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Ballard v. Admiral Insurance Co.

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

March 20, 2018

Desa Ballard and Desa Ballard P.A., d/b/a Ballard & Watson, Plaintiffs,
v.
Admiral Insurance Company, Monitor Liability Managers, Mendes & Mount, LLP, Adele R. Pope, individually and as Special Administrator of the Estate Of Gloria Corley, Defendants.

          REPORT AND RECOMMENDATION

          SHIVA V. HODGES UNITED STATES MAGISTRATE JUDGE

         Desa Ballard (“Ballard”) and her law firm Desa Ballard P.A., d/b/a Ballard & Watson (“Firm”) (collectively “Plaintiffs”) filed this action in the Court of Common Pleas for Richland County on September 19, 2017 (“State Action”), seeking, inter alia, to enforce the terms of her malpractice insurance contract. Plaintiffs sue their malpractice insurer Admiral Insurance Company (“Admiral”), Admiral's underwriting division Monitor Liability Managers, and Mendes & Mount, LLP (collectively “Insurer Defendants”), as well as the parties that brought the underlying malpractice claim (“Underlying Claim”), attorney Adele R. Pope (“Pope”), individually and as Special Administrator of the Estate of Gloria Corley (collectively “Pope Defendants”).

         Insurer Defendants removed the action to this court on October 27, 2017, on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1). [ECF No. 1]. The Insurer Defendants note that although the face of the complaint suggests complete diversity does not exist between Plaintiffs and the five defendants, they assert improper joinder or misalignment of the Pope Defendants. The amount in controversy does not appear at issue. This matter was referred to the undersigned pursuant to Local Civ. Rule 73.02(B)(2)(e) (D.S.C.) because Pope is proceeding pro se in her individual capacity.

         Several days prior to removal of the State Action, Pope filed a motion to dismiss [ECF No. 3], which has since been fully briefed [ECF Nos. 20, 21]. On November 13, 2017, Plaintiffs filed a motion to remand [ECF No. 19], which has been fully briefed [ECF Nos. 22, 28]. Thereafter, Insurer Defendants filed a motion for judgment on the pleadings [ECF No. 23], briefing on which the undersigned stayed [ECF No. 24] pending a resolution of the motion to remand. The motion to remand and the motion to dismiss are ripe for disposition. After a review of the pleadings, the undersigned finds that this case should be remanded because the court lacks subject matter jurisdiction, and therefore makes no determination on the motion to dismiss and the motion for judgment on the pleadings.

         I. Factual Background

         In the complaint, Plaintiffs allege they purchased a professional liability insurance policy annually from the Insurer Defendants since 2010. [Compl. at 5-6 (available at ECF No. 1-1)]. Plaintiffs submit the Underlying Claim is the first claim submitted for defense and indemnity under the policy since its inception. Id. Plaintiffs allege the Insurer Defendants wish to settle the malpractice claim to avoid the cost of defending the claim, but that Plaintiffs do not wish to authorize the settlement. Id. According to Plaintiffs, Insurer Defendants contend that they may engage in settlement discussions with the Pope Defendants and tender the cost of defense in the Underlying Claim and be relieved of any continuing obligation to defend or indemnify Plaintiffs under the policy. Plaintiffs posit the question at issue as “whether the insurer can violate an insured's contractual right to control the final decision to settle a claim or dispute and in order to escape its financial responsibility to provide a defense to its insured under its professional liability policy.” Id. at 5-6.

         Insurer Defendants removed this action on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332. Specifically, they assert that Pope has been fraudulently joined and should not be considered for purposes of determining whether diversity jurisdiction exists. Id. In their motion to remand, Plaintiffs argue that this court does not have diversity jurisdiction over this matter and that the removal was defective.

         II. Discussion

         A. Magistrate Judge's Authority to Remand

         The motion to remand has been referred to the undersigned for disposition pursuant to 28 U.S.C. § 636. A motion to remand does not explicitly fall within any of the dispositive motions set forth in 28 U.S.C. § 636. This omission has led to a split of authority as to whether a United States Magistrate Judge has the authority to remand a matter to state court. While some courts have held that remand motions are nondispositive and orders of remand can be issued by a Magistrate Judge in a non-consent case, the law in the Fourth Circuit remains unclear whether an order or a report and recommendation should be entered. See, e.g., Jonas v. Unisun Ins. Co., No. 00-1217, 2000 WL 1350648, *1 (4th Cir. Sept. 20, 2000) (noting that the Fourth Circuit “has not addressed whether a magistrate judge may issue an order of remand (as opposed to issuing a report and recommendation for the district court's review)”). At least one district court in this district has addressed this issue in a published opinion and held that a Magistrate Judge did not have such authority. See Long v. Lockheed Missiles & Space Co., Inc., 783 F.Supp. 249, 250 (D.S.C. 1992) (“[A] remand order is the equivalent of a dismissal. The Magistrate's Order thus sought to effect an ‘involuntary dismissal' of the action.”) (quoting Giangola v. Walt Disney World Co., 753 F.Supp. 148, 152 (D.N.J. 1990)); see also Mortg. Elec. Registration Sys., Inc. v. Hunt, 6:07-1763-HMH (D.S.C. July 30, 2007) (unpublished opinion collecting cases and finding report and recommendation appropriate when considering motion to remand).

         Although the United States Supreme Court has not addressed the issue directly, it has suggested that a remand motion is functionally indistinguishable from a dispositive motion listed in 28 U.S.C. § 636(b)(1)(A). See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 714 (1996) (“No less than an order staying a federal court action pending adjudication of the dispute in state court, [an order of remand] puts the litigants in this case effectively out of court, and its effect is precisely to surrender jurisdiction of a federal suit to a state court.”) (internal quotation and citation omitted). The federal circuit courts addressing this matter have determined in published opinions that remand motions are dispositive. See Williams v. Beemiller, Inc., 527 F.3d 259, 264-66 (2d Cir. 2008); Vogel v. U.S. Office Prods. Co., 258 F.3d 509, 514-17 (6th Cir. 2001); First Union Mortg. Corp. v. Smith, 229 F.3d 992, 994-97 (10th Cir. 2000); and In re U.S. Healthcare, 159 F.3d 142, 145-46 (3d Cir. 1998).

         The practical impact on the parties of this seemingly-academic dispute is the applicable standard of review in an appeal of the Magistrate Judge's decision on the motion to remand. If the motion to remand is considered nondispositive, the more deferential standard of “clearly erroneous or contrary to law” found in 28 U.S.C. § 636(b)(1)(A) applies to an appeal of the Magistrate Judge's order of remand. If the motion to remand is considered dispositive, the Magistrate Judge should enter a report and recommendation under 28 U.S.C. § 636(b)(1)(B), pursuant to which objections are considered on a de novo standard of review under Fed.R.Civ.P. 72.

         In light of the unsettled state of the law within this district as to whether motions to remand are considered dispositive, out of an abundance of caution, a report and recommendation, instead of an order, is being entered. This route preserves the prerogative of the District Judge to whom this case is assigned, as well as any potentially aggrieved ...


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