Jackson v. Nationwide Insurance Company of America et al

Filing 29

ORDER AND OPINION: Defendants' motion to dismiss Defendants Burris Durham and Burris (ECF No. 5 ) is GRANTED. The Court, however, would not exercise its discretion to remand the matter to State Court and, therefore, the Plaintiff's motion to remand (ECF No. 11 ) is DENIED. Signed by Honorable Bruce Howe Hendricks on 8/29/2014.(prou, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
Graham Keith Jackson,

)
)
Plaintiff,
)
)
v.
)
)
Nationwide Insurance Company of
)
America, William C. Burris-Durham,
)
Sena N. Burris-Jackson,
)
)
Defendants.
)
________________________________ )

Civil Action No.: 4:14-945-BHH
Order and Opinion

This matter is before the Court on the Defendant’s motion to dismiss (ECF No. 5)
and Plaintiff’s motion to remand (ECF No. 11). Defendant Nationwide removed this
declaratory judgment action over underinsurance motorist coverage and now requests that
non-diverse Defendants William C. Burris-Durham and Sena N. Burris-Jackson be
dismissed as having no interest in this lawsuit, allegedly sued only to defeat jurisdiction.
Plaintiff, in his motion, asks that, regardless of the propriety of the presence of those
individual defendants, the Court exercise its discretion to decline jurisdiction under the
Declaratory Judgment Act and remand the case to state court. The case is related to
Nationwide v. Jackson, Case No. 4:14-273.
STANDARD
Federal district courts may exercise diversity jurisdiction over civil actions in which
the matter in controversy exceeds the sum or value of $75,000.00 and is between citizens
of different states. See 28 U.S.C. § 1332(a)(1). Title 28 United States Code Section 1441,
known as the “removal statute,” provides that a case filed in state court may be removed
to federal court when it is shown by the defendant that the federal court has original
jurisdiction. See Mulcahey v. Columbia Organic Chems. Co., 29 F .3d 148, 151 (4th

Cir.1994).
Because removal raises federalism concerns, the court must carefully scrutinize the
facts to ensure that removal is appropriate. Mulcahey, 29 F.3d at 151 (citing Shamrock Oil
& Gas Corp. v. Sheets, 313 U.S. 100 (1941)). The party removing an action bears the
burden of demonstrating that jurisdiction properly rests with the court at the time the petition
for removal is filed. See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 291,
58 S.Ct. 586, 82 L.Ed. 845 (1938); Mulcahey 29 F.3d at 151 (4th Cir.1994). Removal
jurisdiction is strictly construed. Mulcahey, 29 F.3d at 151. If federal jurisdiction is doubtful,
remand is necessary. Id.
To be removable to federal court, a state action must be within the original
jurisdiction of the district court. See 28 U.S.C. § 1441. District courts have original
jurisdiction “where the matter in controversy exceeds the sum or value of $75,000,
exclusive of interest and costs, and is between . . . citizens of different states.” 28 U.S.C.
§ 1332(a)(1).
Fraudulent joinder is an exception to the complete diversity requirement of Section
1332. The fraudulent joinder doctrine allows a district court to disregard, for jurisdictional
purposes, the citizenship of a diversity-destroying defendant, assume jurisdiction over a
case, dismisses the diversity-destroying defendant, and thereby retains jurisdiction. Mayes
v. Rapport, 198 F.3d 457, 461 (4th Cir.1999).
To show fraudulent joinder of a party, a removing party “must demonstrate either
‘outright fraud in the plaintiff's pleading of jurisdictional facts’ or that ‘there is no possibility
that the plaintiff would be able to establish a cause of action against the in-state defendant
in state court.’” Hartley v. CSX Transportation, Inc., 187 F.3d 422, 424 (4th Cir.1999)
(quoting Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir.1993)). “The party
2

alleging fraudulent joinder bears a heavy burden-it must show that the plaintiff cannot
establish a claim even after resolving all issues of law and fact in the plaintiff's favor.”
Hartley, 187 F.3d at 424. The standard to be applied by the court is even more favorable
to the plaintiff than the standard for granting motions to dismiss under Federal Rule of Civil
Procedure 12(b)(6). Id. at 464, 466 (stating that a “glimmer of hope” for relief against the
nondiverse defendant is sufficient to defeat removal jurisdiction).

In making this

determination, the court is not limited to the allegations of the pleadings, but may consider
the entire record and determine the basis of the joinder “by any means available.” Id.
DISCUSSION
The plaintiff concedes that Defendants Burris-Jackson and Burris-Durham have no
interest in a declaration over Defendant Nationwide’s underinsurance motorist coverage
and, therefore, are not proper defendants to this lawsuit. (Pl. Resp. Mot. Dismiss at 1, ECF
No. 12.) But, the plaintiff requests that this Court first remand the case to state court,
whereupon he will voluntarily dismiss them. Their presence, as non-diverse defendants,
is admitted, therefore, not to defeat the Court’s diversity jurisdiction. In his motion,
however, the plaintiff still requests that the Court make a discretionary remand of the case
for the state interest in its resolution.
The federal Declaratory Judgment Act grants courts discretion to decline jurisdiction,
even where it otherwise exists. See Wilton v. Seven Falls Co., 515 U.S. 277, 284-85
(1995). Exercising this discretion, “Courts have been reluctant to exercise jurisdiction over
declaratory judgment actions relating to state insurance issues.” Hyrne v. Allstate Ins. Co.,
2006 WL 1889179, at *1 (D.S.C. July 7, 2006). This discretion is specifically broader than
other related abstention doctrines, including Colorado River Water Conservation Dist. v.
United States, 424 U.S. 800 (1976). See Wilton, 515 U.S. at 286.
3

The Court was originally concerned that Wilton only applies where there is a pending
and related state court action. See Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 412 (4th
Cir. 2004) (“When a related state court proceeding is pending . . . .”); Centennial Life Ins.
Co. v. Poston, 88 F.3d 255, 257 (4th Cir. 1996) (“[W]hen a related state proceeding is
underway . . . .”). “[A]t least where another suit involving the same parties and presenting
opportunities for ventilation of the same state law issues is pending in state court, a district
court might be indulging in ‘gratuitous interference,’ if it permitted the federal declaratory
action to proceed.” Wilton, 515 U.S. at 283 (citation omitted and emphasis added). But,
it appears that the Fourth Circuit has viewed the pendency of a state proceeding as only
one relevant consideration when exercising the Court’s discretion to remand a declaratory
judgment action. See Myles Lumber Co. v. CNA Fin. Corp., 233 F.3d 821, 824 (4th Cir.
2000) (“In contrast, the efficiency factor weighs heavily in favor of retaining jurisdiction.
First, we consider it significant that there is no state action pending.”) Specifically, Coffey
suggests that the pendency of a state court action affects whether or not the four
considerations, in Nautilus Insurance Co. v. Winchester Homes, 15 F.3d 371, 377 (4th
Cir.1994), should additionally be consulted. See Penn-Am. Ins. Co. v. Coffey, 368 F.3d at
412; see also Auto Owners Ins. Co. v. Pers. Touch Med Spa, LLC, 763 F. Supp. 2d 769,
774 (D.S.C. 2011). Regardless of the precise framework, the Court would evaluate
whether a discretionary remand is appropriate, notwithstanding the absence of any parallel
state action.
The Fourth Circuit has developed a two part analysis for determining whether a
district court should stay or dismiss a declaratory judgment action. First, a district court is
directed to consider whether the action:
(i) “‘will serve a useful purpose in clarifying and settling the
4

legal relations in issue,’” and (ii) “‘will terminate and afford
relief from the uncertainty, insecurity, and controversy giving
rise to the proceeding.’” Nautilus Ins. Co. v. Winchester
Homes, Inc., 15 F.3d 371, 375 (4th Cir.1994) (referencing
White v. National Union Fire Ins. Co., 913 F.2d 165 (4th
Cir.1990)) (citations omitted).

Continental Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir.1994).
The relief sought by the plaintiff is not unusual since “[i]t is well established that a
declaration of parties' rights under an insurance policy is an appropriate use of the
declaratory judgment mechanism.” United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 494
(4th Cir.1998). Additionally, the action will serve a useful purpose in settling the disputed
rights under the policy between Nationwide and its insured. See Auto Owners Ins. Co. v.
Pers. Touch Med Spa, LLC, 763 F. Supp. 2d 769, 775 (D.S.C. 2011). Finally, this action
will provide relief by clarifying the uncertainty of whether coverage exists under the policy
for the claims alleged. Id.
If the analysis is contemplated to stop here under Coffey, for want of a state court
action, the Court would exercise jurisdiction. But, for certainty’s sake, the Court would
consider the second step of the prescribed analysis as well.
If the action satisfies the criteria above, which it does, the district court should,
according to Nautilus Insurance Co. v. Winchester Homes, 15 F.3d 371, 377 (4th Cir.1994)
abrogated on other grounds by Wilton, 515 U.S. 277,1 also consider four additional and
non-exclusive factors:
(1) the strength of the state's interest in having the issues
raised in the federal declaratory action decided in state court;
(2) whether the issues raised in the federal action can be more
efficiently resolved in the pending state action; (3) whether the
1

The factors articulated in Nautilus with regard to to a court's exercise of discretion in a
declaratory judgment action remain applicable. See Penn–America, 368 F.3d at 412.

5

federal action in unnecessary entanglement between the
federal and state systems due to overlapping issues of fact or
law; (4) whether the federal action is being used merely as a
device for “procedural fencing,” i.e., to provide another
forum in a race for res judicata. Nautilus, 15 F.3d at 377.

Continental Cas. Co. v. Fuscardo, 35 F.3d 963, 966 (4th Cir.1994). The Nautilus Court
emphasized the importance of considerations of comity and federalism to a district court's
decision. It pointed out:
when a federal court is confronted with an insurer's request for
declaratory judgment on coverage issues during the pendency
of related litigation in the state courts, its discretion must be
guided not only by the criteria outlined in Quarles, which focus
on the general utility of the declaratory relief sought, but also
by the same considerations of federalism, efficiency, and
comity that traditionally inform a federal court's discretionary
decision whether to abstain from exercising jurisdiction over
state law claims in the face of parallel litigation in the state
courts.

Nautilus, 15 F.3d at 376.
So, although not dispositive under Wilton, the lack of any pending state action is
plainly significant. See Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 412 (4th Cir. 2004) (“To
determine whether to proceed with a federal declaratory judgment action when a parallel
state action is pending, we have focused on four factors for guiding the analysis . . . .”
(emphasis added).) And, in this case, not only is there no parallel state action, there
actually exists a companion federal case. See Nationwide Insurance Company of America
v. Jackson, C.A. No. 4:14-CV-273. So, none of the efficiency issues are present that
traditionally weigh in favor of remand or the danger of unnecessary entanglement. Chief
Judge Terry Wooten, of this District, has agreed that the State lacks a particularly strong
interest when there is no pending state court action dealing with coverage. Auto-Owners

6

Ins. Co., 763 F. Supp. 2d at 775.
The defendant contends that it plans to make novel argument related to controlling
South Carolina case law, in Peagler v. USAA Ins. Co., 628 S.E.2d 475, 478 (S.C. 2006),
over which the State has great interest and expertise. And, while the undersigned would
always and readily defer to the State’s own adjudication and interpretation of its laws to the
enthusiasm of this Court not to have to, the efficiency and comity elements are so lacking
in the absence of a pending state action that remand seems a step too far on the facts and
legal claims present in this case. The Court is competent to interpret state law, even
considering the potential of some novelty on the margins here.
The Court, therefore, would not remand the matter.
CONCLUSION
Based on the foregoing and the concession of the plaintiff, Defendants’ motion to
dismiss Defendants Burris Durham and Burris (ECF No. 5) is GRANTED. The Court,
however, would not exercise its discretion to remand the matter to State Court and,
therefore, the Plaintiff’s motion to remand (ECF No. 11) is DENIED.
IT IS SO ORDERED.
s/Bruce Howe Hendricks
United States District Judge
August 29, 2014
Greenville, South Carolina

7