United States District Court, D. South Carolina, Columbia Division
ORDER AND OPINION
Stella Black (“Plaintiff”) filed this action in
the Richland County Court of Common Pleas on August 3, 2018,
against (1) Defendant Safeco Insurance Company of America
(“Safeco”), (2) Defendant Rainbow International
of Columbia (3) Defendant Palmetto Design and Restoration
Contractors, LLC (“Palmetto”), (4) Defendant Mike
Gibson, (5) Defendant Dennis Branham Roofing, LLC, (6)
Defendant Dennis Branham, and (7) Defendant Axiom Adjusting
Services, LLC (“Axiom”) (collectively,
“Co-Defendants”). (ECF No. 1-2.) On September 7,
2018, Safeco removed the action to this court pursuant to 28
U.S.C. § 1441 and 28 U.S.C. § 1332 for diversity of
citizenship between Plaintiff and Safeco. In its Notice of
Removal (ECF No. 1), Safeco acknowledged that diversity of
citizenship was lacking between Plaintiff and all other
Co-defendants, but argued that all other Co-Defendants were
fraudulently joined. In its Motion to Sever (ECF No. 4),
which is currently before the court, Safeco requests that
this court retain jurisdiction over Plaintiff’s claims
against it and remand to state court Plaintiff’s
separate claims against its Co-Defendants. (ECF No. 4.)
Plaintiff has not filed a response to the Motion to Sever,
but at least two Co-Defendants, Palmetto and Mike Gibson
(“Opposing Co-Defendants”), have challenged
Safeco’s removal and its Motion to Sever (ECF No. 9).
For the reasons set forth herein, the court
GRANTS Safeco’s Motion to Sever (ECF
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
filed her action in state court on August 3, 2018, seeking
damages to her home and other properties stemming from an
August 2015 microburst storm. (ECF No. 1-2 at 15–26.)
Plaintiff asserted claims of bad faith and breach of contract
against Safeco for its failure to pay insurance policy
benefits for the storm damage. (Id.) Plaintiff sued
all other Co-Defendants for negligence, gross negligence, and
breach of implied warranty of workmanship for their alleged
failure to properly repair the home, and for allegedly
causing more damage to the home. (Id.) Safeco is
incorporated under the laws of New Hampshire and has its
principal place of business in Massachusetts. (ECF No. 4 at
2.) Plaintiffs and all the other Co-Defendants are South
Carolina citizens and residents. (ECF No. 1-2 at 1-12.)
Safeco filed a Notice of Removal to federal court on
September 7, 2018. (ECF No. 1.)
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). The right to
remove a case from state to federal court derives solely from
28 U.S.C. § 1441, 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, 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). “[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.
The Parties’ Arguments
outset, Safeco avers that removal was appropriate because all
of its Co-Defendants are “nominal” defendants
whose South Carolina residencies cannot defeat diversity.
(ECF No. 4 at 3.) Safeco next argues that its Co-Defendants
were improperly joined in this action under Rule 20.
(Id.) More specifically, Safeco explains that
joinder was inappropriate because Plaintiff asserts
“separate claims against two, or possibly three,
distinct sets of defendants which do not arise out of the
same transaction or occurrence, and there exists no common
questions of law or fact between these separate
claims.” (Id. at 5.) Safeco also argues that
if the claims are not severed, then it will be greatly
prejudiced by including issues of liability and issues of
insurance coverage in the same action. (Id. at 11
(relying primarily on Bartell v. Willis Constr. Co.,
259 S.C. 20, 24, 190 S.E.2d 461, 463 (1972) (establishing
that the fact that a defendant is protected by insurance or
indemnity bond from liability in an action for damages shall
not be known to the jury because the jury's knowledge
that the defendant will not have to pay might have
prejudicial effect). Safeco concludes that the requirements
for diversity jurisdiction are met as to Plaintiff’s
claims against it, alone, and that this court should sever
Plaintiff’s other claims against the Co-Defendants
under Rule 21 due to the “misjoinder” of the
non-diverse Co-Defendants. (Id. at 8.)
Palmetto and Mike Gibson (“Opposing
Co-Defendants”) counter that Safeco never actually
demonstrated that its Co-Defendants were
“nominal.” (ECF No. 9 at 3.) Further, Opposing
Co-Defendants argue that they have a “clear stake in
the outcome of this litigation” merely because
Plaintiff has “brought causes of action [against
them].” (Id. at 4.) Opposing Co-Defendants
next contend that contrary to what Safeco argues, “all
of the claims in this litigation arise from…the
[common] 2015 microburst storm.” (Id. at 5.)
More specifically, Opposing Co-Defendants argue that
Plaintiff’s tort claims against them would not have
been brought but for Safeco’s denial ...