Hopkins et al v. Nationwide Mutual Insurance Company et al
Filing
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MEMORANDUM OPINION - The court finds that Nationwide and Hartford have not shown that the Hopkinses acted in bad faith to prevent the removal of this action before the one-year time limit expired. Therefore, the court will REMAND this case to the Cir cuit Court of Marshall County, Alabama. Also, the court does not find that Nationwide and Hartford lacked an objectively reasonable basis for removing the case, so the court will DENY the Hopkinses request for attorneys fees pursuant to 28 U.S.C. § 1447(c). The court will enter a separate Order consistent with this Memorandum Opinion. Signed by Chief Judge Karon O Bowdre on 7/16/2018. (KEK)
FILED
2018 Jul-16 AM 09:46
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
JOSH HOPKINS AND KRISTY
HOPKINS
Plaintiffs,
v.
NATIONWIDE AGRIBUSINESS
INSURANCE COMPANY, et al.
Defendants.
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Case No. 4:18-cv-00315-KOB
MEMORANDUM OPINION
Before the court is Plaintiffs Josh and Kristy Hopkins’ motion to remand this case to the
Circuit Court of Marshall County, Alabama. (Doc. 4). On January 26, 2017, the Hopkinses sued
Nationwide Agribusiness Insurance Company; Randy Jones & Associates, Inc.; Total Radio
Service, Inc.; and the Hartford Steam Boiler Inspection & Insurance Company for state law
claims arising out of an unpaid insurance claim on the Hopkinses’ poultry houses. (Doc. 1-1). On
February 28, 2018, Defendants Nationwide and Hartford removed the case to this court, arguing
the Hopkinses engaged in bad faith to prevent the removal before that time. (Doc. 1).
As explained below, the court finds that because this case was removed more than one
year after Plaintiffs filed it in state court, and the Defendants have not shown that the Hopkinses
wrongfully prevented the Defendants from removing the case to federal court, the motion to
remand is due to be GRANTED. But the court also finds the Defendants did not lack an
objectively reasonable basis for removing the action, so the Hopkinses’ request for costs
pursuant to 28 U.S.C. § 1447(c) will be DENIED.
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I.
BACKGROUND
Plaintiffs Josh and Kristy Hopkins are poultry farmers who live and work in Alabama.
(Doc. 4-2 at 2). In the spring of 2015, the Hopkinses purchased from Defendant Randy Jones &
Associates an insurance policy to protect their poultry houses. (Id. at 9). The Hopkinses allege
Jones & Associates served as a “front line underwriter” for Defendants Nationwide and Hartford.
The policy that the Hopkinses purchased was issued by Nationwide, Hartford, or both, and
covered the Hopkinses’ four poultry houses from April 24, 2015, to April 24, 2016.
In the summer of 2015, Defendant Total Radio Service performed electrical servicing
work on three of the Hopkinses’ poultry houses. (Id. at 2). The houses contain electrical
equipment that monitors the temperature of the houses and sounds an alarm when the
temperature rises to a level that is harmful to the chickens within them. (Id. at 3).
In early September 2015, the Hopkinses experienced electrical problems with the
controllers that regulate the houses’ temperature and pressure control. (Id. at 3). The temperature
within the houses rose to levels that the chickens could not endure, and because the sensors and
alarms did not properly detect the temperature or alert the Hopkinses of the dangerous condition,
approximately 20,000 chickens perished. The Hopkinses filed a claim on their policy with
Nationwide and Hartford, which was denied.
The Hopkinses then sued Nationwide, Hartford, Jones & Associates, and Total Radio on
June 30, 2016. (Doc. 4-1). Their amended complaint contains claims against the two insurers for
breach of contract, bad faith, fraud, and conspiracy to fraudulently suppress information
regarding their deductibles and benefits. Their claims against Jones & Associates allege that the
company conspired with the insurance companies and negligently performed its duties in the
underwriting inspection and in the procurement process. The Hopkinses also assert that
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Nationwide is vicariously liable for Jones & Associates’ negligence. Finally, the Hopkinses sued
Total Radio for negligently performing its work on the poultry houses’ alarm equipment.
II.
PROCEDURAL HISTORY
The Hopkinses filed their initial Complaint on June 30, 2016, and their Amended
Complaint on January 26, 2017, in the Circuit Court of Marshall County, Alabama. Both
contained counts against diverse Defendants Nationwide and Hartford, and non-diverse,
Alabama corporate Defendants Jones & Associates and Total Radio. All four Defendants filed a
joint motion to transfer the case from Marshall County, Alabama to Morgan County, Alabama on
January 11, 2017, which the state court ultimately denied. (Doc. 1-5 at 42).
During the state court litigation, the Hopkinses served Jones & Associates with three
requests for production and a request for admission concerning the residency of one of its
employees, but never noticed or deposed anyone from the company. (Doc. 1 at 13). However, the
request for production did include a request for the company’s entire file related to the
Hopkinses, and a request for the company’s underwriting guidelines. (Doc. 8 at 11).
The Hopkinses’ discovery requests to Total Radio in August 2016 were limited to two
requests for production. (Docs. 8 at 11; 1 at 12). Those requests sought all of Total Radio’s
records related to the Hopkinses’ farm and its insurance policy. The Hopkinses never noticed or
deposed Total Radio’s two experts.
On December 4, 2017, the Hopkinses voluntarily dismissed Total Radio. (Doc. 1-14 at
83). Approximately two months later, on February 14, 2018, the Hopkinses voluntarily dismissed
all their claims against Jones & Associates. (Doc. 1-14 at 121). After these dismissals, only the
Hopkinses’ claims against the diverse insurance companies remained, which gave rise to
Nationwide and Hartford’s removal of the case on February 28, 2018.
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III.
LEGAL STANDARD
The party seeking removal must present facts establishing its right to remove and has the
burden of proving that federal jurisdiction exists by a preponderance of the evidence. See, e.g.,
Friedman v. N.Y. Life Ins. Co., 410 F.3d 1350, 1353 (11th Cir. 2005). When the defendant fails
to do so, the case must be remanded. Williams v. Best Buy Co., 269 F.3d 1316, 1321 (11th Cir.
2001).
Generally, a defendant may remove a civil action filed in state court if a federal court
would have had original jurisdiction over the case. 28 U.S.C. § 1441(a). A district court has
original jurisdiction over cases in which the parties are of diverse citizenship and the amount in
controversy exceeds $75,000, exclusive of interest and costs. 28 U.S.C. § 1332(a).
Pursuant to 28 U.S.C. § 1446(b)(3), a defendant may remove an action that was not
initially removable if the action later becomes removable. That statute provides that a defendant
seeking to remove a case that was not initially removable must file a notice of removal within 30
days of when he first ascertains that the action is removable. Id. As the statute indicates, a
defendant may be put on notice of removal by a pleading, motion, order or “other paper.” Id. To
provide notice of removability, the “other paper” “must contain an unambiguous statement that
clearly establishes federal jurisdiction.” Lowery v. Ala. Power Co., 483 F.3d 1184, 1215 n. 63
(11th Cir. 2007) (citing Bosky v. Kroger Texas, LP, 288 F.3d 208, 211 (5th Cir. 2002)).
But, a defendant seeking to remove an action based on diversity jurisdiction pursuant to §
1446(b)(3) must satisfy a second time requirement: the defendant must file his notice of removal
no “more than 1 year after commencement of the action, unless the district court finds that the
plaintiff has acted in bad faith in order to prevent a defendant from removing the action.” 28
U.S.C. § 1446(c).
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Thus, for removal to be proper in the present case, the Defendants must have removed the
action within thirty days of receiving notice that the case was removable, and within one year of
the date the Hopkinses filed their suit. But, the will not enforce the one-year time limit if the
Defendants show that the Hopkinses acted in bad faith to prevent removal. 28 U.S.C. § 1446(c).
IV.
ANALYSIS
Nationwide and Hartford removed this case alleging that complete diversity of
citizenship exists pursuant to 28 U.S.C. § 1332. But, “[a] case may not be removed . . . on the
basis of jurisdiction conferred by Section 1332 more than 1 year after commencement of the
action, unless the district court finds that the plaintiff has acted in bad faith in order to prevent a
defendant from removing the action.” 28 U.S.C.A. § 1446(c). The Hopkinses filed their initial
complaint in state court on June 30, 2016, and the Defendants did not remove the action until
February 28, 2018—one year, seven months, and 30 days after the case was filed.
Faced with the burden of demonstrating that federal jurisdiction exists, see Friedman,
410 F.3d at 1353 (11th Cir. 2005), Nationwide and Hartford hang their hats on § 1446(c)’s “bad
faith” exception to the one-year time limit for removing actions on the basis of diversity. To
support their assertion that the Hopkinses engaged in bad faith to prevent the Defendants from
removing the case, Nationwide and Hartford assert that the Hopkinses failed to actively litigate
their claims against the local Defendants. They argue that this failure to litigate constitutes “bad
faith” and, therefore, removal is permitted.
Nationwide and Hartford claim the Hopkinses only engaged in “token discovery” against
the local Defendants Jones & Associates and Total Radio, and then dismissed them after the case
was set for trial by the Marshall County, Alabama Circuit Court. They rely on three factors to
show the Hopkinses did not actively litigate against the non-diverse defendants. First, the
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Hopkinses only proffered two discovery requests to Total Radio and three requests for
production and one request for admission to Jones & Associates. Second, they did not depose
any representative from either of the local corporations or their disclosed experts. Third, the
Hopkinses dismissed Total Radio “without compensation or any legitimate reason,” and Jones &
Associates “for no apparent reason.” (Doc. 1 at 13).
Unable to cite any Eleventh Circuit law on this issue, the Defendants rely on, and ask this
court to adopt, the reasoning found in Aguayo v. AMCO Ins. Co., 59 F. Supp. 3d 1225 (D.N.M.
2014). There, the district court adopted the “actively litigated” test for determining whether a
plaintiff has engaged in bad-faith to prevent removal. The district court reasoned that if a
plaintiff fails to “actively litigate” against the “removal spoiler” in state court, then that behavior
will be deemed “bad faith.” Id. at 1262. It explained that a plaintiff “actively litigates” by
“asserting valid claims, taking discovery, negotiating settlement, seeking default judgments if the
defendant does not answer the complaint, et cetera.” Id.
In the recent case of McAdam Properties, LLC v. Dunkin’ Donuts Franchising, LLC, 290
F. Supp. 1279, 1285, 1291 (N.D. Ala. 2018), Judge Hopkins surveyed the history of the bad faith
exception, and noted a lack of “solid footing” in cases decided since Congress added Section
1446(c) to the removal statute in 2011. However, she went on to state,
[b]ased on Congress’s use of the phrase “bad faith,” and the history of the
exception prior to its enactment as part of section 1446, and in particular the
application of the exception when “manipulation” had occurred, the court
concludes that statutory bad faith requires some sort of intentional misconduct by
the plaintiff, not just fraudulent joinder. All of the common law equitable tolling
cases cited [within this opinion] have that in common. See also, A.S. ex rel. Miller
v. SmithKline Beecham Corp., 769 F.3d 204, 211 (3d Cir. 2014) (noting that
“[c]ases involving equitable tolling of the one-year time limit often focus on
intentional misconduct by the plaintiff”); Barnett v. Sylacauga Autoplex, 973 F.
Supp. 1358, 1367 (N.D. Ala. 1997) (Propst., J.) (“[T]he plaintiff’s claims are in
bad faith if, by [his] actions, [he] attempted to disguise the existence of the
removability of the case until the one-year limitation had run.”).
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Id. at 1291 (emphasis in original).
Although not bound by Judge Hopkins’ decision, the court agrees with her reasoning that
the “bad faith” exception requires a showing that the plaintiff intentionally engaged in
misconduct to prevent removal before the one-year time limit expired. So, the court declines
Nationwide and Hartford’s offer to adopt Aguayo’s “actively litigated” test.
This court also finds other courts’ rationales for rejecting the Aguayo test persuasive. For
example, in Dutchmaid Logistics, Inc. v. Navistar, Inc., the court noted the Aguayo test’s
potential “to deter plaintiffs from dismissing defendants they realize are not necessary, as well as
force plaintiffs to request meaningless discovery,” all to avoid triggering the “bad faith”
exception. No. 2:16-CV-857, 2017 WL 1324610, at *3 (S.D. Ohio Apr. 11, 2017), report and
recommendation adopted, No. 2:16-CV-857, 2017 WL 3085863 (S.D. Ohio July 18, 2017)).
Because this court rejects the Aguayo test for bad faith, it is not persuaded that
Nationwide and Hartford have met their burden to establish that the Hopkinses acted in bad faith
to prevent their case from being removed to federal court. As the Hopkinses argue, their claims
against Jones & Associates and Total Radio were clearly intertwined with their claims against
their insurers, Nationwide and Hartford. And while the Hopkinses engaged in what Nationwide
and Hartford may consider “token” discovery against the two non-diverse defendants, they are
“entitled to choose how they wish to litigate” their claims. Dutchmaid Logistics, at *4. Further, at
least one court that did employ the Aguayo test still recognized that “even ‘bare minimum’
discovery attempts have been considered to not amount to bad faith.” Heacock v. Rolling FritoLay sales, LP, No. C16-0829-JCC, 2016 4009849, at *3 (W.D. Wash. July 27, 2016). Here,
Plaintiffs sought and received the files of both Jones & Associates and Total Radio, and also had
the benefit of their experts’ reports before dismissing them from the case.
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Nationwide and Hartford presented no evidence that the Hopkinses engaged in
intentional misconduct to prevent them from removing this case. Light discovery and voluntary
dismissal of claims approximately a year and one-half after filing suit are not enough. This court
will not presume that a plaintiff that has engaged in small amounts of discovery against a
defendant has done so out of an intentional, mischievous effort to thwart another defendant’s
ability to remove the case to federal court. Nor will it assume a plaintiff’s decision to voluntarily
dismiss a non-diverse defendant more than a year after filing suit to be prima facie evidence of
bad faith. Doing so would be contrary to the presumption against the exercise of federal
jurisdiction, see Russell Corp. v. American Home Assurance Co., 264 F.3d 1040, 1050 (11th Cir.
2001); contrary to the policy that “all uncertainties as to removal jurisdiction are to be resolved
in favor of remand,” see Scimone v. Carnival Corp., 720 F.3d 876, 882 (11th Cir. 2013); and
contrary to the very purpose of § 1447(c), which is to prevent disruptive removal of cases after
substantial progress in the state court has been made, see McAdam Properties, LLC, 290 F. Supp.
at 1290; Rauch v. Rauch, 446 F. Supp. 2d 432, 435–36 (D.S.C. 2006); Price v. Messer, 872 F.
Supp. 317, 320 (S.D.W.Va. 1995).
Therefore, the court finds that Nationwide and Hartford have not met their burden to
establish that the Hopkinses acted in bad faith to prevent the removal of their case to federal
court. The Hopkinses’ motion to remand is due to be GRANTED.
Plaintiffs’ Request for Costs and Fees Pursuant to 28 U.S.C. § 1447(c)
The Hopkinses request the court to require Nationwide and Hartford to pay the costs and
expenses they have incurred as a result of removal pursuant to 28 U.S.C. §1447(c). The Supreme
Court has established that “courts may award attorney's fees under § 1447(c) only where the
removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an
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objectively reasonable basis exists, fees should be denied.” Martin v. Franklin Capital Corp.,
546 U.S. 132, 141 (2005).
The Eleventh Circuit has further explained that, “the reasonableness standard was
ultimately the result of balancing the desire to deter removals sought for the purpose of
prolonging litigation and imposing costs on the opposing party, while not undermining
Congress’ basic decision to afford defendants a right to remove as a general matter, when the
statutory criteria are satisfied.” Bauknight v. Monroe Cty, 446 F.3d 1327, 1329 (11th Cir. 2006).
Nationwide and Hartford argue their removal of this case more than one year after its
commencement is justified because the Hopkinses wrongfully prevented the removal by
retaining the non-diverse defendants in bad faith. They attempted to support this argument by
relying on Aguayo v. AMCO Insurance Co., 59 F. Supp. 3d 1225 (D.N.M. 2014), which provides
that a plaintiff’s failure to “actively litigate” her case against a removal-spoiling defendant in
state court demonstrates bad faith. Nationwide and Hartford recognize that the Eleventh Circuit
has not adopted the Aguayo test for bad faith, but also recognize that neither the Circuit nor this
court has rejected the test or established any alternative in its place. And while Judge Hopkins
recently required a showing of intentional misconduct to establish bad faith in McAdam
Properties, LLC v. Dunkin’ Donuts Franchising, LLC, 290 F. Supp. 1279, 1285, 1291 (N.D. Ala.
2018), that decision does not bind this court.
Further, the Defendants provided examples of at least one other district court in this
Circuit that has adopted the Aguayo analysis. See Kamal-Hashmat v. Loews Miami Beach Hotel
Operating Co., Inc., No. 16-CV-24864, 2017 WL 433209, at *4 (S.D. Fla. Jan. 27, 2017) (“The
Eleventh Circuit has not yet defined ‘bad faith’ in this context. In the absence of guidance from
that court, this Court adopts the well-reasoned two-stage analysis.”).
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Although the court disagrees with the Defendants’ assertion that the Hopkinses’
discovery efforts against the removal-spoilers were merely “token” discovery, the court also
recognizes the lack of Eleventh Circuit case law on the subject. Therefore, the court does not find
that Nationwide and Hartford lacked an objectively reasonable basis for removing this case, and
will DENY the Hopkinses’ request for attorneys fees pursuant to § 1447(c).
V. CONCLUSION
The court finds that Nationwide and Hartford have not shown that the Hopkinses acted in
bad faith to prevent the removal of this action before the one-year time limit expired. Therefore,
the court will REMAND this case to the Circuit Court of Marshall County, Alabama. Also, the
court does not find that Nationwide and Hartford lacked an objectively reasonable basis for
removing the case, so the court will DENY the Hopkinses’ request for attorneys fees pursuant to
28 U.S.C. § 1447(c). The court will enter a separate Order consistent with this Memorandum
Opinion.
DONE this 16th day of July, 2018.
____________________________________
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE
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