Henderson v. Washington Nat. Ins. Co.

• Decision Date: 07 July 2006
• Docket Number: No. 05-15639.,05-15639.
• Citation: 454 F.3d 1278
• Parties: Jacqueline D. HENDERSON, Plaintiff-Appellant, v. WASHINGTON NATIONAL INSURANCE COMPANY, Conseco Services LLC, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

454 F.3d 1278

Jacqueline D. HENDERSON, Plaintiff-Appellant, v. WASHINGTON NATIONAL INSURANCE COMPANY, Conseco Services LLC, et al., Defendants-Appellees.

No. 05-15639.

United States Court of Appeals, Eleventh Circuit.

July 7, 2006.

Michael A. Youngpeter, Steve Olen, Stephen Russell Copeland, Olen, Nicholas & Copeland, P.C., Mobile, AL, for Henderson.

Paul P. Bolus, Christian Watson Hancock, Jason A. Walters, Gary L. Howard, Francis Asbury Flowers, III, Burr & Forman, LLP, Charles D. Stewart, Spain & Gillon, LLC, Birmingham, AL, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before HULL and WILSON, Circuit Judges, and GOLDBERG,^* Judge.

GOLDBERG, Judge:

In this case, appellant Jacqueline D. Henderson ("Henderson"), an Alabama resident, brought a fraud case in Alabama state court against appellees Washington National Insurance Company and Conseco Services, LLC (together, "the diverse defendants")¹. Henderson also named Thomas B. Haney ("Haney"), an Alabama resident, as a defendant in the case.² The diverse defendants removed the case to the district court, alleging that Haney had been fraudulently joined, and moved to dismiss the case for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Henderson moved to remand the case back to Alabama state court. The district court denied Henderson's motion to remand and later granted the diverse defendants' motion to dismiss. Henderson now appeals both of those rulings. In deciding not to remand, the district court held that there was no possibility that Henderson could maintain a cause of action against the domestic defendant Haney. Because we believe there exists at least some possibility that Henderson's claim against Haney is viable under applicable Alabama state law, we reverse and remand.

I. BACKGROUND

Henderson filed her complaint against the defendants in the Alabama Circuit Court of Jefferson County on June 28, 2004. The complaint alleged that the defendants engaged in fraud by concealing the true nature of a group insurance policy Henderson purchased in 1995. Henderson claimed that the defendants misrepresented the method according to which the group premiums were assessed. Specifically, instead of spreading the premium costs over all policyholders as with a typical group policy, the defendants allegedly placed the policyholders who had experienced illness or injury in a separate "group" and calculated their premiums on a separate basis, resulting in higher premiums. Henderson's complaint alleged that her premiums increased dramatically as the years went on. In addition, she claimed her discovery of the fraud was hindered by the "continuing nature" of the fraud that involved the defendants' marketing, sale, and servicing of the policies. Henderson further alleged that during their correspondence with Henderson during the period of increasing premiums, the defendants concealed the nature of the fraud by insisting that the increases were based on the group coverages. The complaint also contained contract claims, but only against the diverse defendants. Of all the named defendants, only Haney was a citizen of Alabama.

On August 6, 2004, the diverse defendants filed a notice of removal with the U.S. District Court for the Northern District of Alabama. The notice of removal claimed that Haney had been fraudulently joined to defeat otherwise valid diversity jurisdiction. A week later, both Haney and the diverse defendants moved to dismiss the case, claiming that Alabama's two-year statute of limitations for fraud cases, see Ala.Code § 6-2-38(l), rendered Henderson's claims time-barred. On September 7, 2004, Henderson moved to remand the case back to state court. On March 23, 2005, the district court denied Henderson's motion to remand on the grounds that Haney was fraudulently joined. The district court found that Ala. Code § 6-2-38(l), and the inapplicability of the tolling statute, see Ala.Code § 6-2-3, precluded any possibility that Henderson could prevail against the in-state defendant Haney, which thus ensured complete diversity of citizenship. On the same day, the district court granted Haney's motion to dismiss and dismissed Henderson's claims against Haney with prejudice. On September 12, 2005, the district court dismissed the remaining claims against the diverse defendants as similarly untimely under Ala.Code § 6-2-38(l).

II. DISCUSSION

A. Standard of Review

We review the district court's denial of Henderson's motion to remand de novo. See Pacheco de Perez v. AT&T Corp., 139 F.3d 1368, 1373 (11th Cir.1998). We review the district court's grant of defendants' motion to dismiss for failure to state a claim de novo as well, and we must accept all factual allegations in the complaint as true and "construe them in the light most favorable to the plaintiff." Simmons v. Sonyika, 394 F.3d 1335, 1338 (11th Cir.2004) (quotation marks omitted).

B. Motion to Remand

An action in state court may be removed to federal court when the federal courts have diversity or federal question jurisdiction. See 28 U.S.C. § 1441(a). When a defendant removes a case to federal court on diversity grounds, a court must remand the matter back to state court if any of the properly joined parties in interest are citizens of the state in which the suit was filed. See Lincoln Prop. Co. v. Roche, ___ U.S. ___, 126 S.Ct. 606, 613, 163 L.Ed.2d 415 (2005) (citing 28 U.S.C. § 1441(b)). Such a remand is the necessary corollary of a federal district court's diversity jurisdiction, which requires complete diversity of citizenship.

When a plaintiff names a non-diverse defendant solely in order to defeat federal diversity jurisdiction, the district court must ignore the presence of the non-diverse defendant and deny any motion to remand the matter back to state court. The plaintiff is said to have effectuated a "fraudulent joinder," see Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir.1997), and a federal court may appropriately assert its removal diversity jurisdiction over the case. A defendant seeking to prove that a co-defendant was fraudulently joined must demonstrate either that: "(1) there is no possibility the plaintiff can establish a cause of action against the resident defendant; or (2) the plaintiff has fraudulently pled jurisdictional facts to bring the resident defendant into state court." Id. The defendant must make such a showing by clear and convincing evidence. See Parks v. New York Times Co., 308 F.2d 474, 478 (5th Cir.1962).³

In this case, the defendants do not allege that Henderson has fraudulently pled facts; instead, they claim that there is no possibility that Henderson could maintain a cause of action against Haney, the non-diverse defendant. The district court agreed with the defendants, holding that any claim against Haney must fail as a matter of law as time-barred under Alabama's two-year statute of limitations for fraud claims, see Ala.Code § 6-2-38(l). Therefore, the district court was correct to deny the motion to remand only if there was no possibility that Henderson could have maintained a cause of action against Haney in Alabama state court.

The prima facie untimeliness of Henderson's claim is undisputed. The events giving rise to the claim occurred in 1995, but Henderson did not file her complaint until June 2004, well beyond the two-year statute of limitations. Instead, the dispute centers around the availability vel non of tolling under the savings clause of Ala.Code § 6-2-3. That statute provides that in fraud cases, the cause of action does not accrue until "the discovery by the aggrieved party of the fact constituting the fraud." Ala.Code § 6-2-3. Ordinarily, where the viability of a plaintiff's claim against a non-diverse defendant depends on whether section 6-2-3's savings clause applies, the case should be remanded summarily; such a question is emphatically a matter for the state courts to decide. Cf. Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir.1999) ("Because removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly [and] all doubts about jurisdiction should be resolved in favor of remand to state court.").

However, in this case the district court held that as a matter of law Henderson's complaint could not succeed against Haney.⁴ Essentially, the district court made, successively, a legal determination and a factual determination: first, it held that pleading fraudulent concealment was a necessary element of an Ala.Code § 6-2-3 tolling claim in a fraud case; and second, it claimed that Henderson's complaint did not, in fact, plead fraudulent concealment. In light of those two findings, the district court found that any court would be compelled to deny the applicability of tolling on these facts.

We will first examine the district court's legal determination that there exists a fraudulent concealment pleading requirement. The defendants point to a line of Alabama Supreme Court cases that require a plaintiff seeking to toll a statute of limitations to plead that the defendant fraudulently concealed the nature of the fraud. It is uncontroversial that fraudulent concealment must be pled in order to toll the statute of limitations in non-fraud cases.⁵ See, e.g., Garrett v. Raytheon Co., 368 So.2d 516, 519 (Ala.1979); see also Sellers v. A.H. Robins Co., Inc., 715 F.2d 1559, 1561 n. * * (11th Cir.1983); Barton v Am. Red Cross, 804 F.Supp. 1455, 1460 (M.D.Ala.1992). At issue before the district court was whether such a requirement exists in fraud cases as well.

Because the explicit terms of Ala.Code § 6-2-3 run the statute automatically from the "discovery ... of the fact constituting the fraud[,]" a strict textual reading of the statute may suggest that a plaintiff need not plead fraudulent concealment to toll the statute in fraud cases. Over the years, though, Alabama ...