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Black v. Safeco Insurance Company of America

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

September 23, 2019

Stella Black, Plaintiffs,
Safeco Insurance Company of America; Rainbow International of Columbia, Palmetto Design and Restoration, Contractors, LLC, Mike Gibson, individually, Dennis Branham Roofing, LLC, Dennis Branham, individually and Axiom Adjusting Services, LLC, Defendants.


         Plaintiff 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 No. 4).


         Plaintiff 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.)


         A. Removal and Diversity Jurisdiction

         A party 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).

         Removal 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.” Id.

         B. Joinder and Severance of Parties

         Rule 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).

         A 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).


         A. The Parties’ Arguments

         At the 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.)

         Co-Defendants 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 ...

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