United States District Court, D. Colorado
TREVOR L. JONES, Plaintiff,
JESSICA MASTERSON and ENCOMPASS INDEMNITY COMPANY Defendants.
Brooke Jackson United States District Judge
L. Jones, a pedestrian, was seriously injured on August 1,
2015 when a vehicle driven by Jessica Masterson struck him.
He filed a negligence suit against Ms. Masterson in the
Denver District Court on March 15, 2016. See ECF No.
4. The case was set for trial to a jury on March 6, 2017.
there are some disputes about liability, it is undisputed
that Mr. Jones' damages exceed the limits of Ms.
Masterson's liability insurance. However, Mr. Jones is a
beneficiary of uninsured/underinsured motorist coverage in an
Encompass Indemnity Company policy issued to Mr. Jones'
parents. Mr. Jones duly notified Encompass of a claim, and as
I will discuss later, Encompass has paid substantial amounts
under the UM/UIM coverage and under excess UM/UIM provisions
of the policy even though the underlying personal injury case
has yet to be completely resolved. The rub is that the
Encompass policy insures four vehicles but has an anti-1
stacking provision. The coverage dispute is whether there is
$1 million in excess coverage or four times that amount,
i.e., $1 million per vehicle.
filed a declaratory judgment action against the Jones in this
court on December 8, 2016, invoking federal jurisdiction on
diversity of citizenship grounds. Case No.
16-cv-03017-PAB-KMT. Mr. Jones was unhappy with that choice
of forum. One day later, he filed an amended complaint in the
state court case naming Encompass as an additional defendant
and asserting breach of contract and bad faith claims. That
didn't sit well with Encompass, and on January 20, 2017
Encompass removed the state case to this court, invoking
federal jurisdiction on diversity of citizenship grounds.
Hence, the present case.
problem is, both Mr. Jones and Ms. Masterson are Colorado
residents, thus eliminating complete diversity between the
plaintiff and the defendants. Recognizing that potential
hurdle, Encompass's Notice of Removal invokes the
“procedural-misjoinder doctrine.” Encompass
argues that under that doctrine, when a diverse insurer is
misjoined to claims against nondiverse tortfeasors, the
claims should be severed, with the federal court retaining
jurisdiction over the diverse claims and remanding the
nondiverse claims to state court. ECF No. 1 at 4.
Jones countered by moving to remand the present case for lack
of complete diversity, ECF No. 25, and moving to dismiss Case
No. 16-cv-03017-PAB on the theory that Ms. Masterson should
have been joined in that case (thus defeating diversity
jurisdiction there). His motion to dismiss in that case is
pending before Judge Brimmer. Before me is Mr. Jones'
motion to remand the present case.
thoughts come to mind. First, the dispute between Mr. Jones
and Ms. Masterson is a straightforward negligence action
between two nondiverse parties, and plaintiff's choice of
forum should be honored if possible. Second, there is
diversity between Mr. Jones and Encompass, and
Encompass's choice of forum should also be honored if
possible. Third, the state and federal courts are equally
capable of resolving either or both sets of claims. Fourth,
to any extent that the maneuvering has delayed the
parties' opportunity to have the various claims resolved,
it does not put the legal system in a positive light.
Lafalier v. State Farm Fire and Cas. Co., 391 F.
App'x. 732 (10th Cir. 2015) (unpublished), the court
discussed procedural or “fraudulent” misjoinder
in the context of a plaintiff who ‘“sues a
diverse defendant in state court and joins a nondiverse
defendant even though the plaintiff has no reasonable
procedural basis to join such defendants in one
action.”' Id. at 739 (quoting E. Farish
Percy, Defining the Contours of the Emerging Fraudulent
Misjoinder Doctrine, 29 Harv. J. L. & Pub. Pol'y
569, 572 (2006)). That is not what happened in the present
case. However, we have what I view as a different form of
Jones' counsel joined Encompass in the state court case
to counter Encompass's choice of the federal forum for
resolution of the insurance coverage issues. The personal
injury and insurance coverage issues do ultimately arise from
the underlying accident. But they otherwise have little in
common. The issues in the personal injury case are the
driver's alleged negligence, Mr. Jones' alleged
comparative negligence, and an assertion that Mr. Jones'
claim against Ms. Masterson might be barred by a release.
See ECF No. 6 at 2; ECF No. 12 at 3. In its
declaratory judgment action Encompass does not dispute Ms.
Masterson's negligence. Indeed, Encompass has already
paid the full limits of the basic UM/UIM coverage ($250, 000)
plus $1 million of excess UM/UIM benefits. Id. at
¶22. Its suit raises only the question whether Mr. Jones
can “stack” the excess coverage on a per vehicle
basis, thus becoming $4 million rather than the $1 million
Encompass paid. That is a matter of policy interpretation.
Mr. Jones' presumptive counterclaim in the federal
action, based on the claims he has asserted against Encompass
in the present case, would seek a determination that the
excess coverages can be stacked plus a statutory penalty for
unreasonable delay or denial of insurance benefits. In short,
the issues are quite different.
diversity does not exist in this case as it is presently
framed. However, a remand of the case as is would reward
plaintiff's forum shopping while thwarting
Encompass's choice of forum. There has been a form of
misjoinder. On the other hand, accepting the removal as is
would put plaintiff's claims against Ms. Masterson in the
federal court, a result that neither party seeks. Encompass
proposes that the Court should sever plaintiff's coverage
claims from his personal injury claims; remand the personal
injury claims to the state court for lack of diversity of
citizenship jurisdiction; and retain jurisdiction over the
coverage claims. See ECF No. 31 at 12.
courts may drop or sever misjoined claims. Fed.R.Civ.P. 21.
The discretion to do so “is circumscribed, however, by
Rule 19(b) because the court cannot proceed without
indispensable parties.” Lenon v. St. Paul Mercury
Ins. Co., 136 F.3d 1365, 1371 (10th Cir. 1998). I find
that Ms. Masterson is not an indispensable party to the
coverage case(s), and that Encompass is not an indispensable
party to the personal injury action. Accordingly, setting
aside the fact that Encompass's proposal would
potentially leave the coverage claims pending in two separate
cases before two different judges of this court, it is a
motion to remand is granted in part and denied in part. The
Court severs plaintiffs first and second claims (negligence
and negligence per se against Ms. Masterson) and remands
those claims to the state court for lack of diversity of
citizenship jurisdiction. The Court will retain jurisdiction
over plaintiffs third claim (breach of insurance contract)
and fourth claim (unreasonable delay or denial of insurance
benefits) for the moment. The parties should consider a
stipulation that all insurance claims between Mr. Jones and
Encompass should be determined in Case No. 16cv3017-PAB and,
therefore, that what remains of the present case following
the remand of the personal injury claims should be dismissed
without prejudice. Absent a stipulation, I presume that the
remainder of this case will probably be consolidated ...