Protopas v. Standard Fire Ins. Co.
| Decision Date | 29 April 2021 |
| Docket Number | Case No.: 2:21-CV-33-RDP |
| Parties | PETER D. PROTOPAS, Plaintiff, v. THE STANDARD FIRE INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. District Court — Northern District of Alabama |
This matter is before the court on Peter D. Protopapas ("Plaintiff")'s Motion to Remand (Doc. # 32). Defendants removed this action based on diversity of citizenship. See 28 U.S.C. § 1441(b). In their removal papers, Defendants contend that Defendant Cobbs Allen & Hall, Inc. a/k/a/ Cobbs Allen, Inc. ("Cobbs Allen"), an Alabama resident, is fraudulently joined and should be disregarded for purposes of determining the propriety of removal under § 1441(b).1 Plaintiff disagrees and argues the court must remand this case to state court based on the resident-defendant rule. (See Doc. # 32). The Motion is fully briefed. .After careful consideration, and for the reasons discussed below, Plaintiff's Motion to Remand is due to be granted.2
Great Barrier Insulation Company ("Great Barrier") was a thermal insulation contractor that operated out of Alabama from 1970 until it dissolved in 2007.3 (See Doc. # 1-1 ¶¶ 1, 10-12). Last year, Great Barrier was sued in South Carolina state court for asbestos-related injuries allegedly caused by its insulation products, and Peter D. Protopapas ("Plaintiff") was appointed Receiver. (See Docs. #1-1 ¶¶ 1, 12; 32 at 2). Plaintiff began managing Great Barrier's assets (including its insurance policies) and discovered the company had limited documentation and/or inadequate insurance. (See Doc. # 1-1 ¶¶ 1, 46). Despite that limited documentation, Plaintiff uncovered that Alabama insurance broker Cobbs Allen brokered policies with Great Barrier that lasted from 1983 to 1987 (one of which was reinsured on an unspecified date). (Doc. # 1-1 ¶ 14). Plaintiff further alleges Great Barrier held insurance throughout Great Barrier's existence. (Doc. # 1-1 ¶ 29).
On December 1, 2020, Plaintiff filed a Complaint for Declaratory Judgment, Breach of Contract[,] and Breach of Duty in the Circuit Court of Jefferson County, Alabama against Cobbs Allen as well as three insurance companies: the Standard Fire Insurance Company, St. Paul Fire and Marine Insurance Company, and General Reinsurance Corporation ("DefendantInsurers/Reinsurer").4 (Doc. # 1-1). Plaintiff asserted three causes of action for declaratory judgment against various Defendants and two causes of action for breach of duty and breach of contract against Cobbs Allen only. Plaintiff did not, however, state when Cobbs Allen committed any breach or act that would give rise to civil liability, though Plaintiff claimed that Cobbs Allen served as Great Barrier's insurance broker "at times pertinent to th[e] complaint." (Doc. # 1-1 ¶¶ 13, 29).
Defendants' removal based on diversity, at least on its face, poses a problem. Cobbs Allen is a resident of Alabama. And, under the resident-defendant rule, a defendant cannot remove a case to federal court if any properly joined defendant is a citizen of the state in which the action is brought. See 28 U.S.C. § 1441(b)(2). But, Defendants assert that Cobbs Allen was not properly joined and, therefore, that removal was proper. As Defendants pointed out in their Notice of Removal, (Doc. # 1), Alabama courts operate under a rule of repose that bars claims "that are not commenced within twenty years from the time they could have been." Spain v. Brown & Williamson Tobacco Corp., 230 F.3d 1300, 1307 (11th Cir. 2000); see McArthur v. Carrie's Admin., 32 Ala. 75, 92-93 (1858) (). Because the only insurance policies listed in the Complaint were entered into between 1983 and 1987, Defendants asserted that all Plaintiff's claims against Cobbs Allen were barred by the rule of repose and thus, were nonviable. (Doc. # 1 ¶ 17). It follows, they argue, that Cobbs Allen was fraudulently (or improperly) joined as there is no possibility that Plaintiffs can establish a cause of action against it.
Plaintiff moved to remand, arguing that because his claims against Cobbs Allen are not limited to the insurance policies that were brokered between 1983 and 1987, the rule of repose does not bar all of his claims. (Doc. # 32). Thus, Plaintiff argues, Cobbs Allen is properly joined and removal was improper. (Doc. # 32). Accordingly, the proper joinder of Cobbs Allen (and whether this court should grant Plaintiff's Motion to Remand) hinges on the following question: are any of the claims against Cobbs Allen viable even though the Complaint does not specifically reference an insurance policy that could give rise to claims falling outside of the rule of repose?
A defendant may remove a case from state court if (1) the district court would have had original jurisdiction over the action and (2) the procedural requirements of the removal statute are satisfied. 28 U.S.C. § 1441(a). Original jurisdiction includes (but obviously is not limited to) diversity jurisdiction. PTA-FLA, Inc. v. ZTE USA, Inc., 844 F.3d 1299, 1305 (11th Cir. 2016). Diversity is the asserted basis for subject matter jurisdiction in this matter. Diversity jurisdiction exists if no plaintiff is a citizen of the same state as any defendant -- that is, there is complete diversity between the parties -- and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a). There are other conditions for removal of an action on the basis of diversity jurisdiction, including two statutory procedural requirements: (1) when removing solely on diversity jurisdiction, a defendant may not remove "if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought," 28 U.S.C. § 1441(b)(2); and (2) "all defendants who have been properly joined and served must join in and consent to the removal of the action," 28 U.S.C. § 1446(b)(2)(A). These procedural hurdles are known, respectively, as the "resident-defendant rule" and the "rule of unanimity." The rule of unanimity is not at issue in this case; the resident defendant rule, however, is central to the parties'dispute because defendant Cobbs Allen is an Alabama resident. So, the court must determine if Cobbs Allen is properly joined.
The resident-defendant rule dictates that even where diversity jurisdiction exists, a defendant cannot remove a case to federal court if one of the defendants "properly joined and served" is a citizen of the state in which the case was filed. 28 U.S.C. § 1441(b); see Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). The theory behind that rule is that removal based on diversity is intended to protect out-of-state defendants from the possible biases of a state court. Congress reasoned there is no need for such protection where a defendant is a citizen of the state in which the case is brought. Application of the resident-defendant rule is usually straightforward: after a resident defendant is served in state court, if it (or another defendant) attempts to remove the case that removal fails because of the citizenship of a served resident defendant. See 28 U.S.C. § 1441(b)(2). Without question, Cobbs Allen is an Alabama "citizen." But, the Defendants removing this case assert resident defendant Cobbs Allen is improperly joined in that all of Plaintiff's claims against Cobbs Allen are barred by Alabama's rule of repose. (Doc. # 1 ¶ 17).
Plaintiff frames this inquiry as jurisdictional (Doc. # 32 at 7-8), but it is procedural. See, e.g., Snapper, Inc. v. Redan, 171 F.3d 1249, 1258 (11th Cir. 1999), Bowman v. PHH Mortg. Corp., 423 F. Supp. 3d 1286, 1288 n.2 (N.D. Ala. 2019). The requirements for diversity jurisdiction are that complete diversity exists and that the amount-in-controversy is met. 28 U.S.C. § 1332(a). Cobbs Allen's joinder does not affect diversity — Plaintiff is not an Alabama resident. There is complete diversity and Defendants have made a sufficient showing that the amount in controversy is greater than $75,000. (See Doc. # 1 ¶¶ 22-27). The question is whether Cobbs Allen, an Alabama resident, can procedurally remove or join in removal. That is, the underlying question about Cobbs Allen's joinder that must be resolved.
1. Standard of Review
At the outset, the court emphasizes that the bar for proper joinder is low; as discussed more fully below, under Eleventh Circuit precedent, if it is reasonably possible that any of the claims against Cobbs Allen would be viable in state court, Cobbs Allen is properly joined and the court must grant Plaintiff's Motion to Remand. (Doc. # 32). To evaluate if Cobbs Allen is properly joined, the court outlines the standard of review before addressing whether any of Plaintiff's claims against Cobbs Allen are viable.
The Eleventh Circuit has instructed district courts to construe removal statutes narrowly. Scimone v. Carnival Corp., 720 F.3d 876, 882 (11th Cir. 2013). There is a "presumption against the exercise of federal jurisdiction," and uncertainties as to removal are to be resolved in favor of remand. Id. This rule prevents "exposing a state-court plaintiff whose case has been removed to the possibility that the plaintiff will win a final judgment in federal court, only to have it determined that the court lacked a proper basis for jurisdiction." Wright, Miller, & Cooper, 14C Fed. Prac. & Proc. Juris. § 3721 (Rev. 4th ed.).
To succeed in proving that a co-defendant was improperly joined, a defendant must demonstrate: "(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 into state court." Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997). If the defendant makes either of these showings, "the resident defendant is subject to dismissal as a party and its citizenship is disregarded for diversity requirement purposes." Brawley v. Nw....
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