Federal Court Shuts Down Bad Faith Plaintiff’s Attempt At Forum Shopping

Matthew M. Haar
Published March 18, 2019

An insurer successfully defeated a plaintiff’s attempt to keep a bad faith action in state court by “manipulating” federal diversity jurisdiction by naming an individual claims adjuster as a defendant. Capitol Body Shop, Inc. v Allstate Ins. Co., No. 3:18-cv-516, 2019 WL 943414 (S.D. Miss. Feb 26, 2019). After determining that plaintiff failed to plead a viable claim against the claims adjuster, the court granted Allstate’s Motion to Dismiss Improperly Joined Defendant and denied plaintiff’s motion for remand.

In July 2017, Capitol Body Shop, a Mississippi corporation located in Jackson, Mississippi, performed a repair on a vehicle insured by Allstate. The claim was handled by Allstate’s adjuster, Edward Permenter, who is a resident of Mississippi. Capitol Body Shop was only willing to release the vehicle back to the insured after Allstate provided assurance that a check for $953.10 was being overnighted to Capitol. Capitol released the car to the insured when it received the check.  When Capitol tried to deposit the check, it was returned two days later with a $10.00 chargeback fee. Permenter had placed a stop payment on the original check and instead sent out a replacement check for $210.60.

Capitol Body Shop filed an action in Mississippi state court on April 26, 2018 against Allstate, Permenter and five Doe defendants, alleging claims of bad faith breach of contract, breach of the duty of good faith and fair dealing, and constructive fraud. Allstate removed the matter to federal court, and promptly filed a motion to dismiss Permenter as an improperly joined defendant. Allstate argued that there was no cognizable claim against Permenter, and that he was joined only to attempt to destroy diversity jurisdiction. Capitol filed a motion to remand in response.

In reviewing the competing motions, the federal court discussed the purpose behind diversity jurisdiction, including the intent to avoid perceived “home-cooking” in state courts. The court explained the improper joinder doctrine which “implements the federal courts’ duty to not allow manipulation of [its] jurisdiction.” After conducting a 12(b)(6) type analysis of Capitol’s allegations against Permenter, the court concluded that there was no viable claim against Permenter, and thus he was improperly joined. In reaching that conclusion, the court discussed “the judicial sin of ‘bunching’” where a plaintiff “loosely attribut[es] liable behavior to a bunch of defendants without any showing that each one of the bunch specifically performed any elements of the asserted cause of action.” The court concluded that plaintiff could not “bunch” claims against both Allstate and Permenter, dismissed all claims against Permenter, and then denied plaintiff’s motion to remand the matter to state court.

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