George v. State Farm Fire & Cas. Co.

• Decision Date: 31 October 2011
• Docket Number: Case No. 2:11–cv–206–MEF.
• Citation: 821 F.Supp.2d 1285
• Parties: George and Barbara EXUM, Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

821 F.Supp.2d 1285

George and Barbara EXUM, Plaintiffs,

v.STATE FARM FIRE AND CASUALTY COMPANY, et al., Defendants.

Case No. 2:11–cv–206–MEF.

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

Oct. 31, 2011.

John William Partin, Larry Shane Seaborn, Penn & Seaborn LLC, Clayton, AL, Myron Cordell Penn, Penn & Seaborn LLC, Union Springs, AL, for Plaintiffs.

Angela Taylor Baker, Michael Baird Beers, Butler Snow O'Mara Stevens & Cannada, PLLC, Montgomery, AL, Courtney Reilly Potthoff, Joel Pierce Smith, Jr., Williams, Potthoff, Williams & Smith, LLC, Eufaula, AL, for Defendants.

MEMORANDUM OPINION AND ORDER

MARK E. FULLER, District Judge.

This cause is before the court on a March 18, 2011 Notice of Removal (Doc. # 2) filed by Defendants State Farm Fire and Casualty Company (“State Farm”) and Ron Abernathy (collectively “Defendants”), and a Motion to Remand (Doc. # 10) filed by Plaintiffs George and Barbara Exum (“Plaintiffs” or individually by name). The issues having been fully briefed, and after careful consideration of the law and the arguments of counsel, the court finds that Plaintiffs' motion to remand is due to be denied.

I. BACKGROUND

On April 13, 2010, Plaintiffs filed suit against State Farm, Ron Abernathy, and several fictitious defendants in the Circuit Court of Barbour County, Alabama. The Complaint (Doc. # 2, Attach. 1) sets forth seven causes of action: breach of contract; bad faith handling of Plaintiffs' insurance claim; fraudulent misrepresentation in sale of insurance policy; fraudulent suppression in sale of insurance policy; negligent or wanton misrepresentation or suppression of terms of insurance policy; negligent failure to hire, train, or supervise Abernathy; and wanton failure to hire, train, or supervise Abernathy. In the ad damnum clause of the Complaint, Plaintiffs seek an unspecified amount of compensatory and punitive damages.

The factual predicate for the Complaint arises out of the Plaintiffs' 1996 purchase of a homeowner's insurance policy from State Farm for a lake house in Abbeville, Alabama. Plaintiffs allege that Abernathy sold them this policy while acting as an agent for State Farm, and that State Farm and Abernathy represented to them that the insurance policy would cover Plaintiffs' property, including a boat dock, for structural damage and loss of use. Plaintiffs also allege that Defendants represented that the policy would pay the “repair/replacement cost” of the property in the event of a loss. Based on these representations, Plaintiffs jointly purchased the policy and paid all premiums due on the policy.

However, the undisputed evidence establishes that Abernathy was not involved in the sale of the insurance policy at issue to Plaintiffs.¹ Abernathy currently is an independent contractor agent for State Farm, but he only began selling and servicing State Farm products in June of 2000, several years after the sale of the policy at issue. (Abernathy Aff. ¶¶ 4–5.) Indeed, the undisputed evidence before the Court establishes that Abernathy did not sell the Plaintiffs' policy, nor any other insurance policies prior to June of 2000.

In February of 2009, very high winds caused significant property damage to Plaintiffs' boat dock. Plaintiffs submitted a claim on their insurance policy and allege that State Farm refused to honor Plaintiffs' claim in violation of the terms of the policy.

Plaintiffs are citizens of Alabama. State Farm is a corporate citizen of Illinois, and Abernathy is a citizen of Alabama. Plaintiffs served Abernathy and State Farm with the Complaint in this action in April of 2010. At that time, State Farm and Abernathy could not determine whether the amount in controversy was sufficient to support subject matter jurisdiction in federal court. During discovery, Defendants attempted to obtain more specificity regarding Plaintiffs' alleged damages. In George Exum's February 16, 2011 deposition, he testified that he and Barbara Exum later sold the home for $175,000, without repair to the damaged dock. (G. Exum Dep. 25 (Doc. # 2, Ex. D).) However, Mr. Exum testified emphatically that the house would have sold for between $325,000 and $375,000 but for the damage to the dock. (G. Exum Dep. 25, 98 (“If that dock had been fixed on that house, that house would have brought $350,000 or $375,000.”).) ² Mr. Exum arrived at that hypothetical selling price based upon the selling prices “other properties had been bringing” and upon the representations of his agent regarding Plaintiffs' property. (G. Exum Dep. 25, 98.)

Within thirty days of this deposition testimony, State Farm and Abernathy jointly filed their Notice of Removal, invoking this Court's subject matter jurisdiction pursuant to 28 U.S.C. § 1332(a). Defendants argue that Abernathy was fraudulently joined as a defendant in this action and that the amount in controversy exceeded $75,000.

On April 13, 2011, within thirty days of the Notice of Removal, Plaintiffs filed their Motion to Remand. In this motion, they argue only that the Defendants have failed to meet their burden of establishing that the amount in controversy exceeds $75,000. Plaintiffs make one passing reference to Defendants' contention that Abernathy was fraudulently joined.

II. STANDARD OF REVIEW

“[F]ederal courts have a strict duty to exercise the jurisdiction that is conferred upon them by Congress.” Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996). However, “[f]ederal courts are courts of limited jurisdiction.” Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir.1994); see also Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Thus, with respect to cases removed to this court pursuant to 28 U.S.C. § 1441, the law of the Eleventh Circuit favors remand where federal jurisdiction is not absolutely clear. “[R]emoval statutes are construed narrowly; where plaintiff and defendant clash about jurisdiction, uncertainties are resolved in favor of remand.” Burns, 31 F.3d at 1095. “In evaluating a motion to remand, the removing party bears the burden of demonstrating federal jurisdiction.” Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 n. 4 (11th Cir.1998) (citing Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1373 (11th Cir.1998)).

III. DISCUSSION

A state court defendant may remove a case to federal court at two procedurally distinct moments in time. See 28 U.S.C. § 1446(b). First, if it is facially apparent from the initial pleading that subject matter jurisdiction exists, the first paragraph of § 1446(b) provides the procedure for removal. See, e.g., Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 754 (11th Cir.2010); Williams v. Best Buy Co., Inc., 269 F.3d 1316, 1319 (11th Cir.2001); 28 U.S.C. § 1446(b). Such a removal must be accomplished “within thirty days after the receipt by the defendant ... of a copy of the initial pleading setting forth the claim for relief upon which such action is based.” § 1446(b) (paragraph one). However, “[i]f the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable ....” § 1446(b) (paragraph two).

Of course, federal diversity jurisdiction under § 1332(a) requires both complete diversity and satisfaction of the requisite amount in controversy. See, e.g., Allapattah Servs., Inc. v. Exxon Corp., 362 F.3d 739, 762 (11th Cir.2004). A case does not become “removable” until both conditions are present. Defendants contend that Defendant Abernathy's fraudulent joinder was apparent from the face of the Complaint, but that the amount in controversy requirement was “first ... ascertained” during Plaintiff George Exum's deposition. § 1446(b) (paragraph two). In other words, the Complaint as initially filed was not removable on its face and only became removable when Defendants possessed the requisite jurisdictional information. Accordingly, this is a § 1446(b) paragraph two removal.

A. Diversity of Citizenship Requirement1. Fraudulent Joinder Standard

Section 1332(a) requires that the parties be “citizens of different States[.]” § 1332(a)(1); 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, 154 F.3d at 1287 (citing Tapscott v. MS Dealer Service Corp., 77 F.3d 1353, 1355 (11th Cir.1996)). “Fraudulent joinder is a judicially created doctrine that provides an exception to the requirement of complete diversity.” Id. The 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 resident (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 resident (non-diverse) defendant. Id.; see also Legg v. Wyeth, 428 F.3d 1317, 1325 (11th Cir.2005).

As to the first type of fraudulent joinder, 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; see also Legg 428 F.3d at 1325 n. 5 (stating that the “potential for legal liability must be reasonable, not merely theoretical”) (internal quotation marks omitted).

“The...