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Bankrupt was not 'nominal' for jurisdiction purposes.

Byline: Virginia Lawyers Weekly

Although an individual defendant filed for bankruptcy protection after allegedly striking the plaintiff with his car and his insurance carrier interpled all relevant proceeds into the state court, he was not a "nominal" party for purposes of diversity jurisdiction and the case must be remanded to state court.

Background

On Oct. 30, 2016, Bobby Harris Sr. was attending a NASCAR Cup Series auto-racing event at the Martinsville Speedway. While leaving that event, plaintiff was struck by a car allegedly driven by Gary Edem, resulting in serious bodily injury.

Since the accident, Edem has filed for and received a bankruptcy discharge in the U.S. Bankruptcy Court for the Eastern District of Virginia. His insurance company has also apparently interpled all relevant insurance policy proceeds with the Henry County Circuit Court. Because of this, defendants maintain, Edem faces no direct financial liability as a result of this suit.

Plaintiff originally brought suit in Richmond Circuit Court. The case was transferred, on Edem's motion, to the Henry County Circuit Court. Thereafter, defendants International Speedway Corporation, Martinsville International Inc. and NASCAR filed a notice of removal, contending that diversity of citizenship granted this court jurisdiction pursuant to 28 U.S.C. 1332. Although both plaintiff and Edem are residents of Virginia, the removing defendants contend that he is a nominal party by virtue of his bankruptcy discharge, and thus his citizenship can be ignored for purposes of establishing jurisdiction.

Plaintiff filed a motion to remand, arguing that Eden is not a nominal party for the jurisdictional analysis.

Analysis

This case presents a discrete issue: Does a defendant, who has received a discharge in bankruptcy, become a nominal party for purposes of the jurisdictional requirement found in 28 U.S.C. 1332(a) and 1441(b)(1)? The answer is no.

First, of those courts that have addressed this issue, they are virtually unanimous that a bankrupt defendant is not "nominal" for purposes of diversity jurisdiction. Like those cases, Virginia law requires plaintiff to sue Edem personally in order to recover insurance proceeds. Because the law of Virginia, which governs this action, requires that Edem be sued, he is not a nominal party.

Defendants argue that, because Edem's personal funds are held by the bankruptcy trustee and the insurance proceeds are held by the circuit court, he faces no actual financial liability in this action. These two facts, defendants argue, make him a nominal party. To put this argument in its honest terms, defendants argue that a judgment-proof defendant's citizenship may be ignored for jurisdictional purposes. That is not the law, and I decline to hold as such in this action. Edem is not a nominal party, and his inclusion as a defendant divests this court of jurisdiction.

Because Edem has a very real stake in this litigation, he is not a nominal party. Therefore, there is not complete diversity among the parties, this court lacks jurisdiction over this action, and this action must be remanded to the Henry County Circuit Court.

Motion to remand granted.

Harris v. Edem, Case No. 18-cv-00053, Feb. 7, 2019. WDVA at Danville (Kiser). VLW 019-3-057. 6 pp.

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Title Annotation:Harris v. Edem, U.S. District Court for the Western District of Virginia
Publication:Virginia Lawyers Weekly
Date:Mar 8, 2019
Words:531
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