Phillips v. First Tower Loan, Inc.
| Decision Date | 20 November 2012 |
| Docket Number | CIVIL ACTION NO.: 2:12cv123-KS-JMR |
| Parties | GREGORY PHILLIPS AND EDNA PHILLIPS PLAINTIFFS v. FIRST TOWER LOAN, INC., ALFA INSURANCE, INC., CHRIS SEAY, JOHNSON & JOHNSON INSURANCE, GREAT LAKES REINSURANCE (U.K.) PLC, AND JOHN DOES I THROUGH 10 DEFENDANTS |
| Court | U.S. District Court — Southern District of Mississippi |
This matter is before the Court on the Motion for Remand [6] of Plaintiffs Gregory Phillips and Edna Phillips. Having considered the motion, the response, the record and the applicable law, the Court finds that this action should be remanded to the Circuit Court of Jefferson Davis County, Mississippi.
On January 27, 2012, Gregory Phillips and Edna Phillips filed suit against First Tower Loan, Inc. ("Tower Loan"); Alfa Insurance, Inc. ("Alfa"); Chris Seay; Johnson & Johnson Insurance ("Johnson & Johnson"); and Great Lakes Reinsurance (U.K.) PLC ("Great Lakes") in Mississippi state court. (See Complaint [1-3 at ECF pp. 1-13].) Plaintiffs assert numerous claims for relief relating to the destruction of their residence by fire and their efforts to obtain insurance benefits for the fire loss.
Plaintiffs allege that on or about June 3, 2010, they executed a deed of trust in favor of Tower Loan, using their residence and forty (40) acres of land as collateral for a loan totaling $34,708.19. Plaintiffs contend their financial contract with Tower Loan required it to pay for insurance on their property. Liability is asserted against Tower Loan primarily on the basis that it failed to pay the insurance premiums. Plaintiffs also requestthat Tower Loan be enjoined from maintaining foreclosure proceedings and taking any action to deprive Plaintiffs of their real property.
Plaintiffs' claims against Chris Seay and Alfa center upon an alleged misrepresentation in an insurance application signed by Gregory Phillips. Plaintiffs claim that Mr. Phillips visited an Alfa branch office in Prentiss, Mississippi after Tower Loan sent the Plaintiffs a letter in August of 2011, advising that their house was not insured. Chris Seay, an insurance agent for Alfa, allegedly filled out an insurance application for dwelling and contents coverage on the Phillips' home. Mr. Phillips signed the application, but supposedly did not review its contents. One section of the completed insurance application indicated that Mr. Phillips had not filed for bankruptcy in the past five (5) years. However, Mr. Phillips had filed a petition under Chapter 13 of the Bankruptcy Code in or about March of 2011. Mr. Phillips contends that Chris Seay did not ask him any specific questions about bankruptcy proceedings while the insurance application was being completed.
Plaintiffs' Complaint asserts that Great Lakes and Johnson & Johnson issued insurance policy number LSG510002071 (the "Subject Policy") pursuant to the above-referenced insurance application. A fire destroyed Plaintiffs' residence on or about November 14, 2011. Plaintiffs subsequently made a claim under the Subject Policy, which was denied because of the inaccurate information in the insurance application concerning Gregory Phillips' bankruptcy history. Plaintiffs contend that Great Lakes and Johnson & Johnson wrongfully refused to provide insurance benefits for the fire loss.
On April 16, 2012, Tower Loan filed a motion to compel arbitration in the statecourt action in reliance on an arbitration provision in its loan agreement with the Plainiffs. On June 14, 2012, an agreed Order Granting Arbitration and Staying Action ("Arbitration Order") [5-1 at ECF pp. 105-06] was filed in the state court proceeding. All of Plaintiffs' claims against Tower Loan were stayed pending the completion of arbitration pursuant to the Arbitration Order.
On July 19, 2012, Alfa and Chris Seay (sometimes collectively referred to as "Alfa") removed the proceeding to this Court on the basis of diversity of citizenship jurisdiction under Title 28 U.S.C. § 1332. (See Notice of Removal [1].) The Notice of Removal [1] provides that for purposes of diversity, the Plaintiffs are citizens of Mississippi; Great Lakes is a Delaware corporation; Johnson & Johnson is a South Carolina corporation; Alfa is an Alabama corporation; Tower Loan is a corporate citizen of Louisiana and Mississippi;1 and Chris Seay is a citizen of Mississippi. Alfa contends that the Mississippi citizenship of Seay and Tower Loan should be disregarded because these Defendants have been fraudulently joined in order to defeat diversity jurisdiction. As to Seay, Alfa alleges that he was acting as an agent for a disclosed principal at all relevant times and that Plaintiffs cannot establish a cause of action against him in Mississippi state court. Alfa posits that the Arbitration Order [5-1 at ECF p. 105] precludes the Plaintiffs from establishing a cause of action against Tower Loan.
The Notice of Removal [1] asserts that the lawsuit became removable once Plaintiffs' claims against Tower Loan were compelled to arbitration, and that Alfa timelyremoved the action within thirty (30) days of its receipt of the Arbitration Order. (See Notice of Removal [1] at ¶ 13.) Great Lakes and Johnson & Johnson have consented to the action proceeding in federal court. (See Consent to Removal [1-2].) Tower Loan has not filed any documents in the action subsequent to removal.
On August 13, 2012, Plaintiffs filed their Motion for Remand [6]. Plaintiffs assert two grounds in support of this cause being sent back to the Circuit Court of Jefferson Davis County, Mississippi. First, Alfa's failure to file all state court documents in its possession in conjunction with the Notice of Removal [1] pursuant to 28 U.S.C. § 1446(a). Second, the viability of their claims against Chris Seay under Mississippi state law. Plaintiffs also request their costs, expenses, and attorney's fees incurred as a result of the removal pursuant to 28 U.S.C. § 1447(c). The Motion for Remand [6] has been fully briefed and the Court is ready to rule.
"A district court has removal jurisdiction in any case where it has original jurisdiction." Gutierrez v. Flores, 543 F.3d 248, 251 (5th Cir. 2008) (citing 28 U.S.C. § 1441(a)). "The removing party bears the burden of establishing that federal jurisdiction exists." De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995) (citing Gaitor v. Peninsular & Occidental S.S. Co., 287 F.2d 252, 253-54 (5th Cir. 1961)). Since federal courts are of limited jurisdiction and removal raises significant federalism concerns, the "removal statutes are to be construed strictly against removal and for remand." Eastus v. Blue Bell Creameries, L.P., 97 F.3d 100, 106 (5th Cir. 1996) (citations omitted). A motion to remand alleging a procedural defect in removal must be brought within thirty(30) days of the filing of the notice of removal, but "the case shall be remanded" at any time before final judgment if it appears that subject matter jurisdiction is lacking. 28 U.S.C. § 1447(c). Courts are to consider "jurisdictional facts as they existed at the time of removal" in ruling on a motion to remand. Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 265 (5th Cir. 1995).
In this case, removal was based on the Court's original jurisdiction under 28 U.S.C. § 1332. (See Notice of Removal [1] at ¶ 3.) The two basic requirements of § 1332 applicable to this action are: 1) that the parties be citizens of different states; and 2) that the amount in controversy, exclusive of interest and costs, exceeds the sum or value of $75,000. Plaintiff's Motion for Remand [6] challenges the first requirement for diversity jurisdiction and asserts a procedural defect in removal under 28 U.S.C. § 1446(a).
Plaintiffs contend that remand is in order because Alfa failed to include several state court documents with the filing of the Notice of Removal [1] in accordance with 28 U.S.C. § 1446(a). The statute provides in pertinent part that a defendant seeking to remove an action must file its notice of removal in the appropriate district court "together with a copy of all process, pleadings, and orders served upon such defendant . . . ." 28 U.S.C. § 1446(a). Alfa contends that it filed all "pleadings" in its possession with the Notice of Removal [1] on July 19, 2012, and that all other state court documents were filed in this Court on August 3, 2012, via the Notice of Filing of Entire State Court Record [5]. Alfa's position is that its failure to include summonses and proofs of service with the Notice of Removal [1] is a de minimis defect, not fatal to removal.
The majority of courts, including the United States Court of Appeals for the Fifth Circuit, take the view that the failure to include all state court documents with a notice of removal is a procedural defect that may be cured by the removing party. See, e.g., Walton v. Bayer Corp., 643 F.3d 994, 998-99 (7th Cir. 2011) (); Countryman v. Farmers Ins. Exch., 639 F.3d 1270, 1273 (10th Cir. 2011) (same); Covington v. Indem. Ins. Co. of N. Am., 251 F.2d 930, 933 (5th Cir. 1958) (); James J. Flanagan Shipping Corp. v. Mediterranean Shipping Co., S.A., 499 F. Supp. 2d 710, 712 (E.D. Tex. 2007) (); see also 14C Charles Alan Wright et al., Federal Practice and Procedure § 3733 (4th ed.) (...
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