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Kemp v. Hudgins

United States District Court, Tenth Circuit

June 12, 2013

JOHN KEMP, individually and as Special Administrator of The Estate of TERESA LEANN KEMP, Plaintiff,
v.
KASTON HUDGINS, Defendant,
v.
DAIRYLAND INSURANCE COMPANY, Garnishee.

MEMORANDUM AND ORDER

JULIE A. ROBINSON, District Judge.

This matter comes before the Court on Plaintiff John Kemp's Motion to Remand (Doc. 12) and Garnishee Dairyland Insurance Company's Motion for Leave to File Sur-Reply (Doc. 10). Garnishee Dairyland Insurance Company has also filed a Motion for Hearing (Doc. 17), requesting a hearing on Plaintiff's Motion to Remand. The Court finds that a hearing would not assist the Court and therefore denies the request for hearing. The remaining matters are fully briefed and the Court is prepared to rule. For the reasons set forth in more detail below, Plaintiff's Motion to Remand is denied and Dairyland's Motion for Leave to File Sur-Reply is denied.

I. Background

Plaintiff John Kemp, individually and as Special Administrator of the Estate of Teresa LeAnn Kemp ("Plaintiff") brought a wrongful death action in the District Court of Cherokee County, Kansas, Case No. 10CV17, against Defendant Kaston Hudgins ("Hudgins"). Following a trial, the District Court of Cherokee County entered Judgment in favor of Plaintiff against Hudgins on Count I of Plaintiff's First Amended Petition for the wrongful death of Teresa Kemp in the amount of $3, 232, 604.67 and on Count II for the wrongful death of Taylor Kemp in the amount of $2, 090, 561.40, plus costs.[1] The state court also entered Judgment for Plaintiff on Count III of Plaintiff's First Amended Petition for personal injuries to Teresa Kemp and punitive damages, against Hudgins in the amount of $438, 142.94 for actual damages and $5, 406.00 for punitive damages, plus costs.[2]

Plaintiff, as judgment creditor, filed a Request for Garnishment on October 18, 2012, naming Hudgins as the Judgment Debtor and Dairyland Insurance Company ("Dairyland"), Hudgin's insurer, as the Garnishee.[3] The court issued an Order of Garnishment[4] and Dairyland filed its Answer, claiming that it held no money for and was not indebted to the judgment debtor.[5] On November 15, 2012, Plaintiff filed a Reply to Dairyland's Answer, disputing that Dairyland was not indebted to Hudgins; alleging that Dairyland acted negligently and/or in bad faith; and seeking judgment against Dairyland in the amount of $5, 766, 715.01, plus interest, costs and attorneys' fees.[6] On November 21, 2012, Dairyland filed its Notice of Removal to this Court.[7] On December 12, 2012, Plaintiff filed the instant Motion to Remand.

II. Standard

Federal courts are required to remand a case to state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction."[8] To avoid remand, a defendant must show that the action satisfies the requirements for federal jurisdiction.[9] Because federal courts "are courts of limited jurisdiction, there is a presumption against federal jurisdiction."[10] Therefore, courts must resolve doubtful cases in favor of remand.[11] Defendant bears the burden of proving facts sufficient to establish jurisdiction.[12]

Remand is improper if the defendant properly removed a case to federal court that the plaintiff could have originally filed in federal court.[13] Federal courts are courts of limited jurisdiction, and as such they must have a statutory or constitutional basis to exercise jurisdiction over any controversy.[14] There are two statutory bases for federal subject matter jurisdiction. First, under 28 U.S.C. § 1332(a), federal district courts have original jurisdiction of civil actions where complete diversity of citizenship and an amount in excess of $75, 000 (exclusive of interest and costs) in controversy exists. Second, under 28 U.S.C. § 1331, federal district courts "have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States." In addition, if the Court has federal question or diversity jurisdiction of some claims, it may exercise supplemental jurisdiction over state law claims.[15]

In this removal action, federal jurisdiction is premised on diversity of citizenship under 28 U.S.C. § 1332. Federal jurisdiction under § 1332 requires complete diversity of citizenship between the plaintiff and defendants and an amount in controversy exceeding $75, 000.[16] "The courts must rigorously enforce Congress' intent to restrict federal jurisdiction in controversies between citizens of different states."[17] The presumption is thus against removal jurisdiction, [18] and courts must refrain from exercising jurisdiction in all cases where such jurisdiction does not affirmatively appear on the record.[19] Statutes conferring both diversity and removal jurisdiction are to be strictly construed, [20] and "[d]oubtful cases must be resolved in favor of remand."[21]

III. Discussion

Federal law governs the characterization of garnishment proceedings for purposes of removal, and provides that the bad faith claim made pursuant to the garnishment proceeding created a new action separate from the underlying litigation.[22] The case law makes it clear that such actions are removable as separate actions.

The court in Smotherman v. Caswell , addressed the same issue involved in this case-whether the court has subject matter jurisdiction where the garnishee removed the case on the basis of diversity of citizenship.[23] The case involved facts very similar to the instant case. In Smotherman, the plaintiffs obtained a judgment against the defendant and then instituted garnishment proceedings against defendant's insurers. The garnishee insurance companies denied liability and in their reply the plaintiffs alleged that the insurance companies were guilty of bad faith and negligence in representing defendant and were therefore liable to plaintiffs for the full amount of the judgment entered against the defendant.[24] The court held that "the characterization of garnishment actions for the purposes of removal should be a matter of federal law rather than a matter to be determined by construing individual state garnishment statutes."[25] The court then concluded that under federal law the garnishment action is a distinct civil action for the purposes of 28 U.S.C. § 1441(a) because it is separate and distinct from the underlying wrongful death action and involves "a new party litigating the question of a new liability."[26] The court further found that even under Kansas law, it would reach the same conclusion.[27]

Plaintiff argues that a determination that the garnishment is a "separate civil action" should not be determinative, and that there is a requirement that the action be capable of being originally filed in federal court. Plaintiff then argues that Kansas law requires an assignment to bring a separate action against the insurer and because Plaintiff did not receive an assignment from Hudgins, a garnishment proceeding was the only available avenue.[28] Plaintiff then argues that he could not have filed this action in federal court because without a federal judgment, there can be no garnishment in federal court. Plaintiff asserts that none of the other cases address this argument.

Plaintiff's argument is unpersuasive. The case law focuses on substance over form, and finds that for purposes of removal, where a separate civil action is found, sufficient subject matter jurisdiction depends on the Court's determination of whether diversity ...


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