City of Vestavia Hills v. Gen. Fid. Ins. Co.

• Decision Date: 13 April 2012
• Docket Number: No. 11–13091.,11–13091.
• Citation: 676 F.3d 1310,23 Fla. L. Weekly Fed. C 930
• Parties: CITY OF VESTAVIA HILLS, a municipal corporation, Plaintiff–Counter Defendant–Appellant, v. GENERAL FIDELITY INSURANCE COMPANY, Defendant–Counter Claimant–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

23 Fla. L. Weekly Fed. C 930
676 F.3d 1310

CITY OF VESTAVIA HILLS, a municipal corporation, Plaintiff–Counter Defendant–Appellant,
v.
GENERAL FIDELITY INSURANCE COMPANY, Defendant–Counter Claimant–Appellee.

No. 11–13091.

United States Court of Appeals, Eleventh Circuit.

April 13, 2012.

J. Bentley Owens, III, Philip Guy Piggott, Benjamin T. Presley, Starnes, Davis, Florie, LLP, Birmingham, AL, for Plaintiff–Appellant.

Stephen N. Fitts, III, James Stanley Witcher, III, Hand Arendall, LLC, Birmingham, AL, for Defendant–Appellee.

Appeal from the United States District Court for the Northern District of Alabama.Before BARKETT and HULL, Circuit Judges, and HUNT,^* District Judge.HUNT, District Judge:

Plaintiff/Appellant, the City of Vestavia Hills, Alabama (“Vestavia Hills”) appeals the district court's denial of its motion to remand the matter back to state court. We have jurisdiction under 28 U.S.C. § 1292(b), and, having concluded that the district court properly denied Vestavia Hills's motion to remand, we affirm.

I. BACKGROUND AND VESTAVIA HILLS'S ARGUMENTS

Vestavia Hills won a judgment in state court against Cameron Development Corporation (“Cameron”). Based on that judgment, Vestavia Hills is now entitled to collect $442,263 from Cameron. Cameron submitted a claim for coverage on the judgment to its insurer, Defendant/Appellee General Fidelity Insurance Company (“General Fidelity”). General Fidelity denied Cameron's claim whereupon Vestavia Hills filed a one-count complaint in state court, suing Cameron and General Fidelity pursuant to Alabama Code § 27–23–2. That code section states, in relevant part:

Upon the recovery of a final judgment against any person ... if the defendant in such action was insured against the loss or damage ... the judgment creditor shall be entitled to have the insurance money provided ... and if the judgment is not satisfied ... the judgment creditor may proceed against the defendant and the insurer to reach and apply the insurance money to the satisfaction of the judgment.

In other words, in Alabama, if a party wins a judgment, and the defendant's insurer refuses to pay the judgment, the judgment creditor can sue the insurer along with the defendant from the earlier suit to reach the insurance proceeds.

Vestavia Hills filed this action in state court, and General Fidelity removed it to the Northern District of Alabama. As Vestavia Hills and Cameron are both Alabama citizens, diversity jurisdiction was questionable. In denying Vestavia Hills's motion to remand, however, the district court realigned Cameron as a plaintiff because Vestavia Hills's and Cameron's interests converged against General Fidelity in that both Vestavia Hills and Cameron want to force General Fidelity to provide coverage.

Vestavia Hills sought an interlocutory appeal, and the district court certified the question to this Court of “whether a district court may, in a case brought under Alabama Code § 27–23–2, which requires a plaintiff to initiate the action against both the insured and the insurer, exercise its discretion to realign the parties based upon their actual interests.”

Vestavia Hills concedes that the purpose of this action is solely to establish whether General Fidelity must provide insurance coverage and that no claim is raised against Cameron, but the city nonetheless argues that the district court erred in realigning the parties because Alabama Code § 27–23–2 expressly states that both the insured and the insurer are to be named as defendants, and points out that the Alabama Supreme Court has held that both parties must be named as defendants. Vestavia Hills further argues that, even if the parties are realigned, this matter must be remanded to state court because realignment would have the effect of turning the case into a direct action under 28 U.S.C. § 1332(c), which provides that, for purposes of diversity jurisdiction, an insurer is deemed a citizen of the insured's State of residence when the insurer is sued in an action to determine the insured's liability and the insured is not named in that suit.

II. DISCUSSION 1. Standard of Review

We review a district court's denial of a motion to remand de novo. Conn. State Dental Ass'n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1343 (11th Cir.2009). This Court reviews findings of jurisdictional facts for clear error. Scarfo v. Ginsberg, 175 F.3d 957, 960 (11th Cir.1999).

2. Analysis

Weighing the propriety of the district court's decision to realign the parties and deny Vestavia Hills's motion to remand requires us to consider two different interests. On the one hand, “[b]ecause removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly. Indeed, all doubts about jurisdiction should be resolved in favor of remand to state court.” Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir.1999) (citation omitted).¹ On the other hand, there exists also a strong federal preference to align the parties in line with their interests in the litigation. We begin with the proposition, voiced by the Supreme Court that, “[f]or the purpose of removal, the federal law determines who is plaintiff and who is defendant. It is a question of the construction of the federal statute on removal, and not the state statute. The latter's procedural provisions cannot control the privilege of removal granted by the federal statute.” Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 580, 74 S.Ct. 290, 294, 98 L.Ed. 317 (1954). Accordingly, what Alabama Code § 27–23–2 or the Alabama Supreme Court have to say about whether Cameron is a defendant or a plaintiff is immaterial, and, further, state legislatures apparently...