Coleman v. Conseco, Inc.

• Decision Date: 30 December 2002
• Docket Number: Civil Action No.3:02-CV-1073BN.
• Parties: Betty J. COLEMAN, et al. Plaintiffs v. CONSECO, INC.; Conseco Senior Health Insurance Company, F/K/A American Travelers Life Insurance Company; Derek Ferguson; Bill Halbert; Vincent Jackson & Fictitious Defendants "A," "B," "C" Defendants.
• Court: U.S. District Court — Southern District of Mississippi

238 F.Supp.2d 804

Betty J. COLEMAN, et al. Plaintiffs v. CONSECO, INC.; Conseco Senior Health Insurance Company, F/K/A American Travelers Life Insurance Company; Derek Ferguson; Bill Halbert; Vincent Jackson & Fictitious Defendants "A," "B," "C" Defendants.

Civil Action No.3:02-CV-1073BN.

United States District Court, S.D. Mississippi, Jackson Division.

December 30, 2002.

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Eugene Coursey Tullos, Tullos, Tullos & Tullos, Raleigh, MS, for Betty J. Coleman, All Plaintiffs, Glynn Garry, Ralph McCoy, Marness L. Bacot, Ruth Beck, Edith Bennetts, Pauline Bradley, Lucille Bullington, Audrey Bush, Wilson Chanove, Betty Clement, Martha Cope, Amy Coppola, Patricia Drishel, Garthedon Embler, Helen Felix, William Fletcher, Matthew Gentene, Ralph Grant, Grace Henry, Alonzo Hess, Keith Holland, Jack Johnston, Betty Kalkbrenner, Letha Kirk, Joseph Kulak, Richard Kyle, Dorothy Lasenberry, Helen Morris, Noah E. Morris, John Mosley, Johnnie Nabors-Scott, Elva Neal, Carolyn Owens, Clara Palmore, Samuel Rosen, Patsy Scent, Helen Sears, Dorothy Settle, Viola Stryker, Joe Sweets, Janet Tantum, Marjorie Thornton, Esther Towne, Freeda Walton, Verna Widhalm, Billy Wiggins, Katharina Leisner, plaintiffs.

Phillip B. Abernethy, P. Ryan Beckett, Butler, Snow, O'Mara, Stevens & Cannada, Jackson, MS, Mindy J. Spector, Adam J. Kaiser, David L. Yohai, John P. Mastando, III, Weil, Gotshal and Manges, New York, NY, William C. Bell, William C. Bell, Attorney, Ridgeland, MS, James M. Crews, III, Herring, Long & Joiner, Canton, MS, for Conseco, Inc., Conseco Senior Health Insurance Company, Derek Ferguson, Bill Halbert, Vincent Jackson, John Does, ABC, whether singular or plural, are those other persons, corporations, firms, or other entities whose wrongful conduct causes or contributed to the injuries and damages to plaintiffs, all of whose true and correct names are unknown to plaintiffs at this time, but will be substituted by amendment when ascertained, defendants.

OPINION AND ORDER

BARBOUR, District Judge.

This cause is before the Court on the following Motions:

1) Motion of Plaintiffs to Remand;

2) Motion of Plaintiffs to Strike Additional Arguments and Exhibits; and 3) Motion of Plaintiffs to Strike Amended Notice of Removal.

Having considered the Motions, Responses Rebuttals, and attachments to each, as well as supporting and opposing authority, the Court finds that:

1) the Motion of Plaintiffs to Remand is not well taken and should be denied;

2) the Motion of Plaintiffs to Strike Additional Arguments and Exhibits is not well taken and should be denied; and

3) Motion of Plaintiffs to Strike Amended Notice of Removal is not well taken and should be denied.

I. Introduction

In In Re: Benjamin Moore & Co., 309 F.3d 296 (5th Cir.2002) the United States Court of Appeals for the Fifth Circuit adopted the principles of fraudulent misjoinder of plaintiffs set forth in Tapscott v. MS Dealer Service Corp., 77 F.3d 1353 (11th Cir.1996). As a result, this Court is confronted with the issue of whether the out-of-state Plaintiffs who were properly joined with the Mississippi Plaintiffs in this case under the Mississippi Rules of Civil Procedure, were egregiously misjoined under the Federal Rules of Civil Procedure. The finding of egregious misjoinder under the Federal Rules and the Tapscott "fraudulent misjoinder of plaintiffs" standards serves as an essential element in the defeat of Plaintiffs' Motion to Remand. This issue of first impression for this Court, as well as other related issues, are considered in this Opinion.

II. Background and Procedural History¹

The forty-eight Plaintiffs² in this cause of action allegedly purchased long-term care insurance policies (hereinafter "LTC policies") from Defendant Conseco Senior Health Insurance Company (hereinafter "Conseco Senior")³. Defendants Derek Ferguson, Bill Halbert (hereinafter "individual Defendants") and Vincent Jackson, were allegedly agents for Conseco Senior who sold some of the policies to some of the Plaintiffs.⁴ Alleging that they were fraudulently induced to purchase the LTC policies through deceptive pricing and marketing schemes, Plaintiffs filed suit against Defendants in the Circuit Court of Smith County, Mississippi, on May 22, 2002. Specifically, Plaintiffs contend that they were led to believe that the premiums for their LTC policies would be lower over time than were actually charged by Conseco Senior. Claims of this type have become known as "vanishing premium" claims.

Conseco Senior removed the case to this Court on June 21, 2002, on jurisdictional grounds of diversity of citizenship. Conseco Senior alleges that the individual Defendants were fraudulently joined, and that the out-of-state Plaintiffs were fraudulently misjoined. Conseco Senior thus contends that the citizenships of the fraudulently joined / misjoined parties should be disregarded in determining whether diversity of citizenship jurisdiction exists under 28 U.S.C. § 1332.

Two requirements must be met before a federal court can exercise diversity of citizenship jurisdiction under § 1332. The requirements are: (1) complete diversity of citizenship between plaintiff(s) and defendant(s); and (2) an amount in controversy exceeding $75,000. The parties agree that the amount in controversy requirement is met. Therefore, the issue to be resolved by the Court is whether the diversity of citizenship requirement is met. For Defendants to succeed in defeating Plaintiffs' Motion to Remand, they must prove both fraudulent joinder of the non-diverse individual Defendants, and fraudulent misjoinder of the out-of-state Plaintiffs. That is, because of the alignment of parties, failure of Defendants to prove either of these legal theories will destroy complete diversity of citizenship.

Plaintiffs filed the subject Motion to Remand on July 19, 2002. The Motion to Remand is now ripe for consideration.

III. Motion to Remand

A. Standard for Fraudulent Joinder of Defendants

Under 28 U.S.C. § 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed ... to the district court of the United States for the district and division embracing the place where such action is pending." The removing party has the burden of proving that the federal court has jurisdiction to hear the case. See, Jernigan v. Ashland Oil, Inc., 989 F.2d 812, 815 (5th Cir.1993), cert. denied, 510 U.S. 868, 114 S.Ct. 192, 126 L.Ed.2d 150 (1993); Laughlin v. Prudential Ins. Co., 882 F.2d 187, 190 (5th Cir.1989) (holding that the "removing party bears the burden of establishing federal jurisdiction."). In cases in which the removing party alleges diversity of citizenship jurisdiction on the basis of fraudulent joinder, "it has the burden of proving the fraud." Laughlin, 882 F.2d at 190; Carriere v. Sears, Roebuck & Co., 893 F.2d 98, 100 (5th Cir.1990), cert. denied, 498 U.S. 817, 111 S.Ct. 60, 112 L.Ed.2d 35 (1990). To establish fraudulent joinder, the removing party must prove: (1) that there was actual fraud in the plaintiff's pleading of the jurisdictional facts or (2) that the plaintiff has no possibility of establishing a cause of action against the non-diverse defendant in state court. Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir.1999) (citations omitted); Burden v. General Dynamics Corp., 60 F.3d 213, 217 (5th Cir.1995); Cavallini v. State Farm Mutual Auto Ins. Co., 44 F.3d 256, 259 (5th Cir.1995).

When considering whether a non-diverse defendant has been fraudulently joined to defeat diversity of citizenship jurisdiction, courts should "pierce the pleadings" and consider "summary judgment-type evidence such as affidavits and deposition testimony." See e.g., Cavallini, 44 F.3d at 256. See also, LeJeune v. Shell Oil Co., 950 F.2d 267, 271 (5th Cir.1992) (holding that "a removing party's claim of fraudulent joinder to destroy diversity is viewed as similar to a motion for summary judgment.... A court is to pierce the pleadings to determine whether, under controlling state law, the non-removing party has a valid claim against the non-diverse parties."). Under this standard, plaintiffs "may not rest upon the mere allegations or denials of [their] pleadings." Beck v. Texas State Bd. of Dental Examiners, 204 F.3d 629, 633 (5th Cir.2000). See, also Badon v. RJR Nabisco, Inc., 236 F.3d 282, 286 n. 4 (5th Cir.2001) (finding that the "mere theoretical possibility of recovery under local law" does not preclude removal. "[T]here must at least be arguably a reasonable basis for predicting that state law would allow recovery in order to preclude a finding of fraudulent joinder."). Further, conclusory or generic allegations of wrongdoing on the part of the non-diverse defendant are not sufficient to show that the defendant was properly joined. See, Badon v, RJR Nabisco, Inc., 224 F.3d at 392-93 (5th Cir.2000); Peters v. Metropolitan Life Ins. Co., 164 F.Supp.2d 830, 834 (S.D.Miss.2001)(holding that the allegations against non-diverse defendants "must be factual, not conclusory, because conclusory allegations do not state a claim."). Therefore, removal is not precluded merely because the state court complaint, on its face, sets forth a state law claim against a non-diverse defendant. See, Badon, 224 F.3d at 390. Removal is proper "if the plaintiff's pleading is pierced and it is shown that as a matter of law there is no reasonable basis for predicting that the plaintiff might establish liability on that claim against the in-state defendant." Id.

When conducting a fraudulent joinder analysis, a court must resolve all disputed questions of fact and ambiguities of law in favor of the non-removing party, see, Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir.1992), but "only when there exists an actual controversy, i.e. when both parties have submitted evidence of contradictory facts." Badon, 224 F.3d at...