SKIDMORE, Assignees

Plaintiffs, Civil Action No. 11-3970 (CCC)

V.

OPINION

NATIOIAL CONTINENTAL

INSURANCE COMPANY, et a!.

Defendants.

CECCHI, District Judge.

This matter comes before the Court on Defendant National Continental Insurance

Company’s objections to Magistrate Judge Joseph A. Dickson’s Report and Recommendation

regarding Plaintiffs’ motion to remand. The Court decides this matter without oral argument

pursuant to Rule 78 of the Federal Rules of Civil Procedure. For the reasons set forth below, the

Court adopts Judge Dickson’s November 17, 2011 Report and Recommendation, and grants

Plaintiffs’ motion to remand.

I. Factual and Procedural History

A detailed factual background of this case is set forth in Magistrate Judge Dickson’s

November 17, 2011 Report and Recommendation, and will not be repeated here, except where

necessary to provide context for this Court’s review of the same,

Plaintiffs commenced the instant action in Superior Court of New Jersey, Sussex County,

against National Continental Insurance Company (“NCIC”). Plaintiffs claim that NCIC acted in

bad faith by declining to settle an underlying personal injury claim for an amount within the

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Cheryl Campis, an employee for NCIC, as a Defendant, and asserted a claim of negligence

against her. On August 2, 2011, Plaintiffs moved to remand this action to the Superior Court of

New Jersey. Plaintiffs argue that this Court lacks subject matter jurisdiction. First, they assert

that complete diversity does not exist because Plaintiffs and Defendant Campis are all citizens of

New Jersey. (P1. Br. 4.) Second, Plaintiffs argue that diversity never existed between the parties

because this is a “direct action” against an insurance company, NCIC, and therefore, its

citizenship is the same as its insured, which in this case, is New Jersey. (P1. Br. 5.) In

Opposition to Plaintiffs’ motion, Defendants argue that Campis was fraudulently joined solely

for the purpose of defeating diversity. (Def. Opp’n. 8.)

By way of Report and Recommendation dated November 17, 2011, Magistrate Judge

Dickson recommended that this Court grant Plaintiffs’ motion to remand. Specifically, Judge

Dickson found that Campis was not joined fraudulently, stating that “Campis is not a gratuitous

party- her alleged personal involvement in the underlying matter is directly tied to Plaintiffs’

claims.” (Rep. & Rec. at 8.) Furthermore, Judge Dickson concluded that Plaintiffs’ claims

against Campis were not “wholly insubstantial or frivolous.” (Rep. & Rec. at 9.) Defendant

NCIC now objects to the Report and Recommendation, arguing that Ms. Campis was

fraudulently joined. Specifically, NCIC claims that Campis was not personally involved in any

of the events at issue, (Defendant’s Objection at 6), and that when an insurance carrier fails to

settle any underlying claims, the cause of action is one for breach of contract, not negligence,
a. Review of a Report and Recommendation

When a magistrate judge addresses motions that are considered “dispositive,” such as to

grant or deny a motion to dismiss, a magistrate judge submits a Report and Recommendation to

the district court. 28 U.S.C. § 636(b)(1)(A); Fed. R. civ. .72; L. Civ. R. 72.1(a)(2). The

district court may then “accept, reject or modify, in whole or in part, the findings or

recommendations made by the magistrate judge. The judge may also receive further evidence or

recommit the matter to the magistrate judge with instructions.” 28 u.s.c. § 636(b)(1)(C); see

also L. Civ. R. 72.1 (c)(2). Unlike an Opinion and Order issued by a magistrate judge, a Report

and Recommendation does not have force of law unless and until the district court enters an

order accepting or rejecting it. United Steelworkers ofAm. V. Ni Zinc Co., Inc., 828 F.2d 1001,

1005 (3d Cir. 1987).

Motions to remand to state court are dispositive motions. In re United States Heaithcare,

159 F.3d 142, 146 (3d Cir. 1998). With respect to dispositive motions, the district court must

make a de novo determination of those portions of the magistrate judge’s Report to which a

litigant has filed objections. 28 U.S.C. § 636(b)(1)(c); Fed. R. Civ. P. 72(b); L. Civ. R.

72. 1(c)(2); see State Farm Indem. v. Fornaro, 227 F. Supp. 2d 229, 231 (D.N.J. 2002).

b. Removal

Under 28 U.S.C § 1441 and 1446, a party may remove a civil action from state court to

federal court if the district court has original jurisdiction over the action and the party removing

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be complete diversity among the parties in that every plaintiff must be diverse from everydefendant. 28 U.S. § 1332(a).

“If at any time before final judgment it appears that the district court lacks subject matter

jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). The burden is on the removing

party to show the case belongs in federal court. Boyer v. Snap-on Tools Corp., 913 F.2d 108,

111 (3d Cir. 1990). Removal statutes should be “strictly construed against removal and all

doubts.. . resolved in favor ofremand.” Boyer, 913 F.2d at 111 (internal quotation omitted).

c. Fraudulent Joinder

In the Third Circuit, “[tjhe doctrine of fraudulent joinder represents an exception to the

requirement that removal be predicated solely upon complete diversity.” In re Briscoe, 448 F.3d

201, 215—16 (3d Cir. 2006). Federal courts are required to dismiss or remand suits in which any

party has been improperly or collusively joined solely to invoke federal diversity jurisdiction.

See 28 U.S.C. § 1359; Rover, 913 F.2d at 110. Thus, if a non-diverse party was fraudulently

joined, the court “can disregard, for jurisdictional purposes, the citizenship of non-diverse

defendants. assume jurisdiction over a case, dismiss the non-diverse defendants, and thereby

retain jurisdiction.” In re Briscoe, 448 F.3d at 215-16. Where a court finds that a non-diverse

party was not fraudulently joined, however, the court lacks subject matter jurisdiction and mustremand the case to state court. 28 U.S.C. § 1447.

“[J]oinder is fraudulent if there is no reasonable basis in fact or colorable ground

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preclude ultimate dismissal for failure to state a claim upon which relief may be granted. Batoff,

977 F.2d at 852; see In re Briscoe, 448 F.3d 201 (3d Cir. 2006). In order for Defendants to meet

their heavy burden, “they must show that there is no possibility that New Jersey law would

recognize any of the claims asserted against” Ms. Campis. Route 27, LLC v. Getty Petroleum

Marketing, Inc., Civ No. 10—3080, 2011 WL 1256618, at *4 (D.N.J. 2011).

III. Analysis

NCIC argues that Plaintiffs’ motion to remand should be denied because Ms. Campis, a

New Jersey state resident, was fraudulently joined for the sole purpose of defeating diversity and

that the claims against Campis are not “colorable.” (Def. Obj. at 3, 6.) NCIC first claims that

the Report and Recommendation misinterprets the holding in Wood v. New Jersey

Manufacturers Insurance Co., 206 N.J. 562 (2011), a case which dealt with the alleged “bad

faith” action of an insurance carrier that lead to the entry of a judgment against the insured in an

amount in excess of the liability policy limits. (Def. Obj. at 4.) NCIC argues that Wood “left

no doubt that such an action does not sound in tort liability.” (Def. Obj. at 4.) Furthermore,

NCIC asserts that “Wood says that if a carrier is to be held liable for failure to settle a claim

against a policyholder within the available liability policy limits, any such liability must rely on a

breach of contract theory.” (Def. Obj. at 5) (emphasis removed).

The Court disagrees with NCIC’s interpretation of Wood. The holding in Wood does not

close the door to all other causes of action that may arise under this scenario. In Wood, the court

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only asserted a claim of bad faith against NCIC, they have also asserted claims of negligence

against Campis. other John Doe defendants, and NCIC. As stated by Judge Dickson, “[ajithough

the gravamen of this cause of action may be the bad faith claim, it is not the only basis for

liability asserted by Plaintiffs.” (Rep. & Rec. at 7.) Under Wood, bad faith claims, such as those

asserted here, sound in contract law. However, that does not preclude other claims, such as

negligence claims, from going forward. Therefore, on this point, the Court agrees with Judge

Dickson that holding in Wood does not bar Plaintiffs from asserting other claims.

NCIC further claims that because Ms. Campis was an employee of NCIC at all times, she

was “acting under its direction” and was not personally involved in any ofthe events. (Def. Obj.

at 6.) As such, NCIC asserts that under the doctrine of respondeat superior, the negligence

claims against her should be rejected. (Def. Obj. at 6-7.) On this point, the Court again agrees

with Judge Dickson. As explained in the Report and Recommendation, Plaintiffs claim that Ms.

Campis, as the insurance adjuster, owed a duty of care to the Plaintiffs, that she breached such

duty, and that as a result of her breach, Plaintiffs were injured. (Rep. & Rec. at 8.) The

Plaintiffs’ allegations do not solely relate to NCIC’s rejection of the settlement offer. (Rep. &

Rec. at 8, n.2.) Whether or not Plaintiffs claims have merit is not for the Court to decide at this

time. In fact, “it is possible that a party is not fraudulently joined, but that the claim against that

party ultimately is dismissed for failure to state a claim upon which relief may be granted.”

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and the parties’ submissions, this Court hereby adopts Magistrate Judge Dickson’s Report and

Recommendation dated November 17, 2011, including the findings of fact and conclusions of

law, and thus grants Plaintiffs’ motion to remand.

An appropriate Order accompanies this Opinion.

I /

Dated:January 4, 2012

HON. CLAIRE C. CECCHI

United States District Judge

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