United States District Court, D. New Mexico
P. Hatcher, Hatcher Law Group, P.A. Santa Fe, New Mexico, for
Defendant MGA Insurance Co.
B. O'Connell, O'Connell Law LLC, Albuquerque, New
Mexico (Geoffrey R. Romero, Law Offices of Geoffrey R.
Romero, Albuquerque, New Mexico, and Randy K. Clark, Randy K.
Clark, P.C., Las Cruces, New Mexico, with her on the brief)
ORDER GRANTING MOTION TO REMAND
MATTER comes on for consideration of Plaintiffs' Motion
for Remand filed May 25, 2017. Doc. 11. Despite the absence
of complete diversity between the parties, this case was
removed to federal court on the basis of fraudulent joinder,
and Plaintiffs now seek a remand to state court. 28 U.S.C.
§ 1447(c). Upon consideration thereof, the motion to
remand is well taken and should be granted.
March 17, 2017, Plaintiffs Amanda Jones Worthington and
Garren Visser filed a state-court complaint against MGA
Insurance (“MGA”) and the Law Offices of Paul S.
Grand, P.A. and Paul S. Grand (collectively “Grand
Defendants”). Doc. 1-1. Defendant MGA removed the
action to this court, asserting diversity jurisdiction
pursuant to 28 U.S.C. § 1332. Doc. 1 at 1. Plaintiffs
Worthington and Visser are residents and citizens of Chaves
County, New Mexico. Doc. 1 at 2. Defendant MGA is a citizen
of Texas, where it is incorporated and where it has its
principal place of business. Id. Defendant Paul S.
Grand, P.A. has its principal place of business in Santa Fe,
and Paul S. Grand is a resident and citizen of Santa Fe, New
Mexico. Id. at 3. Essentially, the present dispute
centers on the Grand Defendants, for if either is a proper
party, diversity jurisdiction does not exist.
to the complaint, Plaintiffs Worthington and Visser were
involved in an auto accident in May 2011, when Mr. Visser
struck the rear of the vehicle in which Ms. Worthington was
riding. See Doc. 1-1 at 3. Ms. Worthington was
severely injured and sued Mr. Visser for damages. Mr. Visser
had insurance coverage through MGA with policy limits of $25,
000 per person and $50, 000 per occurrence. MGA hired Mr.
Grand to represent Mr. Visser. After a jury trial in New
Mexico state court, Mr. Visser was found liable for $360, 000
in compensatory damages and $400, 000 in punitive damages.
Id. The court affirmed the jury's verdict.
Id. Ms. Worthington was awarded double costs because
she obtained a judgment more favorable than Mr. Visser's
pre-trial settlement offer. Id. The state court also
awarded Ms. Worthington pre- and post-judgment interest on
the jury's verdict. Id.
the entry of judgment, MGA paid $25, 000 - Mr. Visser's
policy limit - plus costs to Ms. Worthington. Id. at
6, 9. In exchange for a covenant not to execute judgment
against him, Mr. Visser executed a partial assignment to Ms.
Worthington of any claims he had against MGA and the Grand
Defendants. Ms. Worthington and Mr. Visser then sued MGA and
the Grand Defendants. Against MGA, they alleged six separate
counts: (1) insurance bad faith, (2) breach of the implied
covenant of good faith and fair dealing, (3) breach of
contract, (4) violation of the New Mexico Trade Practices and
Frauds Act and the Insurance Code, (5) violation of the New
Mexico Unfair Trade Practices Act, and (6) violation of the
New Mexico Trade Practices and Frauds Act and the Insurance
Code on behalf of a third-party beneficiary. Id. at
9-20. They alleged two counts against the Grand Defendants:
(1) legal malpractice and (2) breach of fiduciary duty.
Id. at 20-22.
removed the case to federal court on April 27, 2017, under
the theory that the non-diverse parties -the Grand Defendants
- were fraudulently joined to defeat diversity jurisdiction.
See Doc. 1 at 3-4.
invoke this court's diversity jurisdiction, “a
party must show that complete diversity of citizenship exists
between the adverse parties and that the amount in
controversy exceeds $75, 000.” Symes v.
Harris, 472 F.3d 754, 758 (10th Cir. 2006). MGA does not
dispute that the Grand Defendants are citizens of New Mexico
(and that diversity jurisdiction would thus normally not
exist), but instead contends that the Grand Defendants were
fraudulently joined and should be ignored for the purposes of
assessing diversity jurisdiction.
establish [fraudulent] joinder, the removing party must
demonstrate either: (1) actual fraud in the pleading of
jurisdictional facts, or (2) inability of the plaintiff to
establish a cause of action against the non-diverse party in
state court.” Dutcher v. Matheson, 733 F.3d
980, 988 (10th Cir. 2013) (alteration in original) (citation
omitted). “The defendant seeking removal bears a heavy
burden of proving fraudulent joinder, and all factual and
legal issues must be resolved in favor of the
plaintiff.” Id. (citation omitted).
contends that Plaintiffs' claims for legal malpractice
and breach of fiduciary duty against the Grand Defendants
must fail as a matter of law. This is because: (1) Mr. Grand
had no independent duty to Ms. Worthington, who was a third
party; (2) Ms. Worthington cannot be assigned Mr.
Visser's claims as a matter of public policy; (3) Mr.
Grand never had any duty “to timely investigate, assess
and effect settlement” on behalf of his client Mr.
Visser; and (4) Mr. Visser has suffered no harm from any
breach of duty because he received a covenant not to execute
judgment against him, and because MGA paid the policy limit
and courts costs. Doc. 23 at 10-15.
acknowledges that New Mexico “has no clear
decision” prohibiting the assignment of legal
malpractice claims. Id. at 11. But it is clear that
New Mexico courts have upheld an assignment of any proceeds
recovered from a legal malpractice claim. See First
Nat'l Bank of Clovis v. Diane, Inc., 698 P.2d 5, 14
(N.M. Ct. App. 1985). And, as Plaintiffs point out, because
Mr. Visser's assignment of his legal malpractice claim
was only partial, it seems that he would still be a real
party in interest even if the assignment of the actual claim
to Ms. Worthington was held invalid. See Doc. 27 at
the merits of the claim itself, Plaintiffs contend that Mr.
Visser has been harmed in the form of a $760, 000 court
judgment against him as a result of Mr. Grand's legal
malpractice and breach of fiduciary duty. Whether there was
breach of a duty and whether that breach caused Mr.
Visser's injuries involve questions of fact and law. But
merely because Ms. Worthington has agreed not to execute
judgment against Mr. Visser in exchange for a partial
assignment of his claims (against MGA and the Grand
Defendants) does not eliminate the alleged harm. As the New
Mexico Court of Appeals explained in the related context of
assigning a bad faith cause of action against an insurer to a
third party, to accept MGA's contention would mean that