Broadway v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 19 March 2014
• Docket Number: Case No. 2:13–cv–628–MEF.
• Citation: 4 F.Supp.3d 1271
• Court: U.S. District Court — Middle District of Alabama
• Parties: Joseph J. BROADWAY, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Shane Anderson, Defendants.

4 F.Supp.3d 1271

Joseph J. BROADWAY, Plaintiff,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Shane Anderson, Defendants.

Case No. 2:13–cv–628–MEF.

United States District Court,

M.D. Alabama,

Northern Division.

Signed March 19, 2014.

Gregory William Gill, G. William Gill Atty/Counselor at Law, Montgomery, AL, for Plaintiff.

Bert Sheffield Nettles, Charles Dennis Hughes, Haskell Slaughter Young & Rediker LLC, Birmingham, AL Felicia Abernathy Long, Haskell Slaughter Young & Gallion LLC, Montgomery, AL, for Defendants.

MEMORANDUM OPINION AND ORDER

MARK E. FULLER, District Judge.

Before the Court are Defendants State Farm Mutual Automobile Insurance Company (“State Farm”) and Shane Anderson's (“Anderson”) (collectively “Defendants”) Notice of Removal (Doc. # 1), State Farm's Motion to Dismiss (Doc. # 4), Anderson's Motion to Dismiss (Doc. # 5), Plaintiff Joseph Broadway's (“Broadway”) Motion to Remand (Doc. # 7), and Defendants' Motion to Strike (construing Doc. # 13 as containing a motion to strike). After careful consideration of the law, the evidence and arguments presented, and the record as a whole, the Court finds that Defendants' Motions to Dismiss Broadway's fraud claim are due to be GRANTED, Broadway's Motion to Remand is due to be DENIED, and State Farm's Motion to Dismiss Counts I and II of Broadway's complaint is due to be DENIED.

I. FACTUAL AND PROCEDURAL HISTORY

This is a lawsuit by Broadway against State Farm for failure to pay Underinsured Motorist (“UIM”) benefits and against State Farm and State Farm agent Anderson for fraud. Broadway alleges in his complaint that he was in a motor vehicle accident in which Roger Channell (“Channell”) negligently collided with Broadway causing numerous and severe injuries to Broadway. Channell was insured only for the $25,000 minimal amount required by Alabama law. Broadway subsequently obtained a release from Channell and his insurer for the full $25,000 amount of Channell's policy with State Farm's express permission. State Farm also waived its subrogation rights as to Channell in regard to Broadway's claim for UIM benefits with State Farm. State Farm subsequently refused to pay Broadway more than $5,000 in UIM benefits even though Broadway's policy limit was $25,000 and despite Broadway's allegation that State Farm knew “the fair and reasonable settlement value” of Broadway's claim exceeded the limits of Broadway's policy. (Doc. # 1–4, at ¶ 5.) Based on State Farm's failure to pay the $25,000 policy limit for UIM benefits, Broadway asserts a breach of contract claim in Count I and a bad faith claim in Count II against State Farm.

Broadway also alleges fraud claims in Count III against both State Farm and Anderson. Anderson is the agent who sold the State Farm auto insurance policy to Broadway. Broadway alleges that Defendants committed fraud by representing to him through their advertising slogan that they would treat him like a “Good Neighbor,” and that he purchased his policy based on Defendants' representation that he would be treated like a “Good Neighbor,” i.e., Defendants would treat insurance claims “on a fair, reasonable and good faith basis.” (Doc. # 1–4, at ¶ 15.) Broadway seeks the remaining $20,000 UIM benefits under his policy along with interest and costs, as well as $150,000,000 in punitive damages. (Doc. # 1–4, at ¶¶ 9, 13.)

Broadway filed his suit in the Circuit Court of Montgomery County, Alabama on July 29, 2013. Broadway alleges that he is a citizen of Alabama, that State Farm is an Illinois corporation with its headquarters in Illinois, and that Anderson is an Alabama citizen. Defendants removed this action to this Court on August 30, 2013, and assert that Anderson was fraudulently joined, thus providing this Court with subject matter jurisdiction pursuant to 28 U.S.C. § 1332. State Farm and Anderson moved to dismiss with prejudice the fraud claim in Count III, and State Farm moved to dismiss the breach of contract claim in Count I and bad faith claim in Count II under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).¹ Broadway has filed a motion to remand the case back to the Circuit Court of Montgomery County, Alabama. The Court ordered briefing on all motions because whether the Court has jurisdiction over the case depends upon whether Broadway can state a cause of action for fraud against the non-diverse party, Anderson.

II. LEGAL STANDARD

Federal courts are courts of limited jurisdiction. See, e.g., Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994). As such, federal courts have the power to hear only cases that they have been authorized to hear by the Constitution or by the Congress of the United States. See Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673. One type of case that Congress has empowered federal courts to hear are cases that have been removed by a defendant from state to federal court if the plaintiff could have brought his or her claims in federal court originally. See28 U.S.C. § 1441(a); Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). The removing defendant bears the burden of demonstrating that a district court has original jurisdiction over the subject matter of an action. See Diaz v. Sheppard, 85 F.3d 1502, 1505 (11th Cir.1996). Although remanding a case back to state court is the favored course of action when the existence of federal jurisdiction is not absolutely clear, “federal courts have a strict duty to exercise the jurisdiction that is conferred upon them by Congress.” Burns, 31 F.3d at 1095; Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996).

III. DISCUSSION

A. Fraudulent Joinder

1. Fraudulent Joinder Standard

Section 1332(a) requires that the plaintiff and defendant be “citizens of different States[.]” 28 U.S.C. § 1332(a); see also Legg v. Wyeth, 428 F.3d 1317, 1320 n. 2 (11th Cir.2005) (“Federal diversity jurisdiction under [§ 1332(a) ] requires ‘complete diversity’—the citizenship of every plaintiff must be diverse from the citizenship of every defendant.”). However, even if “on the face of the pleadings, there is a lack of complete diversity ..., an action may nevertheless be removable if the joinder of the non-diverse party ... [was] fraudulent.” Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.1998) (citing Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353, 1355 (11th Cir.1996)). Indeed, “[t]he citizenship of a resident defendant fraudulently joined should not be considered by a court for the purpose of determining diversity jurisdiction.” Sellers v. Foremost Ins. Co., 924 F.Supp. 1116, 1118 (M.D.Ala.1996).

Fraudulent joiner is a judicially created doctrine that provides an exception to the requirement of complete diversity. Federal courts have recognized three situations in which joinder may be deemed fraudulent: (1) when there is no reasonable possibility that the plaintiff can prove a cause of action against the non-diverse defendant; (2) when there is outright fraud in the plaintiff's pleading of jurisdictional facts; and (3) when there is no real connection to the claim and the non-diverse defendant. Bloodsworth v. Smith & Nephew, 2005 WL 3470337, at *4 (M.D.Ala.2005).

Considering the first type of fraudulent joinder, which is the only type at issue here, “[t]he plaintiff need not have a winning case against the allegedly fraudulent defendant; he need only have a [ reasonable ] possibility of stating a valid cause of action in order for the joinder to be legitimate.” Triggs, 154 F.3d at 1287 (partial emphasis added). That is to say, if there is even a possibility that a state court would find that the complaint states a cause of action against the non-diverse defendant, remand is required. See Legg, 428 F.3d at 1325. Still, the possibility that the non-diverse defendant could be liable “must be reasonable, not merely theoretical,” with “possible” meaning “more than such a possibility that a designated residence can be hit by a meteor tonight.” Id. at n. 5 (emphasis added).

Determining whether a resident defendant has been fraudulently joined “must be based upon the plaintiff's pleadings at the time of removal, supplemented by any affidavits and deposition transcripts submitted by the parties.” Id. at 1322 (internal quotations and emphasis omitted). “The proceeding appropriate ‘for resolving a claim of fraudulent joinder is similar to that used for ruling on a motion for summary judgment under [Federal Rule of Civil Procedure 56]’.” Id. at 1322–23 (quoting Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir.1997)). “Accordingly, all contested issues of substantive fact and any uncertainties as to the current state of the law must be resolved in the plaintiff's favor.” Exum v. State Farm Fire and Cas. Co., 821 F.Supp.2d 1285, 1290 (M.D.Ala.2011) (citations omitted). However, “[w]hile the proceeding appropriate for resolving a claim of fraudulent joinder is similar to that used for ruling on a motion for summary judgment ..., the jurisdictional inquiry must not subsume substantive determination.” Crowe, 113 F.3d at 1538 (internal quotations omitted). “When considering a motion for remand, federal courts are not to weigh the merits of a plaintiff's case beyond determining whether it is an arguable one under state law.” Id. (internal citations omitted). However, where the non-moving party has presented unrebutted evidence in the form of an affidavit or declaration, courts must give weight to the sworn testimony rather than unsupported allegations in the complaint. See Southern v. Pfizer, Inc., 471 F.Supp.2d 1207 (N.D.Ala.2006).

2. Fraudulent Joinder Analysis

If there is no reasonable possibility of Broadway stating a cause of action in state court against Anderson, the non-diverse defendant, then there is diversity jurisdiction in this case.² The issue, then, is whether there is a...