Andalusia Enterprises, Inc. v. Evanston Ins. Co.

• Decision Date: 15 March 2007
• Docket Number: Civil Action No. 07-AR-0078-S.
• Citation: 487 F.Supp.2d 1290
• Parties: ANDALUSIA ENTERPRISES, INC., et al., Plaintiffs, v. EVANSTON INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Northern District of Alabama

Page 1290

487 F.Supp.2d 1290

ANDALUSIA ENTERPRISES, INC., et al., Plaintiffs, v. EVANSTON INSURANCE COMPANY, et al., Defendants.

Civil Action No. 07-AR-0078-S.

United States District Court, N.D. Alabama, Southern Division.

March 15, 2007.

COPYRIGHT MATERIAL OMITTED

Wayne Morse, Jr., Morse & Dolan PC, Birmingham, AL, for Plaintiffs.

Dorothy A. Powell, Mark W. Lee, Parsons Lee & Juliano, John W. Clark, Jr., Clark, Dolan, Morse, Oncale & Hair, K. Stephen Jackson, Joseph L. Tucker, Jackson & Tucker PC, Birmingham, AL, James W. Garrett, Jr., Paul M James, Jr., Rushton Stakely Johnston & Garrett PA, Montgomery, AL, for Defendants.

MEMORANDUM OPINION

ACKER, District Judge.

There are intriguing twists and turns in this case, which reached this court by removal from the Circuit Court of St. Clair County, Alabama. Was the case improvidently removed? There are two motions to remand, one by plaintiffs, Andalusia Enterprises, Inc. ("Andalusia"), and Ira Hughes ("Hughes"), and the other by a defendant, Broderick Lane ("Lane"), who did not join in the removal. This court's jurisdiction, if it exists, is based upon 28 U.S.C. §§ 1441 and 1332, statutes that allow removal if there is complete diversity between the parties and if there is at least $75,000 in controversy.

The procedural facts reflect that plaintiffs, Andalusia and Hughes, are both citizens of Alabama. They sued Lane in a state court for breach of contract. Lane responded not only with an answer, but with a multi-count counterclaim that included tort claims. Lane added as counterclaim defendants Citgo Petroleum Corporation and others, charging them all with conspiracy to harm him and with specific alleged tortious acts. Andalusia and Hughes thereupon called upon their liability insurance companies, Evanston Insurance Company ("Evanston"), American-Western Insurance Company ("American-Western"), Regis Insurance Company ("Regis"), and Penn-American Insurance Company ("Penn-American"), to defend the counterclaim. When the insurance companies failed or refused to do so, Andalusia and Hughes filed the instant entirely separate action in the same St. Clair Circuit Court against the insurance companies, each of which is a citizen of a state other than Alabama. Invoking Alabama's Declaratory Judgment Act, Andalusia and Hughes sought a declaration that the four insurance companies owe them a defense to Lane's underlying counterclaim, and indemnity in the event Lane prevails on any of his tort theories. In addition to the would-be insurers, Andalusia and Hughes named as a defendant, Lane, who is a fellow citizen of Alabama.

Success on Lane's underlying counterclaim could easily result in a judgment against Andalusia and Hughes in excess of the $75,000 jurisdictional amount for a § 1332 removal. There is no dispute about this jurisdictional prerequisite, that is, unless the complaint is construed not to seek indemnity, as Andalusia and Hughes now ask this court to construe it. If they had only sought to enforce an alleged obligation by their insurers to defend and had not mentioned indemnity, the existence of the $75,000 amount in controversy would be highly problematical. Without a claim for indemnity, the court would require proof by the removing defendants by a preponderance of the evidence that the cost of providing the defense will, in fact, exceed $75,000. Such an undertaking would be difficult, if not impossible. But, such is not the case here. Perhaps the enigmatic request for indemnity was inadvertent, but it appears in the complaint. If Andalusia and Hughes prevail over Lane in the underlying case, the question of indemnity will, of course, become academic. As it stands now, there exists more than $75,000 in controversy.

In the instant action, Andalusia and Hughes seek no relief against Lane.

Within thirty (30) days after service of the state court complaint on Penn-American, which was the first served defendant, Penn-American filed a notice of removal (erroneously styled "Petition for Removal"), removing the case to this court under §§ 1441 and 1332, alleging that Lane, the only non-diverse defendant, was fraudulently joined and/or is a nominal party. American Western and Evanston thereafter timely joined in the removal. Regis is excused from any obligation to join because it had not been served when the notice of removal was filed. As stated, Lane did not join in the removal. Although Penn-American's notice of removal includes a copy of the state court complaint, it does not contain a copy of any summons served on any defendant.

As this court routinely does in cases removed under § 1332 on the basis of alleged fraudulent joinder of a non-diverse defendant, the court deemed a Rule 12(b)(6), F.R.Civ.P., motion to have been filed by Lane, the non-diverse defendant, and the said motion was set for hearing. Before the motion could be heard, Andalusia and Hughes filed their present motion to remand, and Lane filed his separate motion to remand, expressly disclaiming any intention to seek a dismissal of the action as against him.

Only after the motions to remand had been filed, did Evanston file a motion to realign Lane with Andalusia and Hughes as a plaintiff, arguing that to do so is not only proper, but will create the needed diversity of citizenship between plaintiffs and defendants without regard to whether, as Penn-American alleged in its notice of removal, Lane was fraudulently joined or is an unnecessary party. Evanston's motion to realign was filed more than thirty (30) days after the thirty (30) day time period for removal had expired.

Andalusia and Hughes, as plaintiffs, and Lane, as defendant, obviously are protagonists in their underlying case, but uniquely, they agree perfectly with each other in this case that it belongs in the state court where it was filed.

Having given the essential history of the case, the court now proceeds to address the arguments made by movants in support of their pending motions to remand and the counter-arguments made by the removing defendants. As the court examines its jurisdiction, it, as it always must, keeps firmly in mind the constitutional fact that state courts are the courts of primary or general jurisdiction in this country and that the federal courts are courts of limited or statutory jurisdiction, meaning that access to federal courts can be obtained only by a supplicant's meeting all of the jurisdictional requirements, construed against him. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941).

Andalusia, Hughes and Lane all challenge this court's subject-matter jurisdiction that is premised by the removing defendants on diversity. Movants say that non-diverse defendant Lane was not only a proper party defendant in the state declaratory action, but was a necessary party defendant in that action. They are correct. Lane was neither fraudulently joined nor is he a nominal party. The joinder of Lane as a defendant was necessary under Alabama law. This is quickly made clear from a reading of Ala.Code § 6-6-27, which is a part of Alabama's Declaratory Judgment Act. The, following unambiguous language is critical to the core issue before this court:

All persons shall be made parties who have, or claim, any interest which would be affected by the declaration ...

(emphasis supplied).

As an alleged tort victim, Lane had an interest, actual or theoretical, in whatever finding will ultimately be made on the coverage question, whether against Andalusia and Hughes or in their favor. Lane was therefore an indispensable party in the state court action pursuant to § 6-6-27.

For the purposes of § 6-6-27, there is no distinction between an Alabama declaratory action brought by an insurance company against its insured, and a declaratory action brought by an insured against his insurance company. Neither American Automobile Ins. Co. v. English, 266 Ala. 80, 94 So.2d 397 (1957), nor State Farm Mutual Automobile Ins. Co. v. Sharpton, 259 Ala. 386, 66 So.2d 915 (1953), recognizes any difference between a tort victim's being a necessary party under one procedural posture, and not its mirror image. There is nothing remarkable about a tortfeasor's suing not only his insurance company for coverage, but simultaneously naming his adversary in the underlying case as a defendant. This is done every day in Alabama. In fact, under § 6-6-27, it must be done.

The remarkable thing is that the removal issue now before the court under Alabama law had not been specifically addressed in a published opinion until Judge Coogler of this court addressed it on January 17, 2007. When the present motions to remand were orally argued, the parties were just as unaware as this court was that another judge of the court had just finished dealing with it. Judge Coogler's case is strikingly similar to this case, but, as will appear, is different in several material respects. In Earnest v. State Farm Casualty Co., 475 F.Supp.2d 1113 (N.D.Ala.2007), Judge Coogler denied a motion to remand filed by an insured who had sued in an Alabama court both his insurance company and the non-diverse tort claimants who had sued him. Judge Coogler held that "there is no possible cause of action, in the traditional sense, that exists against the non-diverse defendants" (emphasis supplied). Judge Coogler, however, did not go so far as to agree with the removing insurance company that the non-diverse defendants had been fraudulently joined by the plaintiff insured. Instead, he pointed out that in American Safety Casualty Ins. Co. v. Condor Associates Ltd., 129 Fed.Appx. 540 (11th Cir. 2005), the Eleventh Circuit (which was following the old Fifth Circuit's Ranger Ins. Co. v. United Housing of New Mexico, 488 F.2d 682 (5th Cir.1974)) recognizes that tort claimants are indispensable parties in declaratory judgment actions over coverage. Accordingly, based on both Alabama and Eleventh Circuit precedent, Judge Coogler concluded, as ...