United States District Court, D. South Carolina, Charleston Division
STONEY MARINE INTERNATIONAL LIMITED d/b/a Coleman Supply Company and Laurence O. Stoney, Plaintiffs,
ARTHUR J. GALLAGHER & CO., ARTHUR J. GALLAGHER RISK MANAGEMENT SERVICES INC. d/b/a Gallagher Riley, and RILEY & ASSOCIATES INC. and/or its Officers, Directors and Shareholders, Defendants.
C. NORTON UNITED STATES DISTRICT JUDGE
matter is before the court on a motion to remand filed by
plaintiffs Laurence O. Stoney and Stoney Marine International
Limited (“plaintiffs”). For the reasons set forth
below, the court grants plaintiffs' motion.
operate a ship chandlery business, supplying the needs of
vessels in the Port of Charleston, South Carolina. Compl.
¶ 1. From 2007 to 2009 plaintiffs purchased liability
insurance through defendant Riley & Associates, Inc.
(“Riley”). Id. ¶ 17. In 2009 or
early 2010, plaintiffs selected a competing agency, Anderson
Insurance Associates (“Anderson”) to place its
insurance. Id. ¶¶ 18, 19. Riley eventually
approached plaintiffs about regaining their business, and
plaintiffs informed Riley that if it could provide the same
coverage as the policy obtained through Anderson (the
“Anderson Policy”) at a better price, then
plaintiffs would again purchase their insurance through
Riley. Id. ¶¶ 20, 21. Notably, the
Anderson Policy included coverage for claims made pursuant to
the Longshore and Harbor Workers' Compensation Act
(“LHWCA coverage”). Id. ¶ 19.
Plaintiffs provided Riley with a copy of the Anderson Policy
for this purpose. Id. ¶ 21. Based on
Riley's representation that it could provide the same
coverage at a lower premium, plaintiffs resumed purchasing
their insurance from Riley and obtained a policy for the
period of August 1, 2011 to August 1, 2012 (the “2011
Policy”). Id. ¶ 23; see also
Notice of Removal Ex. B, 2011 Policy.
early 2012, defendants Arthur J. Gallagher & Co. and
Arthur J. Gallagher Risk Management Services Inc. (the
“Gallagher defendants”) purchased Riley's
assets and liabilities. Id. ¶ 4. Plaintiffs
then purchased a renewal of the 2011 Policy through the
Gallagher defendants for the period of August 1, 2012 to
August 1, 2013 (the “2012 Policy”). Notice of
Removal Ex. C, 2012 Policy.
about December 24, 2012, plaintiffs were making a water
delivery to a customer vessel when one of plaintiffs'
crew members suffered a fall which caused him significant
injury (the “accident”). Compl. ¶¶ 9,
10. Plaintiffs immediately notified defendants of the
accident and their potential claim. Id. ¶ 11.
In March of 2013, the insurance carrier of the 2012 Policy
denied plaintiffs' claim because there was no coverage in
place to protect plaintiffs from potential liability imposed
under Workers' Compensation, the Longshore and Harbor
Workers' Compensation Act, or the Jones Act. Id.
¶ 12. On February 26, 2016, plaintiffs filed the instant
action in Court of Common Pleas for Charleston County,
bringing claims for negligence and gross negligence, fraud,
fraud in the inducement, violation of the South Carolina
Unfair Trade Practices Act, and negligent misrepresentation
in connection with the defendants' failure to obtain the
proper coverage on plaintiffs' behalf.
April 13, 2016, the Gallagher defendants filed a notice of
removal pursuant to 28 U.S.C. §§ 1332, 1441 and
1446, on the grounds that Riley, the only non-diverse party,
should be disregarded for jurisdictional purposes because
Riley was fraudulently joined. On May 13, 2016, plaintiffs
filed the instant motion to remand, and on May 31, 2016, the
Gallagher defendants filed a response. This matter has been
fully briefed and is ripe for the court's review.
defendant has a statutory right to remove a civil action
brought in state court over which “the district courts
of the United States have original jurisdiction.” 28
U.S.C. § 1441(a); Davis v. N.C. Dep't of
Corr., 48 F.3d 134, 138 (4th Cir. 1995). If it appears
that removal was improper, a party can move to remand the
case to state court “within 30 days after the filing of
the notice of removal.” 28 U.S.C. § 1447(c). When
removal is challenged, the defendant has the burden of
establishing federal jurisdiction. Mulcahey v. Columbia
Organic Chem. Co., Inc., 29 F.3d 148, 151 (4th Cir.
1994). Because federal courts are courts of limited
jurisdiction, removal raises federalism concerns and must be
strictly construed in favor of state court jurisdiction.
Id. “If federal jurisdiction is doubtful, a
remand is necessary.” Id.
Gallagher defendants contend that this court has diversity
jurisdiction over this action pursuant to 28 U.S.C. §
1332. Diversity jurisdiction requires “complete
diversity, ” meaning that “each
defendant [must be] a citizen of a different State from
each plaintiff.” Owen Equip. &
Erection Co. v. Kroger, 437 U.S. 365, 373 (1978)
(emphasis in original). Plaintiffs and Riley are undisputedly
citizens of South Carolina. To avoid this apparent lack of
diversity, the Gallagher defendants look to the doctrine of
doctrine of fraudulent joinder allows a federal court to
“disregard, for jurisdiction purposes, the citizenship
of certain [in-state] defendants, assume jurisdiction over a
case, dismiss [those] defendants, and thereby retain
jurisdiction.” Mayes v. Rapoport, 198 F.3d
457, 461 (4th Cir. 1999). The party asserting fraudulent
joinder has the “heavy burden” to
“demonstrate either outright fraud in the
plaintiff's pleading 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, . . . even after resolving all issues of law and
fact in the plaintiff's favor.” Hartley v. CSX
Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999)
(internal quotation marks and citation omitted) (emphasis in
original). “This standard is even more favorable to the
plaintiff than the motion to dismiss standard under Rule
12(b)(6).” Id. A plaintiff's claim need
only possess a “glimmer of hope” to defeat a
fraudulent joinder challenge. Id. at 426. As always,
the court must “resolve all doubts about the propriety
of removal in favor of retained state court
jurisdiction.” Id. at 425 (internal quotation
their Notice of Removal, the Gallagher defendants argue there
is “no possibility” that plaintiffs can establish
a cause of action against Riley for two reasons. First, the
Gallagher defendants contend that Riley did not procure the
2012 Policy in effect at the time of the accident, and
therefore, there is no casual chain linking Riley's acts
or omissions to plaintiffs' injuries. Notice of Removal
at 4-5; Defs.' Resp. 2-3. The Gallagher defendants next
contend that, even if this causation problem could be
ignored, any claims against Riley are time barred. Notice of
Removal at 5; Defs.' Resp. 4-6. The court addresses each
argument in turn.