Misner et al v. State Farm Fire & Casualty Company et al
Filing
32
ORDER denying 15 Motion to Remand; granting 24 Motion for Discovery (mb)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
TIMOTHY MISNER, et al.,
Plaintiffs,
v.
STATE FARM FIRE AND CASUALTY
COMPANY, et al.,
Defendants.
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Case No. CIV-14-873-D
ORDER
This matter is before the Court on Plaintiffs’ Motion to Remand [Doc. No. 15], which
raises both procedural and jurisdictional challenges to the removal of this action from state
court. Plaintiffs assert that the Notice of Removal was not timely filed by Defendant State
Farm Fire and Casualty Company (“State Farm”), that State Farm waived its right of
removal, and that its allegations and evidence of fraudulent joinder of a nondiverse defendant
are insufficient. State Farm has timely opposed the Motion and, with its response, has filed
Defendant’s Alternative Motion to Conduct Jurisdictional Discovery and for Stay of Ruling
on Plaintiffs’ Motion to Remand [Doc. No. 24]. Both motions are fully briefed.
Factual and Procedural Background
This case concerns an insured loss resulting from the May 20, 2013 tornado in Moore,
Oklahoma. Plaintiffs’ loss was covered by a homeowner’s insurance policy issued by State
Farm. Plaintiffs sued State Farm in the District Court of Cleveland County, Oklahoma, in
August, 2013, claiming that State Farm failed to pay the full amount due under the policy and
breached its duty of good faith and fair dealing. Plaintiffs also included in their petition
additional claims against a local insurance agency that sold Plaintiffs the subject policy,
Defendant Debbie Shepherd Insurance Agency, Inc. (“Shepherd”).
Plaintiffs claim that
Shepherd failed to exercise reasonable care and skill in procuring a replacement cost policy
that would provide the insurance coverage promised to Plaintiffs, failed to inform Plaintiffs
of limitations of the policy, and failed to maintain an appropriate level of coverage. In
addition, Plaintiffs assert claims against Shepherd for negligent misrepresentation, negligent
underwriting, and breach of fiduciary duty.
As shown by the Notice of Removal and attachments spanning more than 1100 pages,
the case was litigated in state court for almost a year before it was removed on August 15,
2014, pursuant to 28 U.S.C. §§ 1441 and 1446.
State Farm invokes subject matter
jurisdiction under 28 U.S.C. § 1332 based on allegations that Plaintiffs fraudulently joined
Shepherd in an attempt to destroy diversity of citizenship. State Farm asserts that “Plaintiffs
have no possibility of establishing a cause of action” against Shepherd. See Notice of
Removal [Doc. No. 1], ¶ 29. Specifically, State Farm contends the allegations of Plaintiffs’
pleading – when “viewed in conjunction with the concessions made by Plaintiffs’ counsel”
at a state court hearing on July 21, 2014 (id. ¶ 31) and viewed in light of the terms of the
policy and facts regarding the loss (id. ¶¶ 34-35) – fail to state a viable claim against
Shepherd under Oklahoma law for negligent misrepresentation, negligence, or breach of
fiduciary duty and, further, any claim would be barred by Oklahoma’s two-year statute of
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limitations. State Farm also contends Plaintiffs prevented it from conducting discovery in
state court that would conclusively show their claims lack any factual basis, and the removal
was timely filed after the statements made by Plaintiffs’ counsel at the July 21 hearing. State
Farm asserts that counsel’s statements provided the “other paper” from which it could first
be ascertained that the case was removable. See 28 U.S.C. § 1446(b)(3); Notice of Removal
[Doc. No. 1], ¶ 30.1
As stated above, Plaintiffs’ Motion challenges both State Farm’s allegations of
fraudulent joinder and the timeliness of removal. Plaintiffs contend nothing has occurred
during the litigation that caused the case to become removable, and removability was not
shown by their attorney’s hearing statements. Regarding timeliness, Plaintiffs argue that, if
the case is removable, State Farm could have ascertained removability based on the petition
and written discovery responses received from Plaintiffs in April, 2014, at the latest. Finally,
Plaintiffs present the affidavit of a retained expert to support their position that Shepherd
“failed to adhere to the basic practices and standards applicable to insurance agents in the
procurement, handling, maintenance and renewal of the Misners’ insurance policy.” See
Plfs’ Mot. Remand [Doc. No. 15] at p.18.
State Farm responds that either the hearing statements of Plaintiffs’ counsel provided
the first “unequivocal notice” of removability or the statements constituted a waiver of any
1
Alternatively, if the Court should determine that a factual showing is necessary to establish fraudulent joinder,
State Farm requests in the Notice of Removal (like its pending motion) that it be permitted to depose Plaintiffs prior to
any ruling on the issue. Id. ¶ 31.
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defects in State Farm’s compliance with the timeliness requirement of § 1446(b). See Def.’s
Resp. Br. [Doc. No. 23] at p.12 (citing Huffman v. Saul Holdings Ltd. P’ship, 194 F.3d 1072,
1079 (10th Cir. 1999)). State Farm contends the vague and conclusory allegations of
Plaintiffs’ pleading made it impossible to ascertain whether a substantial claim against
Shepherd existed, and Plaintiffs’ discovery responses “add[ed] nothing of substance to [their]
allegations” against Sheperd.
Id., p.14.
State Farm argues, however, that “some of
Plaintiffs’ purported claims against Shepherd are invalid on their face” (id., p.18), that other
claims are supported only by vague and “generic” allegations that are identical to ones made
in other cases filed by Plaintiffs’ counsel and so are not credible (id., p.20), that Plaintiffs’
resistance to being deposed raises an inference that their testimony would not have supported
a claim against Shepherd, and that the July 21 hearing statements of Plaintiffs’ counsel
confirm the correctness of this inference. Finally, State Farm urges the Court to disregard
the affidavit submitted by Plaintiffs in support of their negligence claim against Shepherd
“because it proffers improper legal conclusions, expresses ‘opinions’ . . . that are not
supported by Oklahoma law, and is ultimately irrelevant to the issue . . . [of] whether
Plaintiffs have ‘any possibility of recovery’ against Shepherd.” Id., p.22.
Standard of Decision
Subject matter jurisdiction over this case depends on the doctrine of fraudulent
joinder. “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
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establish a cause of action against the non-diverse party in state court.”
Dutcher v.
Matheson, 733 F.3d 980, 988 (10th Cir. 2013) (internal quotation omitted). Under the
circumstances, State Farm must show there is no possibility that Plaintiffs would be able to
establish a cause of action against Shepherd. See Montano v. Allstate Indem., No. 99-2225,
2000 WL 525592, *1-2 (10th Cir. April 14, 2000) (unpublished). The non-liability of a
defendant alleged to be fraudulently joined must be established with “complete certainty.”
See Smoot v. Chicago, Rock Island & Pac. R.R. Co. 378 F.2d 879, 882 (10th Cir. 1967);
Dodd v. Fawcett Publ’ns, Inc., 329 F.2d 82, 85 (10th Cir. 1964). “But upon specific
allegations of fraudulent joinder the court may pierce the pleadings, consider the entire
record, and determine the basis of joinder by any means available.” Smoot, 378 F.2d at 882
(citations omitted).
The timeliness of removal depends on State Farm’s compliance with the statutory
procedure set forth in § 1446(b)(3), which provides:
[I]f the case stated by the initial pleading is not removable, a notice of removal
may be filed within 30 days after receipt by the defendant, through service or
otherwise, of a copy of an amended pleading, motion, order or other paper
from which it may first be ascertained that the case is one which is or has
become removable.
28 U.S.C. § 1446(b)(3). The 30-day time limit begins to run when a defendant with a right
to remove receives unequivocal notice, normally as a result of a voluntary act of the plaintiff,
from which “the defendant is able to intelligently ascertain removability.” See Huffman v.
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Saul Holdings Ltd. P’ship, 194 F.3d 1072, 1078 (10th Cir. 1999) (internal quotation omitted);
see also Akin v. Ashland Chem. Co., 156 F.3d 1030, 1035-36 (10th Cir. 1998).
Federal courts are generally obliged to address jurisdiction as a threshold matter. See
Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94-95 (1998). Further, a
removing party bears the burden to establish subject matter jurisdiction, which cannot be
waived. See Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995). Therefore, the
Court first addresses the issue of whether State Farm has established its asserted basis for
federal jurisdiction – fraudulent joinder.
Discussion
A.
State Farm’s Proof of Fraudulent Joinder
In relying on § 1446(b)(3) to establish the timeliness of the Notice of Removal, State
Farm has conceded that the case stated by Plaintiffs’ pleading was not removable and that
Plaintiffs’ written discovery responses were also insufficient to establish removability. State
Farm expressly argues in its present brief that neither “Plaintiffs’ ambiguous petition” nor
their discovery responses provided clear notice that Shepherd had been fraudulently joined.
See Def.’s Resp. Br. [Doc. No. 23] at pp.10-11. The question becomes, what information
now enables State Farm to show with complete certainty that the case is removable, that is,
Plaintiffs have “no possibility of establishing a cause of action” against Shepherd? See
Notice of Removal [Doc. No. 1], ¶ 29.
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State Farm purports to rely on “concessions made by Plaintiffs’ counsel at the July 21,
2014 hearing.” Id. ¶ 31.2 The statements to which State Farm refers were made during oral
arguments by attorneys for Plaintiffs in a hearing conducted by the presiding Cleveland
County district judge, the Honorable Lori Walkley. Multiple insurance cases against State
Farm related to the May 2013 tornadoes in Moore, Oklahoma, were assigned to Judge
Walkley for consolidated discovery proceedings that were overseen by a discovery master.
As shown by the hearing transcript submitted with Plaintiffs’ Motion, and the appendix of
exhibits attached to the Notice of Removal, the dispute that was the subject of a July 21
hearing before Judge Walkley concerned the timing of depositions and scheduling conflicts
related to the trial schedule of Plaintiffs’ counsel in other cases.
The particular statements on which State Farm relies are those of lead counsel for
Plaintiffs, Jeffrey Marr, who was countering an argument by State Farm’s counsel that a right
of due process would be violated if the defendants were unable to depose the plaintiffs in
cases for which the one-year deadline for removal of 28 U.S.C. § 1446(c)(1) would soon
expire. See 7/14/14 Hr’g Tr. [Doc. No. 1-18], pp.10-11.3 The discovery master had
recommended a schedule to complete the plaintiffs’ depositions in three cases by August 1,
2
State Farm also relies on the fact that Plaintiffs’ counsel has utilized an almost identical, form-like petition
in other cases brought on behalf of other insureds to argue that it is “not remotely plausible” that numerous agents would
have separately engaged in identical conduct. See Def.’s Resp. Br. [Doc. No. 23], p.20. This argument, although
attractive, does not foreclose the possibility that Shepherd engaged in the conduct alleged in Plaintiffs’ pleading. Also,
this fact was previously known to State Farm.
3
State Farm provided with its Notice of Removal only unofficial, partial hearing transcripts that do not permit
a more precise citation.
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2014. See Recom. of Disc. Master [Doc. No. 1-19], p.3. State Farm focuses on Mr. Marr’s
statements that State Farm did not need to take the depositions before removal, that State
Farm already had enough information to remove the cases, that there was “no prejudice to
State Farm” if it did not obtain the deposition testimony before the one-year deadline, and
that it could remove the cases “at any time within one year.” See 7/21/14 Hr’g Tr. [Doc.
No. 15-4], 8:24-9:9, 10:10-19, 15:23-16:1, 16:8-10; see also Notice of Removal [Doc.
No. 1], ¶ 28; Def.’s Resp. Br. [Doc. No. 23], pp.10, 11-12.
In relying on the hearing statements of Plaintiffs’ counsel, State Farm asks the Court
to draw inferences that are unfavorable to Plaintiffs. This is inconsistent with Tenth Circuit
authority, which holds: “The defendant seeking removal bears a heavy burden of proving
fraudulent joinder, and all factual and legal issues must be resolved in favor of the plaintiff.”
Dutcher, 733 F.3d at 988 (internal quotation omitted) accord Travis v. Irby, 326 F.3d 644,
649 (5th Cir. 2003) (“Any contested issues of fact and any ambiguities of state law must be
resolved in [plaintiff’s] favor.”). Viewed most favorably to Plaintiffs, the Court does not find
counsel’s statements to be concessions that Plaintiffs’ testimony would not provide factual
support for their claims against Shepherd, as argued by State Farm.
Read in context, the statements were made in support of Plaintiffs’ legal position that
removal may be based on other sources of factual information, such as written discovery
responses and a defendant’s independent investigation. Mr. Marr argued that State Farm had
provided no legal authority for the proposition that depositions must be taken before removal
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to federal court, and had not shown that taking Plaintiffs’ depositions was the only way to
establish fraudulent joinder. See 7/21/14 Hr’g Tr. [Doc. No. 15-4], 8:25-9:9. His statement
that State Farm had enough information was made in the context of arguing that Plaintiffs
had responded to written discovery requests and supplemented their responses, and that there
was no outstanding discovery motion challenging the sufficiency of Plaintiffs’ responses.
See id. 10:12-19. Mr. Marr’s statement that State Farm was entitled to remove the cases and
could do so within one year of filing could be viewed as simply acknowledgment of the
federal statutes. Mr. Marr was also likely acknowledging that State Farm could proceed
exactly as it has, by removing the case based on allegations of fraudulent joinder and
pursuing discovery in federal court to support the allegations.
In short, Mr. Marr did not provide any facts or make any concessions bearing on the
issue of whether Plaintiffs’ claims against Shepherd were factually supported or supportable.
Accordingly, the Court finds that State Farm’s reliance on these statements to establish that
there is no possibility Plaintiffs could recover against Sheperd is misguided. Instead, the
issue of fraudulent joinder must be decided based on the facts and evidence provided in
support of the Notice of Removal, other than Mr. Marr’s statements.
Upon consideration of the record presented, the Court finds that, notwithstanding
some legal insufficiencies in Plaintiffs’ pleading shown by the Notice of Removal, State
Farm does not fully address in its Notice of Removal all claims asserted against Shepherd.
For example, State Farm expressly concedes that Plaintiffs’ claims of fraud and
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misrepresentation are not facially defective. See Notice of Removal [Doc. No. 1], ¶ 20. But
State Farm fails to present in its subsequent discussion of Plaintiffs’ claims facts that
establish they have no possibility of recovery under this theory.
Plaintiffs claim in their Fourth Cause of Action for “Constructive Fraud and Negligent
Misrepresentation” that they “were induced to accept and purchase the State Farm
homeowners replacement cost policy by Defendant Shepherd’s misrepresentations.” See
Petition [Doc. No. 1-1], ¶ 46. Plaintiffs allege Shepherd misrepresented that: a) the coverage
provided by the policy “was truly one of ‘replacement’;” b) the amount of coverage “was
equal to the estimated replacement cost of Plaintiffs’ home;” c) the amount of coverage
“would provide the coverage necessary to replace their dwelling and personal property in the
event their home was totally destroyed by a covered event;” and d) if Plaintiffs sustained a
covered loss, “their dwelling and personal property would be ‘replaced’ as opposed to
depreciated.” Id. ¶ 42. State Farm does not address particular misrepresentations but argues
only that Plaintiffs’ claim rests on “statements regarding the future performance of the
policy” rather than existing facts. See Notice of Removal [Doc. No. 1], ¶ 33. State Farm also
contends Plaintiffs could not reasonably have relied on any misrepresentations “because they
received a copy of the Policy” (id.), and they could not have been damaged because their
house was not totally destroyed and thus “[t]he replacement cost of Plaintiffs’ house is not
at issue.” Id. ¶ 34. State Farm provides no factual support for these contentions.
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Similarly, State Farm seeks to defeat Plaintiffs’ negligence claim based on the
principle that “an insurance agent has no duty under Oklahoma law to advise an insured
regarding insurance needs or to monitor a policy for ‘appropriate’ coverage.” Id. ¶ 35.
Although no legal authority is cited in the Notice of Removal, State Farm relies in its brief
on decisions of the Oklahoma Court of Civil Appeals. See Def.’s Resp. Br. [Doc. No. 23],
pp.18-19 (citing Rotan v. Farmers Ins. Group of Cos., 83 P.3d 894, 895 (Okla. Civ. App.
2003); Cosper v. Farmers Ins. Co., 309 P.3d 147, 149 (Okla. Civ. App. 2013)). These
decisions refined the rule of Swickey v. Silvey, 979 P.2d 266,269 (Okla. Civ. App. 1999), that
“[a]n agent has the duty to act in good faith and use reasonable care, skill and diligence in
the procurement of insurance and an agent is liable to the insured if, by the agent’s fault,
insurance is not procured as promised and the insured suffers a loss.”
In Rotan, 83 P.3d at 895, the court stated that an agent has a duty to “offer coverage
mandated by law and coverage for needs that are disclosed by the insureds.” The insureds’
negligence claim failed in Rotan because they did not disclose information to the agent that
would have permitted him to determine their need for the type of coverage at issue. In
Cosper, the court declined to extend Swickey and impose a duty to provide an “adequate
amount” of coverage; the insureds’ negligence claim failed in Cosper because they did not
claim to have requested a specific amount and “nothing in the record show[ed the agent]
played any part in setting a coverage limit.” See Cosper, 309 P.3d at 149. In this case, the
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record reveals nothing about what information Plaintiffs provided to Shepherd or what part
he played in determining the coverage of their policy.4
State Farm also alleges that any tort claim is barred by the applicable statute of
limitations. But this allegation is based solely on the fact that Plaintiffs first applied for the
policy in September, 2008. From this, State Farm concludes that the two-year statute of
limitations “would have expired in 2010.” See Notice of Removal [Doc. No. 1], ¶ 39. If the
discovery rule applies, however, the statute of limitations begins to run when a plaintiff
“knows, or in the exercise of due diligence, should have known of the injury.” See Woods
v. Prestwick House, Inc., 247 P.3d 1183, 1186 (Okla. 2011). Plaintiffs’ insurance loss
occurred in 2013. State Farm presents no facts to establish that Plaintiffs should have known
of their injury sooner.
State Farm points to no evidence that would negate Shepherd’s liability for the claims
stated in the petition, but merely relies on a lack of evidence. Under these circumstances,
where neither side has presented any substantive evidence regarding Shepherd, State Farm
has failed to meet its heavy burden to establish fraudulent joinder. See Travis, 326 F.3d
at 650. Therefore, the Court finds that State Farm has failed to show the existence of subject
matter jurisdiction pursuant to 28 U.S.C. § 1332(a).
4
Plaintiffs’ Motion is similarly silent regarding such facts. Their expert’s opinions are not based on any
information provided by Plaintiffs or Shepherd regarding their communications or dealings, but on the fact that Shepherd
provided no documents or discovery responses showing he performed certain tasks.
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B.
Jurisdictional Discovery
Anticipating that the Court might reach this conclusion, State Farm alternatively
requests that it be permitted to conduct jurisdictional discovery to develop a sufficient factual
record to establish fraudulent joinder. State Farm proposes to take the depositions of both
Plaintiffs, and to supplement its response to their Motion within 20 days after the depositions
are completed. Plaintiffs oppose this request on the grounds that State Farm has failed to
establish the depositions are needed, that State Farm had ample opportunity to conduct
discovery in state court before removal, and that the proposed discovery is not sufficiently
tailored to the jurisdictional issues.
The parties’ positions on the availability to State Farm of timely discovery align with
the arguments made by their attorneys in the July 21 hearing before Judge Walkley. State
Farm contends Plaintiffs or their counsel deliberately blocked the depositions; Plaintiffs
faults State Farm for its failure to develop sufficient facts in a timely manner. Judge Walkley
expressed skepticism about both positions; she stated, “I think both sides are posturing a
great deal.” See 7/21/14 Hr’g Tr. 21:13-14. However, it is also clear that she set a deadline
to complete Plaintiffs’ depositions on a date after the one-year deadline of § 1446(c)(1)
because she believed that State Farm could remove based on the existing record and then ask
to supplement its filing after the depositions were taken. Under these circumstances, the
Court finds that State Farm should be permitted to take the depositions before a final decision
regarding jurisdiction is made. There is no reason for this case to bounce back and forth
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between state and federal courts when two depositions are all that is needed to flesh out the
allegations of Plaintiffs’ petition, and resolve the question of whether any substantial claim
against Shepherd exists.
Accordingly, the Court will order the parties to schedule the depositions of Timothy
Misner and Rachel Misner on a mutually agreeable date within 30 days from the date of this
Order. State Farm will be given 21 days from the date of the last deposition to supplement
the record, and Plaintiffs will have 21 days to respond. The Court is mindful, however, that
a federal court must be careful to avoid permitting a summary process designed to establish
jurisdiction from expanding into a resolution of the merits. See Smallwood v. Illinois Cent.
R. Co., 385 F.3d 568, 574 (5th Cir. 2004) (en banc); see also Brazell v. White, 525 F. App’x
878, 881 (10th Cir. 2013) (the objective of the fraudulent joinder inquiry “is not to pre-try
the merits of the plaintiff’s claims”).5 Therefore, State Farm shall limit the areas of inquiry
during the depositions to the jurisdictional issue of fraudulent joinder, and may examine
Plaintiffs only regarding facts that might preclude a recovery from Shepherd.
C.
Timeliness
Plaintiffs also challenge the timeliness of the Notice of Removal, but their position
is not entirely clear. They simultaneously argue that the case is not removable and nothing
transpired to trigger a right of removal under § 1446(b)(3), but that if State Farm believed
5
At least one appellate court has concluded that post-removal discovery to establish jurisdiction is never
appropriate. See Lowery v. Alabama Power Co., 483 F.3d 1184, 1215-26 (11th Cir. 2007). The Tenth Circuit has not
decided this issue.
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the case was removable, it should have undertaken its own investigation and filed a notice
of removal within 30 days of the filing of the petition or, at the latest, within 30 days after
receiving Plaintiffs’ discovery responses. Plaintiffs’ position is contrary to binding precedent
holding that a defendant has no “duty to investigate and determine removability where the
initial pleading indicates that the right to remove may exist; the Tenth Circuit “requires clear
and unequivocal notice from the pleading itself, or a subsequent “other paper.” Akin v.
Ashland Chemical Co., 156 F.3d 1030, 1036 (10th Cir. 1998) (emphasis in original).
Further, under the Tenth Circuit’s view of § 1446(b)(3), “the circumstances permitting
removal must normally come about as a result of a voluntary act on the part of the plaintiff.”
Huffman, 194 F.3d at 1078 (citing DeBry v. Transamerica Corp., 601 F.2d 480, 486-88 (10th
Cir.1979)). Other federal courts agree. See Romulus v. CVS Pharmacy, Inc., No. 14-1937,
2014 WL 5422160, *6 (1st Cir. Oct. 14, 2014) (to be published) (“Section 1446(b)(3) does
not apply until removability can first be ascertained from the plaintiffs’ own papers.”)
(emphasis in original); see also Moltner v. Starbucks Coffee Co., 624 F.3d 34, 38 (2d Cir.
2010) (“the removal clock does not start to run until the plaintiff serves the defendant with
a paper that explicitly specifies the amount of monetary damages sought”); Lowery v.
Alabama Power Co., 483 F.3d 1184, 1213 n.63 (11th Cir. 2007) (“a case becomes removable
when three conditions are present: there must be (1) ‘an amended pleading, motion, order
or other paper,’ which (2) the defendant must have received from the plaintiff (or from the
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court, if the document is an order), and from which (3) the defendant can ‘first ascertain’ that
federal jurisdiction exists.”).
The papers on which Plaintiffs rely to establish adequate notice to State Farm are the
petition and their written discovery responses. The Court finds that none of these papers
provided sufficient information to amount to clear and unequivocal notice to State Farm that
Plaintiffs could not establish a claim against Shepherd. The Court further finds that
Plaintiffs’ failure to provide a paper from which removability could be ascertained does not
mean that the case was improperly removed.
Federal appellate courts that have reached the question have held that the two 30-day
periods of § 1446(b) are not the exclusive time periods for removal. See Cutrone v. Mortg.
Elec. Regis. Sys., Inc., 749 F.3d 137, 147 (2d Cir. 2014); Walker v. Trailer Transit, Inc., 727
F.3d 819, 825-26 (7th Cir. 2013); Roth v. CHA Hollywood Med. Ctr., L.P., 720 F.3d 1121,
1124-25 (9th Cir. 2013). “[A]s long as the complaint or ‘an amended pleading, motion, order
or other paper’ does not reveal that the case is removable, the 30-day time period never starts
to run and the defendant may remove at any time.” Rea v. Michaels Stores Inc., 742 F.3d
1234, 1238 (9th Cir. 2014). In this case, Plaintiffs never provided a discovery response or
other paper showing that Shepherd was fraudulently joined so the 30-day time period of
§ 1446(b)(3) was never triggered. Therefore, the Court finds that State Farm’s Notice of
Removal was not untimely.
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D.
Waiver
Plaintiffs’ second procedural attack on the removal of their case is an assertion that
State Farm waived its right of removal because it “sought substantive relief from the state
court despite its claim that Defendant Shepherd was fraudulently joined.” See Pls.’ Mot.
Remand [Doc. No. 15], p.15. Plaintiffs cite a number of defensive actions undertaken by
State Farm: filing a dismissal motion, procedural motions, and discovery motions; making
an offer to confess judgment; and conducting discovery. The Tenth Circuit has squarely
held, however, that “a defendant who actively invokes the jurisdiction of the state court and
interposes a defense in that forum is not barred from the right to removal in the absence of
adequate notice of the right to remove.” Akin, 156 F.3d at 1036. Because the Court has
found that State Farm did not receive adequate notice of removability before it filed its
Notice of Removal, State Farm could not have waived its right to remove the case through
engaging in litigation activities in state court.
Conclusion
For these reasons, the Court concludes that the present record is insufficient to
determine whether jurisdiction exists but, otherwise, the removal of the case was proper. A
limited amount of jurisdictional discovery will be authorized to determine the question of
fraudulent joinder.
IT IS THEREFORE ORDERED that Plaintiff’s Motion to Remand [Doc. No. 15] is
DENIED in part, and RESERVED in part for future ruling.
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IT IS FURTHER ORDERED that Defendant’s Alternative Motion to Conduct
Jurisdictional Discovery and for Stay of Ruling on Plaintiffs’ Motion to Remand [Doc.
No. 24] is GRANTED. The parties are directed to schedule the depositions of Timothy
Misner and Rachel Misner on a mutually agreeable date or dates to be conducted within
30 days from the date of this Order; these depositions are limited to the issue of fraudulent
joinder, as set forth herein. State Farm shall supplement its response to Plaintiffs’ Motion
to Remand within 21 days from the date of the last deposition, and Plaintiffs shall respond
within 21 days thereafter.
IT IS SO ORDERED this 4th day of December, 2014.
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