‘arise out of or relate to’ those activities.” OMI Holdings Inc., v. Royal Ins.
Co. of Can., 149 F.3d 1086, 1091 (10th Cir. 1998) (quoting Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 472 (1985)).
General jurisdiction, in contrast, is exercisable when “a foreign corporation’s
continuous corporate operations within a state are so substantial and of such a nature as to
justify suit against it on causes of action arising from dealings entirely distinct from those
activities.”
Daimler AG, 134 S. Ct. at 754 (internal quotation marks and citation
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omitted). “A court may assert general jurisdiction over foreign . . . corporations to hear
any and all claims against them when their affiliations with the State are so ‘continuous
and systematic’ as to render them essentially at home in the forum State.” Id. For a
corporation, “the place of incorporation and the principal place of business are paradigm
bases for general jurisdiction.” Id. at 760. “These bases afford plaintiffs recourse to at
least one clear and certain forum in which a corporate defendant may be sued on any and
all claims.” Id.
When a defendant challenges the court’s jurisdiction, the plaintiff bears the burden
of demonstrating that jurisdiction exists. See Wenz v. Memery Crystal, 55 F.3d 1503,
1505 (10th Cir. 1995) (citations omitted). In the preliminary stages of litigation, this
burden is “light,” and prior to trial the “plaintiff is only required to establish a prima facie
showing of [personal] jurisdiction.” Doe v. Nat’l Med. Serv., 974 F.2d 143, 145 (10th
Cir. 1992). The plaintiff may make the required prima facie showing by coming forward
with facts, via affidavit or other written materials, that would support jurisdiction over the
defendant if true. See OMI Holdings, 149 F.3d at 1091. Only the well-pled facts of a
plaintiff’s complaint, however, as opposed to mere conclusory allegations in pleadings or
other materials, must be accepted as true. See Dudnikov v. Chalk & Vermilion Fine Arts,
Inc., 514 F.3d 1063, 1070 (10th Cir. 2008).
Moreover, a plaintiff’s jurisdictional
allegations are not automatically accepted as true when contradicted by affidavit,
although if the parties present conflicting affidavits, all factual disputes must be resolved
in the plaintiff’s favor. See Wenz, 55 F.3d at 1505.
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1. Defendants Zuzanna and Magdalena Czerny
In the First Amended Complaint, Plaintiffs allege that “Defendant Zuzanna A.
Czerny [and Defendant Magdalena Z. Czerny] at all times relevant and material hereto,
[are] resident[s] of the City of Phoenix, County of Maricopa, State of Arizona.”
[Doc. 9, ¶¶ 4, 5] They also state that “the accident which forms the basis of the
instant lawsuit occurred within the County of Maricopa, State of Arizona.” [Doc. 9, ¶
9] They included no other allegations related to personal jurisdiction over the Czerny
defendants. Neither do Plaintiffs make any argument related to the Czerny defendants
in their Response to Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction.
Plaintiffs therefore have not met their burden to make a prima facie showing of
sufficient contacts with New Mexico to support jurisdiction over the Czerny
defendants. Far W. Capital, Inc. v. Towne, 46 F.3d 1071, 1075 (10th Cir. 1995) (“The
plaintiff bears the burden of establishing personal jurisdiction over the defendant.”);
Neogen Corporation v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir.2002) (A
prima facie showing is made “by establishing with reasonable particularity sufficient
contacts between [the defendant] and the forum state to support jurisdiction.” (alterations,
internal quotation marks, and citations omitted)).
The Czerny defendants will be
dismissed.
2. Defendant Progressive Advanced
Plaintiffs next argue that Progressive Advanced “knowingly, purposely, and
intentionally directed” “business contacts and commercial activities” at New Mexico
when it “investigate[d]; manage[d]; and administrate[d] Plaintiffs’ accident claim through
Page 17 of 25
a New Mexico agent located at a New Mexico Progressive Advanced facility.” [Doc. 8,
pg. 1] More specifically, Plaintiffs argue that Progressive Advanced 1) “h[e]ld[] itself
out as an entity doing business in New Mexico” and 2) transacted business in New
Mexico when New Mexico-based claims adjusters managed the claim. [Doc. 8, pg. 4-5]
See § 38-1-16 (“Any person, whether or not a citizen or resident of this state, who in
person or through an agent does any of the [following] acts . . . thereby submits himself .
. . to the jurisdiction of the courts of this state as to any cause of action arising from . . .
the transaction of any business within this state; [or] . . . the commission of a tortious act
within this state.”). In addition, Plaintiffs argue that their claims lie “in the wake” of
Progressive Advanced’s “activities directed toward the forum [s]tate,” i.e., the handling
of Plaintiffs’ coverage claim. [Doc. 8, pg. 5] See Trierweiler v. Croxton & Trench
Holding Corp., 90 F.3d 1523, 1533 (10th Cir. 1996) (“In assessing contacts with a forum,
courts have considered such factors as: (1) whether the corporation solicits business in
the state through a local office or agents; (2) whether the corporation sends agents into
the state on a regular basis to solicit business; (3) the extent to which the corporation
holds itself out as doing business in the forum state, through advertisements, listings or
bank accounts; and (4) the volume of business conducted in the state by the
corporation.”).
Plaintiffs attach as evidence of Progressive Advanced’s continuous and systematic
contacts with New Mexico email correspondence which bears the Progressive logo, and
in which Vickers’ signature block states that she was acting “[o]n behalf of Progressive
Advanced Insurance” from an Albuquerque address. [See, e.g., Doc. 8-2, 8-7 – 8-12]
Page 18 of 25
They also attach printouts from www.bloomberg.com purporting to show that
Progressive Advanced Insurance is a subsidiary of Progressive Direct Holdings, which is
a subsidiary of Progressive Corporation, [Doc. 8-3] and a print out from
www.yellowpages.com purporting to show that a listing for Progressive Insurance has the
same address as that shown in Vickers’ email signature. [Doc. 8-3] Finally, they attach a
print out of Vickers’ LinkedIn profile showing her title as “Claims Generalist
Intermediate, Progressive Insurance.” [Doc. 8-6] They also point to these documents in
support of their argument that Progressive Advanced transacted business in New Mexico
by virtue of adjusting Plaintiffs’ claim. [Doc. 8, pg. 4, 7]
As to Plaintiffs’ assertion that Progressive Advanced has “continuous and
systematic” contacts with New Mexico, Defendants counter with an affidavit by Michael
R. Uth, Deputy General Counsel “for companies within the Progressive Group of
Insurance Companies (‘Progressive’) including Progressive Advanced Insurance
Company.” [Doc. 5-2] In the affidavit, Uth asserts that
3. Progressive Advanced Insurance Company does not conduct business in
the State of New Mexico and did not conduct any business in 2015.
4. Progressive Advanced Insurance Company does not currently pursue
business activity in New Mexico or engage in business activity in New
Mexico and did not in 2015.
5. Progressive Advanced Insurance Company does not currently sell goods
or services, either directly or indirectly, in New Mexico and did not in
2015.
6. Progressive Advanced Insurance Company does not currently solicit
business in New Mexico and did not in 2015.
[Doc. 5-2]
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As to Plaintiffs’ argument that Progressive Advanced transacted business in New
Mexico by adjusting the claim here, Defendants argue that Progressive Advanced’s
claims adjusting activity occurring post-accident cannot serve as a basis for personal
jurisdiction in New Mexico because it only occurred in New Mexico because Plaintiffs
live here. [Doc. 6, pg. 13] They point to cases holding that “[c]laims adjusting activity
in the [f]orum [s]tate related to a claim that occurred outside the [f]orum [s]tate simply
does not constitute the required ‘purposeful availment’ required for personal
jurisdiction.” [Doc. 13, pg. 7] For example, in Johnston v. American Family Mutual
Insurance Company, after their Wisconsin home was burgled and a claim submitted to
American Family, the plaintiffs moved to Santa Fe. No. CV 14-1043 WPL/SCY, 2015
WL 11111293, at *1 (D.N.M. Feb. 19, 2015). They then sued American Family in a
New Mexico court, “alleging claims for breach of contract, bad faith and violation of the
New Mexico Unfair Claims Practices Act.” Id. American Family removed the case to
federal court. Id. “To establish purposeful availment, the [plaintiffs] rel[ied] upon
American Family’s actions in retaining [a local adjusting company] and sending its
adjuster to their home in Santa Fe to inventory their property.” Id. at 2. The court
concluded that this contact was insufficient because it was the result not of American
Family’s purposeful acts, but of the plaintiffs’ decision to move to Santa Fe. Id. at *3. It
stated, “American Family retained the services of [the local adjuster] only because the
[plaintiffs] relocated to New Mexico while their claim was pending. American Family’s
actions do not demonstrate that it purposefully availed itself of the benefits and
protections of New Mexico law.” Id. Similar results were found in Davis v. Am. Family
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Mut. Ins. Co., 861 F.2d 1159, 1162 (9th Cir. 1988) (“The fact that American Family hired
an adjuster who had an office in Montana . . . resulted solely from the fact that Davis
returned to his home in Montana after the accident in the state of North Dakota. Unlike
an insurance defendant whose activities are purposely directed towards participating in
the forum state's insurance market, . . . American Family’s activities in Montana were
conducted for the sole purpose of fulfilling its obligation to adjust Davis’ claim . . . .
American Family’s actions do not demonstrate a purposeful availment of the benefits and
protections of Montana law.”) and Whittaker v. Med. Mut. of Ohio, 96 F. Supp. 2d 1197,
1201 (D. Kan. 2000) (“If not for plaintiff’s unilateral decision to move to Kansas,
Medical Mutual would not have asked [Blue Cross Blue Shield Kansas (BCBSK)] to
process her claims. Medical Mutual contacted B[C]BSK for the sole purpose of fulfilling
its obligation to process plaintiff’s claim.”).
In Johnston, Davis, and Whittaker, the insurer hired an independent, local adjuster
who had no preexisting ties to the insurer to adjust the claim. See Davis, 861 F.2d at
1160; Johnston, at *1; Whittaker, 96 F. Supp. 2d at 1201. Here, in contrast, Plaintiffs
have presented evidence that Vickers and “Mark” either were or held themselves out to
be employees of Progressive Corporation, the parent of Progressive Direct Holdings,
itself the parent of Progressive Advanced.
Nevertheless, both of Plaintiffs’ arguments are unavailing. Plaintiffs’ evidence
shows only that Vickers and “Mark” may be employees of Progressive Corporation, the
parent corporation, and that they acted on behalf of Progressive Advanced in adjusting
the coverage claim. Their status as employees of Progressive Corporation is immaterial
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to whether Progressive Advanced has minimum contacts with New Mexico because the
two entities are legally distinct. Generally, “the mere relationship of parent corporation
and subsidiary corporation is not in itself a sufficient basis for subjecting both to the
jurisdiction of the forum state, where one is a nonresident and is not otherwise present or
doing business in the forum state.” Alto Eldorado P’ship v. Amrep, 2005-NMCA-131,
¶ 32, 138 N.M. 607, 124 P.3d 585. However, where the plaintiffs “ma[k]e a prima facie
case that [the corporate parent] did not simply own [the subsidiary, but instead]
completely controlled it to the point where [the subsidiary] existed as little more than an
instrument to serve [the parent’s] . . . interests,” the corporate parent’s contacts may be
imputed to the subsidiary. Id. ¶¶ 33-34; cf. Weisler v. Cmty. Health Sys., Inc., No. CIV.
12-0079 MV/CG, 2012 WL 4498919, at *11 (D.N.M. Sept. 27, 2012) (stating that “[a]n
exception to th[e general] rule exists, however, where circumstances justify disregard of
the corporate entity, and in such cases, the contacts of the subsidiary may be imputed to
the parent for purposes of establishing general jurisdiction over the parent.”). “A court
can disregard the corporate form and impute jurisdiction to a parent based upon its
subsidiary’s contacts when the subsidiary is simply an agent doing the business of the
parent.” Weisler, 2012 WL 4498919, at *11.
This general rule applies only to impute the subsidiary’s contacts to the parent, not
the other direction. Vacation Travel Int’l, Inc. v. Sunchase Beachfront Condo. Owners
Ass’n, Inc., No. CIVA 06CV02195 LTBCB, 2007 WL 757580, at *5 (D. Colo. Mar. 8,
2007) (stating that “[w]hile under some circumstances a subsidiary corporation’s contacts
may be imputed to a parent for the purposes of jurisdiction, the reverse is not true. The
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Tenth Circuit rejects the proposition that ‘because the court has jurisdiction over a parent
corporation or dominating individual . . . it has jurisdiction over the alter ego
corporation.’” quoting Home–Stake Production Co. v. Talon Petroleum, C.A., 907 F.2d
1012, 1021 (10th Cir.1990)). Thus, even if the Court accepts Plaintiffs’ documentation
as evidence that Vickers and “Mark” are employees of Progressive Corporation and that
Progressive Corporation maintains offices in Albuquerque, thereby maintaining
minimum contacts with New Mexico, those contacts may not be imputed to Progressive
Corporation’s subsidiaries, i.e., Progressive Direct Holdings or Progressive Advanced.
Without these minimum contacts, as in Johnston, the fact that Progressive Advanced
adjusted the coverage claim in New Mexico is insufficient to exercise personal
jurisdiction over Progressive Advanced.
To the extent Plaintiffs argue that personal jurisdiction over Progressive Advanced
is proper based on the New Mexico Superintendent of Insurance’s certification that he
forwarded service of process to Progressive Advanced, the Court disagrees that this fact
is sufficient. [Doc. 8, pg. 2] Plaintiffs attach a copy of a certificate by the New Mexico
Superintendent of Insurance stating that
a copy of a Summons, Complaint for Personal Injuries, and Court Annexed
Arbitration Certificate to Defendant Progressive Advanced Insurance
Company, was sent to Defendant PROGRESSIVE ADVANCED
INSURANCE COMPANY on November 14, 2016 as provided in Section
59A-5-3l and 59A-5-32 NMSA 1978, and was received by said company
on November 16, 2016 as shown by return receipt by Postmaster.
[Doc. 8-1]
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Sections 59A-5-31 and -32 provide for service of process through the
Superintendent for insurers authorized to “transact insurance” in the state. § 59A-531(A). Defendants maintain that Progressive Advanced is not registered to and does not
“transact insurance” in New Mexico. [Doc. 13, pg. 3, 11] Other than the certificate,
Plaintiffs provide no evidence that Progressive Advanced is in fact registered with the
Superintendent of Insurance. In addition to § 59A-5-31, NMSA 1978, § 38-1-8 provides
for service of process through the Superintendent of Insurance on unauthorized insurers.
Even if the Court were to assume that the reference to § 59A-5-31 in the certificate
suggests that Progressive Advanced is authorized, service of process under either § 59A5-31 or § 38-1-8, without more, is insufficient to establish personal jurisdiction. This is
because “[s]ervice can be made on a party within the territorial confines of a court’s
jurisdiction, yet exercise of personal jurisdiction based on such service can contravene
due process because of a lack of sufficient minimum contacts with the court’s
jurisdictional territory.” Quinones v. Pennsylvania Gen. Ins. Co., 804 F.2d 1167, 1178
n.7 (10th Cir. 1986). Thus, “[a]n Unauthorized Insurer’s Process Law (UIPL), [like §
59A-5-31] under which the acts of an unauthorized insurer constitute an appointment of
the state Insurance Commissioner or other specified state official as its agent for service
of process, does not afford a basis for in personam jurisdiction independent of the due
process requirement of minimum contacts with the forum state.” 16 Steven Plitt, et al.,
Couch on Ins. § 228:24.
“[I]n addition to satisfying the UIPL, a nonresident,
unauthorized insurer’s activities in a foreign state must constitute sufficient contacts such
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that maintenance of the lawsuit does not offend the ‘traditional notions of fair play and
substantial justice.’” Id.
In sum, Plaintiffs have not met their burden to demonstrate that Progressive
Advanced has contacts with New Mexico independent of its parent corporations
sufficient to subject it to jurisdiction here. Defendants’ Motion will be granted. Given
the disposition of this issue, there is no need to address Defendants’ arguments as to
whether Arizona or New Mexico law applies, or whether Arizona recognizes as thirdparty claim against an insurer. [Doc. 13, pg. 10-11]
III.
Conclusion
For the foregoing reasons, the Court DENIES in part and GRANTS in part
Defendants’ Motion to Deny the Joinder of Jurisdiction Defeating Defendants and to
Strike Plaintiffs’ Improperly Filed First Amended Complaint [Doc. 12]. Specifically, the
Court DENIES the Motion to Strike Plaintiffs’ Improperly Filed First Amended
Complaint and GRANTS the Motion to Deny Joinder of Jurisdiction Defeating
Defendants.
Further, the Court GRANTS Defendants’ Motion to Dismiss for Lack of Personal
Jurisdiction [Doc. 5].
SO ORDERED this 17th day of July, 2017.
M. CHRISTINA ARMIJO
Chief United States District Judge
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