explaining the use of a Gasquet release
How later courts described this case
- explaining the use of a Gasquet release
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CLARK DAVID BRUMFIELD CIVIL ACTION
VERSUS NO. 19-10818
KAMATH L. BURDE, MEGHANA SECTION “R”(1)
HEMPHILL, AND JAMES RIVER
INSURANCE COMPANY
ORDER AND REASONS
Before the Court is plaintiff Clark David Brumfield’s motion to remand
to state court.1 Because complete diversity does not exist, the Court grants
the plaintiff’s motion.
I. BACKGROUND
On April 2, 2019, the plaintiff filed suit in Louisiana state court against
defendants Burde Kamath,2 Meghana Hemphill, and the James River
Insurance Company (“James River”), for damages that the plaintiff allegedly
suffered in a car collision. The plaintiff alleges that Burde Kamath
1 R. Doc. 5-2.
2 The complaint and subsequent filings incorrectly name one defendant
“Kamath Burde” instead of his correct name “Burde Kamath.” See R. Doc.
5-2 at 2. In this Order and Reasons, we use the defendant’s correct name.
negligently drove into the plaintiff’s car, causing the plaintiff substantial
injury.3 Kamath’s car was owned by Hemphill.4 As a result, plaintiff sued
both Kamath and Hemphill. Brumfield also sued his own insurance
company, James River, which is incorporated in Ohio and headquartered in
Virginia.5 Kamath’s and Hemphill’s primary insurers—Progressive and
Geico—respectively, paid out their policy limits.6 Brumfield signed a limited
release with Kamath and Hemphill, settling his claims against them except
to the extent necessary to pursue any claims against an excess insurer.7
On May 30, 2019, James River removed the suit to federal court.8
While acknowledging that the plaintiff and defendants Kamath and
Hemphill are all residents and domiciliaries of Louisiana, James River
contended that this Court has diversity jurisdiction over the action because
Kamath and Hemphill were improperly joined.9 Specifically, James River
argues that because the plaintiff entered a settlement with Kamath and
3 R. Doc. 1-2 at 1-2.
4 Id.at 2.
5 See R. Doc. 1 at 2; R. Doc. 1-2.
6 See R. Doc. 15-1 at 2; R. Doc. 15-2 at 4.
7 R. Doc. 15-1; R. Doc. 15-2.
8 R. Doc. 1.
9 Id. at 2-3.
Hemphill, plaintiff cannot state a viable cause of action against Kamath or
Hemphill under Louisiana law, and they are therefore improperly joined.10
Shortly after the defendant’s removal of this case, Kamath signed an
affidavit in which he attested that he was insured by Allstate, and not only
Progressive, at the time of the accident.11 Brumfield subsequently amended
his state court complaint to add Allstate as a defendant, although the state
court was deprived of jurisdiction upon removal, rendering the amendment
void.12 On June 28, 2019, the plaintiff filed a motion to remand this matter
to state court, arguing that this Court is without subject-matter jurisdiction
because plaintiff still has a valid claim against Kamath, who resides in the
same state as the plaintiff.13 Brumfield contends he has such a claim because
he signed only a limited release with the defendants and specifically reserved
an action against an insured defendant to the extent necessary to assert
claims against an excess insurer.14
10 Id. at 2-4.
11 R. Doc. 5-3.
12 R. Doc. 5-6.
13 R. Doc. 5-2.
14 Id. at 3-4.
II. LEGAL STANDARD
The plaintiff’s remand motion is governed by the standard for
improper joinder, set forth below.
A defendant may generally remove a civil action filed in state court if
the federal court has original jurisdiction over the action. See 28 U.S.C.
§ 1441(a). The removing party bears the burden of showing that federal
jurisdiction exists. See Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335 (5th
Cir. 1995). “The jurisdictional facts that support removal must be judged at
the time of removal.” Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883
(5th Cir. 2000). In assessing whether removal is appropriate, the Court is
guided by the principle that removal statutes should be strictly construed
because federal courts are courts of limited jurisdiction. See, e.g., Manguno
v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002).
Accordingly, “[a]ny ambiguities are construed against removal.” Id.
For diversity jurisdiction to exist, the amount in controversy must
exceed $75,000, and there must be complete diversity between plaintiffs and
defendants. See 28 U.S.C. § 1332(a); Owen Equip. & Erection Co. v. Kroger,
437 U.S. 365, 373 (1978). Here, the parties do not dispute that the amount-
in-controversy requirement is satisfied. However, complete diversity is
contested. Ordinarily, having a plaintiff and a defendant who reside in the
same state would destroy complete diversity. See McLaughlin v. Miss.
Power Co., 376 F.3d 344, 353 (5th Cir. 2004). And when a nondiverse party
is properly joined as a defendant, no defendant may remove the case under
28 U.S.C. § 1332. But a defendant may remove by showing that the
nondiverse party was joined improperly. Smallwood v. Ill. Cent. R.R. Co.,
352 F.3d 220, 222-23 (5th Cir. 2003).
The burden of demonstrating improper joinder is a heavy one, as the
doctrine is a narrow exception to the rule of complete diversity. Smallwood,
352 F.3d at 222. A defendant may establish improper joinder by showing
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.” Id. at 222-23. Here, there is no allegation that plaintiff
fraudulently pleaded jurisdictional facts; accordingly, only the second prong
of the improper joinder test is at issue. To determine whether the individual
defendants were improperly joined under the second prong, the Court asks
whether “there is arguably a reasonable basis for predicting that the state law
might impose liability on the facts involved.” Id. at 223 (quoting Jernigan v.
Ashland Oil Inc., 989 F.2d 812, 816 (5th Cir. 1993)) (internal quotation
marks omitted).
“In analyzing whether a plaintiff has demonstrated a reasonable
possibility of recovery, the district court may ‘conduct a Rule 12(b)(6)-type
analysis, looking initially at the allegations of the complaint to determine
whether the complaint states a claim under state law against the in-state
defendant.” Menendez v. Wal-Mart Stores, Inc., 364 F. App’x 62, 69 (5th
Cir. 2010) (per curiam) (quoting Smallwood, 385 F.3d at 573). The scope of
the inquiry for improper joinder, however, is even broader than that for
12(b)(6) because the Court may “pierce the pleadings” and consider whether
summary judgment-type evidence determines whether the plaintiff has a
basis in fact for his or her claim. Smallwood, 352 F.3d at 223 n.8 (citing
Travis v. Irby, 326 F.3d 644, 648-49 (5th Cir. 2003)); see also Menendez,
364 F. App’x at 69. In conducting this inquiry, the Court must “take into
account all unchallenged factual allegations, including those alleged in the
complaint, in the light most favorable to the plaintiff.” Travis, 326 F.3d at
649. So, too, must the Court resolve all contested issues of fact and all
ambiguities of state law in favor of the party opposing removal. See id.; Elam
v. Kan. City S. Ry. Co., 635 F.3d 796, 813 (5th Cir. 2011).
III. DISCUSSION
Whether remand is required turns on whether Brumfield “states a
claim under state law” against Kamath, an in-state defendant.15 Menendez,
364 F. App’x at 69. If the plaintiff does state a claim against Kamath under
Louisiana law, Kamath is properly joined and remand is mandated, as
complete diversity does not exist.
To examine whether the plaintiff maintains a claim against Kamath,
the Court looks to the release Brumfield signed partially absolving Kamath
of liability. In Louisiana, such a release is known as a Gasquet release, as it
was authorized by the case Gasquet v. Commercial Union Ins. Co., 391 So.2d
466 (La. App. 4 Cir. 1980). Under a Gasquet release, the plaintiff releases
the defendant from liability except as necessary to pursue an action against
the defendant’s excess insurer. Such releases are generally done where, as
here, the defendant has a primary insurer that pays the policy limits, and the
plaintiff wishes to pursue a claim against any excess insurer. See RSUI
Indem. Co. v. Am. States Ins. Co., 127 F. Supp. 3d 649, 657-58 (E.D. La. 2015)
(explaining the use of a Gasquet release). The release Brumfield signed with
15 Plaintiff does not claim that Hemphill is properly joined or that her
presence in the suit defeats diversity. Therefore, the Court does not reach
this question and examines only the plaintiff’s claim against Kamath.
both individual defendants specifically states that he reserves the following
rights:
to maintain insurance claims and a civil cause of
action against Timothy Hemphill and Burde Kamath
only to the extent legally required maintain Clark
David Brumfield’s full rights to pursue and prosecute
any claims or civil actions against other insurance
policies that may provide coverage to Timothy
Hemphill and Burde Kamath.16
Although the plaintiff signed a limited release, he “retained a very real
and specific claim against the tortfeaser,” such that he could bring a claim
against Kamath’s excess insurer. Durel v. Howard, No. 13-cv-5991, 2013 WL
6499723, at *2 (E.D. La. Dec. 11, 2013). If Kamath had no excess insurer, or
if the plaintiff had otherwise released or settled with the excess insurer, there
would be no remaining basis for a claim against Kamath. But here, Kamath
does have an excess insurer, and thus Brumfield can still “state a claim under
state law” against both the tortfeaser and the excess insurer. Menendez, 364
F. App’x 62, 69. And although Kamath notified Brumfield of the claim after
James River removed the case, Kamath was still liable under the Gasquet
release at the time of removal, and Brumfield still held a claim against
Kamath at that time. Even with a Gasquet release, a claim against Kamath
is necessary for a claim against Allstate under Louisiana’s Direct Action
16 R. Doc. 15-2 at 4 (emphasis omitted).
statute. See La. R.S. 22:1269(B)(1). That statute provides that a plaintiff
cannot bring a tort claim against an insurer unless he or she also brings a
claim against the insured, except in limited circumstances not present here.
Id.17
Because Louisiana law affords Brumfield a claim against Kamath
notwithstanding the Gasquet release, Kamath has not been improperly
joined. Indeed, James River does not seem to disagree. Rather, defendant
argues that joinder was improper and remand unnecessary only if the
plaintiff fully released Kamath and did not execute a Gasquet release.18
Having reviewed the release at issue, that is not the case here, as Brumfield
17 Louisiana courts have emphasized that an insurer’s liability is based in
the liability of the insured, who committed the tort. See, e.g., Brown v.
Unknown Driver, 925 So.2d 583, 590 (La. App. 4 Cir. 2006); Lucey v.
Harris, 490 So. 2d 416, 419 (La. App. 5 Cir. 1986). In Soileau v. Smith True
Value Rental, 144 So.3d 771 (La. 2013), the Louisiana Supreme Court held
for the first time that under the Direct Action Statute, a judgment may be
entered against an insurer even if the insured party has been dismissed. Id.
at 778-79. However, the Court there also held that an insured is a necessary
party when, as here, an action was being commenced against the insurer. Id.
The Louisiana Supreme Court also found it relevant to its holding that the
insured and insurer had been codefendants for two years, and the insured
defendant was dismissed at trial. Id. at 779 n.5. Here, where plaintiff first
sued Allstate in June and before the litigation progressed significantly, the
holding in Soileau does not render Kamath an unnecessary party at this point
in the litigation.
18 R. Doc. 9.
executed only a partial release.!°9 Therefore, because Kamath has been
properly joined, complete diversity does not exist, and the case must be
remanded to state court.
IV. CONCLUSION
For the foregoing reasons, the plaintiffs motion to remand is
GRANTED.
New Orleans, Louisiana, this _13th of September, 2019.
dork VG2+42_
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE
19 Other courts that have considered Gasquet releases have similarly
found remand appropriate. See Tipton v. Landen, No. 6:15-cv-02811, 2016
WL 919539, at *5-6 (W.D. La. Mar. 8, 2016) (holding that the citizenship of
a defendant-tortfeasor cannot be ignored for diversity purposes when the
plaintiff sued both tortfeasors and their primary and excess insurers at the
outset of the case, and then settled with the tortfeasors via a Gasquet
release); cf’ Dural v. Howard, No. 13-cv-5991, 2013 WL 6499723, at *2
(E.D. La. Dec. 11, 2013) (holding that although the contract at issue was not
a proper Gasquet release, “[t]he circumstances of Gasquet likely would
have precluded removal had it been attempted.”)
10