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Aung v. GEICO

United States District Court, D. South Carolina, Beaufort Division

June 5, 2017

Aye Aung, Plaintiff,
GEICO and Sharon Cogdill, Defendants.


          PATRICK MICHAEL DUFFY United States District Judge.

         This matter is before the Court on Plaintiff Aye Aung's motion to remand (ECF No. 5). Aung argues Defendants GEICO and Sharon Cogdill improperly removed this case from state court because Aung and Cogdill are both South Carolina citizens. For the reasons set forth herein, the Court grants Aung's motion but denies her request for fees and costs.


         In June 2010, Aung was severely injured in an automobile collision caused by Meredith Daley. Daley's liability insurance carrier paid Aung roughly the limits of Daley's policy, but the payment did not fully compensate Aung for her various losses. Aung therefore made a claim for underinsured motorist (“UIM”) benefits on a policy she had purchased from GEICO, a corporate citizen of Maryland. Negotiations on the claim were unsuccessful, so Aung sued Daley in state court. GEICO assumed Daley's defense.

         At some point, Cogdill, an adjuster employed by GEICO, became involved in the handling of Aung's UIM claim and Daley's defense. According to Aung, Cogdill improperly investigated and evaluated Aung's claim, leading GEICO to make unreasonably low settlement offers that never exceeded $2, 500.

         Mediation was not successful. Aung alleges Cogdill attended mediation without having appropriate settlement authority or discretion over the resolution of the claim. She also contends Cogdill's lack of authority and unwillingness to mediate in good faith was a violation of South Carolina state-court mediation rules that unnecessarily prolonged the litigation by forcing a trial.

         Aung's case against Daley went to trial in February 2014. The jury returned a $250, 000 verdict for Aung. A post-trial award of costs, pre-judgment interest, and penalties increased the judgment to nearly $275, 000. GEICO has paid Aung $50, 000 but refuses to pay any remaining portion of the judgment.

         On February 1, 2017, Aung sued GEICO and Cogdill in state court, asserting causes of action against them for negligence and insurance bad faith for the manner in which they handled her UIM claim. She also asserted a declaratory judgment cause of action against GEICO alone.

         GEICO and Cogdill removed the case to this Court on March 31. Acknowledging that Aung and Cogdill are both citizens of South Carolina, the defense contended that the Court nonetheless has jurisdiction over this case because Cogdill's joinder was fraudulent. On April 17, Aung moved to remand. GEICO and Codgill filed a response on May 1, to which Aung replied on May 4. Accordingly, this matter is now ripe for consideration.


         I. Aung's Request to Remand

         Defendants in “diversity” cases-those in which citizens of different states litigate only state-law claims worth more than $75, 000-may remove their litigation from state court to federal district court. See 28 U.S.C. § 1441(a) (giving federal district courts removal jurisdiction over state-court cases); 28 U.S.C. § 1332(a)(1) (giving courts original jurisdiction over cases between citizens of different states if the amount in controversy exceeds $75, 000). The required diversity of citizenship exists only when “no party shares common citizenship with any party on the other side” of the v. Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir. 1999). If that requirement is not met, the federal court lacks jurisdiction and must remand the case to state court. See 28 U.S.C. § 1447(c).

         As Aung and Cogdill are both South Carolinians, it appears that diversity of citizenship does not exist. GEICO, however, contends this Court may disregard Cogdill's citizenship because Aung fraudulently joined her as a defendant. GEICO and Cogdill bear the burden of proving that contention. See Hartley v. CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir. 1999).

         The citizenship of a fraudulently joined defendant does not count in the complete-diversity analysis. See Mayes, 198 F.3d at 461. Fraudulent joinder occurs when the plaintiff engages in “outright fraud” in her pleading of jurisdictional facts or when “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, 187 F.3d at 424 (citation and quotation marks omitted). Proving the latter[1]is “a heavy burden”-the removing parties “must show that the plaintiff cannot establish a claim even after resolving all issues of law and fact in the plaintiff's favor.” Id. (citation omitted). This standard is even more favorable to plaintiffs than the one for Rule 12(b)(6) motions. Id. A “glimmer of hope” of recovery is enough to prevent the removing parties from meeting their burden. Id. at 426 (citation omitted); see also Addison v. Travelers Indem. Co. of Am., No. ...

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