Gulf Hauling & Construction, Inc. et al v. QBE Insurance Corporation et al

Filing 31

MEMORANDUM OPINION AND ORDER entered re 11 Motion to Remand. The motion to remand is therefore GRANTED, and the Clerk is DIRECTED to REMAND this matter to the Circuit Court of Hale County, Alabama and CLOSE this case. Signed by Magistrate Judge William E. Cassady on 5/20/2013. (eec)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
NORTHERN DIVISION
GULF HAULING & CONSTRUCTION,
INC., et al.,
Plaintiffs,

:
:

v.

:

CA 2:13-00083-C

QBE INSURANCE CORPORATION, et al., :
Defendants.

:
MEMORANDUM OPINION AND ORDER

Now before the Court in this matter proceeding before the undersigned United
States Magistrate Judge for all purposes pursuant to 28 U.S.C. § 636(c) (see Docs. 14, 15)
is a motion to remand (Doc. 11), filed by the plaintiffs on March 15, 2013, and joined by
Defendants Crowley Cattle Company, Inc., Carl G. (Billy) Frye, Jeffrey G. Frye, and
Tracy Frye on March 26, 2013 (see Doc. 16). The removing defendant, QBE Insurance
Corporation, has filed responses to both (Docs. 17, 20); the proponents of remand have
filed replies in support (Docs. 23, 26); and, on May 14, 2013, the Court conducted a
hearing regarding remand (see Doc. 30). After consideration of the pleadings and the
parties’ presentations at the hearing, and for the reasons explained in this order, the
motion to remand (Doc. 11) is GRANTED, and this matter is REMANDED to the
Circuit Court of Hale County, Alabama.
I.

Background

On January 10, 2013, Gulf Hauling & Construction, Inc. (“Gulf Hauling”), Lamar
Allen Harrison, and Gulf Farms, LLC (collectively, the “Gulf Parties”) filed a six-count
complaint in the Circuit Court of Hale County against QBE and two groups of other
defendants—the “Crowley Cattle Parties” (the abovementioned Crowley Cattle

Company, Browne, and three Fryes) and the “Foundation Farms Parties” (Defendants
Laird Cole, Henry Lee Cole, and Foundation Farms, LLC)—who had previously
brought separate lawsuits against the Gulf Parties. In regard to the two underlying
lawsuits, the Crowley Cattle Parties sued the Gulf Parties in Hale County Circuit Court,
the Foundation Farms Parties sued them in Dallas County Circuit Court, and the cases
were ultimately consolidated in Hale County. Although a pro tanto joint stipulation of
dismissal of certain claims in regard to the suit brought by the Crowley Cattle Parties
was filed on April 3, 2013 (see Doc. 27), the consolidated state-court action remains set
for trial in July 2013.1
The first five counts of the Gulf Parties’ complaint (the one removed to federal
court) solely concern their insurer, QBE.2 The Gulf Parties contend that: QBE issued
various Commercial General Liability and Commercial Umbrella policies to Gulf
Hauling; QBE was duly and timely notified of the two suits against the Gulf Parties and
the incidents allegedly underlying them; QBE is defending Gulf Hauling and Harrison
in those suits under a reservation of rights to certain policies; QBE has intervened in the
underlying lawsuits, seeking “to participate in discovery, for the purpose of denying its
duty to indemnify [the Gulf Parties] for some or all of the claims asserted against
[them]; and, “[a]s a result of QBE’s tortious conduct . . . , [the Gulf Parties] have suffered
damages and Lamar Harrison has suffered mental anguish and emotional distress.”
(Doc. 1-1, state-court compl., ¶¶ 15-20.) The complaint’s sixth count, asserted against all
defendants, seeks a declaratory judgment concerning insurance coverage.
1

And, importantly for determining this Court’s subject-matter jurisdiction, at the
time QBE removed this matter, all claims in the consolidated state-court actions were alive and
well.
2

Those counts are for: (I) bad faith; (II) breach
negligence/wantoness; (IV) misrepresentation; and (V) suppression.

2

of

contract;

(III)

Invoking jurisdiction pursuant to § 1332, and without obtaining the consent of its
co-defendants, see 28 U.S.C. § 1446(b)(2)(A), QBE removed this matter on February 21,
2013.

(See generally Doc. 1, notice of removal.)

The plaintiffs are individual and

corporate citizens of Alabama (see id., ¶¶ 14-16), and QBE, a Pennsylvania corporation,
asserts that the amount in controversy exceeds the jurisdictional minimum and, once
the non-consenting defendants, individual and corporate citizens of either Alabama or
Florida, are realigned as party plaintiffs, there is complete diversity and the unanimity
rule is mooted. (Id., ¶¶ 17-27.) The day after removing this matter, on February 22,
2013, QBE filed a motion to dismiss the first five counts of the complaint pursuant to
Rule 12(b)(6). (Doc. 3; see also Doc. 4, brief in support).
II.
A.

Analysis

As the removing defendant, QBE must prove that this Court has subjectmatter jurisdiction.

“Any civil case filed in state court may be removed by the defendant to federal
court if the case could have been brought originally in federal court.” Tapscott v. MS
Dealer Serv. Corp., 77 F.3d 1353, 1356 (11th Cir. 1996) (citing 28 U.S.C. § 1441(a)),
abrogated on other grounds by Cohen v. Office Depot, Inc., 204 F.3d 1069 (11th Cir. 2000).
And a federal court may exercise diversity jurisdiction over all civil actions where the
amount in controversy exceeds $75,000, exclusive of interest and costs, and the action is
between citizens of different states. 28 U.S.C. § 1332(a)(1). Nevertheless, “[b]ecause
removal jurisdiction raises significant federalism concerns, federal courts are directed to
construe removal statutes strictly . . . . Indeed, all doubts about jurisdiction should be
resolved in favor of remand to state court.” University of S. Ala. v. American Tobacco Co.,
168 F.3d 405, 411; cf. D.M.C. Enters. Inc. v. Best McAllister, LLC, Civil Action No. 1000153-CB-N, 2010 WL 3039477, at *2 (S.D. Ala. Aug. 4, 2010) (“Because it is conferred by
3

statute, the right of removal is strictly construed to limit federal jurisdiction.”) (citing
Diaz v. Sheppard, 85 F.3d 1502, 1505 (11th Cir. 1996)); White v. Wells Fargo Home Mortgage,
Civil Action No. 1:11–cv–408–MHT, 2011 WL 3666613, at *3 (M.D. Ala. Aug. 22, 2011) (a
federal court is “obligat[ed] to narrowly construe removal statutes”; this obligation
necessarily “requires that uncertainties be ‘resolved in favor of remand’”) (quoting
Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994)).
Therefore, QBE must establish the propriety of removal under section 1441 and,
for that reason, “bears the burden of establishing the existence of federal jurisdiction[,]”
Brown v. Kabco Builders, Inc., Civil Action 07-0099-WS-C, 2007 WL 841690, at *1 (S.D. Ala.
Mar. 15, 2007) (citing Leonard v. Enterprise Rent a Car, 279 F.3d 967, 972 (11th Cir. 2002)),
which requires that a defendant, one, establish complete diversity—that all plaintiffs are
diverse from all defendants, Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th
Cir. 1998) (citation omitted)—and, two, show that the amount in controversy more
likely than not exceeds the $75,000 jurisdictional requirement, see Fitzgerald v. Besam
Automated Entrance Sys., 282 F. Supp. 2d 1309, 1314 (S.D. Ala. 2003).3
No parties dispute—and, moreover, the Court, through its independent review,
is satisfied—that there is a sufficient amount in controversy. The parties’ true dispute is
whether the eight non-QBE defendants should be realigned as party plaintiffs, which is
necessary for diversity jurisdiction to exist.
B.

In the context of removal, federalism concerns notwithstanding, this
Court has a duty to “arrange the parties according to their sides in the
dispute as determined by the principal purpose of the suit and the

3

Further, “’[o]nly state-court actions that originally could have been filed in
federal court may be removed to federal court by the defendant.’” City of Vestavia Hills v.
General Fid. Ins. Co., 676 F.3d 1310, 1313 n.1 (11th Cir. 2012) (quoting Caterpillar, Inc. v. Williams,
482 U.S. 386, 392 (1987)). And “the removal statute forbids removal ‘if any of the parties in
interest properly joined and served as defendants is a citizen of the State in which such action is
brought.’” Id. (quoting 28 U.S.C. § 1441(b)(2)).

4

primary and controlling matter in dispute.”
“It is [the] duty [of all] federal courts, to look beyond the pleadings and arrange
the parties according to their sides in the dispute.” Northbrook Nat’l Ins. Co. v. Brewer,
493 U.S. 6, 16 n.5 (1989) (citations and internal quotation marks omitted). But, as the
Gulf Parties point out (see Doc. 11 at 5-6), the undersigned has observed that some
courts—at least some in the Fifth Circuit—“have seriously questioned whether the
procedural mechanism of ‘realignment’ can be used to support removal at all.” Karp v.
American Law Enforcement Network, LLC, No. CA 11–0449–CG–C, 2011 WL 6963254, at *7
(S.D. Ala. Nov. 18, 2011) (quoting Salge v. Buchanan, C.A. No. C-07-212, 2007 WL
1521738, at *4 n.5 (S.D. Tex. May 24, 2007)), report & recommendation adopted, 2012 WL
38161 (S.D. Ala. Jan. 6, 2012).4 Fortunately, the Eleventh Circuit recently gave its district
4

Karp and Salge involved removal attempts by third-parties—a counter-defendant,
in Karp, and a third-party defendant, in Salge—who seemed to recognize that realignment, if
allowed, would “cure [the] defect in [their] removal” and “avoid the statutory limit [even as
extended by some courts] on the parties able to remove.” Huntsman Corp. v. International Risk
Ins. Co., Civil Action No. H-08-1542, 2008 WL 4453170, at *7 (S.D. Tex. Sept. 26, 2008). But, as
Judge Jack points out in Salge, skepticism concerning the use of realignment to create
jurisdiction that would not otherwise exist may reach broader than third-party practice.
Indeed, “the major Supreme Court and Fifth Circuit cases addressing realignment involve the
question of whether suits originally filed in federal court (rather than removed) could proceed
under diversity jurisdiction.” 2007 WL 1521738, at *4 n.5 (citing City of Indianapolis v. Chase Nat’l
Bank of New York, 314 U.S. 63 (1941); Zurn Induss., Inc. v. Acton Constr. Co., Inc., 847 F.2d 234 (5th
Cir. 1988); Lowe v. Ingalls Shipbuilding, A Div. of Litton Sys., Inc., 723 F.2d 1173 (5th Cir. 1984))
(other citations omitted); but see Lott v. Scottsdale Ins. Co., 811 F. Supp. 2d 1220, 1223 (E.D. Va.
2011) (“Put simply, it is settled that where, as here, there is no diversity of citizenship based on
the initial alignment of the parties in an action commenced in state court, a defendant may
nonetheless remove the case to federal court and request realignment of the parties to produce
the requisite diversity. If the motion to realign is granted and the other requirements for
diversity jurisdiction are met, the case may proceed in federal court. If the motion to realign is
denied and hence the requisite diversity does not exist, the case must be remanded to state
court. The seldom stated, but sensible rationale for these decisions is that jurisdictional
consequences should not be determined until the parties are properly aligned according to their
interests, and this principle applies equally to cases that are originally filed in federal court as it
does to cases that are removed from state court.”) (collecting authority); contra cf. Huntsman
Corp., 2008 WL 4453170, at *7 (“[T]he trend in [at least the Fifth C]ircuit disapproves of using
realignment after removal to cure a defect in removal jurisdiction. . . . Using realignment both to
avoid the statutory limit on the parties able to remove and the jurisdictional limit on removal is
a far cry from resolving all doubts against removal.”) (citation omitted).

5

courts guidance as to how to balance these “two different interests” in the context of
removal jurisdiction. See City of Vestavia Hills v. General Fid. Ins. Co., 676 F.3d 1310, 1313
(11th Cir. 2012) (“Weighing the propriety of the district court’s decision to realign the
parties and deny Vestavia Hills’s motion to remand requires us to consider two
different interests.”):
On the one hand, because removal jurisdiction raises significant
federalism concerns, federal courts are directed to construe removal
statutes strictly. Indeed, all doubts about jurisdiction should be resolved
in favor of remand to state court. On the other hand, there exists also a
strong federal preference to align the parties in line with their interests in
the litigation. We begin with the proposition, voiced by the Supreme
Court that, for the purpose of removal, the federal law determines who is
plaintiff and who is defendant. It is a question of the construction of the
federal statute on removal, and not the state statute. The latter’s
procedural provisions cannot control the privilege of removal granted by
the federal statute. Accordingly, what [state law has] to say about
whether [a party] is a defendant or a plaintiff is immaterial, and, further,
state legislatures apparently cannot craft a statute in this manner to render
certain causes of action “unremovable.”
We next note that federal courts are required to realign the parties in an
action to reflect their interests in the litigation. The parties themselves
cannot confer diversity jurisdiction upon the federal courts by their own
designation of plaintiffs and defendants. This Court concludes that the
converse of this principle—that parties cannot avoid diversity by their
designation of the parties—is also true. Rather it is the duty of the lower
federal courts to look beyond the pleadings and arrange the parties
according to their sides in the dispute as determined by the principal
purpose of the suit and the primary and controlling matter in dispute.
Where the parties’ interests are the same, we have held that those parties
must be aligned together and have reversed a district court’s failure to do
so, even where the parties’ interests were in opposition outside of the
issues raised in the subject action.
Id. at 1313-14 (footnote and internal citations and quotation marks omitted and
punctuation modified); accord Cromwell v. Admiral Ins. Co., Civil Action No. 11–0155–
CG–N, 2011 WL 2670098, at *4 (S.D. Ala. June 21, 2011), report and recommendation
adopted, 2011 WL 2689356 (S.D. Ala. July 7, 2011).5
5

In Cromwell, facing a motion to remand and a motion to realign the parties, this

6

The facts underlying Vestavia Hills were: after the City of Vestavia Hills obtained
a state-court judgment against Cameron Development (and after Cameron’s insurer,
General Fidelity, denied Cameron’s claim for coverage), the City filed an action in state
court against Cameron (an Alabama citizen) and General Fidelity (not a citizen of
Alabama).

General Fidelity removed the action to federal court; Judge Proctor

determined that, because their interests were the same, Cameron should be realigned as
a plaintiff with the City; and the Eleventh Circuit affirmed that decision:
Having reviewed the single-count complaint, it is clear that Vestavia Hills
did not seek any relief from Cameron. Cf. Duffey v. Wheeler, 820 F.2d 1161
(11th Cir. 1987). There no longer is any dispute between Vestavia Hills
and Cameron, and the only thing that Cameron could want out of this
case is for Vestavia Hills to win. Obviously, the two parties’ interests are
identical or at least materially so. As was noted by the Seventh Circuit in
Home Insurance Co. of Illinois v. Adco Oil Co., 154 F.3d 739, 741 (7th Cir.
1998), in determining subject matter jurisdiction on the basis of diversity,
“the normal alignment of parties in a suit seeking a declaratory judgment
of non-coverage is Insurer versus Insured and Injured Party.”
Id. at 1314 (footnote omitted).
Similarly, in Cromwell, the action removed to this Court was initiated after a
state-court judgment was obtained. See 2011 WL 2670098, at *6. There, the $3.5 million
Court stated,
In addressing the proper alignment of the parties, the court must consider “the
principal purpose of the suit and the primary and controlling matter in dispute.”
Indemnity Ins. Co. of North America v. First Nat. Bank at Winter Park, Fla., 351 F.2d
519, 522 (5th Cir. 1965) (citing City of Indianapolis v. Chase Nat’l Bank, 314 U.S. 63,
72 (1965)). “It is our duty . . . to ‘look beyond the pleadings, and arrange the
parties according to their sides in the dispute.’ . . . Litigation is the pursuit of
practical ends, not a game of chess. Whether the necessary ‘collision of interest,’ .
. . exists, is therefore not to be determined by mechanical rules. It must be
ascertained from the ‘principal purpose of the suit,’ . . . and the ‘primary and
controlling matter in dispute.’” City of Indianapolis, at 70 (citations omitted);
Hamer v. New York Ry., 244 U.S. 266 (1917) (parties must be realigned for
diversity purposes according to their ultimate interests in the outcome of the
case).
Id.

7

judgment exceeded the $1 million policy limit; in addition, the policy was “a ‘wasting’
policy under which the policy limits are reduced by the insurer’s defense costs.” Id.
And Judge Nelson concluded that
the primary thrust of the current litigation will be the issue of the amount
[and potentially the existence] of coverage. Despite plaintiff’s claim that
defendant SafetyNet takes an adverse position to the plaintiff because it
seeks continued defense [and thus continued expenses reducing the
available policy proceeds] by Admiral in the state court litigation, it is
clear that SafetyNet’s principal interest in this suit is in having Admiral
pay as large a portion of the judgment as possible, thereby reducing the
unsatisfied remainder of the judgment for which SafetyNet would remain
liable. No other substantive issue has been demonstrated to be involved
in this action. Based on the record, the undersigned concludes that the
interests of SafetyNet are properly aligned in this litigation with those of
the plaintiff.
Id.
In cases like Vestavia Hills and Cromwell, where a state-court judgment has
already been entered, it is easy to honor the maxim that, “in determining subject matter
jurisdiction on the basis of diversity, ‘the normal alignment of parties in a suit seeking a
declaratory judgment of non-coverage is Insurer versus Insured and Injured Party.’”
Vestavia Hills, 676 F.3d at 1314 (quoting Home Ins. Co. of Ill., 154 F.3d at 741).
This is so because any finding that the insurer owes a duty to indemnify
an insured mutually benefits the insured party and the injured party. The
insured party is relieved of having to pay the judgment out of his own
pocket, at least to the extent of the policy limit. At the same time, the
injured party is assured that he will be able to collect at least a portion of
the judgment owed him.
Grinnell Select Ins. Co. v. Glodo, Nos. 08–cv–891–JPG, 09–cv–004–JPG, 2009 WL 455126, at
*2 (S.D. Ill. Feb. 23, 2009) (also citing Home Ins. Co. of Ill., 154 F.3d at 741)6; compare, e.g.,

6

There, the court further noted,

What is true in the usual case, is true here. The singular interest of both
[Insured] Bria and [Injured] Keown is in obtaining a declaration that [Insurer]
Grinnell must pay at least part of the judgment that Bria owes Keown. The fact
that the judgment exceeds the policy limits does nothing to diminish this fact,

8

Porter v. Crumpton & Assocs., LLC, 862 F. Supp. 2d 1303, 1307-08 (M.D. Ala. 2012) (“The
Porters’ interests as the judgment creditor align directly with those of Crumpton &
Associates, the judgment debtor, because both parties want American Guarantee to pay
the judgment. This situation mirrors exactly the circumstances in Vestavia Hills, where
the interests of the judgment creditor and judgment debtor aligned against the insurer.
In other words, it would make little sense to stick Crumpton & Associates on the same
side of the ‘v’ as American Guarantee when determining whether there exists complete
diversity between adverse parties.”), with Wheeler’s Moving & Storage, Inc. v. Markel Ins.
Co., No. 11–80272–CIV, 2011 WL 3419633, at *3 & n.2 (S.D. Fla. Aug. 4, 2011) (“[U]nder
the facts of this case, [Injured] McTigue’s interests can be said to be aligned with
[Insured] Wheele’s efforts to obtain indemnity from Markel and Vanliner, because if
Wheeler's is successful, it will ensure that McTigue’s judgment will be paid from
insurance proceeds. . . . [Further, t]he fact Wheeler’s interests were adverse to
McTigue’s interests in the underlying action is not relevant to the determination as to
whether McTigue is properly aligned as a defendant in this case.”) (citing, inter alia,
Federal Ins. Co. v. Bill Harbet Constr. Co., 82 F. Supp. 2d 1331, 1334 (S.D. Ala. 1999)
(Vollmer, J.)). Here, however, no state-court judgment exists. And while some courts
have found it proper to realign an underlying state-action plaintiff/federal defendant as
a federal plaintiff in a pure declaratory judgment action absent a judgment in the
underlying case, see, e.g., Brave Ventures, LLC v. Ambrester, 854 F. Supp. 2d 356, 358 (E.D.
nor to make Bria’s interests in the instant case adverse to Keown’s. And, while it
is true that Bria and Keown had adverse interests in the underlying case, that
case has proceeded to judgment, at which point their legal adversity came to an
end. Therefore, the Court will realign the parties accordingly.
Id. (emphasis added).

9

Va. 2012),7 this action compels a different result.
First, it is clear that the “principal purpose” of the Gulf Parties’ lawsuit is a
frontal attack on their insurer, QBE.8 In addition to asserting claims for bad faith,
breach of contract, negligence and wantonness, misrepresentation, and suppression
against QBE (solely), the complaint includes a declaratory judgment count.

The

inclusion of that count required the Gulf Parties name the Crowley Cattle Parties and
the Foundation Farms Parties as parties to their lawsuit. See Andalusia Enters., Inc. v.
Evanston Ins. Co., 487 F. Supp. 2d 1290, 1293-94 (N.D. Ala. 2007) (“[A]n alleged tort
victim[ has] an interest, actual or theoretical, in whatever finding will ultimately be
made on the coverage question, whether against [the plaintiffs] or in their favor. [He is]
therefore an indispensable party in the state court action pursuant to § 6–6–227[ of

7

There, the court granted a motion to realign:

Examining the alleged circumstances of this matter, it seems clear that Ambrester
is not properly aligned as a defendant in this case. The primary issue addressed
in the complaint is Mount Vernon’s duty to provide coverage for the subject
incident. Ambrester is not a party to the insurance agreement and has no
potential duties under the insurance policy itself. As a plaintiff in a separate tort
suit in state court, his sole interest in this action would be maximizing his
potential recovery, and therefore establishing coverage under any and all
insurance policies that could potentially compensate him, if he prevails in his
lawsuit.
Id. (internal citations omitted and emphasis added).
8

“The determination of the ‘primary and controlling matter in dispute’ . . . is to be
determined by plaintiff’s principal purpose for filing its suit.” Zurn Indus., Inc. v. Acton Constr.
Co., Inc., 847 F.2d 234, 237 (5th Cir. 1988) (cited in Bill Harbet Constr. Co., 82 F. Supp. 2d at 1337
n.5); see also Builders Mut. Ins. Co. v. Dragas Mgmt. Corp., 497 Fed. App’x 313, 316 (4th Cir. Nov.
20, 2012) (per curiam) (“To determine when to realign parties, we apply the two-step ‘principal
purpose’ test. First, we determine the primary issue in the controversy by considering the
‘plaintiff’s principal purpose for filing its suit.’ Palisades Collections LLC v. Shorts, 552 F.3d 327,
337 (4th Cir. 2008) (internal quotation marks omitted). Second, ‘we align the parties according
to their positions with respect to the primary issue.’ Id. If the alignment differs from that in
plaintiff’s complaint, we look to whether diversity jurisdiction still exists.”) (internal citation
omitted).

10

Alabama’s Declaratory Judgment Act].”).9
Against this backdrop the Court must decide whether to realign the parties.
And, in order to determine whether the non-QBE defendants should be realigned as
party-plaintiffs, the Court must examine the relief requested pursuant to the only count
concerning those defendants, the declaratory judgment count. Among other things,
there, the Gulf Parties request an order and judgment declaring that (1) their applicable
QBE “insurance policies provide coverage for the underlying claims and lawsuits
against [them]”; (2) “[e]ach of the [Gulf Parties] is an insured under the insurance
policies in question”; and (3) “QBE owes a duty to indemnify the [Gulf Parties] for any
judgment which may be entered against [them] in the underlying lawsuits regardless of
policy limits.” (Doc. 1-1 at 9.) While the last request listed may be premature,10 none of
these requests appear to be adverse to the interests of the Crowley Cattle Parties and the
Foundation Farms Parties.

However, the Gulf Parties’ request for an order and

9

Of course, this requirement of Alabama’s declaratory judgment act does not itself
prevent removal. See, e.g., Vestavia Hills, 676 F.3d at 1313 (“[F]or the purpose of removal, the
federal law determines who is plaintiff and who is defendant. It is a question of the
construction of the federal statute on removal, and not the state statute. The latter’s procedural
provisions cannot control the privilege of removal granted by the federal statute.”) (quoting
Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 580 (1954)).
10

“There is abundant support in the case law for the proposition that ‘an insurer’s
duty to indemnify is not ripe for adjudication in a declaratory judgment action until the insured
is in fact held liable in the underlying suit.’” W.G. Yates & Sons Constr. Co. v. Zurich Am. Ins. Co.,
Civil Action No. 06-0803-WS-B, 2008 WL 161921, at *6-7 (S.D. Ala. Jan. 8, 2008) (Steele, J.)
(quoting Assurance Co. of Am. v. Legendary Home Builders, Inc., 305 F. Supp. 2d 1266, 1270 (S.D.
Ala. 2003)) (collecting authority and further determining: “In light of the foregoing authorities,
the Court is of the opinion that it would be inappropriate at this time to enter a declaration as to
Zurich’s duty to indemnify Yates in the Guerrero Action. At present, it is purely a matter of
speculation and hypothesis as to whether judgment will ever be entered against Yates in those
state-court proceedings. Entry of a ruling now as to whether Zurich is responsible for footing
the bill if the Guerrero Action culminates in a monetary judgment against Yates would run
contrary to fundamental notions of judicial economy, wise judicial administration, and prudent
allocation of scarce judicial resources. Accordingly, in the exercise of the Court’s sound
discretion, Yates’ claims for a declaratory judgment on the question of Zurich’s duty to
indemnify are dismissed without prejudice.”).

11

judgment declaring “[t]hat QBE has a continuing duty to defend the [Gulf Parties] in
the underlying lawsuits”—lawsuits brought by the Crowley Cattle Parties and the
Foundation Farms Parties against the Gulf Parties—does not align with the interests of
the non-QBE defendants. Further, because no state-court judgment has been entered
(or, more properly, had been entered before this case was removed), making any duty
to indemnify purely speculative and, accordingly, not ripe for consideration by this
Court, the principal insurance coverage issue—if the Court accepts QBE’s position that
the principal purpose of the Gulf Parties’ lawsuit is solely coverage—is QBE’s duty to
defend the Gulf Parties (or some of those parties) in the still active underlying litigation.
Therefore, again accepting QBE’s view of this lawsuit, the non-QBE defendants are
adverse to the Gulf Parties as to the principal purpose of this lawsuit.
For example, in Preferred Chiropractic, LLC v. Hartford Casualty Insurance Co., No.
10–cv–972–DRH, 2011 WL 2149091 (S.D. Ill. May 31, 2011), the court began with the
same maxim, provided by the Seventh Circuit and used by the Eleventh Circuit in
Vestavia Hills—“[t]he ‘normal alignment of parties in suits seeking a declaratory
judgment of non-coverage is Insurer vs. Insured and Injured Party[,]’” id. at *3 (quoting
Home Ins. Co. of Ill., 154 F.3d at 741). But, the court continued,
[w]hile this alignment is generally true for declaratory judgments seeking
indemnity, a duty to defend is different. In Illinois, a duty to defend is
distinct and separate from a duty to indemnify.
The issue of
indemnification is not ripe until the underlying litigation is terminated—
until there has been an actual judgment that requires payment from the
insured or its insurer to the plaintiff. In the actions underlying
declaratory judgment actions regarding duties to defend, the insured and
injured often have adverse interests—an adversity which does not end
until after a judgment.
Id. (citations omitted); compare id., with W.G. Yates & Sons Constr. Co. v. Zurich Am. Ins.
Co., Civil Action No. 06-0803-WS-B, 2008 WL 161921, at *6 (S.D. Ala. Jan. 8, 2008) (Steele,

12

J.) (“Under Alabama law, an insurer’s duty to indemnify and its duty to defend the
insured are distinct obligations. See Tanner v. State Farm Fire & Cas. Co., 874 So. 2d 1058,
1063 (Ala. 2003) (“Liability insurance coverage includes two separate duties: (1) the
duty to defend; and (2) the duty to indemnify.”). Those duties must be analyzed
separately for purposes of determining an insurer’s obligations to its insured.”)
The court in Preferred Chiropractic then concluded that realignment was not
proper there:
Plaintiff Chiropractic and defendant Weiss have adverse interests in the
underlying action where they are adverse parties and Weiss alleges
counterclaims against Chiropractic. This adversity will not end until
judgment has been reached in the underlying proceeding. Hartford’s
assertion that Weiss has an interest in Chiropractic obtaining funds from
Hartford with which to pay a prospective judgment against Chiropractic
conflates a duty to defend with a duty to indemnify. Chiropractic is not
seeking indemnification from Hartford with which to satisfy a judgment
in favor of Weiss—there is no judgment to satisfy. Chiropractic is seeking
a defense. The point of substantial antagonism between Chiropractic and
Weiss is their opposition in the underlying suit and Chiropractic’s
attempt to obtain a defense from Hartford with which to ultimately
defeat Weiss in the underlying action. As such, the parties in the instant
declaratory judgment action are properly aligned-defendant Weiss is
properly considered a defendant, aligned with defendant Hartford and
against plaintiff Chiropractic.
Id. at *3 (emphasis added).
This lack of a state-court judgment coupled with a request that the insurer
defend its insured in the still-pending underlying action was also why Judge Proctor, in
Smith v. Catlin Insurance Co., Case No.: 7-12-CV-4070-RDP (N.D. Ala. Feb. 23, 2013),
refused to realign an underlying plaintiff (Burks) with the federal declaratory judgment
action plaintiffs, distinguishing that decision from his decision in Vestavia Hills to
realign Cameron Development as a plaintiff, a decision affirmed by the Eleventh
Circuit:
The main fact distinguishing this case from the Vestavia Hills case is that
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here there is no final judgment. Burks is still prosecuting her claims in the
state court action. In contrast, in Vestavia Hills, an underlying state court
judgment has already been entered against one of the defendants,
Cameron Development.
Thus, Cameron Development, a nominal
defendant, and the City, the plaintiff in the underlying action in Vestavia
Hills, had a virtually identical interest in requiring the insurance company,
the other defendant in that case, to pay the judgment. Id. at 1314. That is,
there was no issue concerning a duty to defend in Vestavia Hills—the
case had already been tried and a final judgment entered. Here, Burks has
not yet obtained a judgment. And as Burks makes clear . . . , she has no
interest in the insurer defendants providing Plaintiffs in this case with a
defense to her claims against them in the underlying case. Thus, this case
is readily distinguishable from Vestavia Hills, and Burks’s interest cannot
be said to be aligned with the interests of Plaintiffs in this case.
(N.D. Ala. Case No.: 7-12-CV-4070-RDP, Doc. 25, order granting motion to remand, at 23 (emphasis added); see also id. at 3 n.1 (“In fact, although Burks may, eventually, desire
that the insurer Defendant indemnify Plaintiffs for any judgment she might obtain
against them, at least at present, she prefers that Plaintiffs present no defense to her
claims, whether provided by the insurer Defendant or otherwise.”).)11
III.

Conclusion

Because the interests of the Crowley Cattle Parties and the Foundation Farms
Parties are in opposition to the interests of the Gulf Parties as to the current primary
purpose of this litigation that affects all parties—as demonstrated by the only
declaratory relief the Gulf Parties request in their complaint that is ripe for
consideration—the Court cannot realign the Crowley Cattle Parties and the Foundation
Farms Parties as plaintiffs in this dispute. Thus, complete diversity is lacking, and this

11

Like the Gulf Parties here, in Smith, the declaratory judgment plaintiffs were also
being defended in the underlying action under a reservation of rights. (See N.D. Ala. Case No.:
7-12-CV-4070-RDP, Doc. 1, notice of removal, at 95-104 (May 17, 2012 Letter from counsel for
Catlin Insurance Company, Inc. (“Therefore, the company has determined that it will provide a
defense to Mr. Smith and Dixie Air Service, Inc., reserving all of its rights under the policy
contract. . . .”); Oct. 8, 2012 Letter from Cincinnati Insurance Company (“Without waiving any
rights under its reservation of rights, Cincinnati has retained the firm of Scott Tyra . . . to defend
Dixie Air Services, Inc. and Danny Smith. . . .”)).)

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Court does not possess subject-matter jurisdiction pursuant to 28 U.S.C. § 1332. The
motion to remand (Doc. 11) is therefore GRANTED, and the Clerk is DIRECTED to
REMAND this matter to the Circuit Court of Hale County, Alabama and CLOSE this
case.
DONE and ORDERED this the 20th day of May, 2013.
s/WILLIAM E. CASSADY
UNITED STATES MAGISTRATE JUDGE

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