Ullman v. Safeway Ins. Co.

Decision Date31 December 2013
Docket NumberNo. CIV 13–0595 JB/RHS.,CIV 13–0595 JB/RHS.
Citation995 F.Supp.2d 1196
PartiesBetty E. ULLMAN, for herself and other similarly situated, Plaintiffs, v. SAFEWAY INSURANCE COMPANY and Richard Bailey, Defendants.
CourtU.S. District Court — District of New Mexico


Geoffrey R. Romero, Law Offices of Geoffrey R. Romero, Erin B. O'Connell, O'Connell Law LLC, David A. Freedman, Joseph Goldberg, Vincent J. Ward, Freedman Boyd Hollander Goldberg Urias & Ward, P.A., Matthew L. Garcia, Garcia Ives Nowara LLC, Ray M. Vargas, II, Vargas Law Firm, LLC, Albuquerque, NM, for Plaintiff.

James H. Johansen, Geoffrey D. White, Butt Thornton & Baehr, P.C., Albuquerque, NM, for Defendant, Safeway Insurance Company.


JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on the Plaintiff's Motion for Remand, filed July 24, 2013 (Doc. 10)(Motion to Remand). The Court held a hearing on November 14, 2013. The primary issues are: (i) whether Defendant Safeway Insurance Company has established that Plaintiff Betty Ullman's claims exceed the jurisdictional minimum for conventional diversity jurisdiction; (ii) whether Ullman fraudulently joined nondiverse Defendant Richard Bailey; (iii) whether Ullman procedurally misjoined Bailey to defeat federal diversity jurisdiction; and (iv) whether Ullman is entitled to attorney's fees. The Court concludes that, because Ullman's claims exceed $75,000.00, the amount in controversy requirement is satisfied, and the Court may exercise supplemental jurisdiction over the remaining putative class members' claims if they satisfy the other requirements of diversity jurisdiction, but, because it also concludes that the Ullman did not fraudulently join or procedurally misjoin Bailey and the claims against him, there is not complete diversity, and the Court does not have subject-matter jurisdiction over the case. The Court will, therefore, grant the Motion to Remand in part and remand the case to state court, but it will deny Ullman's request for attorney's fees.


The Court takes its facts from the Class Action Complaint for Breach of Statutory, Common Law, and Contractual Duties, and for Injunctive and Delaratory [sic] Relief and for Personal Injuries, filed in state court May 23, 2013, filed in federal court June 27, 2013 (Doc. 1 at 12)(“Complaint”). The dispute arises from uninsured/underinsured motorist (“UM/UIM”) coverage provisions in Safeway Insurance policies issued to Ullman and others similarly situated.

On May 3, 2012, Bailey struck the passenger side of Ullman's vehicle, injuring Ullman and totaling her vehicle; Bailey fled the scene, but a witness reported Bailey's license plate number to the police, who then arrested him at his home. See Complaint ¶¶ 12–17, at 13–14. Bailey was uninsured, see Complaint ¶ 27, at 15; Ullman carried liability coverage from Safeway Insurance for the vehicle in the accident and a second vehicle in the amounts of $25,000 per person, $50,000 per occurrence for bodily injury damages, and $25,000 for property damage, see Complaint ¶ 21, at 14. Ullman complains that Safeway Insurance did not adequately inform her of her options to purchase uninsured/underinsured motorist (“UM/UIM”) coverage, nor did it obtain a waiver of UM/UIM coverage equal to the limits of liability coverage or a waiver of stacking the UM/UIM coverage; Ullman asserts that Safeway Insurance instead improperly advised that stacking coverage is not available. See Complaint ¶¶ 22–26, at 14–15. Ullman made a claim for UM/UIM benefits under her Safeway Insurance policy, “requesting equalization of UM/UIM coverage in an amount equal to the limits of her liability coverage, including the stacking of the UM/UIM coverage for the two vehicles covered under the policy,” Complaint ¶ 28, at 4, but Safeway Insurance denies coverage, see Complaint ¶ 29, at 16.


Ullman alleges that Safeway Insurance improperly denied benefits under the UM/UIM insurance coverage to her and other similarly situated. See Complaint ¶ 1, at 12. She alleges, for herself and others similarly situated, eight insurance bad faith counts against Safeway Insurance, including: (i) violation of the New Mexico Unfair Trade Practices Act, N.M. Stat. Ann. §§ 57–12–1 to –22, see Complaint ¶¶ 48–52, at 21–22; (ii) violation of the New Mexico Trade Practices and Frauds Act, N.M. Stat. Ann. §§ 59A–16–1 to –30, see Complaint ¶¶ 53–57, at 23–24; (iii) denial of uninsured motorist benefits, see Complaint ¶¶ 58–60 at 24; (iv) breach of the implied covenant of good faith and fair dealing, see Complaint ¶¶ 61–63, at 24; (v) breach of contract, see Complaint ¶¶ 64–67, at 25; (vi) injunctive relief, see Complaint ¶¶ 68–70, at 25; (vii) declaratory judgment, see Complaint ¶¶ 71–74, at 25–26; (viii) and punitive damages, see id. ¶¶ 75–77, at 26. See also Notice of Removal to the United States District Court for the District of New Mexico ¶ 7, at 2, filed June 27, 2013 (Doc. 1)(“Notice of Removal”). Ullman also alleges three personal injury counts against Bailey and Safeway Insurance, including: (i) negligence, see Complaint ¶¶ 78–83, at 28–29; (ii) negligence per se, see Complaint ¶¶ 84–98, at 29–31; and (iii) punitive damages, see id. ¶¶ 99–103, at 31. See also Notice of Removal ¶ 8, at 2. Ullman asserts that Safeway Insurance “is liable for damages recovered 1 by Plaintiff Ullman against Defendant Bailey, an uninsured driver, pursuant to Plaintiff Ullman's UM/UIM coverage under her policy of insurance with Safeway.” Complaint ¶ 83, at 29. Accord id. at ¶¶ 98, 103, at 31 (same).

Safeway Insurance removed the case to federal court based on diversity jurisdiction: Ullman is a New Mexico citizen, and Safeway Insurance is incorporated in Illinois with its principal place of business in Illinois. See Notice of Removal ¶ 2, at 1; id. ¶ 4, at 2. Safeway Insurance does not admit that Ullman and the class may recover any specific amount, but contends that it has a good-faith basis to assert that the amount in controversy exceeds the jurisdictional minimum, because the Complaint prays for general, punitive, and treble damages, and stacked coverage of the reformed policies, and because “the cost of reforming policies to liability limits for the entire class would far exceed $75,000, as would the administrative costs that Defendant Safeway would have to bear.” Notice of Removal ¶ 25, at 8. Safeway Insurance asserts that it asked Ullman to “stipulate, on behalf of herself and others similarly situated,” that she would not claim more than $75,000.00 in damages, but she refused to stipulate to that fact.2 Notice of Removal ¶ 26, at 8.

Safeway Insurance argues that Ullman cannot state a claim against it for negligence; it says it is liable to Ullman for her personal injuries “through a contractual basis and only if the Court finds that Plaintiff did not properly reject UM/UIM coverage.” Notice of Removal ¶ 17, at 4. Safeway Insurance maintains that it does not have a duty to indemnify Bailey and was not responsible for Bailey's actions while he drove the vehicle; instead, Safeway Insurance argues that it is in privity with Ullman to bring claims against Bailey pursuant to the insurance policy, and that Ullman must preserve and protect its “right to subrogate” against Bailey. Notice of Removal ¶ 17, at 4–5.

Bailey was a New Mexico citizen.3See Notice of Removal ¶ 15, at 3. Safeway Insurance argues that Ullman fraudulently joined and procedurally misjoined Bailey to defeat diversity jurisdiction, and, thus, that the Court should ignore Bailey's citizenship. See Notice of Removal ¶ 22, at 6–7. Safeway Insurance argues that a party is fraudulently joined when “the plaintiff has not or cannot state a claim for relief against that party or does not intend to secure a judgment against that particular defendant,” Notice of Removal ¶ 16, at 4 (citing 14B C. Wright, A. Miller, E. Cooper, & J. Steinman, Federal Practice and Procedure, § 3723, at 795–96 4 (4th ed., 2009)); in Safeway Insurance's view, Ullman is seeking damages from it rather than from Bailey for Bailey's negligence, and, thus, Ullman's claims against Bailey are a sham, see Notice of Removal ¶ 18, at 5. Safeway Insurances contends that “there is no basis” for Ullman to recover from Bailey and that Ullman “seeks to recover fully from Defendant Safeway by reforming the Safeway policy to include UM/UIM coverage.” Notice of Removal ¶ 18, at 5. Safeway Insurance argues that Ullman will not likely recover from Bailey, because he passed away sometime after the accident: “While Plaintiff may have a negligence claim against Defendant Bailey and/or his estate, it is virtually impossible that Plaintiff would recover damages from the estate of Defendant Bailey.” Notice of Removal ¶ 19, at 5. Safeway Insurance argues that the other putative class members do not have personal injury claims against Bailey, and, thus, that the class does not share common questions of law or fact, further evincing that Ullman's claims against Bailey are fraudulent and a sham. See Notice of Removal ¶ 20, at 5–6.

Safeway Insurance further asserts that Ullman misjoined Bailey under rule 20(a)(2) of the Federal Rules of Civil Procedure, because Ullman's claims against Safeway Insurance “require different questions of law and fact[ ] than the questions of law and fact required for Plaintiff's negligence claims against Bailey,” and arise out of different transactions or occurrences. Notice of Removal ¶¶ 22–24, at 6–7. Safeway Insurance asserts that, although the Court may find that it has a duty to provide uninsured motorist coverage, it did not cause the car accident, and it has no relationship with Bailey that would require it “to indemnify, subrogate to, or be in privity with Defendant Bailey”; thus, the insurance bad faith claims against it “require different questions of law and fact, than the questions of law and fact required for Plaintiff's negligence claims against Bailey.” Notice of...

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