United States District Court, D. South Carolina, Columbia Division
Stephen F. Morris and Martha Morris, Plaintiffs,
Cary's Lake Homeowners Association; Upper Rockyford Lake Owners Association, Inc., f/k/a North Lake Company, Inc.; Lake Elizabeth Estates, Inc.; and Owners Insurance Company, Defendants.
ORDER AND OPINION
matter is before the court on the Motion to Sever of
Defendant Auto-Owners Insurance Company
("Defendant") to sever the claims of Stephen F.
Morris and Martha Morris ("Plaintiffs") against it
from their claims against its Co-Defendants. (ECF No. 9.)
Defendant moreover requests that this court retain
Plaintiffs' claims against it and remand to state court
Plaintiffs' separate claims against its Co-Defendants.
(Id.) For the reasons set forth herein, the court
GRANTS Defendant's Motion to Sever (ECF
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
filed their action in state court on February 24, 2016
seeking damages stemming from the October 2015 flooding of
their home. (ECF No. 1-1 at 6-23.) Plaintiffs asserted claims
of bad faith, breach of contract, and breach of contract with
fraudulent intent against Defendant for not paying insurance
policy benefits for the flood damage. (Id.)
Plaintiffs sued the other Co-Defendants in this matter for
negligence, strict liability, and nuisance for their alleged
failure to maintain, build, and/or operate the dams, the
breaking of which allegedly contributed to the flood damage
of Plaintiffs' property. (Id.)
is incorporated under the laws of Michigan and has its
principal place of business there. (ECF No. 1-1 at 6-7.)
Plaintiffs and all the other Co-Defendants are South Carolina
citizens and residents. (Id.) Defendant filed a
Notice of Removal to federal court on March 18, 2016. (ECF
Removal and Diversity Jurisdiction
seeking to remove a case from state to federal court bears
the burden of demonstrating that jurisdiction is proper at
the time it files its petition for removal. Caterpillar
Inc. v. Lewis, 519 U.S. 61, 73 (1996). If federal
jurisdiction is doubtful, remand is necessary. Mulchaey
v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th
Cir. 1994); see Marshall v. Manville Sales Corp., 6
F.3d 229, 232 (4th Cir. 1993) (noting Congress's
"clear intention to restrict removal and to resolve all
doubts about the propriety of removal in favor of retained
state court jurisdiction"); see also Auto Ins.
Agency, Inc. v. Interstate Agency, Inc., 525 F.Supp.
1104, 1106 (D.S.C. 1981) (citations omitted).
right to remove a case from state to federal court derives
solely from 28 U.S.C. § 1441 (2012), which provides that
"any civil action brought in a State court of which the
district courts of the United States have original
jurisdiction, may be removed by the defendant or the
defendants, to the district court of the United States for
the district and division embracing the place where such
action is pending." Absent jurisdiction based on the
presentation of a federal question, see 28 U.S.C.
§ 1331 (2012), a federal district court only has
"original jurisdiction of all civil actions 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) (2012). "[28 U.S.C. § 1332(a)] and its
predecessors have consistently been held to require complete
diversity of citizenship. That is, diversity jurisdiction
does not exist unless each defendant is a citizen of
a different State from each plaintiff."
Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365,
373 (1978) (emphasis in original) (footnote omitted);
Crawford v. C. Richard Dobson Builders, Inc., 597
F.Supp.2d 605, 608 (D.S.C. 2009) ("The complete
diversity rule of § 1332 requires that the citizenship
of each plaintiff be different from the citizenship of each
defendant."). Moreover, a corporation is a
"citizen" of the state in which it is incorporated.
28 U.S.C. § 1332(c)(1).
requires the consent of all defendants, unless the defendant
is a nominal party. See 28 U.S.C. § 1446(b)(2)
(2012); Hartford Fire Ins. Co. v. Harleysville Mut. Ins.
Co., 736 F.3d 255, 259 (4th Cir. 2013). Moreover, in
evaluating citizenship for purposes of determining whether
complete diversity exists, the court considers only the
citizenship of real and substantial parties to the litigation
and does not take into account nominal or formal parties that
have no real interest in the litigation. Navarro Sav.
Ass'n v. Lee, 446 U.S. 458, 460-61 (1980). Whether a
party is nominal for removal purposes depends on whether the
party has an "immediately apparent stake in the
litigation either prior or subsequent to the act of
removal." Hartford Fire Ins. Co., 736 F.3d at
260. "In other words, the key inquiry is whether the
suit can be resolved without affecting the non-consenting
nominal defendant in any reasonably foreseeable way."
Joinder and Severance of Parties
20(a)(2) of the Federal Rules of Civil Procedure describes
the requirements for permissive joinder: "Persons . . .
may be joined in one action as defendants if: (A) any right
to relief is asserted against them jointly, severally, or in
the alternative with respect to or arising out of the same
transaction, occurrence or series of transactions or
occurrences; and (B) any question of law or fact common to
all defendants will arise in the action." Fed.R.Civ.P.
20(a)(2). The United States Supreme Court has articulated
that "the impulse is toward the broadest possible scope
of action consistent with fairness to the parties; joinder of
claims, parties and remedies is strongly encouraged."
See United Mine Workers of Am. v. Gibbs, 383 U.S.
715, 724 (1966). Additionally, the Court of Appeals for the
Fourth Circuit has explained that "Rule 20 grants courts
wide discretion concerning the permissive joinder of
parties." Aleman v. Chugach Support Servs.
Inc., 485 F.3d 206, 218 n.5 (4th Cir. 2007).
district court also possesses broad discretion in ruling on a
requested severance under Fed.R.Civ.P. 21. See Saval v.
BL, Ltd., 710 F.2d 1027, 1031-32 (4th Cir. 1983).
Specifically, whether to drop parties from a case to
establish diversity between the remaining parties is a
decision within the trial court's discretion.
Caperton v. Beatrice Pocahontas Coal Co., 585 F.2d
683, 691 (4th Cir. 1978) ("There is, of course, sound
authority for the view that non-diverse parties whose
presence is not essential under Rule 19 may be dropped to
achieve diversity between the plaintiffs and the defendants .
. . ."). However, a court cannot ignore Rule 20's
requirements. See Neitzke v. Williams, 490 U.S. 319,
328 (1989); see also, e.g., McCoy v.
Willis, No. 4:07-cv-3563-PMD-TER, 2008 WL 4221745, at *5
(D.S.C. Sept. 15, 2008). If Rule 20's requirements are
not met, and defendants are deemed improperly joined, the
court "on motion or on its own . . . may at any
time, on just terms . . . drop a party." Fed.R.Civ.P. 21
(emphasis added). Rule 21 provides the court with the power
to sua sponte sever improperly joined defendants.
Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826,
832, L.Ed.2d 893 (1989) ("[I]t is well settled that Rule
21 invests district courts with authority to allow a
dispensable non-diverse party to be dropped at any time . . .
."). A court can sever misjoined parties if the
severance will not prejudice substantial rights. See,
e.g., Coughlin v. Rogers, 130 F.3d 1348, 1350
(9th Cir. 1997).