Graham v. Troncoso

ELFIGO GRAHAM and LISA GRAHAM, Plaintiffs, v. XOCHIL TRONCOSO and USAA CASUALTY INSURANCE, Defendants.

No. CIV 14-0745 JB/WPL

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

March 30, 2015

MEMORANDUM OPINION AND ORDER

THIS MATTER comes before the Court on the Plaintiffs' Motion to Remand to State Court, filed September 3, 2014 (Doc. 5)("Motion"). The Court held a hearing on November 20, 2014. The primary issues are: (i) whether Plaintiffs Elfigo Graham and Lisa Graham, New Mexico citizens, have adequately pled a cause of action against Defendant Xochil Troncoso, also a New Mexico citizen; and (ii) whether the Grahams fraudulently joined Troncoso in this case. Because the Grahams have sufficiently alleged a valid cause of action against Troncoso, and because there is not complete diversity, the Court will grant the Motion, remand the case to state court, and award the Grahams attorney fees and costs.

PROCEDURAL BACKGROUND

On July 24, 2014, the Grahams filed this lawsuit in state court. See Complaint for Declaratory Judgment and to Recover Uninsured Motorist Benefits for Personal Injuries, filed in state court on July 24, 2014, filed in federal court on August 20, 2014 (Doc. 1-1)("Complaint"). The Grahams allege that they are New Mexico residents, that Troncoso is a New Mexico resident, and that Defendant USAA Casualty Insurance is a foreign corporation. See Complaint¶¶ 1-4, at 1-2. In a section titled "General Allegations," the Grahams allege that Troncoso "negligently and carelessly operated a 1998 Ford in such a manner that it collided with the [Grahams'] 2012 Chevy." Complaint ¶ 6, at 2. The Grahams allege that Troncoso's acts were "the direct and proximate cause of the subject collision and Plaintiffs' resulting injuries and damages," and that "Troncoso is to be considered negligent per se and strictly liable to the Plaintiffs." Complaint ¶¶ 7-8, at 2. The Grahams allege that "Troncoso is an uninsured motorist as defined by the policies of insurance issued by USAA" and that, at the time of the accident, USAA Casualty insured the Grahams' 2012 Chevy. Complaint ¶¶ 9-10, at 2. The Grahams allege that USAA Casualty contends that it rejected the Grahams' uninsured motorist coverage for the 2012 Chevy. See Complaint ¶ 10, at 2.

In the Complaint, the Grahams list specific claims against USAA Casualty, including: (i) declaratory judgment "that underinsured motorist coverage exists for the Plaintiffs on all policies issued to Mr. and Mrs. Graham by USAA"; (ii) insurance bad faith; and (iii) violation of the Unfair Insurance Practices Act, N.M. Stat. Ann. § 59A-16-20. Complaint ¶¶ 12-29, at 3-7. The Grahams request, among other things, "judgment as against Defendant Troncoso . . . including both compensatory and punitive damage." Complaint ¶ (b), at 7.

On August 20, 2014, USAA Casualty removed the case to federal court. See Notice of Removal, filed August 20, 2014 (Doc. 1)("Notice of Removal"). USAA Casualty contends that, while the Grahams and Troncoso are New Mexico residents, Troncoso "has been fraudulently joined in this action in order to defeat diversity jurisdiction." Notice of Removal at 2. It asserts that the Grahams "have asserted no causes of action whatsoever against Defendant Troncoso in their complaint." Notice of Removal at 3 (emphasis in original). USAA Casualty argues that, because the Grahams have fraudulently joined Troncoso, the Court has diversity jurisdictionpursuant to 28 U.S.C. § 1332, because the Grahams are New Mexico residents and USAA Casualty is a Texas corporation with its principal place of business in Texas. See Notice of Removal at 3-4.

On September 3, 2014, the Grahams moved for the Court to issue an order, remanding the case to the Third Judicial District Court, State of New Mexico. See Motion at 1. The Grahams argue that Troncoso ran a red light and crashed into their car, which resulted in personal injuries. See Motion at 1. They contend that the Complaint alleges that "Troncoso negligently collided with Plaintiffs' car causing Plaintiffs' injuries and damages," and that the "Complaint requests that the Court enter a judgment against Defendant Troncoso." Motion at 1. The Grahams assert that the Complaint also alleges that "USAA inappropriately handled Plaintiffs' uninsured claim and seeks a declaration of the Plaintiffs' rights under the USAA policy." Motion at 1. They also contend that they properly served both Troncoso and USAA. See Motion at 2.

The Grahams argue that, because they and Troncoso are New Mexico residents, the Court lacks diversity jurisdiction and must remand the case. See Motion at 2. The Grahams contend that Troncoso was not fraudulently joined and that the "Complaint clearly includes notice of a negligent claim against Defendant Troncoso." Motion at 2. They assert that the removing party asserting fraudulent joinder "must demonstrate that there is no possibility that the plaintiff would be able to establish a viable cause of action against the joined party in state court." Motion at 2 (citing Hart v. Bayer Corp., 199 F.3d 239, 246 (5th Cir. 2000); Griggs v. State Farm Lloyds, 181 F.3d 694, 701 (5th Cir. 1999); Montoya v. Apfel, No. 99-2156, 211 F.3d 1278 (10th Cir. May 8, 2000)(unpublished)(table opinion)). The Grahams contend that the Court must determine whether they have any possibility of recovery against Troncoso and, if they have a possibleviable claim, the Court must remand the case. See Motion at 3 (citing Green v. Amerada Hess Corp., 707 F.2d 201, 207 (5th Cir. 1983)). They maintain that, because the Complaint clearly states that Troncoso caused the accident and clearly states a viable claim against him, Troncoso was not fraudulently joined. See Motion at 4.

USAA Casualty responds by arguing that the Complaint does not assert any claims or causes of action against anyone other than USAA Casualty. See Response to Plaintiffs' Motion to Remand to State Court, filed September 19, 2014 (Doc. 8)("Response"). USAA Casualty contends that, because "no count, claim, or cause of action is brought against Troncoso, a resident of New Mexico, she has been improperly joined in the action in an apparent attempt to prevent USSA . . . from its statutory right to have a federal court hear the case." Response at 1. It maintains that the Grahams named a non-diverse party solely for the purpose of defeating diversity jurisdiction. See Response at 2. USAA Casualty asserts that this case is similar to Lloyd v. Travelers Property Casualty Insurance Company, 699 F. Supp. 2d 812 (E.D. Va. 2010)(Ellis, J.). See Response at 3. There, according to USAA Casualty, the plaintiff was injured in a car accident with an underinsured driver and brought a declaratory judgment action against the plaintiff's insurer. See Response at 3. USAA Casualty asserts that the plaintiff named the other driver as a defendant, but did not assert any claims against him. See Response at 3. USAA Casualty contends that, after the defendant removed the case to federal court, the district court judge refused to remand, because the plaintiff did not bring any claims against the other driver, who "had no stake in the outcome of the coverage dispute." Response at 3 (emphasis in original). USAA Casualty contends that, because the tortious driver had no stake in the outcome of the case, his citizenship could not be properly considered for diversity purposes. See Response at 4. USAA Casualty argues that, because the Grahams have asserted no cause ofaction against Troncoso, there is no reason for her to remain in this case. See Response at 5. It contends that, even though it may later subrogate¹ against Troncoso, Troncoso's potential exposure in a separate lawsuit does not mean that she has a stake in this one. See Response at 5, n.1.

USAA Casualty maintains that the Grahams' prayer for relief, which requests a judgment against Troncoso, is insufficient to assert a claim against her. See Response at 5. It asserts that Trigo v. Travelers Commercial Insurance Co., No. CIV 10-0028, 2010 WL 3521759 (W.D. Va. Sept. 7, 2010)(Moon, J.), considered and rejected the same argument. See Response at 5. There, according to USAA Casualty, the plaintiff sued his insurer and the other driver in an action seeking declaratory judgment for uninsured motorist coverage. See Response at 5. USAA Casualty contends that the plaintiff did not assert any claims against the other driver, but sought relief "against the defendants." Response at 5. USAA Casualty argues that the district judge found that, because there were no claims against the other driver, the prayer for relief was insufficient and the other driver did not any interest in the case. See Response at 5. USAA Casualty asserts that the district judge refused to remand the case. See Response at 5. It argues that each claim concerns an insurance dispute between it and the Grahams, and that the prayer for relief is insufficient to create a cause of action against Troncoso. See Response at 5-6. USAA Casualty distinguishes the cases to which the Grahams cite by arguing that they concern situations in which the plaintiffs asserted causes of action against a non-diverse party and that, here, there is no cause of action. See Response at 6-7.

The Grahams reply by arguing that USAA Casualty grossly misrepresents the Complaint and "blatantly ignores" their claim against Troncoso. Plaintiff's [sic] Reply for Motion to Remand to State Court at 1, filed October 3, 2014 (Doc. 11)("Reply"). They argue that the Complaint clearly meets New Mexico's notice requirement. See Reply at 1. The Grahams contend that, because they must show that Troncoso drove negligently to establish a claim against USAA Casualty, they could not have fraudulently joined Troncoso. See Reply at 1-2. They maintain that they are seeking damages from Troncoso. See Reply at 2. The Grahams argue that USAA Casualty has not demonstrated that they "have no possibility of establishing a viable cause of action against...