New Jerusalem Rebirth & Restoration Ministries, Inc. v. Peerless Insurance Company et al
ORDER granting 9 Plaintiff's Motion to Remand to Cleveland County General Court of Justice, Superior Court Division; denying Plaintiff's Motion for Costs and Fees; denying as moot 14 & 15 Defendant's Motion to Dismiss. Signed by District Judge Martin Reidinger on 07/05/2012. (thh)
THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CIVIL CASE NO. 1:11cv312
NEW JERUSALEM REBIRTH &
RESTORATION MINISTRIES, INC.,
PAUL MEYER and PEERLESS
THIS MATTER is before the Court on the Plaintiff’s Motion for Remand
and For Costs and Fees [Doc. 9].
The Plaintiff New Jerusalem Rebirth & Restoration Ministries, Inc. filed
this action in the General Court of Justice, Superior Court Division, Cleveland
County, North Carolina, on October 7, 2011, asserting claims against the
Defendants Paul Meyer and Peerless Insurance Company for breach of
contract, bad faith, fraud, and violations of the North Carolina Unfair and
Deceptive Trade Practices Act, N.C. Gen. Stat. §§ 75-1.1, et seq., arising from
the Defendants’ refusal to approve and pay for the costs necessary to upfit,
equip and operate a temporary location for the Plaintiff’s operations under the
terms of the Plaintiff’s insurance policy. [Complaint, Doc. 1-1].
The Plaintiff is a corporation that maintains its principal offices in
Cleveland County, North Carolina. [Id.]. The Defendant Paul Meyer (“Meyer”)
is a citizen of North Carolina, and the Defendant Peerless Insurance
Company (“Peerless”) is a New Hampshire corporation. The Defendants were
served with the summons and Complaint on October 14, 2011, and October
17, 2011, respectively. [Notice of Removal, Doc. 1].
On November 14, 2011, the Defendants filed a Notice of Removal
removing the lawsuit to this Court on the basis of diversity jurisdiction. [Id.].
Thereafter, the Plaintiff filed the present Motion to Remand and for Costs and
Fees, arguing that the Court lacks subject matter jurisdiction because this
case does not involve a federal question and because both the Plaintiff and
Defendant Meyer are citizens of North Carolina, thereby defeating any
grounds for diversity jurisdiction. [Doc. 9]. Contemporaneous with the Motion
for Remand, the Plaintiff also filed an Amended and Restated Complaint
(“Amended Complaint”), setting forth additional factual allegations and an
against Defendant Meyer for negligent
misrepresentation. [Doc. 10]. The Defendants oppose the Plaintiff’s Motion
for Remand, arguing that diversity jurisdiction is present because Defendant
Meyer was fraudulently joined in this action in order to defeat jurisdiction.
[Doc. 13]. The Defendants further move to dismiss this action in its entirety
pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. [Docs. 14,
STANDARD OF REVIEW
A defendant may remove a civil action from state court where the action
is one that could have been brought originally in a federal district court. 28
U.S.C. § 1441(a).
“When federal-court jurisdiction is predicated on the
parties’ diversity of citizenship, see [28 U.S.C.] § 1332, removal is permissible
‘only if none of the parties in interest properly joined and served as defendants
is a citizen of the State in which the action was brought.’” Lincoln Prop. Co.
v. Roche, 546 U.S. 81, 83-84, 126 S. Ct. 606, 163 L. Ed. 2d 415 (2005)
(quoting 28 U.S.C. § 1441(b)).
The fraudulent joinder doctrine permits the district court to assume
jurisdiction over a case, even if complete diversity does not exist, in order to
dismiss non-diverse defendants and thereby retain jurisdiction. Mayes v.
Rapoport, 198 F.3d 457, 461 (4th Cir. 1999). When a case is removed based
on fraudulent joinder, the removing party has the burden of proof to show that
either: “there is no possibility that the plaintiff would be able to establish a
cause of action against the in-state defendant in state court; or that there has
been outright fraud in the plaintiff’s pleading of jurisdictional facts.” Marshall
v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993) (citation omitted).
The party alleging fraudulent joinder bears the heavy burden of showing that
the plaintiff cannot establish a claim, even after all issues of law and fact have
been resolved in the plaintiff’s favor. Hartley v. CSX Transp., Inc., 187 F.3d
422, 424 (4th Cir. 1999). “This standard is even more favorable to the plaintiff
than the standard for ruling on a motion to dismiss under Fed. R. Civ. P.
In the present case, the Defendants do not claim any fraud in the
pleading of jurisdictional facts, and therefore must prove that there is no
possibility that the Plaintiff will be able to establish any of its causes of action
against Defendant Meyer under state law. In conducting the analysis of the
viability of the Plaintiff’s claims, the Court is “not bound by the allegations of
the pleadings, but may instead consider the entire record, and determine the
basis of joinder by any means available.” AIDS Counseling & Testing Ctrs.
v. Group W Television, Inc., 903 F.2d 1000, 1004 (4th Cir. 1990) (citation
This case originated with a fire at the Plaintiff's former facility on October
7, 2008, which damaged its worship facility (hereinafter “the covered
property”). [Complaint, Doc. 1-1 at ¶¶ 4-6]. The Plaintiff was covered under
a Peerless Insurance policy, and Defendant Meyer, a Peerless company
adjuster, was assigned to adjust any claims made. [Id. at ¶¶ 5, 8].
The Plaintiff's policy provided coverages for building replacement costs,
debris removal, and business personal property loss, which were all settled
for their respective policy limits. [Affidavit of Paul Meyer (“Meyer Aff.”), Doc.
13-3 at ¶ 8]. The policy also provided for extra expense coverage for costs
necessary to minimize the suspension of Plaintiff's business and to allow the
continuation of business activities occurring at the covered property.
[Insurance Policy, doc. 13-6 at 6-7,§ I A(5)(g)]. Such expenses were covered
for the period of restoration, up to a maximum of twelve months. [Id.].
According to the Complaint, the Plaintiff requested approval to upfit and
use its gymnasium as a temporary location for its Sunday worship services
and other operations. The Defendants refused to approve the gymnasium as
a temporary location because, according to Defendant Meyer, it would cost
too much. [Complaint, Doc. 1-1 at ¶¶ 13-14].
The Plaintiff then identified a former Walmart store located at 1730 East
Dixon Boulevard in Shelby (“the Old Walmart Store”) and proposed it as the
site of its temporary facility. [Id. at ¶ 15]. Meyer immediately rejected it, even
though he had not undertaken a reasonable investigation into other suitable
locations in or around Shelby which could serve as a temporary location for
the Plaintiff. [Id. at ¶ 16]. Throughout November 2008, Meyer stood on his
rejection of the Old Walmart Store location and directed the Plaintiff to other
premises which were either unavailable or unsuitable, and without ever finding
another suitable temporary location, he offered to pay the Plaintiff an amount
far less than needed to lease a suitable temporary location. [Id. at ¶ 19].1
In December 2008, the Plaintiff met with Defendant Meyer and architect
Bob Smith and general contractor Mason Venable regarding upfitting the Old
Walmart Store as a temporary location. [Id. at ¶ 21]. Meyer authorized Smith
to draw up plans to upfit the Old W almart Store and to provide them to
contractor Venable for pricing. [Id. at ¶ 22]. Meyer led the Plaintiff to believe
the Old Walmart Store had been approved as a temporary location and that
The Defendants dispute these allegations, asserting that Meyer contacted
several local real estate agents who identified multiple alternative properties, including
an existing church for sale less than 0.5 miles from the covered property. [Meyer Aff.,
Doc. 13-3 at ¶¶ 13-16]. The Defendants assert that the Plaintiff rejected the proposed
properties, stating that it had already decided on the Old Walmart. [Id. at ¶¶ 15].
the Plaintiff was authorized to execute a one-year lease at a cost of $120,000.
[Id. at ¶ 24]. In reliance on these representations, the Plaintiff signed a oneyear lease of the Old Walmart Store on January 9, 2009. [Id. at ¶ 25]. Smith
drew plans and Venable prepared cost estimates projecting an uplift cost of
approximately $500,000 and a two to three-month period of construction. [Id.
at ¶ 26]. Defendant Meyer subsequently refused to approve the plans and the
project stalled. [Id. at ¶ 28]. On March 16, 2009, Defendant Meyer, Smith,
and Venable met with the Plaintiff at the Old Walmart Store. By the end of the
meeting, Defendant Meyer and the Plaintiff had reached an agreement to
proceed with the upfitting of the Old Walmart Store based on Smith’s latest set
[Id. at ¶ 30].
The following day, however, Defendant Meyer
“reversed course” and directed Smith to stop all work. [Id. at ¶ 31]. As a
result of the Defendants’ actions, the Plaintiff was without a temporary location
from March to October 2009. [Id. at ¶ 32].
The Defendants dispute the version of the events alleged by the Plaintiff
and offer the affidavits of Smith, Meyer, and Venable in support of their
opposition. According to the Defendants, Smith’s original plans called for a
two-phase upfit of the Old WalMart Store. [Affidavit of Robert Smith (“Smith
Aff.”), Doc. 13-2 at ¶¶ 12-13]. Phase I would create a 300-seat facility in order
to allow the Plaintiff to begin operating out of the Walmart as soon as
possible, and Phase II would expand the seating capacity and provide for
other upfit spaces. [Id. at ¶ 12]. After Smith began working on the plans,
however, the Plaintiff began contacting him with changes that resulted in an
increase of the size and scope of the renovation. [Id. at ¶¶ 13-22]. In March
2009, Meyer received a copy of the proposed plans. [Smith Aff., Doc. 13-2 at
¶ 22; Meyer Aff., Doc. 13-3 at ¶ 27]. According to the Defendants, Meyer
made it clear to the Plaintiff at the March 16, 2009 meeting, that the current
version of the plans were not in keeping with what the policy provided for and
that Peerless could not approve them. [Meyer Aff., Doc. 13-3 at ¶¶ 28-29].
Before the meeting concluded, however, Meyer indicated some portions of the
plans, specifically those portions that were similar to what Plaintiff had at the
covered property, were likely acceptable. [Id.]. The following day, Meyer met
with Smith and instructed him to modify the plans. [Smith Aff., Doc. 13-2 at
¶ 26; Meyer Aff., Doc. 13-3 at ¶ 30]. After receiving the revised plans, the
Plaintiff informed Meyer that it was not in agreement with the new changes.
[Meyer Aff., Doc. 13-3 at ¶ 32]. The Defendants contend that the Plaintiff then
instructed Smith that the plans were on hold, and he should do no more work
until they were able to reach an agreement with Meyer. [Smith Aff., Doc. 13-2
at ¶ 29]. The parties met again on April 28, 2009, but no agreement was
reached at that time. [Meyer Aff., Doc. 13-3 at ¶ 36]. Meyer asked Smith to
get building department approval for the revised March 25, 2009 plans.
[Smith Aff., Doc. 13-2 at ¶ 32-33; Meyer Aff., Doc. 13-3 at ¶ 37-38]. The
Plaintiff, however, continued to reject the March 25, 2009 plans and did not
work with Smith to create any further plans [Smith Aff., Doc. 13-2 at ¶¶ 29- 30;
Meyer Aff., Doc. 13-3 at ¶ 39].
In arguing in favor of remand, the Plaintiff urges the Court to consider
the allegations of its Amended Complaint, which was filed contemporaneously
with its Motion for Remand.
Specifically, the Plaintiff argues that the
allegations of this pleading are “more than sufficient” to state causes of action
against Defendant Meyer for negligent misrepresentation, fraud, and unfair
and deceptive trade practices.2 [Doc. 9-1 at 4].
The Plaintiff asserts its breach of contract claim against Peerless only, and
therefore this claim is not the subject of the fraudulent joinder analysis. The Plaintiff
also asserts a claim for bad faith against both Defendants; however, the Plaintiff makes
no argument in support of its claim for common law bad faith in its Memorandum of Law
in support of its Motion to Remand. Accordingly, the Court finds that the Plaintiff has
abandoned that cause of action as a basis for remand in this case, and will therefore
limit its analysis to the Plaintiff’s claims for fraud and for unfair and deceptive trade
The Amended Complaint asserts additional factual allegations in support
of the Plaintiff’s claims as well as an additional cause of action for negligent
misrepresentation against Defendant Meyer.
The existence of diversity
jurisdiction, however, is determined as of the time of removal. See St. Paul
Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-91, 58 S.Ct. 586, 82
L.Ed. 845 (1938). As such, courts generally do not consider post-removal
pleadings in determining the existence of diversity jurisdiction. See Porsche
Cars N. Am., Inc. v. Porsche.net, 302 F.3d 248, 255-56 (4th Cir. 2002). This
rule applies equally to the fraudulent joinder analysis. See Justice v. Branch
Banking and Trust Co., Civil Action No. 2:08-230, 2009 WL 853993, at *1 n.2
(S.D.W.Va. Mar. 24, 2009) (noting that in conducting fraudulent joinder
analysis, “[p]ost-removal filings may not be considered ... when or to the
extent that they present new causes of action or theories not raised in the
controlling petition filed in state court”) (quoting Griggs v. State Farm Lloyds,
181 F.3d 694, 700 (5th Cir. 1999)). Accordingly, the Court will consider only
the factual allegations and causes of action set forth in the Plaintiff’s original
Complaint in determining the fraudulent joinder issue.
In order to establish a cause of action for fraud against Defendant
Meyer, the Plaintiff must establish the following elements: (1) a false
representation or concealment of a material fact, (2) which is reasonably
calculated to deceive, (3) which is made with intent to deceive, (4) which does
in fact deceive, (5) and which results in damage to the injured party. See
Forbis v. Neal, 361 N.C. 519, 526-27, 649 S.E.2d 382, 387 (2007).
Additionally, the Plaintiff must establish that any reliance on the allegedly false
representations was reasonable.
Id. at 527, 649 S.E.2d at 387.
reasonableness of a party’s reliance is a question for the jury, unless the facts
are so clear that they support only one conclusion.” Id.
In analyzing whether the Plaintiff has established these elements, the
pleadings are analyzed in accordance with the state court’s pleading
North Carolina courts specifically have declined to adopt the
“plausibility standard” set forth in Bell Atlantic v. Twombly, 550 U.S. 544, 127
S.Ct. 1955, 167 L.Ed.2d 929 (2007). See Holleman v. Aiken, 193 N.C.App.
484, 490-91, 668 S.E.2d 579, 584 (2008); Childress v. Concord Hospitality
Assocs., LLC, No. COA10-1019, 2011 WL 2848767, at *3 (N.C. Ct. App. July
19, 2011). In determining whether a complaint states a claim upon which
relief can be granted, North Carolina courts consider “whether, as a matter of
law, the allegations of the complaint, treated as true, are sufficient to state a
claim upon which relief may be granted under some legal theory.” Craven v.
Cope, 188 N.C. App. 814, 816, 656 S.E.2d 729, 731-32 (2008). In so doing,
“[t]he complaint must be liberally construed, and the court should not dismiss
the complaint unless it appears beyond a doubt that the plaintiff could not
prove any set of facts to support his claim which would entitle him to relief.”
Here, Defendant Meyer argues that this standard cannot be met
because the allegations upon which the fraud claim is based “are patently
false” and because there is no basis for “an honest belief” that Meyer made
any fraudulent misrepresentations.
[Doc. 13 at 19].
In support of this
argument, the Defendant points to evidence in the record demonstrating that
Meyer worked in good faith to secure approval of the upfit necessary to allow
the Plaintiff to continue its operations at the Old Walmart location. [Id. at 1923]. At this point in the proceedings, however, the Court must treat the
Plaintiff’s allegations as true, and under that standard, the Court cannot say
as a matter of law that the Plaintiff has no reasonable basis for its fraud
Accordingly, the Court concludes that Defendant Meyer is properly
joined and this case should be remanded.
Unfair and Deceptive Trade Practices
“Chapter 75 of [the North Carolina] General Statutes prohibits unfair acts
which undermine ethical standards and good faith between persons engaged
in business dealings.” Pleasant Valley Promenade v. Lechmere, Inc., 120
N.C. App. 650, 657, 464 S.E.2d 47, 54 (1995). In order to establish a prima
facie claim for unfair trade practices, a plaintiff must show that: (1) the
defendant committed an unfair or deceptive act or practice, (2) the action in
Indeed, the allegations of the Plaintiff’s Complaint adequately set forth each of
the elements necessary to state a fraud claim against Defendant Meyer. Specifically,
the Complaint alleges that Meyer, in the course of his employment and/or business as
an insurance adjuster, represented to the Plaintiff that he had approved the Old
Walmart Store as a temporary location for the Plaintiff’s operations. [Complaint, Doc. 11 at ¶ 414, 27]. The Complaint further alleges that such representations were false, as
Defendant Meyer did not have any intention of actually approving the upfits necessary
in order for the Plaintiff to use the Old Walmart Store as a temporary church facility, and
that he knowingly made such representations with the intent that the Plaintiff rely upon
them. [Id. at 42]. The Complaint goes on to allege that the Plaintiff reasonably relied on
Defendant Meyer’s false representations, in that the Plaintiff stopped its search for an
alternative temporary location and executed a one-year lease on the Old Walmart Store.
[Id. at ¶¶ 42-43]. The Complaint further alleges that as a proximate result of its
reasonable reliance on Defendant Meyer’s false representations, the Plaintiff suffered
damages. [Id. at ¶ 44]. By alleging the facts as set forth above, the Plaintiff has pled all
of the elements necessary to make out a cause of action against Defendant Meyer for
fraud under North Carolina law. While a North Carolina court ultimately may determine
that the Plaintiff cannot prevail on this cause of action, at this juncture, the Court cannot
say that there is no possibility that the Plaintiff could prevail on this claim.
question was in or affecting commerce, and (3) the act proximately caused
injury to the plaintiff. Id. at 664, 464 S.E.2d at 58.
The Defendants contend that the Plaintiff cannot maintain a claim
against Meyer under Chapter 75 because as an insurance company adjuster,
he is not a “market participant” and thus his action were not “in or affecting
commerce.” [Doc. 13 at 14-15]. The Defendants concede, however, that the
North Carolina courts have not specifically addressed whether an insurance
adjuster may be subject to individual liability for unfair and deceptive trade
practices under Chapter 75. [Id.]. “In the absence of a North Carolina case
that squarely resolves that Plaintiff’s claim is not actionable or when the issue
involves a judgment call and a federal court cannot say with certainty what a
North Carolina would hold, remand is proper.” Geller v. Provident Life and
Acc. Ins. Co., No. 5:10-cv-00096, 2011 WL 1239835, at *5 (W.D.N.C. Mar. 30,
2011) (Voorhees, J.). Because there is at least “some possibility” that the
Plaintiff may recover against Defendant Meyer under Chapter 75, the Court
concludes that remand is proper.4 See id.
The Defendants further argue that as an employee-agent of the insurer,
Defendant Meyer owed duties only to his employer-principal and thus cannot be subject
to an insured’s claim under Chapter 75. [Doc. 13 at 16-17]. In support of this argument,
the Defendants cite Koch v. Bell, Lewis & Associates, Inc., 176 N.C. App. 736, 627
S.E.2d 636 (2006). In Koch, however, the plaintiffs were third-party claimants who were
not in privity with the insurer, and it was on this basis that the Court of Appeals
concluded that the plaintiffs could not sustain claims for unfair and deceptive trade
Award of Fees
The Plaintiff requests that the Court award the Plaintiff its costs and fees
incurred as a result of the Defendants’ wrongful removal. The award of fees
and costs upon remand is a matter within the wide discretion of the Court.
See 28 U.S.C. § 1447(c); In re Lowe, 102 F.3d 731, 733 n. 2 (4th Cir. 1996).
“There is a presumption neither in favor of nor against the awarding of
attorney fees under 1447(c).” Crawford v. C. Richard Dobson Builders, Inc.,
597 F. Supp. 2d 605, 612 (D.S.C. 2009).
As the Supreme Court has
[T]he standard for awarding fees should turn on the
reasonableness of the removal. Absent unusual
circumstances, courts may award attorney's fees
under § 1447(c) only where the removing party lacked
an objectively reasonable basis for seeking removal.
Conversely, when an objectively reasonable basis
exists, fees should be denied.
Martin v. Franklin Capital Corp., 546 U.S. 132, 136, 126 S.Ct. 704, 163
L.Ed.2d 547 (2005).
While Defendants Peerless and Meyer were not
ultimately successful in establishing that Defendant Meyer should be
disregarded pursuant to the fraudulent joinder doctrine, the Defendants made
practices or negligent misrepresentation against the insurer or its adjusters. Id. at 740,
627 S.E.2d at 638-39. By contrast, in the instant case, the Plaintiff is the insured and
thus stands in privity with the Defendants. The reasoning of Koch, then, is simply not
applicable on the facts of this case.
several reasonable legal arguments in support of their opposition to the
Motion for Remand. Thus, the Court concludes that the Defendants had an
objectively reasonable basis for seeking removal of this case. Accordingly,
in the exercise of its sound discretion, the Court declines to make an award
of fees and costs in this matter.5
Accordingly, IT IS, THEREFORE, ORDERED that the Plaintiff’s Motion
for Remand [Doc. 9] is GRANTED, and this case is hereby REMANDED to
the Cleveland County General Court of Justice, Superior Court Division.
IT IS FURTHER ORDERED that the Plaintiff’s Motion for Costs and
Fees [Doc. 9] is DENIED.
IT IS FURTHER ORDERED that the Defendants’ Motions to Dismiss
[Docs. 14, 15] are DENIED AS MOOT.
IT IS SO ORDERED.
Signed: July 5, 2012
In remanding this matter to state court, the Court in no way expresses any
opinion regarding the ultimate merit of the Plaintiff’s claims.
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