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WM Recycle America LLC v. Great Divide Insurance Co.

United States District Court, D. Maryland

July 26, 2018

WM Recycle America LLC, et al.
v.
Great Divide Insurance Company, et al

          Catherine C. Blake United States District Judge

         Memorandum

         WM Recycle America, and its fellow plaintiffs, [1] sued the defendants Great Divide Insurance Company, Nautilus Insurance Company, Am Wins Program Underwriters, Inc., and Martens-Johnson Insurance Agency in the Circuit Court for Baltimore City for breach of contract and for declaratory judgments as to the scope of its insurance coverage. Certain defendants removed the case to this court, and the plaintiffs filed a motion to remand. For the reasons stated below, the court finds remand appropriate.[2]

         Background

         This suit springs from another: In June 2017, [3] an employee of TAC Transport, LLC sued the same plaintiffs represented here for personal injuries suffered while working under the terms of a contract between TAC and WM Recycle America ("WM"). (Compl. ECF No. 2 at ¶¶ 15-18). WM sought refuge from its potential liability under the terms of its agreement with TAC, . claiming TAC was required to indemnify WM and to provide WM with certain insurance coverage. (Id. at ¶¶ 33-36). WM was denied insurance coverage, however, (id, at ¶¶ 54-56), and afterward filed suit in state court seeking declaratory judgments regarding the scope of its insurance coverage, and asserting claims for breach of contract. (ECF No. 2). Although not originally parties to the lawsuit, WM joined and served Am Wins Program Underwriters, Inc. on November 8, 2017, and Martens-Johnson Insurance Agency on December 8, 2017. Notice of removal to federal court was filed by Great Divide and Nautilus on December 15, 2017. (ECF No. 1).[4] The plaintiffs now move to remand the case to state court. (ECF No. 23).

         Analysis

         WM argues that the court should remand this case to state court because, among other things, the defendants have not complied with statutory removal requirements. Although the defendants concede the accuracy of WM's charge, they nevertheless claim that removal was proper because Martens-Johnson and AmWins were fraudulently joined in the suit. Because the defendants failed to meet procedural requirements for removal, and because they misapply the doctrine of fraudulent joinder, the plaintiffs' motion for remand will be granted.

         I.

         A defendant defending suit in state court may remove its case to federal court by filing "in the district court of the United States for the district and division within which such action is pending a notice of removal. .. containing a short and plain statement of the grounds for removal." 28 U.S.C. § 1446(a). A defendant must remove a case "within 30 days after" receiving the plaintiffs pleadings or "within 30 days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter." § 1446(b)(1). When a case removed under section 1441(a) includes more than one defendant, "all defendants who have been properly joined and served must join in or consent to the removal of the action." § 1446(b)(2)(A). And the defendants must do so "independently or by unambiguously joining in or consenting to another defendant's notice, within the thirty-day period following service of process." Costley v. Service Protection Advisors, LLC, 887 F.Supp.2d 657, 658 (D. Md. 2012) (citation omitted).[5] If this rule is not observed, if not every defendant consents to removal, the case was improperly removed and this court must order remand. See Moore v. Svehlak, 2013 WL 3683838, at * 19 (D. Md. July 11, 2013); see also Sclafani v. Insurance Co. of North America, 671 F.Supp. 364, 366 (D. Md. 1987) (ordering remand after finding the defendant had not complied with statutory removal requirements).[6]

         No doubt, the defendants have not complied with the procedural requirements for removal. AmWin and Martens-Johnson were served on November 8, 2017, and December 8, 2017, respectively, giving them until December 2017 at the earliest, and January 2018, at the latest, to consent to removal. But neither consented to removal, either independently, or by unambiguously joining in their co-defendants' notice of removal. In fact, the only notice of removal filed in this case makes the opposite plain: only "Defendants Great Divide Insurance Company and Nautilus Insurance Company" sought to "remove the above-entitled action ... to the United States District Court for the District of Maryland." (ECF No. 1). The time to join or consent to removal has come and passed without Am Wins and Martens-Johnson doing either. Section 1446(b)(2)(A) has thus been violated.

         II.

         The defendant has no quibble with the court's analysis up until its conclusion. As Great Divide and Nautilus would have it, remand is not appropriate notwithstanding the violation of section 1446(b)(2)(A) because Am Wins and Martens-Johnson were fraudulently joined by the plaintiffs.

         Fraudulent joinder is a judicially created doctrine that permits a court to retain jurisdiction over a removed case notwithstanding the joinder of a non-diverse party if: "(1) [t]here is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court; or (2)... there has been outright fraud in the plaintiffs pleading of jurisdictional facts." See Mayes v. Rapoport, 198 F.3d 457, 461, 464 (4th Cir. 1999) (citation omitted, numeration added, and emphasis in the original).

         By its terms, however, the doctrine of fraudulent joinder does not apply to the joinder of defendants who would not affect the court's jurisdiction over the case. That is because the joinder of a diverse defendant does not allow a plaintiff to manufacture the jurisdictional problems the doctrine exists to prevent. See id, at 461. Rather, the doctrine applies where an instate defendant is fraudulently joined to defeat diversity jurisdiction in the federal court. Every single published Fourth Circuit case the court has found applying the doctrine is consistent with this understanding. See, e.g., Johnson v. American Towers, LLC, 781 F.3d 693, 704 (4th Cir. 2015) (noting that under the doctrine of fraudulent joinder "naming non-diverse defendants does not defeat diversity jurisdiction") (emphasis added); Weidman v. Exxon Mobil Corp., 776 F.3d 214, 218 (4th Cir. 2015) (same); Barlow v. Colgate Palmolive Co.,772 F.3d 1001, 1004 n.2 (4th Cir. 2014) (same); ED. ex rel. Darcy v. Pfizer, Inc., 722 F.3d 574, 578 (4th Cir. 2013); Hartley v. CSX Transp., Inc.,187 ...


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