Absher et al v. American National Property and Casualty Company et al
MEMORANDUM OPINION AND ORDER REMANDING CASE that the plaintiffs motion to remand is GRANTED and it is ORDERED that this action is REMANDED to the Circuit Court of Cullman County, Alabama, from which it was removed; cost incurred herein are taxed as paid; as more fully set out in order. Signed by Judge C Lynwood Smith, Jr on 5/7/2012. (AHI)
2012 May-07 PM 02:27
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
VICTOR ABSHER, and
PROPERTY AND CASUALTY
COMPANY, and TRACY
Civil Action No. CV-11-S-4005-NE
MEMORANDUM OPINION AND ORDER
This case is before the court on plaintiffs’ motion to remand.1 Plaintiffs, Victor
Absher and Deborah Absher, commenced this action in the Circuit Court of Cullman
County, Alabama, to recover for alleged breach of contract, fraud, and actions
undertaken in bad faith related to plaintiffs’ insurance policy with defendant
American National Property and Casualty Company.2 Defendant American National
removed the case to this court, with defendant Tracy Putnam’s consent, on the
grounds that plaintiffs fraudulently joined defendant Putnam and, thus, this court has
Doc. no. 3 (Motion to Remand).
See doc. no. 1-1 (State Court File), at 5-8.
diversity of citizenship jurisdiction over this suit.3 See 28 U.S.C. § 1332(a)(1).
I. SUMMARY OF THE FACTS AS ALLEGED AND PROCEDURAL
Plaintiffs reside in Cullman County, Alabama.4 Defendant American National
is a citizen of Missouri where it was incorporated and where it maintains its principal
place of business.5 Defendant Tracy Putnam is a citizen of the State of Alabama.6
Plaintiffs purchased a farm owners insurance policy from defendant American
National on July 15, 2010, and the policy became effective on the date of purchase.7
The policy provided insurance coverage for the plaintiffs’ residence and poultry farm
for a term of one year.8
Severe weather including tornados and strong winds ravaged the State of
Alabama on April 27, 2011, and plaintiffs suffered damage to their residence and
poultry farm.9 Plaintiffs made claims under the policy for the damages suffered.10
Plaintiffs commenced this action in the Circuit Court of Cullman County,
See doc. no. 1 (Notice of Removal), at 3-8.
See State Court File, at 5; Notice of Removal, at 3.
See Notice of Removal, at 3.
See State Court File, at 5; Notice of Removal, at 4.
See State Court File, at 5; doc. no. 2 (Answer), at 2.
See State Court File, at 5; Answer, at 2.
See State Court File, at 6; Answer, at 2.
Alabama on October 21, 2011.11 Plaintiffs assert three claims against American
National for breach of contract, bad faith, and fraud, and one claim against Putnam
Specifically, plaintiffs allege that American National breached their contract
with the plaintiffs by refusing to pay claims according to the terms of the insurance
policy.13 Plaintiffs also allege that American National “acted in bad faith in refusing
to pay said claim.”14
Plaintiffs’ claim for fraud, asserted against both American National and Tracy
Putnam, reads in pertinent part as follows:
11. Defendant [American National], by and through their agent
Tracy Putnam, represented to the plaintiffs that they had insurance
coverage for their poultry houses and that claims would be paid
according to the terms of their policy of insurance.
12. Said representations were false and defendants knew they
were false or, were false and defendants, without knowledge of the true
facts, recklessly misrepresented the facts; or were false and made by
defendant by mistake, but with the intention that plaintiff should rely on
13. Plaintiffs believed said representations and relied on them
and acted upon them to their detriment.
See State Court File, at 5; Notice of Removal, at 2.
See State Court File, at 5-8.
See id. at 6.
Id. at 7.
14. Plaintiffs have suffered severe mental anguish as a
proximate result of said fraud.
15. Plaintiffs claim punitive damages of [sic] the defendants
because of the intentional and/or reckless nature of the fraud.
WHEREFORE, the plaintiffs demand judgment against the
defendants, jointly and severally, for compensatory and punitive
damages in an amount to be determined by a jury, plus interests and
Plaintiffs elaborate on their fraud claim in their motion to remand and briefs
supporting that motion, stating:
In an August 12, 2011 letter, [American National] stated that they
were denying the Plaintiffs’ claim because their engineer opined that the
damage to the Plaintiffs’ property was not caused by the April 27, 2011
storm, rather, any damage to their chicken houses was due to “the age
of the structures, types of construction, as well as the installation
methods used in the construction.” . . . If [American National] can
prove that the damage to the Plaintiffs’ chicken houses was due [to] “the
age of the structures, types of construction, as well as the installation
methods used in the construction,” which Plaintiffs dispute, then those
statements prove that Defendant Putnam, acting as agent for Defendant
[American National], misrepresented to the Plaintiffs the condition of
their chicken houses and that they had insurance coverage. Putnam also
should have disclosed to Plaintiffs the true nature of their chicken
houses and advised them that their chicken houses were uninsurable.16
In an affidavit of plaintiff Victor Absher submitted in support of plaintiffs’
motion to remand, Mr. Absher states that, prior to July 15, 2010, he called defendant
Id. at 6-7.
Doc. no. 3-1 (Memorandum in Support of Motion to Remand), at 4-5 (alteration supplied).
Tracy Putnam and asked him to provide a quote for insurance coverage for plaintiffs’
residence and poultry farm.17 Putnam allegedly came out to plaintiffs’ farm, inspected
the premises, and said that the chicken houses located on the property “were some of
the straightest plumbed conventional houses for their age.”18 Mr. Absher goes on to
Defendant Putnam later came back to our farm and presented a proposal
for insurance. Mr. Putnam represented to us that our property would be
covered for damage due to wind, hail, storms, fire, and other perils as
detailed in our policy of insurance. He also represented to us that any
claims we made for covered losses would be paid. I relied on these
representations in deciding to cancel the policy of insurance that I had
in place issued by another company and purchase the insurance policy
at issue in this case.19
Mr. Absher further states that, following the damage to plaintiffs’ property on
April 27, 2011, American National acknowledged that the chicken houses were
leaning, but refused to pay the costs of repairing the lean on the grounds that the lean
is a result of the age of the structures and the methods used to construct them. Mr.
Absher concludes his affidavit by stating:
Putnam did not disclose to me that I did not have coverage to my
chicken houses. On the contrary he approved the type of construction
and the methods and materials used in the construction with all of his
favorable comments. Instead of disclosing to me that I did not have
Doc. no. 3-2 (Affidavit of Victor Absher), at 1.
Id. at 1.
Id. at 2 (emphasis supplied).
coverage because of these facts, he told me I had coverage on these
The insurance policy contains an exclusion providing:
WE do not cover loss resulting directly or indirectly from one or more
of the following exclusions, regardless of any other causes or events
contributing concurrently or in any sequence to the loss:
Error, Omissions, and Defects, which result from one or more
of the following:
an act, error or omission (negligent or not) relating to:
the design, specification, construction, workmanship
or installation of property;
planning, zoning, development, surveying, siting,
grading, compaction; or
maintenance of property (including land, structures
a defect, a weakness, the inadequacy, a fault or
unsoundness in materials used in construction or repair
whether on or off the PREMISES.20
Plaintiffs allege that defendant American National refuses to pay for damages to the
chicken houses on the basis of the “Error, Omissions, and Defects” exclusion.
Doc. no. 3(A) (Insurance Policy), at 4-5 (boldface emphasis in original, italicized emphasis
Additionally, plaintiffs assert that “the evidence demonstrates that Defendant
Putnam fraudulently suppressed from the Plaintiffs that Defendant [American
National] would not provide coverage to the Plaintiffs’ chicken houses because of
‘the age of the structures, types of construction, as well as the installation methods
used in construction.”21 Plaintiffs further state that they “are prepared to amend their
complaint adding a claim for fraudulent suppression.”22
American National, with Putnam’s consent, removed the case to this court on
November 23, 2011.23 American National asserts that plaintiffs fraudulently joined
defendant Putnam as a resident defendant with no connection to the suit, and that,
disregarding Putnam as a fraudulently joined defendant, complete diversity exists
among the parties and, thus, this court has diversity of citizenship jurisdiction over
the suit.24 Plaintiffs assert that Putnam is not a fraudulently joined defendant and,
thus, diversity of citizenship does not exist.25
II. LEGAL STANDARDS
A removing defendant bears the burden of proving that federal jurisdiction
exists. See, e.g., Leonard v. Enterprise Rent A Car, 279 F.3d 967, 972 (11th Cir.
Memorandum in Support of Motion to Remand, at 1 n.1.
See doc. no. 1 (Notice of Removal), at 1.
See id. at 3-9.
See Memorandum in Support of Motion to Remand, at 3-7.
2002); Williams v. Best Buy Co., 269 F.3d 1316, 1319-20 (11th Cir. 2001).
Moreover, removal statutes must be construed narrowly, and “all uncertainties as to
removal jurisdiction are to be resolved in favor of remand.” Russell Corp. v. American
Home Assurance Co., 264 F.3d 1040, 1050 (11th Cir. 2001) (citing Burns v. Windsor
Insurance Co., 31 F.3d 1092, 1095 (11th Cir. 1994)).
Normally the presence of a non-diverse plaintiff and defendant — i.e., a
plaintiff and a defendant who are citizens of the same State — means that complete
diversity does not exist and there is no federal diversity of citizenship jurisdiction
under 28 U.S.C. § 1332. However, “[f]raudulent joinder is a judicially created
doctrine that provides an exception to the requirement of complete diversity.” Triggs
v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998) (alteration
supplied). Under the doctrine of “fraudulent joinder,” if a removing party can show
that a non-diverse party was fraudulently joined, the citizenship of the non-diverse
party is disregarded for the purpose of diversity of citizenship jurisdiction.26 See
The use of the word “fraudulent” in the term “fraudulent joinder” is “a bit of a misnomer”
because the party alleging fraudulent joinder is not required to prove that anyone acted fraudulently
when joining a party. Charles Alan Wright, Arthur R. Miller, et al., 13F Federal Practice &
Procedure § 3641.1 (3rd ed.) The confusion is explained by Federal Practice & Procedure as
Despite the wide use of the term “fraudulent joinder,” the party seeking the
federal forum — usually a removing defendant — does not have to show that the
joinder of a nondiverse party was motivated primarily by a desire to remain in state
court or to prove that the state court plaintiff’s conduct constituted fraud in some
legal sense. It is sufficient if the challenging party either can demonstrate actual
Tapscott v. MS Dealer Service Corp., 77 F.3d 1353, 1359 (11th Cir. 1996).
The Eleventh Circuit recognizes the following three forms of fraudulent
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, 154 F.3d at 1287.
Here, defendant American National alleges that defendant Putnam was joined
fraud or more likely, that the plaintiff cannot state a reasonable or colorable claim
for relief under the applicable substantive law against the party whose presence in
the action would destroy the district court’s subject matter jurisdiction.
Thus the term “fraudulent joinder” is a bit of a misnomer, but one that has
become a term of art. The Fifth Circuit has adopted the term “improper joinder” as
more accurately characterizing the concept. But a number of federal courts seem to
agree that the subject typically referred to as “fraudulent joinder” is an aspect of the
generic concept of “procedural misjoinder,” namely the joinder of a nondiverse
plaintiff who destroys complete diversity, the handling of which follows the same
analytical framework as the case law on fraudulent joinder.
Id. (footnotes omitted).
through the first form of fraudulent joinder.27 To establish that form of fraudulent
joinder the removing party must show “that there is no possibility that the plaintiff
would be able to establish a cause of action against the resident defendant in state
court.” Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir. 1983). “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 the
joinder was proper and remand the case to the state court.” Id. at 1440-41.
In making that determination, “[t]he district court must evaluate all factual
issues and questions of controlling substantive law in favor of the plaintiff.” Id. at
1440 (alteration supplied). When considering a motion to remand and a claim of
fraudulent joinder, “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 v.
Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997). The court makes the determination
based on the pleadings at the time of removal and also may consider any affidavits
or deposition transcripts submitted by the parties. Id.
To prove fraud under Alabama law, “the plaintiff must show the following: (1)
See Notice of Removal, at 6 (“Plaintiffs’ joinder of Putnam to this case is fraudulent and
diversity jurisdiction exists in the present case because Plaintiffs have no possibility of proving a
cause of action against Putnam, the only non-diverse defendant, in this case.”).
that the defendant made a false representation to the plaintiff; (2) that the
representation concerned a material fact; (3) that the plaintiff relied on the
representation; and (4) that the plaintiff incurred damage as a proximate result of the
reliance.” Reeves Cedarhurst Development Corporation v. First American Federal
Savings & Loan Association, 607 So. 2d 180, 182 (Ala. 1992). To satisfy the reliance
requirement, the plaintiff must have reasonably relied on the representation. See
Foremost Insurance Co. v. Parham, 693 So. 2d 409, 421 (Ala. 1997).
Defendant American National presents two arguments as to why there is not
even a possibility that a state court would find that plaintiffs’ complaint states a cause
of action against Putnam. First, it argues that the representations defendant Tracy
Putnam made were true and, thus, plaintiffs cannot make out a claim against Putnam
for fraud. American National cites to a number of cases for the proposition that “[n]o
cause of action for fraud in the sale of an insurance policy exists when the insureds
are informed about the true nature of their insurance coverage.”28 However, as
discussed above, plaintiffs allege that defendant American National asserts that the
poor, aged condition of the chicken houses caused the damage to them and, thus,
those damages are excluded from the insurance coverage provided by the policy. If
Doc. no. 5 (Response in Opposition to the Motion to Remand), at 4 (citing Fowler v.
Provident Life and Accident Insurance Co., 256 F. Supp. 2d 1243, 1247 (N.D. Ala. 2003); Ex parte
ERA Marie McConnell Realty, Inc., 774 So. 2d 588, 591 (Ala. 2000); Ex parte Ikner, 682 So. 2d 8,
10 (Ala. 1996)).
American National adopts that position, then it implicitly acknowledges that
Putnam’s representation concerning the condition of the chicken houses was false.
Second, American National argues that plaintiff could not have reasonably
relied upon the representations made by defendant Putnam because the
representations were inconsistent with the terms of the policy. American National
asserts that, under Alabama law, an insured cannot reasonably rely on alleged
misrepresentations made by an insurance agent that are inconsistent with the policy
terms when the insured has received the policy.29 See AmerUS Life Insurance Co. v.
Smith, 5 So. 3d 1200, 1215-16 (Ala. 2008); Liberty National Life Insurance Co. v.
Ingram, 887 So. 2d 222, 229 (Ala. 2004); Cherokee Farms, Inc. v. Fireman’s Fund
Insurance Co., 526 So. 2d 871, 877 (Ala. 1988) (“‘[I]t is unreasonable to rely on oral
statements when one is in possession of written documents that would put one on
notice as to the validity of oral statements’”) (alteration supplied) (quoting Woodlawn
Fraternal Lodge No. 525, F. & A.M. v. Commercial Union Insurance Co., 510 So. 2d
162, 164 (Ala. 1987)).
The argument that plaintiffs could not have reasonably relied on Putnam’s
statements fails because Putnam’s statements were not inconsistent with the written
terms of the insurance policy. Putnam allegedly made a representation about the
See id. at 6-9.
condition of the chicken houses, and the insurance policy does not contain a
statement about the condition of the chicken houses.
Plaintiffs have set forth allegations as to each element of a claim for fraud
under Alabama law. Plaintiffs allege that Putnam made representations that their
chicken houses were in good condition and plumb, that their chicken houses were
insured, and that claims under the insurance policy would be paid according to the
policy. Plaintiffs allege that those representations were both false and material
because American National now refuses to cover the losses to the chicken houses due
to their condition.
Plaintiffs allege that they reasonably relied on those
representations in canceling a prior insurance policy on the chicken houses. Finally,
plaintiffs allege that they suffered damages because American National refuses to
compensate them for their losses, and that they would not have suffered those
damages but for Putnam’s misrepresentations.
Thus, there is a possibility that an Alabama state court would find that
plaintiffs’ complaint states a cause of action against Putnam. Therefore, Putnam was
not fraudulently joined, diversity of citizenship does not exist, and this case is due to
be remanded to the Circuit Court of Cullman County, Alabama.
IV. COSTS AND EXPENSES
Plaintiffs move this court, pursuant to 28 U.S.C. § 1447(c), to order the
removing defendant, American National, to pay plaintiffs’ costs and expenses,
including attorney’s fees, incurred because of the removal of this action.30
28 U.S.C. § 1447(c) provides that “[a]n order remanding the case may require
payment of just costs and any actual expenses, including attorney fees, incurred as a
result of the removal.” The issue of whether to award costs and expenses incurred as
a result of removal is a matter within the discretion of the district court. See IMCO
USA, Inc. v. Title Insurance Co. of Minnesota, 729 F. Supp. 1322, 1323 (M.D. Fla.
Generally, courts only award costs and expenses when the removing defendant
acted unreasonably based on the information available at the time of removal. See
Johnston Industries, Inc. v. Milliken & Co., 45 F. Supp. 2d 1308, 1315 (M.D. Ala.
1999) (“The standard that has emerged is whether ‘the defendants in this action acted
reasonably on the basis of the information available at the time of removal.’”)
(quoting Howard Griggs Trucking, Inc. v. American Central Insurance Co., 894 F.
Supp. 1503, 1510 (M.D. Ala. 1995)); Publix Supermarkets, Inc. v. United Food &
Commercial Workers, 900 F. Supp. 419, 422 (M.D. Fla. 1995) (awarding the plaintiff
the costs and expenses incurred seeking remand because federal subject matter
See doc. no. 3 (Motion to Remand), at 1; doc. no. 3-1 (Memorandum in Support of Motion
to Remand), at 8.
jurisdiction was “patently lacking” at the time of removal).31
The court declines to award costs and attorneys fees because it is not clear that
defendant American National acted unreasonably at the time of removal. Plaintiffs’
complaint did not contain detailed factual allegations concerning its fraud claim
against Putnam. Rather, it only stated: “Defendant [American National], by and
through their agent Tracy Putnam, represented to the plaintiffs that they had insurance
coverage for their poultry houses and that claims would be paid according to the
terms of their policy of insurance.”32 Based on those limited facts, defendant
American National was not unreasonable in concluding that the fraud claim against
Putnam was merely a fraudulent joinder of Putnam as a non-diverse defendant. It was
not until the present motion to remand was filed and the briefs and affidavits were
submitted in support of that motion that the factual basis for plaintiffs’ fraud claim
In line with this standard, the case law has been summarized as follows:
For many courts the main consideration seemed to be the nature of the defect in the
attempted removal and where the removal seemed to fall on a spectrum running from
reasonable to frivolous. District courts were and remain inclined to order the
payment of costs and fees under Section 1447(c) when the non-removability of the
action should have been obvious and thus the filing of the notice [of removal] clearly
was improper, or when a second notice of removal was filed unnecessarily.
Conversely, district courts generally deny an award of costs and fees when the
removing defendants had plausible reason to believe that the removal was proper.
Charles Alan Wright, Arthur R. Miller, et al., 14C Federal Practice & Procedure § 3739 (4th ed.)
(bracketed alteration supplied, footnotes omitted).
Doc. no. 1-1 (State Court File), at 6.
against Putnam became clear.
For the foregoing reasons, plaintiffs’ motion to remand is GRANTED. It is
ORDERED that this action be, and the same hereby is, REMANDED to the Circuit
Court of Cullman County, Alabama, from which it was removed. The Clerk is
directed to send a certified copy of this order of remand to the clerk of the state court.
Costs incurred herein are taxed as paid. The Clerk is directed to close this file.
DONE and ORDERED this 7th day of May, 2012.
United States District Judge
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