Radchyshyn v. Allstate Indemnity Company

Filing 38

ORDER denying 26 Motion to Intervene; denying 29 Motion to Exercise Supplemental Jurisdiction. Signed by District Judge Martin Reidinger on 11/5/2015. (kby)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:14-cv-00169-MR-DLH
MYKHAILO RADCHYSHYN,
Plaintiff,

)
)
)
vs.
)
)
ALLSTATE INDEMNITY
)
COMPANY,
)
Defendant.
)
___________________________ )

ORDER

THIS MATTER is before the Court on the Motion to Intervene filed by
Michael Christopher Tolley [Doc. 26], and the Motion to Exercise
Supplemental Jurisdiction filed by Defendant Allstate Indemnity Company
(“Allstate”). [Doc. 29]. For the reasons that follow, both motions will be
denied.
BACKGROUND SUMMARY
Plaintiff filed his Complaint against Allstate on May 28, 2014, in the
Buncombe County, North Carolina, Superior Court.

[Doc. 1-1 at 2-7].

Plaintiff’s Complaint seeks monetary damages from Allstate on claims for
breach of contract and unfair and deceptive trade practices stemming from
Allstate’s refusal to pay for Plaintiff’s vehicle loss. [Id.]. Allstate removed
Plaintiff’s action to this Court, by Notice filed July 2, 2014, based upon the

diversity of the parties and an amount in controversy exceeding $75,000.
[Doc. 1]. On July 9, 2014, Allstate filed an Answer and Counterclaim, as well
as a Motion to Dismiss Plaintiff’s second cause of action, the unfair and
deceptive trade practices claim.

[Docs. 3; 4].

Ultimately, the Court

dismissed Plaintiff’s unfair and deceptive trade practices claim on September
8, 2014. [Doc. 7]. Plaintiff thereafter sought to remand this matter back to
state court since the dismissal of his second cause of action reduced the
amount in controversy below the statutory threshold. [Doc. 21].

Allstate

opposed remand. [Doc. 23]. In its discretion, the Court denied Plaintiff’s
motion to remand. [Doc. 25].
Prior to the Court entering its Order denying remand, Plaintiff filed a
separate action in the Buncombe County, North Carolina, Superior Court
captioned Mykhailo Radchyshyn vs. Michael Christopher Tolley d/b/a Chris
Tolley Agency, file number 15 CVS 1570. [Doc. 26-2]. Michael Christopher
Tolley is a registered insurance agent and the person who issued the Allstate
insurance policy at the heart of the dispute in this matter. [Doc. 26]. By
motion filed May 13, 2015, Tolley is seeking to intervene in this matter as a
party defendant. [Id.]. Allstate, by motion filed May 15, 2015, is likewise
asking the Court to exercise its supplemental jurisdiction and permit Tolley
to intervene as a defendant. [Doc. 29]. Both Tolley’s and Allstate’s pending
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motions required the Plaintiff to respond thereto by June 1, 2015. Plaintiff
sought and obtained from the Court an Order permitting him additional time
to respond to both Tolley’s intervention motion and Allstate’s supplemental
jurisdiction motion. [Doc. 31]. The Court allowed Plaintiff up to and including
June 15, 2015, to respond to the motions filed by Tolley and Allstate, and
further, allowed Tolley and Allstate each up to and including July 1, 2015, to
reply thereto if either so chose. Plaintiff filed a Response in opposition to
Tolley’s intervention motion and Allstate’s motion asking the Court to
exercise supplemental jurisdiction. [Doc. 32] Tolley filed a Reply to Plaintiff
Response. [Docs. 34; 35]. Allstate filed no Reply.
DISCUSSION
Michael Tolley, an Allstate authorized agent, seeks permissive
intervention pursuant to Fed. R .Civ .P. 24(b)(1)(B). That rule grants a court
the discretion to permit any person to intervene who has a claim or defense
that shares with the main action a common question of law or fact. Id. Tolley
alleges that Allstate authorized him to issue insurance policies for it, that he
issued an Allstate policy to Plaintiff covering Plaintiff’s car, and that the facts
surrounding his issuance of the Allstate policy to Plaintiff is central both to
this case and to Plaintiff’s case against him in state court.

[Doc. 26].

Because of this, Tolley asserts further that his defenses to Plaintiff’s state
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court action against him share common questions of law and fact with the
defenses Allstate has alleged herein. [Id.]. Finally, Tolley argues that the
interests of judicial efficiency will best be served by allowing him to intervene
in this matter so that discovery can move forward here in a single action thus
preventing duplicative work and the possibility of inconsistent verdicts from
separate venues. [Id.].
For its part, Allstate agrees with Tolley that sound reasons exist to
allow his intervention. [Doc. 29-1 at 5-6]. Accordingly, Allstate has moved
the Court to exercise supplemental jurisdiction.

Allstate asserts that

Congress has given the Court the power to act in this regard under 28 U.S.C.
§ 1367(b). [Id. at 4]. That statutory subsection provides:
In any civil action of which the district courts have original
jurisdiction founded solely on section 1332 of this title, the district
courts shall not have supplemental jurisdiction under subsection
(a) over claims by plaintiffs against persons made parties under
Rule 14, 19, 20, or 24 of the Federal Rules of Civil Procedure, or
over claims by persons proposed to be joined as plaintiffs under
Rule 19 of such rules, or seeking to intervene as plaintiffs under
Rule 24 of such rules, when exercising supplemental jurisdiction
over such claims would be inconsistent with the jurisdictional
requirements of section 1332.
28 U.S.C. § 1367(b). Under this provision, Allstate argues that, “while a
plaintiff would be barred from using supplemental jurisdiction to undermine
the jurisdictional requirements of 28 U.S.C. § 1332, there is no such bar on
a motion by an intervening defendant. Subsection (b) does not affect
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claims by defendants, or those who intervene as a defendant under Rule 24.”
[Doc. 29-1 at 5]. Plaintiff responds to Allstate’s supplemental jurisdictional
argument by contending that § 1367(b), by its very terms, prevents the Court
from entertaining any of Plaintiff’s claims against Tolley. [Doc. 32 at 12].
Plaintiff cites to Rosmer v. Pfizer Inc., 263 F.3d 110 (4th Cir. 2001), as
precedent supporting his argument. [Id. at 11].
Allstate removed Plaintiff’s state case against it to this Court based
upon the complete diversity of the parties under 28 U.S.C. § 1332. Plaintiff
then sued Tolley in state court. As an individual not diverse from Plaintiff
Tolley is barred from removing Plaintiff’s state action against him to this
Court. He seeks instead to intervene as a defendant in Plaintiff’s case
against Allstate, and have the claim against him adjudicated here as well. A
straight forward reading of § 1367(b), to borrow a phrase, clearly prohibits
such interpretive “jiggery-pokery”1 to aid Tolley’s intervention. Congress
wrote 28 U.S.C. § 1367(b) quite clearly: “the district courts shall not have
supplemental jurisdiction under subsection (a) over claims by plaintiffs
against persons made parties under Rule … 24 of the Federal Rules of Civil
Procedure … when exercising supplemental jurisdiction over such claims
would be inconsistent with the jurisdictional requirements of section 1332.”

1

King v. Burwell, 135 S. Ct. 2480, 2500 (2015) (Scalia, J., dissenting).

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Id. As interpreted by the Fourth Circuit, § 1367(b) “imposes specific limits on
the use of supplemental jurisdiction in diversity cases.” Shanaghan v. Cahill,
58 F.3d 106, 109 (4th Cir. 1995). “For example, in diversity actions the rule
of complete diversity would still be required in the context of Rule 24
intervention[.]” Rosmer, 263 F.3d at 115. The Court would thus violate §
1367(b) and run afoul of Rosmer’s dictates were it to permit Tolley to
intervene to defend against Plaintiff’s claims.
Notwithstanding this precedent, Allstate maintains that § 1367(b) “does
not affect claims by defendants, or those who intervene as a defendant under
Rule 24,” even if such defendants share the same citizenship as the plaintiff.
[Doc. 29-1 at 5]. Allstate argues that defendants are completely exempt from
the prohibitions of §1367(b), because those limitations are to prevent
plaintiffs from “smuggl[ing] in claims” for which no jurisdiction would lie, citing
only two law review articles. Allstate’s position, however, is not supported
by either the language of the statute or the cases. There are only two
circumstances in which a defendant may be permitted to intervene when
diversity would otherwise be destroyed. Neither apply to the facts of this
case.
The first of these intervention circumstances requires an examination
of the principal purpose of the lawsuit and the how the parties are aligned in
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accordance with it. A court may consider party realignment before denying
intervention if the nature of the realigned parties’ claims coincide and, after
realignment, complete diversity exists. In an effort to preserve jurisdiction,
courts have a “duty” to “look beyond the pleadings and arrange the parties
according to their sides in the dispute.” Indianapolis v. Chase Nat'l Bank, 314
U.S. 63, 69 (1941) (quoting Dawson v. Columbia Trust Co., 197 U.S. 178,
180 (1905)). As explained by the Fourth Circuit, in adopting the “principal
purpose” test for alignment from Indianapolis, the test requires two steps.
“First, the court must determine the primary issue in the controversy. Next,
the court should align the parties according to their positions with respect to
the primary issue. If the alignment differs from that in the complaint, the court
must determine whether complete diversity continues to exist.” U.S. Fidelity
& Guaranty Co. v. A&S Mfg. Co., Inc., 48 F.3d 131, 133 (4th Cir. 1995). In
the context of intervention, if a court determines that any claims raised by an
intervenor/defendant (who as a party defendant would destroy diversity
because he shares citizenship with plaintiff) are actually in alignment with the
plaintiff,

the

court

may

redesignate

the

intervenor/defendant

as

intervenor/plaintiff, permit the intervention, and proceed with the action.
Vestavia Hills v. General Fidelity Ins. Co., 676 F.3d 1310, (11th Cir. 2012)
(affirming, for complete diversity purposes, district court’s realignment of
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intervenor/defendant as intervenor/plaintiff where original plaintiff and
intervenor/plaintiff’s interests converged against original defendant);
Development Finance Corp. v. Alpha Housing & Health Care, Inc., 54 F.3d
156, 159 (3d Cir. 1995) (same, explaining intervention realignment).
In this matter, it is undisputed that Tolley is aligned with Defendant
Allstate. In fact, it is because Tolley is so closely aligned with the Defendant
that he seeks to intervene. Therefore, this line of cases does not support
intervention.
The second intervention circumstance requires an examination of the
principal purpose of the lawsuit and comparison of that purpose with the
proposed claims asserted by the defendant/intervenor. Section 1367(b)
does not deprive a district court of supplemental jurisdiction over a
counterclaim or cross-claim raised by a joined defendant, even where that
defendant shares citizenship with an original plaintiff. United Capitol Ins. Co.
v. Kapiloff, 155 F.3d 488 (4th Cir. 1998). This is so for two reasons: (1)
section 1367(b) prohibits district courts from exercising supplemental
jurisdiction only over “claims by plaintiffs” made against intervenors who are
not diverse; and (2) as a matter of judicial economy, § 1367(b)’s prohibition
aimed at plaintiffs should not be extended so as to preclude the resolution of
an intervenor’s counterclaims or crossclaims that are intertwined with claims
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brought by the originally diverse parties. Professor Moore gave the following
explanation:
Under Section 1367, one may intervene as a defendant and then
assert a counterclaim against a nondiverse plaintiff or a
crossclaim against a nondiverse party. However, the plaintiff
may not respond with a claim against a nondiverse intervenor
because it is a claim made by a plaintiff against a person made
a party under Rule 24, a result expressly prohibited by Section
1367(b).
*************
Under judicial construction of Section 1367, a party may
not intervene as a defendant solely for the purpose of asserting
a claim against a nondiverse plaintiff. The intervenor must be
potentially liable to the plaintiff on the primary claim in order to
be treated as a defendant to whom supplemental jurisdiction may
apply under Section 1367(b). ... [N]onplaintiff intervenors entitled
to the exercise of supplemental jurisdiction for their claims are
those who must intervene to defend or protect interests put at
issue by the original action, and likely to be lost without the
party's intervention.
16 James William Moore, Federal Practice § 106.46 (3d ed. 2013) (emphasis
added). In accord, Kapiloff, 155 F.3d at 493 (plaintiff did not join additional
parties nor did it seek to assert claims against any additional parties;
defendants joined the nondiverse parties as counterclaim defendants);
Pennsylvania Nat’l Mutual Casualty Ins. Co. v. Perlberg, 268 F.R.D. 218 (D.
Md. 2010) (supplemental jurisdiction exists to allow intervenor/defendant to
assert a crossclaim for contribution against original defendant despite the
common citizenship of the intervenor/defendant and the original plaintiff). In
other words, a non-diverse party can intervene as a defendant if he is
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intervening as of right pursuant to Rule 24(a). Tolley, however, moves for
permissive intervention pursuant to Rule 24(b)(1)(B). [Doc. 26 at 1]. In
addition, Tolley presents no claim against any party herein. He merely seeks
to defend against a claim that has not been brought against him in this Court.
This brings the Court full-circle, back to the language Congress chose
when drafting the supplemental jurisdiction statute. Section 1367(b)
unambiguously states “the district courts shall not have supplemental
jurisdiction under subsection (a) over claims by plaintiffs against persons
made parties under Rule … 24 of the Federal Rules of Civil Procedure …
when exercising supplemental jurisdiction over such claims would be
inconsistent with the jurisdictional requirements of section 1332.” 28 U.S.C.
§ 1367(b). If Plaintiff’s original state lawsuit against Allstate had included
Tolley as a party defendant, Allstate would have been precluded from
removing it to this Court for want of diversity jurisdiction under § 1332.
Section 1367(b) prevents Tolley from now seeking to side-step this
jurisdictional requirement through intervention. Accordingly, the Court
concludes that Tolley’s Motion to Intervene and Allstate’s Motion to Exercise
Supplemental Jurisdiction should both be denied.

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ORDER
IT IS, THEREFORE, ORDERED that the Motion to Intervene filed by
Michael Christopher Tolley [Doc. 26] is DENIED.
IT IS FURTHER ORDERED that the Motion to Exercise Supplemental
Jurisdiction filed by Defendant Allstate Indemnity Company [Doc. 29] is
DENIED.
IT IS SO ORDERED.
Signed: November 5, 2015

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