United States District Court, M.D. Alabama, Eastern Division
MEMORANDUM OPINION AND ORDER
W. KEITH WATKINS, Chief District Judge.
This action, which began in state court, arises out of a dispute over the amount of insurance coverage Allstate must pay Plaintiffs under their homeowners' policy after a tornado damaged their home. Allstate removed this action pursuant to 28 U.S.C. §§ 1441 and 1446(b)(1), alleging that this case is within the court's original jurisdiction under 28 U.S.C. § 1332(a). It contends that the amount in controversy is met and that the non-diverse Defendants, Clarence Cook and Cook Insurance Agency, Inc. ("Cook Defendants"), were fraudulently joined to defeat federal-diversity jurisdiction. Before the court is Plaintiffs' motion to remand. (Doc. # 15.) Plaintiffs do not challenge the amount in controversy, but argue that Allstate has failed to show the fraudulent joinder of the Cook Defendants and that, therefore, complete diversity is lacking. Allstate responded to the motion (Doc. # 17), and each side has submitted affidavits in support of their positions. Based upon the arguments of counsel and the relevant law, Plaintiffs' motion to remand is due to be granted.
I. STANDARD OF REVIEW
An action is removable if the joinder of a non-diverse party is fraudulent. Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998). The presence of a fraudulently joined, non-diverse defendant does not defeat diversity jurisdiction because where the joinder is fraudulent, the court "must dismiss the non-diverse defendant and deny any motion to remand the matter back to state court." Florence v. Crescent Res., LLC, 484 F.3d 1293, 1297 (11th Cir. 2007). Defendants argue that the joinder of the Cook Defendants is fraudulent because there is no possibility that the plaintiff can prove a cause of action against the non-diverse defendant. Triggs, 154 F.3d at 1287. "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. (quotations omitted). That possibility, however, must be "reasonable, not merely theoretical." Legg v. Wyeth, 428 F.3d 1317, 1325 n.5 (11th Cir. 2005).
The removing party bears the burden of proving fraudulent joinder by "clear and convincing evidence, " and the burden is "a heavy one.'" Stillwell v. Allstate Ins. Co., 663 F.3d 1329, 1332 (11th Cir. 2011) (quoting Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir. 1997)). A court examines fraudulent joinder based on the plaintiff's pleadings at the time of removal, but it also "may consider affidavits or deposition transcripts submitted by the parties." Id .; see also Legg, 428 F.3d at 1324. Additionally, the court "draw[s] all reasonable inferences from the record in the plaintiff's favor and then resolve[s] all contested issues of fact in favor of the plaintiff." Crowe, 113 F.3d at 1541-42. In this way, the inquiry resembles that required on a motion for summary judgment; however, the inquiry differs in that the court may not "weigh the merits of a plaintiff's claim beyond determining whether it is an arguable one under state law." Id. at 1538. In other words, "there need only be a reasonable basis for predicting that the state law might impose liability on the facts involved.'" Id. at 1542 (citation and internal quotation marks omitted).
Plaintiffs purchased an Allstate homeowners' insurance policy from Mr. Cook, an independent insurance agent from whom Plaintiffs had bought insurance for "many years." (Mr. Brooks's Aff., at ¶ 2.) The policy was in full force and effect on April 11, 2013, when a tornado damaged Plaintiffs' home in Notasulga, Alabama. (Compl., at ¶ 24.) Plaintiffs' policy had combined limits in excess of $500, 000. (Not. of Removal, at 4.) Plaintiffs promptly notified Allstate of the loss through Mr. Cook. Plaintiffs allege that Allstate "refused to pay the sums due and owing under the policy" and "refused to pay Plaintiffs' claim as a total loss. " (Compl., at ¶ 25 (emphasis added).) According to Plaintiffs, Allstate has made "false claims that the home can be salvaged." (Compl., at ¶ 26.) Allstate, in turn, summarizes this lawsuit as one alleging that Allstate "undervalued [Plaintiffs'] loss." (Not. of Removal, at 4.)
The claims against the Cook Defendants that are the focus of the motion to remand are the ones for fraud, conspiracy, and negligence/wantonness. Central to these claims are allegations that Allstate developed and concealed from policyholders a fraudulent company-wide set of claims-handling practices known as the Claims Core Process Redesign program ("CCPR") and related practices, such as the zero-sum gaining theory. According to Plaintiffs, these practices were designed to deny homeowners' claims or undervalue paid claims. Plaintiffs allege that the Cook Defendants, acting individually and as part of a conspiracy with Allstate, fraudulently suppressed knowledge of these practices. Had Plaintiffs known of the fraudulent claims-handling practices, "they would not have purchased the policy in question." (Compl., at ¶ 52.) Plaintiffs also allege that the Cook Defendants "negligently and/or wantonly failed to properly sell, underwrite, rate, and investigate the claim and/or application." (Compl., at ¶ 77.)
Allstate argues that all claims against the Cook Defendants "are legally and factually deficient and constitute fraudulent joinder." (Not. of Removal, at 3.) If there is a reasonable possibility that a state court would find that Plaintiffs state even one claim against the Cook Defendants, then their joinder is not fraudulent, and remand is required. For the reasons that follow, Allstate has failed to meet its burden of demonstrating fraudulent joinder on the fraudulent-suppression claim. It is unnecessary to address, therefore, the parties' fraudulent-joinder arguments with respect to the other claims.
"The elements of a cause of action for fraudulent suppression are: (1) a duty on the part of the defendant to disclose facts; (2) concealment or nondisclosure of material facts by the defendant; (3) inducement of the plaintiff to act; (4) action by the plaintiff to his or her injury." Lambert v. Mail Handlers Benefit Plan, 682 So.2d 61, 63 (Ala. 1996). Allstate contends Plaintiffs have no reasonable possibility of establishing elements one and two of a fraudulent-suppression claim.
Beginning with the second element, Allstate submits Mr. Cook's affidavit, which sets out that, as an independent insurance agent, Mr. Cook was unaware of any information concerning Allstate's claims-adjustment practices. Allstate argues that there is no evidence that Mr. Cook had any knowledge of the facts allegedly suppressed and that Mr. Cook obviously cannot conceal facts of which he is unaware. See McGarry v. Flournoy, 624 So.2d 1359, 1362 (Ala. 1993) ("An action for suppression will lie only if the defendant actually knows the fact alleged to be suppressed."). Allstate relies upon two decisions from two other judges of this court. See Moses v. Allstate Indem. Co., No. 3:06cv154, 2006 WL 1361131 (M.D. Ala. May 17, 2006) (Albritton, J.); Via v. Allstate Indem. Co., No. 06cv531 (M.D. Ala. Aug. 30, 2006) (DeMent, J.) (unpublished). Allstate argues that this action is materially indistinguishable from Moses and Via. In Moses and Via, which likewise were before the court on motions to remand, the agents provided uncontested affidavits establishing that they had no knowledge of the fraudulent practices allegedly suppressed. See, e.g., Moses, 2006 WL 1361131, at *4 ("Walden further states that he has never been involved or had any personal knowledge regarding CCPR, Zero Sum Game, Tech-Cor, or Allstate's litigation tactics, and has no role in the adjustment of claims."). The plaintiffs submitted no evidence to contradict the agents' attestations of their absence of knowledge. See, e.g., Moses, 2006 WL 1361131, at *5 ("Each of the facts allegedly suppressed are facts about which Walden and Watts have stated in their affidavits they have no knowledge. The Plaintiff has not presented any evidence contrary to the affidavits provided. Therefore, with respect to the fraudulent suppression claim, the Defendants have met their burden under Legg. "). As the Eleventh Circuit in Legg made clear, "When the Defendants' affidavits are undisputed by the Plaintiffs, the court cannot then resolve the facts in the Plaintiffs' favor based solely on the unsupported allegations in the Plaintiffs' complaint." 428 F.3d at 1323. Based on the affidavits, the Moses and Via courts found no possibility of a cause of action for fraudulent suppression on the issue of whether the agents had knowledge of the facts allegedly suppressed.
Plaintiffs have not directly confronted Moses and Via, but they contend that their affidavits create factual disputes on the issue of Mr. Cook's knowledge of Allstate's allegedly fraudulent claims-handling practices. (Pls.' Mot. to Remand, at 9.) If Plaintiffs' affidavits and Mr. Cook's affidavit are at odds on whether Mr. Cook knew about Allstate's claims-handling practices, then the issue of Mr. Cook's knowledge must resolve in Plaintiffs' favor, and this case is distinguishable from Moses and Via.
In his affidavit, Mr. Cook attests that, at all times material to this litigation, he was not employed by Allstate as an adjuster, had no training involving claims adjustment, played no role in the adjustment of Plaintiffs' claim, and had no knowledge of Allstate's claims-adjustment procedures, including CCPR and the zero-sum gaming theory. Mr. Cook attests that his only involvement ...