JULY 2008 BAD FAITH CASES
MOTION TO REMAND COMPLAINT TO STATE COURT GRANTED WHERE AT LEAST ONE COLORABLE CLAIM EXISTED AGAINST NON-DIVERSE PARTIES (Middle District)
In Kenia v. Nationwide Mutual Insurance Company the insured initiated a complaint against the insurer, for among other things, bad faith relating to the processing of the insured’s claim for underinsured motorist benefits. Kenia alleged he was injured in a motor vehicle accident and named the insurer, an Ohio corporation with its principal place of business in Ohio, and several alleged claims representatives of the insurer, who were all residents of Pennsylvania. Kenia initiated the action by filing a complaint in the Court of Common Pleas of Luzerne County. The insurer then filed a notice of removal contending that the United States District Court for the Middle District of Pennsylvania had jurisdiction. Kenia then filed a motion to remand. A Magistrate Judge issued a report and recommendation that Kenia’s motion be granted because the complaint states colorable claims against the non diverse parties and therefore complete diversity jurisdiction does not exist.
If a non diverse party has been joined as a defendant a removing defendant may avoid remand only by demonstrating that the non diverse party was fraudulently joined. Joinder is fraudulent if there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant. However, 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 joinder must be found proper and the federal court must remand back to the state court.
Kenia argued that there are colorable claims against all the defendants, including the non-diverse claims representatives, and all were properly named in the action. The Insurer argued that the non-diverse parties were fraudulently joined to defeat federal diversity jurisdiction. The court found that the insurer did not satisfy its heavy burdent of showing that the non-diverse parties were fraudulently joined. Kenia’s complaint advanced at least one claim, the alleged violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, that is not wholly insubstantial or frivolous against the non-diverse parties. Therefore this court did not have diversity jurisdiction over this action and so the court granted Kenia’s motion to remand.
Date of Decision: January 25, 2008