Shipman v. Mountain Lake Risk Retention Group, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

AARON SHIPMAN CIVIL ACTION

VERSUS No. 23-5730

MOUNTAIN LAKE RISK SECTION I

RETENTION GROUP, INC. ET AL.

ORDER & REASONS

Before the Court is plaintiff Aaron Shipman’s (“Shipman”) motion to remand

the above-captioned action to the Civil District Court for the Parish of Orleans.1

Defendants U.S. Xpress, Inc. (“USX”), U.S. Xpress Leasing, Inc., and Mountain Lake

Risk Retention Group, Inc. (collectively, “opposing defendants”) jointly oppose the

motion. 2 Plaintiff filed a reply3 and opposing defendants filed a sur-reply.4

Defendants Hartford Fire Insurance Company (“Hartford UM”) and Gary Strong

(“Strong”) (collectively with opposing defendants, “defendants”) did not file

oppositions to Shipman’s motion. For the following reasons, the Court grants

Shipman’s motion to remand and denies his request for costs and attorney’s fees.

I. BACKGROUND

This action arises out of an accident that occurred on December 14, 2021 in St.

Tammany Parish. The street sweeping vehicle Shipman was operating was struck by

an 18-wheeler truck operated by Strong, who was allegedly intoxicated at the time.5

1 R. Doc. No. 5.

2 R. Doc. No. 9.

3 R. Doc. No. 15.

4 R. Doc. No. 18.

5 Case No. 22-4545, R. Doc. No. 1-1, ¶¶ III–IV.

Shipman filed a lawsuit in the Civil District Court for the Parish of Orleans, alleging

a number of state law causes of action against Strong as well as against Strong’s

employers, U.S. Xpress, Inc., U.S. Xpress Leasing, Inc, and U.S. Xpress Enterprises,

Inc.6 Shipman also named as defendants U.S. Xpress, Inc.’s insurer Mountain Lake

Risk Retention Group, Inc. and Shipman’s employer’s uninsured/underinsured

motorist (“UM”) insurers, Hartford UM and State Farm Mutual Automobile

Insurance Company.7

Shipman’s complaint alleges that he sustained, or will sustain, the following

damages: “past, present, and future physical pain and suffering,” “past, present, and

future mental pain and suffering,” mental anguish, “past and future physical

impairment and disability,” “past and future medical expenses and rehabilitation

expenses,” “past and future loss of income,” “past and future loss of earning capacity,”

“past and future loss of enjoyment of life,” “loss of services,” loss of consortium, loss

of society, as well as punitive and exemplary damages.8

Defendants first removed this action to federal court on November 16, 2022.9

On January 30, 2023, Hartford Fire Insurance Company’s workers’ compensation

division (“Hartford WC”)10 filed an unopposed motion to intervene as of right

6 Id. ¶ VI.

7 Id. ¶¶ IX, X. “The object of UM insurance is to provide full recovery for automobile

accident victims who suffer damages caused by a tortfeasor who is not covered by

adequate liability insurance.” Duncan v. U.S.A.A., 950 So. 2d 544, 547 (La. 2006).

8 Id. ¶ II.

9 E.D. La. Case No. 22-4545, R. Doc. No. 1.

10 Twin City Fire Insurance Company (“Twin City”) was later substituted in place of

Hartford WC. Both Twin City and Hartford WC have their principal places of

pursuant to Federal Rule of Civil Procedure 24(a).11 The complaint-in-intervention

named Shipman, U.S. Xpress, Inc., U.S. Xpress Leasing, Inc., U.S. Xpress

Enterprises, Inc., Mountain Lake Risk Retention Group, Inc., Strong (“Strong”), and

State Farm Mutual Automobile Insurance as defendants-in-intervention.12 The

complaint asserts that Hartford WC was Shipman’s employer’s workers’

compensation insurer and, in that capacity, “has paid medical and indemnity benefits

to and/or on behalf of Aaron Shipman. . .”13 Accordingly, Hartford WC asserts,

“[p]ursuant to conventional and legal subrogation, Intervenor [Hartford WC] is

entitled to collect from defendants[-in-intervention] the full and true sum of

[$53,190.70], plus any additional amounts that may be paid to and/or on behalf of

Aaron Shipman as a result of the Workers’ Compensation payments that Intervenor

has made and/or continue to make[.]”14 This Court granted Hartford WC’s motion to

intervene on January 31, 2023.15

Shipman filed a motion to remand on March 20, 2023, on the ground that

Hartford WC, as the intervening workers’ compensation insurer, is not diverse from

Hartford UM, the defendants’ UM insurer.16 The opposing defendants argued that

Hartford WC was improperly joined and, even if joinder was proper, the Court should

business in Connecticut. R. Doc. No. 2, at 4. Accordingly, this substitution does not

change the diversity analysis.

11 E.D. La. Case No. 22-4545, R. Doc. No. 20.

12 Id. ¶ 2.

13 Id. ¶ 7.

14 Id. ¶ 11.

15 E.D. La. Case No. 22-4545, R. Doc. No. 21.

16 E.D. La. Case No. 22-4545, R. Doc. No. 29-1, at 2.

only remand the claims in intervention.17 On April 25, 2023, this Court granted

Shipman’s motion to remand, finding that joinder of Hartford WC was proper and it

was in the interests of justice and judicial economy to allow the action to proceed

together.18

On October 3, 2023, defendants filed another notice of removal.19 The notice of

removal alleged that “[s]ince the case was remanded to state court, it has become

evident that the UM/UIM defendants were named in bad faith to obtain a favorable

state court venue.”20 State Farm was dismissed on July 11, 2023 from the state court

proceeding after settling with Shipman for what defendants allege was a nominal

amount.21 Defendants assert that they learned that State Farm had been dismissed

on September 19, 2023.22 Defendants argue that Hartford UM should also be

dismissed because “USX provided Plaintiff with insurance policies showing up to $50

million in insurance coverage for the liability claims[,]” and “USX received

stipulations from several of its insurers showing coverage for the personal injury

claims up to $30 million.”23 Defendants also assert that they have provided “clear and

unmistakable evidence that [they] have up to $75 million in liability coverage to cover

Plaintiff’s claims.”24 They assert plaintiff’s recovery is not capable of exceeding $30

17 E.D. La. Case No. 22-4545, R. Doc. No. 32.

18 Case No. 22-4545, R. Doc. No. 58.

19 R. Doc. No. 2.

20 R. Doc. No. 2, ¶IV.

21 Id.; R. Doc. No. 9, at 1.

22 R. Doc. No. 2, ¶IV.

23 R. Doc. No. 9, at 2.

24 R. Doc. No. 18, at 6. Defendants’ response and sur-reply are confusing, and it is not

clear to the Court whether defendants have $50 million or $75 million in liability

million.25 Therefore, defendants argue Shipman has refused to remove Hartford UM

solely to destroy diversity, rendering removal proper.26

On November 11, 2023, Shipman filed the motion to remand presently before

this Court.27 Shipman argues that this removal is duplicative of issues already

adjudicated, untimely, and lacks the consent of all the defendants.28 Shipman also

requests costs and attorney’s fees and costs pursuant to 28 U.S.C. 1447(c) because

this removal is frivolous and duplicative.29

In response, opposing defendants argue USX has policies demonstrating up to

$75 million in insurance coverage.30 Therefore, they argue that Shipman cannot

recover from Hartford UM pursuant to Louisiana law because, to recover from a UM

insurer, a plaintiff must prove the value of his claim exceeds the tortfeasor’s

insurance.31 Defendants also allege this removal is timely because they learned of

State Farm’s dismissal on September 19, 2023 and Shipman refused to dismiss

Hartford UM on October 2, 2023.

coverage. The difference in the amounts does not, however, influence the Court’s

analysis or conclusion.

25 Id. at 14.

26 R. Doc. No. 2, ¶IV.

27 R. Doc. No. 5.

28 R. Doc. No. 5-1, at 1.

29 Id. at 2.

30 R. Doc. No. 9, at 10.

31 Id.

II. STANDARD OF LAW

a. Removal

Pursuant to 28 U.S.C. § 1441(a), a civil action brought in state court may be

removed to the federal district court embracing the place where such action is

pending so long as the federal courts have original jurisdiction over that action. “A

federal district court has subject matter jurisdiction over a state claim when the

amount in controversy [exceeds $75,000] and there is complete diversity of citizenship

between the parties.” Mumfrey v. CVS Pharmacy, Inc., 719 F.3d 392, 397 (5th Cir.

2013) (citing 28 U.S.C. § 1332(a)).

The “party seeking to invoke federal diversity jurisdiction bears the burden of

establishing both that the parties are diverse and that the amount in controversy

exceeds $75,000.” Garcia v. Koch Oil Co. of Tex. Inc., 351 F.3d 636, 638 (5th Cir. 2003).

The removing party must “distinctly and affirmatively allege the citizenship of the

parties.” Howery v. Allstate Ins. Co., 243 F.3d 912, 919 (5th Cir. 2001) (cleaned up).

“To determine whether jurisdiction is present for removal, [courts] consider the

claims in the state court petition as they existed at the time of removal.” Manguno v.

Prudential Prop. And Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). “Any ‘doubts

regarding whether removal jurisdiction is proper should be resolved against federal

jurisdiction.’” Vantage Drilling Co. v. Hsin-Chi Su, 741 F.3d 535, 537 (5th Cir. 2014)

(quoting Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000)).

b. Timing of Removal

“Under 28 U.S.C. § 1446(b), when an action is not initially removable, the

defendant has 30 days after it receives a copy of ‘other paper from which it may first

be ascertained’ that the case is or has become removable.” S.W.S. Erectors, Inc. v.

Infax, Inc., 72 F.3d 489, 494 (5th Cir. 1996). “The Fifth Circuit has also recognized a

defendant's right to seek subsequent removals after remand.” Zea v. Avis Rent a Car

System, Inc., 435 F.Supp.2d 603, 606 (S.D. Tex. 2006) (citing S.W.S. Erectors, Inc. v.

Infax, Inc., 72 F.3d 489, 492 (5th Cir.1996)). “Once a case is remanded, a defendant

is precluded from seeking removal again on the same ground. That is, a defendant

cannot rely on the same pleading or event to argue removability. However,

the theory of removability may be the same.” Id. (emphasis in original).

“The Fifth Circuit has indicated that the “other paper” conversion requires a

voluntary act by the plaintiff.” S.W.S. Erectors, Inc.. 72 F.3d at 494 (citing Gaitor v.

Peninsular & Occidental S.S. Co., 287 F.2d 252, 254 (5th Cir.1961)) (emphasis in

original).32 “Further, [the Fifth Circuit] has held that the defendant's subjective

32 The Court notes that there are exceptions to the rule requiring a voluntary act by

the plaintiff. See Zea, 435 F.Supp.2d at 606 (S.D. Tex. 2006) (citing exceptions); see

also Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d 529, 533 (5th Cir. 2006) (holding

that “removal on the basis of an unappealed severance, by a state court, of claims

against improperly joined defendants is not subject to the voluntary-involuntary

rule.”).

knowledge cannot convert a case into a removable action.” Chapman v. Powermatic,

Inc., 969 F.2d 160, 163 (5th Cir. 1992).

“Removal statutes are to be construed strictly against removal and for remand

and a failure to timely file a notice of removal is a defect that requires remand to state

court.” Moore v. Kerr, No. CIV. A. 01-3341, 2002 WL 58540, at *2 (E.D. La. Jan. 14,

2002) (Vance, J.).

c. Improper Joinder

The Fifth Circuit has recognized two ways to establish improper joinder: “(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.” Travis v.

Irby, 326 F.3d 644, 646–47 (5th Cir. 2003).33 As articulated by the Fifth Circuit in

Smallwood v. Illinois Central Railroad Co., “the test for fraudulent joinder is whether

the defendant has demonstrated that there is no possibility of recovery by the plaintiff

against an in-state[, non-diverse] defendant, which stated differently means that

there is no reasonable basis for the district court to predict that the plaintiff might be

able to recover against an in-state[, non-diverse] defendant.” 385 F.3d 568, 573 (5th

Cir. 2004).

“Pursuant to the Fifth Circuit's holding in Smallwood, to resolve this inquiry,

a court may conduct a Federal Rule of Civil Procedure 12(b)(6)-type analysis,

considering ‘the allegations in the complaint to determine whether the complaint

33 Defendants do not allege actual fraud in the pleading of jurisdictional facts. Rather,

defendants allege that plaintiff will not be able to establish a cause of action against

Hartford UM.

states a claim under the state law against the in-state defendant.’” Bourgeois v. U.S.

Shipping Corp., No. CV 23-1544, 2023 WL 4624736, at *3 (E.D. La. July 19, 2023)

(Africk, J.) (quoting Bayou Acquisitions, LLC v. Badger Daylighting Corp., No. 22-

4541, 2023 WL 2367440, at *3 (E.D. La. Mar. 6, 2023) (Ashe, J.)). “Ordinarily, if a

plaintiff can survive a Rule 12(b)(6) challenge, there is no improper joinder.” Id.

(quoting Bayou Acquisitions, LLC, 2023 WL 2367440, at *3). “However, if ‘a plaintiff

has stated a claim, but has misstated or omitted discrete facts that would determine

the propriety of joinder. . . the district court, may, in its discretion, pierce the

pleadings and conduct a summary inquiry.’” Id. (quoting Bayou Acquisitions, LLC,

2023 WL 2367440, at *3). “[A] summary inquiry is appropriate only to identify the

presence of discrete and undisputed facts that would preclude plaintiff's recovery

against the in-state defendant.” Id. (quoting Bayou Acquisitions, LLC, 2023 WL

2367440, at *3).

“When determining the validity of an improper joinder claim, the Court does

‘not determine whether the plaintiff will actually or even probably prevail on the

merits of the claim, but look[s] only for a possibility that the plaintiff might do so.’”

Id. (quoting Guillory v. PPG Indus., Inc., 434 F.3d 303, 309 (5th Cir. 2005)). “[T]he

district court ‘must evaluate all of the factual allegations in the light most favorable

to the plaintiff, resolving all contested issues of substantive fact in favor of the

plaintiff.’” Richmond v. Chubb Grp. of Ins. Cos., No. 06-3973, 2006 WL 2710566, at

*2 (E.D. La. Sept. 20, 2006) (Africk, J.) (quoting Burden v. Gen. Dynamics, 60 F.3d

213, 216 (5th Cir. 1995)). However, “[a] mere theoretical possibility of recovery . . .

will not preclude a finding of improper joinder.” Smallwood, 385 F.3d at 573 n.9.

d. Attorney’s Fees and Costs

“An order remanding the case may require payment of just costs and any actual

expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C.

§ 1447. The statute “authorizes courts to award costs and fees, but only when such

an award is just.” Martin v. Franklin Cap. Corp., 546 U.S. 132, 138 (2005). “[T]he

standard for awarding fees should turn on the reasonableness of the removal. Absent

unusual circumstances, courts may award attorney's fees under § 1447(c) only where

the removing party lacked an objectively reasonable basis for seeking removal.” Id.

at 141.

“The application of § 1447(c) requires consideration of the propriety of the

removing party's actions based on an objective view of the legal and factual elements

in each particular case. [Courts] evaluate the objective merits of removal at the time

of removal, irrespective of the fact that it might ultimately be determined that

removal was improper.” Valdes v. Wal-Mart Stores, Inc., 199 F.3d 290, 293 (5th Cir.

2000).

III. ANALYSIS

Defendants rely on three events to demonstrate the timeliness of their

removal: (1) the dismissal of State Farm on July 11, 2023, which defendants allege

they learned about on September 19, 2023; (2) USX providing Shipman with

insurance policies showing liability coverage up to $50 million on September 19, 2023;

and (3) Shipman denying defendants’ request to dismiss Hartford UM from the

litigation on October 2, 2023.34 They argue that these events are “other papers” from

which “it may first be ascertained that the case is one which [ ] has become

removable.” 28 U.S.C. § 1446

The information provided by USX to Shipman concerning the liability coverage

is not an “other paper.” As mentioned previously, “[t]he Fifth Circuit has indicated

that the ‘other paper’ conversion requires a voluntary act by the plaintiff.” S.W.S.

Erectors, Inc., 72 F.3d at 494. Therefore, documents “created by the defendant” cannot

constitute an “other paper.” Id.

Additionally, the “other paper” “must result from the voluntary act of a

plaintiff which gives the defendant notice of the changed circumstances which now

support federal jurisdiction.” Addo v. Globe Life & Acc. Ins. Co., 230 F.3d 759, 762

(5th Cir. 2000). The notice of State Farm’s dismissal did not constitute “changed

circumstances” which now support federal jurisdiction. State Farm’s dismissal did

not result in diversity jurisdiction because Hartford UM and Twin City are not

diverse from each other.35

Defendants have been in possession of information concerning the amount of

liability coverage throughout this entire litigation. That Shipman would not be able

to recover from Hartford UM unless his recovery exceeded the coverage of the other

policies has been evident since the complaint was filed. In fact, this Court previously

34 R. Doc. No. 9, at 17.

35 Defendants admit that “Hartford’s citizenship is the same as Twin City’s, and

ostensibly destroys diversity.” R. Doc. No. 2, at 5.

addressed whether Shipman could recover from Hartford UM.36 In considering the

alleged improper joinder of Hartford WC in connection with defendant’ first motion

to remand, this Court found that defendants had not demonstrated that there was no

possibility of recovery against Hartford UM.37

Defendants’ delay in calculating the liability coverage to determine Shipman’s

likelihood of recovery against Hartford UM does not provide them with additional

time to file a notice of removal. Additionally, given the complexity of litigation and

settlement, the Court cannot definitively conclude that a settlement with one party

can constitute an admission that a plaintiff will not be able to recover from another

party who was not involved in the settlement.

Finally, Shipman’s denial of the request to dismiss Hartford UM is also not

“notice of [ ] changed circumstances which now support federal jurisdiction.” See

Addo, 230 F.3d at 762. While the denial constitutes a voluntary act by Shipman, it

does not support federal jurisdiction. If, as defendants allege, joinder of Hartford UM

was improper because Shipman cannot recover from Hartford UM, federal

jurisdiction would have existed regardless of whether Shipman accepted or rejected

defendants’ request to dismiss Hartford UM.38 Accordingly, such denial is not notice

of “changed circumstances.”

36 E.D. La. Case No. 22-4545, R. Doc. No. 58.

37 E.D. La. Case No. 22-4545, R. Doc. No. 58, at 11.

38 Assuming joinder was improper as alleged, defendants could have removed the case

either on the basis of improper joinder or on the basis of diversity. Therefore, the case

was removable regardless of whether Shipman voluntarily dismissed Hartford UM

or not. Shipman’s denial of voluntary dismissal did not change whether federal

jurisdiction existed.

As stated, failure to timely remove is a defect that requires remand to state

court. See Moore, 2002 WL 58540, at *2. Accordingly, the Court will remand this

action to state court. 39

Shipman also seeks an award of attorney’s fees and costs. “Absent unusual

circumstances, courts may award attorney's fees pursuant to 28 U.S.C. § 1447(c) only

where the removing party lacked an objectively reasonable basis for seeking

removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). However, “[t]he

statute does not contain a presumption either in favor of or against awarding fees,

and whether to award fees under the statute is committed to the Court's discretion.”

Citi Prop. Holdings, Inc. v. Labranche, No. 11-617, 2011 WL 1980016, at *2 (E.D. La.

May 20, 2011) (Lemmon, J.) (quoting Admiral Ins. Co. v. Abshire, 574 F.3d 267, 280

(5th Cir. 2009)). This Court exercises its discretion not to grant Shipman’s request

for attorney’s fees and costs.

IV. CONCLUSION

Accordingly,

IT IS ORDERED that Shipman’s motion to remand is GRANTED IN PART

and DENIED IN PART. This case is REMANDED to the Civil District Court for

the Parish of Orleans, State of Louisiana for further proceedings. Shipman’s request

for attorney’s fees and costs is DENIED.

39 Because the Court remands the case on the basis of untimely removal, the Court

need not address defendants’ improper joinder argument or whether all defendants

consented to removal.

New Orleans, Louisiana, December 14, 2023.

□□ AFRICK

UNITED STATES DISTRICT JUDGE

14