Bedford v. Connecticut Mut. Life Ins. Co., Civil Action No. 96-D-81-N.

• Decision Date: 13 February 1996
• Docket Number: Civil Action No. 96-D-81-N.
• Citation: 916 F. Supp. 1211
• Parties: Roger Hugh BEDFORD, Jr., Plaintiff, v. CONNECTICUT MUTUAL LIFE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

916 F. Supp. 1211

Roger Hugh BEDFORD, Jr., Plaintiff, v. CONNECTICUT MUTUAL LIFE INSURANCE COMPANY, et al., Defendants.

Civil Action No. 96-D-81-N.

United States District Court, M.D. Alabama, Northern Division.

February 13, 1996.

Jere L. Beasley, Wilson D. Miles, III, Montgomery, AL, for plaintiff.

Charles D. Stewart, Howard K. Glick, Birmingham, AL, for Connecticut Mutual.

Jerry D. Hillman, Vernon L. Wells, II, Birmingham, AL, for James R. McCown and W. Russell McCown.

MEMORANDUM OPINION AND ORDER

DE MENT, District Judge.

Before the court is the plaintiff's motion filed January 18, 1996, to remand the above-styled action to the Circuit Court of Montgomery County, Alabama, and to award the plaintiff attorney's fees and costs. Also before the court is the plaintiff's motion filed January 18, 1996, to strike the affidavit of James McCown. On February 8, 1996, the defendants responded in opposition to the plaintiff's motions. After careful consideration of the arguments of counsel, the relevant case law, and the record as a whole, the court finds that the plaintiff's motion to remand is due to be granted but that the plaintiff's motions to strike and for attorney's fees and costs are due to be denied.

STATEMENT OF FACTS

The plaintiff, Roger H. Bedford, Jr., alleges various claims including fraud, fraudulent suppression, negligent supervision and wanton supervision. Three of these claims involve the actions or inaction of defendants James R. McCown and W. Russell McCown, employees of defendant Connecticut Mutual Life Insurance Company.

Specifically, the plaintiff contends that around June, 1992, the McCowns, while acting as agents of Connecticut Mutual Life Insurance Company, fraudulently represented to him that the insurance policy in question, Policy No. 4844307, issued on or about January 20, 1989, would be paid-in-full in six years from the time of purchase. He also contends that the McCowns had a duty to disclose that the disputed policy would not be paid-in-full in six years and would require premium payments for the life of the policy. Furthermore, he asserts that the McCowns acted innocently, recklessly, negligently or wantonly in making the aforementioned misrepresentations and/or concealing the material facts relating to the terms of the insurance policy.

The McCowns are the only defendants who are citizens of the state of Alabama. As such, the parties agree that their presence as party defendants destroys the diversity jurisdiction that the court would otherwise have over the above-styled action. The defendants request the court to disregard the McCowns as party defendants and exercise diversity jurisdiction under 28 U.S.C. § 1332(a). The defendants argue that the McCowns should be disregarded for the purpose of determining diversity jurisdiction because they were fraudulently joined as party defendants for the sole purpose of destroying diversity jurisdiction.

DISCUSSION

This action was removed by the defendants from the Circuit Court of Montgomery County on the basis of diversity jurisdiction.¹ Defs.' Notice of Removal at 2. A district court has original jurisdiction over all cases where citizens of different states are involved and the amount in controversy exceeds $50,000, exclusive of interest and costs. 28 U.S.C. § 1332(a). When federal subject matter jurisdiction is predicated on diversity of citizenship, complete diversity must exist between the opposing parties. Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373-74, 98 S.Ct. 2396, 2402-03, 57 L.Ed.2d 274 (1978).

Any party who urges federal jurisdiction on a federal court bears the burden of showing that the jurisdiction exists. Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir.1989) (citing Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir.1983)). More importantly here, the defendants bear the burden of proving fraudulent joinder. Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir.1983). "The burden on the defendants is high; its presentation must be one that `compels the conclusion that the joinder is without right and made in bad faith....'" Frontier Airlines, Inc. v. United Air Lines, Inc., 758 F.Supp. 1399, 1404 (D.Colo.1989) (quoting Chesapeake & Ohio Railway Co. v. Cockrell, 232 U.S. 146, 152, 34 S.Ct. 278, 280, 58 L.Ed. 544 (1914)); see also Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 37, 66 L.Ed. 144 (1921) ("Defendant's showing must consist of a statement of facts rightly leading to the conclusion that joinder is fraudulent apart from the pleader's conclusions.").

A. Motion to Strike

The plaintiff contends that the court should strike and, therefore, not consider the affidavit of James McCown in determining whether the McCowns were fraudulently joined. However, it is a well established principle that a defendant seeking removal is entitled to present facts to show fraudulent joinder. In fact, "when a removing defendant claims that a non-diverse defendant has been fraudulently joined to preclude federal subject matter jurisdiction, the parties may submit, and the court may consider, both affidavits and deposition excerpts in support of and in opposition to a motion to remand." Howard Griggs Trucking, Inc. v. American Central Ins. Co., 894 F.Supp. 1503, 1508 n. 10 (M.D.Ala.1995) (De Ment, J.); see also Fowler v. Safeco Ins. Co. of America, 915 F.2d 616, 617 (11th Cir.1990) ("Defendants have the opportunity to submit affidavits, depositions, or other evidence to support removal."); Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir.1989) (In addressing the issue of fraudulent joinder, the district court can consider any submitted affidavits and/or deposition transcripts.); Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir.1983) ("Both parties may submit affidavits and deposition transcripts."); Lott v. Metropolitan Life Ins. Co., 849 F.Supp. 1451, 1452 (M.D.Ala.1993) ("A defendant may submit affidavits, depositions, or other evidence to support removal."); Lane v. Champion Intern. Corp., 827 F.Supp. 701, 706 (S.D.Ala. 1993) ("Both parties may submit affidavits and/or deposition transcripts on a motion to remand."). Based on the foregoing, the court finds that the plaintiff's motion to strike is due to be denied.

B. Fraudulent Joinder

The court cannot exercise diversity jurisdiction unless it disregards the citizenship of the McCowns for purposes of determining diversity jurisdiction. As noted above, the defendants argue that the McCowns were fraudulently joined for the purpose of destroying diversity jurisdiction and should be disregarded as party defendants. The doctrine of fraudulent joinder is applicable when the plaintiff, a citizen of the forum state, joins a resident citizen defendant with a nonresident citizen defendant. The joinder is fraudulent if the plaintiff fails to state a cause of action against the resident defendant and the failure is obvious according to the settled rules of the state. See Parks v. New York Times Co., 308 F.2d 474, 477 (5th Cir.1962), cert. denied, 376 U.S. 949, 84 S.Ct. 964, 11 L.Ed.2d 969 (1964). In Parks, the court gave the following guidance in defining fraudulent joinder:

The joinder is fraudulent if it is clear that, under the law of the state in which the action is brought, the facts asserted by the plaintiff as the basis for the liability of the resident defendant could not possibly create such liability so that the assertion of the cause of action is as a matter of local law plainly a sham and frivolous. And a joinder is fraudulent if the facts asserted with respect to the rest of the defendants are shown to be so clearly false as to demonstrate that no factual basis existed for any honest belief on the part of the plaintiff that there was joint liability.

Id. at 477. The court went on to hold that:

there can be no fraudulent joinder unless it be clear that there can be no recovery under the law of the state on the cause alleged, or on the facts in view of the law as they exist when the petition to remand is heard. One or the other at least would be required before it could be said that there was no real intention to get a joint judgment and that there was no colorable ground for so claiming.

Id. at 478.

When determining whether a defendant was fraudulently joined, the court must evaluate all factual issues and substantive law in favor of the plaintiff. Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir.1983) (citing Bobby Jones Garden Apts. v. Suleski, 391 F.2d 172, 177 (5th Cir.1968)).² If there is a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that the joinder is proper and remand the case to the state court. Coker, 709 F.2d at 1440 (citing Parks, 308 F.2d at 477-78) (emphasis added). As stated earlier, "the removing party bears the burden of proving that the joinder of the resident defendant was fraudulent." Cabalceta, 883 F.2d at 1561 (citing Coker, 709 F.2d at 1440).

The plaintiff makes three separate claims against the McCowns: fraudulent misrepresentation under Ala.Code § 6-5-101,³ fraudulent suppression under Ala.Code § 6-5-102,⁴ and fraudulent deceit under Ala.Code § 6-5-103.⁵ The defendants assert that it is legally impossible for the plaintiff to prevail against the McCowns under Alabama law on his claims alleging fraudulent misrepresentation of a material fact, fraudulent suppression of a material fact and fraudulent deceit. If it is possible for the plaintiff to state a cause of action under any one of these theories, then the defendants cannot prove that the McCowns were fraudulently joined. The court will only address the fraudulent suppression claim, as it is dispositive of the remand issue.

The Alabama Code provides that "suppression of a material fact which the party is under an obligation to communicate constitutes fraud. The obligation to communicate may arise from the...