Hanahan v. John Hancock Life Insurance

Citations: 518 F. Supp. 2d 780; 2007 U.S. Dist. LEXIS 95805Docket: C.A. No. 9:07 cv 2715-PMD

Court: District Court, D. South Carolina; October 12, 2007; Federal District Court

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Plaintiffs Ralph B. Hanahan and Grey M. Geissler filed an amended complaint in South Carolina state court against several defendants, including Jeffrey Covelli, Brian Kreider, and Haynes Brokerage Group, alleging wrongful conversion of property and other claims related to Geissler, who is an elderly widow. The defendants, who are from jurisdictions outside South Carolina, filed a Notice of Removal to federal court, asserting complete diversity jurisdiction under 28 U.S.C. 1332. Plaintiffs moved to remand the case, arguing that Defendants William M. Rhett, Jr. and Nancy Rhett, who are South Carolina citizens, remained parties to the action due to alleged noncompliance with a Consent Order that released them from liability under certain conditions. Defendants countered that the Rhetts were no longer parties and should not be considered for diversity purposes, as all other South Carolina defendants had been dismissed or settled. The court emphasized that the burden of proof for jurisdiction lies with the removing party and that removal jurisdiction must be interpreted strictly due to federalism concerns. Ultimately, the court denied the Plaintiffs' motion to remand, concluding that the Rhetts were not parties in interest, thereby affirming the existence of complete diversity among the remaining parties.

Defendants argue that removal of the case to federal court is justified based on original jurisdiction under 28 U.S.C. § 1332, which allows district courts to hear cases involving over $75,000 in controversy between citizens of different states. Section 1446 allows for removal when complete diversity arises after litigation begins, permitting a notice of removal within thirty days of the defendant's receipt of documents indicating the case's removability. To establish diversity jurisdiction, every plaintiff must be from a different state than every defendant, as established in Strawbridge v. Curtiss.

If a plaintiff enters into a covenant not to execute against non-diverse defendants, this can create complete diversity and allow for federal removal, provided the plaintiff’s actions show a desire to abandon claims against those parties. The key issue is whether the plaintiff's actions indicate a voluntary decision not to pursue the case against the non-diverse parties, as highlighted in Higgins v. E.I. DuPont de Nemours Co. 

It is established that a voluntary dismissal or settlement with a non-diverse defendant makes the case removable, as shown in cases such as Estate of Martineau v. ARCO Chemical Co. The court must determine if the Consent Order with the Rhetts reflects a desire not to pursue claims against them or if it constitutes an enforceable settlement under South Carolina law. The Consent Order binds the plaintiffs not to enforce claims against the Rhetts in exchange for the Rhetts agreeing to several conditions, including: their non-involvement in certain actions by another defendant, cooperation in financial accounting, assistance in the case, and potential restitution of funds identified as wrongfully obtained.

The Consent Order, signed by the Rhett Plaintiffs and their counsel, was adopted by Master in Equity Curtis L. Coltrane. Plaintiffs claim the Rhetts have not fulfilled the order's conditions and may have breached it, asserting that the Rhetts remain parties to the case under the court's jurisdiction. However, the court finds this assertion insufficient to maintain the Rhetts as parties of interest due to the clear intent of the Consent Order to release them from further liability. Allowing the Rhetts to remain in the litigation would unfairly undermine diversity jurisdiction by keeping nondiverse defendants involved who have already settled. The Consent Order is legally binding under South Carolina law and constitutes a settlement that cannot be unilaterally retracted by Plaintiffs to avoid diversity. The court acknowledges alleged breaches by the Rhetts but concludes that Plaintiffs have other recourse options without the Rhetts in the litigation. Consequently, the Rhetts are no longer considered real parties in interest, and their South Carolina citizenship is disregarded for diversity purposes. This leaves the Plaintiffs, citizens of South Carolina, and diverse Defendants, allowing for proper removal to federal court. Thus, the court denies Plaintiffs’ Motion for Remand. Additionally, it notes the citizenships of other parties and the dismissal of claims against certain defendants.