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Bowers v. State Farm Mutual Automobile Insurance Co.

United States District Court, M.D. North Carolina

December 14, 2017



          L. Patrick Auld United States Magistrate Judge

         This 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.)[1] For the reasons that follow, the Court should grant the Motion.


         Billie 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.)[2] 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.)

         Plaintiffs 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 1.)


         State 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.

         I. Whether Mr. Torres Is a Nominal Party

         For 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.

         The 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, as

[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.

         Here, 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.

         Mrs. 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 ...

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