Who Has Jurisdiction?
In this case, does the state or federal court have jurisdiction?
A recent case brought in the United States District Court in Alabama was the result of a fire that started in a kitchen. The alarm system did not alert the occupants of the fire or notify authorities. The occupants subsequently died. The plaintiffs, as personal representatives of the estates of decedents, filed a complaint in state court alleging they died because of the negligence and breach of contract of the installing alarm company and the monitoring company.
The defendant monitoring company, based in another state, moved to have the action moved to federal court, contending that since the installer of the system assigned all contractual rights and liabilities to the monitoring company, and the installer was no longer in business, that the plaintiffs fraudulently joined the local installer as a defendant to destroy federal jurisdiction. The court granted the plaintiffs’ motion to remand back to the state court.
For federal jurisdiction to exist, there must be complete diversity of citizenship and the amount in controversy must exceed $75,000.00. If the defendant is a citizen of the state where the plaintiff filed suit, there is no diversity. If the defendant can show there is no possible way the plaintiff can establish a cause of action against the resident installing company, then the plaintiff will be considered to have fraudulently joined the non-deceased defendant.
The district court may deny a motion to remand when the defendants prove by clear evidence that there is no possibility the plaintiff can establish a cause of action against the resident defendant. A plaintiff does not have to have a winning case; they need only have a possibility of stating a valid cause of action in order for the joinder to be legitimate. The district court must evaluate factual allegations in the light most favorable to the plaintiff and resolve any uncertainties about the applicable law in the plaintiff’s favor.
The monitoring company asserted that the deceased contractually waived their right to sue the installing alarm company for negligence, pointing out a provision in the contract with the installing company, including: “The subscriber does not desire this contract to provide for full liability of dealer and agrees that dealer shall be exempt from liability, loss, damage or injury due directly or indirectly to occurrences or consequences therefrom, which the service or equipment is designed to detect or avert….”
The court pointed out that the installing company’s viability as a company does not necessarily make its joinder in this action fraudulent. The question is whether the plaintiffs can possibly prove the installing company’s liability, not the plaintiffs’ ability to recover on the claim. “The motive for joining such a defendant is immaterial, even when the defendant is judgment-proof, or when the plaintiff is ultimately found not to have had a cause of action against the non-diverse defendant.”
The court found that the monitoring company had not established by clear evidence that there is no possibility the plaintiff can establish a cause of action against the resident defendant. The monitoring company has not demonstrated that the plaintiffs fraudulently joined the installing company as a defendant.
If the installing company was a citizen of the state in which the plaintiff filed suit, then the state court would be proper jurisdiction for the action as there would be no diversity. The monitoring company was apparently not a citizen of the state where the action was filed. The court agreed with the plaintiff that the installing company was a proper party to the action, there was no diversity and the State Court was the proper jurisdiction.
The Court granted the plaintiffs’ motion and remanded this case back to the Circuit Court.