United States District Court, M.D. North Carolina
MEMORANDUM OPINION AND RECOMMENDATION OF UNITED
STATES MAGISTRATE JUDGE
Patrick Auld United States Magistrate Judge
case comes before the undersigned United States Magistrate
Judge for a recommendation on Defendant State Farm Mutual
Automobile Insurance Company's “Motion to Dismiss
Defendant Bryan Torres as a Nominal Party” (Docket
Entry 11) (the “Motion”). Plaintiff filed no
response to the Motion. (See Docket Entries dated
Sep. 22, 2017, to present.) For the reasons that follow, the
Court should grant the Motion.
Bowers, Jr., and Mary Ann Bowers (the
“Plaintiffs”), initiated a lawsuit in Cabarrus
County Superior Court against Defendants State Farm Mutual
Automobile Insurance (“State Farm”) and Bryan
Torres. (See Docket Entry 1-1 at 5.) Plaintiffs allege
that Mr. Torres drove negligently and injured Mr. Bowers in
an automobile accident. (Id., ¶¶ 11-13.)
Mr. Torres's insurance carrier “tendered Mr.
Torres'[s] policy limit, ” and Mr. Bowers
thereafter “agreed to a Covenant not to Enforce
Judgement against Mr. Torres and his insurance carrier,
Geico.” (Id., ¶¶ 14-15; see
also Docket Entry 1-2 (the “Covenant not to
Enforce”).) “However, the amount represented by
the policy limit of the Geico policy is not sufficient to
compensate [Mr. Bowers] for his personal injury caused by the
collision. In this respect, Mr. Torres is an underinsured
motorist.” (Docket Entry 1-1, ¶ 16.) Mr. Bowers
possessed underinsured motorist's coverage through State
Farm and “made a timely demand [for payment of
benefits] upon [it], ” which State Farm refused.
(Id., ¶¶ 18-22.) Plaintiffs then commenced
this action, in which Mr. Bowers alleges negligence as to Mr.
Torres, and alleges bad faith, breach of covenant of good
faith and fair dealing, and breach of contract as to State
Farm. (See id. at ¶¶ 24-50.) Mrs. Bowers
also asserts a claim for loss of consortium against Mr.
Torres. (Id. at ¶¶ 51-52.)
and Mr. Torres qualify as North Carolina citizens, and State
Farm constitutes an Illinois corporation. (See
Docket Entry 1 at ¶¶ 5, 8.) State Farm removed the
case to this Court on the basis of diversity jurisdiction
(see generally id.), and now moves to dismiss Mr.
Torres as a nominal party whose presence does not defeat
complete diversity (see Docket Entry 11 at 1). State
Farm argues that Mr. Torres “has no financial stake in
this lawsuit since Mr. Bowers entered into a covenant not to
enforce any judgment in excess of Torres'[s] previously
tendered insurance policy limits.” (Docket Entry 14 at
Farm argues that “Torres should be dismissed as a
nominal party under Rule 21 [of the Federal Rules of Civil
Procedure].” (Id.) As an initial matter,
“[t]he proper inquiry for dropping a party under Rule
21, however, is not whether the party is nominal but whether
the party is dispensable.” Rouse v. State Farm Mut.
Auto. Ins. Co., No. 1:14-CV-690, 2015 WL 3849648, at *4
(M.D. N.C. June 22, 2015). “[State Farm's] argument
therefore conflates two issues: (1) whether [Mr. Torres]
should be dropped under Rule 21 and (2) whether [Mr. Torres]
is a nominal party.” Id.
Whether Mr. Torres Is a Nominal Party
purposes of diversity jurisdiction, “a federal court
must disregard nominal or formal parties and rest
jurisdiction only upon the citizenship of real parties to the
controversy.” Navarro Sav. Ass'n v. Lee,
446 U.S. 458, 460-61 (1980). “Nominal means simply a
party having no immediately apparent stake in the litigation
either prior or subsequent to the act of removal. In other
words, the key inquiry is whether the suit can be resolved
without affecting the . . . nominal defendant in any
reasonably foreseeable way.” Hartford Fire Ins. Co.
v. Harleysville Mut. Ins. Co., 736 F.3d 255, 260 (4th
Cir. 2013). “Determining nominal party status is a
practical inquiry, focused on the particular facts and
circumstances of a case . . . .” Id.
“Courts have looked to numerous factors in deciding
whether someone is a real party in interest, ” such as
“the level of control that the party retains over the
litigation[, ] . . . the weightiness of the party's
interest in the litigation[, ] . . . whether the party has
retained counsel[, ] . . . [and] whether the party has given
a statement or deposition.” Owens v.
Overstreet, Civil Action No. 1:10-00784, 2010 WL
4721709, at *3 (S.D. W.Va. Nov. 15, 2010). “To
determine the significance of the [party's] interest [in
the litigation], a court will often consider the likelihood
that the party will incur financial liability as a result of
later proceedings.” Id.
facts in Owens appear similar to those in this case.
In Owens, the plaintiff alleged that the defendant
injured him in an automobile accident. See id. at
*1. After the accident, “[the p]laintiff and [the
d]efendant entered into a settlement agreement, under which
[the d]efendant's insurance company . . . agreed to pay
[the p]laintiff . . . the policy limit . . . . [The
p]laintiff promised . . . not to enforce any court-ordered
judgment against [the d]efendant that [the p]laintiff might
obtain at a future time.” Id. The plaintiff
then sued the defendant, as well as the plaintiff's
employer's insurance carrier, seeking underinsured
motorist insurance payments. Id. The Owens
court found that the defendant constituted a nominal party,
[the d]efendant's level of control over the litigation
appears to be minimal. The parties have submitted no evidence
to suggest that [the d]efendant has made any appearances in
the proceedings, or that [the d]efendant plans to make any in
the future. Furthermore, [the d]efendant has neither made a
statement nor given a deposition. The [the d]efendant's
counsel is also the same as counsel for [the insurance
company]. This suggests that [the d]efendant does not plan to
retain a significant amount of individual control and
latitude over litigation strategy . . . .
Id. at *3. Finally, and “[p]erhaps most
importantly, [the d]efendant d[id] not face any financial
liability in this lawsuit because of the settlement agreement
. . . .” Id. at *3.
Mr. Bowers and Mr. Torres entered into the Covenant not to
Enforce, in which Mr. Bowers promised that he would
“not take action to enforce [a] Judgment against [Mr.
Torres], individually, for any amount over and above the
applicable underinsured motorist insurance coverage in
force.” (Docket Entry 1-2 at 1.) Mr. Torres therefore
does not face financial liability to Mr. Bowers as a result
of this litigation. In addition, Mr. Torres appears to
possess a minimal level of control, as he has neither
retained counsel nor given a statement or deposition.
(See Docket Entries dated Sep. 15, 2017, to
present.) He has also failed to serve an answer on
Plaintiffs. (See Docket Entries dated Sep. 25, 2017,
to present.) Accordingly, Mr. Torres constitutes a nominal
party, at least with respect to Mr. Bowers.
Bowers's claim against Mr. Torres presents a more
difficult matter. Mrs. Bowers filed a state-law claim against
Mr. Torres for loss of consortium as a result of the
accident. (See Docket Entry 1-1, ¶¶
51-52.) “A federal court, sitting in North Carolina in
a diversity case, must apply the law as announced by the
highest court of that state or, if the law is unclear, as it
appears the highest court of that state would rule.”
Brendle v. General Tire & Rubber Co., 505 F.2d
243, 245 (4th Cir. 1974). “In doing so, the [C]ourt may
consider cases from the Supreme Court of North Carolina, the
North Carolina Court of Appeals, treatises, and the practices
of other states.” Yarbrough ...