First National Bank of Talladega, The et al v. Lovell et al
MEMORANDUM OPINION. Signed by Judge Virginia Emerson Hopkins on 10/1/2014. (JLC)
2014 Oct-01 PM 02:29
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
THE FIRST NATIONAL BANK OF )
TALLADEGA, et al,
) Case No.: 1:14-CV-1222-VEH
JOHN E. LOVELL, et al,
This is a civil action filed by the plaintiffs, The First National Bank of
Talladega and First National Talladega Corporation, against the defendants, John E.
Lovell, Southeastern Apparatus Sales, LLC (“SAS”), and Federal Insurance Co.
(“Federal”) (Doc. 1-1). The action was originally filed on April 25, 2014, in the
Circuit Court of Talladega County, Alabama. (Doc. 1-1). Against Lovell and SAS,
the complaint alleges the Alabama state law claims of fraud (Count One), breach of
contract (Count Two), and conspiracy to defraud (Count Four).1 Against Federal, the
complaint alleges the Alabama state law claim of breach of a contract to provide
insurance coverage. (Count Three).
Count Four is also alleged against fictitious defendants.
On June 25, 2014, Federal removed the case to this court alleging “diversity”
subject matter jurisdiction pursuant to 28 U.S.C. § 1332, which provides, in pertinent
part, that “[t]he district courts shall have original jurisdiction of all civil actions where
the matter in controversy exceeds the sum or value of $75,000, exclusive of interest
and costs, and is between . . . citizens of different States.” 28 U.S.C.A. § 1332(a)(1).
“‘Diversity jurisdiction requires complete diversity; every plaintiff must be diverse
from every defendant.’” Leyva v. Daniels, 530 F. App’x 933 (11th Cir. 2013) (quoting
Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.1998)). The case
comes before the court on the plaintiffs’ motion to remand (doc. 7), which correctly
points out that there is not completely diversity in this case. Defendant Federal argues
in response that the citizenship of the non-diverse defendants should be ignored
because they were “fraudulently misjoined.”2
Not all defendants joined in the removal of this case. It has been noted:
The Eleventh Circuit employs the “unanimity rule,” which requires that all
defendants consent to removal. See Tri–Cities Newspapers, Inc. v. Tri–Cities
Printing Pressmen and Assistants, Local 349, 427 F.2d 325, 326–27 (5th Cir.1970);
Miles v. Kilgore, 928 F.Supp. 1071, 1076 (N.D.Ala.1996). This rule is subject to the
following exception: “unless and until the case is remanded it is not necessary that
a fraudulently or improperly joined defendant join with the other defendants in a
petition for removal.” Erkins v. American Bankers Ins. Co. of Florida, 866 F.Supp.
1373, 1375 (N.D.Ala.1994) (citations omitted); see also Emrich v. Touche Ross &
Co., 846 F.2d 1190, 1193 n. 1 (9th Cir.1988) (holding that all properly served
defendants must join in petition for removal except for nominal, unknown, or
fraudulently joined parties); Polyplastics, Inc. v. Transconex, Inc., 713 F.2d 875, 877
(1st Cir.1983) (holding that a “party fraudulently joined to defeat removal need not
join in removal petition”).
As discussed below, because the court determines that the non-diverse
defendants have not been fraudulently misjoined, there is not complete diversity and
the motion to remand will be GRANTED.
“Federal courts are courts of limited jurisdiction. They possess only that power
authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of
America, 511 U.S. 375, 377 (1994). For removal to be proper, the court must have
subject-matter jurisdiction in the case. “Only state-court actions that originally could
have been filed in federal court may be removed to federal court by the Defendant.”
Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). In addition, the removal
statute must be strictly construed against removal, and any doubts should be resolved
in favor of remand. See, City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310,
1313 (11th Cir. 2012) (“[b]ecause removal jurisdiction raises significant federalism
concerns, federal courts are directed to construe removal statutes strictly. Indeed, all
doubts about jurisdiction should be resolved in favor of remand to state court.”)
Clay v. Brown & Williamson Tobacco Corp., 77 F. Supp. 2d 1220, 1225 (M.D. Ala. 1999). If this
court determines that the other defendants were fraudulently joined, they need not have joined in the
“In removal cases, the burden is on the party who sought removal to
demonstrate that federal jurisdiction exists.” Friedman v. New York Life Ins. Co., 410
F.3d 1350, 1353 (11th Cir. 2005) (citation omitted); Williams v. Best Buy Co., 269
F.3d 1316, 1319 (11th Cir.2001).
That burden goes not only to the issue of federal jurisdiction, but also to
questions of compliance with statutes governing the exercise of the right
of removal. Albonetti v. GAF Corporation-Chemical Group, 520
F.Supp. 825, 827 (S.D. Texas 1981); Jennings Clothiers of Ft. Dodge,
Inc. v. U.S. Fidelity & Guaranty Co., 496 F.Supp. 1254, 1255 (D.Iowa
1980); Fort v. Ralston Purina Company, 452 F.Supp. 241, 242
Parker v. Brown, 570 F.Supp. 640, 642 (D.C. Ohio, 1983)
While it is undoubtedly best to include all relevant evidence in the
petition for removal and motion to remand, there is no good reason to
keep a district court from eliciting or reviewing evidence outside the
removal petition. We align ourselves with our sister circuits in adopting
a more flexible approach, allowing the district court when necessary to
consider post-removal evidence in assessing removal jurisdiction. We
emphasize, as did the court in Allen, that “under any manner of proof,
the jurisdictional facts that support removal must be judged at the time
of the removal, and any post-petition affidavits are allowable only if
relevant to that period of time.” Allen, 63 F.3d at 1335.
Sierminski v. Transouth Financial Corp., 216 F.3d 945, 949 (11th Cir. 2000).
FACTS AS ALLEGED IN THE COMPLAINT3
Federal claims that there is jurisdiction based on the diversity of citizenship of the
parties. It argues that the claims against the non-diverse defendants should be ignored because
those claims have been “fraudulently misjoined.” Accordingly, an examination of the facts, as
alleged in the complaint, is appropriate.
The case concerns a 2010 Crimson Legend Pumper fire truck built upon a cab
and chassis manufactured by an entity which the complaint identifies as
“International, a Navistar company.” (Doc. 1-1 at 5). In or around December, 2009,
Navistar, Inc., which the court assumes is the same entity identified in the complaint
as “Navistar,” issued a “Certificate of Origin” to identify the chassis and document
its purchase. (Doc. 1-1 at 6). Navistar then sold the cab and chassis to an entity named
“Crimson Fire,” which in turn, in May of 2010, sold it to SAS. (Doc. 1-1 at 6).
According to the complaint, SAS “planned to build a fire truck on the chassis per
specifications of its own customer.” (Doc. 1-1 at 6).
On April 30, 2010, SAS obtained a loan from, and signed a promissory note to,
the plaintiffs,4 to finance the purchase of the cab and chassis. (Doc. 1-1 at 6). Lovell
signed the security agreement and promissory note and personally guaranteed the
debt. (Doc. 1-1 at 6). SAS purchased the cab and chassis, and the plaintiffs received
the original Certificate of Origin as collateral for the debt. SAS then built the truck
on the cab and chassis.
On or about September 7, 2010, Lovell told International and Navistar, Inc. that
the original Certificate of Origin had been lost and requested that they deliver a
The complaint actually states that the loan was made with “The First National Bank of
Talladega.” (Doc. 1-1 at 6). However, for the purposes of the instant motion, the court treats all
rights as belonging to both plaintiffs.
replacement to SAS. (Doc. 1-1 at 6-7). As noted above, the original Certificate of
Origin was actually not lost, but was being held by the plaintiffs as collateral for the
SAS loan. A new certificate was issued that same day (September 7, 2010) and
delivered to SAS and Lovell. SAS and Lovell used the new certificate to sell the
vehicle to the City of Florala on October 14, 2010. (Doc. 1-1 at 7). The plaintiffs were
not listed as lienholders on the title of the vehicle. (Doc. 1-1 at 7).
Even though the truck had already been sold to the City of Florala, it was used
by SAS and Lovell as collateral for additional loans from the plaintiffs on October 29,
2010, December 7, 2010, and March 1, 2011. (Doc. 1-1 at 7, 8, 9). The complaint
alleges that Lovell continuously “represented to [the plaintiffs] that the 2010 Crimson
Legend Pumper truck was still in the possession of . . . SAS and that SAS continued
efforts to sell the pumper truck.” (Doc. 1-1 at 6, 7, 8, 9).
On February 26, 2013, the plaintiffs discovered that SAS and Lovell did not
have possession of the truck and that it had actually been sold. (Doc. 1-1 at 9). The
plaintiffs submitted a loss claim to Federal, their insurer, which was denied on August
Against Lovell and SAS, the complaint alleges the Alabama state law claims
of fraud (Count One), breach of contract (Count Two), and conspiracy to defraud
(Count Four). Against Federal, the complaint alleges the Alabama state law claim of
breach of a contract to provide insurance coverage. (Count Three). It is undisputed
that the plaintiffs are citizens of the State of Alabama, and that SAS and Lovell are
citizens of the State of Alabama.5 Federal is an Indiana Company, with its principal
place of business in Indiana. It is a citizen of Indiana.
“‘Diversity jurisdiction requires complete diversity; every plaintiff must be
diverse from every defendant.’” Leyva v. Daniels, 530 F. App’x 933 (11th Cir. 2013)
(quoting Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.1998)).
The plaintiffs’ motion correctly points out that there is not complete diversity in this
case. Federal attempts to get around the problem by arguing that SAS and Lovell have
been “fraudulently misjoined” in this action, and therefore their citizenship should not
The Eleventh Circuit has explained:
The First National Bank of Talladega is a national banking association with its principal
place of business in Talladega, Alabama. It is a citizen of Alabama. 28 U.S.C.A. § 1348 (“All
national banking associations shall, for the purposes of all other actions by or against them, be
deemed citizens of the States in which they are respectively located.”). First National Talladega
Corporation is an Alabama corporation with its principal place of business in Talladega,
Alabama. It is a citizen of Alabama. 28 U.S.C. § 1332(c)(1) (“a corporation shall be deemed to
be a citizen of every State and foreign state by which it has been incorporated and of the State or
foreign state where it has its principal place of business.”). Lovell is a “resident citizen of Shelby
County, Alabama.” (Doc. 1-1 at 3). SAS, which is an LLC, “is a citizen of any state of which a
member of the company is a citizen.” Flintlock Const. Servs., LLC v. Well-Come Holdings, LLC,
710 F.3d 1221, 1224 (11th Cir. 2013) (internal quotations and citations omitted). Lovell is
described in the complaint as the “sole owner” of SAS. (Doc. 1-1 at 3). Since Lovell is a citizen
of Alabama, so is SAS.
Fraudulent joinder is a judicially created doctrine that provides an
exception to the requirement of complete diversity. Joinder has been
deemed fraudulent in two situations. The first is when there is no
possibility that the plaintiff can prove a cause of action against the
resident (non-diverse) defendant. Coker v. Amoco Oil Co., 709 F.2d
1433, 1440 (11th Cir.1983), superceded by statute on other grounds as
stated in Georgetown Manor, Inc. v. Ethan Allen, Inc., 991 F.2d 1533
(11th Cir.1993). The second is when there is outright fraud in the
plaintiff’s pleading of jurisdictional facts. Coker, 709 F.2d at 1440. In
Tapscott, 77 F.3d at 1355 (11th Cir.1996), a third situation of fraudulent
joinder was identified—i.e., 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. Id. at 1360.
Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998). Federal
asserts that the Tapscott type of fraudulent joinder exists in this case.
The burden of proving fraudulent joinder rests with Federal as the removing
party. See Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir.1997). In evaluating
whether there has been fraudulent joinder, all allegations and submissions must be
viewed in the light most favorable to the plaintiff. See Crowe, 113 F.3d at 1538. In
fact, “the district court should resolve all questions of fact and controlling law in
favor of the plaintiff....” Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th
Cir.1989); Crowe, 113 F.3d at 1538.
Further, as noted in Tapscott, mere misjoinder is not enough. The Tapscott
[It is contended that] a misjoinder, no matter how egregious, is not
fraudulent joinder. We disagree.
Joinder of defendants under Rule 20 requires: (1) a claim for relief
asserting joint, several, or alternative liability and arising from the same
transaction, occurrence, or series of transactions or occurrences, and (2)
a common question of law or fact. Fed.R.Civ.P. 20(a). . . . Misjoinder
may be just as fraudulent as the joinder of a resident defendant against
whom a plaintiff has no possibility of a cause of action. A defendant’s
“right of removal cannot be defeated by a fraudulent joinder of a
resident defendant having no real connection with the controversy.”
Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 37, 66
L.Ed. 144 (1921). . . . We do not hold that mere misjoinder is fraudulent
joinder, but we do agree with the district court that Appellants’ attempt
to join these parties is so egregious as to constitute fraudulent joinder.
Tapscott, 77 F.3d at 1360, abrogated on other grounds by Cohen v. Office Depot, Inc.,
204 F.3d 1069 (11th Cir. 2000) (emphasis added).
It should be noted that Federal argues:
– “The separate counts against Federal and the Borrowers share no common
operative facts. Federal is not named in the counts asserted against the
Borrowers, and vice versa.” (Doc. 10 at 10);
– “The operative facts underlying the alleged claims [against SAS and
Lovell] do not involve Federal. Federal did not aid, abet or conspire with the
Borrowers in perpetrating any alleged fraud. Nor is Federal a party to the
unpaid notes. (Doc. 10 at 11);
– “The operative facts underlying [the claim against Federal] do not involve
the Borrowers. The Borrowers are not parties to the Bond. And their alleged
conduct was necessarily a fait accompli before Federal’s assessment of First
National’s claim. The operative facts relate exclusively to Federal’s
independent conduct in context of the contract of insurance.” (Doc. 10 at 12);
– “Federal is entitled to remove the breach of contract claim because it shares
no common questions of fact or law with the tort claims against the
Borrowers.” (Doc. 10 at 11).
However, Federal ignores the fact that the claims against Federal require proof
of the some of the same facts that the plaintiffs must prove to prevail in their claims
against SAS and Lovell. The Banker’s Blanket Bond policy provides coverage for
“[a] loss of property resulting directly from . . . false pretenses . . . committed by a
natural person while on the premises of the [plaintiffs], while the Property is Lodged
or deposited at premises located anywhere.” (Doc. 1-1 at 12). The plaintiffs allege
that at least one act of fraud by Lovell and SAS occurred on their premises. The proof
for that act will be exactly the same as the proof for coverage under the bond. Second,
Federal’s liability is dependent upon SAS and Lovell being liable, so Federal has a
vested interest in the outcome of the case against those defendants. Finally, if Federal
is required to pay on the bond it doubtless will proceed against SAS and Lovell to
recoup the amounts paid. In the instant case, it cannot be said that the joined claims
have no “real connection” to each other.
This exact issue arose in this district in Colson v. Joe E. Heating & Air
Conditioning, Inc., CV-12-J-3839-S, 2012 WL 6186176 (N.D. Ala. Dec. 10, 2012)
(Johnson, J.). Judge Johnson set out the facts of that case as follows:
Defendant USAA Casualty Insurance Company (“USAA”)
removed this action from the Circuit Court of Madison County,
Alabama, asserting that this court has jurisdiction under 28 U.S.C. §
1332 (Notice of Removal, ¶ 6), and that the non-diverse defendants were
Defendant alleges that the matter in controversy exceeds
$75,000.00 and that, absent the fraudulently joined defendants Joe East
Heating and Air Conditioning (“Joe East”) and Stay Dry Drainage and
Waterproofing (“Stay Dry”), it is between citizens of different states.
Notice of Removal, ¶¶ 11–16.
In support of its Notice of Removal, defendant USAA alleges that
the claims against Joe East and Stay Dry “do not create joint, several or
alternative liability with the claims asserted against USAA ... and the
claims have no real connection to each other.”Notice of Removal, ¶ 19.
However, defendant USAA’s assertions are contradicted by the
plaintiff’s complaint (submitted as Exhibit 2 to the Notice of Removal).
In her complaint, the plaintiff alleges that defendant Joe East was hired
to inspect the HVAC system in her home. Complaint, ¶ 10. Upon
inspection, Joe East recommended installation of a new system, which
the plaintiff and her now deceased husband purchased for the sum of
$11,600.00. Id., ¶¶ 11–12.The plaintiff also entered a service agreement
with Joe East for periodic inspections and maintenance of the system.
Id., ¶ 14. In the course of further service under the agreement, the
plaintiff was informed mold was found in her home, and thus paid Joe
East additional sums to install specialized equipment within the HVAC
system. Id., ¶¶ 15–16. Joe East further recommended plaintiff hire Stay
Dry to inspect her home for moisture, which plaintiff did. Id., ¶¶
17–18.Upon the representations of Stay Dry, plaintiff purchased further
equipment from Stay Dry to prevent mold and moisture. Id., ¶¶ 19–22.
After the death of her husband, water damage from the HVAC
system was found and further investigation revealed it had been
improperly installed, allowing mold to develop in the house. Complaint,
¶¶ 26–30. Because of the extensive damage, plaintiff submitted a claim
to defendant USAA, her home insurer, which has failed and refused to
provide plaintiff with coverage. Id., ¶¶ 35–36.Based on these
allegations, the plaintiff filed suit for negligence and wantonness against
defendants Joe East and Stay Dry (Count I); breach of agreement against
defendants Joe East and Stay Dry (Count II); fraud and deceit against
defendants Joe East and Stay Dry (Count III); insurance benefits against
USAA (Count IV); and bad faith against USAA (Count IV).
Colson, 2012 WL 6186176 at *1.
Judge Johnson then wrote:
The Eleventh Circuit made clear in Tapscott that it was not
holding that “mere misjoinder is fraudulent joinder,” but rather, that
“egregious” misjoinder constitutes fraudulent joinder. Tapscott’s logic
was drawn from the rules for permissive joinder as set forth in Rule
20(a), Federal Rules of Civil Procedure. See Tapscott, 77 F.3d at
1360.In turn Rule 20(a)(2), Fed.R.Civ.P., sets forth the following
requirements for permissive joinder of defendants: “[p]ersons ... may be
joined in one action as defendants if (A) any right to relief is asserted
against them jointly, severally, or in the alternative with respect to or
arising out of the same transaction, occurrence, or series of transactions
or occurrences; and (B) any question of law or fact common to all
defendants will arise in the action.”Fed.R.Civ.P. 20(a)(2).6 Under
Alabama law, courts must consider each case individually to determine
The wording of the current rule is identical.
whether claims are logically related, therefore allowing “all reasonably
related claims for relief by or against different parties to be tried in a
single proceeding.”Atchison v. Woodmen of the World Ins. Soc’y, 982
F.Supp. 835, 839 (S.D.Ala.1997) (internal citations omitted).See also In
re Accutane Products Liability, 841 F.Supp.2d 1243, 1246
(M.D.Fla.2012) (noting that egregious misjoinder, under Tapscott,
requires there be no “real connection” between the controversies).
Having considered the foregoing, the court is of the opinion that
the plaintiff’s claims are sufficiently stated against each of the
defendants to demonstrate that joinder of the claims in one action was
proper. As a practical matter, the claims against defendant USAA
require proof of the same set of facts that the plaintiff must prove to
prevail in her claims against Joe East and Stay Dry. Additionally, should
USAA provide benefits under its mold remediation clause, it has the
right to seek the same back from those who allegedly caused the
damage, namely Joe East or Stay Dry, there will be no claim left against
USAA. Thus, USAA, as plaintiff’s insurer, has a vested interest in
plaintiff’s claims against the other two defendants. The claims against
the Alabama defendants and USAA are logically related, based on the
same set of facts, and it is certainly within the realm of reason that
recovery against one or more of the non-diverse defendants will impact
plaintiff’s claim against defendant USAA. As well stated by the
Southern District of Alabama, “the Court can discern of no legal, factual
or commonsense reason why all claims stated by the plaintiff in the
instant case should not be tried together.”Bryan v. Lexington Insurance
Co., 2006 WL 2052524, *8 (S.D.Ala.2006).
The court finds the allegations of the plaintiff’s complaint more
than sufficient to establish a “right to relief ... jointly, severally, or in the
alternative with respect to or arising out of the same transaction,
occurrence, or series of transactions or occurrences ... and ... any
question of law or fact common to all defendants will arise in the
action.”Fed.R.Civ.P. 20(a)(2). The court therefore finds that joinder of
the diverse and non-diverse defendants was proper, thus complete
diversity between all parties is lacking. See28 U.S.C. §§ 1332 and
1441(b)(“Any other such action shall be removable only if none of the
parties in interest properly joined and served as defendants is a citizen
of the state in which such action is brought”). The court specifically
finds that joinder of the diverse and non-diverse defendants certainly
was not “egregious.”
Id. at *3-4.7
The facts of the instant case are very similar to those set out in Judge Johnson’s
well reasoned opinion. The court is further persuaded by her opinion that there is not
egregious fraudulent misjoinder in this case.
For the foregoing reasons, and keeping in mind that “all doubts about
jurisdiction should be resolved in favor of remand to state court,” Vestavia Hills, 676
F.3d at 1313, this case is due to be, and will be, REMANDED by separate order.
DONE and ORDERED this 1st day of October, 2014.
VIRGINIA EMERSON HOPKINS
United States District Judge
Federal argues that Colson is distinguishable because “the insurer [in Colson]
acknowledged coverage for the type of claim the plaintiff was making and had paid other claims
submitted by the plaintiff . . . [b]ut . . . apparently still had not paid some potentially coverable
claim or claims. . . . The Colson court concluded that ‘as a practical matter’ the claim would
require the plaintiff to prove the same set of facts.” (Doc. 10 at 14). Federal claims that, in this
case, “[the plaintiffs have] not established a covered claim.” (Doc. 10 at 14). It contends that “the
key issue is whether the Loan Loss Exclusion in Federal’s Bond precludes coverage.” (Doc. 10 at
15). Whatever Federal sees as “the key issue,” certainly an “additional issue” would be whether
the facts surrounding the fraud itself are covered. The court sees no meaningful distinction in the
facts of the instant case and those of Colson.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?