Four Way Plant Farm, Inc. v. NCCI

• Decision Date: 25 July 1995
• Docket Number: Civ. A. No. 94-A-1324-N.
• Citation: 894 F. Supp. 1538
• Parties: FOUR WAY PLANT FARM, INC., et al., Plaintiffs, v. NCCI, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

894 F. Supp. 1538

FOUR WAY PLANT FARM, INC., et al., Plaintiffs, v. NCCI, et al., Defendants.

Civ. A. No. 94-A-1324-N.

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

July 25, 1995.

COPYRIGHT MATERIAL OMITTED

Jere L. Beasley, Lowell Landis Sexton, Frank M. Wilson, P. Leigh O'Dell, Beasley, Wilson, Allen, Main & Crow, P.C., Montgomery, AL, for plaintiffs Four Way Plant Farm, Inc., McDonald Const. Co., Inc., Walker Logging Co. Inc., Individually and on Behalf of All Others Similarly Situated as More Specifically Alleged in the Complaint.

Walker Percy Badham, III, Maynard, Cooper & Gale, P.C., Birmingham, AL, Kevin J. Arquit, John A. Karaczynski, Guy C. Quinlan, Gary Carney, Rogers & Wells, New York City, for defendants National Council on Compensation Ins., Nat. Workers' Compensation Reinsurance Pool, Liberty Mut. Ins. Co., Robert E. Maxwell, Jr.

Sydney R. Prince, III, Dennis Patrick McKenna, Prince, McKean, McKenna & Broughton, Mobile, AL, Maureen McGuirl, Leslye Fraser, Gibson, Dunn & Crutcher, Los Angeles, CA, for defendant Liberty Mut. Ins. Co.

Richard Henry Sforzini, Jr., Sirote & Permutt, P.C., Montgomery, AL, J. Mason Davis, Sirote & Permutt, Birmingham, AL, Mark F. Horning, Merritt R. Blakeslee, Anthony J. LaRocca, Steptoe & Johnson, Washington, DC, for defendant Aetna Cas. and Sur. Co.

Robert A. Huffaker, Charles A. Stakely, Jr., Rushton, Stakely, Johnston & Garrett, Montgomery, AL, Stanley B. Block, Vedder, Price, Kaufman & Kummolz, Chicago, IL, for defendant Fidelity and Cas. Co. of New York.

Horace G. Williams, Law Offices of Horace Williams, Eufaula, AL, James R. Safley, Linda S. Foreman, Robins, Kaplan, Miller & Ciresi, Minneapolis, MN, William H. Stanhope, Sheri L. Gates, Atlanta, GA, for defendant Employers Ins. of Wausau.

Harry Cole, John M. Milling, Jr., Hill, Hill, Carter, Franco, Cole & Black, Montgomery, AL, William M. Hannay, Andrew C. Porter, Edward J. Wong, III, Schiff, Hardin & Waite, Chicago, IL, for defendants Hartford Acc. and Indem. Co., Hartford Underwriters Ins. Co.

James W. Gewin, John E. Goodman, Michael R. Pennington, Bradley, Arant, Rose & White, Birmingham, AL, Richard G. Parker, Jeffrey Kilduff, O'Melveny & Myers, Washington, DC, for defendant Ins. Co. of North America.

Warren B. Lightfoot, Sabrina Andry Simon, Lightfoot, Franklin, White & Lucas, Birmingham, AL, Leon R. Goodrich, Bradley G. Clary, Oppenheimer, Wolff & Donnelly, St. Paul, MN, for defendant St. Paul Fire and Marine Ins. Co.

Thomas S. Lawson, Jr., James N. Walter, Jr., Capell, Howard, Knabe & Cobbs, P.A., Montgomery, AL, for defendant Travelers Ins. Co.

Charles M. Crook, M. Roland Nachman, Jr., Balch & Bingham, Montgomery, AL, Lewis A. Noonberg, David H. Bamberger, Piper & Marbury, Washington, DC, for defendant U.S. Fidelity and Guar. Co.

Deborah Alley Smith, Thomas A. Carraway, Rives & Peterson, Birmingham, AL, for defendant Hanover Ins. Co.

Robert S. Vance, Jr., Johnston, Barton, Proctor, Swedlaw & Naff, Birmingham, AL, for defendant Granite State Ins. Co.

MEMORANDUM OPINION AND ORDER

ALBRITTON, District Judge.

INTRODUCTION

Plaintiffs Four Way Plant Farm, Inc., McDonald Construction Co., and Walker Logging Co., Inc., ("Plaintiffs") brought this action in the Circuit Court for Bullock County, Alabama. They sued individually and also alleged a class action on behalf of other similarly situated Alabama employers who purchased workers' compensation insurance in Alabama since January 1, 1985.¹ In their complaint plaintiffs claimed under the antitrust law of Alabama, Ala.Code §§ 8-10-1 et seq. and § 6-5-60, that defendants engaged in a price-fixing scheme in connection with assigned risk workers' compensation insurance. They specifically stated that they asserted no federal cause of action and that they alleged no violation of federal antitrust laws, and they explicitly waived any potential federal claims they might have.

Defendants are National Council on Compensation Insurance ("NCCI"), an insurance rating organization;² National Workers' Compensation Reinsurance Pool ("National Pool"), a name given to the group of insurance companies which have contracted together to provide insurance to the residual market and reduce the risks associated with these policies; Robert J. Maxwell, Jr., ("Maxwell") a salaried employee of NCCI, Director of Government, Consumer, and Industry Affairs for NCCI's Southern Region, and an Alabama resident; and numerous named and fictitious insurance companies doing business in Alabama.

Alabama employers employing more than three persons are required to obtain workers' compensation insurance. Three manners of obtaining such coverage exist: (1) purchase the insurance in the "voluntary" market from an insurer licensed to create such a policy, (2) purchase the insurance from the "assigned risk" or "residual" market from an insurance company which is one of the servicing carriers joined together as National Pool, or (3) self-insure if the employer meets certain prerequisites.

Plaintiffs assert that defendants have engaged in a conspiracy of price-fixing and other antitrust violations under Alabama law which artificially inflate the cost of premiums in the residual market.

Defendants removed the case to the federal district court alleging federal question jurisdiction and federal diversity jurisdiction.³ Plaintiffs filed a motion to remand the case to the state court.

Defendants allege two grounds for federal question jurisdiction: plaintiffs' claim is actually federal in nature and plaintiffs have engaged in artful pleading in an effort to evade federal jurisdiction, and plaintiffs cannot waive potential federal claims when they assert representation on the part of a class, albeit a class not yet certified. Defendants base diversity jurisdiction on two arguments: defendant Maxwell, an Alabama citizen, is fraudulently joined, and defendant National Pool, alleged by plaintiffs to be an unincorporated association with Alabama citizen members, is not a suable entity but is merely a contractual reinsurance mechanism, thus diversity jurisdiction exists.

The court holds that there is neither federal question jurisdiction nor federal diversity jurisdiction, thus plaintiffs' motion to remand is due to be GRANTED.

MOTION TO REMAND STANDARD

The plaintiff is the master of the complaint and at liberty to choose federal or state jurisdiction. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987). A defendant seeking removal has the burden of demonstrating that the district court has jurisdiction. Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir.1989). The removal statute is interpreted strictly with remand being favored when removal jurisdiction is in doubt. Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994).

FEDERAL QUESTION JURISDICTION

Defendants contend that federal question jurisdiction exists because plaintiffs' claims are federal in nature in spite of the fact that the complaint specifically disavows any federal claim and restricts the plaintiffs' claims to alleged violation of state statutes. Defendants argue that plaintiffs' efforts to deny them a federal forum for what are essentially federal claims cannot succeed for two reasons discussed hereafter.

Artful Pleading

The doctrine of artful pleading, recognized by the Supreme Court in Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 397 n. 2, 101 S.Ct. 2424, 2427 n. 2, 69 L.Ed.2d 103 (1981), is a narrow exception to the rule that the plaintiff is the master of his or her complaint. Artful pleading occurs when a plaintiff, in an attempt to avoid federal jurisdiction, characterizes a claim as a state claim when the real nature of the claim is federal. The doctrine applies in two categories of cases.⁴

In the first category, plaintiff brings a cause of action in federal court and loses. The plaintiff then brings a similarly or identically worded complaint in state court. The defendant removes the case to federal court and moves for summary judgment or dismissal based on res judicata. The district court finds that removal jurisdiction exists because the "real nature" of the claim is federal. See, e.g., Federated Dep't Stores, 452 U.S. at 396-97 & n. 2, 101 S.Ct. at 2426-27 & n. 2 (history of the case). The instant case clearly does not fall into this category since the plaintiffs have not brought their claims in federal court at any prior time.

In the second category of cases where artful pleading applies, the claim brought by plaintiff in state court is based on subject matter that is preempted by federal law. See Caterpillar, Inc., 482 U.S. at 393, 107 S.Ct. at 2430; Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987); King Provision Corp. v. Burger King Corp., 750 F.Supp. 501, 504 (M.D.Fla.1990). See also Shaw v. Dow Brands, Inc., 994 F.2d 364 (7th Cir.1993) (held that federal law preempted state law, thus removal was proper); Travelers Indem. Co. v. Sarkisian, 794 F.2d 754 (2d Cir.) (citing preemption cases as the paradigm of artful pleading), cert. denied, 479 U.S. 885, 107 S.Ct. 277, 93 L.Ed.2d 253 (1986); In re Carter, 618 F.2d 1093, 1101 (5th Cir.1980) ("The accepted rule in this circuit is that upon removal the removal court should inspect the complaint carefully to determine whether a federal claim is necessarily presented, even if the plaintiff has couched his pleading exclusively in terms of state law."), cert. denied, 450 U.S. 949, 101 S.Ct. 1410, 67 L.Ed.2d 378 (1981); Salveson v. Western States Bankcard Ass'n, 525 F.Supp. 566, 572-73 (N.D.Cal.1981) ("If the subject matter of the claim has been preempted, there is no room for the assertion of a claim under state law."), aff'd in part, rev'd in part, 731 F.2d 1423 (9th Cir.1984). Compare Cheshire v. Coca-Cola Bottling Affiliated, Inc., 758 F.Supp. 1098, 1100 (D.S.C.1990) ("Federal question jurisdiction does not exist...