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Bound v. State Farm Mutual Automobile Insurance Co.

United States District Court, N.D. West Virginia

June 11, 2019

EZEKIEL BOUND; REX BOUND, individually and as parent of Ezekiel Bound; and WENDY BOUND, individually and as parent of Ezekiel Bound, Plaintiffs,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a foreign corporation; and JENNY GARTON INSURANCE AGENCY, INC., a West Virginia corporation, Defendants.



         Pending before the Court are motions to remand and stay proceedings filed by the plaintiffs, Ezekiel Bound, Rex Bound, and Wendy Bound (collectively, “the Bounds”) (Dkt. Nos. 8, 9), and a motion to dismiss filed by the defendant, Jenny Garton Insurance Agency, Inc. (“Garton”) (Dkt. No. 6). Because Garton was fraudulently joined, the Court DENIES the Bounds' motion to remand (Dkt No. 9) and DISMISSES their claims against Garton WITHOUT PREJUDICE. Further, it DENIES AS MOOT the Bounds' motion to stay proceedings and Garton's motion to dismiss (Dkt Nos. 6, 8).

         I. BACKGROUND

         A. The Facts[1]

         Since at least September 1996, the Bounds have purchased automobile insurance from State Farm Mutual Automobile Insurance Co. (“State Farm”) through Garton, a local insurance agency that provides insurance-related services exclusively for State Farm. As of November 2016, the Bounds had six active State Farm automobile insurance policies.

         On November 4, 2016, Ezekiel Bound was a passenger in a Ford F250 pick-up truck owned and operated by Tyler M. Parker (“Parker”) when Parker suddenly lost control of his vehicle. As a consequence of the one-vehicle accident, Ezekiel Bound sustained serious injuries and was life flighted to a hospital in Morgantown, West Virginia. At the time of this accident, Ezekiel Bound was a minor living with his parents, Rex and Wendy Bound, who notified State Farm of the accident and sought assistance with their automobile insurance claims.

         After the accident, State Farm adjusted a claim filed by Parker, the driver, who was also insured by State Farm. In September 2017, State Farm sought to obtain a release of all claims against Parker from the Bounds in exchange for his automobile insurance policy limits. This release also sought to have the Bounds release State Farm from any further claims.

         Suspicious of State Farm's motives, the Bounds retained private counsel, who then negotiated a release of all claims against Parker in exchange for policy limits of $25, 000.00. However, because Ezekiel Bound's injuries and damages exceeded Parker's $25, 000.00 policy limit, the Bounds reserved their claims for underinsured motorists (“UIM”) coverage against State Farm.

         In their Complaint, the Bounds allege that, although their six policies included uninsured motorist (“UM”) coverage, they did not include UIM coverage, and that State Farm never advised them of the potential for UIM coverage under their policies. Garton asserts that, although UIM coverage was offered to them, the Bounds rejected that coverage on multiple occasions.

         B. Procedural History

         On November 2, 2018, the Bounds initiated this civil action in the Circuit Court of Harrison County, West Virginia, seeking, among others, a declaratory judgment that State Farm had failed to make a commercially reasonable offer of UIM coverage (Dkt. No. 1-1 at 2). After being served, State Farm and Garton timely removed the case to this Court on March 15, 2019, contending that diversity jurisdiction existed because Garton had been fraudulently joined (Dkt. No. 1). On March 22, 2019, State Farm answered the Complaint, and Garton moved to dismiss the claims against it for failure to state a claim (Dkt. Nos. 5, 6, 7). On April 2, 2019, the Bounds filed a motion to stay proceedings based on their intent to file a motion to remand (Dkt. No. 8). That motion was filed on April 8, 2019 (Dkt. No. 9) and asserts that Garton was not fraudulently joined because their Complaint alleged three independent tort claims against it (Dkt. No. 9).


         “When an action is removed from state court, a federal district court must determine whether it has original jurisdiction over the plaintiff's claims.” Dotson v. Elite Oil Field Servs., Inc., 91 F.Supp.3d 865, 869 (N.D. W.Va. 2015) (citation omitted). “Federal courts have original jurisdiction primarily over two types of cases, (1) those involving federal questions under 28 U.S.C. § 1331, and (2) those involving diversity of citizenship under 28 U.S.C. § 1332.” Id. “When a party seeks to remove a case based on diversity of citizenship under 28 U.S.C. § 1332, that party bears the burden of establishing ‘the amount in controversy exceeds the sum or value of $75, 000, exclusive of interests and costs, and is between citizens of different states.'” Id. (quoting 28 U.S.C. 1332(a)). “Courts should resolve any doubt “‘about the propriety of removal in favor of retained state court jurisdiction.'” Id. (quoting Marshall v. Manville Sales Corp., 6 F.3d 229, 232-33 (4th Cir. 1993)).

         “The doctrine of fraudulent joinder is a narrow exception to the complete diversity requirement.” Id. (citation omitted). “The fraudulent joinder doctrine ‘effectively permits a district court to disregard, for jurisdictional purposes, the citizenship of certain non-diverse defendants, assume jurisdiction over a case, dismiss the non-diverse defendants, and thereby retain jurisdiction.'” Grubbs v. Westfield Ins. Co., 430 F.Supp.2d 563, 566 (N.D. W.Va. 2006) (quoting Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir. 1999)).

         “To prove fraudulent joinder, the removing party must show either ‘[t]hat there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court; or [t]hat there has been outright fraud in the plaintiff's pleading of jurisdictional facts.'” Id. (alterations in original) (quoting Marshall, 6 F.3d at 232). “The burden on the defendant claiming fraudulent joinder is heavy: the defendant must show that the plaintiff cannot establish a claim against the nondiverse defendant even after resolving all issues of fact and law in the plaintiff's favor.” Marshall, 6 F.3d at 232-33 (citation omitted). And this “standard is even more favorable to the plaintiff than the standard for ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6).” Hartley v. CSX ...

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