Rich et al v. State Farm Fire & Casualty Company et al

Filing 33

ORDER granting 9 Motion to Remand; denying 16 Motion for Discovery, as more fully set out. Signed by Honorable David L. Russell on 12/12/14. (jw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
JOHNNY RICH
AND CAROLYN RICH,
Plaintiffs,
v.
STATE FARM FIRE AND
CASUALTY COMPANY and
TERRY CAVNAR,
Defendants.

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Case No. CIV-14-1010-R

ORDER
Before the Court is Plaintiffs’ Motion to Remand [Doc. No. 9], to which
Defendant has filed a Response [Doc. No. 15].

On the same date as its response,

Defendant State Farm Fire and Casualty Company (“State Farm”) filed an Alternative
Motion to Conduct Jurisdictional Discovery and for Stay of Ruling on Plaintiff's Motion
to Remand [Doc. No. 16], to which Plaintiffs have objected. Having considered the
parties' submissions with regard to both motions, for the reasons set forth herein, the
Court hereby denies Defendant's request for discovery and a stay and grants Plaintiffs'
motion to remand.
Plaintiffs commenced this action in the District Court of Cleveland County on
September 30, 2013. Doc. No. 1, Ex. 1, at 1. The underlying dispute is State Farms'
alleged failure to properly pay Plaintiffs for insured losses resulting from a May 20, 2013
tornado that damaged their Moore, Oklahoma home. Id. at 2. Citing 28 U.S.C. § 1332,
State Farm removed the action to this Court on September 18, 2014. Doc. No. 1.

Conceding the presence of a non-diverse Defendant, Terry Cavnar, State Farm
nevertheless asserted that the Court could exercise diversity jurisdiction because Cavnar,
an insurance agent, had been fraudulently joined and thus his citizenship could be
disregarded for purposes of assessing diversity. State Farm asserted that its removal was
timely based on 28 U.S.C. § 1446, which permits removal within 30 days of the date on
which it received a paper from which it could first ascertain that the case was or had
become removable.
In seeking remand Plaintiffs contend that Defendant's attempt at removal is
untimely, because nothing has occurred during the litigation that moved this case from
non-removable to removable, such that the provision of § 1446(b)(3) should apply. 28
U.S.C. § 1446(b)(3) provides that "a notice of removal may be filed within 30 days after
receipt by the defendant … 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.” State Farm counters by conceding the action was not initially removable and
that Plaintiffs' discovery responses, provided in state court, did not provide notice that the
case was subject to removal. Defendant contends, however, that a Motion to Quash, filed
by Plaintiffs on September 8, 2014, provided the "other paper" necessary to establish that
removal was appropriate. "The removal clock only started running when Plaintiffs took

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actions making clear their position that their counsel's July 21 assertions apply equally to
this case." Response to Motion to Remand, p. 19.1
The Court disagrees with Defendant's characterization of both the Plaintiffs'
counsels statements at the July 2, 2014 hearing and the subsequent motion, which
allegedly extended its position to this particular case. First, an “other paper” under §
1446(b)(3) must provide a “clear and unequivocal notice” of the right to remove and
“should not be ambiguous.” Akin, 156 F.3d at 1035-36 (quoting DeBry v. Transamerica
Corp., 601 F.2d 480, 489 (10th Cir. 1979)). Furthermore, in determining whether removal
is timely, “all factual and legal issues must be resolved in favor of the plaintiff.” Dutcher
v. Matheson, 733 F.3d 980, 988 (10th Cir. 2013) (quoting Pampillonia v. RJR Nabisco,
Inc., 138 F.3d 459, 461 (2d Cir. 1998)).
The Motion to Quash does not “unequivocally” notify State Farm that there is no
factual basis for the Plaintiffs’ claims against Defendant Cavnar.

Nothing therein

indicates that Plaintiffs will dismiss its claims against the agents or that the claims against
the non-diverse Defendant are not viable. Indeed Plaintiffs' position prior thereto was
that the claims were valid under Oklahoma law, as indicated by its response in opposition
to a motion to dismiss filed by Defendants in the District Court of Cleveland County.

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As the parties are aware, this is one of eleven cases filed against State Farm and a number of agents stemming from
the May 2013 tornado in Moore, Oklahoma. The cases were all filed originally in the District Court of Cleveland
County and consolidated in that forum for discovery and pretrial purposes. Therefore, many of the documents cited
by the parties were filed in other cases which are related, albeit, indirectly. Defendant contends that Plaintiffs'
counsel's statements at a July 21, 2014 hearing regarding removability did not unequivocally apply to this case, and
that the Motion to Quash, filed in this action while pending in the District Court of Cleveland County gave
Defendants first notice that the statement applied herein.

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State Farm also argues that Plaintiffs’ arguments in state court that State Farm could
remove anytime within one year “waived any objections to any procedural deficiencies in
State Farm’s removal.” Doc. No. 31, at 3. Even if Plaintiffs’ counsel’s statements could
reasonably be interpreted in this manner, State Farm cites no authority for its contention
that a plaintiff can waive the procedural requirements of § 1446 prior to removal. See
Sheldon v. Khanal, 502 F. App’x 765, 771 (10th Cir. 2012) (unpublished)
(“Nonjurisdictional defects must be raised within 30 days after the filing of the notice of
removal or they are waived.” (emphasis added) (citations omitted)). Because one cannot
“ascertain” a “clear and unequivocal notice” of a right to remove from the Motion to
Quash, and State Farm has not pointed to any “other paper” satisfying the requirements of
§ 1446(b)(3), State Farm’s removal was improper and untimely under the provisions of
28 U.S.C. § 1446(b)(3).2
As noted above, Defendant filed an Alternative Motion to Conduct Jurisdictional
Discovery, stating therein that should the Court determine that the current record is not
sufficient to establish fraudulent joinder that it should permit Defendants to engage in
jurisdictional discovery to support their fraudulent joinder theory. In support of its
position, State Farm cites to McPhail v. Deere & Co., 529 F.3d 947, 954 (10th Cir. 2008),
in which the Tenth Circuit stated that it is within the Court’s discretion to grant such
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In light of the one year period for removal set forth in § 1446(c), the above would seem to foreclose removal to
defendants who find themselves unable to conduct timely jurisdictional discovery in state court. The caveat added to
§ 1446(c) by the 2011 amendments, however, offers the potential for timely removal under § 1446(b)(3) even after
one year, where the court "finds that the plaintiff has acted in bad faith in order to prevent a defendant from
removing the action." See Aguayo v. AMCO Ins. Co., --- F.3d - -, 2014 WL 5859098 (D.N.M. Oct. 31,
2014)(discussing and assessing bad faith exception to the one year rule in cases alleging fraudulent joinder).

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discovery requests. Id. (“[P]erhaps because there was no time to do so in state court”).
The Court declines to provide for jurisdictional discovery in this case for two reasons.
First, State Farm has not produced sufficient evidence demonstrating its inability to
obtain supporting evidence during its entire time in state court, even though it “believed
from the outset of this case that Plaintiffs here have no more basis for their purported
claims against Earles than the plaintiffs in Neil had for their claims against Stout.” Doc.
No. 16, at 4; see Neill v. State Farm Fire & Cas. Co., No. CIV-13-627-D, 2014 WL
223455, at *4 (W.D. Okla. Jan. 21, 2014) (dismissing Defendant Stout as fraudulently
joined). Second, in McPhail there was no argument that the removal was untimely under
§ 1446(b), which the Court finds and this Court has found no Tenth Circuit case in which
jurisdictional discovery was permitted in federal court when neither thirty-day period in §
1446(b) was triggered. In its Notice of Supplemental of Authority State Farm directs the
Court to a recent decision in Misner v. State Farm Fire & Cas. Co., No. CIV-14-873-D,
2014 WL 6879094 (W.D. Okla. Dec. 4, 2014). In that case, the Court found that State
Farm’s Notice of Removal was not untimely because “the two 30-day periods of §
1446(b) are not the exclusive time periods for removal,” and granted State Farm leave to
conduct jurisdictional discovery to support its claim of fraudulent joinder. Id.
In support of the argument that the two thirty-day periods in § 1446(b) are not the
only time in which a defendant may remove, the Court in Misner cites to three cases from
the Second, Seventh, and Ninth Circuit Courts of Appeals. But in each of these cases, the

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Circuit Courts held that removal was not improper under § 1446(b) when the defendant
had found a basis for removal on its own investigation, prior to removal.3 In those cases,
the reasoning was that a plaintiff should not “be able to prevent or delay removal by
failing to reveal information showing removability and then object[] to removal when the
defendant has discovered that information on its own.” Roth, 720 F.3d at 1125.
Removal may be timely when a defendant independently discovers information
justifying removal and then files a notice of removal within one year of the
commencement of the action; but that is not the case here. State Farm is asking the Court
to conduct jurisdictional discovery so that it can find evidence to support the Notice of
Removal that it has already filed. Although the two thirty-day periods do not begin to run
until there is “clear and unequivocal notice” of the right to remove because there is no
“duty to investigate” in state court, Akin, 156 F.3d at 1036, there is no right to
investigation in federal court for a defendant who has never received such notice and has

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See Cutrone v. Mortg. Elec. Registration Sys., Inc., 749 F.3d 137, 147 (2d. Cir. 2014) (“When neither
30-day removal clock of 28 U.S.C. § 1446(b) was triggered, may MERS remove based on its own
investigation? … The Ninth Circuit has resolved this question, and we agree with its approach.”); Walker
v. Trailer Transit, Inc., 727 F.3d 819, 821 (7th Cir. 2013) (“The 30–day removal clock is triggered by the
defendant’s receipt of a pleading or other paper that affirmatively and unambiguously reveals that the
case is or has become removable. Here, Trailer Transit never received a pleading or other paper from
Walker specifically disclosing the damages demand. Trailer Transit based its notice of removal on its own
estimate of damages after Walker introduced a new theory of damages into the case in response to
requests for admission. Because the removal clock never started to run, the district court properly denied
the motion to remand.”); Roth v. CHA Hollywood Med. Ctr., L.P., 720 F.3d 1121, 1125 (9th Cir. 2013)
(“We conclude that §§ 1441 and 1446, read together, permit a defendant to remove outside the two thirtyday periods on the basis of its own information, provided that it has not run afoul of either of the thirtyday deadlines.”).

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not, through its own voluntary investigation in state court, uncovered evidence justifying
removal in the one-year removal period.
Conclusion
In accordance with the foregoing, State Farm’s motion to conduct jurisdictional
discovery and for a stay of the Court’s ruling on the motion to remand [Doc. No. 16] is
DENIED, and Plaintiffs’ Motion to Remand [Doc. No. 9] is GRANTED. Plaintiffs seek
their costs and fees resulting from State Farm’s improper removal. The Court “may award
attorney’s fees under § 1447(c) only where the removing party lacked an objectively
reasonable basis for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132,
141 (2005). Because State Farm did not lack an objectively reasonable basis for removal,
as evidenced by the disparity in opinions from the judges in this District, Plaintiffs’
request for fees and costs is denied.
IT IS SO ORDERED this 12th day of December, 2014.

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