NINA CHELLANI DHRUVA THANWARDAS CHELLANI KRYSTAL CHELLANI v. JASON DARREL FRYE GENERAL MOTROS LLC (2026)

ORDER

Plaintiffs (collectively “Chellani”) move to remand. (D.E. 17.) In this case, Chellani brought claims against Defendant General Motors, LLC, and Defendant Jason Frye. Both Nina and Krystal Chellani are citizens of North Carolina. Frye is a North Carolina citizen and was properly joined and served before removal. General Motors is a citizen of Delaware and Michigan. General Motors challenges Chellani's motion for lack of complete diversity, arguing that Frye is a nominal defendant and withheld from the diversity calculation. (D.E. 21.) This Court denies the Motion to Remand.

BACKGROUND

Chellani brought suit in the North Carolina Superior Court for claims arising out of an automobile accident between Chellani and Frye. (D.E. 1, Ex. A-1.) The Complaint alleges Frye drove negligently. (Id.) As to General Motors, it alleges negligent design, failure to warn, and unfair trade and deceptive practices. Against both parties, the Complaint alleges negligent infliction of emotional distress and wrongful death claims. (Id.)

Chellani and Frye signed a covenant not to enforce a judgment before the lawsuit that invokes N.C.G.S. § 1B-4 and Yates v. New South Pizza. 412 S.E.2d 666 (N.C. 1992); (D.E. 15, Ex. 1–3.) That Covenant states it is not intended to “release, bar, estop, waive, or otherwise prevent” claims against anyone other than Frye and his insurer, while specifically preserving underinsured motorist claims and the right to sue Frye “to the extent necessary” to recover underinsured motorist coverage,¹ with an agreement not to execute against Frye's property personally. (D.E. 15, Ex. 1, ¶ 2.) Frye is represented by counsel and filed an answer to the Complaint.

ANALYSIS

Chellani argues that this Court lacks diversity jurisdiction because Frye is a North Carolina citizen. General Motors bears the burden to demonstrate that this case belongs in federal court. See Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co., 736 F.3d 255, 259 (4th Cir. 2013). General Motors argues that Frye is a nominal defendant for the purposes of diversity jurisdiction. (D.E. 21.)

For a district court to properly exercise diversity jurisdiction over a case, the action must be between “citizens of different States.” 28 U.S.C. § 1332(a)(1). But federal courts “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, 461 (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, 736 F.3d at 260. This is a practical inquiry, focused on the individual facts and circumstances of a case. Id.²

Here, the question is whether Frye has any “apparent stake in the litigation” and whether “the suit can be resolved without affecting” him “in any reasonably foreseeable way.” Id. Chellani and Frye signed a covenant not to enforce any judgment against Frye. This eliminated Frye's personal financial exposure.³ (D.E. 15, Ex. 1–3.) Since Frye cannot be financially harmed, it is not apparent how the suit would affect him. Nor does Chellani provide any arguments or explanation about how this lawsuit would impact Frye. Parties in underinsured motorist disputes who are named only as a “means to a more substantial end, namely the establishment of [their] liability ․ so as to trigger [an] obligation to pay on [uninsured] motorist coverage” can be nominal parties. See Kidd v. Gilfilen, 170 F. Supp. 2d 649, 652 (S.D.W.VA. 2021); see also Wayne J. Griffin Elec., Inc. v. Travelers Prop. Cas. Co. of Am., No. 1:13CV882, 2014 WL 842983, at *4 (M.D.N.C. Mar. 4, 2014).

Hartford Fire found that where no monetary judgment or non-declaratory injunctive relief was sought against an insurer and all claims against the insurer underlying the action were settled, there was no reason to believe the insurer would be affected by the eventual judgment. 736 F.3d at 261. As further evidence that the party was nominal, it determined that if the party were absent from the proceeding, it would have no effect on the plaintiff's ability to be made whole by other parties. Id. Unlike in Hartford Fire, Frye is a necessary party to Chellani's underinsured motorist claim. But Frye is necessary in a technical sense—to establish liability and allow coverage on an underinsured motorist claim. The suit will not affect him “in any reasonably foreseeable way.” Id. at 260.

Because Hartford Fire sets forth the relevant legal standard, it is not appropriate to use the four-factor test that some district courts have applied. See, e.g., Owens v. Overstreet, No. 1:10-00784, 2010 WL 4721709 (S.D.W. Va. Nov. 15, 2010).⁴ Owens and its four-factor test predates the Fourth Circuit's decision in Hartford Fire. 736 F.3d at 255. Considering the Fourth Circuit's insistence on a “straightforward examination,” this Court finds the Owens test inconsistent with the ruling in Hartford Fire. 736 F.3d at 260. Instead, this Court focused on the key inquiry of whether the suit can be resolved without affecting the nominal defendant in “any reasonably foreseeable way.” Id. As discussed above, it can.

As for Chellani's argument that the forum-defendant rule applies to this case and requires remanding the case back to state court, the Court disagrees. “[W]hile the forum defendant rule precludes removal if any defendant is a citizen of the state in which the action was brought, it does not apply to a nominal defendant.” Jimenez v. Kiefer, 100 F.4th 931, 935 (7th Cir. 2024) (citing GE Betz, Inc. v. Zee Co., 718 F.3d 615 (7th Cir. 2013)); but see Mikhasenak for Mikhasenak v. Knight, No. 4:20-cv-04169-JD, 2021 WL 6803001 (D.S.C. July 6, 2021). Including nominal defendants for the forum-defendant rule would render the nominal-defendant rule meaningless.

CONCLUSION

Having found that Frye is a nominal party to the litigation in this court, the court DENIES Plaintiffs’ Motion to Remand (D.E. 17) as complete diversity exists.

This the 4th day of June, 2026.

FOOTNOTES

1.   Under North Carolina law, an insured must obtain a liability determination against a tortfeasor as a predicate to recovering underinsured motorist benefits, as this coverage is “derivative” of the at-fault driver's liability. Elliott v. Am. States Ins. Co., 883 F.3d 384, 398 (4th Cir. 2018) (“[U]nder state law, a plaintiff is legally entitled to recover under a UIM policy only once a judgment is issued against the underinsured motorist determining liability and damages owed to the plaintiff.”); N.C.G.S. § 20-279.21(b)(4).

2.   In deciding Hartford Fire, the Fourth Circuit considered various tests devised by other circuits and refused to embrace them. See Ryan v. State Bd. Of Elections of Ill., 661 F.2d 1130, 1134 (7th Cir. 1981) (requiring a defendant be “indispensable” to avoid the nominal party exception); Farias v. Bexar Cnty. Bd. Of Trustees for Mental Health Mental Retardation Servs., 925 F.2d 866, 871 (5th Cir. 1991) (requiring that the defendant be “neither necessary nor indispensable to join in the action”); Thorn v. Amalgamated Transit Union, 305 F.3d 826, 833 (8th Cir. 2002) (describing nominal defendants as “those against whom no real relief is sought”) (internal quotation marks omitted). It rejected the tests in favor of a more “straightforward examination of the meaning of the word ‘nominal.’ ” Hartford Fire, 736 F.3d at 260.

3.   The Court acknowledges Chellani's argument that North Carolina law does not treat covenants not to enforce as a release, and that a covenant not to enforce does not extinguish a cause of action and instead limits enforcement. Simpson v. Plyler, 128 S.E.2d 843, 846 (N.C. 1963). However, whether or not Frye has legal liability for the automobile accident is irrelevant to whether he will incur an enforceable financial obligation. Chellani acknowledges that Plaintiffs cannot collect from Frye at the end of the case due to the covenants.

4.   The Owens four-factor test considers “[1] the level of control that the party retains over the litigation ․ [2] the weightiness of the party's interest in the litigation ․ [3] whether the party has retained counsel ․ [and] [4] whether the party has given a statement or a deposition.” Owens, 2010 WL 4721709 at *3; see also Bowers v. State Farm Mut. Auto. Ins. Co., No. 1:17CV825, 2017 WL 6389705 (M.D.N.C. Dec. 14, 2017); Shorraw v. Bell, No. CIV.A. 4:13-01992, 2014 WL 692752 (D.S.C. Feb. 21, 2014); Scherling v. Chubb Ltd., No. CV 23-1303 (TJK), 2024 WL 1213401 (D.D.C. Mar. 21, 2024).

David A. Bragdon United States District Judge