IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 5, 2007
No. 07-30206 Charles R. Fulbruge III
Clerk
STEPHEN E CAMPBELL; JENNIE CAMPBELL
Plaintiffs-Appellants
v.
STONE INSURANCE INC
Defendant-Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
Before JOLLY, HIGGINBOTHAM, and PRADO, Circuit Judges.
PRADO, Circuit Judge:
Plaintiffs-Appellants Stephen and Jennie Campbell (the “Campbells”)
appeal the order dismissing their case against Stone Insurance, Inc. (“Stone
Insurance”), the insurance agent that procured their renters’ insurance policy.
The district court dismissed the Campbells’ action pursuant to a Louisiana
statute that requires the filing of a suit within one year of the plaintiffs’
knowledge or constructive knowledge of the facts that led to the cause of action.
For the following reasons, we AFFIRM.
No. 07-30206
I. FACTUAL AND PROCEDURAL BACKGROUND
The Campbells moved to New Orleans, Louisiana, in June 2004. They
rented a residence and retained Stone Insurance, an insurance agent, to procure
renters’ insurance. Stone Insurance procured insurance coverage through the
Fireman’s Fund Insurance Company (“Fireman’s Fund”). The policy coverage
began on July 16, 2004. Stone Insurance sent the Campbells the policy
documents to review and a flood rejection form to sign on August 13, 2004.
Stone Insurance included a cover letter that stated, in part, that by signing the
enclosed flood rejection form, the Campbells were “acknowledging we discussed
flood insurance and you do not want it at the present time.” After reviewing the
insurance documents, the Campbells found certain provisions ambiguous and
asked for clarification. The Campbells allege that Stone Insurance assured them
that the policy covered any potential damage, including flood damage. The
Campbells also allege that Stone Insurance told them they could not obtain flood
insurance through the National Flood Insurance Program because they were
renters, not homeowners. On August 15, 2004, Stephen Campbell signed the
enclosed flood rejection form, titled “Waiver of Agent’s Responsibility,” which
stated that Stone Insurance offered flood insurance coverage in the “National
Flood Program through Omaha Property & Casualty,” that the Campbells
rejected such coverage, and that Stone Insurance “will be held harmless and not
liable in the event” of a flood loss.
On August 29, 2005, Hurricane Katrina hit New Orleans and caused
massive flooding. Upon returning to their house, the Campbells found all of
their belongings destroyed. They made a claim under the Fireman’s Fund policy
but found out that the policy did not cover flood damage. They also learned that
they could have obtained coverage for flood damage under the National Flood
Insurance Program as renters of a residence. On August 28, 2006, the
Campbells brought suit in Louisiana state court against Fireman’s Fund,
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No. 07-30206
alleging that the policy should cover their damage, and against Stone Insurance,
alleging that it misrepresented the extent of the Fireman’s Fund coverage and
the availability of other flood insurance coverage.
Stone Insurance and Fireman’s Fund each filed a Notice of Removal to
federal court. Although Fireman’s Fund is a diverse party, Stone Insurance is
not diverse. The Notices of Removal alleged that the Campbells had improperly
joined Stone Insurance in the suit, thereby making the fact that Stone Insurance
is not diverse irrelevant for subject matter jurisdiction. The Campbells filed a
Motion to Remand and Stone Insurance filed a Motion for Summary Judgment.
The district court granted Stone Insurance’s motion and denied the Campbells’
motion. The court held that a Louisiana statute “perempted” any claims against
Stone Insurance, precluding any possibility of recovery.1 The court ruled that
for this reason, the Campbells had no viable causes of action and therefore had
improperly joined Stone Insurance, leaving diversity jurisdiction intact against
Fireman’s Fund. The Campbells appeal the district court’s order granting Stone
Insurance’s Motion for Summary Judgment and denying their Motion to
Remand. Subsequent to the district court’s order, the Campbells and Fireman’s
Fund settled, and the district court granted a joint motion to dismiss Fireman’s
Fund.2 We have jurisdiction to review the district court’s final judgment
1
“Peremption is a period of time fixed by law for the existence of a right. Unless timely
exercised, the right is extinguished upon the expiration of the peremptive period.” LA. CIV.
CODE ANN. art. 3458 (2007).
2
The district court’s action dismissing Fireman’s Fund, the only diverse defendant, does
not now defeat diversity jurisdiction. The district court is required to determine whether there
is complete diversity only at the time the plaintiffs bring a suit or when the defendants remove
a case to federal court. See Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426, 428
(1991) (per curiam); see also Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723
(5th Cir. 2002) (“To determine whether jurisdiction is present for removal, we consider the
claims in the state court petition as they existed at the time of removal.”); Hegwood v. Ross
Stores, Inc., No. 3:04-CV-2674, 2007 WL 2187245, at *6 n.3 (N.D. Tex. July 28, 2007)
(“Settlement with Plaintiffs removed diversity, but the settlement did not divest the Court of
jurisdiction since jurisdiction in federal court based on diversity of citizenship, once established,
3
pursuant to 28 U.S.C. § 1291.
II. STANDARD OF REVIEW
This court reviews a district court’s summary judgment order de novo.
Morris v. Equifax Info. Servs., L.L.C., 457 F.3d 460, 464 (5th Cir. 2006).
Summary judgment is appropriate when, after considering the pleadings,
depositions, answers to interrogatories, admissions on file, and affidavits, “there
is no genuine issue as to any material fact and . . . the moving party is entitled
to a judgment as a matter of law.” FED. R. CIV. P. 56(c); Bulko v. Morgan Stanley
DW, Inc., 450 F.3d 622, 624 (5th Cir. 2006). This court also reviews the denial
of a motion to remand to the state court de novo. See Miller v. Diamond
Shamrock Co., 275 F.3d 414, 417 (5th Cir. 2001).
To determine whether the district court correctly denied a motion to
remand because the plaintiff improperly joined a nondiverse defendant to defeat
subject matter jurisdiction, the court must analyze whether (1) there is actual
fraud in pleading jurisdictional facts or (2) the plaintiff is unable to establish a
cause of action against the nondiverse defendant. See Ross v. Citifinancial, Inc.,
344 F.3d 458, 461 (5th Cir. 2003). The doctrine of improper joinder is a “narrow
exception” to the rule of complete diversity, and the burden of persuasion on a
party claiming improper joinder is a “heavy one.” McDonal v. Abbott Labs., 408
F.3d 177, 183 (5th Cir. 2005) (quoting Griggs v. State Farm Lloyds, 181 F.3d 694,
701 (5th Cir. 1999)). Under the second prong (inability to establish a cause of
action), the court must determine whether “there is arguably a reasonable basis
for predicting that state law might impose liability.” Ross, 344 F.3d at 462.
“This means that there must be a reasonable possibility of recovery, not merely
a theoretical one.” Id. Further, the standard for evaluating a claim of improper
is not affected by subsequent events such as the elimination of parties essential to the creation
of diversity jurisdiction at the time the action was filed.”). But see 28 U.S.C. § 1447(e) (“If after
removal the plaintiff seeks to join additional defendants whose joinder would destroy subject
matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the
State court.”).
4
joinder is similar to that used in evaluating a motion to dismiss for failure to
state a claim under Federal Rule of Civil Procedure 12(b)(6). Id. The scope of
the inquiry for improper joinder, however, is broader than that for Rule 12(b)(6)
because the court may “pierce the pleadings” and consider summary
judgment-type evidence to determine whether the plaintiff has a basis in fact for
the claim. Id. at 462-63 (citing Travis v. Irby, 326 F.3d 644, 648-49 (5th Cir.
2003)). In conducting this inquiry, the court “must also take into account all
unchallenged factual allegations, including those alleged in the complaint, in the
light most favorable to the plaintiff.” Id. at 463 (quoting Travis, 326 F.3d at
649). “In addition, the Court must resolve all ambiguities of state law in favor
of the non-removing party.” Id.
If the Campbells have no viable claims against Stone Insurance, then
complete diversity existed between the Campbells and Fireman’s Fund and the
court properly denied the Motion to Remand. If the Campbells have a viable
claim against Stone Insurance, however, then Stone Insurance must remain in
the case and complete diversity is defeated. See Smallwood v. Ill. Cent. R.R. Co.,
385 F.3d 568, 574 (5th Cir. 2004) (en banc) (noting that a party is improperly
joined if the plaintiff would be unable to establish a cause of action against the
nondiverse party in state court). Thus, the main issue in this case is whether
the Campbells can establish a viable cause of action against Stone Insurance
that would fall within the peremptive period.
III. DISCUSSION
A. The district court properly granted Stone Insurance’s Motion for
Summary Judgment because LA. REV. STAT. ANN. § 9:5606 (2007)
perempts all of the Campbell’s claims
LA. REV. STAT. ANN. § 9:5606 provides, in relevant part:
No action for damages against any insurance agent, broker,
solicitor, or other similar licensee under this state, whether based
upon tort, or breach of contract, or otherwise, arising out of an
engagement to provide insurance services shall be brought unless
filed in a court of competent jurisdiction and proper venue within
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one year from the date of the alleged act, omission, or neglect, or
within one year from the date that the alleged act, omission, or
neglect is discovered or should have been discovered. However, even
as to actions filed within one year from the date of such discovery,
in all events such actions shall be filed at the latest within three
years from the date of the alleged act, omission, or neglect.
This “peremptive” period is only inapplicable in cases of fraud, which the
Campbells do not allege, and “may not be renounced, interrupted, or suspended.”
Id. In sum, the statute requires a plaintiff to file suit against an insurer within
one year of the plaintiff’s knowledge or constructive knowledge of the act,
omission, or neglect that led to the cause of action, and no later than three years
after the act, omission, or neglect actually occurred. The fact that the plaintiffs
may have renewed the insurance policy each year does not restart the one-year
peremptive period. See Bel v. State Farm Mut. Auto. Ins. Co., 845 So. 2d 377,
382 (La. Ct. App. 2003). Here, the district court ruled that the Campbells had
constructive knowledge of the alleged misrepresentations when Stone Insurance
issued the policy in July 2004, making their suit fall outside of the peremptive
period.
1. Claim for misrepresentation as to the extent of the Fireman’s Fund
policy
The Campbells argue that Stone Insurance misrepresented the extent of
the Fireman’s Fund insurance policy because Stone Insurance told them that the
policy would cover damage from a flood. The district court ruled that the
Campbells had not filed a timely claim under LA. REV. STAT. ANN. § 9:5606 for
this allegation because “[a]ll of the insurance agent’s alleged failures relate to
procurement of the policy, which means the peremptive period commenced upon
the policy’s issuance with respect to these allegations.” Therefore, the
peremptive period began at the latest on August 15, 2004, when Stephen
Campbell signed a document stating that the Campbells refused flood
6
insurance.3 Because the Campbells did not initiate their suit until August 28,
2006, their claim is barred by the one-year limit in the statute.
The Campbells do not challenge this decision, instead focusing their appeal
on whether Stone Insurance misrepresented the availability of insurance
through the National Flood Insurance Program. Therefore, the Campbells have
waived any argument challenging the district court’s decision regarding the
extent of their insurance. See Robinson v. Guarantee Trust Life Ins. Co., 389
F.3d 475, 481 n.3 (5th Cir. 2004) (“Failure to adequately brief an issue on appeal
constitutes waiver of that argument.”).
Even if the Campbells had not waived this argument, however, the district
court’s conclusion was correct. In Campo v. Correa, 828 So. 2d 502, 510-11 (La.
2002), the Louisiana Supreme Court explained that:
A prescriptive period will begin to run even if the injured party does
not have actual knowledge of facts that would entitle him to bring
a suit as long as there is constructive knowledge of same.
Constructive knowledge is whatever notice is enough to excite
attention and put the injured party on guard and call for inquiry.
Such notice is tantamount to knowledge or notice of everything to
which a reasonable inquiry may lead. Such information or
knowledge as ought to reasonably put the alleged victim on inquiry
is sufficient to start running of prescription.4
3
The district court ruled that the peremptive period began in July 2004 because that
is when Stone Insurance issued the policy. However, the peremptive period actually began in
August 2004 when the Campbells read the policy and signed the flood rejection form, because
that is when they should have known that any alleged misrepresentation contradicted the form
that Stephen signed. This difference is immaterial, because either way the Campbells filed
their suit after the peremptive period had lapsed.
4
Campo discussed a similar statute that included a “prescriptive period” for medical
malpractice claims. 828 So. 2d at 508. Although a “prescriptive period” differs from a
“peremptive period” because prescription prevents the enforcement of a right by legal action
but does not terminate the “natural obligation” while peremption forever extinguishes the
right, see Reeder v. North, 701 So. 2d 1291, 1298 (La. 1997), the distinction is irrelevant for the
standard of when a party has constructive knowledge of the action that begins the prescriptive
or peremptive period. Compare Campo, 828 So. 2d at 510-11 (using this language for a statute
involving a prescriptive period for medical malpractice claims) with Dobson v. Allstate Ins. Co.,
No. 06-252, 2007 WL 854312, at *1 (E.D. La. Mar. 19, 2007) (citing Campo for this standard
regarding LA. REV. STAT. ANN. § 9:5606 in a Hurricane Katrina insurance case) and Roadhouse
Bar-B-Que, Inc. v. Certain Underwriters at Lloyds, 909 So. 2d 619, 623 (La. Ct. App. 2005)
7
Louisiana law imposes a duty on the insured to read and know his or her
insurance policy provisions. See Motors Ins. Co. v. Bud’s Boat Rental, Inc., 917
F.2d 199, 205 (5th Cir. 1990) (noting that claimants are responsible for reading
the clear provisions of an insurance policy); Giardina v. Allstate Ins. Co., No. 06-
6415, 2006 WL 3406743, at *4 (E.D. La. Nov. 22, 2006) (“Under Louisiana law,
an insured has a duty to read his insurance policy and know its provisions.”)
(citing Stephens v. Audubon Ins. Co., 665 So. 2d 683, 686 (La. Ct. App. 1995)).
Any claim regarding the extent of the Fireman’s Fund policy involves whether
the policy language itself included flood coverage. It is undisputed that the
Campbells read their insurance policy documents because they asked for
clarification on certain issues. Further, the cover letter Stone Insurance sent
with the policy documents explicitly stated that by signing the enclosed flood
rejection form “you are acknowledging we discussed flood insurance and you do
not want it at this time.” Because the Campbells read the cover letter and
policy, and signed the flood rejection form, they had constructive knowledge of
the contents of the policy at that time. Any misrepresentation from the agent
stating that the policy included flood coverage would have contradicted the cover
letter and the flood rejection form, which would have put the Campbells on
constructive notice of the misrepresentation. See, e.g., Chagnard v. Cambre,
Nos. 07-1754, 06-2613, 2007 WL 2229296, at *3 (E.D. La. Aug. 1, 2007)
(“Knowledge of policy terms that directly contradict a statement by the agent
who sold the policy is sufficient to excite attention and put the insured on guard.
Thus, plaintiff knew or should have known of [the agent’s] wrongful conduct as
of the time his policy was first issued in 2004.”). In the same way, the cover
letter to the policy documents and the flood rejection form should have “excited
attention” and put the Campbells “on guard” of any misrepresentation at least
(citing Campo for this proposition involving the peremptive period in § 9:5606).
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by August 15, 2004. Therefore, we hold that the one-year peremptive period
ended in August 2005, well before the Campbells initiated the instant suit.
2. Claim for misrepresentation as to the availability of flood coverage
through the National Flood Insurance Program
The Campbells contend that Stone Insurance misrepresented that they
were ineligible for flood insurance under the National Flood Insurance Program
because they were renters, not homeowners. They assert that the district court
either overlooked this argument or erroneously addressed it under the wrong
standard. The Campbells argue that they did not know they were eligible to
obtain flood insurance through the National Flood Insurance Program until after
Hurricane Katrina on August 29, 2005, making their complaint fall within the
one-year peremptive period. Stone Insurance responds that the district court
implicitly rejected the Campbells’ argument because Stephen Campbell signed
the flood rejection form on August 15, 2004.5 Therefore, Stone Insurance asserts
that the Campbells should have known of the availability of National Flood
insurance or of any misrepresentations when Stephen signed the flood rejection
form, making the one-year peremptive period end on August 14, 2005.
The flood rejection form that Stephen Campbell signed on August 15, 2004,
stated that Stone Insurance “offered Flood Insurance Coverage, in the National
Flood Program through Omaha Property & Casualty.” The Campbells do not
contest that Stephen signed the form or that the form is valid. Nor do the
Campbells explain why Stephen signed a document that stated the exact
opposite of what they allege Stone Insurance had told them. At a minimum, this
discrepancy should have provided enough to “excite attention and put the
[Campbells] on guard and call for inquiry.” See Campo, 828 So. 2d at 510-11.
The Campbells had at least constructive knowledge that Stone Insurance had
offered them flood insurance through the National Flood Insurance Program
5
The district court did not mention the waiver, instead combining all of the Campbells’
arguments and concluding that they all “relate to procurement of the policy, which means the
peremptive period commenced upon the policy’s issuance.”
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even if the agent told them otherwise because Stephen Campbell signed a
document to that effect. Therefore, the peremptive period for this claim ended
on August 14, 2005, one year after the Campbells signed the form that gave
them constructive knowledge of the alleged misrepresentation. Because LA. REV.
STAT. ANN. § 9:5606 perempts this claim, the Campbells do not have a viable
cause of action against Stone Insurance, and the district court correctly granted
Stone Insurance’s Motion for Summary Judgment.
B. The district court correctly denied the Campbell’s Motion to
Remand because the Campbells improperly joined Stone
Insurance
Because the peremptive statute bars the Campbells’ claims, the Campbells
have no viable causes of action against Stone Insurance. Therefore, the
Campbells improperly joined Stone Insurance, leaving only Fireman’s Fund, a
diverse party, in the suit. See Smallwood, 385 F.3d at 574. Complete diversity
exists between the Campbells and Fireman’s Fund, meaning that the district
court properly denied the Campbells’ Motion to Remand.
IV. CONCLUSION
We hold that the Campbells have no viable causes of action under
Louisiana law against Stone Insurance because they had at least constructive
knowledge of the alleged misrepresentations more than one year before they
filed their suit. Therefore, the district court’s judgment is affirmed.
AFFIRMED.
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