Benjamin White; White Cloud Adventures LLC v. Recreation Risk Retention Group, Inc.; Jared Potter

Summary

The United States District Court for the District of Utah granted Plaintiffs’ motion to remand an insurance coverage dispute to Utah’s Third District Court. The court held that complete diversity was absent because Plaintiff Benjamin White, Plaintiff White Cloud Adventures LLC, and Defendant Jared Potter were Utah citizens, and Defendant Recreation Risk Retention Group failed to establish fraudulent joinder or grounds for realignment. The court also rejected federal question jurisdiction based on the Liability Risk Retention Act and Federal Arbitration Act, concluding that the claims arose under state law.

Holdings

1. The court lacked diversity jurisdiction because the plaintiffs and Jared Potter were all Utah citizens, and Recreation failed to establish that Potter was fraudulently joined or should be realigned. White, White Cloud, and Potter had a substantial adverse interest concerning whether Potter's release was effective, making Potter a real and substantial party to the controversy.
2. The Liability Risk Retention Act did not create federal-question jurisdiction because plaintiffs' claims for breach of contract, breach of the implied covenant, breach of fiduciary duty, and declaratory relief arose under state law. Recreation's reliance on federal preemption was a defense that did not appear on the face of the well-pleaded complaint.
3. The Federal Arbitration Act did not supply federal-question jurisdiction because it did not create the source of plaintiffs' causes of action and could not substitute for an independent jurisdictional basis.

Questions Presented

1. Whether the court had diversity jurisdiction despite the common Utah citizenship of plaintiffs and defendant Jared Potter because Potter was allegedly fraudulently joined or should be realigned.
2. Whether the Liability Risk Retention Act created federal-question jurisdiction over plaintiffs' state-law insurance and contract claims.
3. Whether the Federal Arbitration Act supplied an independent basis for federal-question jurisdiction.

Disposition

remanded