Early et al v. Allstate Indemnity Company et al
MEMORANDUM OPINION. Signed by Magistrate Judge John E Ott on 5/28/2014. (PSM)
2014 May-28 AM 10:58
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
KIMBERLEY EARLEY and
ALLSTATE INDEMNITY COMPANY et al.,
) Case No. 6:13-cv-02203-JEO
This matter is before the court on three pending motions. The first is a motion filed by
defendant Allstate Vehicle and Property Insurance Company1 (“Allstate”) to dismiss defendants
James Anthony and Anthony Agency, Inc.2 (collectively, the “Anthony Defendants”). (Doc. 3).
The second is a motion filed by the Plaintiffs to remand this action to the Circuit Court of Walker
County, Alabama, from where it was removed by Allstate based upon a claim of fraudulent
joinder. (Doc. 6). The third is a motion filed by the Plaintiffs to strike portions of the Affidavit of
James Anthony (“Anthony Affidavit,” doc. 1-4), which was submitted along with Allstate’s
notice of removal. (Doc. 7).
Upon consideration, the court finds that the fraudulent joinder doctrine is not applicable
here and that the Plaintiffs’ motion to remand is due to be GRANTED. Accordingly, the court
Allstate Vehicle and Property Insurance Company was incorrectly identified in the complaint as Allstate
Indemnity Company, Allstate Insurance Company, Allstate Fire and Casualty Co., and Allstate Property and
Casualty. (See Motion to Dismiss, Doc. 3 at 1) (References to “Doc(s).__” are to the documents as numbered by the
clerk of the court in the court’s record of the case.)
Anthony Agency, Inc. was incorrectly identified in the complaint as “James Anthony d/b/a and in his
capacity as owner, employee, agent, servant or otherwise for” various Allstate companies. (See Motion to Dismiss,
Doc. 3 at 1).
lacks jurisdiction to consider Allstate’s motion to dismiss, and the Plaintiffs’ motion to strike
portions of the Anthony Affidavit is moot.
On November 1, 2013, the Plaintiffs initiated this action by filing a complaint in the
Circuit Court of Walker County, Alabama, against Allstate, the Anthony Defendants, and various
fictitious parties. (Doc. 1-1). In their complaint, the Plaintiffs allege that the Anthony Defendants
sold them an Allstate homeowner’s insurance policy and that they believed their home and its
contents would be insured and replaced in the event of a loss. (Doc. 1-1 at ¶¶ 19-20). They further
allege that the policy was in full force and effect when their home and its contents were destroyed
by fire, but that the Defendants have failed or refused to pay their claim for fire loss. (Id. at 19, 2930). The Plaintiffs assert claims for fraud, suppression, breach of contract, “normal” bad faith,
“abnormal” bad faith, unjust enrichment, and civil conspiracy.
On December 6, 2013, Allstate filed a notice of removal in this court pursuant to 28
U.S.C. § 1441 et seq. (Doc. 1 at ¶ 6). The notice of removal is supported by the Anthony Affidavit
(doc. 1-4), which is attached as an exhibit to the notice. In the notice of removal, Allstate invokes
this court’s diversity jurisdiction under 28 U.S.C. § 1332, which, in relevant part, authorizes the
federal district courts to hear “civil actions where the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs, and is between ... citizens of different states.”
28 U.S.C. § 1332(a)(1). Allstate asserts that there is complete diversity of citizenship because both
Plaintiffs are residents of Alabama while Allstate is a corporation organized and existing under
the laws of Illinois with its principal place of business in Illinois. (Doc. 1 at ¶¶ 2-3). Allstate
acknowledges that the Anthony Defendants are Alabama citizens, but argues that they were
fraudulently joined in this action and that their citizenship should be ignored for purposes of
removal. (Id. at ¶¶ 4-5). Contemporaneously with the removal, Allstate filed a motion to dismiss
all claims against the Anthony Defendants. (Doc. 3).
On January 6, 2014, the Plaintiffs filed a motion to remand the action to the Circuit Court
of Walker County (doc. 6), a motion to strike the Anthony Affidavit (doc. 7), and a response to
the motion to dismiss. (Doc. 8). In their motion to remand, the Plaintiffs argue that the Anthony
Defendants are not fraudulently joined because there is, at the very least, “a possibility” that an
Alabama state court would find that the complaint states a cause of action against them for fraud
and/or suppression. (Doc. 6 at 5-8 ). Accordingly, the Plaintiffs argue, the Anthony Defendants are
proper defendants whose presence destroys complete diversity and requires a remand for lack of
subject-matter jurisdiction. (Id. at 11).
Allstate has filed a response in opposition to the motion to remand (doc. 9) and a response
to the motion to strike the Anthony Affidavit. (Doc. 10). The Plaintiffs have filed a reply in
support of their motion to remand. (Doc. 12). All pending motions are now ripe for disposition.3
MOTION TO REMAND
When a defendant removes a case to federal court based on diversity of citizenship, “a
court must remand the matter back to state court if any of the properly joined parties in interest are
citizens of the state in which the suit was filed.” Henderson v. Washington Nat. Ins. Co., 454 F.3d
1278, 1281 (11th Cir. 2006). “Such a remand is the necessary corollary of a federal district court’s
diversity jurisdiction, which requires complete diversity of citizenship.” Id.
The parties have consented to jurisdiction by a magistrate judge pursuant to 28 U.S.C. § 636(c). (See Doc.
When a plaintiff names a non-diverse defendant solely to defeat federal diversity
jurisdiction, “the district court must ignore the presence of the non-diverse defendant and deny
any motion to remand the matter back to state court.” Id. In such a case, “[t]he plaintiff is said to
have effectuated a ‘fraudulent joinder,’ see Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir.
1997), and a federal court may properly assert its removal diversity jurisdiction over the case.”
Henderson, 454 F.3d at 1281. To establish 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.’” Stillwell v. Allstate Ins. Co., 663 F.3d 1329, 1332 (11th
Cir. 2011) (quoting Crowe, 113 F.3d at 1538). The removing party must support its claim of
fraudulent joinder by “clear and convincing evidence.” Henderson, 454 F.3d at 1281 (citing
Parks v. New York Times Co., 308 F.2d 474, 478 (5th Cir. 1962).
“The burden of establishing fraudulent joinder is a heavy one.” Pacheco de Perez v.
AT&T Co., 139 F.3d 1368, 1380 (11th Cir. 1998). As the Eleventh Circuit has emphasized:
“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.” ... In other words,
“[t]he 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.”
Stillwell, 663 F.3d at 1333 (internal citations omitted). As long as a plaintiff’s claim against a nondiverse defendant is “colorable,” fraudulent joinder does not apply and the action is due to be
remanded. Pacheco de Perez, 139 F.3d at 1380.
Here, Allstate argues in its notice of removal that the Anthony Defendants were
fraudulently joined because none of the Plaintiffs’ claims against them are colorable under
Alabama law. (See Doc. 1 at ¶ 18). In the Plaintiffs’ motion to remand, they offer no rebuttal to
Allstate’s argument that their claims against the Anthony Defendants for breach of contract, bad
faith, unjust enrichment, and civil conspiracy are not colorable. Instead, the Plaintiffs focus solely
on their fraud and suppression claims. Accordingly, for purposes of the motion to remand, the
dispositive issue is whether any possibility exists that the Plaintiffs’ complaint states a cause of
action against the Anthony Defendants for fraud and/or suppression.
Allstate has offered three arguments as to why the Plaintiffs’ fraud claims against the
Anthony Defendants are not colorable. First, Allstate argues that the Plaintiffs have “fraudulently
asserted jurisdictional facts” to lend credence to their fraud claims and defeat federal diversity
jurisdiction. (Doc. 9 at 3). Second, Allstate argues that the Plaintiffs’ fraud claims were
insufficiently pled and cannot be utilized by the court in deciding jurisdiction. (Id. at 4-5). Third,
Allstate argues that the fraud claims were pled without any factual basis. (Id. at 5-10). The court
will address each argument in turn.
Plaintiffs’ Pleadings of Jurisdictional Facts
Allstate alleges that the Plaintiffs have fraudulently pled two “jurisdictional” facts: (1) that
there was no insurance policy in place providing coverage for fire loss, and (2) that their insurance
claim was denied based on the existence of a prior fire loss.4 (See Doc. 9 at 3). These alleged
facts, however, are not jurisdictional in nature. For purposes of determining federal diversity
jurisdiction, the only facts of jurisdictional relevance are the citizenship of the parties and the
The Plaintiffs deny that either of these alleged facts was fraudulently pled. (See Plaintiffs’ Reply in
Support of Their Motion to Remand, Doc. 12 at 7-13).
amount in controversy. See 28 U.S.C. § 1332(a). Here, there is no suggestion by Allstate that the
Plaintiffs have misrepresented the citizenship of the parties or the amount in controversy. To the
contrary, Allstate acknowledges in its notice of removal that the Plaintiffs and the Anthony
Defendants are all citizens of Alabama and that the Plaintiffs are claiming damages in excess of
$75,000 exclusive of interest and costs. (See Doc. 1 at ¶¶ 2, 4, 5, and 13). In other words, Allstate
has confirmed the jurisdictional facts as pled by the Plaintiffs. There has been no fraud in the
Plaintiffs’ pleadings of those facts. See, e.g., Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111
(3d Cir. 1990) (“[T]here is no suggestion by defendants that plaintiffs have falsely alleged their
Pennsylvania citizenship. ... In other words, this is not a situation where ‘there has been outright
fraud in the plaintiff’s pleadings of jurisdictional facts.’”) (quoting B., Inc. v. Miller Brewing Co.,
663 F.2d 545, 549 (5th Cir. 1981)); Green v. Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir.
1983) (noting that the plaintiff’s pleadings of jurisdictional facts were “obviously not fraudulent”
where the parties had admitted that the plaintiff and one of the defendants were residents of the
Sufficiency of the Plaintiffs’ Fraud Pleadings
Allstate contends that the Plaintiffs’ fraud claims were insufficiently pled and should not
be considered by the court in deciding whether federal jurisdiction exists. As the Eleventh Circuit
has noted, however, “the decision as to the sufficiency of the pleadings is for the state courts, and
for a federal court to impose its judgment would fall short of the scrupulous respect for the
institutional equilibrium between the federal and state judiciaries that our federal system
demands.” Henderson, 454 F.3d at 1284. In ruling on a motion to remand a case that was removed
based on a claim of fraudulent joinder, the federal court’s task “is not to gauge the sufficiency of
the pleadings,” but rather to determine whether the removing defendant has shown by “clear and
convincing evidence” that there is “no possibility” that the plaintiff can establish a cause of action
against the non-diverse defendant(s). See id. at 1283-84.
Here, the Plaintiffs’ complaint alleges that the Anthony Defendants made “certain
representations” when they sold the Plaintiffs an Allstate homeowner’s insurance policy and that
the Plaintiffs “believed that their home and its contents would be insured and replaced should they
suffer a loss of same.” (Doc. 1-1 at ¶ 20). The complaint further alleges that Plaintiff Kimberly
Earley disclosed to the Anthony Defendants that her former home had been damaged by fire and
that she had made a fire loss claim under her previous policy of insurance. (Id. at ¶¶ 21, 24). The
complaint alleges that after the Plaintiffs purchased their Allstate homeowner’s policy, they
suffered a fire loss to their current home and its contents, but that the Defendants have failed or
refused to pay their claim pursuant to the policy. (Id. ¶¶ at 29-30). Based on these factual
allegations, the Plaintiffs allege that the Anthony Defendants are liable for fraud for
“misrepresent[ing] material facts” to them and “inducing them to purchase said policy of
insurance,” which “would not be, and was not, covered or paid as represented.” (Id. at ¶¶ 37-39).
The Plaintiffs allege that the Anthony Defendants are also liable for fraudulent suppression for
failing to disclose “the true and actual nature, scope, availability and extent of coverage–or lack
thereof–provided for and covered by said policy of insurance. ...” (Id. at ¶¶ 43-44).
In support of their motion to remand, the Plaintiffs have submitted the Affidavit of
Kimberly Earley (“Earley Affidavit,” Doc. 6-1), which further expands on the Plaintiffs’ fraud
claims.5 In her affidavit, Earley states as follows:
At no time prior to purchasing the [Allstate] Policy, did any representative of
the Agency, including James Anthony, ever inform me that my insurance coverage
under the Policy, or even my ability to qualify for insurance coverage under the
Policy, would be negatively affected or impacted as a result of my having previously
made a fire loss claim under a former policy of insurance. To the contrary, I was
assured that the Policy would be issued, and would provide insurance coverage,
despite the fact that I had previously made a fire loss claim under a former policy of
(Doc 6-1 at ¶ 4). She further states:
I would not have purchased the Policy if I had been told by James Anthony,
or any other person on behalf of the Anthony Agency, Inc., that my having made a
previous fire loss claim under a former policy might negatively affect or impact my
insurance coverage under the Policy, or my ability to qualify for insurance coverage
under the Policy. I only purchased the Policy because I was told–and I
(Doc. 6-1 at ¶ 7).
Based on the allegations in the Plaintiffs’ complaint and the statements in the Earley
Affidavit, the court concludes that there is, at a minimum, a “possibility” that the Plaintiffs can
state a valid cause of action against the Anthony Defendants for fraud/suppression. The court is
unwillingly to find that the Plaintiffs’ fraud claims are insufficiently pled under Alabama law and
will defer to the state court to resolve any uncertainties in that regard. See Manning v. Nationwide
Mut. Fire Ins. Co., 2013 WL 1346984, *5 (N.D. Ala. 2013) (“[T]his court will not decide the
issue of fraudulent joinder on Defendants’ assertion that Plaintiffs’ fraud claims against Defendant
Traywick are insufficiently pleaded. ... this court is not prepared to find that Plaintiffs’ Complaint
fails to meet the Rule 9(b) pleading standard and will defer to the state court to resolve any
In ruling on a motion to remand, “the court may consider affidavits and deposition transcripts submitted by
the parties.” Crowe, 113 F.3d at 1538 (citing B,Inc., 663 F.2d at 549).
uncertainties as to that issue.”) (footnote omitted).
Factual Basis for Plaintiffs’ Fraud Claims
At the heart of Allstate’s claim that the Anthony Defendants have been fraudulently joined
is Allstate’s assertion that the Plaintiffs’ fraud claims were pled without any factual basis. Allstate
asserts that there is no basis for the Plaintiffs to claim that Allstate did not issue them a
homeowner’s policy providing coverage for fire loss and no basis for the Plaintiffs to claim that
Allstate denied their fire loss claim. Allstate contends that the Plaintiffs’ policy did, in fact,
provide coverage for fire loss (subject to the terms and conditions of the policy) and that the
Plaintiffs’ fire loss claim was still under investigation, and had not been denied, at the time the
Plaintiffs filed suit. (See Doc. 9 at 5-9). Allstate argues that the Plaintiffs have “literally
manufactured” a denial of their claim and have used that “baseless assertion” as a basis for
claiming that the Anthony Defendants committed fraud when they promised the Plaintiffs that the
policy would provide coverage for fire loss. (Id. at 9-10).
Before addressing Allstate’s argument, the court would emphasize, again, that a federal
court’s task in assessing a claim of fraudulent joinder is simply to determine whether the plaintiff
has a “possibility” of stating a cause of action against the non-diverse defendant. See Stillwell, 663
F.3d at 1333. In doing so, “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. The court
“must evaluate the factual allegations in the light most favorable to the plaintiff and must resolve
any uncertainties about state substantive law in favor of the plaintiff.” Id.
Viewing the factual allegations in the light most favorable to the Plaintiffs, and without
weighing the merits of their fraud claims, the court again finds that the Plaintiffs have a
“possibility” of stating a fraud/suppression claim against the Anthony Defendants. Under
Alabama law an insurance company’s denial of a claim may be either “express” or “constructive.”
State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 317 n. 6 (Ala. 1999). A plaintiff can
establish a constructive denial of a claim “(1) by showing that the passage of time is so great that
the delay alone creates a denial; or (2) by showing sufficient delay in payment coupled with some
wrongful intent by the insurance company.” Id. (citation omitted). Here, based upon the
allegations in the Plaintiffs’ complaint and the Earley Affidavit, there is at least a possibility that
the Plaintiffs will be able to establish that Allstate constructively denied their fire loss claim, that
the denial was based (at least in part) on Earley’s having made a previous fire loss claim under a
former policy, and that the Anthony Defendants committed fraud when they induced the Plaintiffs
to purchase the Allstate policy by promising that the policy would cover and pay for fire loss
notwithstanding Earley’s having made the previous fire loss claim. That is not to say that the
Plaintiffs will ultimately be able to prevail on their fraud/suppression claims (the court expresses
no opinion on the merits of the claims), but only that the claims are “arguable,” which is all that is
necessary to defeat a claim of fraudulent joinder.
Accordingly, the court holds that Allstate has failed to establish that the Anthony
Defendants were fraudulently joined in this action. See Henderson, 454 F.3d at 1284; Manning,
20013 WL 1346984, *5-6. The Plaintiffs’ motion to remand is due to be granted.
MOTION TO DISMISS AND MOTION TO STRIKE
Because this action is due to be remanded to state court, there is no basis for subject-
matter jurisdiction so as to allow the court to consider Allstate’s motion to dismiss the Anthony
Defendants. See Henderson, 454 F.3d at 1284; Batoff v. State Farm Ins. Co., 977 F.2d 848, 854
(3d Cir. 1992). Furthermore, the court’s decision to remand the action renders Allstate’s motion to
strike the Anthony Affidavit moot. Accordingly, the court will not address either motion.
Based on the foregoing, the court holds that the fraudulent joinder doctrine is not
applicable to the Plaintiff’s claims against the Anthony Defendants and that, as a result, the
Plaintiffs’ motion to remand this action to the Circuit Court of Walker County, Alabama (doc. 6),
is due to be granted. The court further concludes that it lacks subject-matter jurisdiction to
consider Allstate’s motion to dismiss (doc. 3) and that Allstate’s motion to strike the Anthony
Affidavit (doc. 7) is moot. A separate order will be entered contemporaneously herewith.
DONE, this the 28th day of May, 2014.
JOHN E. OTT
Chief United States Magistrate Judge
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