Brawley v. Northwestern Mutual Life Insurance Company et al
Filing
19
MEMORANDUM OPINION AND ORDER DENYING 11 MOTION to Remand and GRANTING 8 MOTION to Dismiss of Defendants Jack Wright and Robert F. Kerr. To the extent that Messrs. Kerr and Wright have requested a with-prejudice dismissal, that portion of their Dismissal Motion is DENIED as set out herein. Signed by Judge Virginia Emerson Hopkins on 12/21/2017. (JLC)
FILED
2017 Dec-21 PM 01:34
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
GLEN L. BRAWLEY, DMD,
)
)
Plaintiff,
)
)
v.
) Case No.: 2:17-CV-1513-UJB-VEH
)
NORTHWESTERN MUTUAL LIFE )
INSURANCE COMPANY, JACK
)
WRIGHT, and ROBERT F. KERR, )
)
Defendants.
)
MEMORANDUM OPINION AND ORDER
I.
Introduction
Plaintiff Glen L. Brawley (“Dr. Brawley”) originally filed this insurance action
in the Circuit Court of Jefferson County, Alabama, on August 1, 2017. (Doc. 1-1 at
8).1 Dr. Brawley claims that he is disabled and can no longer work as an orthodontist.
His case against Northwestern Mutual Life Insurance Company (“Northwestern”) and
two resident insurance agents–Jack Wright (“Dr. Wright”) and Robert F. Kerr (“Dr.
Kerr”)–stems from a denial of long-term disability benefits sought by Dr. Brawley
under several different disability policies.
1
All page references to Doc. 1-1 correspond with the Court’s CM/ECF numbering system.
Dr. Brawley’s lawsuit contains 6 separate counts. Count One is for breach of
contract against Northwestern only. Count Two is for fraud in the inducement against
all three Defendants. Count Three is for negligent and/or wanton training and
supervision against Dr. Wright and Northwestern. Count Four is for suppression
against all three Defendants. Count Five is for bad faith against Northwestern.
Finally, Count Six is for negligent procurement and failure to notify against Messrs.
Kerr and Wright.
Northwestern removed this litigation to this Court on September 6, 2017,
asserting diversity under 28 U.S.C. § 1332 as the basis for federal jurisdiction. (Doc.
1 at 1). Critical to its Notice of Removal on diversity grounds, Northwestern contends
that Messrs. Kerr and Wright have been fraudulently joined by Dr. Brawley and, as
a result, their presence in the lawsuit cannot defeat jurisdiction under § 1332. (Doc.
1 at 4 ¶ 11). Consistent with Northwestern’s fraudulent joinder allegations, Messrs.
Kerr and Wright have filed a Motion To Dismiss (doc. 8) (the “Dismissal Motion”).
Dr. Brawley opposed the Dismissal Motion on October 6, 2017. (Doc. 12).
The Court also has before it Dr. Brawley’s Motion To Remand (doc. 11) (the
“Remand Motion”) filed on October 6, 2017. Northwestern filed its opposition (doc.
17) to Dr. Brawley’s Remand Motion on October 27, 2017, and Dr. Brawley followed
with his reply (doc. 18) on November 10, 2017. Because the Court concludes that
2
Messrs. Kerr and Wright have been fraudulently joined, complete diversity does exist
in this case. Consequently, the Remand Motion is DENIED, and the Dismissal
Motion is GRANTED.
II.
Dr. Brawley’s Allegations Against Messrs. Kerr and Wright
A.
Dr. Brawley’s Purchase of Five Northwestern Disability
Policies
Dr. Brawley asserts that Mr. Kerr “was a special agent of Northwestern, and
subject to the control of both Northwestern and [Mr.] Wright.” (Doc. 1-1 at 9 ¶ 4).
Mr. Wright “was the Northwestern general agent responsible for training, supervision
and conduct of Special Agent [Mr.] Kerr.” (Id. ¶ 3).
Dr. Brawley purchased his first disability policy from Northwestern through
an agent other than Mr. Kerr or Mr. Wright. (Doc. 1-1 at 9 ¶ 7). That first policy,
number D-216-477, was issued on April 10, 1981 (the “1981 Policy”).2 Id. Prior to
purchasing the 1981 Policy, Dr. Brawley explained to the agent that he “wanted what
is referred to as an ‘own occupation’ policy that would pay benefits if he became
disabled and unable to perform as a specialist in orthodontics.” (Doc. 1-1 at 9-10 ¶
7). The 1981 Policy “remained in full force and effect until April 10, 2017, long after
[Dr. Brawley] became disabled.” (Id. at 10 ¶ 7).
2
Dr. Brawley asserts no claims against the agent who sold him this 1981 Policy. Mr. Kerr
sold Dr. Brawley the remaining four Northwestern policies.
3
After the purchase of the 1981 Policy, Dr. Brawley “began developing a
business rapport in 1987” with Mr. Kerr when he “became [Dr. Brawley]’s
Northwestern agent for disability insurance.” (Doc. 1-1 at 10 ¶ 8). Dr. Brawley and
Mr. Kerr met in October of 1987 to discuss Dr. Brawley’s disability insurance needs.
(Id. ¶ 9).
Dr. Brawley claims that Mr. Kerr “represented to [him] that Northwestern’s
policies were the top of the line and true ‘own occupation’ policies in the sense that
[Dr. Brawley] would receive disability benefits if he could not perform, on a full time
basis, the primary activities of his specific specialty (orthodontics) – that is, the
physical activities performed by orthodontists on a routine and daily basis (i.e.,
bending wire)[.]” (Doc. 1-1 at 10 ¶ 10). This assurance was vital to [Dr. Brawley]
because he was developing a very demanding and successful specialty practice ….”
(Id. at 10-11 ¶ 10).
Mr. Kerr recommended that Dr. Brawley purchase a second Northwestern
disability policy. (Doc. 1-1 at 11 ¶ 11). Dr. Brawley agreed and the second policy,
number D-560360, was issued on November 10, 1987 (the “1987 Policy”). Id. The
1987 Policy “remained in full force and effect until April 10, 2017, long after [Dr.
Brawley] became disabled.” Id.
In December of 1989, Mr. Kerr and Dr. Brawley met again to discuss Dr.
4
Brawley’s disability insurance needs. (Doc. 1-1 at 11 ¶ 12). Because Dr. Brawley’s
“practice-based income had increased,” Mr. Kerr recommended a corresponding
adjustment to Dr. Brawley’s monthly benefit. Id. Mr. Kerr further indicated that the
proposed policy was “virtually identical to his previous Northwestern policies in
terms of its definition of ‘total disability.’” Id. Dr. Brawley accepted Mr. Kerr’s
recommendation and the third policy, number D-727-724, was issued on January 10,
1990 (the “1990 Policy”). Id. The 1990 Policy “remained in full force and effect until
April 10, 2017, long after [Dr. Brawley] became disabled.” (Id. at 12 ¶ 12).
In March of 2002, Mr. Kerr and Dr. Brawley met again to discuss Dr.
Brawley’s disability insurance needs. (Doc. 1-1 at 12 ¶ 13). Because of the continued
growth of Dr. Brawley’s practice, Mr. Kerr again recommended a corresponding
adjustment of Dr. Brawley’s monthly benefit, but this time he proposed that Mr. Kerr
purchase two policies. Id. Mr. Kerr “confirmed that the policies he was
recommending were essentially the same as the prior policies.” Id. “Again, [Dr.
Brawley] accepted [Dr.] Kerr’s recommendation and “the fourth and fifth policies,
numbers D1-451-476 and D1-451-480, were issued on March 10, 2002 (the ‘476
Policy’ and ‘480 Policy’ respectively, and collectively, the ‘2002 Policies’).” (Id. at
12 ¶ 14). The 2002 Policies “remained in full force and effect until April 10, 2017,
long after [Dr. Brawley] became disabled.” Id.
5
“Based on [Mr.] Kerr’s representation that the two new policies were
essentially the same as the three previous policies, and the relationship of trust [that]
had developed between [Dr. Brawley] and [Mr.] Kerr over the years, [Dr. Brawley]
did not compare the exact language of the two new policies with that of the three
previous policies. (Doc. 1-1 at 12 ¶ 15 (emphasis added)). “Unbeknownst to [Dr.
Brawley], the definition of total disability in the two new policies added a provision
to the definition that [did not appear] in the three previous policies.” (Id. at 12-13 ¶
15).
The new provision stated that:
If the Insured can perform one or more of the principal duties of the
regular occupation, the Insured is not totally disabled; however, the
Insured may qualify as partially disabled.
(Id. at 13 ¶ 15).
Concerning Dr. Brawley’s purchase of the multiple Northwestern policies, Dr.
Brawley further asserts:
17. At no time did [Mr.] Kerr, or any other Northwestern agent,
including [Mr.] Wright, ever disclose the following facts to [Dr.
Brawley]:
a.
That Northwestern would not pay any disability
benefits so long as [Dr. Brawley] could perform incidental
and insignificant duties of his specialty, even if he could
not perform the most significant activity or activities of his
specialty;
6
b.
That Northwestern would deny an insured
orthodontist’s disability claim even if said specialist could
not perform the work within his specialty;
c.
That Northwestern would deny an insured
orthodontist’s disability claim even if said specialist could
only work 18 hours per week in his specialty;
d.
That Northwestern would deny an insured
orthodontist’s disability claim even if said specialist could
only perform a few of the procedures within his specialty,
so long as he could still supervise technicians, prepare
treatment plans and/or perform administrative work.
e.
That, after 1989, Northwestern incurred excessive
losses in claims on policies like [Dr. Brawley]’s first three
policies, and subsequently changed its policies to where it
would deny disability claims as long as an orthodontist
could teach, prepare treatment plans, supervise technicians
or perform administrative work, even though said specialist
was unable to regularly perform the significant procedures
within his specialty;
f.
That once a disability claim was filed, Northwestern
would ignore statements from its insured orthodontist
about the level of pain he experienced while performing
repeated orthodontic procedures;
g.
That Northwestern would not pay partial disability
benefits if an insured orthodontist could only perform
orthodontist procedures for 18 hours per week;
h.
That, during the claims process, Northwestern would
“cherry-pick” certain information (or select bits and pieces
of information) from the insured orthodontist’s medical
record and/or the reports of its paid experts that might
support a claim denial, and then rely on that information to
7
deny a claim while refusing the insured access to the
potentially negative information so that he could respond
to []it;
i.
That, during the claims process, Northwestern would
“cherry-pick” certain information (or select bits and pieces
of information) from the insured orthodontist’s medical
record and/or the reports of its paid experts that might
support a claim denial, and then refuse the insured access
to parts of the paid expert reports supporting a disability
claim;
j.
That, during the claims process, Northwestern would
rely on a 3-4 hour Functional Capacity Evaluation (“FCE”)
to deny claims submitted by an insured orthodontist,
despite the fact that the insured’s disability was based, in
large part, not only on increased paid and fatigue as a
single work day progressed, but also chronic pain and
fatigue as consecutive days of work accumulated[;]
k.
That, during the claims process, Northwestern would
ignore evidence from its own independent medical
examiners supporting disability if it could find an internal
“specialist” who would support a claim denial;
i.
That because Northwestern chose not to define the
phrase “principal duties” in its disability policies, and
because it ignored the insured’s own statement of his
principal duties in his application, Northwestern
considered itself free to deny claims so long as the insured
was still capable of performing some duty of his predisability occupation.
(Doc. 1-1 at 12-15 ¶¶ 13-17).
B.
Dr. Brawley’s Injury and Processing of His Disability Benefits
Claim
8
“On February 5, 2013, [Dr. Brawley] was involved in a brush saw accident”
and suffered a severe injury of his right hand that required surgery. (Doc. 1-1 at 15
¶ 19). Due to the work-related impact of this injury, Dr. Brawley filed a disability
claim with Northwestern on February 21, 2013, under all of five policies. (Id. at 20
¶ 34).
As for the claims process, Dr. Brawley alleges that Northwestern first denied
his claim for disability benefits on February 25, 2015 (doc. 1-1 at 21 ¶ 40), but that
he appealed that denial on March 20, 2015. (Id. ¶ 41). The record confirms that
Northwestern’s February 25, 2015, correspondence advised Dr. Brawley that he had
a 30-day window to file an appeal:
If you disagree with this decision and want to appeal it, please submit
within 30 days any information or documentation that you would like
for us to consider and that you believe supports your decision.
(Doc. 1-2 at 126).3
In Dr. Brawley’s appeal letter,
[Dr. Brawley] also requested that Northwestern provide him with copies
of the documentation that it relied on in denying his claim, so that he
could respond fully to the allegations and comments allegedly contained
therein. On or about March 24, 2015, Northwestern wrote [Dr. Brawley]
a letter in which it refused to produce the requested documentation.
Following the letter, [Dr. Brawley] made numerous phone calls to
Northwestern, to learn what action it was taking, but heard nothing.
3
All page references to Doc. 1-2 correspond with the Court’s CM/ECF numbering system.
9
Finally, on or about April 28, 2015, [Dr. Brawley] was told that he
needed to file a written request “to move forward with the appeal,”
which he did on April 29, 2015.
(Doc. 1-1 at 21 ¶ 41 (footnote omitted)).
After sending Northwestern confirmation “to move forward” on April 29, 2015,
Dr. Brawley allegedly made “numerous phone calls seeking information about the
status of his appeal[.]” (Doc. 1-1 at 21 ¶ 42). “Northwestern did not respond to [Dr.
Brawley] until December 23, 2015, approximately eight months after his appeal was
filed” and “reiterated Northwestern’s claim denial . . . .” (Id. at 21-22 ¶ 42).
Subsequent to receiving the December notice denying his appeal, Dr. Brawley
“submitted a 3-page letter to Northwestern, along with a new Request for Disability
Benefits under all five of his Northwestern disability policies” on March 27, 2016.
(Doc. 1-1 at 22 ¶ 43). Northwestern followed with a letter on June 15, 2016,
“den[ying] any disability benefits to [Dr. Brawley].” (Id. ¶ 44 (emphasis omitted)).
Dr. Brawley “continued pursuing his appeals and making numerous phone calls
to Northwestern to determine its final decision.” (Id. ¶ 45). At some point after a
telephone conversation with Northwestern that occurred on October 7, 2016, Dr.
Brawley “received notice that Northwestern would not pay him any benefits beyond
which it had already paid.” (Doc. 1-1 at 23 ¶ 45).
III.
Standards
10
A.
General Jurisdictional Principles
“It is by now axiomatic that the inferior courts are courts of limited jurisdiction.
They are ‘empowered to hear only those cases within the judicial power of the United
States as defined by Article III of the Constitution,’ and which have been entrusted
to them by a jurisdictional grant authorized by Congress.” Univ. of S. Ala. v. The Am.
Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v. Appleton, 30
F.3d 1365, 1367 (11th Cir. 1994)). “Accordingly, ‘[w]hen a federal court acts outside
its statutory subject-matter jurisdiction, it violates the fundamental constitutional
precept of limited federal power.’” Univ. of S. Ala., 168 F.3d at 409 (quoting
Marathon Oil Co. v. Ruhrgas, 145 F.3d 211, 216 (5th Cir. 1998) (en banc) (citing
another source), reversed on other grounds by Ruhrgas AG v. Marathon Oil Co., 526
U.S. 574, 588, 119 S. Ct. 1563, 1572, 143 L. Ed. 2d 760 (1999)). “Simply put, once
a federal court determines that it is without subject matter jurisdiction, the court is
powerless to continue.” 168 F.3d at 410.
“A necessary corollary to the concept that a federal court is powerless to act
without jurisdiction is the equally unremarkable principle that a court should inquire
into whether it has subject matter jurisdiction at the earliest possible stage in the
proceedings.” Id. “Indeed, it is well settled that a federal court is obligated to inquire
into subject matter jurisdiction sua sponte whenever it may be lacking.” Id. (citing
11
Fitzgerald v. Seaboard Sys. R.R., 760 F.2d 1249, 1251 (11th Cir. 1985) (per curiam)).
Additionally, “[t]he jurisdiction of a court over the subject matter of a claim
involves the court’s competency to consider a given type of case, and cannot be
waived or otherwise conferred upon the court by the parties. Otherwise, a party could
‘work a wrongful extension of federal jurisdiction and give district courts power the
Congress denied them.’” Jackson v. Seaboard Coast Line R.R., 678 F.2d 992, 100001 (11th Cir. 1982) (quoting Am. Fire & Cas. Co. v. Finn, 341 U.S. 6, 18, 71 S. Ct.
534, 542, 95 L. Ed. 702 (1951)) (internal footnote and citation omitted). Furthermore,
“[b]ecause removal jurisdiction raises significant federalism concerns, federal courts
are directed to construe removal statutes strictly.” Univ. of S. Ala., 168 F.3d at 411
(citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S. Ct. 868,
872, 85 L. Ed. 1214 (1941)).
Lastly, Congress has decreed and the Supreme Court has confirmed that–with
the limited exceptions of lawsuits brought against federal officers or agencies (28
U.S.C. § 1442) and civil rights cases (28 U.S.C. § 1443) that have been removed–
orders of remand by district courts based upon certain grounds, including in particular
those premised upon lack of subject matter jurisdiction, are entirely insulated from
review. More specifically, § 1447(d) provides:
An order remanding a case to the State court from which it was removed
12
is not reviewable on appeal or otherwise, except that an order remanding
a case to the State court from which it was removed pursuant to section
1442 or 1443 of this title shall be reviewable by appeal or otherwise.
28 U.S.C. § 1447(d) (emphasis added); see also Kirchner v. Putnam Funds Trust, 547
U.S. 633, 642, 126 S. Ct. 2145, 2154, 165 L. Ed. 2d 92 (2006) (recognizing that
“‘[w]here the [remand] order is based on one of the grounds enumerated in 28 U.S.C.
§ 1447(c), review is unavailable no matter how plain the legal error in ordering the
remand’”) (quoting Briscoe v. Bell, 432 U.S. 404, 413 n.13, 97 S. Ct. 2428, 2434
n.13, 53 L. Ed. 2d 439 (1977)); Milton I. Shadur, Traps for the Unwary in Removal
and Remand, 33 no. 3 Litigation 43 (2007); Powerex Corp. v. Reliant Energy Servs.,
Inc., 551 U.S. 224, 234, 127 S. Ct. 2411, 2418, 168 L. Ed. 2d 112 (2007) (holding
that when “the District Court relied upon a ground that is colorably characterized as
subject-matter jurisdiction, appellate review is barred by § 1447(d)”).
B.
Diversity Jurisdiction
Northwestern premises its removal upon this Court’s diversity jurisdiction.
“Diversity jurisdiction exists where the suit is between citizens of different states and
the amount in controversy exceeds the statutorily prescribed amount, in this case
$75,000.” Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th Cir. 2001) (citing 28
U.S.C. § 1332(a)). Therefore, removal jurisdiction based upon diversity requires: (1)
complete diversity of citizenship between the plaintiff(s) and the defendant(s); and
13
(2) satisfaction of the amount-in-controversy requirement.4
1.
Citizenship Requirement
Diversity jurisdiction “requires complete diversity—every plaintiff must be
diverse from every defendant.” Palmer v. Hosp. Auth., 22 F.3d 1559, 1564 (11th Cir.
1994). “Citizenship, not residence, is the key fact that must be alleged in the
complaint to establish diversity for a natural person.” Taylor v. Appleton, 30 F.3d
1365, 1367 (11th Cir. 1994). Although Dr. Brawley has sued fictitious parties, “[f]or
purposes of removal…the citizenship of defendants sued under fictitious names shall
be disregarded.” 28 U.S.C. § 1441(b)(1).
2.
Fraudulent Joinder Principles
The dispute over satisfaction of the citizenship requirement in this case has to
do with whether Dr. Brawley has fraudulently joined the non-diverse Defendants,
Messrs. Kerr and Wright. “[W]hen there is no possibility that the plaintiff can prove
a cause of action against the resident (non-diverse) defendant[,]” fraudulent joinder
is established. Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.
1998). Relatedly, if fraudulent joinder is established, then the resident defendant is
4
Dr. Brawley has not contested satisfaction of the amount-in-controversy threshold.
Moreover, the Court has studied Northwestern’s Notice of Removal and finds that Northwestern has
satisfied its burden as to that component given the estimated value of past due disability benefits
owed to Dr. Brawley in the amount of $437,440. (See Doc. 1 at 10 ¶ 25 (citing Thomas v. Travelers
Ins. Co., 154 F. 2d 950, 951 (5th Cir. 1946)).
14
subject to dismissal as a party and its citizenship is disregarded for diversity
requirement purposes. See id.
The Eleventh Circuit extensively addressed diversity-based removal when the
removing party maintains that a non-diverse defendant has been fraudulently joined
in Crowe v. Coleman, 113 F.3d 1536 (11th Cir. 1997). There the court stated:
In a removal case alleging fraudulent joinder, the removing party has the
burden of proving 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. Cabalceta v. Standard Fruit Co., 883 F.2d
1553, 1561 (11th Cir. 1989). The burden of the removing party is a
‘heavy one.’ B, Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.
Unit A 1981).
Crowe, 113 F.3d at 1538.5
The standard is onerous because, absent fraudulent joinder, a plaintiff has the
absolute right to choose his forum. That is, courts must keep in mind that the plaintiff
is the master of his complaint and has the right to choose how and where he will fight
his battle. As Crowe further recognized:
This consequence makes sense given the law that “absent fraudulent
5
Under the second prong of the fraudulent joinder test, the Court must determine whether
the plaintiff has fraudulently pled facts relating to a party’s citizenship in an effort to avoid diversity
jurisdiction. No issue related to the second prong exists in this case. A third category–when “the
claim against the diverse defendant has no real connection to the claim against the non-diverse
defendant[,]” Triggs, 154 F.3d at 1287, is also not applicable. Accordingly, the Court limits its
analysis to the first prong–whether Northwestern has shown that there is no possibility that Dr.
Brawley can establish a cause of action against Mr. Kerr or Mr. Wright.
15
joinder, plaintiff has the right to select the forum, to elect whether to sue
joint tortfeasors and to prosecute his own suit in his own way to a final
determination.” Parks v. The New York Times Co., 308 F.2d 474, 478
(5th Cir. 1962). The strict construction of removal statutes also prevents
“exposing the plaintiff to the possibility that he will win a final
judgment in federal court, only to have it determined that the court
lacked jurisdiction on removal,” see Cowart Iron Works, Inc. v. Phillips
Constr. Co., Inc., 507 F. Supp. 740, 744 (S.D. Ga. 1981) (quoting 14A
C. Wright, A. Miller & E. Cooper, Federal Practice and Procedures §
3721), a result that is costly not only for the plaintiff, but for all the
parties and for society when the case must be re-litigated.
Crowe, 113 F.3d at 1538.
To establish fraudulent joinder of a resident defendant, the burden of proof on
the removing party is a “heavy one[,]” see Crowe, 113 F.3d at 1538 (internal
quotation marks omitted) (quoting Miller Brewing, 663 F.2d at 549), requiring clear
and convincing evidence and particularity in pleading. Parks, 308 F.2d at 478.
Although affidavits and depositions may be considered, the Court must not undertake
to decide the merits of the claim but must look to whether there is a possibility that
a claim exists. More particularly, the Crowe court explained the framework for
analyzing fraudulent joinder as:
While ‘the proceeding appropriate for resolving a claim of fraudulent
joinder is similar to that used for ruling on a motion for summary
judgment under FED. R. CIV. P. 56(b),’ [Miller Brewing, 663 F.2d at 549
n.9], the jurisdictional inquiry ‘must not subsume substantive
determination.’ Id. at 550. Over and over again, we stress that ‘the trial
court must be certain of its jurisdiction before embarking upon a safari
in search of a judgment on the merits.’ Id. at 548-49. When considering
16
a motion for remand, federal courts are not to weigh the merits of a
plaintiff’s claim beyond determining whether it is an arguable one under
state law. See id. ‘If there is even a possibility that a state court would
find that the complaint states a cause of action against any one of the
resident defendants, the federal court must find that joinder was proper
and remand the case to state court.’ Coker v. Amoco Oil Co., 709 F.2d
1433, 1440-41 (11th Cir. 1983), superseded by statute on other grounds
as stated in Georgetown Manor, Inc. v. Ethan Allen, Inc., 991 F.2d 1533
(11th Cir. 1993).
Crowe, 113 F.3d at 1538 (emphasis added).
In a later fraudulent joinder decision, the Eleventh Circuit elaborated:
The fact that the plaintiffs may not ultimately prevail against the
individual defendants because of an insufficient causal link between the
defendants’ actions and the plaintiffs’ injuries does not mean that the
plaintiffs have not stated a cause of action for purposes of the fraudulent
joinder analysis. In a fraudulent joinder inquiry, ‘federal courts are not
to weigh the merits of a plaintiff’s claim beyond determining whether it
is an arguable one under state law.’ Crowe, 113 F.3d at 1538.
Pacheco de Perez v. AT & T Co.,139 F.3d 1368, 1380-81 (11th Cir. 1998) (emphasis
added); see also Tillman v. R.J. Reynolds Tobacco, 340 F.3d 1277, 1279 (11th Cir.
2003) (“[I]f there is a possibility that a state court would find that the complaint states
a cause of action against any of the resident defendants, the federal court must find
that the joinder was proper and remand the case to state court.”).
IV.
Analysis
Against the foregoing backdrop, the Court now addresses the application of the
fraudulent joinder standard to this case. The Court begins with Northwestern’s rule17
of-repose contentions.
A.
Alabama’s Rule of Repose Bars All Tort Claims Against
Messrs. Kerr and Wright under the 1987 and 1990 Policies.
Northwestern’s opening position in opposition to the Remand Motion is that
the rule of repose precludes all of Dr. Brawley’s fraud and negligence claims against
Messrs. Kerr and Wright connected to his 1987 and 1990 Policies. (Doc. 17 at 11).6
Northwestern further contends that “the application of the rule of repose leaves no
doubt that [Dr. Brawley]’s hopes of sustaining any claims against [Messrs.] Wright
and Kerr necessarily hinge on the sale of the 2002 Policies.” (Doc. 17 at 13 (emphasis
added)). The Court agrees.
As explained in Am. Gen. Life & Acc. Ins. Co. v. Underwood, 886 So. 2d 807
(Ala. 2004), Alabama’s rule of repose
“bars actions that have not been commenced within 20 years from the
time they could have been commenced.” Tierce v. Ellis, 624 So. 2d 553,
554 (Ala. 1993). The rule of repose “is not affected by the circumstances
of the situation, by personal disabilities, or by whether prejudice has
resulted or evidence [has been] obscured.” Boshell v. Keith, 418 So. 2d
89, 91 (Ala. 1982). “Lack of notice is not sufficient to avert the
application of the [rule of repose].” Ballenger v. Liberty Nat’l Life Ins.
Co., 271 Ala. 318, 322, 123 So. 2d 166, 169 (1960); accord Ex parte
Liberty Nat’l Life Ins. Co., 825 So. 2d 758, 764 (Ala. 2002), and Ex
parte Liberty Nat’l Life Ins. Co., 858 So. 2d 950, 957-59 (Ala. 2003)
(Johnstone, J., dissenting). “[T]he only element of the rule of repose is
time.” Boshell, 418 So. 2d at 91.
6
All page references to Doc. 17 correspond with the Court’s CM/ECF numbering system.
18
Underwood, 886 So. 2d at 812.
The Supreme Court of Alabama further made clear in Underwood that, for tort
claims tied to insurance policies
the rule of repose beg[i]ns running on each claim arising from the
purchase of a particular policy as soon as the plaintiff pa[ys] the first
premium for the policy because that payment supplie[s] the last essential
element necessary for all essential elements of the particular claim to
coexist so that the plaintiff could file suit.
886 So. 2d at 813 (emphasis added).
Dr. Brawley paid monthly premiums on his 1987 and 1990 Policies and did not
initiate his lawsuit until August 1, 2017. Because well over 20 years elapsed between
the payment of his first monthly premium for each policy and the filing date of his
state court complaint, “the rule of repose barred his claims before he commenced this
lawsuit.” Underwood, 886 at 813.
In reply, Dr. Brawley does not substantively challenge Northwestern’s
straightforward invocation of the rule of repose or its establishment of fraudulent
joinder as to these particular tort claims. Instead, Dr. Brawley points out that any
claims attributable to the 2002 Policies are not subject to the rule of repose:
Although the Parties dispute whether Brawley’s tort claims based
on the 1987 and 1990 Policies are barred by Alabama’s rule of repose,
it is undisputed that his fraud and negligence claims regarding the 2002
Policies are not subject to a similar bar. For purposes of remand,
Northwestern’s rule of repose argument is unavailing because the Parties
19
agree that at least some of Brawley’s tort claims (i.e., the claims based
on the 2002 Policies) are not barred by the rule.
(Doc. 18 at 1-2 ¶ 2).
Therefore, on the basis of the rule of repose, the Court finds that Dr. Brawley
has no possible (or arguable) claim against Messrs. Kerr and Wright with respect to
either the 1987 Policy or the 1990 Policy. Accordingly, the Court turns its focus to
the viability of Dr. Brawley’s tort claims against these resident Defendants with
respect to the 2002 Policies.
B.
Dr. Brawley’s Remaining Fraud Claims against Messrs. Kerr
and Wright under the 2002 Policies Are Time-Barred.7
Northwestern relies upon the seminal case of Foremost Ins. Co. v. Parham, 693
So. 2d 409 (Ala. 1997), and contends that any fraud claims brought against Messrs.
Kerr and Wright under the 2002 Policies are time-barred under Ala. Code § 6-2-38.
(Doc. 17 at 13). Section 6-2-38 establishes a two-year statute of limitations period for
fraud claims. See Ala. Code § 6-2-38(l) (“All actions for any injury to the person or
rights of another not arising from contract and not specifically enumerated in this
section must be brought within two years.”); see also Ala. Code § 6-2-3 (“In actions
7
Northwestern’s statute-of-limitations (and other) contentions in support of fraudulent
joinder are not exclusive to the 2002 Policies. However, because the Court has separately found that
the rule of repose bars all tort claims against Messrs. Kerr and Wright that are tied to Dr. Brawley’s
earlier policies, the remainder of this opinion deals only with Dr. Brawley’s claims pertaining to the
2002 Policies.
20
seeking relief on the ground of fraud where the statute has created a bar, the claim
must not be considered as having accrued until the discovery by the aggrieved party
of the fact constituting the fraud, after which he must have two years within which
to prosecute his action.”).
In Foremost, the Alabama Supreme Court fundamentally modified the reliance
standard for fraud claims. More specifically, the Foremost court retreated from a
subjective viewpoint of justifiable reliance as previously adopted by Hickox v. Stover,
551 So. 2d 259 (Ala. 1989), and returned to an objective one of reasonable reliance
as “most closely associated with Torres v. State Farm Fire & Casualty Co., 438 So.
2d 757 (Ala. 1983).” Foremost, 693 So. 2d at 421; see id. (overruling Hickox, “to the
extent that it changed the law of fraud as it had existed prior there to” and “return[ing]
to the reasonable reliance standard”).
Of particular concern to the Foremost court in returning actionable fraud to a
pre-Hickox standard was Hickox’s “eliminat[ion] [of] the general duty on the part of
a person to read the documents received in connection with a particular transaction
(consumer or commercial)[.]” 693 So. 2d at 421. Additionally, Foremost made it clear
that a plaintiff is entitled “to rely on a representation only if he fulfills his
responsibility, or duty, to exercise ordinary prudence.” 693 So. 2d at 438.
Relatedly, the Foremost formulation impacted the accrual period for fraud:
21
The Foremost decision reestablished that the objective standard
for determining the accrual date for a fraud claim imposes a duty to read
documents received in connection with a particular transaction.9 Id. at
421. Therefore, fraud claims accrue upon the earlier of: (1) actual
discovery of the alleged fraud; or (2) receipt of a document or contract
alerting the plaintiff to the possibility of fraud, if the plaintiff could have
read and understood such document and chose to ignore its written
terms.
Owens v. Life Ins. Co. of Georgia, 289 F. Supp. 2d 1319, 1325 (M.D. Ala. 2003)
(footnote omitted); see also Foremost, 693 So. 2d at 421 (overruling Hicks v. Globe
Life & Acc. Ins. Co., 584 So. 2d 458 (Ala. 1991), “to the extent that it changed the
standard that had previously existed for determining the statute of limitations issue
in fraud cases”); Foremost, 693 So. 2d at 438 (“With respect to the statute of
limitations for a fraud claim, the ‘reasonable reliance’ standard requires the buyer to
act reasonably to discover fraud.”) (emphasis added).
Consistent with the foregoing framework, Northwestern argues that “the
limitations period on [Dr. Brawley]’s fraud claims began to run when he received a
copy of his policies.” (Doc. 17 at 15). Absent the application of an exception to the
Foremost accrual rule, that would mean the statute of limitations for Dr. Brawley’s
fraud claims that are based on his 2002 Policies ran on March 10, 2004.
Indeed, as Northwestern points out, several district courts have applied similar
limitations-based reasoning in concluding that the insurance agent who the plaintiff
22
sued for fraud was fraudulently joined. See, e.g., Bullock v. United Ben. Ins. Co., 165
F. Supp. 2d 1255, 1258 (M.D. Ala. 2001)(finding “no possibility that Plaintiff can
establish a cause of action [for fraud] against [the individual defendant]” due to
expiration of the 2-year limitations period before commencing lawsuit); Fowler v.
Provident Life & Accident Ins. Co., 256 F. Supp. 2d 1243, 1249 (N.D. Ala. 2003)
(finding fraudulent joinder because “under the Foremost rule, the plaintiff should
have discovered the possibility of fraud and misrepresentation in 1992 when she
purchased the policy, and the two year statute of limitations commenced running at
that time”); Owens, 289 F. Supp. 2d 1319, 1326 (finding fraudulent joinder due to
expiration of the statute of limitations period when “Plaintiff should have discovered
the possibility of fraud and misrepresentation in 1984 when he purchased the
Policy”); cf. also Waldrup v. Hartford Life Ins. Co., 598 F. Supp. 2d 1219, 1228
(N.D. Ala. 2008) (determining concealment allegations to be inadequate to invoke
Ala. Code § 6-2-3 (the savings provision for fraud) and finding “no possibility that
plaintiffs could escape the bar of the statute of limitations”).
In reply, Dr. Brawley does not discuss any of these on-point insurance fraud
cases. He instead cites to Mattox v. State Farm Fire & Cas. Co., No. CA
12-0192-KD-C, 2012 WL 3870392 (S.D. Ala. Aug. 15, 2012), report and
recommendation adopted, No. CIV. A. 12-0192-KD-C, 2012 WL 3870495 (S.D. Ala.
23
Sept. 6, 2012), as a countervailing authority. (Doc. 18 at 2-3 ¶ 3). The problem with
Dr. Brawley’s misguided reliance upon Mattox is that he falls outside the particular
parameters of that case’s holding:
[N]one of these cases furthers this Court’s analysis of the issue because,
to the extent each case was decided adversely to the plaintiffs, it was
because each plaintiff predicated liability on representations occurring
at or around the date of purchase of the policy or annuity when each
plaintiff was in possession of documents contradicting the alleged oral
misrepresentations or the information allegedly suppressed. . . . Here, of
course, liability is not predicated on alleged misrepresentations or
suppression of information occurring at or around renewal of the subject
policy, but instead, liability is predicated on misrepresentations or
suppressions occurring during State Farm’s adjustment/handling of
plaintiff’s claim; therefore, the federal cases relied upon by defendant
simply do not foreclose the possibility that in the state courts of
Alabama, under the unique circumstances presented here, Mattox can
overcome the statute of limitations bar. More importantly, because the
removing defendants have not come forward with a federal case finding
fraudulent joinder in a situation like the present, where liability is
predicated on misrepresentations—or the suppression of
information—during the adjustment or handling of a claim, and the
Alabama courts post-Foremost have signaled that the statute of
limitations should be decided as a matter of law only at the summary
judgment stage or later, after the close of all discovery, this Court should
decline at this point in the proceedings to make such a finding as a
matter of law.
2012 WL 3870392, at *18 (emphasis added).8 Unlike the plaintiff in Mattox, Dr.
8
This Court rejects as inconsistent with the contrary outcomes in Bullock, Fowler, Owens,
and Waldrup—and inconsistent with the holding in Foremost—any argument that the language in
Mattox can be read more broadly to foreclose a finding of fraudulent joinder whenever that finding
is premised upon a statute-of-limitations theory.
24
Brawley’s fraud claims against Messrs. Kerr and Wright are unrelated to the
“adjustment or handling of a claim[.]”
Dr. Brawley additionally argues that ambiguity in policy language means that
“there is at lease some possibility” that his fraud claims are not time-barred by
Foremost. (Doc. 18 at 3 ¶ 4). Dr. Brawley is correct that the Foremost accrual rule is
not absolute. As another judge sitting in this district has observed:
There are limitations on the Foremost rule. An individual is not
capable of discovering a fraud or negligent misrepresentation by reading
and understanding the terms of a contract if he or she is illiterate, see
Potter v. First Real Estate Co., 844 So. 2d 540, 2002 WL 31002850, at
*6-7, 2002 Ala. LEXIS 259, at *17-18 (Ala. Sept. 6, 2002) (“It has long
been settled law of this State that a party to a contract who is illiterate
can allege fraud and thereby overcome the other party’s reliance on the
terms expressed in the contract.”) (citing Paysant v. Ware, 1 Ala. 160
(1840)), or if the underlying document is ambiguous, i.e., capable of
more than one interpretation, and thus hard to understand, see Ex parte
Seabol, 782 So. 2d 212, 216-17 (Ala. 2000) (finding that where
underlying documents are not easily understood, plaintiff’s reliance on
oral representation concerning documents is reasonable).
Fowler, 256 F. Supp. 2d at 1248 (emphasis added).9
However, as stated in his reply brief, the ambiguous language that Dr. Brawley
relies upon is the language that he read in his (time-barred) 1987 and 1990 Policies.
(Doc. 18 at 3-4 ¶ 4). Any ambiguity in those earlier policies cannot save his fraud
claims based on the 2002 Policies that contain different language (which he did not
9
The illiteracy exception to Foremost is not an issue in this case.
25
read).10 Furthermore, “[Dr. Brawley] had in h[is] possession documents which
contradicted the alleged oral misrepresentations made by [Mr. Kerr] and [which]
provided the information allegedly suppressed [about the definition of “total
disability” under the 2002 Policies].”. , Bullock, 165 F. Supp. 2d 1255, 1258. “The
fact that [Dr. Brawley] elected not to read [the 2002 Policies] does not toll the statute
of limitations.” Id.
In his reply, Dr. Brawley also cites to the non-insurance case of Potter v. First
10
In his Remand Motion, Dr. Brawley cites to Giddens v. Equitable Life Assur. Soc. of U.S.,
445 F.3d 1286 (11th Cir. 2006), and argues that the ambiguity in the definition of “total disability”
“prevented [him] from discovering the full scope of coverage set forth in the 1987 and 1990 Policies,
which he read, just as it would have prevented him from discovering the full scope of coverage set
forth in the 2002 Policies, had he read them.” (Doc. 11 at 24); (see also Doc. 12 at 5-6 ¶ 9 (arguing
in opposition to Dismissal Motion that “[b]ecause the policies in [Dr.] Brawley’s possession did not
‘clearly indicate’ that the coverage contained therein was different than what he requested, [Dr.]
Brawley cannot be found contributorily negligent as a matter of law”)). Giddens involves neither
fraudulent joinder nor Alabama law. See id. at 1297 (“Because this defense is based on the policy
language, we first review the Georgia law regarding construction of insurance contracts and then the
Policies.”).
In any event, the vaguely defined term of “total disability” analyzed in Giddens is
significantly different than unambiguous provision included in the 2002 Policies by Northwestern.
Compare Giddens, 445 F.3d at 1297 (explaining that “the Policies define ‘Total Disability’ as the
inability to ‘engage in the substantial and material duties of your regular occupation’” and finding
that such language is ambiguous because it “does not say ‘all’ substantial and material duties or
‘most’ or any percentage”), with Doc. 1-1 at 13 ¶ 15 (explaining that in the 2002 Policies if “the
Insured can perform one or more of the principal duties of the regular occupation, the Insured is not
totally disabled”). Therefore, Giddens does not persuade this Court that Alabama’s ambiguity
exception to Foremost applies to the meaning of “total disability” under the 2002 Policies.
Additionally, Dr. Brawley has not cited to any Alabama (or other) authority in which the term
“principal duties” or other language used to define “total disability” within the 2002 Policies was
determined to be ambiguous. Without such a window of possibility, the Court is convinced that no
Alabama court would conclude anything but that the definition of “total disability” contained in the
2002 Policies is unambiguous.
26
Real Estate Co., 844 So. 2d 540 (Ala. 2002), and argues that a special relationship
exception precludes application of the Foremost accrual rule, even though he never
read the 2002 Policies. (Doc. 18 at 4-6 ¶¶ 5-6). More specifically, Dr. Brawley states:
Unlike the 1987 and 1990 Policies, [Dr.] Brawley never read the
2002 Policies, specifically because [Mr.] Kerr made added assurances
to him, on the date of the issuance of the policies, that both were
essentially the same as Brawley’s three previous policies. See Doc. 1-1
at Compl. ¶¶ 13-15. This misrepresentation [by Mr. Kerr], made
contemporaneously with the issuance of the 2002 Policies, lulled [Dr.]
Brawley into a false sense of security about the true nature of the
coverage provided under each. As a result, [Dr.] Brawley never read the
2002 Policies, even though he had reviewed his three previous policies,
nor did he ever have any actual knowledge of the true nature of the
coverage provided under the 2002 Policies. Under these circumstances,
it is possible that an Alabama state court would find that [Dr.] Brawley’s
reliance on [Mr.] Kerr’s added assurances about the 2002 Policies was
reasonable, despite his failure to read the policies.
(Doc. 18 at 5-6 ¶ 6 (emphasis added)).
The problem with this argument is that the Alabama Supreme Court rendered
the Potter special-relationship exception inapplicable to the very type of fraud claims
asserted by Dr. Brawley here:
Under those circumstances [in Potter], we concluded that there was
evidence of a special relationship between the plaintiffs and their
acknowledged real-estate agent, together with evidence indicating that
the agent had employed an artifice at the closing that lulled the plaintiffs
into a false sense of security as to the contents of a document the
plaintiffs were unable to read. We reversed the summary judgment in
favor of the real-estate agent and her company. The exception to the rule
discussed in Potter does not apply in this case, however, because Smith
27
[, i.e., the insured] and Jeffrey[, i.e., the agent] do not have the kind of
special relationship that was present between the plaintiffs and the
defendant in Potter. Had Jeffrey been the minister and Smith the
congregant, a different situation might exist, but that case is not
presented here.
AmerUs Life Ins. Co. v. Smith, 5 So. 3d 1200, 1210 (Ala. 2008) (emphasis added).
While Dr. Brawley asserts that “it is possible that an Alabama state court would find
that [his] reliance on [Mr.] Kerr’s added assurances about the 2002 Policies was
reasonable, despite his failure to read [them]” (doc. 18 at 6 ¶ 6), he offers no Alabama
authority in which AmerUs’s holding has been distinguished and/or Potter’s holding
has been applied to a fraud claim against an insurance agent.
Thus, the Court agrees with Northwestern that Dr. Brawley’s fraud claims
against Messrs. Kerr and Wright under the 2002 Policies are time-barred and that no
exceptions possibly apply.11 Further, in light of the foregoing limitations analysis,
Northwestern has satisfied the fraudulent joinder standard as to these remaining fraud
11
The Court alternatively agrees with Northwestern that, if Dr. Brawley’s fraud claims
against Messrs. Kerr and Wright under the 2002 Policies are not clearly time-barred, they are,
nonetheless, impossible under Alabama law because he “had a duty to read his policies and his
failure to do so negates as a matter of law the reasonable reliance element of his fraud claims.” (Doc.
17 at 32); see, e.g., Alfa Life Ins. Corp. v. Colza, 159 So. 3d 1240, 1252 (Ala. 2014) (“As evidenced
by this case and by Foremost’s other progeny, we have essentially held that it is almost never
reasonable for an individual to ignore the contents of documents given him or her in association with
a transaction.”); id. (“Although the Foremost line of cases deals primarily with fraud claims, there
is no reason this principle should not apply to other claims as well.”); AmerUs, 5 So. 2d at 1216
(“We conclude that no reasonable person could read the policies and the cost-benefit statement and
not be put on inquiry as to the existence of inconsistencies, thereby making reliance on Jeffrey’s
representations unreasonable as a matter of law.”).
28
claims.
C.
Dr. Brawley’s Remaining Negligence Claims against Messrs.
Kerr and Wright under the 2002 Policies Are Either TimeBarred or Precluded on the Merits.
Northwestern similarly maintains that Dr. Brawley’s negligence claims under
the 2002 Policies against Messrs. Kerr and Wright are time-barred by a two-year
statute of limitations period. (Doc. 17 at 29); see also Henson v. Celtic Life Ins. Co.,
621 So. 2d 1268, 1274 (Ala. 1993) (“The statutory period of limitations for
negligence and wantonness actions, found at Ala. Code 1975, § 6-2-38, is two years
from the date the injury occurred.”).
Concerning negligent training and supervision, Dr. Brawley relies upon Mr.
Wright’s actions that took place in 2002. Therefore, Northwestern contends that the
limitations period for that count expired in 2004. (Doc. 17 at 29); see also Booker v.
United Am. Ins. Co., 700 So. 2d 1333, 1339 (Ala. 1997) (finding negligent or wanton
supervision claim time-barred when latest negligent act took place in May 1991 and
lawsuit was not filed until August 1993 “–over two years after [the plaintiffs’] claims
accrued[.]”). Northwestern makes a similar untimeliness argument about Dr.
Brawley’s negligent procurement (and failure to notify)12 count. (Doc. 17 at 30).
12
Dr. Brawley and Northwestern do not ever separately analyze an alleged failure to notify
as a claim independent from negligent procurement.
29
In support of these negligence claims, Dr. Brawley maintains that he was not
“damaged by either act of negligence” until Northwestern finally denied his appeal
on February 16, 2017. (Doc. 11 at 20).13 The Court easily rejects Dr. Brawley’s
position as it pertains to his negligent training and supervision claim because it is
directly counter to Booker. In particular, Dr. Brawley has made no effort to discount
Booker or point to contrary Alabama authority regarding the accrual of a negligent
training and supervision claim. Thus, because Dr. Brawley’s negligent training claim
under the 2002 Policies is stale, Northwestern has satisfied the fraudulent joinder
standard as to that claim.
The limitations analysis of Dr. Brawley’s negligent procurement count is less
straightforward. Dr. Brawley alleges that he “advised [Mr.] Kerr . . . that he wished
to obtain true ‘own occupation’ disability insurance coverage to protect him in the
event that he became unable to perform the primary activity of his specialty.” (Doc.
1-1 at 33 ¶ 72). Dr. Brawley further asserts that he “relied on the expertise and
judgment of [Messrs.] Kerr, [and] Wright . . . in purchasing the type of disability
coverage that he needed, and monitoring the status of the coverage, the carrier
13
Dr. Brawley does not address the validity of his negligence claims in his reply brief.
Instead, he refers back to his arguments made in his Remand Motion. (See Doc. 18 at 8-9 ¶ 9
(“Rather than waste the Court’s time reiterating Section IV(B) of his Motion, which addressed the
sufficiency of his negligence claims, [Dr.] Brawley adopts and incorporates by reference, as if fully
set forth herein, the entirety of that argument, as it originally appeared in his Motion.”)).
30
providing coverage, and the carrier’s claim practices.” Id.
Northwestern relies upon the Rule 12(b)(6) case of Toffel v. Nationwide Mut.
Ins. Co., No. 2:15-CV-01669-KOB, 2016 WL 4271837, at *1 (N.D. Ala. Aug. 15,
2016), to show that Dr. Brawley can establish no cause of action for negligent
procurement against Messrs. Kerr and Wright due to its staleness. In Toffel, the
district court summarized the accrual standard for negligent procurement:
Under Alabama law, the statute of limitations applicable to
negligence claims, including claims for negligent failure to procure
insurance coverage, is two years. Ala. Code § 6-2-38; Bush v. Ford Life
Ins. Co., 682 So. 2d 46, 47 (Ala. 1996). The statute of limitations period
for a negligent procurement claim begins “when a loss that would
trigger liability under the policy occurs” and when the insurer notifies
the insured that it will not honor his claim. Id.
2016 WL 4271837, at *6.
Against this legal backdrop, the Toffel court found the statute of limitations
barred the negligent procurement claim, explaining:
In the instant case, Nationwide informed Nineteenth Street
Investments on July 19, 2007 that it would not honor its claim for the
loss related to the car accident in the state court law suits against
Nineteenth Street. In its July 19, 2007 letter to Nineteenth Street,
Nationwide stated in clear terms: “[T]here is no coverage for The
Nineteenth Street Investments, Inc. Therefore, Nationwide respectfully
disclaims coverage for the claim submitted as the Nineteenth Street
Investments, Inc.”
Thus, the cause of action for Nineteenth Street’s negligent failure
to procure insurance claim accrued on July 19, 2007, when Nationwide
31
informed Nineteenth Street that it would not honor its claim. The statute
of limitations period for Nineteenth Street’s negligent procurement
claim expired on July 19, 2009, two years after the claim accrued.
Consequently, when Trustee Andre Toffel filed the adversarial
proceeding against the Defendants on September 6, 2013, his negligent
procurement claim was untimely.
2016 WL 4271837, at *6-7 (emphasis by underlining added) (citation omitted).
Based upon the reasoning in Toffel, Northwestern contends that because it
initially denied Dr. Brawley’s disability claim on February 25, 2015, Dr. Brawley’s
negligent procurement claim expired on February 25, 2017, as a matter of law. (Doc.
17 at 30). Northwestern further maintains that the untimeliness of this claim is
without any uncertainty such that the demanding fraudulent joinder standard applies
to it.
However, factually absent from Toffel is any indication that the finality of the
denial of that insurance claim was impacted by the claimant’s right (and decision) to
appeal. Also, the denial letter that appears in that record does not include any
language regarding a right to appeal. See Toffel, No. 2:15-CV-1669-KOB, (Doc. 9-1
at 15-21) (N.D. Ala. Oct. 9, 2015).14 Consequently, Toffel is inapposite and fails to
persuade this Court that, on the facts presented here, no Alabama court would
conclude anything but that Dr. Brawley’s negligent procurement claim is stale.
14
All page references to Doc. 9-1 of the Toffel case correspond with the Court’s CM/ECF
numbering system.
32
Moreover, when the accrual of Dr. Brawley’s negligent procurement claim is
measured by the date on which Northwestern first denied his appeal–December 23,
2015 (or any date after that)–then the Complaint flied in this action August 1, 2017
predates the applicable 2-year statute of limitations period (which expired at the
earliest on December 23, 2017). While an Alabama court might ultimately agree with
Northwestern’s position that Dr. Brawley’s negligent procurement claim accrued on
the earlier date of February 25, 2015, despite his appeal, none of the cases that
Northwestern cites establishes such an unambiguous holding under Alabama law.
(See Doc. 18 at 7 ¶ 7 (“Even if the Court rejects that position, and finds that Brawley
should have discovered the fraud prior to the final denial, it would nevertheless have
been reasonable for [Dr.] Brawley to not suspect foul play until December 23, 2015,
the date upon which Northwestern denied the appeal invited by its February 25, 2015
letter.”)). Further, the Eleventh Circuit law on fraudulent joinder leaves no room for
doubt that any state-law legal uncertainties are to be resolved in Dr. Brawley’s favor.
See Pacheco, 139 F.3d at 1380 (“[T]he district court must evaluate factual allegations
in the light most favorable to the plaintiff and resolve any uncertainties about the
applicable law in the plaintiff’s favor.”). Therefore, the Court rejects this portion of
Northwestern’s opposition of the Remand Motion.
However, Northwestern alternatively maintains that Dr. Brawley’s tort claims
33
against Messrs. Kerr and Wright are non-cognizable because he had a duty to read his
2002 Policies under Foremost (and its progeny) and has admitted in his complaint
that he never did. (Doc. 17 at 32); (see Doc. 1-1 at 12 ¶ 15 (“[Dr. Brawley] did not
compare the exact language of the two new policies with that of the three previous
policies.”)).
Concerning Dr. Brawley’s negligence claims more specifically, Northwestern
states that his contributory negligence bars them all as a matter of law:
This same principle negates [Dr. Brawley]’s negligence claims.
[Dr. Brawley]’s failure to read the policies he received renders him
contributorily negligent, barring his negligence claims against the
resident defendants. See, e.g., Liberty Corp. Capital Ltd. v. Club
Exclusive, Inc., No. 1:16-CV-791-VEH, 2016 WL 6157772, at *2–3
(N.D. Ala. Oct. 24, 2016) (Hopkins, J.) (holding “as a matter of law that
[Plaintiff] had a duty to read the policy and therefore cannot recover on
its negligent procurement of insurance claims”). This Court agrees and
has dismissed negligent procurement claims on this same basis. See
Brown v. State Farm Fire & Casualty Co., No. 1:16-cv-1390-VEH,
2017 WL 492992 (N.D. Ala. Feb. 2, 2017) (Hopkins, J.) (holding that
“judgment as a matter of law in favor of an agent is required ‘when
documents available to the insured clearly indicate that the insurance in
fact procured for the insured is not what the insured subsequently claims
he or she requested the agent to procure”) (quoting Alfa, 159 So. 3d at
1253). [Dr. Brawley] admits that he received his policies. (Doc. 1-1, ¶
15, Ex. A). Had he read them, he could have easily discovered the scope
of his own occupation coverage and, as he admits, compared the
language of his 2002 policies to that of his prior policies.
In his motion to remand, [Dr. Brawley] does very little to address
these deficiencies. (Doc. 11 at 22). In fact, instead of attempting to
distinguish Colza, Smith, Club Exclusive, and Brown, [Dr. Brawley]
34
again falls back on his argument that an “ambiguity prevented Brawley
from discovering the full scope of coverage.” (Doc. 11 at 22). Yet [Dr.
Brawley] does not cite a single case in which a court has reached the
holding he urges this Court to make (i.e. that the Policies did not
“clearly indicate” the scope of coverage). Moreover, the case he cites to
argue that the Policies are ambiguous does not even employ the same
language. Here, [Dr. Brawley] admits receiving the Policies, which
specifically set forth the definition for “Total Disability.” If [Dr.
Brawley] did not understand what the term “principal duties” meant,
then he should have exercised the free look provision set forth on the
first page of the Policy and received a full refund from Northwestern.
[Dr. Brawley] failed to do so. Given that [Dr. Brawley] received the
Policies, had a duty to read them, and elected to keep them for decades,
[Dr. Brawley]’s negligence claims against [Messrs.] Wright and Kerr are
barred as a matter of law by his contributory negligence.
(Doc. 17 at 33-34).
The Court is persuaded by Northwestern’s alternative position (that includes
several decisions by the undersigned) and finds that Dr. Brawley has no possible
negligent procurement claim under the 2002 Policies in light of his own negligent
failure to read them. See Brown, 2017 WL 492992, at *7, *11 (finding that insured’s
contributory negligence in not reading policy prevents recovery on negligent
procurement claim as a matter of law and ultimately finding the presence of
fraudulent joinder as to all claims asserted against the insurance agent). The same is
true of Dr. Brawley’s failure-to-notify claim to the extent that he has asserted it as an
independent act of negligence–Dr. Brawley’s contributory negligence bars it as a
matter of law. Consequently, Northwestern has satisfied the fraudulent joinder
35
standard as to Dr. Brawley’s remaining negligence claims against Messrs. Kerr and
Wright under the 2002 Policies.
V.
Conclusion
Therefore, as explained above, Northwestern has clearly and convincingly
satisfied the fraudulent joinder standard. Consequently, disregarding the Alabama
citizenship of Messrs. Kerr and Wright is appropriate and exercising diversity
jurisdiction over this removed action is proper. Accordingly, Dr. Brawley’s Remand
Motion is DENIED.
Further, for the same reasons set out in this opinion, Dr. Brawley has no
possible claims against Messrs. Kerr and Wright. Accordingly, their Dismissal
Motion is GRANTED and Messrs. Kerr and Wright are HEREBY DISMISSED
WITHOUT PREJUDICE from this action.15 The Clerk of the Court is further
15
To the extent that Messrs. Kerr and Wright have requested a with-prejudice dismissal, that
portion of their Dismissal Motion is DENIED for two reasons. (Doc. 8 at 7). First, they have not
cited to a binding Eleventh Circuit decision that establishes their right to a with-prejudice dismissal
based upon fraudulent joinder. Cf. Miller Brewing, 663 F.2d at 550) (“We believe that jurisdictional
inquiry [of fraudulent joinder] must not subsume substantive determination.”) (emphasis added). But
cf. Florence v. Crescent Res., LLC, 484 F.3d 1293, 1296, 1299 (11th Cir. 2007) (acknowledging that
purportedly fraudulently-joined party moved for a dismissal with prejudice which district court
granted, but ultimately reversing jurisdictional determination as erroneous, vacating all judgments,
and remanding consolidated cases to district court for return to state court). Second, this Court
customarily treats a dismissal based upon fraudulent joinder as a non-merits-based one. (See, e.g.,
Brown, 2017 WL 492992, at *11 (granting fraudulently-joined party’s motion to dismiss filed
pursuant to Rule 12(b)(6), but dismissing that party without prejudice)); see also Fowler, 256 F.
Supp. 2d at 1249 (dismissing fraudulently-joined defendant without prejudice).
36
HEREBY DIRECTED to terminate Messrs. Kerr and Wright as party defendants.
DONE and ORDERED this the 21st day of December, 2017.
VIRGINIA EMERSON HOPKINS
United States District Judge
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