Butler v. Allstate Indemnity Company, Inc. et al

Filing 12

MEMORANDUM OPINION AND ORDER denying 8 MOTION to Remand, and that Hamilton is DISMISSED as a party dft, as further set out in order. Signed by Honorable William Keith Watkins on 1/25/2010. (wcl, )

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IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION D E M IT R IA BUTLER, P l a in tif f , v. A L L S T A T E INDEMNITY COMPANY, IN C ., et al., D e f e n d a n ts . ) ) ) ) ) ) ) ) ) ) C A S E NO. 3:09-CV-838-WKW [WO] M E M O R A N D U M OPINION AND ORDER T h is cause is before the court on Plaintiff Demitria Butler's ("Butler") Motion to R em an d and accompanying brief. (Docs. # 8, 9.) Butler seeks remand to the Circuit Court o f Macon County, Alabama for lack of diversity jurisdiction under 28 U.S.C. 1332(a). She asse rts that complete diversity of citizenship does not exist because Defendant Jerry H a m ilto n ("Hamilton") is a non-diverse Defendant. Defendant Allstate Indemnity Company, In c . ("Allstate"), as the removing defendant, opposes the motion (Doc. # 11), arguing that a b s e n t the fraudulent joinder of Hamilton, complete diversity exists. A fte r careful consideration of counsels' arguments, the relevant law, and the record a s a whole, the court finds that Butler's motion to remand is due to be denied. I. BACKGROUND O n August 12, 2009, Butler filed suit against Allstate, Hamilton, and various unnamed d e f e n d a n t s in the Circuit Court of Macon County, Alabama, alleging six state law violations. (C o m p l. (Doc. # 1, Attach. 3).) Butler and Hamilton are Alabama citizens. (Compl. 1, 3 .) Allstate is incorporated in Illinois and has its principal place of business in Illinois. (N o tice of Removal 4 (Doc. # 1).) The complaint alleges the following facts. Butler purchased a homeowner's insurance p o lic y from Allstate in 1998 for her residence in Macon County, Alabama, and renewed the p o lic y on or about May 3, 2008. (Compl. 10.) On August 27, 2008, while the policy was in effect, Butler's home was destroyed by a fire. (Compl. 10-11.) To date, Allstate, th ro u g h its agents, including Hamilton, has failed to compensate Butler as set out in the insu ran ce agreement. (Compl. 13.) Allstate sent Butler a check for $79,436.43 on January 2 6 , 2009, but Butler rejected the check, contending that Allstate failed to determine the s tru c tu ra l unsoundness of the home before sending payment to repair the home. (Compl. 1 4 .) Specifically, Butler contends that Allstate was obligated, but failed, to pay the loss of th e subject structure and belongings, the debris removal, the additional living expenses in c u rre d by Butler and her family, the contents of the home, and the personal property there in. (Compl. 13-14.) On February 18, 2009, Allstate refused to renew Butler's insu ran ce coverage. (Compl. 15.) On August 12, 2009, Butler filed the instant suit, alleging the following state law c la im s against Hamilton: breach of contract, bad faith, and negligence and/or wantonness. O n September 2, 2009, Allstate filed a notice of removal in the United States District Court f o r the Middle District of Alabama predicated on diversity jurisdiction. 28 U.S.C. 1332(a), 1441. Although complete diversity does not exist on the face of the complaint 2 b e c au s e Butler and Hamilton are both citizens of Alabama, the removal petition alleges that th e r e is no possibility that Butler can establish a cause of action against Hamilton, and, thus, th a t Hamilton was fraudulently joined. O n October 2, 2009, Butler filed a motion to remand and an accompanying brief, a ss e rtin g that Hamilton is a non-diverse defendant who has not been fraudulently joined and th a t diversity of citizenship does not exist in this case. In support of her motion, Butler s u b m itte d an affidavit and a letter from Allstate denying her request to renew the policy. (D o c . # 9, Attachs. 1-2.) I I . STANDARD OF REVIEW " [ F ]e d e ra l courts have a strict duty to exercise the jurisdiction that is conferred upon th e m by Congress." Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996). However, " [ f ]e d e ra l courts are courts of limited jurisdiction." Burns v. Windsor Ins. Co., 31 F.3d 1092, 1 0 9 5 (11th Cir. 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 n o t absolutely clear. "[R]emoval statutes are construed narrowly; where plaintiff and d e f en d a n t clash about jurisdiction, uncertainties are resolved in favor of remand." Burns, 31 F .3 d at 1095. " D iv e rs ity jurisdiction, as a general rule, requires complete diversity every plaintiff m u s t be diverse from every defendant." Palmer v. Hosp. Auth. of Randolph County, 22 F.3d 1 5 5 9 , 1564 (11th Cir. 1994); see also 28 U.S.C. 1332. If, however, non-diverse parties are 3 f ra u d u le n tly joined to an action, their citizenship will not be considered for purposes of d e te rm in in g diversity jurisdiction. Tedder v. F.M.C. Corp., 590 F.2d 115, 117 (5th Cir. 1 9 7 9 ) (per curiam).1 The Eleventh Circuit recognizes three forms of fraudulent joinder. T r ig g s v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998) (citing Coker v. A m o c o Oil Co., 709 F.2d 1433, 1440 (11th Cir. 1983), superseded by statute on other g r o u n d s as stated in Georgetown Manor, Inc. v. Ethan Allen, Inc., 991 F.2d 1533, 1540 (11th C ir. 1993)). The one relevant to this case is fraudulent joinder "when there is no possibility th a t the plaintiff can prove a cause of action against the resident (non-diverse) defendant." Id . The removing party bears the burden of proving fraudulent joinder, and the burden is "heavy." Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997) (internal quotation m a rk s and citation omitted). "[A]ll factual issues and questions of controlling substantive la w " must be viewed in the light most favorable to the plaintiff. Coker, 709 F.2d at 1440. " [ I]f there is any possibility that the state law might impose liability on a resident defendant u n d e r the circumstances alleged in the complaint, the federal court cannot find that joinder o f the resident defendant was fraudulent, and remand is necessary." Florence v. Crescent R e s., LLC, 484 F.3d 1293, 1299 (11th Cir. 2007). Although for purposes of determining f ra u d u le n t joinder, courts may consider affidavits and deposition transcripts submitted by In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted as binding precedent all decisions handed down by the former Fifth Circuit prior to October 1, 1981. 1 4 e ith e r party, in addition to the plaintiff's pleadings at the time of removal, Legg v. Wyeth, 428 F .3 d 1317, 1322 (11th Cir. 2005), "the jurisdictional inquiry must not subsume substantive d e te rm in a tio n ," Crowe, 113 F.3d at 1538 (internal quotation marks and citation omitted). C o u rts must be "certain" of their jurisdiction and "are not to weigh the merits of a plaintiff's c la im beyond determining whether it is an arguable one under state law." Id. (internal q u o tation marks and citation omitted). I I I . DISCUSSION A s the bases for its fraudulent joinder argument, Allstate contends that (1) under A la b a m a law, a party to an insurance contract may not sue a nonparty for breach of that c o n tra c t; (2) Alabama does not recognize a claim for bad faith against individual employees o f the insurer; and (3) Alabama does not recognize a claim for negligent and/or wanton h a n d l in g of an insurance claim. (Def.'s Resp. Br. 2-5 (Doc. # 11).) If, as Allstate contends, B u tle r cannot establish a cause of action for his breach of contract, bad faith, and negligence a n d /o r wantonness claims against Hamilton, Hamilton has been fraudulently joined, c o m p le te diversity exists, and the motion to remand must be denied. If, on the other hand, B u tle r can assert an "arguable" claim under state law against Hamilton, Hamilton has not b e e n fraudulently joined, his presence destroys complete diversity, and the motion to remand m u s t be granted. 5 A. B re a ch of Contract and Bad Faith A c c o rd in g to Alabama law, claims for breach of contract and bad faith based on an in s u ra n c e contract may only be brought against a party to that contract. Pate v. Rollison L o g g in g Equip., Inc., 628 So. 2d 337, 343 (Ala. 1993); Ligon Furniture Co. v. O.M. Hughes In s ., Inc., 551 So. 2d 283, 285 (Ala. 1989); see also Owens v. Life Ins. Co. of Georgia, 289 F . Supp. 2d 1319, 1324 (M.D. Ala. 2003). Here, the complaint does not allege that Mr. H am ilton was a party to the insurance contract. Instead, the complaint alleges that Mr. H a m ilto n , as an insurance agent acting on behalf of Allstate, "made the decision, re c o m m e n d a tio n and/or took other action and . . . refused to provide the protection afforded u n d e r the policy," and that Allstate "[t]hrough the actions of defendant Hamilton[,] . . . d e n ie d plaintiff's claim and refused to provide protection to its insured, Ms. Butler, without th o ro u g h ly examining and testing to determine the structural soundness of the home . . . ." (C o m p l. 19, 23.) Thus, Hamilton is not a proper defendant for Butler's breach of contract a n d bad faith claims, see Bullock v. United Benefit Ins. Co., 165 F. Supp. 2d 1255, 1257 ( M .D . Ala. 2001), and there is no possibility that Butler can prove these claims against H a m ilto n . B. N e g l ig e n c e and/or Wantonness Butler alleges in her complaint that Hamilton "had a duty to properly handle, in v e stig a te [ ,] and pay Ms. Butler's claims." (Compl. 34.) However, Alabama courts have " c o n sis te n tly refused to recognize a cause of action for the negligent handling of insurance 6 c la im s , and . . . [do] not recognize a cause of action for alleged wanton handling of insurance c la im s ." Kervin v. S. Guar. Ins. Co., 667 So. 2d 704, 706 (Ala. 1995). Butler argues in her m o tio n to remand that Hamilton's failure "to properly and in good faith investigate, adjust[,] a n d pay" Butler's claim presents a "colorable claim sufficient under the law to negate the f ra u d u le n t joinder argument." (Pl.'s Br. 8-9 (Doc. # 9).) This contention, made without c ita tio n to any authority, runs contrary to Alabama law Butler cannot state a cause of action a g a in s t Hamilton for negligence and/or wantonness because of how he handled her insurance c la im . Kervin, 667 So. 2d at 706. IV. CONCLUSION B e c au s e Butler has failed to demonstrate any arguable claim against Hamilton, he was f ra u d u le n tly joined and complete diversity exists. Accordingly, it is ORDERED that Butler's m o tio n to remand is DENIED, and that Hamilton is DISMISSED as a party defendant. DONE this 25th day of January, 2010. /s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE 7

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