Alfa Financial Corp. v. Key
| Decision Date | 17 May 1996 |
| Docket Number | No. CV-95-A-1373-E.,CV-95-A-1373-E. |
| Court | U.S. District Court — Middle District of Alabama |
| Parties | ALFA FINANCIAL CORPORATION, an Alabama Corporation; and Alfa Life Insurance Corporation, an Alabama Corporation, Plaintiffs, v. Kenneth A. KEY; William L. & Stacie Stufflebeme; Johnny Pippin; Katrina Faulk; Sammy Lee Haynes; Malcolm Spivey; James L. Marchand; Roxanne F. Anthony; W.H. Taylor, Jr.; Richard Woods; and Margaret Woods, Defendants. |
COPYRIGHT MATERIAL OMITTED
Algert S. Agricola, Jr., Wallace, Jordan, Ratliff & Brandt, L.L.C., Montgomery, AL, Robert William Bradford, Jr., Hill, Hill, Carter, Franco, Cole & Black, Montgomery, AL, Albert L. Jordan, Wallace, Jordan, Ratliff & Brandt, L.L.C., Birmingham, AL, for ALFA Financial Corporation, ALFA LIFE Insurance Corporation.
Garve Ivey, Jr., King, Ivey & Junkin, Jasper, AL, for Kenneth A. Key, William L. Stufflebeme, Stacie Stufflebeme.
Christian Edward Roberson, Gordon, Silberman, Wiggins & Childs, Birmingham, AL, Donald P. McKenna, Jr., Taylor & Taylor, Birmingham, AL, for Johnny Pippin, Katrina Faulk, Sammy Lee Haynes, Malcolm Spivey.
James L. Marchand, Navarre, FL, pro se.
Roxanne F. Anthony, Weldon, NC, pro se.
Debbie Lindsey Jared, Elba, AL, Jeffrey Wayne Kelley, Lindsey & Kelley, Elba, AL, for W.H. Taylor, Jr.
This cause is before the court on three Motions to Dismiss. The first Motion to Dismiss was filed by the Defendants, Kenneth A. Key ("Key"), and William L. and Stacie Stufflebeme (the "Stufflebemes"), on November 15, 1995. The second Motion to Dismiss was filed by the Defendants, Johnny Pippin ("Pippin"), Katrina Faulk ("Faulk"), Sammy Lee Haynes ("Haynes"), and Malcolm Spivey ("Spivey"), on November 17, 1995. The third Motion to Dismiss was filed by the Defendant, William H. Taylor ("Taylor"), on January 16, 1996.
This suit arises from the efforts of the Plaintiffs, Alfa Financial Corporation ("Alfa Financial") and Alfa Life Insurance Corporation ("Alfa Life") (together "the Alfas"), to put an end to litigation in the state courts of Alabama resulting from their alleged fraudulent pattern and practice in making loans. The Alfas brought this action on October 23, 1995 seeking declaratory relief and relief in the nature of interpleader. They contend that the purpose of the action is to protect themselves from multiple and vexatious suits seeking punitive damages as a result of an alleged fraudulent pattern and practice of unlawfully requiring Alfa Financial loan customers to purchase life insurance or credit life insurance from Alfa Life as a condition to obtaining a loan ("the alleged fraudulent pattern and practice").
The events underlying this law suit began on February 23, 1994, when Eddie and Mary Catherine Christ filed suit against the Alfas in the Circuit Court for Barbour County, Alabama. See Christ v. Alfa Life Ins. Corp., No. CV-94-022 (Ala.Cir.Ct. (Barbour Cty.) Feb. 23, 1994). They alleged that the Alfas defrauded them by requiring them to purchase life insurance from Alfa Life and to assign the proceeds to Alfa Financial as a condition to obtaining a loan. In their suit, they sought unspecified compensatory and punitive damages. In the ensuing months, thirty seven additional civil actions were filed against the Alfas in the Circuit Court for Barbour County and other Alabama state courts alleging the same fraudulent pattern and practice.
On the eve of the Christ trial, the parties to all of the pending cases involving the alleged fraudulent pattern and practice informed the Barbour County court that they had tentatively reached a settlement (the "Christ settlement"). The terms of the settlement required the Alfas to pay $4.1 million to the plaintiffs in 41 cases, 37 of which included claims involving the alleged fraudulent pattern and practice. $3.4 million of the settlement amount was earmarked to satisfy the claims involving the alleged fraudulent pattern and practice. Approximately 90% of the payment was designated as punitive damages. The Alfas did not admit liability, and they contend that they agreed to the settlement to avoid the risk and expense of protracted litigation and to eliminate their exposure to punitive damages for the alleged fraudulent pattern and practice.
At the same time, the Alfas submitted a motion requesting that the Barbour County court hold a Hammond hearing to determine whether the settlement amount for punitive damages was sufficient to punish them adequately for their alleged illegal fraudulent pattern and practice. See Ala.Code § 6-11-23; Green Oil Co. v. Hornsby, 539 So.2d 218 (Ala.1989); Hammond v. City of Gadsden, 493 So.2d 1374 (Ala.1986). On February 6, 1995, the Hammond hearing was held, and the Alfas presented evidence relating to the adequacy of the punitive damage award. In ruling on the motion, the court assumed that the Alfas were guilty of the alleged fraudulent pattern and practice. See Christ v. Alfa Life Ins. Corp., No. CV-94-022 (Ala.Cir.Ct. (Barbour Cty.) Feb. 6, 1995) (order setting forth Hammond hearing findings). After the hearing was concluded, the Barbour County court entered an order finding that:
This court is firmly convinced that payment of the amounts which Alfa Life and Alfa Financial have either paid or agreed to pay, as well as its other costs incurred, is sufficient to punish Alfa Life and Alfa Financial for the alleged intent, scheme, and pattern and practice of wrongful conduct set forth above and to deter Alfa Life, Alfa Financial, and others from any similar misconduct in the future.... The court further concludes that the imposition of additional punitive damages against Alfa Life and/or Alfa Financial for such alleged misconduct, scheme, and pattern and practice in excess of the amount already paid in the settlements mentioned above, whether in this case or any other proceeding, would constitute duplicative, multiple, and unjust punishment.
Sometime after the Christ settlement was reached, the Alfas became aware of other individuals who claimed or could claim that they are entitled to awards of punitive damages against the Alfas arising out of the alleged fraudulent pattern and practice. The Alfas allege that the Defendant Key filed a civil action against them in Walker County, Alabama, seeking punitive damages based on the alleged fraudulent pattern and practice and purporting to represent a class of approximately 10,000 persons. The Alfas also allege that the Stufflebemes brought a counterclaim against them in a law suit in Walker County, Alabama, seeking punitive damages based on the alleged fraudulent pattern and practice. Additionally, the Alfas allege that the Defendants, Pippin, Faulk, Haynes, and Spivey, filed civil actions against them in Barbour County, Alabama; that the Defendant Taylor filed a civil action against them in Coffee County, Alabama; and that the Defendants, Richard and Margaret Woods (the "Woods"), filed a civil action against them in Marion County, Alabama. The Alfas allege that all of these Defendants seek punitive damages based on the alleged fraudulent pattern and practice. Finally, the Alfas allege that the Defendants, James L. Marchand ("Marchand") and Roxanne F. Anthony ("Anthony"), also claim or may claim to be entitled to awards of punitive damages based on the alleged fraudulent pattern and practice.
The Alfas filed this suit on October 23, 1995 in the Middle District of Alabama seeking to protect themselves from further punitive damage awards based on the alleged fraudulent pattern and practice. They predicate this court's jurisdiction upon the federal interpleader statute, 28 U.S.C. § 1335, and upon 28 U.S.C. § 1331.
The Alfas contend that, based on the Hammond order entered by the Alabama Circuit Court for Barbour County in the Christ case, they are no longer subject to liability for punitive damages arising from the alleged fraudulent pattern and practice. They also contend that additional awards of punitive damages against them would violate the United States Constitution and the Constitution of the State of Alabama. In the alternative, they contend that, if punitive damages can still be awarded against them, any further awards cannot exceed a total of $100,000. At the time the Alfas filed their Complaint in this suit, they paid $100,000 into this court. They give no explanation, however, for how they arrived at $100,000 as the extent of their liability.
The Alfas claim that this is an action in the nature of interpleader because their liability for punitive damages based on the alleged fraudulent pattern and practice is limited to a fixed stake. They claim that they already paid the full stake over to the plaintiffs involved in the Christ settlement. Accordingly, they claim that they may no longer be subjected to liability for punitive damages and that the $100,000 they paid into the court should be returned to them. They also seek a declaration from this court that additional awards of punitive damages are prohibited and a declaration that the Defendants' claims for punitive damages are unconstitutional under the Constitution of the United States and under the Constitution of the State of Alabama. In the alternative, they seek a resolution of the conflicting claims of the Defendants and they seek a declaration that additional awards for punitive damages cannot exceed a total of $100,000.
On November 15, 1995, the Defendants, Key and the Stufflebemes, filed a motion to dismiss. They argue that the Plaintiffs' claims must be dismissed because no real case or controversy exists between the parties; because this action should be dismissed in favor of prior pending actions; because this suit cannot be brought under the federal interpleader statute; and because equity is a bar to this action.
On November 17, 1995, the Defendants, Pippin, Faulk, Haynes, and Spivey, filed a motion to dismiss. They argue that the Plaintiffs'...
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