Reagan Pharmacy, Inc. v. Fred's Stores of Tennessee, Inc. et al
MEMORANDUM OPINION AND ORDER denying 8 MOTION to Remand. Signed by Honorable Judge W. Harold Albritton, III on 1/27/2014. (wcl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
REAGAN PHARMACY, INC.,
FRED’S STORES OF TENNESSEE, INC.
and WES MADDOX,
CIVIL ACTION NO. 1:13-cv-848-WHA
MEMORANDUM OPINION AND ORDER
This action is before the court on a Motion to Remand (Doc. # 8) filed by the Plaintiff,
Reagan Pharmacy, Inc (“Reagan Pharmacy”), on December 11, 2013.
The Plaintiff originally filed a Complaint in this case in the Circuit Court of Geneva
County, Alabama on October 18, 2013. The Plaintiff brings state claims for Specific
Performance (Count I), Breach of Contract (Count II), and Fraudulent Deceit (Count III).
On November 20, 2013, the Defendants timely removed the case to this court on the basis
of diversity jurisdiction, alleging that the individual defendant Wes Maddox (“Maddox”), a
resident of the State of Alabama, had been fraudulently joined as a defendant to defeat this
For reasons to be discussed, the Motion to Remand is due to be DENIED.
II. MOTION TO REMAND STANDARD
Federal courts are courts of limited jurisdiction. See Kokkonen v. Guardian Life Ins. Co.
of Am., 511 U.S. 375 (1994); Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (1994); Wymbs v.
Republican State Exec. Comm., 719 F.2d 1072, 1076 (11th Cir. 1983), cert. denied, 465 U.S.
1103 (1984). As such, federal courts only have the power to hear cases that they have been
authorized to hear by the Constitution or the Congress of the United States. See Kokkonen, 511
U.S. at 377. Because federal court jurisdiction is limited, the Eleventh Circuit favors remand of
removed cases where federal jurisdiction is not absolutely clear. See Burns, 31 F.3d at 1095.
The Complaint alleges the following facts:
On or about February 22nd, 2013, the Plaintiff and the Defendants entered into a Sale and
Purchase Agreement to sell the Plaintiff’s pharmacy to the Defendant, Fred’s Stores of
Tennessee, Inc. (“Fred’s”). On April 1, 2013, Maddox met with an employee of Reagan
Pharmacy to discuss the completion of the Sale and Purchase Agreement. During that discussion,
the Reagan Pharmacy employee told Maddox about a competing pharmacy that was opening up
near Reagan Pharmacy. Maddox immediately ended the conversation and said that he had to
leave and would return after lunchtime. This representation was made in order and for the
purpose of informing Fred’s of the competing pharmacy. Maddox did not return after lunch, and
Fred’s contacted Reagan Pharmacy the next day and announced that the sale was off.
“Except as otherwise expressly provided by Act of Congress,” a defendant may remove
from state court any civil case that could have originally been brought in federal court. 28 U.S.C.
§ 1441(a). District courts have original jurisdiction of civil actions where the amount in
controversy exceeds $75,000 and the action is between citizens of different states. 28 U.S.C. §
1332. “Diversity jurisdiction requires complete diversity; every plaintiff must be diverse from
every defendant.” Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998).
Here, Plaintiff Reagan Pharmacy is an Alabama Corporation with its principal place of
business in Alabama. Defendant Fred’s is a Tennessee Corporation with its principal place of
business in Tennessee. Defendant Maddox is a citizen of Alabama. Thus, on the face of the
pleadings, the parties in this case are not completely diverse, and removal would normally be
However, if joinder of the non-diverse party is “fraudulent,” then removal may still be
appropriate. Id. “To establish fraudulent joinder, ‘the removing party has the burden of proving
[by clear and convincing evidence] that either: (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.’” Stillwell v. Allstate Ins.
Co., 663 F.3d 1329, 1332 (11th Cir. 2011) (alteration in original) (quoting Crowe v. Coleman,
113 F.3d 1536, 1538 (11th Cir. 1997)). In a third situation, joinder may also be fraudulent
“where a diverse defendant is joined with a nondiverse defendant as to whom there is no joint,
several or alternative liability and where the claim against the diverse defendant has no real
connection to the claim against the nondiverse defendant.” Triggs, 154 F.3d at 1287. The
defendant has a heavy burden, and “[t]o determine whether the case should be remanded, the
district court must evaluate the factual allegations in the light most favorable to the plaintiff and
must resolve any uncertainties about state substantive law in favor of the plaintiff.” Crowe, 113
F.3d at 1538. “The plaintiff need not have a winning case against the allegedly fraudulent
defendant; he need only have a possibility of stating a valid cause of action in order for the
joinder to be legitimate.” Triggs, 154 F.3d at 1287. But, if the defendant is found to have been
fraudulently joined, “the district court must ignore the presence of the non-diverse defendant and
deny any motion to remand the matter back to state court.” Henderson v. Wash. Nat’l Ins. Co.,
454 F.3d 1278, 1281 (11th Cir. 2006).
In this case, the Complaint alleges causes of action against Defendants Maddox and
Fred’s for Specific Performance, Breach of Contract, and Fraudulent Deceit. The Defendants
only assert the first form of fraudulent joinder, namely that “there is no possibility the plaintiff
can establish a cause of action against the resident defendant.” Stillwell, 663 F.3d at 1332. For
the following reasons, the court finds that Reagan Pharmacy has no possibility of proving a claim
against Maddox for any of the three causes of action. Thus, Maddox’s citizenship should be
ignored, diversity of citizenship is satisfied, and this case was properly removed to this court.
A. Breach of Contract and Specific Performance
In the Complaint, Reagan Pharmacy alleges that, “[a]fter negotiations in regard to the
contract [in this case], Defendants drafted [the contract] and forwarded it to Plaintiff for
signature.” (Doc. # 1-1 ¶ 6) The Complaint then alleges a number of actions undertaken by the
Defendants to “show their mutual assent to the terms and conditions of the contract.” (Id. ¶ 7)
Further, the Complaint alleges that the “Defendants breached the agreement by failing to abide
by the material terms and by failing to pay the agreed price.” (Id. ¶ 11) Based on these
allegations, the Plaintiff brings claims for breach of contract and specific performance.
Maddox cannot be held liable for any contract claim because Maddox is only alleged to
have acted as the agent or employee of the disclosed principal, Fred’s. Indeed, in the Complaint
itself, the Plaintiff states that “Maddox[,] at all times mentioned [therein], was an agent, servant
or employee of Fred’s, acting in the line and scope of his employment.” (Doc. # 1-1 ¶ 3) Under
Alabama law, “[a]n agent acting with actual or apparent authority who enters a contract on
behalf of a principal binds the principal but not himself.” Lee v. YES of Russellville, Inc., 784 So.
2d 1022, 1027 (Ala. 2000). However, if the agent does not disclose either that he or she works
for a principal or the identity of the principal, then both the agent and the principal are bound by
the contract. Willis v. Parker, 814 So. 2d 857, 864 (Ala. 2001).
First, there is no allegation or suggestion that Maddox failed to disclose that he was
working for a principal or that Fred’s was the principal. Rather, the Plaintiff asserts in brief that
Maddox “met and discussed with [one Reagan Pharmacy employee] the procedure for the
completion of the contract” and that Maddox’s plans to “meet with Reagan Pharmacy
employees to introduce them to Fred’s as well as [to] begin the process of obtaining
background tests and drug screens” were formed “for the purpose of completing the Sale and
Purchase.” (Doc. # 8-1 at 4) The Sale and Purchase Agreement attached to the Complaint (Doc.
# 1-1) is specifically stated to be between Reagan Pharmacy and Fred’s. Thus, there is no
possibility that Maddox did not disclose either that he was working for a principal or that Fred’s
was the principal.
Second, because Maddox worked for Fred’s as the disclosed principal, Maddox cannot be
bound by the contract. Lee, 784 So. 2d at 1027. Instead, only Fred’s is bound as the principal,
and only Fred’s may be found liable for any claims arising from the contract. Thus, Reagan
Pharmacy has no possibility of proving a contract claim against Maddox.
B. Fraudulent Deceit
The Complaint next alleges that Maddox and a Reagan Pharmacy employee “were
discussing the completion of the Sale and Purchase Agreement” when “Maddox was told that a
competing pharmacy was locating” nearby. (Doc. # 1-1 ¶ 13) As a result, “Maddox immediately
ended the conversation and represented and stated that he had to leave and would return after
lunch.” (Id.) According to the Complaint, “[s]uch representation was made in order and for the
purpose of informing Fred’s of the competing pharmacy.” (Id.) Maddox did not return after
lunch, and Fred’s contacted Reagan Pharmacy the next day to announce that the deal would no
longer occur. Based on these allegations, the Plaintiff brings a claim for fraudulent deceit against
the Defendants because “Maddox’s representation was false; it was material to [the Sale and
Purchase Agreement]; it was relied on by Plaintiff in regard to [the Agreement;] and Plaintiff
suffered damages as a proximate result thereof.” (Id.) In addition to the claim as alleged, in its
briefs the Plaintiff argues that “Maddox suppressed the fact that Fred’s would not complete the
Sale and Purchase contract.” (Doc. # 8-1 at 4)
The Defendants argue that no suppression claim has been alleged and that the Plaintiff
cannot prove reliance.
There is no possibility that a state court would find that Reagan Pharmacy has alleged a
claim for fraudulent deceit against Maddox, because Reagan Pharmacy has not alleged facts to
show that it detrimentally relied on either Maddox’s promise to return from lunch or, to the
extent the claim has been alleged, his alleged suppression of Fred’s intent not to go forward with
the Agreement. Reasonable reliance is “[a]n essential element of any fraud claim.” Mantiply v.
Mantiply, 951 So. 2d 638, 658 (Ala. 2006). “Reliance requires that the misrepresentation actually
induced the injured party to change its course of action.” Hunt Petroleum Corp. v. State, 901 So.
2d 1, 4 (Ala. 2004). Thus, if the plaintiff “‘would have adopted the same course irrespective of
the misrepresentation and would have sustained the same degree of damages anyway, it [cannot]
be said that the misrepresentation caused any damage, and the defendant will not be liable
therefor.’” Id. (quoting Shades Ridge Holding Co. v. Cobbs, Allen & Hall Mortg. Co., 390 So. 2d
601, 611 (Ala. 1980)). In this case, the Complaint fails to allege any fact to show that the
Plaintiff changed its course of action based on Maddox’s actions. See Crowe, 113 F.3d at 1538
(requiring the Complaint to state a cause of action against a resident defendant in order to find
that joinder was proper). Further, because the actions complained of in this suit occurred more
than one month after Reagan Pharmacy alleges it sent the completed Sale and Purchase
Agreement to the Defendants and because the Plaintiff’s claimed damages from breach of the
Agreement would have been the same regardless of whether Maddox had failed to return after
having said he would do so, Reagan Pharmacy cannot show how Maddox’s actions in April were
“relied on by Plaintiff in regard to [the Agreement].” (Doc. # 1-1 ¶ 13) There are simply no facts
alleged of Reagan Pharmacy detrimentally relying in any way before Fred’s refused to complete
the purchase on Maddox’s statement that he would return after lunch. As a result, the Plaintiff
has no possibility of proving a claim against Maddox for fraudulent deceit under the theory pled,
or the theory argued in brief.
C. Fraudulent Joinder and Diversity of Jurisdiction
For the reasons discussed, the court finds that the Plaintiff has no possibility of proving
claims for specific performance, breach of contract, or fraudulent deceit against Defendant
Maddox. Therefore, this court finds that Maddox was fraudulently joined under Eleventh Circuit
law and that, as a result, Maddox’s citizenship should be ignored for the diversity-of-citizenship
analysis. Because the amount-in-controversy of at least $800,000 in claimed damages exceeds
the statutorily required amount of $75,000 and because Fred’s, a citizen of Tennessee, and
Reagan Pharmacy, a citizen of Alabama, are completely diverse, this court has diversity
For the stated reasons, it is hereby
ORDERED that Plaintiff Reagan Pharmacy’s Motion to Remand is DENIED, and the
case will continue in this court.
DONE this 27th day of January, 2014.
/s/ W. Harold Albritton
W. HAROLD ALBRITTON
SENIOR UNITED STATES DISTRICT JUDGE
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