Howard v. Citifinancial, Inc.

• Decision Date: 13 March 2002
• Docket Number: No. CIV.A.3:01-CV-471BN.,CIV.A.3:01-CV-471BN.
• Citation: 195 F.Supp.2d 811
• Parties: Denise HOWARD, Lena Chambers, Priscilla Chalmers, Betty Whitley, Faye Denise Logan, Carol Buseck, Kelvin Johnson, Phillip Gordon, Debbie Gordon, Alisha F. Wilson, Margaret Haymon, Wanda Allen, Monroe Hoggatt, Eugene Haymon, and Eva Parker Hall Plaintiffs v. CITIFINANCIAL, INC., a Maryland Corporation F/K/A First Family Financial Services, Inc., CitiFinancial, Inc., a Maryland Corporation F/K/A Commercial Credit of Mississippi, Inc., CitiFinancial, Inc., a Tennessee Corporation F/K/A First Family Financial Services, Inc., CitiFinancial, Inc., a Tennessee Corporation F/K/A Commercial Credit of Mississippi, Inc., CitiFinancial Services, Inc., a Georgia Corporation, Union Security Life Insurance Company, American Security Insurance Company, Tracy Mitchell, Darla Farmer, Valerie Stevens, and John Does 1-50 Defendants
• Court: U.S. District Court — Southern District of Mississippi

195 F.Supp.2d 811

Denise HOWARD, Lena Chambers, Priscilla Chalmers, Betty Whitley, Faye Denise Logan, Carol Buseck, Kelvin Johnson, Phillip Gordon, Debbie Gordon, Alisha F. Wilson, Margaret Haymon, Wanda Allen, Monroe Hoggatt, Eugene Haymon, and Eva Parker Hall Plaintiffs v. CITIFINANCIAL, INC., a Maryland Corporation F/K/A First Family Financial Services, Inc., CitiFinancial, Inc., a Maryland Corporation F/K/A Commercial Credit of Mississippi, Inc., CitiFinancial, Inc., a Tennessee Corporation F/K/A First Family Financial Services, Inc., CitiFinancial, Inc., a Tennessee Corporation F/K/A Commercial Credit of Mississippi, Inc., CitiFinancial Services, Inc., a Georgia Corporation, Union Security Life Insurance Company, American Security Insurance Company, Tracy Mitchell, Darla Farmer, Valerie Stevens, and John Does 1-50 Defendants

No. CIV.A.3:01-CV-471BN.

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

March 13, 2002.

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Thandi Wade, Joe N. Tatum, Tatum & Wade, PLLC, Jackson, MS, for plaintiffs.

Robert H. Walker, Fred Krutz, III, Daniel J. Mulholland, Bonnie Bridgers Smith, Forman, Perry, Watkins, Krutz & Tardy, Jackson, MS, for CitiFinancial, Inc., Maryland Corp., CitiFinancial, Inc., Tennessee Crop., CitiFinancial, Georgia Corp., Tracy Mitchell, Valerie Stevens, defendants.

Randy L. Dean, Walter D. Willson, Wells, Marble & Hurst, Jackson, MS, for Union Security Life Ins., American Security Ins. Co., defendants.

OPINION AND ORDER

BARBOUR, District Judge.

This cause is before the Court on the Motion of Plaintiffs to Remand. Having considered the Motion, Response, Rebuttal, attachments to each, and supporting and opposing authority, the Court finds that the Motion is not well taken and should be denied.

I. Background and Procedural History

Plaintiffs all entered loan agreements with either Defendants CitiFinancial, Inc., f/k/a First Family Financial Services, Inc., Defendants CitiFinancial, Inc., f/k/a Commercial Credit of Mississippi, Inc., or CitiFinancial Services, Inc. (collectively "CitiFinancial").¹ In conjunction with the loans, Plaintiffs purchased various insurance policies through Defendants Union Security Life Insurance Company ("Union Security") and/or American Security Insurance Company ("American Security") (collectively "Insurance Defendants").

On May 9, 2001, Plaintiffs filed a complaint in the Circuit Court of Holmes County, Mississippi, against CitiFinancial, the Insurance Defendants, Tracy Mitchell ("Mitchell"), Darla Farmer ("Farmer") and Valerie Stevens ("Stevens") (collectively "individual Defendants").² Plaintiffs allege that, "[c]ontrary to law, the Defendants required collateral protection insurance, credit life insurance, credit accident and health insurance, accidental death and dismemberment insurance, involuntary unemployment insurance, property insurance, and/or other insurance in connection with their loans to Plaintiffs." Complaint, ¶ 29. Plaintiffs also allege that the premiums paid for the allegedly required insurance products were excessive in comparison to similar products on the market, and that they were not offered alternative, and presumably less costly, insurance. Plaintiffs allege that the premiums were inflated because of undisclosed commissions and other remuneration received from the Defendant insurers for selling their policies. Plaintiffs further allege that Defendants engaged in insurance packing, padding, flipping, and churning in violation of Mississippi law. Based on this conduct, Plaintiffs allege claims of breach of fiduciary duty, breach of implied covenants of good faith and fair dealing, fraudulent and negligent misrepresentation and/or omission, civil conspiracy, negligence, and unconscionability under the Uniform Commercial Code of Mississippi ("UCC").

On June 11, 2001, the CitiFinancial Defendants and Insurance Defendants removed the lawsuit to this Court pursuant to 28 U.S.C. § 1441 on the basis of diversity of citizenship jurisdiction under 28 U.S.C. § 1332.³ For the purpose of diversity analysis, Defendant CitiFinancial, Inc., f/k/a First Family Financial Services, Inc., and Commercial Credit of Mississippi, Inc., are Maryland corporations with their principal places of business in Maryland. Defendant CitiFinancial, Inc., f/k/a First Family Financial Services, Inc., and Commercial Credit of Mississippi, Inc., are Tennessee corporations with their principal places of business in Tennessee. Defendant CitiFinancial Services, Inc., is a Georgia corporation with its principal place of business in Georgia. Defendants Union Security and American Security are Delaware corporations with their principal places of business in Georgia. Defendants Tracy Mitchell, Darla Farmer, and Valerie Stevens are citizens of Mississippi. Defendants contend that Plaintiffs have fraudulently joined the non-diverse Defendants to avoid federal jurisdiction and, therefore, the Court may properly assert federal subject matter jurisdiction over this case. Plaintiffs filed the instant Motion to Remand on July 6, 2001.⁴

II. Fraudulent Joinder Standard

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.2000) (finding that the "mere theoretical possibility of recovery under local law" does not preclude removal. Plaintiffs must show that there exists "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 that defendant was not fraudulently joined. See Badon v. RJR Nabisco, Inc., 224 F.3d 382, 392-93 (5th Cir.2000); Peters v. Metropolitan Life Ins. Co., 164 F.Supp.2d 830, 834 (S.D.Miss. 2001) (J. Bramlette) (holding that the allegations against non-diverse defendants "must be factual, not conclusory, because conclusory allegations do not state a claim."). Therefore, when responding to a charge of fraudulent joinder, a plaintiff must allege specific acts of wrongdoing on the part of the non-diverse defendant in the complaint and submit evidence to support those claims. See Badon, 224 F.3d at 390 (holding that removal is not precluded merely because the state court complaint, on its face, sets forth a state law claim against a non-diverse defendant. 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 instate defendant.").

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 394. A court should not, "in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts" to support his claims against the non-diverse defendant. Id. (citing Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994)) (alteration in original). In the event the court, after resolving all disputed questions of fact and ambiguities of law in favor of the non-removing party, finds that there is "arguably a reasonable basis for predicting that the state law might impose liability on the facts involved, then there is no fraudulent joinder"...