Thames v. Evanston Ins. Co., Case No. 13-CV-425-TCK-PJC
| Decision Date | 13 March 2014 |
| Docket Number | Case No. 13-CV-425-TCK-PJC |
| Parties | GERRY G. THAMES, Plaintiff, v. EVANSTON INSURANCE COMPANY, Defendant/Garnishee. |
| Court | U.S. District Court — Northern District of Oklahoma |
Before the Court is Plaintiff's Motion for Remand (Doc. 16).
The following facts alleged in the petition are taken as true for the purpose of the Motion to Remand filed by Plaintiff Gerry G. Thames ("Plaintiff"). Plaintiff brought the underlying action in the District Court for Tulsa County, State of Oklahoma, on June 30, 2011, in the case styled Thames v. Brookside Title & Escrow, Inc., et al., Case No. CJ-2011-3624 ("Tulsa County Action"). In the Tulsa County Action, Plaintiff sued defendants Brookside Title and Escrow, Inc. ("Brookside") and Debbie Stockton ("Stockton"), among others, for an alleged intentional misappropriation of funds paid by Plaintiff in connection with a real estate closing. Plaintiff alleged claims for breach of contract, civil conspiracy, breach of fiduciary duty, conversion, and fraud. (Doc. 3 ¶¶ 1, 6.)
Plaintiff ultimately obtained a judgment against Brookside and Stockton in the Tulsa County Action in the amount of $120,000. (Doc. 3-3.) During the time relevant to the Tulsa County Action, Brookside held a professional negligence insurance policy issued by Defendant/Garnishee Evanston Insurance Company ("Evanston" or "Garnishee"). However, Evanston was never a party in theTulsa County Action and did not receive notice of the Tulsa County Action from Brookside, its insured.
After obtaining judgment against Brookside and Stockton, Plaintiff filed a Garnishment Affidavit in the Tulsa County Action on May 24, 2013, instituting a garnishment proceeding against Evanston ("Garnishment Proceeding"). Evanston filed an Answer to the Garnishment Affidavit on June 10, 2013, alleging that the policy at issue did not provide coverage for the claims within the Judgment and indicating that Evanston did not possess or control any property that could satisfy Plaintiff's judgment. On June 19, 2013, Plaintiff filed an Application for Hearing to Determine Insurance Coverage. Evanston filed its Notice of Removal with this Court on July 15, 2013. (Doc. 3.)1 Evanston alleged diversity jurisdiction pursuant to 28 U.S.C. § 1332(a) as the basis for removal.
Plaintiff asserts two bases upon which the Court should remand the Garnishment Proceedings to the Tulsa County Action: (1) that removal was improper because the Court lacks diversity jurisdiction under 28 U.S.C. § 1332(a); and (2) that Evanston failed to file the notice of removal within thirty days as required by 28 U.S.C. § 1446(b).
Federal courts are courts of limited jurisdiction, and, as the party seeking to invoke federal jurisdiction, Plaintiff bears the burden of proving the exercise of such jurisdiction is proper. Southway v. Cent. Bank of Nigeria, 328 F.3d 1267, 1274 (10th Cir. 2003). Diversity jurisdiction requires the party to show that there is both complete diversity and a sufficient amount incontroversy. 28 U.S.C. § 1332(a); Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Complete diversity exists where the parties are citizens of different states. 28 U.S.C. § 1332(a)(1). The amount in controversy must exceed $75,000. Id. § 1332(a). "The amount in controversy is ordinarily determined by allegations of the [petition], or, where they are not dispositive, by the allegations in the notice of removal." Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995). Because Plaintiff already obtained a judgment against Brookside and Stockton in the amount of $120,000, the parties do not dispute that the amount in controversy exceeds $75,000.
Plaintiff does not explicitly argue that 28 U.S.C. § 1441(a) precludes the removal of a garnishment action to federal court, but Evanston addresses such an argument in its response. Accordingly, the Court will address this issue. Section 1441(a) determines the removability of actions and provides:
Except as otherwise expressly prohibited by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
Section 1441(a) only applies if the garnishment proceeding is a distinct civil action. Smotherman v. Caswell, 755 F. Supp. 346, 348 (D. Kan. 1990) (quoting Adriaenssens v. All-State Ins. Co., 258 F.2d 888, 890 (10th Cir. 1958)). If a garnishment proceeding is merely an ancillary proceeding, it may not be removed to federal court. Id. Courts are divided as to whether the nature of garnishment proceedings should be determined by state law or federal law. Id.
The Court concludes that a garnishment action is a distinct civil action under both federal and Oklahoma law. See Smotherman, 755 F. Supp. at 348 (); Spriggs v. Wolf, 496 F. Supp. 990, 991 (W.D. Okla. 1979) (applying Oklahoma law) ( ). Accordingly, a garnishment proceeding initiated in Oklahoma state court may be removed to federal court pursuant to 28 U.S.C. § 1441(a) where the requirements of diversity jurisdiction are otherwise satisfied.
Plaintiff claims removal is not proper because the parties are not diverse. As support for his argument, Plaintiff relies on (1) an Oklahoma statute, (2) the "direct action" exception, and (3) the citizenship of an allegedly "necessary" party. First, Plaintiff contends that title 36, section 404 of the Oklahoma Statutes deems Evanston to be a citizen of Oklahoma for purposes of diversity jurisdiction. (Doc. 16 at 3-4.) Section 404 itemizes activities which are "defined to be doing the business of insurance" in the State of Oklahoma. Although his argument is difficult to follow, Plaintiff appears to argue that because Brookside, as a "title insurance agent," was "regulated and licensed under the Insurance Commissioner of the State of Oklahoma," Evanston, as Brookside's insurer, was "deemed to do business in Oklahoma." (Doc. 16 at 3-4.) But Plaintiff's reliance on an Oklahoma statute is misplaced. Federal law determines the citizenship of a corporation for purposes of diversity jurisdiction. See 28 U.S.C. § 1332(c)(1). A corporation is deemed to be a citizen of any state in which it is incorporated and the state where it has its principal place of business. Id. Evanston is incorporated in Illinois and has its principal place of business in Illinois.Therefore, Evanston is a citizen of Illinois for purposes of determining whether diversity of citizenship exists.
Second, Plaintiff contends that the "direct action" exception in Section 1332(c)(1) operates to destroy diversity. This exception provides that "in any direct action against the insurer of a policy or contract of liability insurance . . . to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen." Id. "Direct action," as used in Section 1332(c)(1), "refers to a case 'in which a party suffering injuries or damage for which another is legally responsible is entitled to bring suit against the other's liability insurer without joining the insured or first obtaining a judgment against him.'" Hipke v. Kilcoin, 279 F. Supp. 2d 1089, 1092 (D. Neb. 2003) (quoting Beckham v. Safeco Ins. Co. of Am., 691 F.2d 898, 901-02 (9th Cir. 1982)) ( that a garnishment proceeding in federal court was not a direct action for purposes of Section 1332(c)(1) where plaintiff had already obtained a judgment on the tort claims in state court). "Where a tort action has already been litigated against the insured, the insurer is no longer litigating the issue of its insured's liability but is instead 'litigating the existence of a new liability' . . . ." Id. (quoting Butler v. Polk, 592 F.2d 1293, 1295-96 (5th Cir. 1979)). The determination of Evanston's liability under any contact of insurance it had with Brookside is a separate and distinct issue from those litigated in the Tulsa County Action. Moreover, Oklahoma law does not authorize direct actions against insurers. Weekley v. Bennett Motor Express, LLC, 858 F. Supp. 2d 1257, 1259 (N.D. Okla. 2012) () (quoting Daigle v. Hamilton, 782 P.2d 1379, 1383 (Okla. 1989)). Therefore, the present action is not a "direct action" within the meaning of Section 1332(c)(1), but, instead, is a separate, independent action wherebyPlaintiff seeks to enforce the judgment he obtained in the Tulsa County Action. The exception in Section 1332(c)(1) does not apply, and complete diversity exists between the parties.
Finally, Plaintiff claims that Brookside, Evanston's insured, is a necessary party to this proceeding and that Brookside's joinder would necessarily destroy diversity. However, even if Brookside were joined as a party, such joinder would not destroy diversity. "In garnishment actions, where a garnishee has denied liability to the judgment debtor, the judgment creditor's and...
To continue reading
Request your trial