Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-4_05-cv-04045/USCOURTS-arwd-4_05-cv-04045-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1331 Fed. Question: Insurance Contract

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AO72A

(Rev. 8/82)

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

TEXARKANA DIVISION

EVELYN J. CHIVERS, HAVEN and LINDA 

TYSON, MARY LYNN FREEMAN, JAMES 

JOINER, DANIEL JOE SHERROUSE, BILL 

FEELY, DALE DROSTE, JARL CARTWRIGHT, 

BRAD SCHOONOVER, JOHN and GLORIA 

LANG, PHILLIP and CYNDI ALEXANDER,

BERNE FRANCIS, DIANE THORNTON, TONY 

THOMPSON, C.T. HINSHAW and ANTHONY 

BEARDEN, Individually and as Class 

Representatives of all Similarly 

Situated Persons PLAINTIFFS

V. Civil No. 05-4045

STATE FARM FIRE AND CASUALTY COMPANY,

STATE FARM LLOYDS, STATE FARM GENERAL

INSURANCE COMPANY, STATE FARM FIRE AND

CASUALTY, INC., FARM BUREAU MUTUAL 

INSURANCE COMPANY OF ARKANSAS, INC., 

FLORIDA FARM BUREAU CASUALTY INSURANCE

COMPANY, SOUTHERN FARM BUREAU CASUALTY

INSURANCE COMPANY, FOREMOST INSURANCE

COMPANY, FOREMOST PROPERTY AND CASUALTY

INSURANCE COMPANY, ALLSTATE COUNTY MUTUAL

INSURANCE COMPANY, ALLSTATE INDEMNITY

COMPANY, ALLSTATE INSURANCE COMPANY, 

ALLSTATE PROPERTY AND CASUALTY INSURANCE

COMPANY, ALLSTATE TEXAS LLOYD’S INC., 

ALLSTATE FIRE AND CASUALTY INSURANCE

COMPANY, FARMERS INSURANCE COMPANY, INC.,

FARMERS INSURANCE EXCHANGE, FARMERS GROUP,

INC., TEXAS FARMERS INSURANCE COMPANY,

NATIONWIDE GENERAL INSURANCE COMPANY,

NATIONWIDE LLOYDS, NATIONWIDE MUTUAL

FIRE INSURANCE COMPANY, NATIONWIDE 

MUTUAL INSURANCE COMPANY, NATIONWIDE

PROPERTY AND CASUALTY INSURANCE COMPANY,

NATIONWIDE INSURANCE COMPANY OF AMERICA,

CHUBB LLOYDS INSURANCE COMPANY OF TEXAS,

CHUBB INDEMNITY INSURANCE COMPANY, CHUBB

CUSTOM INSURANCE COMPANY and CHUBB NATIONAL

INSURANCE COMPANY DEFENDANTS

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The Nationwide Defendants join and adopt in their entirety

the Responses of the State Farm and Allstate Defendants.

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MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiffs’ Motion to Remand (Docs.

62-63). Separate Defendants Allstate Texas Lloyds, Inc.,

State Farm General Insurance, State Farm Lloyds, State Farm,

Nationwide Insurance Company of America, Nationwide Mutual,

Nationwide Mutual Fire, Nationwide Lloyds, Nationwide General

have filed responses (Docs. 69-71, 76, 80-81, 83, 85) and 1

Plaintiffs have replied and supplemented their Motion (Docs.

78, 82, 84).

I. BACKGROUND

Plaintiffs filed this putative class action complaint in

the Circuit Court of Miller County, Arkansas on September 8,

2004, alleging claims for civil conspiracy, unjust enrichment,

fraud and constructive fraud on behalf of themselves and a

class consisting of residents of Texas and Arkansas who “were

customers of Defendants, who received payments, directly or

indirectly, from any Defendant for physical loss or damage to

their dwelling...at any time between September 6, 1996 and the

date of class certification.” (Doc. 1, Ex. 1, ¶39).

Plaintiffs allege that Defendants improperly profited by

failing to pay general contractors’ profit and overhead (GCOP)

when paying claims for loss or damage to real property. (Doc.

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State Farm Defendants and the remaining Allstate

defendants join in Allstate Texas Lloyd’s Joinder and

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1, Ex. 1, ¶1). GCOP is the fee paid for the services of a

general contractor when one is reasonably necessary to repair

or replace a property loss. (Doc. 1, Ex. 1, ¶2). 

In the complaint, Plaintiffs allege that the amount in

controversy for each Plaintiff is less than $75,000 and

stipulate to seek less than $75,000 total recovery for each

Plaintiff or Class Member. (Doc. 1, Ex. 1, ¶38). Plaintiffs’

Third Amended Complaint was filed on June 3, 2005. (Doc. 1,

Ex. 1). Plaintiffs seek both monetary damages and injunctive

relief against Defendants.

On June 20, 2005, Separate Defendants State Farm Fire and

Casualty Company, State Farm General Insurance Company, and

State Farm Lloyds (the “State Farm Defendants”) removed the

action from state court asserting the existence of exclusive

federal question jurisdiction. (Doc. 1). The State Farm

Defendants filed supplements to their notice of removal on

July 7 & 15, 2005. (Docs. 52, 56). On June 20, 2005,

Separate Defendant Allstate Texas Lloyd’s filed a memorandum,

and later a supplement to the memorandum, joining in State

Farm Defendants’ notice of removal and further asserting the

existence of diversity jurisdiction under 28 U.S.C. § 1332 as

a basis for removal. (Docs. 3, 7) . 

2

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Memorandum Regarding Further Grounds for Removal Based on

Diversity. 

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In the Notice of Removal, State Farm Defendants contend

that exclusive federal question jurisdiction exists as

Plaintiffs are pursuing flood claims governed by the National

Flood Insurance Program (NFIP), 42 U.S.C. § 4011-4128. State

Farm Defendants further assert their removal is timely as it

was made within thirty days of the case becoming removable.

State Farm Defendants contend they first became aware that

Plaintiffs were making flood claims upon receipt of

Plaintiffs’ discovery responses on May 24, 2005 and the filing

of Plaintiffs’ Third Amended Complaint on June 3, 2005.

Finally State Farm Defendants contend that unanimous consent

was not required as some defendants were fraudulently joined.

The Allstate Defendants contend that diversity jurisdiction

exists as many defendants were fraudulently joined solely for

the purpose of defeating diversity. 

Plaintiffs maintain that this Court lacks subject matter

jurisdiction as complete diversity among the parties does not

exist and that federal question jurisdiction does not exist as

Plaintiffs are not pursuing flood claims pursuant to the NFIP.

The Plaintiffs also contend Defendants cannot show fraudulent

joinder, and the amount in controversy does not exceed

$75,000. Plaintiffs further contend this action should be

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remanded as the State Farm and Allstate Defendants failed to

comply with the procedural requirements of 28 U.S.C. § 1446

when removing the case.

II. DISCUSSION 

Currently before the Court is Plaintiffs’ motion to

remand. (Docs. 62-63). The party seeking removal or opposing

remand has the burden of establishing federal jurisdiction,

and all doubts on that issue are to be resolved in favor of

remand. Transit Casualty Co. v. Certain Underwriters at

Lloyd's of London, 119 F.3d 619, 625 (8th Cir. 1997). As a

court of limited jurisdiction, a federal district court has a

duty to assure itself that the threshold requirement of

subject matter jurisdiction has been met in every case.

Bradley v. American Postal Workers Union, AFL-CIO, 962 F.2d

800 (8th Cir. 1992). A defendant in state court may remove

the case to federal court if the defendant can demonstrate

that the federal court has original jurisdiction over the

case. 28 U.S.C. § 1441(a). This requirement can be met in

one of two ways: (1) case in question involves a federal

question, (2) diversity jurisdiction exists. In a case where

the plaintiff's pleadings do not allege a federal question

"the matter in controversy [must exceed] the sum or value of

$75,000, exclusive of interest and costs, and [must involve]

citizens of different states." 28 U.S.C. § 1332(a). In the

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present case, Plaintiffs dispute the existence of both types

of federal jurisdiction. 

A. Exclusive Federal Question Jurisdiction

Removal based on federal question jurisdiction is

generally governed by the “well-pleaded complaint” rule, which

provides that federal jurisdiction exists only where a federal

question is presented on the face of the plaintiff’s properly

pleaded complaint. Krispin v. The May Department Stores, Co.,

218 F.3d 919 (8th Cir. 2000). 

In the Notice of Removal, State Farm Defendants contend

that the Third Amended Complaint asserts claims under the

Standard Flood Insurance Policies (SFIPs) issued in accordance

with the NFIP, and therefore, the claims must be adjudicated

in a federal forum. The State Farm Defendants rely on two

paragraphs in Plaintiffs’ Third Amended Complaint (Doc. 63,

Ex. F, ¶¶ 75 & 78) and Plaintiffs’ responses to Defendant

State Farm Fire and Casualty Company’s Interrogatories (Doc.

1, Ex. 2, p. 28) to support their contention. 

 In the motion to remand, Plaintiffs contend that federal

question jurisdiction under the NFIP does not exist as

Plaintiffs have never filed federal flood insurance claims

under the NFIP with any Defendants; Defendants have not issued

SFIPs to any named Plaintiff; Plaintiffs’ dwellings are not

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located in 100-year flood plains where SFIPs would be

mandatory and Plaintiffs have only asserted state law claims

related to homeowners’ policies. Plaintiffs allege their

claims arise under issued homeowners’ policies, not SFIPs.

State Farm Defendants contend that the Third Amended

Complaint and Responses to Defendant State Farm Fire and

Casualty Company’s Interrogatories fall within the purview of

exclusive federal jurisdiction as Plaintiffs’ allege flood

claims pursuant to the NFIP. In the Third Amended Complaint,

Plaintiffs allege that Defendants “rely on third-par[t]y and

independent adjusters to adjust claims, especially claims

arising from disaster events such as hurricanes, tornados[,]

ice storms, and floods.” (Doc. 1, Ex. 1, ¶78). As part of

the conspiracy allegations, Plaintiffs also allege that none

of the Defendants ever marketed the GCOP benefit to its

customers “even after a major destructive event such as a

hurricane or flood...”. Id. at ¶ 75. In response to

Interrogatory H-10, Plaintiffs state “that no cause of loss or

type of property damage is excluded under Plaintiffs’ current

class definition. (Doc. 1, Ex. 2, p. 28). 

Any reference to “floods” by Plaintiffs in the Third

Amended Complaint and discovery responses is merely

superfluous and has little to do with the crux of Plaintiffs’

claims pursuant to their homeowners’ policies. Additionally,

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the fact that some putative class members may have been issued

SFIPs by Defendants is insufficient to establish federal

question jurisdiction. The State Farm Defendants have the

burden of proving that Plaintiffs’ claims implicate a federal

question, and they have failed to meet this burden.

As the Court concludes that no federal question exists,

it is not necessary to address Plaintiffs’ arguments that the

Notice of Removal was untimely or that the removal was

procedurally flawed.

B. Diversity of Citizenship

District courts have original jurisdiction over civil

actions where the parties are citizens of different states and

the amount in controversy exceeds $75,000. 28 U.S.C. §

1332(a)(1). Jurisdiction under § 1332 requires complete

diversity of citizenship among all of the parties. Capitol

Indemnity Corp. v. Russellville Steel Co., Inc., 367 F.3d 831

(8th Cir. 2004). Diversity jurisdiction exists only when all

parties on one side of the litigation are of different

citizenship from all of those on the other side. Id. 

Allstate contends that the only Plaintiff alleging a

claim against any of the Allstate defendants is Bill Feely who

was issued a homeowner’s policy by Allstate Texas Lloyd’s and

that Plaintiffs have no factual basis to support a conspiracy

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between the defendants sufficient to satisfy the joinder

requirements under Rule 20 of the Federal Rules of Civil

Procedure. Allstate requests the Court to ignore the

citizenship of all other named defendants based upon the

doctrine of fraudulent joinder. Allstate Defendants do not

dispute that complete diversity does not exist between and

among all of the named parties but contend that only the

citizenship of Plaintiff Feely and Allstate Texas Lloyd’s

should be considered.

Title 28 U.S.C. § 1447(c) mandates that a case be

remanded to the state court from which it was removed whenever

the district court concludes that subject matter jurisdiction,

which is based on complete diversity, is nonexistent. Filla

v. Norfolk So. Ry. Co. 336 F.3d 806, 809 (8th Cir. 2003).

Under the doctrine of fraudulent joinder, joinder of a party

that is designed solely to deprive federal courts of

jurisdiction is deemed fraudulent and does not prevent

removal. Anderson v. Home Ins. Co., 724 F.2d 82, 84 (8th Cir.

1983). Joinder is fraudulent and removal is proper when there

exists no reasonable basis in fact and law to support a claim

against the resident defendant. See Wiles v. Capitol Indem.

Corp., 280 F.3d 868 (8th Cir. 2002); see also Filla, 336 F.3d

at 810 (noting if there is a colorable cause of action, then

there is no fraudulent joinder). In determining if nondiverse

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parties have been fraudulently joined to avoid removal,

district courts should resolve all facts and ambiguities in

current substantive law in the plaintiff’s favor. Filla, 336

F.3d at 811. In situations where the sufficiency of the

complaint against the non-diverse defendant is questionable,

the better practice is for the federal court not to decide the

doubtful question in connection with a motion to remand but

simply to remand the case and leave the question for the state

courts to decide. Id. The Court must remand if “there is

even a possibility” that plaintiff has stated a colorable

cause of action against the in-state defendants. See In re

Business Men’s Assurance Co. of Am., 992 F.2d 181 (8th Cir.

1993)(all doubts should be resolved in favor of remand).

Under Arkansas law, a civil conspiracy is a combination

of two or more persons to accomplish a purpose that is

unlawful or oppressive or to accomplish some purpose, not in

itself unlawful, oppressive, or immoral, by unlawful,

oppressive or immoral means, to the injury of another. Mason

v. Funderburk, 446 S.W.2d 543 (Ark. 1969)(citation omitted).

A conspiracy may be shown by direct evidence of an actual

agreement or understanding between conspirators, but it may

also be shown by circumstantial evidence. Id. (citation

omitted). It also may be inferred from actions of alleged

conspirators, if it can be shown that they pursued the same

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unlawful object, each doing a part, so that their acts,

although apparently independent, are in fact connected and

cooperative, indicating a closeness of personal association

and a concurrence of sentiment. Id. (citation omitted).

Allstate Defendants contend Plaintiffs’ conspiracy

allegations are insufficient to create joint and several

liability among Defendants, and the only citizenship that

should be considered for jurisdictional purposes is that of

Plaintiff Feely and Allstate Texas Lloyd’s. Allstate

Defendants also argue that Rule 20 prohibits Plaintiffs’

joinder of all Defendants as their claims do not arise out of

the same transaction, occurrence, or series of transactions or

occurrences.

Some of Plaintiffs’ allegations they contend support the

conspiracy claim are that Defendants had substantially uniform

policies and practices regarding GCOP, direct sharing of

information about policies and practices regarding GCOP,

policies that Defendants would not disclose the GCOP scheme

nor compete on the basis of payment of GCOP, and an unwritten

agreement to commit fraud against their customers on the basis

of such non-disclosure policies. See Plaintiffs’ Third

Amended Complaint, Doc. 63, Ex. F, ¶¶ 67-68, 70. 

While the Court agrees that specific proof of Plaintiffs’

claim of civil conspiracy appears to be lacking at this stage

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of the litigation, we find that Plaintiffs have at the very

least stated a “colorable” claim of civil conspiracy against

Defendants. The Court finds no merit in Allstate’s claim of

fraudulent joinder. Accordingly, complete diversity does not

exist between the parties in this action, and the Court lacks

jurisdiction under § 1332(a)(1). Finally, as the Court

concludes the parties are not diverse, it is not necessary to

address the amount in controversy requirement or Plaintiffs’

contention that the removal was untimely, procedurally flawed

and in violation of an agreement by Allstate Defendants to

neither remove the case nor consent to removal of the case by

another Defendant.

III. ORDER

Based on the foregoing, the Court finds that no basis

exists for federal jurisdiction, and the entire action must be

remanded to state court. Accordingly, Plaintiffs’ motion to

remand (Doc. 62) is hereby GRANTED and this case is remanded

to the Circuit Court of Miller County. The remaining pending

motions (Docs. 8, 12, 14, 16, 18, 20, 22, 24, 26, 32, 34, 36,

38, 40, 42, 53, 65, 77 and 79) are DENIED AS MOOT.

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IT IS SO ORDERED this 5 day of January 2006. th

/s/ Robert T. Dawson

Honorable Robert T. Dawson

United States District Judge

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