M & B Oil, Inc. v. Federated Mut. Ins. Co.

Decision Date06 August 2021
Docket Number4:21-CV-00250-NCC
PartiesM & B OIL, INC., Plaintiff, v. FEDERATED MUTUAL INSURANCE COMPANY and CITY OF ST. LOUIS, Defendants.
CourtU.S. District Court — Eastern District of Missouri
MEMORANDUM AND ORDER

NOELLE C. COLLINS UNITED STATES MAGISTRATE JUDGE

This matter is before the Court on Plaintiff M&B Oil Inc.'s Motion to Remand (Doc. 39) and the interrelated Motions to Dismiss filed by Defendants Federated Mutual Insurance Company and the City of St. Louis (Docs. 33, 35). The Motions are fully briefed and ready for disposition. The parties have consented to the jurisdiction of the undersigned United States Magistrate Judge pursuant to Title 28 U.S.C § 636(c) (Doc. 41). For the following reasons, Plaintiff M&B Oil, Inc.'s Motion to Remand (Doc. 39) will be DENIED, Defendants Federated Mutual Insurance Company's Motion to Dismiss (Doc. 33) will be DENIED, and Defendant the City of St. Louis' Motion to Dismiss (Doc. 35) will be GRANTED.

I. Background

Plaintiff M&B Oil, Inc. (Plaintiff) filed this action for breach of contract against Defendant Federated Mutual Insurance Company (Federated) (Count I) and for detrimental reliance against Defendant the City of Saint Louis (“the City”) (Count II) on June 5, 2020, in the Circuit Court of Saint Louis City, Missouri (Doc. 4). In the Petition, Plaintiff alleges that on February 2, 2019, Plaintiff sustained damage due to a freezing water pipe on its property located at 2501 N. Grand Blvd., St. Louis, MO 63106. Plaintiff alleges that it relied on the City's statement through the City of St. Louis Fire Department that the City was shutting off the water to the premises, but the City did not shut off the water and did not advise either the Fire Department or Plaintiff of this. Plaintiff further alleges that Federated refused to provide coverage for the damage incurred as a result of this incident and that the denial was vexatious and in bad faith. Specifically, Plaintiff alleges that “this refusal to pay the value of the damage was vexatious and in bad faith as it was without reasonable cause or excuse, in that Defendant has unreasonably delayed payment of the loss, and has no basis for not paying the claim other than to unnecessarily delay payment, thereby entitling plaintiff to the penalties set for in Mo. Rev. Stat. § 375.420, including attorneys' fees” (Id. at ¶10). Plaintiff indicates that it sustained damages to its premises in excess of $400, 000.

On February 26, 2021, Federated removed the action to this Court, alleging that the Court has subject matter jurisdiction pursuant to the Court's diversity jurisdiction under 28 U.S.C. § 1332(a) (Doc. 1). Upon review of the Notice of Removal, the Court found Federated had not met its burden to establish this Court's subject matter jurisdiction and directed Federated to show cause why this action should not be remanded for want of jurisdiction (Doc. 13). Federated timely complied and the Court determined it properly had subject matter jurisdiction (Docs. 20, 30 at 1). Both Federated and the City filed Motions to Dismiss which were subsequently denied without prejudice in light of the Court permitting Plaintiff to file a First Amended Complaint (Doc. 30).

In its First Amended Complaint, Plaintiff amends its pleading as to Count II against the City and adds a claim, Count III, for inverse condemnation against the City (Doc. 22-1). Specifically, in Count II, Plaintiff now alleges that it relied on the statement of the City through the Water Department, not the Fire Department, that it was shutting off the water to the premises, but the City did not shut off the water and did not advise either the Fire Department or Plaintiff of this. In Count III, Plaintiff alleges, the City's “use of its property, namely the water piping system, was unreasonable” causing damage to the property in excess of $400, 000. Count I against Federated remains unchanged.

Plaintiff now moves to remand the amended pleading back to state court (Doc. 39) and Defendants have renewed their motions to dismiss (Docs. 33, 35).

II. Analysis
A. Motion to Remand

The propriety of removal to federal court depends on whether a claim comes within the scope of the federal court's subject matter jurisdiction. See 28 U.S.C. § 1441(b). The party seeking removal and opposing remand has the burden to establish federal subject matter jurisdiction. Turntine v. Peterson, 959 F.3d 873, 881 (8th Cir. 2020). Generally, a court must resolve all doubts about federal jurisdiction in favor of remand to state court. Mensah v. Owners Ins. Co., 951 F.3d 941, 943 (8th Cir. 2020). Under 28 U.S.C. § 1332(a), the Court has subject matter jurisdiction over cases where the amount in controversy exceeds $75, 000 and there is complete diversity of citizenship among the litigants. In re Prempro Prod. Liab. Litig., 591 F.3d 613, 619-20 (8th Cir. 2010).

Federated removed this action on the basis of diversity jurisdiction and argued that the City was improperly joined in this case in order to defeat diversity jurisdiction. Alternatively, in their response to the Court's show cause order, Federated argued that under the doctrine of “snap removal” the Court had diversity jurisdiction under 28 U.S.C. § 1441(b)(2) because the City had not been served at the time of removal. Section 1441(b)(2) states, a case may not be removed based on diversity jurisdiction “if any of the parties in interest properly joined and served as defendants is a citizen of the forum state. While the statute plainly does not allow removal once a forum defendant has been properly served, courts are divided about the permissibility of this type of “snap removal, ” where a defendant removes a case before the plaintiff has a chance to serve the forum defendant.

The Eighth Circuit has not addressed the propriety of “snap removal.” Other circuits have concluded section 1441(b)(2)'s plain language allows for removal until a forum defendant has been served. See Texas Brine Co., LLC v. Am. Arbitration Ass'n, Inc., 955 F.3d 482, 485-87 (5th Cir. 2020) (explaining section 1441(b)(2) unambiguously precludes removal only when a forum defendant has been served, and allowing removal otherwise does not yield absurd results that hinder the statute's apparent purpose); Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699, 705-06 (2d Cir. 2019) (concluding Section 1441(b)(2) is inapplicable until a home-state defendant has been served in accordance with state law” and such a reading is not absurd “merely because it produces results that a court or litigant finds anomalous or perhaps unwise” (quotation marks omitted)); Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147, 15254 (3d Cir. 2018) (allowing snap removal does not contravene Congress' apparent purpose to address fraudulent joinder, and such an outcome is not so “outlandish as to constitute an absurd or bizarre result”).

Meanwhile, this district has taken three different approaches: (1) permitting snap removals based on the plain language of the statute, (2) remanding snap removals because they are inconsistent with the legislative intent behind the forum defendant rule and the purposes of removal, and (3) allowing snap removals only when at least one defendant has been served, based on a construction of the word “any” in section 1441(b)(2). Tillman v. BNSF Ry. Co., No. 4 1:20 CV 00178 SNLJ, 2021 WL 842600, at *2 (E.D. Mo. Mar. 5, 2021) (collecting cases); Laster v. Monsanto Co., No. 4:18-CV-397 CAS, 2018 WL 1566846, at *2 (E.D. Mo. Mar. 30, 2018) (also collecting cases). Following the plain, unambiguous language of the statute and in line with this Court's more narrow application of it, the undersigned determined that where, as is the case here, one defendant had been served but the forum defendant had not been served before removal, that section 1441(b)(2) does not preclude removal. See Czapla v. Republic Servs., Inc., 372 F.Supp.3d 878, 881 (E.D. Mo. 2019) (acknowledging the Court's more recent narrow application of § 1441(b) requiring service on at least one defendant before the case may be removed). As such the Court cited to Tillman in reference to its detailed overview of the doctrine of “snap removal” when finding that Federated had indeed established the Court's subject matter jurisdiction and granting Plaintiff the right to amend its complaint, an action the Court could not take without subject matter jurisdiction.

Nevertheless Plaintiff filed the current motion to remand his amended complaint noting the lack of diversity of citizenship.[1] Thus, the question now before the Court is whether Plaintiff's amendment alters the Court's prior reasoning and the applicability of the “snap removal” doctrine. The Court finds that it does not. In its amended complaint, Plaintiff merely added a claim against the City and amended its prior claim against the City. In the case of a removed action, the diversity inquiry occurs at the time of removal and later events can, but do not always, deprive a court of jurisdiction. See e.g., Anderson v. Hoffman, No. 2:20 CV 87 SPM, 2021 WL 329779, at *2 (E.D. Mo. Feb. 1, 2021) (in the context of the amount of controversy; [t]he amount of controversy is determined at the time of removal, and subsequent events do not divest the court of jurisdiction after it attaches”). See also Schubert v. Auto Owners Ins. Co., 649 F.3d 817, 822 (8th Cir. 2011) (“It is axiomatic the court's jurisdiction is measured either at the time the action is commenced or, more pertinent to this case, at the time of removal.”). Plaintiff did not add a new party whose citizenship would impact the diversity jurisdiction analysis. Were the Court to find a minor amendment to the claims against the forum defendant sufficient to overcome its initial diversity...

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