United States District Court, D. New Mexico
LEE HUNT, as Personal Representative of the Wrongful Death Estate of Heath Dale Bennett, deceased, Plaintiff,
JACK V. WATERS, D.C, P.C, a New Mexico For-Profit Professional Corporation, et al., Defendants.
MEMORANDUM AND OPINION
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.
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.
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.
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.
Subject Matter Jurisdiction
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).
Diversity of the Parties
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.)).
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).
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.
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
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). 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.”