Sandusky v. Acuity, Ins. Co., Civil Action No. 3:17-cv-516-DJH-CHL
| Decision Date | 01 May 2018 |
| Docket Number | Civil Action No. 3:17-cv-516-DJH-CHL |
| Parties | BRIAN SANDUSKY, Plaintiff, v. ACUITY, A MUTUAL INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. District Court — Western District of Kentucky |
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Plaintiff Brian Sandusky was injured in an accident while riding in a car owned by his employer. (Docket No. 1-2) As a result, Sandusky has received payment from the at-fault driver's insurance company and workers' compensation benefits from the Kentucky Association of General Insurers Fund. (Id.) Sandusky brings this action against his employer's insurer, Acuity, seeking unpaid underinsured motorist benefits. (Id.) Sandusky also names the Fund as a defendant, denying the Fund's claimed right to reimbursement from any settlement or judgment he may receive as a result of bringing this action. (Id.) Acuity removed the action to this Court on the basis of diversity of citizenship (D.N. 1), and Sandusky has filed a motion to remand, arguing that complete diversity of the parties does not exist. (D.N. 7) Acuity opposes the motion, arguing that Sandusky fraudulently joined the nondiverse party, the Fund, to the case. (D.N. 8) Acuity has also filed an unopposed motion to bifurcate and stay discovery as to Sandusky's bad-faith claims. (D.N. 12) For the reasons explained below, the motion to remand will be denied, and the motion to bifurcate and stay discovery will be granted.
In 2016, Sandusky suffered injuries in a car accident while riding as a passenger in a car owned by his employer. (D.N. 1-2, PageID # 12) Sandusky made a claim against the at-fault driver, William Goodwin, and his insurer, State Farm. (Id.) State Farm offered Sandusky what it represented to be Goodwin's policy limit, and Sandusky accepted payment from State Farm and released Goodwin's estate from liability. (Id., PageID # 12-13) Sandusky's damages exceeded Goodwin's coverage limits, however, and Sandusky demanded underinsured motorist benefits from Acuity, his employer's insurance carrier. (Id., PageID # 12-13) Acuity ultimately offered to pay Sandusky only a small portion of his claim. (Id., PageID # 16) Sandusky now asserts claims against Acuity for breach of contract and bad faith, arguing that it unreasonably delayed and denied his claim for underinsured motorist benefits. (Id., PageID # 16-18)
Sandusky also received workers' compensation benefits from the Kentucky Association of General Insurers Fund, which provided workers' compensation insurance to his employer. (Id., PageID # 18) According to the complaint, the Fund notified Sandusky that it would seek reimbursement of the benefits it paid to him from any settlement or judgment that may result from this action. (Id.) Sandusky names the Fund as a defendant in this action, denying the Fund's claimed right to reimbursement. (Id.)
Sandusky filed this action in Nelson County Circuit Court. (Id., PageID # 11-19) Acuity removed the action to this Court, invoking the Court's diversity jurisdiction. (D.N. 1) Both Sandusky and the Fund are citizens of Kentucky, however. (Id., PageID # 3) Sandusky has filed a motion to remand, arguing that the Court should send this action back to state court as complete diversity does not exist. (D.N. 7) Acuity argues that the Court maintains diversity jurisdiction, because Sandusky fraudulently joined the Fund against whom it has no colorable cause of action.1 (D.N. 8)
Acuity filed a motion to bifurcate and stay discovery as to Sandusky's bad-faith claims. (D.N. 12) Acuity argues that bifurcation and a stay of discovery as to those claims is appropriate because Sandusky's contract claims may be dispositive. (D.N. 12-1) Acuity certified that no party opposes the motion (D.N. 12, PageID # 100). No party filed a response to the motion, and it is therefore deemed unopposed. See LR 7.1(c).
"When considering a motion to remand, the Court must examine whether the case was properly removed to federal court." Graves v. Standard Ins. Co., 66 F. Supp. 3d 920, 922 (W.D. Ky. 2014) (citation and internal quotations omitted). Removal based on diversity jurisdiction requires both complete diversity and an amount in controversy exceeding $75,000. 28 U.S.C. § 1332(a).
When a nondiverse party has been joined as a defendant—as here—then "the removing defendant may avoid remand only by demonstrating that the non-diverse party was fraudulently joined." Casias v. Wal-Mart Stores, Inc., 695 F.3d 428, 432 (6th Cir. 2012) (quoting Jerome-Duncan, Inc. v. Auto-By-Tel, LLC, 176 F.3d 904, 907 (6th Cir. 1999)). The relevant inquiry for a fraudulent-joinder claim is whether Sandusky "had at least a colorable cause of action against" the Fund in Kentucky state courts. Jerome-Duncan, 176 F.3d at 907. The question, then, "is whether there is arguably a reasonable basis for predicting that the state law might impose liability on the facts involved." Alexander v. Elec. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994) (citation and internal quotations omitted). If so, then joinder is proper, and the Court mustremand the case to state court. See Mason v. Excel Indus., No. 3:10-CV-175, 2011 WL 847449, at *2 (W.D. Ky. Mar. 9, 2011) (citing Alexander, 13 F.3d at 949).
The standard for determining whether a cause of action is colorable is more lenient than the Rule 12(b)(6) motion-to-dismiss standard. Casias, 695 F.3d at 433. "Therefore, it is possible that a party is not fraudulently joined, but that the claim against that party ultimately is dismissed for failure to state a claim upon which relief may be granted." Hix v. Affiliated Computer Servs., No. 5:08-521, 2009 WL 2240548, at *2 (E.D. Ky. July 27, 2009) (quoting Batoff v. State Farm Ins. Co., 977 F.2d 848, 852 (3d Cir. 1992)). The Court is permitted to "look to material outside the pleadings for the limited purpose of determining whether there are 'undisputed facts that negate the claim.'" Walker v. Philip Morris USA, Inc., No. 3:13-CV-00560-CRS, 2014 WL 1319682, at *5 (W.D. Ky. Mar. 28, 2014) (quoting Casias, 695 F.3d at 433). But the Court must resolve "all disputed questions of fact and ambiguities in the controlling . . . state law in favor of the non removing party." Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999) (citation and internal quotations omitted). "All doubts as to the propriety of removal are resolved in favor of remand." Id.
Sandusky's complaint makes only limited references to the Fund. The complaint alleges that the Fund "made payments to various entities and to [Sandusky] as a result of coverage through a Kentucky Worker's Compensation Insurance Plan provided by [Sandusky's] employer" and "notified [Sandusky] that it [was] making a claim for subrogation and/or reimbursement from any settlement or judgment in this claim for any compensation paid under the Worker's Compensation policy." (D.N. 1-2, PageID # 18) The complaint further "denies the Fund's claimed right to subrogation or reimbursement." (Id.)
Sandusky describes his alleged cause of action against the Fund differently in his motion-to-remand briefing, however. Instead of denying the Fund's right to subrogation or reimbursement, Sandusky now asserts that he and the Fund disagree as to whether the amount of the Fund's workers' compensation lien must be reduced by the amount of attorney fees Sandusky pays in bringing this action for underinsured motorist benefits. (D.N. 7-1, PageID # 52, 61; see also D.N. 10)
"In a case removed to federal court, '[t]he existence of subject matter jurisdiction is determined by examining the complaint as it existed at the time of removal.'" Arrington v. Nationwide Mut. Fire Ins. Co., No. 3:14-cv-322-DJH, 2015 WL 852056, at *2 (W.D. Ky. Feb. 26, 2015) (quoting Harper v. AutoAlliance Int'l, 392 F.3d 195, 210 (6th Cir. 2004)). At the time of removal, Sandusky's complaint contained no allegations regarding the amount of the Fund's workers' compensation lien or the attorney fees Sandusky seeks to subtract from that amount. (See D.N. 1-2, PageID # 11-19) The only "claim" Sandusky brought against the Fund was his denial of the Fund's right to subrogation or reimbursement. (See id., PageID # 18) Sandusky cannot rely on his arguments in the briefs regarding the lien and attorney fees to create a colorable cause of action where his complaint contained no such allegations. See Arrington, 2015 WL 852056, at *3 (); see also id. at *3 n.3 ().
Viewing the complaint as it existed at the time of removal, the Court finds that Sandusky has no "colorable cause of action" against the Fund. Jerome-Duncan, 176 F.3d at 907. WhileSandusky asserts that the Fund "is making a claim for subrogation and/or reimbursement from any settlement or judgment in this claim" (D.N. 1-2, PageID # 18), it is undisputed that the Fund has no right to any settlement or judgment that Sandusky might receive in this insurance action. Kentucky workers' compensation law provides:
If compensation is awarded under this chapter, the employer, his insurance carrier, the special fund, and the uninsured employer's fund, or any of them, having paid the compensation or having become liable therefor, may recover in his or its own name or that of the injured employee from the other person in whom legal liability for damages exists, not to exceed the indemnity paid and payable to the injured employee, less the employee's legal fees and expense.
Ky. Rev. Stat. § 342.700(1) (emphasis added). The Kentucky Supreme Court has recognized that "'the other person in whom legal liability for...
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