Harris v. ACCC Insurance Company et al

Filing 20

MEMORANDUM OPINION AND ORDER: The Court GRANTS the Motion to Dismiss Based on Fraudulent Joinder (Doc. 5 ) and DENIES the Motion to Remand (Doc. 11 ). Signed by Honorable Judge Terry F. Moorer on 11/28/2016. (kh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
ROSIE HARRIS,
Plaintiff,
v.
ACCC INSURANCE COMPANY, et al.,
Defendants.

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CASE NO. 2:16-cv-636-TFM
[wo]

MEMORANDUM OPINION AND ORDER
This action is assigned to the undersigned magistrate judge to conduct all proceedings
and order entry of judgment by consent of all the parties (Docs. 17-19, filed 9/1/16) and 28
U.S.C. § 636(c). Pending before the Court are Defendant Potts’ Motion to Dismiss (Doc. 5, filed
8/22/16) and Plaintiff’s Motion to Remand (Doc. 11, filed 9/2/16). The motions have been fully
briefed and is ripe for review. Having considered the motions and relevant law, the Court finds
the motion to dismiss is due to be GRANTED and the motion to remand is due to be DENIED.
I.

FACTS AND PROCEDURAL HISTORY

Plaintiff Rosie Harris (“Harris” or “Plaintiff”) filed this a complaint in the Circuit Court
of Lowndes County, Alabama on September 23, 2015. See Doc. 1, Atch 1, Complaint. Harris is
an Alabama citizen. The suit alleged breach of contract and bad faith against Defendants ACCC
Insurance Company, ACCC Claims, Central Alabama Insurance Agency, Inc., and Steve Cole.
The allegations against all Defendants involved solely Alabama state law issues and relate to the
denial of Plaintiff’s insurance claim for the loss of her vehicle.
Central Alabama Insurance Agency, Inc. and Steve Cole were both considered Alabama
citizens. As such, the case was not removable due to lack of diversity in citizenship. On July 11,

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2016, Harris filed a second amended complaint which added Defendant James A. Potts (“Potts”)
as a defendant and asserted two Alabama state law claims against him. Specifically, the claims
against Potts were Interference with a Contractual Relationship and Outrage. See Doc. 1, Atch
10, Second Amended Complaint. As part of the claims process, the ACCC Defendants hired
Defendant Potts – a licensed Alabama attorney – to represent ACCC Insurance for the limited
purposes obtaining an examination under oath from Plaintiff Harris.

Defendant Potts sent

Plaintiff numerous letters which attempted to schedule the examination under oath and required
her to bring certain documents to the examination. Plaintiff refused to attend the examination.
The ACCC Defendants denied her car insurance claim. A few weeks later, Plaintiff filed the
instant suit.
On August 2, 2016, shortly after Plaintiff’s dismissal of Central Alabama Insurance
Agency, Inc. and Steve Cole, Defendants ACC Insurance Company and ACCC Claims Service,
Inc. (collectively “the ACCC Defendants”) filed a Notice of Removal in this court based on an
assertion of diversity jurisdiction. See Doc. 1, generally. Defendants state in their Notice of
Removal that the case is properly removable under 28 U.S.C. §1441 because the United States
District Court now has original jurisdiction over this case under 28 U.S.C. §1332.
Specifically, the ACCC Defendants assert diversity jurisdiction exists in this case because
the amount in controversy exceeds the $75,000 jurisdictional threshold and complete diversity of
citizenship exists among the “true parties” when considering Defendant Potts has been
fraudulently joined and Defendants Central Alabama Insurance Agency, Inc. and Steve Cole had
previously been voluntarily dismissed. Plaintiff is a citizen of Alabama. The ACCC Defendants
are citizens of Texas. Defendant Potts – the defendant which has allegedly been fraudulently
joined – is a citizen of Alabama.

The case had not been originally removable because

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Defendants Central Alabama Insurance Agency, Inc. and Steve Cole were citizens of Alabama
which thereby destroyed diversity of citizenship among the parties.
Shortly after removal, Defendant Potts filed a motion to dismiss based on fraudulent
joinder on August 22, 2016. See Doc. 5. On September 2, 2016, Plaintiff timely filed her
motion to remand. See Doc. 11. In the motion to remand, Plaintiff asserts Defendant Potts was
not fraudulently joined and therefore this case was not removable as there is not complete
diversity of citizenship since Plaintiff and Defendant Potts are both Alabama citizens.
Specifically, Plaintiff argues “there has been no allegations by the Defendants of ‘outright fraud’
in Plaintiff[’s] pleadings of jurisdictional facts…and no dispute that Defendant Potts is a citizen
of Alabama.” See Doc. 11 at p. 3. Plaintiff also filed a response to Defendant Potts’ motion to
dismiss for fraudulent joinder. See Doc. 9. In the response, Plaintiff argues that she does have
viable causes of action for tortious interference with a contract and outrage.

Specifically,

Plaintiff states Defendant Potts was a stranger to the contract (not an agent) and therefore could
meet the elements of tortious interference with a contract. Potts was brought in after the claim
had arisen. She further argues that Potts’ sole purpose was to make it impossible for Plaintiff to
comply with the terms of the examination under oath. Plaintiff also asserts Potts’ letters were
intentionally calculated to inflict emotional distress and prevent her from being able to enjoy the
benefits of her insurance contract which establishes the outrage claim. Finally, Plaintiff also
filed a motion to stay proceedings pending review of the motion to remand. See Doc. 10. In the
motion, Plaintiff argued all other motions should defer to her motion to remand (including
Defendant Potts’ motion to dismiss). In that motion, Plaintiff also separately asserted that the
ACCC Defendants’ notice of removal was procedurally defective because the notice did not
include a signature from all named parties – specifically Defendant Potts. On September 2,

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2016, the Court denied the motion to stay stating the following:
At this stage in the process the Court has made no substantive rulings on any
matters in this case. The Plaintiff can be assured that the Court will certainly
address jurisdictional matters – including the motion to remand – first prior to any
other substantive rulings. From a very brief review of the motion to dismiss
based on fraudulent joinder (Doc. 5, filed 8/22/16), it does, however, appear to be
intertwined with the very issues presented in the motion to remand. In short, both
matters are jurisdictional in nature. Further, Plaintiff already filed her brief in
opposition to the motion to dismiss. See Doc. 9. As such, the Court declines to
enter a stay of proceedings in this matter, but will withhold briefing on the nonjurisdictional motions pending the Court’s determination on jurisdiction.
See Doc. 12. Despite the denial of the motion to stay, the Court will consider the procedural
defect arguments raised in the motion.
The ACCC Defendants responded to the motion to remand arguing that Potts was
fraudulently joined because Plaintiff could not recover against him under Alabama law. See
Doc. 15.

Therefore, if fraudulently joined, the Court must disregard his citizenship when

considering the existence of diversity of citizenship. The ACCC Defendants also address the
procedural defect argument by arguing that a fraudulently joined defendant need not join in or
consent to removal.
Defendant Potts filed a response to the motion to remand which also constitutes his reply
for the motion to dismiss. See Doc. 16. In the response, Potts argues that general agency is not
required to be a stranger to the contract. Rather, if the alleged interferer’s acts were within the
scope of the duties as an agent, then he is not a stranger to the contract. Next, Potts asserts the
letters, even if not reasonable within the insurance industry, still did not rise to the level of
extreme and outrageous conduct necessary to establish a claim of outrage under Alabama law.
Finally, with regard to the procedural defect argument, Potts makes the same arguments as the
ACCC Defendants in that he is not a properly joined defendant and therefore not required to join
in or consent to removal. Further, Potts asserts Harris waived the procedural defect because he
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raised the argument on September 2, 2016 which is more than 30 days after the August 2, 2016
notice of removal.
After review of the various pleadings, motions, and responses, the Court determines the
jurisdictional issue is fully briefed and no oral arguments are necessary. The jurisdictional issue
is ripe for review.
II. STANDARD OF REVIEW
Federal courts have a strict duty to exercise jurisdiction conferred on them by Congress.
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S. Ct. 1712, 1720, 135 L.Ed.2d 1
(1996). However, federal courts are courts of limited jurisdiction and possess only that power
authorized by Constitution and statute. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377, 114 S. Ct. 1673, 1675, 128 L.Ed.2d 391 (1994); Burns v. Windsor Insurance Co., 31
F.3d 1092, 1095 (1994). Defendant, as the party removing this action, have the burden of
establishing federal jurisdiction. See Leonard v. Enterprise Rent a Car, 279 F.3d 967, 972 (11th
Cir. 2002) (citing Williams v. Best Buy Co., 269 F.3d 1316, 1318 (11th Cir. 2001)). Further, the
federal removal statutes must be construed narrowly and doubts about removal must be resolved
in favor of remand. Allen v. Christenberry, 327 F.3d 1290, 1293 (11th Cir. 2003) (citing Diaz v.
Sheppard, 85 F.3d 1502, 1505 (11th Cir. 1996)); Burns, 31 F.3d at 1095 (citations omitted).
Even if complete diversity is lacking “on the face of the pleadings,” a defendant may
remove “an action…if the joinder of the non-diverse party…[was] fraudulent.” Triggs v. John
Crump Toyota, Inc., 154 F.3d 1284, 1287 (citing Tapscott v. MS Dealer Service Corp., 77 F.3d
1353, 1355 (11th Cir. 1996)). The action is removable because “[w]hen a plaintiff names a nondiverse defendant solely in order to defeat federal diversity jurisdiction, the district court must
ignore the presence of the non-diverse defendant.” Henderson v. Wash. Nat’l Ins. Co., 454 F.3d

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1278, 1281 (11th Cir. 2006). “Fraudulent joinder is a judicially created doctrine that provides an
exception to the requirement of complete diversity.” Triggs, 154 F.3d at 1287. The Eleventh
Circuit has recognized three situations in which joinder may be deemed fraudulent: (1) when
there is no possibility that the plaintiff can prove a cause of action against the resident (or nondiverse) 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 (or non-diverse)
defendant. Id.
“[T]he determination of whether a [non-diverse] defendant has been fraudulently joined
must be based upon the plaintiff's pleadings at the time of removal, supplemented by any
affidavits and deposition transcripts submitted by the parties.” Legg v. Wyeth, 428 F.3d 1317,
1322 (11th Cir. 2005) (quoting Pacheco de Perez v. AT&T Co., 139 F.3d 1368, 1380 (11th Cir.
1998)). “The proceeding appropriate for resolving a claim of fraudulent joinder is similar to that
used for ruling on a motion for summary judgment under [Federal Rule of Civil Procedure 56].”
Id. at 1322-23. Accordingly, all contested issues of substantive fact and any uncertainties as to
the current state of the law must be resolved in the plaintiff's favor. See id. at 1323; see also
Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir. 1989).
III. DISCUSSION AND ANALYSIS
Since this lawsuit began in state court, the court’s jurisdiction depends on the propriety of
removal.
A.

Procedural Defect in Removal
The Court first addresses Plaintiff’s procedural defect argument. The case was removed

on August 2, 2016. See Doc. 1. “A motion to remand on the basis of any defect other than lack
of subject-matter jurisdiction must be made within 30 days after the filing of the notice of

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removal under [28 U.S.C.] § 1446(a).” 28 U.S.C. § 1447(c). Thirty days from August 2, 2016 is
September 1, 2016. Plaintiff filed her motion to stay proceedings and motion to remand on
September 2, 1016. See Docs. 10-11. As such, Plaintiff is outside the 30-day window on
procedural defects and the argument has been waived. See Wilson v. Gen. Motor Corp., 888
F.2d 779, 781 n. 1 (11th Cir. 1989) (citing Grubbs g. Gen. Elec. Corp., 405 U.S. 699, 702, 92 S.
Ct. 1344, 1347, 31 L. Ed. 2d 612 (1972)); see also Ammedie v. Sallie Mae, Inc., 485 Fed. Appx.
399, 400-01 (11th Cir. 2012) (citing Wilson and stating same).
even if it was not waived, Defendant Potts’ signature and/or consent would not be
required as the unanimity rule applies only to defendants properly joined and served. In cases
involving a question of fraudulent joinder, the application of the unanimity rule would create a
nonsensical loop. If fraudulently joined, a signature or consent would not be required. But, if
not fraudulently joined the signature and consent would be required, yet that would mean that the
court would not have diversity anyway thereby destroying subject-matter jurisdiction. Thus, the
simple common-sense answer in cases involving a question of fraudulent joinder is that a
signature or consent of the alleged fraudulently joined defendant is not procedurally required for
removal. See, e.g. Maxwell v. E-Z-Go, 843 F. Supp.2d 1209, 1213 (M.D. Ala. 2012) (citations
omitted).
B.

Fraudulent Joinder – State Law Claims
Diversity jurisdiction exists where there is diversity of citizenship and the amount in

controversy exceeds $ 75,000, exclusive of interest and costs. 28 U.S.C. § 1332. Section
1446(b) then answers the question of when an action is removable, setting forth the
preconditions for removal in two types of cases: (1) those removable on the basis of an initial
pleading; and (2) those that later become removable on the basis of “a copy of an amended

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pleading, motion, order or other paper.” Normally, the notice of removal must “be filed 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 or proceeding is based.” 28 U.S.C. § 1446(b).
“A party removing a case to federal court based on diversity of citizenship bears the
burden of establishing the citizenship of the parties.” Rolling Greens MHP, L.P. v. Comcast
SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004). Therefore, removal jurisdiction
based upon diversity requires: (1) a complete diversity of citizenship between the plaintiff(s) and
the defendant(s) and (2) satisfaction of the amount in controversy requirement. The amount in
controversy is not at issue, thus the Court looks to the diversity of citizenship and whether
fraudulent joinder has occurred.
Plaintiff is “the master of the complaint and is free to avoid federal jurisdiction, by
structuring [her] case to fall short of a requirement of federal jurisdiction. [Courts] permit this so
long as the method of avoidance is not fraudulent.” Scimone v. Carnival Corp., 720 F.3d 876,
882 (11th Cir. 2013) (internal citations and quotations omitted). Defendants have alleged that
Potts has been fraudulently joined under the “no cause of action” theory of fraudulent joinder.1
This theory requires the defendants to prove that there is “[no] possibility that a state court would
find that the complaint states a cause of action against . . . the [non-diverse] defendant[].” Crowe
v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997) (quotation marks omitted); see also Restivo v.
Bank of Am. Corp., 618 Fed. Appx. 537, 539 (11th Cir. July 8, 2015) (quoting Crowe). “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.”

1

In her motion to remand, Plaintiff states “there has been no allegation by Defendants of ‘outright
fraud’ in the Plaintiff[’s] pleadings of jurisdictional facts…” See Doc. 11 at p. 3. However, that is not the
sole theory required for fraudulent joinder and it is crystal clear that Defendants are alleging the “no cause
of action” theory of fraudulent joinder.
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Triggs, 154 F.3d at 1287. The “potential for legal liability must be reasonable,” however, “not
merely theoretical.” Legg, 428 F.3d at 1325 n.5 (citation and internal quotation marks omitted).
Stated differently, a court may deny the motion to remand only if there was no possibility that
the plaintiff could have maintained a cause of action. Henderson, 454 F.3d at 1281-82. The
court’s “task is not to gauge the sufficiency of the pleadings in this case. [The] inquiry is more
basic: [The court] must decide whether the defendants have proven by clear and convincing
evidence that no Alabama court could find this complaint sufficient…” Id. at 1284; see also
Gonzalez v. J.C. Penney Corp., 209 Fed. Appx. 867, 869 (11th Cir. 2006) (“The burden of
establishing fraudulent joinder is a heavy one.”).
The question which remains before the Court is whether or not there is any possibility
that Plaintiff could maintain either of her causes of action against Defendant Potts.
i.

Tortious Interference with a Contract

The Alabama Supreme Court held that “properly stated, the elements of the tort are (1)
the existence of a protectable business relationship; (2) of which the defendant knew; (3) to
which the defendant was a stranger; (4) with which the defendant intentionally interfered; and (5)
damage.” Walter Energy, Inc. v. Audley Capital Advisors, LLP, 176 So. 3d 821, 828 (Ala. 2015)
(quoting White Sands Group, L.L.C. v. PRS II, LLC, 32 So. 3d 5 (Ala. 2009)). All five elements
must be established. In the case at hand, the third element – whether defendant was a stranger –
is the primary element at issue.
The Alabama Supreme Court has squarely addressed the “stranger” requirement of the
tort. The Alabama Supreme Court explained “a defendant need not be a signatory to the subject
contract or one of the primary actors in the business relationship to effectively be a party to it,
but that a defendant is a party in interest to a relationship if the defendant has any beneficial or

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economic interest in, or control over, that relationship.” Walter Energy, 176 So. 3d at 828
(quoting Waddell & Reed, Inc. v. United Investors Life Ins. Co., 875 So. 2d 1143 (Ala. 2003)
(internal quotation marks omitted); see also White Sands, 32 So. 3d at 14 (citations omitted) (“In
the process of defining the tort of wrongful interference with a business relationship, we deem it
prudent to reiterate that one of the elements is that the defendant be a stranger to the
relationship.”). Further, “[a] tortious interference claim requires, among other things, wrongful
conduct by the defendant without privilege; ‘privilege’ means legitimate economic interests of
the defendant or a legitimate relationship of the defendant to the contract, so that he is not
considered a stranger, interloper, or meddler. A person with a direct economic interest in the
contract is not a stranger to the contract. Parties to an interwoven contractual arrangement are not
liable for tortious interference with any of the contracts or business relationships.’” Id. at 828-29
(quoting Waddell, 875 So. 2d at 1157). In short, the Alabama Supreme Court adopted the term
“participant to describe an individual or entity who is not a party, but who is essential, to the
allegedly injured relationship and who cannot be described as a stranger.” Id. at 829 (quoting
Waddell, 875 So. 2d at 1157). “One cannot be guilty of interference with a contract even if one
is not a party to the contract so long as one is a participant in a business relationship arising from
interwoven contractual arrangements that include the contract. In such an instance, the
participant is not a stranger to the business relationship and the interwoven contractual
arrangements define the participant's rights and duties with respect to the other individuals or
entities in the relationship.” Id.
Turning to the claims by Harris against Potts, the Court must determine whether he is a
“stranger” to the contractual relationship between Plaintiff and the ACCC Defendants.

In

applying a summary judgment standard, the undisputed facts are that Defendant Potts is an

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Alabama attorney hired by the ACCC Defendants to conduct an examination under oath as a
result of Harris’ claim against her automobile policy. After being hired, Defendant Potts sent
Harris several letters scheduling the examination under oath and requesting a list of documents
from Plaintiff to be brought to the examination. Harris did not attend the examination under oath
nor did she provide the requested documents. Ultimately Harris’ claim under the policy was
denied. In her response to the motion to dismiss, Plaintiff argues that Potts was not a general
agent for the insurance company and that he was brought in only after the claim was filed with
the insurance company. However, Plaintiff cites no Alabama case law to support her argument
that Potts was a stranger to the contract. Rather Plaintiff relies upon general assertions of agency
theory and excerpts from American Jurisprudence research to argue Potts was a stranger.
In looking to the Alabama Supreme Court’s analysis in Waddell, Walter Energy, and
White Sands, this Court finds it clear that Defendant Potts was NOT a stranger to the contract.
Rather, Defendant was a participant brought in by the ACCC Defendants to act on their behalf in
conducting the examination under oath. His legal status was tied to conducting acts requested by
the ACCC Defendants. As such, Potts cannot be considered a stranger and this claim fails as a
matter of law without even examining the remaining elements of the tort.
ii.

Outrage

“[T]he tort of outrage is viable only when the conduct is ‘so outrageous in character and
so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as
atrocious and utterly intolerable in a civilized society.’” Ex parte Bole, 103 So. 3d 40, 52 (Ala.
2012 (citations omitted); Little v. Robinson, 72 So. 3d 1168, 1173 (Ala. 2011). To recover on the
tort of outrage, “a plaintiff must demonstrate that the defendant’s conduct: (1) was intentional or
reckless; (2) was extreme and outrageous; and (3) caused emotional distress so severe that no

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reasonable person could be expected to endure it.” Little, 72 So. 3d at 1172 (quoting Green Tree
Acceptance, Inc. v. Standridge, 565 So. 2d 38, 44 (Ala. 1990)).
Plaintiff asserts that Defendants’ arguments on what was “reasonable in the insurance
industry” is a question that the litigation seeks to answer. See Doc. 9 at p. 5; Doc. 11 at p. 4.
However, at issue on the fraudulent joinder question is whether Potts’ letters and conduct
towards Harris fell outside all bounds of decency and thus utterly intolerable to a civilized
society. In looking at the three elements established by the Alabama Supreme Court, even
considering all facts in the light most favorable to the Plaintiff, this Court cannot conclude that
Potts’ letter rise to the level required by the tort of outrage. Plaintiff seemingly conflates her
claims against the ACCC Defendants and Defendant Potts when arguing they created “an
arbitrary set of standards calculated to make it impossible for someone like Rosie Harris to ever
collect on an insurance claim.” See id. However, the outrage claim was asserted solely against
Defendant Potts. The question at issue on fraudulent joinder is not whether the application of the
insurance contract by the ACCC Defendants was reasonable, but rather were Defendant Potts’
actions such that shock the conscious and go beyond the bound of decency. A review of the
letters sent by Potts to Harris fall well short of that criteria.
In the Second Amended Complaint, Count VI asserts a claim for Outrage. See Doc. 1,
Atch 10. Paragraph 2 states “[t]his amended Complaint applies to Defendant James A. Potts II.”
While the remainder of the Second Amended Complaint’s allegations clearly state they relate to
Defendant Potts, the Court notes Count VI’s Outrage claim states “Defendants’ DCH, Douglas
and Jeb, extreme and outrageous conduct, intentionally and/or recklessly caused severe
emotional distress to Plaintiffs.” Id. at ¶ 17 (emphasis added). Though no party mentions this
discrepancy, the Court wishes to note it as further support that the pleading is insufficient as it

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pertains to Defendant Potts and describing how the claim could be sustained against him.
Applying the summary judgment standard as required in a fraudulent joinder context, the
Court finds the claim cannot stand against Defendant Potts.
IV. CONCLUSION
When considering the motion to remand and applying the summary judgment standard by
resolving all factual disputes in favor of the plaintiff, it is clear under Alabama law that
Plaintiff’s asserted claims against Defendant Potts fail as a matter of law. The Court finds that
Defendants have met their heavy burden on removal to prove Plaintiff fraudulently joined
Defendant Potts.
Pursuant to the foregoing Memorandum Opinion, the Court GRANTS the Motion to
Dismiss Based on Fraudulent Joinder (Doc. 5) and DENIES the Motion to Remand (Doc. 11).
DONE this 28th day of November, 2016.
/s/Terry F. Moorer
TERRY F. MOORER
UNITED STATES MAGISTRATE JUDGE

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