BOWERS et al v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al

Filing 16

MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE L. PATRICK AULD signed on 12/14/2017. RECOMMENDED that State Farm's Motion to Dismiss Defendant Bryan Torres (Docket Entry 11 ) be granted.(Daniel, J)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
BILLIE BOWERS, JR., and
MARY ANN BOWERS,
Plaintiffs,
v.
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY and
BRYAN TORRES,
Defendants.

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1:17CV825

MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
This

case

comes

before

the

undersigned

United

States

Magistrate Judge for a recommendation on Defendant State Farm
Mutual Automobile Insurance Company’s “Motion to Dismiss Defendant
Bryan Torres as a Nominal Party” (Docket Entry 11) (the “Motion”).
Plaintiff filed no response to the Motion.
dated Sep. 22, 2017, to present.)1

(See Docket Entries

For the reasons that follow,

the Court should grant the Motion.

1

By local rule, “[i]f a respondent fails to file a response
within the time required . . ., the motion will be considered and
decided as an uncontested motion, and ordinarily will be granted
without further notice.” M.D.N.C. LR 7.3(k). However, the United
States Court of Appeals for the Fourth Circuit requires substantive
review of even unopposed motions to dismiss. See Stevenson v. City
of Seat Pleasant, Md., 743 F.3d 411, 416 n.3 (4th Cir. 2014) (“Even
though [the plaintiffs] did not challenge the motions to dismiss,
we note that the district court nevertheless has an obligation to
review the motions to ensure that dismissal is proper.”).

BACKGROUND
Billie Bowers, Jr., and Mary Ann Bowers (the “Plaintiffs”),
initiated a lawsuit in Cabarrus County Superior Court against
Defendants State Farm Mutual Automobile Insurance (“State Farm”)
and Bryan Torres.

(See Docket Entry 1-1 at 5.)2

Plaintiffs allege

that Mr. Torres drove negligently and injured Mr. Bowers in an
automobile accident.

(Id., ¶¶ 11-13.)

Mr. Torres’s insurance

carrier “tendered Mr. Torres’[s] policy limit,” and Mr. Bowers
thereafter “agreed to a Covenant not to Enforce Judgement against
Mr. Torres and his insurance carrier, Geico.”

(Id., ¶¶ 14-15; see

also Docket Entry 1-2 (the “Covenant not to Enforce”).)

“However,

the amount represented by the policy limit of the Geico policy is
not sufficient to compensate [Mr. Bowers] for his personal injury
caused by the collision.
underinsured motorist.”

In this respect, Mr. Torres is an

(Docket Entry 1-1, ¶ 16.)

Mr. Bowers

possessed underinsured motorist’s coverage through State Farm and
“made a timely demand [for payment of benefits] upon [it],” which
State Farm refused.

(Id., ¶¶ 18-22.)

Plaintiffs then commenced

this action, in which Mr. Bowers alleges negligence as to Mr.
Torres, and alleges bad faith, breach of covenant of good faith and
fair dealing, and breach of contract as to State Farm.

2

(See id. at

Citations to Docket Entry pages utilize the CM/ECF footer’s
pagination.
-2-

¶¶ 24-50.) Mrs. Bowers also asserts a claim for loss of consortium
against Mr. Torres.

(Id. at ¶¶ 51-52.)

Plaintiffs and Mr. Torres qualify as North Carolina citizens,
and State Farm constitutes an Illinois corporation.
Entry 1 at ¶¶ 5, 8.)

(See Docket

State Farm removed the case to this Court on

the basis of diversity jurisdiction (see generally id.), and now
moves to dismiss Mr. Torres as a nominal party whose presence does
not defeat complete diversity (see Docket Entry 11 at 1).

State

Farm argues that Mr. Torres “has no financial stake in this lawsuit
since Mr. Bowers entered into a covenant not to enforce any
judgment in excess of Torres’[s] previously tendered insurance
policy limits.”

(Docket Entry 14 at 1.)
DISCUSSION

State Farm argues that “Torres should be dismissed as a
nominal

party

Procedure].”

under
(Id.)

Rule

21

[of

the

Federal

Rules

of

Civil

As an initial matter, “[t]he proper inquiry

for dropping a party under Rule 21, however, is not whether the
party is nominal but whether the party is dispensable.”

Rouse v.

State Farm Mut. Auto. Ins. Co., No. 1:14–CV–690, 2015 WL 3849648,
at *4 (M.D.N.C. June 22, 2015). “[State Farm’s] argument therefore
conflates two issues: (1) whether [Mr. Torres] should be dropped
under Rule 21 and (2) whether [Mr. Torres] is a nominal party.”
Id.

-3-

I. Whether Mr. Torres Is a Nominal Party
For purposes of diversity jurisdiction, “a federal court must
disregard nominal or formal parties and rest jurisdiction only upon
the citizenship of real parties to the controversy.”
Ass’n v. Lee, 446 U.S. 458, 460-61 (1980).

Navarro Sav.

“Nominal means simply

a party having no immediately apparent stake in the litigation
either prior or subsequent to the act of removal.

In other words,

the key inquiry is whether the suit can be resolved without
affecting the . . . nominal defendant in any reasonably foreseeable
way.”

Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736

F.3d 255, 260 (4th Cir. 2013).
is

a

practical

inquiry,

“Determining nominal party status

focused

circumstances of a case . . . .”

on

the

Id.

particular

facts

and

“Courts have looked to

numerous factors in deciding whether someone is a real party in
interest,” such as “the level of control that the party retains
over the litigation[,] . . . the weightiness of the party’s
interest in the litigation[,] . . . whether the party has retained
counsel[,] . . . [and] whether the party has given a statement or
deposition.”

Owens v. Overstreet, Civil Action No. 1:10–00784,

2010 WL 4721709, at *3 (S.D.W. Va. Nov. 15, 2010).

“To determine

the significance of the [party’s] interest [in the litigation], a
court will often consider the likelihood that the party will incur
financial liability as a result of later proceedings.”

-4-

Id.

The facts in Owens appear similar to those in this case.

In

Owens, the plaintiff alleged that the defendant injured him in an
automobile

accident.

See

id.

at

*1.

After

the

accident,

“[the p]laintiff and [the d]efendant entered into a settlement
agreement, under which [the d]efendant’s insurance company . . .
agreed to pay [the p]laintiff . . . the policy limit . . . .
[The p]laintiff promised . . . not to enforce any court-ordered
judgment against [the d]efendant that [the p]laintiff might obtain
at a future time.”

Id.

The plaintiff then sued the defendant, as

well as the plaintiff’s employer’s insurance carrier, seeking
underinsured motorist insurance payments.

Id.

The Owens court

found that the defendant constituted a nominal party, as
[the d]efendant’s level of control over the litigation
appears to be minimal. The parties have submitted no
evidence to suggest that [the d]efendant has made any
appearances in the proceedings, or that [the d]efendant
plans to make any in the future.
Furthermore,
[the d]efendant has neither made a statement nor given a
deposition. The [the d]efendant’s counsel is also the
same as counsel for [the insurance company].
This
suggests that [the d]efendant does not plan to retain a
significant amount of individual control and latitude
over litigation strategy . . . .
Id.

at

*3.

Finally,

and

“[p]erhaps

most

importantly,

[the d]efendant d[id] not face any financial liability in this
lawsuit because of the settlement agreement . . . .”

Id. at *3.

Here, Mr. Bowers and Mr. Torres entered into the Covenant not
to Enforce, in which Mr. Bowers promised that he would “not take
action to enforce [a] Judgment against [Mr. Torres], individually,

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for any amount over and above the applicable underinsured motorist
insurance coverage in force.” (Docket Entry 1-2 at 1.) Mr. Torres
therefore does not face financial liability to Mr. Bowers as a
result of this litigation.

In addition, Mr. Torres appears to

possess a minimal level of control, as he has neither retained
counsel nor given a statement or deposition.
dated Sep. 15, 2017, to present.)
answer on Plaintiffs.
present.)

(See Docket Entries

He has also failed to serve an

(See Docket Entries dated Sep. 25, 2017, to

Accordingly, Mr. Torres constitutes a nominal party, at

least with respect to Mr. Bowers.
Mrs.

Bowers’s

difficult matter.

claim

against

Mr.

Torres

presents

a

more

Mrs. Bowers filed a state-law claim against Mr.

Torres for loss of consortium as a result of the accident.
Docket Entry 1-1, ¶¶ 51-52.)

(See

“A federal court, sitting in North

Carolina in a diversity case, must apply the law as announced by
the highest court of that state or, if the law is unclear, as it
appears the highest court of that state would rule.”

Brendle v.

General Tire & Rubber Co., 505 F.2d 243, 245 (4th Cir. 1974).

“In

doing so, the [C]ourt may consider cases from the Supreme Court of
North Carolina, the North Carolina Court of Appeals, treatises, and
the practices of other states.”

Yarbrough v. East Wake First

Charter Sch., 108 F. Supp. 3d 331, 336 (E.D.N.C. 2015).
must

therefore

apply

North

Carolina

law

consortium in analyzing Mrs. Bowers’s claim.

-6-

governing

The Court
loss

of

Mrs. Bowers did not enter into the Covenant not to Enforce
(see Docket Entry 1-2), but state courts differ as to whether an
injured party’s settlement with a tortfeasor bars the party’s
spouse from bringing a loss of consortium claim.

Compare, e.g.,

Pugh v. Super Fresh Food Mkts., Inc., 640 F. Supp. 1306, 1308 (E.D.
Pa. 1986) (“[P]laintiff-husband’s claims are derivative of his
wife’s and thus extinguished by his wife’s settlement.”), with
Martin v. Ohio Cty. Hosp. Corp., 295 S.W.3d 104, 109 (Ky. 2009) (“A
loss of consortium action can continue even when the injured spouse
or the estate has settled or otherwise been excluded from an
action . . . .”).

Neither the North Carolina Supreme Court nor the

North Carolina Court of Appeals has squarely addressed this issue.
Nonetheless, in looking to “treatises, and the practices of
other states,” Yarbrough, 108 F. Supp. 3d at 336, it appears that
state courts that treat loss of consortium as a derivative claim
also hold that settlements with tortfeasors prevent spouses from
bringing loss of consortium claims.

See, e.g., Pugh, 640 F. Supp.

at 1308; Hall v. Gardens Servs., Inc., 332 S.E.2d 3, 5, 174 Ga.
App. 856, 857 (1985) (“Since the right of the husband to recover
for consortium is dependent upon the right of the wife to recover,
and since on the record before us she cannot recover [because she
signed a liability waiver], he likewise cannot recover.”); see also
41

Am.

Jur.

2d

Husband

and

Wife

§

214

(2d

ed.

2017)

(“In

jurisdictions where the action for loss of consortium is seen as

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purely derivative of the original cause of action, the action for
loss of consortium is also barred once the original cause of action
is

released.”).

The

law

of

North

Carolina

treats

loss

of

consortium claims as derivative. See Trivette v. Yount, 735 S.E.2d
306, 313, 366 N.C. 303, 313 (2012) (“[T]he loss of consortium claim
of [the plaintiff’s spouse] is derivative of [the] plaintiff’s
negligence claim . . . .”) (citing Nicholson v. Hugh Chatham Mem’l
Hosp., Inc., 266 S.E.2d 818, 823, 300 N.C. 295, 304 (1980)).
Accordingly, the Supreme Court of North Carolina would likely rule
that an injured party’s agreement not to sue a tortfeasor would
defeat an accompanying loss of consortium claim by that party’s
spouse

as

well.

Mrs.

Bowers

therefore

does

not

possess

an

independent loss of consortium claim against Mr. Torres, and he
thus faces no financial liability to her.

As such, Mr. Torres

qualifies as a nominal party as to both Plaintiffs.
II. Whether Mr. Torres Should Be Dropped Under Rule 21
Pursuant to Rule 21, “[o]n motion or on its own, the [C]ourt
may at any time, on just terms, add or drop a party.”
P. 21.

Fed. R. Civ.

“Courts frequently employ Rule 21 to preserve diversity

jurisdiction over a case by dropping a nondiverse party if the
party’s presence in the action is not required under Rule 19.”

7

Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 1685 (3d ed. 2017).

However, courts may also dismiss

a nondiverse party pursuant to Rule 21 even when a court would

-8-

retain

diversity

jurisdiction,

qualifies as nominal.

because

the

nondiverse

party

See, e.g., Payroll Mgmt., Inc. v. Lexington

Ins. Co., 815 F.3d 1293, 1298 (11th Cir. 2016) (upholding the
district court’s dismissal of a nondiverse defendant as a nominal
party pursuant to Rule 21).

“[P]arties whose presence is not

essential under Rule 19 may be dropped . . . .”

Caperton v.

Beatrice Pocahontas Coal Co., 585 F.2d 683, 691 (4th Cir. 1978).
A party qualifies as non-essential under Rule 19 “if it is not
necessary for the plaintiff to sue that party in order to recover.”
Linnin v. Michielsens, 372 F. Supp. 2d 811, 826 (E.D. Va. 2005).
As discussed previously, Plaintiffs cannot recover from Mr. Torres
by virtue of the Covenant not to Enforce.

Therefore, because “it

is not necessary for . . . [P]laintiff[s] to sue [Mr. Torres] in
order to recover,” id., the Court may drop him as a party pursuant
to Rule 21.
CONCLUSION
The Covenant not to Enforce relieves Mr. Torres from financial
liability in this action.

As such, he qualifies as nominal and

dispensable.
IT IS THEREFORE RECOMMENDED that State Farm’s Motion to
Dismiss Defendant Bryan Torres (Docket Entry 11) be granted.
This 14th day of December, 2017.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
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