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Hunt v. Jack V. Waters, D.C, P.C.

United States District Court, D. New Mexico

November 12, 2019

LEE HUNT, as Personal Representative of the Wrongful Death Estate of Heath Dale Bennett, deceased, Plaintiff,
v.
JACK V. WATERS, D.C, P.C, a New Mexico For-Profit Professional Corporation, et al., Defendants.

          MEMORANDUM AND OPINION

         This matter is before the Court on Plaintiff's Motion to Remand for Lack of Subject Matter Jurisdiction and for Fees Incurred as a Result of Improper Removal, filed August 19, 2019. (Doc. 5). Defendants Allied Professionals Insurance Company and the National Chiropractic Council (APIC and NCC, or Insurance Defendants) filed a response on September 10, 2019, and Plaintiff filed a reply on September 23, 2019. (Docs. 13 and 14). Having considered the parties' briefing, the record of the case, and applicable law, the Court grants Plaintiff's Motion to Remand and remands the case to state court. I. Procedural Background On July 31, 2018, Plaintiff filed a Complaint in state court alleging Heath Dale Bennett died after suffering “an acute left vertebral artery injury during chiropractic manipulation” by his chiropractor, Dr. Waters. (Doc. 2-1) at 12. Plaintiff brings the following claims: negligence and breach of fiduciary duty against Dr. Waters; violations of the New Mexico Unfair Practices Act against Jack V. Waters, D.C., P.C.; and aiding and abetting breach of fiduciary duty and conspiracy to commit breach of fiduciary duty against the Insurance Defendants. Id. at 13-20.

         This action is the second time Defendants have removed Plaintiff's case to this Court. On September 13, 2018, Defendants removed this case for the first time, arguing the Court had diversity subject matter jurisdiction even though both Plaintiff and Defendants Dr. Waters and Jack V. Waters, D.C., P.C. (Waters Defendants) were New Mexico residents. (Doc. 1), filed in Case No. CIV 18-863 JB/KK. Defendants argued the Waters Defendants' citizenship should be ignored because they entered into an arbitration agreement with Mr. Bennett prior to his death. Id. On April 29, 2019, Judge Browning rejected Defendants' argument and granted Plaintiff's motion to remand. (Doc. 34), filed in Case No. CIV 18-863 JB/KK, at 48-55.

         On July 31, 2019, the Insurance Defendants removed this case from state court for the second time, stating the Court now has diversity subject matter jurisdiction because the Waters Defendants and Plaintiff have reached an agreement to settle. (Doc. 1) at 2. In Plaintiff's Motion to Remand, however, he argues the claims against the Waters Defendants have not yet been disposed of because the state court must approve the settlement which involves minors. (Doc. 5) at 2-3, 7-9. Plaintiff further contends the Insurance Defendants' removal was untimely and the Insurance Defendants consented to the state court's jurisdiction by continuing to litigate after they were aware of the settlement. Id. at 3-4, 10-13. Plaintiff asks the Court to remand the case to state court and to award his attorney fees and costs in bringing this motion. Id. at 13-15.

         In response, the Insurance Defendants ask the Court to disregard the Waters Defendants' citizenship for purposes of determining jurisdiction because of their settlement with Plaintiff. (Doc. 13) at 5-6. They also argue the Waters Defendants are procedurally misjoined and nominal parties to this action as a result of the settlement. Id. at 6-8. In addition, the Insurance Defendants dispute Plaintiff's assertion that their Notice of Removal was untimely or that they consented to state court jurisdiction by continuing to litigate, and they contend an award of attorney fees and costs is not appropriate. Id. at 8-10. In reply, Plaintiff maintains that the Court does not have diversity jurisdiction, the Notice of Removal was untimely, the Insurance Defendants consented to state court jurisdiction by continuing to litigate, and Plaintiff should be awarded fees and costs. (Doc. 14) at 2-8.

         II. Analysis

         A. Subject Matter Jurisdiction

         A defendant can remove a civil case brought in state court if the federal court has original jurisdiction. 28 U.S.C. § 1441(a). District courts have original jurisdiction of all civil actions where the amount in controversy exceeds $75, 000, and the action is between citizens of different states. 28 U.S.C. § 1332. The removing party bears the burden of proving diversity jurisdiction under Section 1332, and complete diversity does not exist where any plaintiff has the same residency as any defendant. Dutcher v. Matheson, 733 F.3d 980, 987 (10th Cir. 2013). When a case is not initially removable because of the presence of a non-diverse defendant, a defendant may remove the case within thirty days from ascertaining that the case has become removable, provided that it does so within one year from the commencement of the action. 28 U.S.C. §§ 1446(b)-(c). In addition, if the non-diverse defendant has been procedurally misjoined or is a nominal party to the action, the court may ignore such defendant for purposes of assessing complete diversity. Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 460-61 (1980); Lafalier v. State Farm Fire & Cas. Co., 391 Fed.Appx. 732, 739 (10th Cir. 2010). However, there is a presumption against removal jurisdiction, and “statutes conferring jurisdiction upon the federal courts, and particularly removal statutes, are to be narrowly construed in light of [the courts'] constitutional role as limited tribunals.” Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1094-95 (10th Cir. 2005).

         1. Diversity of the Parties

         The parties agree that Plaintiff and the Waters Defendants are citizens of New Mexico. Nevertheless, the Insurance Defendants ask the Court to disregard the Waters Defendants' citizenship because Plaintiff agreed to settle his claims against them. (Doc. 13) at 5-6. Plaintiff, on the other hand, argues that settlement with the non-diverse party does not establish diversity jurisdiction until that party is dismissed from the action. (Doc. 5) at 8 (citing Dunkin v. A.W. Chesterson Co., 2010 WL 1038200, *6 (N.D. Cal.)).

         The Tenth Circuit has not issued an opinion on this issue and the Insurance Defendants offer no other circuit opinion to support this position. Several district courts have found that an agreement to settle with the non-diverse party is sufficient to render a case removable to federal court. However, each of these courts has emphasized the settlement must be binding, unequivocal, and enforceable under state law. See Evans v. Metro. Prop. & Cas., 2013 WL 6835287, *2 (W.D. Okla.) (finding notice of settlement with non-diverse party triggered opportunity for removal because agreement was unequivocal and binding under state law); Turley v. Stilwell, 2011 WL 1104543, *3 (N.D. Okla.) (same); Bromeland v. Ramos, 2008 WL 11411270, *4-5 (W.D. Tex.) (same); Cf. Reid v. Am. Commerce Ins. Co., 2007 WL 1173030, *3 (E.D. Ky.) (finding notice of intent to settle, which could still be revoked by either party, is “not a sufficiently certain indication that [the non-diverse party] had actually settled her claims”). Indeed, several district courts have specifically held that a settlement involving minor children that requires state court approval does not dispose of the non-diverse party for purposes of removal until the settlement has been approved. See Ray v. Craig Loftin Trailer Sales, LLC, 2009 WL 2175971, *2 (E.D. Okla.) (remanding to state court where settling non-diverse defendant not “effectively eliminated as a party because under Oklahoma law a settlement reached on behalf of a minor is not final without a court order”); Elizondo v. Nissan N. Am., 2019 WL 3305286 (S.D. Tex.) (explaining settlement involving minors not binding until approved by court as required by Texas law, so non-diverse party “is still a Defendant and diversity jurisdiction does not exist”) (citation omitted); Evers v. CEC Entertainment, 2011 WL 995697, *2 (N.D. Ill.) (same, applying Illinois state law requiring state court approval of settlement involving minor); Tripp v. Kline, 2007 WL 844821, *4 (E.D. Mo.) (same, applying Missouri state law requiring state court approval of settlement involving minor); Singh v. Edwards Lifesciences Corp., 2006 WL 3499235, *1 (W.D. Wash.) (same, applying Washington state law requiring state court approval of settlement involving minor).

         In this case, on May 20, 2019, the Waters Defendants filed a notice of acceptance of Plaintiff's settlement offer in state court under Rule 1-068, NMRA 2003. (Doc. 2-27). Rule 1-068 provides that if a party serves written notice of acceptance of a settlement offer, “either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon such judgment may be entered as the court may direct.” The New Mexico Court of Appeals has explained that “ordinarily” a Rule 1-068 notice of settlement “leaves no discretion in the district court to do anything but to enter the judgment.” Shelton v. Sloan, 1999-NMCA-048, ¶ 42, 127 N.M. 92. However, in New Mexico the “general rule is that a … settlement is not binding on [a minor] in the absence of judicial approval.” Collins v. Tabet, 111 N.M. 391, ¶ 30, 806 P.2d 40 (N.M. 1991) (citing Garcia v. Middle Rio Grande Conservancy Dist., 99 N.M. 802, ¶ 28, 664 P.2d 1000 (N.M. Ct. App. 1983)). Therefore, when a Rule 1-068 notice of settlement is filed in a case involving minors, the court must review the settlement before entering judgment and reject it if it is not fair to the minors. Shelton, 1999-NMCA-048, ¶ 42.

         The Insurance Defendants ask the Court to disregard the Waters Defendants' citizenship because, pursuant to the settlement, there is “no possibility that the Plaintiff could now recover against this in-state defendant.” (Doc. 13) at 5. To the contrary, because the settlement between Plaintiff and the Waters Defendants involves minors, the state court must review it and reject it if it is not fair to the minors. As such, until the settlement is approved by the state court, the Waters Defendants are still parties to this case and Plaintiff's claims against them will proceed if the settlement is rejected. Therefore, the settlement is not yet binding, unequivocal, and enforceable under state law, the Waters Defendants are still non-diverse parties to this case, and the Court does not have diversity jurisdiction.

         2. Procedural Misjoinder

         The Insurance Defendants next argue the Waters Defendants are procedurally misjoined because Plaintiff has not petitioned the state court for approval of the settlement or sought their dismissal. (Doc. 13) at 6-7. Procedural misjoinder occurs “when a plaintiff sues a diverse defendant in state court and joins a non-diverse or in-state defendant even though the plaintiff has no reasonable procedural basis to join such defendants in one action.” Lafalier, 391 Fed.Appx. at 739 (citation omitted).[1] The Tenth Circuit has not adopted this doctrine, but several district courts have applied it by considering whether a joined party satisfies the permissive joinder standards under Fed.R.Civ.P. 20. See Lafalier, 391 Fed.Appx. at 739 (declining to adopt procedural misjoinder doctrine because there was another basis for remand); Ullman v. Safeway Ins. Co., 995 F.Supp.2d 1196, 1247 (D.N.M. 2013) (defining procedural misjoinder issue as whether plaintiff “misjoined [the non-diverse defendant] in violation of Rule 20”); Klintworth v. Valley Forge Ins. Co., 2018 WL 4945237, *3 (N.D. Okla.) (same). Rule 20 permits the joinder of defendants in one action if “any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences” and “any question of law or fact common to all defendants will arise in the action.” Fed.R.Civ.P. ...


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