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Ake v. Central United Life Insurance Co.

United States District Court, W.D. Oklahoma

July 21, 2017

REBECCA L. AKE, Plaintiff,
CENTRAL UNITED LIFE INSURANCE CO., a foreign insurance company, and CAROL GATLIN, an Oklahoma resident, Defendants.



         Before the Court is Plaintiff's Motion to Remand. Doc. 5. Defendant has responded. Doc. 6. For the reasons that follow, Plaintiff's Motion is GRANTED.

         I. Background

         Plaintiff Rebecca Ake filed this action against Defendants in the District Court of Oklahoma County, Oklahoma, on November 2, 2016. Nearly a decade before that, in July 1997, Defendant Central United Life Insurance Company (“Central United”) issued an insurance policy to Ms. Ake. The policy provided for benefits if Ms. Ake or her spouse contracted cancer. When Ms. Ake's spouse contracted cancer, Central United refused to pay benefits under the policy. In response, Ms. Ake sued Central United for breach of contract and the duty to deal in good faith. She also has sued Central United's agent, Defendant Carol Gatlin, whom Ms. Ake alleges made fraudulent or at least negligent representations about the policy.

         Citing diversity jurisdiction per 28 U.S.C. § 1332, Central United removed this action under 28 U.S.C. § 1441 on May 9, 2017. Ms. Ake moves to remand, arguing that Defendants have not established the requisite amount in controversy and that Defendant Carol Gatlin-an Oklahoma citizen like Ms. Ake-spoils complete diversity. Because the Court agrees that Ms. Gatlin's presence in this case destroys jurisdiction under 28 U.S.C. § 1332, it will remand the case to state court.

         II. Diversity Jurisdiction under § 1332(a)

         “The district courts of the United States . . . are courts of limited jurisdiction.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005) (quotes omitted). Diversity jurisdiction under 28 U.S.C. § 1332(a) requires that complete diversity exist between plaintiffs and defendants and that the amount in controversy exceeds $75, 000, exclusive of interests and costs. Section § 1332(a) demands that the citizenship of all defendants must be different from the citizenship of all plaintiffs. McPhail v. Deere & Co., 529 F.3d 947, 951 (10th Cir. 2008). “For purposes of diversity jurisdiction, a person is a citizen of a state if the person is domiciled in that state . . . [a]nd a person acquires domicile in a state when the person resides there and intends to remain there indefinitely.” Middleton v. Stephenson, 749 F.3d 1197, 1200 (10th Cir. 2014). In regard to § 1332(a)'s amount in controversy requirement, that amount is simply “an estimate of the amount that will be put at issue in the course of the litigation.” McPhail, 529 F.3d at 956 (10th Cir. 2008). It is the party invoking diversity jurisdiction, in this case Central United, who has the “burden of proving [diversity jurisdiction] by a preponderance of the evidence.” Middleton v. Stephenson, 749 F.3d 1197, 1200 (10th Cir. 2014). The removing party may rely on, among other things, affidavits, interrogatories or admissions in state court, and calculations from the complaint's allegations. McPhail, 529 F.3d at 954.

         A. Amount in Controversy

         So the first question, then, is whether Defendant Central United has established that this dispute meets § 1332(a)'s amount in controversy requirement-a sum greater than $75, 000-by a preponderance of the evidence. Id. “The general federal rule has long been to decide what the amount in controversy is from the complaint itself, unless it appears or is in some way shown that the amount stated in the complaint is not claimed ‘in good faith'.” Marchese v. Mt. San Rafael Hosp., 24 Fed.Appx. 963, 964 (10th Cir. 2001) (citing Horton v. Liberty Mut. Ins. Co., 367 U.S. 348, 353 (1961)); see also St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (“[U]nless the law gives a different rule, the sum deemed by the plaintiff controls if apparently made in good faith.”). Once the party asserting federal jurisdiction has done that, the “St. Paul Mercury standard comes to the fore”-that is, “the case stays in federal court unless it is legally certain that the controversy is worth less than the jurisdictional minimum.” McPhail, 529 F.3d at 954. In a sense, then, the burden shifts to the party seeking remand, who must then prove to a legal certainty that the amount in controversy is less than $75, 000.

         Here, the amount in controversy requirement is clearly met: Ms. Ake's Petition seeks “judgment against the Defendant or Defendants in a sum in excess of Seventy-Five Thousand Dollars . . . .” Doc. 1, Ex. 1, at 3. A “[p]laintiff cannot defeat jurisdiction by backtracking on [her] allegations.” Chen v. Dillard Store Servs., Inc., 579 F.Appx. 618, 621 (10th Cir. 2014), which is precisely what Ms. Ake is attempting to do here by asserting, for the first time, that the amount in controversy requirement is not satisfied. Her Petition says the opposite. This is not to say that a party moving to remand could never argue that the amount sought in the Petition does not fairly represent the amount in controversy. If that were the case, the party would have the burden of proving to a legal certainty that the amount in dispute is $75, 000 or less. Ms. Ake, though, has not done that, and her conclusory allegations fail to carry her burden. Nor is the Court convinced otherwise by Johnson v. Wal-Mart Stores, Inc., 953 F.Supp. 351 (N.D. Okla. 1995), which Ms. Ake cites for the idea that when the amount sought is uncertain, Defendant will not have established the requisite amount in controversy. Ms. Ake, however, omits that in Johnson the plaintiff's petition sought damages “in excess of $10, 000”-plainly less than § 1332(a)'s jurisdictional threshold. Id. at 353.

         B. Diversity of Citizenship

         The issue of diversity between the parties is a tad trickier. Again, under 28 U.S.C. § 1332(a) the citizenship of all defendants must be different from the citizenship of all plaintiffs. See, e.g., McPhail, 529 F.3d at 951 (10th Cir. 2008). No one is disputing the alleged citizenship of the named parties. Plaintiff Ake is a citizen of Oklahoma. Defendant Central United is a citizen of Arkansas (its state of incorporation) and Texas (its principal place of business). What the parties dispute is whether Defendant Carol Gatlin, a citizen of Oklahoma, spoils diversity because she has not been properly served.

         Central United's theory is this: once a plaintiff has filed a petition in Oklahoma state court, she has 180 days to serve a defendant with process. Okla. Stat. tit. 12, § 2004(I).[1] If she fails to serve “and the plaintiff cannot show good cause why such service was not made within that period, the action shall be deemed dismissed as to that defendant without prejudice.” Id. Central United Argues that the 180-day period for Ms. Ake to serve Gatlin with summons and a copy of the Petition lapsed on May 1, 2017. Her failure to serve Gatlin within the six-month period thus shows that Ms. Ake fraudulently joined Ms. Gatlin for the sole purpose of spoiling diversity jurisdiction. And because a “defendant's right of removal cannot be defeated by a fraudulent joinder[, ]”, see, e.g., Estes v. Airco Serv., Inc., No. 11-CV-776-GKF-FHM, 2012 WL 1899839, at * 1 (N.D. Okla. May 24, 2012), this case has been properly removed to federal court.

         Central United's argument tees up an uncomplicated question for the Court: does an unserved defendant's citizenship count for diversity purposes? Nearly every court has said yes. That is, even if a named defendant has not been properly served, that defendant can still spoil diversity. “[T]he law is clear that the citizenship of all named defendants, whether served with process or not, must be considered in determining whether complete diversity exists, thereby providing a jurisdictional basis for removal under 28 U.S.C. § 1441(a).” Ott v. Consol. Freightways Corp. of Delaware, 213 F.Supp.2d 662, 664 (S.D.Miss. 2002). This rule comes from blackletter law requiring a court to “examine the face of the complaint to determine whether a party has adequately presented facts sufficient to establish diversity jurisdiction.” Gaines v. Ski Apache, 8 F.3d 726, 729 (10th Cir. 1993). It ...

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