United States District Court, N.D. Oklahoma
OPINION AND ORDER
V. LAUAN UNITED STATES DISTRICT JUDGE
before the Court is plaintiff Anthony Clarence DeSmet's
motion to remand (Dkt. # 13). Plaintiff asks the Court to
remand his case to state court, arguing that the parties are
not completely diverse. Defendants state in their notice of
removal that there is complete diversity, and that plaintiff
fraudulently joined defendant CSAA Insurance Exchange to
defeat diversity (Dkt. # 2).
alleges that on March 5, 2018, he was injured in an
automobile collision that was proximately caused by William
Donald Akehurst's negligence. Dkt. # 2-2, at 2. Plaintiff
alleges that, at the time of the collision, he had
uninsured/underinsured motorist coverage under a policy
written by defendant CSAA General Insurance Company, d/b/a
AAA Insurance Company (AAA Insurance), policy number
OKSS104088747 (Policy). Id. Plaintiff filed his
lawsuit in state court against defendants, alleging breach of
contract and breach of the duty of good faith and fair
dealing. Id. at 4-6. Plaintiff argues that, although
he submitted his claim to AAA Insurance, AAA Insurance
“failed to promptly and fairly investigate or evaluate
Plaintiff's claim and refused to pay Plaintiff the limits
of his Policy for which he has paid premiums to
obtain.” Id. at 2. On November 18, 2019,
defendants filed a notice of removal to this Court from the
Tulsa County District Court. Dkt. # 2. Plaintiff filed a
motion to remand, arguing that the CSAA Insurance Exchange is
nondiverse and the Court lacks jurisdiction. Dkt. # 13.
is a citizen of Oklahoma. Dkt. # 2-2, at 1. AAA Insurance is
a citizen of Indiana and California. Dkt. # 2, at 2.
Defendant CSAA Insurance Exchange is an unincorporated,
reciprocal insurance exchange based in California.
Id. As courts have held, “[a] reciprocal
insurance exchange is essentially an insurance company
cooperatively owned by those it insures.” True v.
Robles, 571 F.3d 412, 414 (5th Cir. 2009).
“Through such an entity, members ‘undertake to
indemnify each other against certain kinds of losses by means
of a mutual exchange of insurance contracts, usually through
the medium of a common attorney-in-fact appointed for that
purpose by each of the underwriters . . . .'”
Id. (quoting 43 Am. Jur. 2d Insurance
§ 81 (2008)). However, certain exchanges issue
“nonassessable policies, under which subscribers ha[ve]
no contingent liability for claims, expenses, or losses of
the exchange.” Id.
Rules and Regulations of the Insurance Board of CSAA
Insurance Exchange (Rules) includes a right to sue and be
sued clause. Dkt. # 13-3, at 6. The Rules also includes an
indemnification clause. Id. at 13. AAA Insurance is
a subscriber/member of CSAA Insurance Exchange. Dkt. # 13-4.
The Subscriber Agreement (Agreement) between AAA Insurance
and CSAA Insurance Exchange includes an indemnification
clause. Id. Plaintiff entered into an insurance
agreement with AAA Insurance, and argues that he is also a
member of CSAA Insurance Exchange. See Dkt. # 13-5;
Dkt. # 13, at 21.
diverse defendant may remove “any civil action brought
in a State court of which the district courts of the United
States have original jurisdiction . . . to the district court
of the United States for the district and division embracing
the place where such action is pending.” 28 U.S.C.
§ 1441(a). However, actions founded on diversity of
citizenship “may not be removed if any of the parties
in interest properly joined and served as defendants is a
citizen of the State in which such action is brought.”
28 U.S.C. § 1441(b)(2). Under 28 U.S.C. § 1447(c),
“[if] at any time before final judgment it appears that
the district court lacks subject matter jurisdiction, the
case shall be remanded.”
courts are courts of limited jurisdiction, and there is a
presumption against removal. U.S. ex rel. Hafter D.O. v.
Spectrum Emergency Care, Inc., 190 F.3d 1156, 1160 (10th
Cir. 1999). The party opposing remand is required to show
jurisdiction by a preponderance of the evidence. Karnes
v. Boeing Co., 335 F.3d 1189, 1194 (10th Cir. 2003). But
a defendant's “right of removal cannot be defeated
by a fraudulent joinder of a resident defendant having no
real connection with the controversy.” Wilson v.
Republic Iron & Steel Co., 257 U.S. 92, 97 (1921).
“[I]n order to prove fraudulent joinder, [d]efendants
must show that [p]laintiff either (1) committed outright
fraud in pleading the jurisdictional facts, or (2) have no
possibility of recovery against the non-diverse
[d]efendants.” Slover v. Equitable Variable Life
Ins. Co., 443 F.Supp.2d 1272, 1276 (N.D. Okla. 2006)
(citing Dodson v. Spiliada Maritime Corp., 951 F.2d
40, 42-43 n.2 (5th Cir. 1992)). To prove fraudulent joinder,
the defendant has the burden to “demonstrate that there
is no possibility that [plaintiff] would be able to establish
a cause of action against [the joined party] in state
court.” Hart v. Bayer Corp. 199 F.3d 239, 246
(5th Cir. 2000). “When a defendant raises specific
allegations of fraudulent joinder, the court may pierce the
pleadings to evaluate the defendant's argument.”
Von Downum v. Synthes, 908 F.Supp.2d 1179, 1182
(N.D. Okla. 2012) (citing Smoot v. Chicago, Rock Island
& Pac. R.R. Co., 378 F.2d 879, 881-82 (10th Cir.
1967)). “The burden of persuasion placed upon those who
cry ‘fraudulent joinder' is indeed a heavy
one.” Hart, 199 F.2d at 246 (quoting B.,
Inc. V. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.
1981)). However, “[t]his does not mean that the federal
court will pre-try, as a matter of course, doubtful issues of
fact to determine removability; the issue must be capable of
summary determination and be proven with complete
certainty.” Smoot, 378 F.2d at 882.
purposes of plaintiff's motion, the Court assumes without
deciding that CSAA Insurance Exchange is nondiverse, because
it may have subscribers in Oklahoma. See McDonald v. CSAA
Ins. Exchange, 2017 WL 887108, at *1 (W.D. Okla. March
6, 2017) (granting plaintiff's motion to remand because
defendant had not met its high burden of showing that CSAA
Insurance Exchange had no Oklahoma members). However, the
Court finds that the case should not be remanded to state
court because plaintiff “ha[s] no possibility of
recovery against the non-diverse [d]efendant, ” which
is CSAA Insurance Exchange. Slover, 443 F.Supp.2d at
asserts two claims for relief against AAA Insurance in his
state court petition: (1) breach of contract and (2) breach
of the duty of good faith and fair dealing. Dkt. # 2-2, at
4-6. To assert these claims against CSAA Insurance Exchange,
plaintiff would be required to prove that CSAA Insurance
Exchange is a party to his Policy. See Miller v. BCG
Healthcare Investments LLC, 2012 WL 12863169, at *1
(W.D. Okla. Sept. 11, 2012) (“Ordinarily, a person or
entity not a party to a contract cannot breach that
contract.”); see also Badillo v. Mid Century Ins.
Co., 121 P.3d 1080, 1115 at n.9 (Okla. 2005) (“The
tort [of bad faith] does not inure to the benefit of one who
is not a party to the contract.”); Hensley v. State
Farm Fire and Cas. Co., 398 P.3d 11, 18 (Okla. 2017)
(“[T]his duty was not extended to an individual who was
not a party to the contract, and non-insurer defendants did
not possess this duty: an action based on the duty to deal
fairly and act in good faith will not lie against a stranger
to the contract.”); see also Lopez v. Farmers Ins.
Co., Inc., 2011 WL 1807158, at *4 (W.D. Okla. May 6,
2011) (holding that an insurance exchange did not breach a
contract to which it was not a party). The Court can find no
language in the Policy suggesting that CSAA Insurance
Exchange is a party to the Policy. Further, the references to
the Agreement (between AAA Insurance and CSAA Insurance
Exchange) in the state court petition and supporting exhibits
show only that AAA Insurance is a member of the exchange, not
plaintiff. See Dkt. ## 2-2, at 2; 2-9; 13-5;
13-7. Therefore, CSAA Insurance Exchange cannot be liable for
breach of contract or breach of the duty of good faith and
fair dealing under plaintiff's Policy. Accordingly, the
Court finds that CSAA Insurance Exchange was fraudulently
joined, and plaintiff's motion to remand (Dkt. # 13)
should be denied.
IS THEREFORE ORDERED that plaintiff Anthony Clarence
DeSmet's motion to remand (Dkt. # 13) is
IS FURTHER ORDERED that defendant CSAA Insurance