Fisher et al v. Allstate Property and Casualty Insurance Company et al

Filing 42

MEMORANDUM OPINION AND ORDER granting plaintiffs' 9 MOTION to Remand to Circuit Court; directing that this action is remanded for all further proceedings to the Circuit Court of Kanawha County. Signed by Judge John T. Copenhaver, Jr. on 11/30/2011. (cc: attys; Circuit Court of Kanawha County) (cbo)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
LINDA FISHER,
JOHN FISHER,
Plaintiffs,
v.

Civil Action No. 2:11-00550

ALLSTATE PROPERTY & CASUALTY
INSURANCE COMPANY, WOLF FINANCIAL
SERVICES, INC., DARRELL JOE WOLF,
and SCOTT FRASER,
Defendants.

MEMORANDUM OPINION AND ORDER

Pending is plaintiffs’ motion to remand, filed August
26, 2011.

Also pending are defendant Scott Fraser’s motion to

dismiss, filed August 16, 2011, and defendants Wolf Financial
Services, Inc. and Darrell Joe Wolf’s motion to dismiss, or, in
the alternative, for judgment on the pleadings, filed August 30,
2011.

When, as here, a motion to remand and a Rule 12(b)(6)
motion to dismiss are both made, it is ordinarily improper to
resolve the Rule 12(b)(6) motion before deciding the motion to
remand.

The question arising on the motion to remand as to

whether there has been a fraudulent joinder is a jurisdictional
inquiry.

See Batoff v. State Farm Ins. Co., 977 F.2d 848, 852

(3rd Cir. 1992); cf. Mayes v. Rapoport, 198 F.3d 457, 460 (4th
1999) (observing that the propriety of removal and fraudulent
joinder are jurisdictional questions).

I.

Background

This dispute arises from the denial of an insurance
claim stemming from water damage to residential property located
in Hedgesville, West Virginia.

Plaintiffs Linda and John Fisher

are residents of Maryland and own the Hedgesville property that
is the subject of the underlying insurance claim.

(Compl. ¶ 1).

Defendant Allstate Property and Casualty Insurance Company
(“Allstate”) is an out-of-state corporation with its principal
place of business in Illinois.

(Notice of Removal ¶ 7(a)).

Allstate is licensed by the West Virginia Office of the
Insurance Commissioner to underwrite homeowner’s insurance
policies within the state.

(Allstate Ans. ¶ 2).

Defendant Wolf

Financial Services, Inc. (“Wolf Financial”) is in the business
of selling homeowner’s insurance in West Virginia.
Financial Ans. ¶ 4; Notice of Removal ¶ 7(c)).

(Wolf

Defendant

Darrell J. Wolf sells insurance in West Virginia as an agent for
Allstate.

(Wolf Financial Ans. ¶ 5).

Wolf Financial and Wolf

(collectively, the “nondiverse defendants”) are residents of
Maryland.

(Id. ¶¶ 4-5; Notice of Removal ¶ 7(c)).

Defendant

Scott Fraser is a resident of Virginia and was at relevant times
2

employed by Allstate to inspect and adjust insurance claims in
West Virginia.

(Allstate Ans. ¶ 3).

The following factual

recitation is taken from the record.

In March 2010, plaintiffs purchased a home at 347
Winter Camp Trail, Hedgesville, West Virginia.

(Compl. ¶ 9).

This was not the plaintiffs’ primary residence.

(Id.).

Concurrent with the property purchase, plaintiffs obtained a
homeowner’s insurance policy from Allstate through the
nondiverse defendants to cover their Hedgesville home.
10-11; Wolf Financial Ans. ¶ 11).

(Id. ¶¶

Prior to purchase, plaintiffs

contracted with an engineer and termite inspection company to
inspect the home, including the crawl space.
Neither inspection revealed mold damage.

(Compl. ¶¶ 12-14).

(Id. ¶ 14).

On June

1, 2010, a termite inspector installed vents in the crawl space
at the home and found no signs of leaks or fungal growth in the
area.

(Id. ¶ 15).

On July 5, 2010 plaintiffs left their Hedgesville home
around 6:30 p.m.

(Id. ¶ 16).

Prior to departing, plaintiffs

observed no signs of water leakage in the kitchen, dining room,
or hallway.

(Id.).

However, when they returned eleven days

later around 9:30 p.m. on July 16, 2010, plaintiffs “noticed
water soaking the dining room and hallway carpets and wetness in
the kitchen.”

(Id. ¶ 17).

Upon investigation, plaintiffs
3

discovered the leak originated from a waterline connected to the
refrigerator.

(Id. ¶ 18).

That next day, July 17, 2010, plaintiffs contacted
Allstate and reported a claim for the water damage.

(Id. ¶ 19).

The Fishers advised Allstate and its adjuster, Mr. Fraser, that,
prior to returning to their home on July 16, they had not seen
any water in the dining room and hallway, and that they had not
been to the property since July 5.

(Id. ¶ 20).

With respect to

the claim, Allstate determined the date of loss to be July 4,
2010.

(Id. ¶ 21).

On July 17, Rodney Trenary of Puroclean, a

water mitigation firm, was hired by Allstate to inspect the
property.

(Id. ¶ 22; W. Va. Ins. Comm’r, Rec. Decision of

Hearing Examiner (“Commissioner Decision”) at 2).

Trenary took

a “cursory look” at the inside of the home and spent a few
minutes in the crawl space.

(Id.).

At this time, Trenary

discovered significant mold presence in the home.
23-24; Commissioner Decision at 2).

(Compl. ¶¶

Trenary never returned to

the property.

Prior to the completion of the investigation, on July
26, 2010, Fraser sent the Fishers a letter explaining that their
homeowner’s policy excluded losses consisting of or caused by
mold.

(Compl. ¶ 26).

On July 27, Michael Ritter, an industrial

hygienist hired by Allstate, inspected the residence, taking
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several pictures.

(Id. ¶ 27).

Ritter advised Fraser that he

could not give a definitive or general timeframe as to when the
water leak began.

(Id.).

Neither Fraser, nor any employee of

Allstate or any licensed adjuster, inspected the property.

As

of July 27, no remediation had been done at the property, a fact
of which Fraser was aware.

(Id. ¶ 28).

On July 29, Fraser sent plaintiffs a letter denying
their claim, explaining that the leak was found to have been
continuous or repeated over a period of weeks, months, or even
years.

(Id. ¶ 29).

Fraser stated that his investigation

concluded that the leak had been ongoing for more than several
weeks, based on the saturation level of the wood, the amount of
mold, and the deterioration of the subflooring.

(Id. ¶ 30).

During the pendency of plaintiffs’ claim, nondiverse defendant
Wolf was “in contact with Allstate and Fraser . . .” and
“participated in the events leading up to . . . [the] denial of
the Fishers’ insurance claim.”

(Pl.’s Reply 2).

As a result of the claim denial, plaintiffs bore the
expense of fixing their Hedgesville residence.

(Compl. ¶ 41).

Plaintiffs instituted this action in the Circuit Court
of Kanawha County on July 6, 2011.

Defendants removed on August

12, 2011, invoking the court’s diversity jurisdiction.
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The

complaint sets forth six counts: Count I, Breach of Contract
against Allstate; Count II, Violations of the West Virginia
Unfair Trade Practices Act and Insurance Regulations (“UTPA”);1
against all defendants; Count III, Common Law Bad Faith against
Allstate and the nondiverse defendants; Count IV, Reasonable
Expectations against Allstate;2 Count V, Negligence against
Allstate and the nondiverse defendants; Count VI, Declaratory
Judgment.

(See id. ¶¶ 43-78).3

Plaintiffs have moved to remand, asserting that the
nondiverse defendants defeat complete diversity and that this
court thus lacks subject matter jurisdiction.

In opposition to

remand, defendants claim that the nondiverse defendants were
joined solely for the purpose of defeating diversity
jurisdiction.

1

The claim in Count II will be referred to as plaintiffs’
“UTPA claim.”
2

While Count IV makes allegations against Allstate and
unnamed “defendants,” the Fishers appear to abandon any Count IV
claim against the nondiverse defendants in their supporting
memorandum. (See Pl.’s Mem. 5 (“Plaintiffs’ complaint squarely
sets forth viable causes of action against [the nondiverse
defendants] in count II, III and V.”)).

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II.

A.

Motion to Remand

Governing Standard

“A defendant may remove any action from a state court
to a federal court if the case could have originally been
brought in federal court.”

Yarnevic v. Brink's, Inc., 102 F.3d

753, 754 (4th Cir. 1996) (citing 28 U.S.C. § 1441).

Federal

district courts have original jurisdiction over actions between
citizens of different states in which the matter in controversy
exceeds $75,000, exclusive of interest and costs.

28 U.S.C.

§ 1332(a).

The doctrine of fraudulent joinder permits a district
court to “disregard, for jurisdictional purposes, the
citizenship of certain nondiverse defendants, assume
jurisdiction over a case, dismiss the nondiverse defendants, and
thereby retain jurisdiction.”
461 (4th Cir. 1999).

Mayes v. Rapoport, 198 F.3d 457,

Our court of appeals lays a “heavy burden”

upon a defendant claiming fraudulent joinder:
“In order to establish that a nondiverse defendant has
been fraudulently joined, the removing party must
establish either: [t]hat there is no possibility that
3

On November 1, 2011, the court entered an agreed order
dismissing Counts III and IV as against defendant Fraser.

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the plaintiff would be able to establish a cause of
action against the in-state defendant in state court;
or [t]hat there has been outright fraud in the
plaintiff's pleading of jurisdictional facts.”
Id. at 464 (emphasis in original) (quoting Marshall v. Manville
Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993)).

The applicable

standard “is even more favorable to the plaintiff than the
standard for ruling on a motion to dismiss.”

Hartley v. CSX

Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999).

Indeed, “‘the

defendant must show that the plaintiff cannot establish a claim
against the nondiverse defendant even after resolving all issues
of fact and law in the plaintiff’s favor.’”

Mayes, 198 F.3d at

464 (quoting Marshall, 6 F.3d at 232–33)).

As Hartley illustrates, fraudulent joinder claims are
subject to a rather black-and-white analysis in this circuit.
Any shades of gray are resolved in favor of remand.
Hartley, 187 F.3d at 425.

See

At bottom, a plaintiff need only

demonstrate a “glimmer of hope” in order to have his claims
remanded:
In all events, a jurisdictional inquiry is not the
appropriate stage of litigation to resolve . . .
various uncertain questions of law and fact . . .
Jurisdictional rules direct judicial traffic.
They
function to steer litigation to the proper forum with
a minimum of preliminary fuss.
The best way to
advance this objective is to accept the parties joined
on the face of the complaint unless joinder is clearly
improper.
To permit extensive litigation of the
merits of a case while determining jurisdiction
thwarts the purpose of jurisdictional rules.
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* * * *
We cannot predict with certainty how a state court and
state jury would resolve the legal issues and weigh
the factual evidence in this case.
[Plaintiff’s]
claims may not succeed ultimately, but ultimate
success is not required . . . . Rather, there need be
only a slight possibility of a right to relief. Once
the court identifies this glimmer of hope for the
plaintiff, the jurisdictional inquiry ends.
Id. at 425-26 (citations omitted).

In determining “whether an

attempted joinder is fraudulent, 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.”

Mayes, 198 F.3d at 464 (internal quotations

omitted).

Inasmuch as plaintiffs do not allege any fraud in the
pleading, the only question for fraudulent joinder purposes is
whether plaintiff has any possibility of recovery in state court
against the nondiverse defendants.

The complaint alleges four

counts against the nondiverse defendants: Count II (UTPA
violations); Count III (common law bad faith); Count V
(negligence); and Count IV (reasonable expectations), which
plaintiffs appear to have abandoned.

B.

See supra note 2.

UTPA Claims

The UTPA is a comprehensive statute designed to
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“regulate trade practices in the business of insurance” in the
State of West Virginia.

W. Va. Code § 33-11-1.

Like the tort

of bad faith, the UTPA “appl[ies] only to those persons or
entities and their agents who are engaged in the business of
insurance.”

Syl. Pt. 2, Hawkins v. Ford Motor Co., 566 S.E.2d

624, 625, (W. Va. 2002).4

The issue here is whether the

complaint alleges one or more violations of the Act such that
plaintiffs have a possibility of relief against the nondiverse
defendants.

See § 33-11-4.

The complaint generally alleges that all defendants
violated the UTPA and accompanying regulations through “selling”
plaintiffs the underlying policy, and “adjusting,” “handling,”
“and/or investigating” plaintiffs’ claim.
Pl.’s Mem. 5; Pl.’s Reply 2).

(Compl. ¶¶ 51, 56;

The allegations appear to be

aimed at the practices proscribed by § 33-11-4(9), a section
titled “Unfair claim settlement practices.”

Plaintiffs further

allege that defendants’ violations of the UTPA “occurred with
such frequency as to amount to general business practices.”

4

The statute “includes any individual, company, insurer,
association, organization, society, reciprocal, business trust,
corporation, or any other legal entity, including agents and
brokers” within the definition of “person.” § 33–11–2(a). It
is undisputed that the nondiverse defendants -- Wolf, an
individual, and Wolf Financial, a corporate entity -- fall under
the Act’s definition of “person.” Id.

10

(Id. ¶ 53).

Defendants assert that plaintiffs have failed to

sufficiently allege that the nondiverse defendants committed one
or more of the acts enumerated in § 33-11-4.

When viewed through the generous lens of remand, the
court cannot say that, with respect to their UTPA claims,
plaintiffs have no possibility of relief against the nondiverse
defendants.

According to plaintiffs, nondiverse defendant Wolf

was “in contact with Allstate and Fraser during the
investigation and adjusting” of plaintiffs’ insurance claim and
“participated in the events leading up to” its denial.
Reply 2).

(Pl.’s

Moreover, plaintiffs claim that Allstate and Fraser

were aware of Wolf’s involvement in the decision to deny
coverage “since they spoke with Wolf and made note of it in
their call log” during the relevant period.
1).

(Pl.’s Reply 2 n.

Resolving all issues of fact and law in the plaintiff’s

favor, defendants have failed to show that these allegations
cannot possibly implicate one or more unfair claim settlement
practices set forth in § 33-11-4(9) against the nondiverse
defendants.

Defendants counter that the nondiverse defendants only
“sell insurance . . . . [and] did not adjust or handle
Plaintiff’s claim under the Allstate policy.”

(Def.’s Resp. 4).

Even if defendants are ultimately correct, the fraudulent
11

joinder standard resolves such factual disputes at this stage in
favor of the party seeking remand.

And while the complaint may

fail to set forth sufficient factual allegations to withstand a
motion to dismiss the nondiverse defendants, that is not the
standard here.

All that plaintiffs need to show is a “slight

possibility of a right to relief.”

Hartley, 187 F.3d at 426.

They have done so.

Inasmuch as plaintiffs have shown a possibility of
relief with respect to the UTPA claims against the nondiverse
defendants, the court need not address plaintiffs’ other claims
against the nondiverse defendants.

Accordingly, the court

concludes that Wolf and Wolf Financial are not fraudulently
joined.

III.

Conclusion

Based upon the foregoing discussion, it is ORDERED as follows:
1. That plaintiff’s motion to remand be, and it hereby
is, granted; and
2. That this action be, and it hereby is, remanded for
all further proceedings to the Circuit Court of
Kanawha County.

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The Clerk is directed to forward copies of this
written opinion and order to all counsel of record and a
certified copy to the Circuit Court of Kanawha County.

DATED: November 30, 2011
John T. Copenhaver, Jr.
United States District Judge

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