Campbell v. Stone Ins., Inc.

Decision Date05 December 2007
Docket NumberNo. 07-30206.,07-30206.
Citation509 F.3d 665
PartiesStephen E. CAMPBELL; Jennie Campbell, Plaintiffs-Appellants, v. STONE INSURANCE, INC., Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Stephen M. Huber, John W. Houghtaling, Gauthier, Houghtaling & Williams, Metairie, LA, for the Campbells.

William Harry Eckert, Ginger K. DeForest, Ungarino & Eckert, Metairie, LA, for Stone Ins., Inc.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before JOLLY, HIGGINBOTHAM and PRADO, Circuit Judges.

PRADO, Circuit Judge:

Plaintiffs-Appellants Stephen and Jennie Campbell (the "Campbells") appeal the order dismissing their case against Stone Insurance, Inc. ("Stone Insurance"), the insurance agent that procured their renters' insurance policy. The district court dismissed the Campbells' action pursuant to a Louisiana statute that requires the filing of a suit within one year of the plaintiffs' knowledge or constructive knowledge of the facts that led to the cause of action. For the following reasons, we AFFIRM.

I. FACTUAL AND PROCEDURAL BACKGROUND

The Campbells moved to New Orleans, Louisiana, in June 2004. They rented a residence and retained Stone Insurance, an insurance agent, to procure renters' insurance. Stone Insurance procured insurance coverage through the Fireman's Fund Insurance Company ("Fireman's Fund"). The policy coverage began on July 16, 2004. Stone Insurance sent the Campbells the policy documents to review and a flood rejection form to sign on August 13, 2004. Stone Insurance included a cover letter that stated, in part, that by signing the enclosed flood rejection form, the Campbells were "acknowledging we discussed flood insurance and you do not want it at the present time." After reviewing the insurance documents, the Campbells found certain provisions ambiguous and asked for clarification. The Campbells allege that Stone Insurance assured them that the policy covered any potential damage, including flood damage. The Campbells also allege that Stone Insurance told them they could not obtain flood insurance through the National Flood Insurance Program because they were renters, not homeowners. On August 15, 2004, Stephen Campbell signed the enclosed flood rejection form, titled "Waiver of Agent's Responsibility," which stated that Stone Insurance offered flood insurance coverage in the "National Flood Program through Omaha Property & Casualty," that the Campbells rejected such coverage, and that Stone Insurance "will be held harmless and not liable in the event" of a flood loss.

On August 29, 2005, Hurricane Katrina hit New Orleans and caused massive flooding. Upon returning to their house, the Campbells found all of their belongings destroyed. They made a claim under the Fireman's Fund policy but found out that the policy did not cover flood damage. They also learned that they could have obtained coverage for flood damage under the National Flood Insurance Program as renters of a residence. On August 28, 2006, the Campbells brought suit in Louisiana state court against Fireman's Fund, alleging that the policy should cover their damage, and against Stone Insurance, alleging that it misrepresented the extent of the Fireman's Fund coverage and the availability of other flood insurance coverage.

Stone Insurance and Fireman's Fund each filed a Notice of Removal to federal court. Although Fireman's Fund is a diverse party, Stone Insurance is not diverse. The Notices of Removal alleged that the Campbells had improperly joined Stone Insurance in the suit, thereby making the fact that Stone Insurance is not diverse irrelevant for subject matter jurisdiction. The Campbells filed a Motion to Remand and Stone Insurance filed a Motion for Summary Judgment. The district court granted Stone Insurance's motion and denied the Campbells' motion. The court held that a Louisiana statute "perempted" any claims against Stone Insurance, precluding any possibility of recovery.1 The court ruled that for this reason, the Campbells had no viable causes of action and therefore had improperly joined Stone Insurance, leaving diversity jurisdiction intact against Fireman's Fund. The Campbells appeal the district court's order granting Stone Insurance's Motion for Summary Judgment and denying their Motion to Remand. Subsequent to the district court's order, the Campbells and Fireman's Fund settled, and the district court granted a joint motion to dismiss Fireman's Fund.2 We have jurisdiction to review the district court's final judgment pursuant to 28 U.S.C. § 1291.

II. STANDARD OF REVIEW

This court reviews a district court's summary judgment order de novo. Morris v. Equifax Info. Servs., L.L.C., 457 F.3d 460, 464 (5th Cir.2006). Summary judgment is appropriate when, after considering the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(c); Bulko v. Morgan Stanley DW, Inc., 450 F.3d 622, 624 (5th Cir.2006). This court also reviews the denial of a motion to remand to the state court de novo. See Miller v. Diamond Shamrock Co., 275 F.3d 414, 417 (5th Cir.2001).

To determine whether the district court correctly denied a motion to remand because the plaintiff improperly joined a nondiverse defendant to defeat subject matter jurisdiction, the court must analyze whether (1) there is actual fraud in pleading jurisdictional facts or (2) the plaintiff is unable to establish a cause of action against the nondiverse defendant. See Ross v. Citifinancial, Inc., 344 F.3d 458, 461 (5th Cir.2003). The doctrine of improper joinder is a "narrow exception" to the rule of complete diversity, and the burden of persuasion on a party claiming improper joinder is a "heavy one." McDonal v. Abbott Labs., 408 F.3d 177, 183 (5th Cir.2005) (quoting Griggs v. State Farm Lloyds, 181 F.3d 694, 701 (5th Cir. 1999)). Under the second prong (inability to establish a cause of action), the court must determine whether "there is arguably a reasonable basis for predicting that state law might impose liability." Ross, 344 F.3d at 462. "This means that there must be a reasonable possibility of recovery, not merely a theoretical one." Id. Further, the standard for evaluating a claim of improper joinder is similar to that used in evaluating a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Id. The scope of the inquiry for improper joinder, however, is broader than that for Rule 12(b)(6) because the court may "pierce the pleadings" and consider summary judgment-type evidence to determine whether the plaintiff has a basis in fact for the claim. Id. at 462-63 (citing Travis v. Irby, 326 F.3d 644, 648-49 (5th Cir.2003)). In conducting this inquiry, the court "must also take into account all unchallenged factual allegations, including those alleged in the complaint, in the light most favorable to the plaintiff." Id. at 463 (quoting Travis, 326 F.3d at 649). "In addition, the Court must resolve all ambiguities of state law in favor of the non-removing party." Id.

If the Campbells have no viable claims against Stone Insurance, then complete diversity existed between the Campbells and Fireman's Fund and the court properly denied the Motion to Remand. If the Campbells have a viable claim against Stone Insurance, however, then Stone Insurance must remain in the case and complete diversity is defeated. See Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 574 (5th Cir.2004) (en banc) (noting that a party is improperly joined if the plaintiff would be unable to establish a cause of action against the nondiverse party in state court). Thus, the main issue in this case is whether the Campbells can establish a viable cause of action against Stone Insurance that would fall within the peremptive period.

III. DISCUSSION
A. The district court properly granted Stone Insurance's Motion for Summary Judgment because LA.REV.STAT. ANN. § 9:5606 (2007) perempts all of the Campbell's claims

LA.REV.STAT. ANN. § 9:5606 provides, in relevant part:

No action for damages against any insurance agent, broker, solicitor, or other similar licensee under this state, whether based upon tort, or breach of contract, or otherwise, arising out of an engagement to provide insurance services shall be brought unless filed in a court of competent jurisdiction and proper venue within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission, or neglect is discovered or should have been discovered. However, even as to actions filed within one year from the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect.

This "peremptive" period is only inapplicable in cases of fraud, which the Campbells do not allege, and "may not be renounced, interrupted, or suspended." Id. In sum, the statute requires a plaintiff to file suit against an insurer within one year of the plaintiff's knowledge or constructive knowledge of the act, omission, or neglect that led to the cause of action, and no later than three years after the act, omission, or neglect actually occurred. The fact that the plaintiffs may have renewed the insurance policy each year does not restart the one-year peremptive period. See Bel v. State Farm Mut. Auto. Ins. Co., 845 So.2d 377, 382 (La.Ct.App.2003). Here, the district court ruled that the Campbells had constructive knowledge of the alleged misrepresentations when Stone Insurance issued the policy in July 2004, making their suit fall outside of the peremptive period.

1. Claim for misrepresentation as to the extent of the Fireman's Fund policy

The Campbells argue that Stone Insurance misrepresented the extent of the Fireman's Fund insurance policy because...

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