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Hines v. Mutual of Omaha Insurance Co.

United States District Court, W.D. Pennsylvania

May 20, 2015

DAVID HINES, Plaintiff,


MARK R. HORNAK, District Judge.

The question the Court must address is: in what court should this case be decided? The Defendants removed this action pursuant to the diversity of citizenship jurisdiction conferred by 28 U.S.C § 1332, even though one of the Defendants, John Hunter, was not a diverse party. The Defendants asserted in their Notice of Removal that Hunter was "fraudulently joined" by the Plaintiff and that removal was thus permissible under that limited exception to the complete diversity rule. The Plaintiff did not file (and has not filed) a motion to remand this action to state court, but this Court has an independent duty to ensure that it has subject matter jurisdiction. Having reviewed the Defendants' Notice of Removal and the applicable law related to fraudulent joinder, the Court concludes that it does not have subject matter jurisdiction and must therefore order that this action be remanded forthwith to the Court of Common Pleas of Allegheny County.


On December 31, 2014, Plaintiff David Hines filed an action in the Allegheny County Court of Common Pleas against Mutual of Omaha Insurance Company ("MOIC") and John Hunter. ECF No. 1-2. Hines is a citizen of Pennsylvania. ECF No. 1-2, at ¶ 1. MOIC is incorporated in Nebraska and its principal place of business is there also. ECF No. 1, at 2. Hunter, however, is a citizen of Pennsylvania. Id.

The Complaint alleges the following facts. Hines met with Hunter to fill out an application for disability insurance with MOIC. ECF 1-2, at ¶ 4. At the meeting, Hunter asked Hines questions, and Hines answered honestly. ECF 1-2, at ¶¶ 5-6. Hunter then used Hines's statements to fill out an "Insured's Statement for Disability Benefits" and had Hines sign the statement. ECF 1-2, at ¶¶ 7-9. Hines started making monthly premium payments of $87.98 on September 7, 2013. ECF 1-2, at ¶ 10-11. On November 19, 2013, Hines suffered an injury that caused him to be disabled. ECF 1-2, at ¶¶ 12-13. Hines filed for disability benefits with MOIC but was denied benefits. ECF 1-2, at ¶¶ 14-15. MOIC cited two reasons as grounds for its denial of benefits: (1) based on medical records it had obtained, MOIC concluded that Hines's application was not correct because he was treated from February 2011 through September 2012 for severe arthritis of Plaintiff's knees; and (2) Hines's actual 2013 income was less than his stated 2013 income of $55, 400.00. ECF No. 1-2, at ¶ 15.

Based on those facts, the Complaint asserted two causes of action against the Defendants: breach of contract and insurance bad faith. For the breach of contract claim, Hines alleges that "[t]he parties entered into an agreement wherein Plaintiff agreed to pay premiums and upon receipt of those premiums, Defendants were to provide disability insurance to the Plaintiff should Plaintiff become disabled" and that "Defendant breached that agreement by failing to provide disability payments as per the agreement." ECF No. 1-2, at ¶¶ 20-21. The bad faith claim alleges that MOIC breached an implied covenant of good faith and fair dealing by refusing to pay disability benefits without a reasonable basis for that refusal. ECF No. 1-2, at ¶¶ 25-29.

Defendants removed the case to this Court on February 23, 2015, invoking this Court's jurisdiction based on diversity of citizenship under 28 U.S.C. § 1332. ECF No. 1. Defendants argued that Hines had fraudulently joined Hunter as a Defendant, specifically asserting that Hines failed to plead a cause of action against Hunter and that Hines only included Hunter in the Complaint to destroy diversity. ECF No. 1, at ¶¶ 9-23. Further, Defendants said that the amount in controversy was more than $75, 000. ECF No. 1, at ¶¶ 27-34. Hines did not file a motion to remand.[1]


"Remand to state court is required if at any time before final judgment it appears that the district court lacks subject matter jurisdiction.'" Hoffman v. Nutraceutical Corp., 563 F.Appx. 183, 185 (3d Cir. 2014) (quoting 28 U.S.C. § 1447(c)) (alteration omitted). Moreover, "the removal statute should be strictly construed and all doubts should be resolved in favor of remand." Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985). "The defendant's right to remove is to be determined according to the plaintiffs' pleading at the time of the petition for removal, and it is the defendant's burden to show the existence of federal jurisdiction." Id. (citing Pullman Co. v. Jenkins, 305 U.S. 534, 537, 540 (1939)). "[B]ecause subject matter jurisdiction is non-waivable, courts have an independent obligation to satisfy themselves of jurisdiction if it is in doubt, " and a "court can raise sua sponte subject-matter jurisdiction concerns." Nesbit v. Gears Unlimited, Inc., 347 F.3d 72, 76-77 (3d Cir. 2003).


A. Fraudulent Joinder

A defendant may remove a civil action from state court if the case could have originally been brought in federal court. 28 U.S.C. § 1441(a). "For a removal predicated upon diversity of citizenship, a proper exercise of federal jurisdiction requires satisfaction of the amount in controversy requirement as well as complete diversity between the parties, that is, every plaintiff must be of diverse state citizenship from every defendant." In re Briscoe, 448 F.3d 201, 215 (3d Cir. 2006). "The doctrine of fraudulent joinder represents an exception to the requirement that removal be predicated solely upon complete diversity." Id. at 215-16. "Joinder is fraudulent where there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendants or seek a joint judgment." Brown v. Jevic, 575 F.3d 322, 326 (3d Cir. 2009) (quoting In re Briscoe, 448 F.3d at 216).

This Court has stated in the past that fraudulent joinder may be found to have occurred "when a party is joined as a defendant in good faith (or at least not in bad faith), but as a matter of law, based on the facts alleged, there is no basis for the assessment of liability against such joined defendant." Rice v. Chesapeake Energy Corp., No. 12-00392, 2012 WL 3144318, at *1 (W.D. Pa. Aug. 1, 2012). In cases removed on the basis of fraudulent joinder, "the removing party carries a heavy burden of persuasion in making this showing." In re Briscoe, 448 F.3d at 217 (quoting Batoff v. State Farm Ins. Co., 977 F.2d 848 (3d Cir.1992)). As our Court of Appeals has explained:

If there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that joinder ...

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