Meteor Express Inc v. Travelers Property Casualty Company of America et al

Filing 17

MEMORANDUM OPINION. Signed by Judge Inge P Johnson on 8/24/12. (ASL)

FILED
2012 Aug-24 PM 01:02
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
METEOR EXPRESS, INC.,
Plaintiff,
vs.
TRAVELERS PROPERTY
CASUALTY COMPANY OF
AMERICA; and SCHOOLAR &
ASSOCIATES, INC.,
Defendants.

)
)
)
)
)
)
)
)
)
)

CASE NO. CV 12-J-2518-NE

MEMORANDUM OPINION
This matter is before the court on plaintiff Meteor Express, Inc.’s (“Meteor
Express”) motion for remand to the Circuit Court of Jackson County, Alabama (doc.
8); a motion to dismiss count two of plaintiff’s complaint by defendant Travelers
Property Casualty Company of America (“Travelers”) (doc. 3); plaintiff’s response
to Travelers’ motion to dismiss (doc. 13); Travelers’ response in opposition to
plaintiff’s motion for remand (doc. 14); defendant Schoolar & Associates, Inc.’s
(“Schoolar”) joinder in the notice of removal and motion to dismiss filed by
defendant Travelers (doc. 15); and Travelers’ reply to plaintiff’s response to the
motion to dismiss (doc. 16).
Defendant Travelers, subsequently joined by defendant Schoolar, previously
removed this action from the Circuit Court of Jackson County, Alabama, asserting

1

that this court has jurisdiction under 28 U.S.C. § 1446(b)(2)(B). See Notice of
Removal (doc. 1) (July 23, 2012). Defendants allege that defendant Schoolar was
fraudulently joined in the underlying action in order to defeat complete diversity of
the parties; see Notice of Removal (doc. 1) at 3–9. On August 3, 2012, plaintiff filed
a motion to remand, vigorously disputing defendant’s allegation; see Pl. Mot. for
Remand (doc. 8) at 9–35.
“Diversity jurisdiction under 28 U.S.C. § 1332 requires complete
diversity––every plaintiff must be diverse from every defendant.” Tapscott v. MS
Dealer Service Corp., 77 F.3d 1353, 1359 (11th Cir. 1996), rev’d on other grounds,
Cohen v. Office Depot, Inc. 204 F.3d 1069 (11th Cir. 2000). See also Carden v.
Arkoma Assoc., 494 U.S. 185, 187 (1990) (“Since its enactment, we have interpreted
the diversity statute to require ‘complete diversity’ of citizenship.”) (citing
Strawbridge v. Curtiss, 3 Cranch 267, 2 L. Ed. 435 (1806)). The only means by which
this case may remain in this court is if the lack of diversity which appears on the face
of the complaint is through fraudulent joinder of the non-diverse party, as alleged by
defendant.
Joinder has been deemed fraudulent in two situations. The
first is when there is no possibility that the plaintiff can
prove a cause of action against the resident (non-diverse)
defendant. Coker v. Amoco Oil Co., 709 F.2d 1433, 1440
(11th Cir. 1983), superceded by statute on other grounds as
stated in Georgetown Manor, Inc. v. Ethan Allen, Inc., 991
F.2d 1533 (11th Cir. 1993). The second is when there is
outright fraud in the plaintiff’s pleading of jurisdictional
2

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. In the instant
case, the parties do not suggest that there has been
“outright fraud in the plaintiff's pleading of jurisdictional
facts,” so we concern ourselves only with the first and third
types of fraudulent joinder. Turning to the first type, “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.”
Coker, 709 F.2d at 1440-41 (emphasis added). The plaintiff
need not have a winning case against the allegedly
fraudulent defendant; he need only have a possibility of
stating a valid cause of action in order for the joinder to be
legitimate.
Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998).
The defendants, as the parties removing the action to federal court, have the
burden to establish federal jurisdiction. See Pacheco de Perez v. AT&T Co., 139 F.3d
1368, 1373 (11th Cir. 1998); Diaz v. Sheppard, 85 F.3d 1502, 1505 (11th Cir. 1996).
All doubts (and uncertainties) about federal court jurisdiction must be resolved in
favor of a remand to state court. See Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095
(11th Cir. 1994); Diaz, 85 F.3d at 1505. “The burden of the removing defendant is a
‘heavy one.’ To determine whether the case should be remanded, the district court
must evaluate the factual allegations in the light most favorable to the plaintiff and
must resolve any uncertainties in favor of the plaintiff.” Crowe v. Coleman, 113 F.3d
3

1536, 1538 (11th Cir. 1997) (internal citations omitted).1 “Where a plaintiff states even
a colorable claim against the resident defendant, joinder is proper and the case should
be remanded to state court.” Pacheco, 139 F.3d at 1380.
In this case, the court finds that two causes of action are stated against
Schoolar, the non-diverse defendant: fraud (Count II) and negligence (Count V). See
Compl., Ex. A (doc. 1) at ¶¶ 30–45.2 At dispute is an insurance policy (the “Insurance
Policy”) issued by defendant Travelers to plaintiff. On or about April 13, 2012,
plaintiff had accepted a load of cargo for shipment that was subsequently stolen by
an unknown third party from a location in Columbus, Mississippi. See Compl., Ex.
A (doc. 1) at ¶¶ 10–11. Plaintiff claims that the stolen cargo constituted “Covered
Property” under the insurance policy issued by defendant Travelers through its agent,
defendant Schoolar, such that plaintiff’s insurance claim for the stolen goods is due
to be paid by Travelers. See id. at ¶¶ 8, 12–13. Travelers refused to pay plaintiff’s
claim, citing an applicable exclusion in the policy. See id. at ¶¶ 15–19. Plaintiff
alleges that the policy is ambiguous and should be construed in its favor. See id. at

1

This court is cognizant of the Eleventh Circuit’s admonition in Burns v. Windsor Ins.
Co., 31 F.3d 1092, 1095 (11th Cir. 1994), where the court stated “Federal courts are courts of
limited jurisdiction. While a defendant does have a right, by statute, to remove in certain
situations, plaintiff is still the master of his own claim (citations omitted). Defendant’s right to
remove and plaintiff’s right to choose his own forum are not on equal footing; . . . removal
statutes are construed narrowly; where plaintiff and defendant clash about jurisdiction,
uncertainties are resolved in favor of remand.”
2

Plaintiff alleges three other counts in the complaint––an action on the insurance policy
(Count I), bad faith (Count III), and declaratory judgment (Count IV)––which are applicable only
against defendant Travelers.
4

¶¶17–18. Plaintiff also claims that in the process of applying for and receiving the
Insurance Policy, defendant Schoolar made certain representations to plaintiff
regarding the policy, viz., that the Insurance Policy was the same as that offered under
a standard policy by one of Travelers’ competitors, with which plaintiff was familiar,
and which did not include the exclusion relied upon by Travelers in denying
plaintiff’s claim. See id. at ¶¶ 20–21. Defendants assert that plaintiff cannot maintain
claims of fraud and negligent procurement against Schoolar, arguing in essence that
plaintiff was in possession of the policy for seven months prior to the claimed loss;
plaintiff failed to read the policy; such failure defeats plaintiff’s claim of reasonable
reliance on Schoolar’s representations; and plaintiff’s claims against Schoolar thus
fails under Alabama law. See Def. Resp. (doc 14) at 3–6; see also AmerUs Life Ins.
Co. v. Smith, 5 So. 3d 1200, 1208 (Ala. 2008) (“[T]his Court has consistently held
that a plaintiff who is capable of reading documents, but who does not read them or
investigate facts that should provoke inquiry, has not reasonably relied upon a
defendant’s oral representations that contradict the written terms in the documents.”).
Plaintiff directs the court’s attention to the unreported case of S&S Trucking,
LLC v. Canal Ins. Co., 2010 WL 2560043 (S.D. Ala. 2010), arguing that case
presents nearly identical facts to the present matter and that this court should adopt
the reasoning of Judge Granade of the Southern District of Alabama, who remanded
that case to the Circuit Court of Conecuh County, Alabama. See Pl. Mot. to Remand

5

(doc. 8) at 16–19; see also S&S Trucking, 2010 WL 2560043 at *5. Defendants argue
that S&S Trucking is distinguishable because, while the federal district court did
remand the case, the plaintiff there had only a “two days”3 between receipt of the
policy in question and the loss claimed, and while it may be unreasonable to expect
the S&S Trucking plaintiff to have fully read a 147-page policy in two days, it is not
unreasonable to expect Meteor Express to have read its policy during the seven
months prior to its claimed loss. See Def. Resp. (doc. 14) at 5–6; see also S&S
Trucking at *2.
The court agrees with plaintiff, and with Judge Granade, who wrote the
following, as excerpted by plaintiff in its motion:
The defendants are correct that “[t]he right of reliance [or
an agent’s representations] comes with a concomitant duty
on the part of the plaintiffs to exercise some measure of
precaution to safeguard their interests”, thus insureds have
a duty to read their insurance policies. Foremost Ins. Co. v.
Parham, 693 So.2d 409, 433 (Ala. 1997). Furthermore, the
defendants are right that “an insurance agent cannot be
held liable due to plaintiff’s own negligent failure to ensure
they received the policy they expected.” BDB, L.L.C. v.
James River Ins. Co., Civ. 6:07–cv–01985–SLB, at *7
(N.D. Ala. Sept. 30, 2008) or (Doc. 17, p. 17). However,
contrary to the defendants’ assertions otherwise, a plaintiff
is not contributorily negligent as a matter of law merely
because it failed to review the insurance policy the moment
the plaintiff received it. Rather, as stated clearly in BDB,
L.L.C., a trier of fact must determine that a plaintiff was

3

The facts as presented in S&S Trucking establish only that the plaintiff in that case “did
not receive the [insurance] policy until a few days before the loss.” 2010 WL 2560043 at *2
(emphasis added).
6

negligent in its failure to read the insurance policy and only
then shall a plaintiff be deemed contributory negligent.
The Alabama Supreme Court maintains that a question of
contributory negligence is generally for the jury, and it is
only when the facts are such that all reasonable men must
draw the same conclusion does contributory negligence
become a question of law for the court. Jones Food Co. v.
Shipman, 981 So.2d 355, 369–370 (Ala. 2006) (citations
omitted). Therefore, this court does not need to reach a
definite pronouncement of whether the plaintiff’s failure to
review the policy in the present case constituted
negligence, because in reviewing a motion to remand in
light of a fraudulent joinder claim, the precise contours of
the plaintiff’s failure are not relevant. The Eleventh Circuit
has made it clear that this court may deny a motion to
remand only if the defendants have proved by clear and
convincing evidence that there is “ no possibility ” that the
plaintiff “can establish a cause of action against the []
resident defendant . . . .” Henderson [v. Washington Nat.
Ins. Co.], 454 F.3d [1278,] 1283 [(11th Cir. 2006)]
(emphasis in original) (citations omitted). In other words,
remand must be granted if “after drawing all reasonable
inferences from the record in the plaintiff’s favor and then
resolving all contested issues of fact in favor of the
plaintiff, there need only be ‘a reasonable basis for
predicting that the state law might impose liability on the
facts involved.[’]” Crowe [v. Coleman], 113 F.3d [1536,]
1541–1542 [(11th Cir. 1997)] (emphasis in original)
(citation omitted) (“In the remand context, the district
court’s authority to look into the ultimate merit of the
plaintiff's claims must be limited to checking for obviously
fraudulent or frivolous claims. Although we have said that
district courts may look beyond the face of the complaint,
we emphasize that the district court is to stop short of
adjudicating the merits of cases that do not appear readily
to be frivolous or fraudulent.”). As a result, if, after
examining the plaintiff’s complaint and accompanying
affidavits in this case, this court is able to say that there is
any possibility, no matter how small, that an Alabama state
7

court might find that the plaintiff was not negligent in its
failure to review the insurance policy prior to the theft,
then the Eleventh Circuit has mandated that this court shall
grant the plaintiff’s motion to remand.
S&S Trucking, 2010 WL 2560043 at *4; see also Pl. Mot. for Remand (doc. 8) at
17–18.
Because both contributory negligence and the alleged ambiguity of the
Insurance Policy are jury questions under Alabama law, it is plain to the court that
“there is arguably a reasonable basis for predicting that the state law might impose
liability on the facts involved.” Crowe, 113 F.3d at 1542. Accordingly, “[i]f that
possibility exists, a good faith assertion of such an expectancy in a state court is not
a sham, is not colorable and is not fraudulent in fact or in law.” Id.
Having found that the plaintiff has stated a plausible claim against the nondiverse defendant, this court finds that complete diversity between all parties is
lacking. See 28 U.S.C. §§ 1332 and 1441(b) (“Any other such action shall be
removable only if none of the parties in interest properly joined as served as
defendants is a citizen of the state in which such action is brought.”). Under
applicable precedent, “‘[i]f at any time before final judgment it appears that the
district court lacks subject matter jurisdiction, the case shall be remanded’ to the state
court from whence it came.” University of S. Ala. v. Amer. Tobacco Co., 168 F.3d

8

405, 410 (11th Cir. 1999) (quoting 28 U.S.C. § 1447(c)).4
The court having considered the foregoing and finding that this case has been
improvidently removed, the court shall remand this case to the Circuit Court of
Jackson County, Alabama, by separate Order. No attorneys fees shall be assessed
against either party.
DONE and ORDERED this 24th day of August 2012.

INGE PRYTZ JOHNSON
U.S. DISTRICT JUDGE

4

The opinion then continued, “Moreover, a federal court must remand for lack of subject
matter jurisdiction notwithstanding the presence of other motions pending before the court.”
See, e. g., Marathon Oil Co. v. Ruhrgas, 145 F.3d 211, 220 (holding that district court should
have considered motion to remand for lack of subject matter jurisdiction before it addressed
motion to dismiss for want of personal jurisdiction). Accordingly, defendants’ motion to dismiss
Count II of plaintiff’s complaint (doc. 3) is MOOT.
9