Tipton v. Landen
| Decision Date | 08 March 2016 |
| Docket Number | CIVIL ACTION NO. 6:15-cv-02811 |
| Parties | EUGENE TIPTON AND MILDRED TIPTON v. KEITH LANDEN, ET AL. |
| Court | U.S. District Court — Western District of Louisiana |
Currently pending is the motion to remand (Rec. Doc. 9), which was filed by the plaintiffs, Eugene and Mildred Tipton. The motion is opposed. (Rec. Doc. 13). Oral argument was heard on February 29, 2016. Considering the evidence, the law, and the arguments of the parties, and for the reasons fully explained below, the motion is granted.
On August 24, 2014, Eugene and Mildred Tipton allegedly were the invited guests Keith and Noel Landen at a camp in Grand Isle, Louisiana. As Mr. Tipton was loading luggage into the elevator on the second floor of the camp, the elevator allegedly dropped to the first floor, trapping Mr. Tipton's arm and leg between the first and second floors of the elevator shaft. Mr. Tipton allegedly hung upside down for approximately an hour before he was freed. The plaintiffs alleged that this resulted in severe injuries and permanent disability to Mr. Tipton and loss of consortium damages to Mrs. Tipton.
Mr. and Mrs. Tipton sued Keith and Noel Landen and Grand Isle Rental Properties, LLC, the alleged owners of the camp,1 as well as their insurers, Lexington Insurance Company and Hudson Specialty Insurance Company. The suit was filed in the 16th Judicial District Court, St. Mary Parish, Louisiana.
On October 13, 2015, Mr. and Mrs. Tipton, the Landens, and Lexington entered into a settlement agreement,2 by which the full amount of Lexington's policy would be paid to the plaintiffs in exchange for the dismissal of Lexington from the lawsuit with prejudice. Under the settlement agreement, the Landens were not released from all liability; instead, the plaintiffs reserved their claims against the Landens to the extent of any insurance coverage they might have in excess of that afforded by Lexington's policy. Additionally, the plaintiffs agreed not to execute on any judgment obtained against the Landens except to the extent of the coverage afforded by any excess insurance policy. The settlement agreement also stated thatthe Landens are to remain in this lawsuit as nominal defendants. Such a procedure was utilized in Gasquet v. Commercial Union Insurance Company, 391 So.2d 466 (La. App. 4 Cir. 1980), writs denied, 296 So.2d 921, 922 (La. 1981), and such an arrangement is referred to in Louisiana jurisprudence as "a Gasquet settlement." The dismissal order in the state-court action dismisses Lexington with prejudice while "specifically reserving unto Plaintiffs any and all rights and causes of action against all other parties not dismissed herein, including KEITH LANDEN, NOEL LANDEN, GRAND ISLE RENTAL PROPERTIES, LLC[,] and HUDSON SPECIALTY INSURANCE COMPANY."3
Defendant Hudson, the Landens' alleged excess insurance carrier, removed the case to this forum, arguing that the Gasquet settlement made this case removable. The plaintiffs responded with the instant motion to remand.
The plaintiffs argue that removal was improper and that remand is necessary because removal of this action would violate the forum defendant rule. The forum defendant rule is a statutory provision that precludes removal on the basis of diversity jurisdiction when one or more defendants in the suit is a citizen of the forum state. It reads as follows:
A civil action otherwise removable solely on the basis of the jurisdiction under section 1332(a) of this title may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.4
The plaintiffs contend that Keith Landen, Noel Landen, and Grand Isle Properties, LLC were properly joined and served as defendants and are Louisiana citizens, precluding removal.
Hudson argues that the forum defendant rule does not apply because the Gasquet settlement made Keith Landen, Noel Landen, and Grand Isle Properties, LLC nominal parties against whom a judgment cannot be obtained, making their citizenship irrelevant.
Federal district courts are courts of limited jurisdiction, possessing only the power authorized by the Constitution and by statute.5 Accordingly, federal courts have subject-matter jurisdiction only over civil actions presenting a federal question6 and those in which the amount in controversy exceeds $75,000 exclusive of interestand costs and the parties are citizens of different states.7 For that reason, a suit is presumed to lie outside a federal court's jurisdiction until the party invoking federal-court jurisdiction establishes otherwise.8 "[B]ecause the effect of removal is to deprive the state court of an action properly before it, removal raises significant federalism concerns."9 The removal statute must therefore be strictly construed, and any doubt about the propriety of removal must be resolved in favor of remand and against federal-court jurisdiction.10
The party invoking subject matter jurisdiction in federal court has the burden of establishing the court's jurisdiction.11 When an action is removed from state court, as this suit was, the removing party bears the burden of proving that federal jurisdiction exists.12 Even when a motion to remand is filed, the burden remains withthe removing party.13 Accordingly, Hudson, the removing defendant in this case, has the burden of establishing that the court has subject-matter jurisdiction.
A district court is required to remand the case to state court if, at any time before final judgment, it determines that it lacks subject-matter jurisdiction.14 Indeed, a federal court has an independent duty, at any level of the proceedings, to determine whether it properly has subject-matter jurisdiction over a case.15
In this case, Hudson contends that the criteria for diversity jurisdiction are satisfied when the citizenship of the allegedly nominal defendants16 is disregarded, while the plaintiffs argue that the forum defendant rule precludes removal.
The citizenship of the parties to this lawsuit is undisputed. The citizenship of a natural person is determined by the state in which he or she is domiciled.17 Therefore, the Tiptons are Florida citizens,18 and the Landens are Louisiana citizens.19 A limited liability company is a citizen of every state in which any member of the company is a citizen.20 Grand Isle Rental Properties, LLC has two members, Mr. and Mrs. Landen.21 Therefore, it is a Louisiana citizen. A corporation's citizenship is determined by its state of incorporation and the state of its principal place of business.22 Hudson is a New York company, with its principal place of business in New York. Therefore, it is a New York citizen.23 Accordingly, there is no dispute that there is complete diversity between the parties, no dispute that the Landens and the limited liability company are Louisiana citizens, and no dispute that the defendants were joined and served before removal. Therefore, the sole issue to be resolved is whether the forum defendant rule requires remand of this action.
The forum defendant rule states that a case cannot be removed on the basis of diversity jurisdiction if a defendant, who was properly joined and properly served, is a citizen of the forum state.24 In accordance with the plain language of the statute, this rule applies even if the other criteria for removal are present. The forum defendant rule is procedural rather than jurisdictional; therefore, a failure to comply with the rule is a defect in removal procedure25 that is waived unless an objection is timely filed.26 In this case, however, the procedural defect was raised in a timely remand motion.
Hudson provided no jurisprudential or statutory authority for the proposition that the citizenship of an in-forum defendant can be disregarded if he is a "nominal defendant" due to a Gasquet settlement. The cases that were cited by Hudson are not directly on point.
RSUI Indemnity Co. v. American States Ins. Co., No. 12-2820, 2015 WL 5059704 (E.D. La. Aug. 26, 2015), was cited by Hudson because it explains what a Gasquet settlement is and states that when such a settlement is reached the insureds remain in the case as nominal defendants. But RSUI was not a removed action. Thesuit originally filed in state court was completed, and then the excess insurer sued the primary level insurer in federal court, arguing that its actions resulted in the excess carrier having to pay more than it should have. The decision reached by the court in RSUI had nothing to do with whether the presence of in-forum defendants precludes removal or whether the citizenship of an in-forum defendant can be disregarded.
In Hargrove v. Bridgestone, No. 10-cv-0318, 2012 WL 692410 (W.D. La. Mar. 2, 2012), a state-court suit was removed to a Louisiana federal court even though some defendants were Louisiana citizens. However, the Louisiana defendants had all settled even though no dismissal documents had been filed. The court noted that, although they had not been formally dismissed, the settling defendants were not "actually present" in the lawsuit. The court also said it could find "no plausible explanation for plaintiff's failure to dismiss the Louisiana Defendants as required by their agreement. . . ." The court tolled the one-year deadline for removing a case on the basis of diversity and denied the motion to remand. But the ruling provides no guidance for the situation created by the Gasquet settlement in this case. In Hargrove, the Louisiana defendants had fully settled their claims and should have been dismissed from the suit but in the instant case, the Louisiana defendants must remain in the lawsuit. The two situations are not equivalent.
In Gore v. Robertson, No. 14-00749-BAJ-RLB, 2015 WL 5749459 (M.D. La. Sept. 30, 2015), the lawsuit was filed following a motor vehicle accident, and the plaintiff executed a Gasquet sett...
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